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Gatekeeper to Promise-keeper: A Fresh Look at the Familiar Problem of Life Underinsurance

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Industry discussions about closing the life insurance coverage gap can follow a numbingly familiar pattern: Carriers begin by wondering why so many consumers fail to understand the value of life insurance and conclude by calling for greater financial education.


As I take on a new role as Senior Vice President, Head of Underwriting for RGA’s U.S. Mortality Markets (USMM) division, I've grappled with this industrywide frustration. Yet as a neurologist and a chief medical director for USMM, I’ve been trained to look at problems from the inside-out, as well as the outside-in.

And things may look very different on the inside of this industry than they do as we step away. The 2021 LIMRA and Life Happens Insurance Barometer Study found that more than 35% of consumers surveyed plan to purchase life insurance within the next 12 months, the highest numbers in the survey’s history. People want and need protection in these uncertain times. And yet, nearly half (47%) of potential customers have delayed making an insurance purchase, and over a third (36%) believe they simply would not qualify for coverage. 

Let me suggest that our best yield will be to look inward – to challenge our assumptions about the consumer and to assume equal responsibility for making a life insurance purchase a more compelling proposition. RGA is seeking to do just this through our participation in Help Protect Our Families in partnership with seven U.S. life insurance trade associations, numerous life insurers, and other financial security professionals. The goal of this industry-wide initiative is to think differently and explore new methods to raise awareness about the value of life insurance and address America’s steadily growing financial protection gap.

The problem of underinsurance poses a very real danger to the financial and physical health of families and communities. Just 54% of all Americans have life insurance coverage, a notable decline from 63% just a decade ago. There are 60 million uninsured and underinsured households with an average life insurance gap of $200,000.2  Year after year it seems, the mortality protection gap widens as life insurance growth lags.

Addressing this discrepancy requires that we bust common consumer myths about insurance:

Myth one: Underwriting is a gate designed to keep out applicants.


Underwriters are not gatekeepers, but promise-keepers, focused on keeping coverage sustainable so that insurers can continue to earn trust and fulfill responsibilities for generations to come.

Far too many individuals don’t even bother applying for life insurance because they believe pre-existing conditions would disqualify them or make coverage prohibitively expensive. When asked why they did not buy insurance, 63% of underinsured respondents1 to a recent LIMRA survey deemed coverage too expensive. Yet, when asked how much the cost of insurance would be, most consumers estimated costs that were triple the actual rates.

What is behind this disconnect? The misunderstanding may stem from a false belief that life insurance is designed for an exclusive group; the opposite is true. Life insurance is based on the idea of pooling or spreading risk among the largest possible population to minimize costs from any one event. Insurers could not survive by keeping those who want insurance from getting it. On a practical and actuarial level, this means that we are continually striving to understand that next medical advance or uncover the newest technologies and data sources to identify unserved markets and make more attractive offers. For example, many diabetics might consider themselves un-insurable but coverage has been steadily improving due to advances in treatment and care that have markedly reduced mortality and morbidity risks for well-controlled cases.

As an industry, we have an opportunity to draw attention to these new product designs and rapid scientific advances that are empowering carriers to help more people. We also can be more transparent about the process of underwriting.

Myth two: Life insurance is a luxury, not a necessity.

Life insurance protects the future.   

A disturbingly large proportion of the U.S. population lives on the financial edge, just one emergency away from insolvency. In a 2020 LIMRA Insurance Barometer Survey, 44% of families believed they would face financial hardship if the primary wage earner died within 6 months; for 28%, it would be within just one month.3

The global recession caused by COVID-19 has only exaggerated these challenges – and we must realize that this financial fragility has implications for the well-being of individuals and society. In medicine, we often refer to the “social determinants” of health. This is the idea that conditions in the places where people live, work, and play affect a wide range of health and quality-of life-risks and outcomes. Life insurance, or its lack, is part of these social determinants and can play an essential role in these outcomes. Consider how the grief of losing a loved one can be magnified by severe financial stressors caused when the household must make up for the lack of an income, which might include forgoing education, skipping bills, and even deferring preventive healthcare. This can fuel a downward cycle, where individuals who do not pursue life insurance leave families unprotected and even less capable of adequately transferring wealth to future generations. And as financial resources continue to decline, long-term inequities in health and wealth widen.

