Pandemic-Induced Global Insurance Trends Could Signal Market Boom

The pandemic has influenced all parts of the economy, and the insurance industry is no exception.

The Numbers: According to MIB Group, life insurance applications were up 4% in 2020, the highest growth rate since 2001. The overall numbers were boosted by more policy buying among younger Americans, who were likely motivated by constant headlines about mounting death tolls.

Applications among Americans under the age of 45 were up 7.9% in 2020 compared to just a 3.8% increase for those between ages 45 and 59, MIB found. Policy applications for Americans aged 60 and older, the group most vulnerable to COVID-19, were actually down slightly compared to 2019.

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Lincoln National Corporation LNC reported its term-life applications were up 25% year-over-year through the first nine months of 2020. Lincoln said its typical buyer is a male of around 40 years of age buying a 20-year, $500,000 policy, which costs roughly $345 per year.

New York Life Insurance reported that policy sales were still going strong through the end of the year. New York Life said it recorded double-digit percentage increases in total policies sold and new-sales premium in a record month of December.

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The insurance boom has also impacted the health insurance industry. A recent survey by healthinsurance.com found that 26% of respondents changed their health insurance in some way in 2020. Of those that made changes, nearly two-thirds (65%) increased their coverage.

Benzinga's Take: Despite the increase in policy sales, life insurance stocks remain some of the cheapest stocks in the market relative to their earnings power. Aggressive Federal Reserve interest rate cuts have pressured insurance stocks, and leading insurers such as Lincoln Financial, Metlife Inc MET and Prudential PLC PUK have all lagged the market in the past year despite having forward earnings multiples in the single digits.

Lincoln, Prudential and other life insurers have continued to underperform the overall market so far in 2021. However, Metlife has broken away from its peers so far this year, gaining 18.5% already year-to-date.