Abstract
Life insurance has long played a central role in providing financial protection and stability for individuals, families, and businesses. However, the industry’s broader societal value is less frequently considered. As a Milliman research team, we are exploring the topic of the societal value of life insurance and life insurers.
The first step in our research included conducting in-depth interviews with key stakeholders across the life insurance ecosystem to better understand their perspectives on the societal purpose and benefits of life insurance and life insurers in the United States. This paper summarizes the initial findings of these interviews. They reveal widespread agreement on the importance of life insurance as a social good and highlight opportunities and challenges in maximizing its positive impact.
Introduction
The U.S. life insurance industry has evolved significantly over the past century, now reaching a broad swath of the population and offering a range of protection options. While the industry’s financial strength and profitability are well documented, less attention has been paid to its societal impact: the ways in which life insurance contributes to the well-being of not just beneficiaries, but also society at large. We believe that life insurers can do more to understand, measure, and promote their societal impact.
To begin to address this gap and enhance our understanding of the societal value of life insurance, we conducted a series of qualitative interviews with a diverse array of stakeholders, including insurance company leaders (e.g., heads of marketing, product design professionals, actuaries, and distribution experts), professionals from industry organizations, and regulators. Our aim was to capture a wide spectrum of perspectives on the societal purpose and benefits of life insurance, identify areas where the industry excels, and uncover challenges and opportunities for further advancing both the actual societal impact and the public understanding of that impact.
Background
Life insurance is widely recognized as a means of managing the financial risks to beneficiaries from the death of an insured, as well as a means of asset accumulation. Beyond these core functions, life insurers also play a role as major institutional investors, employers, and contributors to social stability. The industry’s practices—such as how it educates customers, designs products, and invests funds—can have significant ripple effects on society at large.
Despite these broad impacts, the industry’s narrative has often focused on financial metrics, shareholder returns, and value to beneficiaries. However, a renewed focus on societal purpose could create a virtuous cycle, benefiting both the industry and society.
Findings from stakeholder interviews
Below we distill the collective insights and perspectives of industry professionals, organization leaders, and regulators on key elements of the societal purpose and benefit of life insurance and life insurers.
1. Financial security and social stability
Stakeholders nearly unanimously identified the primary societal purpose of life insurance as providing financial security for families and other beneficiaries, such as business partners or charitable institutions. In the event of death or disability, insurance benefits (which include access to a policy’s cash value or accelerated death benefit)—whether in the form of a lump sum or an annuity payout—support beneficiaries in avoiding (sometimes sudden) financial hardship. These benefits may enable beneficiaries to maintain their standard of living, pay off debts, and cover essential needs, such as housing and education.
Many stakeholders also noted the importance of a prudent regulatory environment that helps maintain a strong insurance industry, capable of providing funds to beneficiaries as promised.
Beyond the role of life insurance in providing financial security to the immediate family, stakeholders also highlighted its role in promoting social stability in broader society. By preventing financial shocks from cascading through communities, life insurance contributes to overall economic resilience and helps maintain social cohesion and a strong economy.
2. Poverty reduction and intergenerational mobility
Stakeholders emphasized the significant economic impact of life insurers as institutional investors. By channeling policyholder premiums into long-term investments in infrastructure, housing, and businesses, life insurers support economic growth and stability. They also noted that life insurers are significant providers of long-horizon capital, which supports projects with broad societal benefits, such as facilitating home ownership.
Furthermore, life insurance is regarded as a critical bulwark against poverty, particularly for vulnerable households, which can be an important tool for intergenerational upward economic mobility.
3. Financial literacy and education
Stakeholders noted that insurers and agents often serve as important sources of financial education, helping consumers understand risk, plan for the future with greater confidence, and make informed choices about protection and savings. Many stakeholders reported positive feedback from policyholders regarding advice they received from companies and agents.
The consistency and effectiveness of these efforts vary, with some interviewees suggesting that more robust, accessible educational initiatives are needed. While ongoing guidance from insurance representatives is helpful, broader education on insurance, annuities, and risk management—for example, in school curriculum—might be more effective.
4. Psychological benefits and peace of mind
Interviewees consistently noted that the psychological comfort and peace of mind that life insurance affords is key to the value proposition. Knowing that their loved ones or businesses are protected, policyholders benefit from reduced anxiety about the future.
This assurance provides people with the confidence to take on rewarding activities, such as buying homes or cars, having children, or starting businesses, despite the risk involved.
5. Encouraging healthy behaviors
Some products and insurer-led initiatives, including wellness programs and wearables, incentivize healthy lifestyle changes, such as smoking cessation or changes in diet or exercise routines. While at an early stage of adoption, some stakeholders saw these efforts as having the potential to improve public health outcomes. Additionally, they discussed premium discounts as a way to encourage healthy behavior or premium subsidies as an additional way to attract lower-income population to buy insurance.
6. Challenges
Despite the many benefits, stakeholders identified persistent gaps in access to life insurance, particularly among low-income and minority communities. They cited distribution costs, competitive pressures, life insurer ownership structures, and state-based regulation as causes for the disproportionate attention paid to higher-income customers and intermediaries rather than to those with the greatest need for protection. They broadly agreed on the need for simpler products, promotion of income annuities, more inclusive marketing, and greater outreach to underserved populations.
Stakeholders highlighted the ongoing challenges of trust and transparency and emphasized the importance of clear communication, fair claims practices, and regulatory oversight.
Additionally, stakeholders recognized opportunities for innovation in product design, distribution, and technology, such as artificial intelligence, as ways to reach new markets and broadly improve customer experience.
Conclusion
The industry experts we spoke with expressed that life insurance serves a multifaceted societal purpose: It protects families and businesses from financial hardship, supports economic stability, and contributes to societal well-being. While the industry has achieved significant success, important opportunities remain to broaden access, enhance education, and innovate for greater impact. This initial phase of our research will guide our further exploration into this important topic and result in actionable insights to help life insurers fulfill their societal mission and build a more resilient and equitable society.