“Sales strategies developed around face-to-face interactions with older, higher-net worth customers may not translate well to these changes in the consumer landscape,” Conning said.
A combination of increasing longevity, immigration and comparatively higher fertility rates has led to a population increase in the United States, but the increase is not spread uniformly. The Western and Southern regions are growing, while the Northeast and Midwest regions are essentially flat. The United States also is aging, as birth rates have declined in generations subsequent to the baby boomers.
“To the extent that specific products are targeted to specific age ranges, this can have profound impacts on the overall success in achieving sales growth,” Conning said. “If one is targeting the younger middle-aged population, one must note that that group has actually decreased in absolute numbers and is projected to continue to decrease in the short term. This could make growth a challenge.”
In addition to the changes in racial and generational composition of the United States, there are significant differences in age distribution among racial and ethnic groups. For example, while non-Hispanic whites are still the majority, the group skews much older than Hispanics, who as a group are the youngest of any race. More than 20 percent of the U.S. Hispanic population was under the age of 10 in 2011, compared with only 11 percent of the non-Hispanic white population, and almost 16 percent of the non-Hispanic white population was age 65 or over, while 6 percent of Hispanics were in that age group.
Changes in employment and retirement patterns also will affect the need for life and annuity products. Whereas women’s labor force participation increased from the post-World War II era, it remains less than that of men. However, the gender-based employment gap is not consistent across generational or racial and ethnic lines.
“While this employment gender gap exists for all major ethnic/racial groupings, the gap is least among Blacks and greatest among Asians and Hispanics,” Conning said. “In recent decades, labor force participation has dropped for the youngest age groups (16-24) and increased for the oldest group (age 65 and over). Median earnings for groups do show a gender gap in average earnings, as well as different earnings patterns by age for different groups. These differences may be due to immigration effects as well as differences in career paths in the aggregate.”
Employment levels among older people also have been increasing for the past 20 years, with most of the increase among women. Other important demographic changes among women include lower birth rates among younger women, and higher birth rates among women ages 30-to34, which now exceed those of women 10 years younger.
“Of particular concern for life insurers is that the percentage of households with children, regardless of the family structure, has been declining,” Conning said. “The growth strategies the life industry has employed to take advantage of the demographic phenomenon of the Baby Boomer may no longer work as younger generations adopt a different life pattern in terms of family formation and as a changing ethnic profile brings its own set of differences.”
The protection gap across demographic segments in 2006 was $11.3 trillion and increased to $22.8 trillion in 2012 estimate. While that number likely will fall to $21.2 trillion in 2013, the gap represents a large increase compared to what existed before the financial crisis and recession in 2008-2009. The protection gap also is not uniformly spread amongst demographic groups, and presents the potential for future growth, Conning said.
Individual life insurance ownership has declined significantly over the past fifty years, Conning said, and attitudes toward life and annuity products have changed and differ by gender, race or ethnicity. Further, consumers tend to overestimate their knowledge of the products, as well as their cost. Consumers largely said they do not understand annuity products, and consider annuities from an investment perspective rather than a consumption perspective; increased education about annuities and the value of lifetime income streams may increase the appeal of those products, Conning said.