Individual Life Insurance Sales Slowly Recover After Difficult First Half of 2009, LIMRA Reports

WINDSOR, Conn., Feb. 26, 2010 — Total new annualized premium for individual life insurance declined five percent in the fourth quarter of 2009, resulting in a 15 percent reduction for the year as compared to 2008, according to LIMRA’s quarterly individual life insurance sales survey.

“After an extremely rocky first half of 2009 where we were down 26 percent in the first quarter and 21 percent in the second, individual life insurance sales began to show improvement in the third and fourth quarters,” said Ashley Durham, LIMRA senior analyst for product research. “We are encouraged that all product sales are showing signs of recovery.”

After falling by about 30 percent in the first and second quarters, the drop in universal life (UL) sales was reduced to 15 percent in the third quarter. By fourth quarter, UL sales were only three percent lower than they were in fourth quarter 2008. Overall, 2009 UL premium declined 20 percent as compared to 2008.

Guarantees continue to be important to consumers. Guaranteed death benefit universal life (GDBUL) sales only fell by about 11 percent in 2009, while non-death benefit guarantee UL products dropped 26 percent. As a result, GDBUL market share of UL sales increased to 53 percent, up from 48 percent in 2008.

“It’s interesting that as UL premium has declined over the past year, UL policy count has grown,” noted Durham. “UL policies in 2009 were up five percent over 2008. We are selling more smaller-face policies to more people. This trend reverses what we have observed for the last decade.”

UL still represents the largest share of the annualized premium at 38 percent, with whole life and term at 28 percent and 27 percent respectively.

Fourth quarter variable products sales remain depressed, down 36 percent compared to prior year but this marks a more than 50 percent increase over prior quarter. For the year, variable products declined by half.

Simple and affordable, term continued to be appealing to consumers and as a result, sales remained steady throughout the year. In the fourth quarter, sales were up one percent, ending 2009 down only one percent.

After single digit drops in the first two quarters of the year, whole life sales increased 12 percent in the third quarter and another 12 in the fourth quarter. Marking a four percent gain in 2009, whole life is the only product line to perform better in 2009 than in 2008. Along with whole life’s increase in premium sales, policy count also increased, up six percent in the fourth quarter.

Overall, total individual life insurance policy count increased three percent for the quarter and dropped two percent for the year.

View the latest data table on U.S. life insurance sales trends. For more statistics, visit the newly updated Fact Tank.

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LIMRA is a worldwide research, consulting and professional development organization that helps more than 850 insurance and financial services companies in 73 countries increase their marketing and distribution effectiveness. Visit LIMRA at www.limra.com.