Life insurance can serve as a break on this downward cycle. It offers the income replacement that can pay for education, health care, and much more. As an industry, we can do more to make the case that a life policy may be a financial product, but it is also a societal good. Our business is to protect the future.

3. Myth three: Life insurance is about your death.


Life insurance is about the lives of your loved ones.

Based on Google searches, U.S. interest in life insurance is at its highest level it has been in the past 5 years. The reason for that is clear. Six in 10 Americans say they have a heightened awareness of the importance of life insurance due to COVID-19.4 The threat of death, or severe illness, from a pandemic has a way of re-focusing the mind on priorities like health and well-being. But will this sudden surge in interest persist once the immediate health crisis ends?

One perception that fuels the protection gap is that a life policy is only valuable upon death – and all of us want to use the products we purchase during our lives. As an industry, we must do more to nurture relationships with insureds to highlight the value of policy ownership today. For the un/underinsured, we must change the narrative to bust the myths for those who see life insurance as a luxury, as not intended for them, or as unattainable.

Within every myth, there is a kernel of truth and an opportunity for change. The novel coronavirus has forced many of us to confront our own vulnerability to loss and to think more seriously about planning for our family’s protection. All of us are susceptible to disease, joblessness, and family changes, but we don’t have to be made more fragile by these crises. Yet for too many, life insurance is perceived as out-of-reach.

It is time for us, within the industry, to consider how to make our products more approachable and appealing. Learn more about Help Protect our Families and consider joining our mythbusting mission.   


Author

Dr. Dave Rengachary 
Named Head of RGA U.S. Underwriting
 
Dr. Dave Rengachary has been named Senior Vice President, Head of Underwriting for RGA’s U.S. Mortality Markets (USMM) division. He replaces Jaime Correa, who will retire in January after a distinguished career at RGA and within the industry.
 
Presently, Dave is Senior Vice President and Chief Medical Director for U.S. Mortality Markets where he has served in instrumental roles in setting the risk philosophy for the department, oversight of U.S. underwriting manual development, as well as leadership roles across numerous USMM underwriting initiatives and regulatory engagements.
 
Prior to joining RGA in 2013, Dave was a general neurologist in practice at Missouri Baptist Medical Center where he also served as medical director for their Primary Stroke Center. He attended the Honors Program in Medical Education at Northwestern University. He then completed an adult neurology residency at Washington University in Saint Louis followed by a fellowship in Clinical Neurophysiology. He serves on the board of directors of Memory Home Care Solutions and Oasis, two non-profit organizations dedicated to Alzheimer’s caregiver support and healthy aging respectively. Dave is board certified in neurology and insurance medicine, and he earned his FALU and FLMI designations. Currently, he is enrolled in the Executive M.B.A. program at the Olin Business School at Washington University in Saint Louis. 
 
In 2021, Dave accepted a position as chair of ACLI’s Risk Classification Committee. He is Past-President of the Midwestern Medical Directors Association; current Deputy Director of the Longer Life Foundation; Medical Consultant for the Academy of Life Underwriting; and a member of the Educational Committee of the American Academy of Insurance Medicine.
  

References.

  1. Understanding Life — The Impact of Consumer Knowledge on Life Insurance Ownership (2019), LIMRA
  2. Turn Up the Volume: $12 Trillion Sound Opportunities (2017), LIMRA
  3. 2020 Insurance Barometer Study, LIMRA and Life Happens
  4. LIMRA Quarterly Consumer Sentiment Study, October 2020

The Author

  • Dr. Dave Rengachary
    DBIM, FALU, FLMI
    Named Senior Vice President
    Head of Underwriting

    U.S. Mortality Markets
    Send email >

Summary

The novel coronavirus has forced many of us to confront our own vulnerability to loss and to think more seriously about planning for our family’s protection, according to RGA's Dr. Dave Rengachary. He calls on the industry to consider how to make insurance products more approachable and appealing to close the protection gap. Learn more about Help Protect our Families.   
  • coverage gap
  • Customer engagement
  • customer journey
  • customer relationship
  • Dave Rengachary
  • distribution
  • insurance distribution
  • protection gap
  • Rengachary
  • underinsurance
  • uninsurance