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Regulatory Environment Key to Expanding Life Insurance Coverage

Regulatory Environment
Key to Expanding Life
Insurance Coverage


Jillian Froment
Executive Vice President & General Counsel

June 2023

Life insurance is a powerful financial tool to substantially strengthen financial well-being and security from one generation to the next, especially for a typical family working to make ends meet and help their children succeed.

In fact, inadequate or no life insurance coverage may be the greatest avoidable threat to financial security. Even so, in 2021, just over half of American adults owned life insurance, down from 63 percent in 2011, according to LIMRA.

It is a trend that has not gone unnoticed. Life insurers have been working to improve their interactions with customers and make it easier and more convenient for modern consumers to get the financial protection they need. This includes greater use of technologies that simplify the underwriting process and a broader-based agent population to help more consumers have access to a financial professional’s help.

Industry improvements in these areas will help close the life insurance coverage gap. The right regulatory environment goes a long way toward making these efforts a success.


Life insurers have always embraced technology. For example, the industry’s adoption over the past decade of simplified underwriting — automated underwriting drawing from available electronic data — is a clear example. Most life insurers offer this option to customers, in addition to traditional methods that typically rely on obtaining individual medical records and the collection of bodily fluids.

The time to approve applications for life insurance can be significantly reduced when using automated underwriting. Access to electronic data, such as prescription drug records and motor vehicle records, is key to the quicker process. To be sure, electronic data must be used with consumers’ knowledge in a way that safeguards them and is in accordance with sound actuarial principles and reasonably anticipated experience.

Colorado is currently developing regulations that could have a chilling effect on the use of such technologies and life insurers’ goal to expand coverage. A draft regulation released earlier this year was extremely prescriptive. The draft followed the Legislature’s passage in 2021 of an anti-insurance discrimination measure that aimed to ensure algorithms employed in the application process were not biased against protected classes, including people of color.

Life insurers strongly support the goal of the new law.

Among a variety of problems with the draft regulation is that its overly prescriptive nature would dampen any consumer benefit from advanced use of technology.

Colorado regulators are expected to issue a second draft this summer. Life insurers are requesting it to be more principles-based and less prescriptive to ensure consumers benefit from dynamic and evolving technologies.

The National Association of Insurance Commissioners (NAIC) is also aiming to address insurers’ use of algorithms. The way life insurers see the issue, any regulation or model that stifles the use of new technologies and innovation that could expand coverage will do more harm than good. Any regulatory framework designed to eliminate unfair discrimination must live in harmony with technologies that help expand coverage in underserved communities, where the gap is greatest.

Agent Licensing

Like technology, an increased agent pool promises to help close the life insurance coverage gap. LIMRA research in 2021 shows there are an estimated 60 million uninsured and underinsured American households, with an average coverage gap of $200,000.

The American Council of Life Insurers (ACLI), the National Association of Insurance and Financial Advisors (NAIFA) and FINSECA strongly support efforts to boost agent recruitment, retention and diversity. These organizations share the conviction that a diverse producer base is fundamental to providing access to protection and savings products for all individuals.

Greater uniformity and efficiency across the producer licensing process is one step toward achieving this goal, and the industry is exploring improvements in several areas to help make this happen, including:

  • Working on making sure 1033 waiver materials used for background screenings are available on insurance department websites and simplifying the waiver application process.
  • Eliminating mandatory prelicensing education hours, which many states do not have in place and have been shown to have no correlation to consumer protection.
  • Making the producer examination available online in a proctored environment, which most states implemented during Covid-19.
  • Providing state-by-state transparency and consistency to the examination process, including pass rates and other items that may present unnecessary barriers to entry.
  • Making the producer examination available in more languages than English, which would particularly assist professionals working in underserved communities.
  • Exploring mentorship and apprenticeship programs that likely will increase entry and retention, especially of minority producer candidates.

Removing barriers to the producer licensing process will take time and incremental steps through state legislation or regulatory action across multiple jurisdictions and governmental entities.

Fostering a regulatory environment that helps expand outreach to consumers, both online and in-person, will advance the industry’s mission to help more families build financial security.

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