Life Insurance

Millennials' Obsession with Fitness Will Benefit Life Insurers

Millennials' Obsession with Fitness Will Benefit Life Insurers

Life insurance coverage has been on the decline for the past several decades, but fitness-based discount programs may offer a solution to the industry's woes. While 52% of millennials have life insurance, 86% believe that most people need it, which means that life insurance companies would greatly benefit by targeting millennials.
Young father deciding whether to buy life insurance
Young father deciding whether to buy life insurance Source: Getty Images

Some life insurers are looking to offer discounts and rewards to millennials and others who tend to exhibit healthier habits than the majority of Americans. John Hancock and Health I.Q. are among the insurance companies who are offering fitness and health programs to market to the 34% of millennials who believe that life insurance is important but don't have a policy themselves. While John Hancock and Health I.Q.'s programs have different features, they both provide discounts for exercising and tracking workouts with a fitness device.

Nearly half of millennials lack life insurance coverage

Research shows that the vast majority of millennials value the protection offered by life insurance, but many haven't yet purchased a policy. Just over half (52%) of millennials have life insurance, but 86% said that most people need it, according to a study from LIMRA and Life Happens, a nonprofit formed by seven insurance organizations. This leaves a gap of at least 34% of millennials who don't have life insurance but believe it's important.

With a chance to sell over 28 million new life insurance policies to U.S. millennials, it's no wonder insurers are looking for ways to offer incentives to this fitter-than-most demographic. One such opportunity is to focus on millennials, who have a track record for their high spending on fitness.

Michael Doughty, president of John Hancock, says that the hope is the Vitality Program, which offers fitness-based discounts, reinvigorates life insurance sales. The number of households with life insurance has been declining over the past 30 years, according to data from the Board of Governors of the Federal Reserve System. In 1989, 77% of households had life insurance, while the most recent figure was down to just 60%. It stands to reason that even the best life insurance companies are looking for ways to reinvent themselves and reverse the downward trend by tailoring their offerings toward millennial consumers.

Millennials take an active view toward health

Health-related life insurance discounts come at a time when fitness is becoming a main focal point for many Americans, especially millennials. Millennials have a different view of what it means to be healthy when compared to previous generations, according to a survey conducted by Aetna. While over 40% of baby boomers and Gen Xers define being healthy as not being sick, just 29% of millennials shared the same view.

Instead, a significantly higher percentage of millennials define being healthy as exercising and eating right, compared to other generations. Life insurance discounts, like those offered through John Hancock and Health I.Q., have the potential to attract millennials by developing policies that focus on active health, rather than a static snapshot of health taken at the time a person applies for coverage.

Examples of health and fitness-based discounts for life insurance

John Hancock's Vitality program is the first fitness-based program for life insurance in the country, but prospective policyholders can also achieve discounts through Health I.Q., which functions as an insurance broker. It remains to be seen whether these fitness programs can lure millennials and whether they will prompt more insurance companies to follow suit with similar programs. Despite this, these programs are beneficial as customers can take advantage of discounted life insurance rates.

Here are details on two life insurance programs with a fitness component:

  • John Hancock's Vitality: You may have heard of auto insurers offering a discount for using an app that tracks your driving behavior. John Hancock's Vitality is similar, using a fitness device, like a Fitbit, to track your physical activity. Policyholders who meet certain health-related goals get points—by exercising, getting health screenings, flu shots and more. Accumulating a certain level of points earns users life insurance discounts of up to 15% off the cost of a policy and other rewards.
  • Health I.Q.: This insurance broker uses a proprietary health quiz to evaluate your general health knowledge. The company discovered a relationship between its health quiz scores and mortality rates and thus entered into partnerships with life insurance companies, like SBLI and Ameritas, to offer discounts. Based on your scores, Health I.Q. offers a life insurance discount of up to 4%. Users who verify their fitness through an app can qualify for another discount of up to 4%. Additional savings of up to 25% can be earned from special credits that are awarded to you based on your lifestyle.

The programs have attracted criticism from industry experts who are concerned about data privacy. The fear is that companies will use these programs as a way to deny insurance coverage to people who fail to stay active. John Hancock mitigates data privacy concerns by allowing policyholders to choose which data to submit and opting to not sell consumer data. However, John Hancock shares the data with entities that help administer the program, meaning that a data breach could impact policyholders who submit data for discounts. Health I.Q. seems largely unaffected by the concerns, as they haven't stopped the company from receiving more than $81 million in funding.

Fitness and saving on life insurance

Even without discount programs, fitness impacts the cost of life insurance. For example, body weight is one of the two metrics used to calculate a person's body mass index (BMI), which is then used by insurance companies to help determine a person's insurability and life insurance rates.

We gathered quotes for $500,000 life insurance policies from Ameritas Life Insurance. The quotes for both male and female 35-year-old nonsmokers, for a 20-year term policy. We found that a 5-foot, 9-inch-tall man who weighs just 10 pounds more than the national average of 196 pounds can expect to pay $355 more for life insurance per year. A 5-foot, 3-inch-tall woman who weighs just 10 pounds more than the national average of 169 pounds can expect to pay $245 more for life insurance per year.

Gender
Weight (in pounds)
Annual Life Insurance Rate
Difference
Male196$1,055
Male206$1,410$355
Female169$870
Female179$1,115$245

Your BMI factors into your life insurance rates, and it could even outright disqualify you from coverage with some insurance companies.

For instance, Allstate generally denies coverage to someone who has a BMI that falls outside the range of 17.4 to 48.9. Some insurance companies are more conservative about who they underwrite policies to. For example, Pacific Life generally doesn't offer coverage to those with a BMI over 35.

Your life insurance premiums are partially determined by body weight, but other fitness factors also play a role. When you submit an application for life insurance, the insurance company may request that you undergo a medical exam. The exam may involve a physical, a urine test and a blood test. The information gathered from these exams will help gauge your risk to the insurer, which is how your life insurance company determines your rate.