WINDSOR, Conn., Nov. 22, 2011 — Total individual life insurance premium grew six percent in the third quarter and five percent in the first nine months of 2011, due in large part to robust whole life sales (WL), according to LIMRA's U.S. Individual Life Insurance Sales report.
“The biggest driver of individual life insurance growth in the third quarter was WL, whose premium increased 10 percent both for the quarter and year-to-date,” said Ashley Durham, senior research analyst, LIMRA product research. “WL is likely benefiting from premium and cash-value guarantees along with lifetime coverage, which are leading concerns for buyers — concerns that are likely compounded during times of economic uncertainty. It’s the only product to produce positive growth in each of the past five years, and, so far in 2011, nearly three quarters of the writers were able to grow their sales; more than half managed double-digit increases.”
Mutual companies, representing just a quarter of the WL manufacturers, reported more than half of the new WL premium and are responsible for half of the absolute dollar growth year-to-date. But success has not been limited to mutual companies. Stock companies increased their sales by 11 percent and fraternal companies, while only representing just about five percent of total sales, grew their WL sales by 25 percent.
Affiliated agents sold nine percent more WL premium in the first nine months of 2011, representing three quarters of the WL premium. Independent producers sold 18 percent more WL premium and direct marketing methods brought in seven percent more WL premium. Other channels such as bank and worksite, which represent a small portion of annualized premium sales, enjoyed double-digit growth.
WL policy count is also growing, up five percent for the quarter and six percent year-to-date.
Universal Life (UL) premium improved three percent in the third quarter and grew six percent year-to-date. UL enjoyed the second biggest increase in terms of absolute dollar growth (behind WL) during the first nine months of 2011.
Strong indexed UL sales influenced overall UL sales growth both for the quarter and year. Indexed UL premium rose 30 percent in the third quarter and 35 percent year-to-date. Five years ago, indexed UL represented just seven percent of total UL sales; today, indexed UL makes up over 20 percent of the UL market. With more companies entering this market, LIMRA expects indexed UL to continue to grow market share.
UL policy count also showed improvement, growing eight percent for the quarter and 12 percent during the first nine months of 2011.
Variable UL (VUL) premium jumped 34 percent in the third quarter, resulting in a 17 percent increase year-to-date. While much of the increase reflects non-traditional sales such as corporate owned life insurance, almost half of the VUL writers increased their sales and about a quarter saw double-digit growth both for the quarter and in the first nine months of 2011.
However, VUL policy count remains low, down three percent for the quarter and nine percent for the first nine months of the year. Companies have only issued around 20,000 policies per quarter over the past few years, compared with 160,000 when VUL peaked in 2000.
While term remains the most commonly purchased product after WL, its premium continues to decline, down four percent in the third quarter and seven percent year-to-date. It is important to note that if term/UL sales were included with term instead of with UL, term premium and policy count would only be down one and three percent in the third quarter, respectively.
Term policy count fell five percent for the quarter and seven percent in the first nine months of 2011. Because unemployment, which remains around nine percent, plays a key role in determining terms sales growth, LIMRA expects term sales to struggle over the next few years.
“The good news is overall life insurance policy sales have improved two percent so far this year,” noted Durham. “If you look back 25 years, we have only had two other years where policy count has improved; so this is a good sign that we are reaching more consumers.”
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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.