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How Life Insurance Has Evolved Over the Years


Life insurance has undergone significant changes over the past several years. Like all forms of insurance, it has been impacted by consumer demands and advances in technology. Most recently, life insurance has dealt with the effects of the ongoing worldwide coronavirus pandemic. However, what hasn’t changed is the necessity to obtain and retain this essential coverage as a means of ensuring financial security and peace of mind.

A Brief History of Insurance

Insurance in some form has been in existence since the Middle Ages, when the guild system emerged, along with the concept of spreading risk over a larger pool. This concept has survived in the form of group insurance. The actuarial table is based on Pascal’s Triangle, a tool for calculating risk devised by Frenchmen Blaise Pascal and Pierre de Fermat in the 1600s. The concept of insurance finally made its way to America in the 1750s. These concepts have been applied to all forms of insurance to this day, including life insurance. 

Changes in Insurance Over the Last 25 Years

Insurance has experienced a number of changes in the last 25 years. There is less cyclicity and more resiliency. However, the industry is subject to stricter regulation in the United States through the Dodd-Frank Act as well as through Systemically Important Financial Institutional (SIFI) designations, and international designations such as G-SIIs.

In response to low-interest rates and yields, insurance has become less dependent on investment income. In turn, more pressure has been placed on pricing, holding down expenses, and in underwriting. Underwriting is especially important with life insurance. Under the Affordable Care Act, health insurance providers are required to disregard many underwriting requirements when providing coverage; however, these requirements do not apply to life insurance. 

The Impact of Technology

Disruptive innovations such as the Internet of Things, the sharing and gig-based economy, drones, driverless vehicles and wearable tech have also impacted the insurance industry in general and life insurance in particular. Specifically, the insurance industry has had to adapt to the demands of customers to access products through digital and mobile devices. Insurance providers have had to adapt core insurance functions such as obtaining quotes, issuing policies and filing claims for access by customers who are less likely to contact them through a landline than on a laptop, tablet or mobile phone. 

The Effect of Covid-19

The ongoing Covid-19 pandemic has upended daily life all over the world, including the life insurance sector. Understandably, consumer interest in this essential coverage has been heightened, along with concerns about the strength of particular life insurance providers. Underwriting has also been impacted, with more emphasis on minimizing risks from known links to coronavirus infection, such as travel to hard-hit hot spots. At the same time, lockdowns have made it necessary to move many service functions online, and at the same time, have made it more challenging to schedule health-related underwriting examinations. 

The Continuing Evolution of Life Insurance

The concept of insurance has existed for thousands of years. In this country, insurance has been impacted by regulations such as the Dodd-Frank Act, as well as by disruptions such as the sharing economy and increasing reliance on technology, and mobile technology in particular. The ongoing Covid-19 pandemic has presented significant challenges in administering policies and providing services. What has not changed is the need for life insurance as a means for policyholders to protect themselves and their loved ones in cases of emergencies or tragic loss.