New premium collected falls after five years of consecutive growth
WINDSOR, Conn., June 08, 2015 —More individual life combination policies were sold in 2014 than in 2013, according to LIMRA's 2014 Individual Life Combination Products Annual Review. Just under 100,000 policies were purchased in 2014, a 4 percent increase over 2013.
New premium collected fell 9 percent in 2014, compared with 2013 sales results to reach $2.4 billion. Combination life products represented 12 percent of total new premium for the individual life insurance market in 2014.
"After several consecutive years of double-digit growth, new sales premium for combination products declined in 2014, while new policies continue to grow at a moderate pace," said Catherine Ho, LIMRA product actuary. “The decline in new premium is mainly due to a shift from single premium products to limited pay products. This trend is seen throughout the U.S. Individual Life Insurance market, and is not specific to combination products.
Limited-payment life insurance refers to a life insurance policy with a limited number of higher payments by eliminating the life-long payments of the past. LIMRA noted that some companies are shifting from single premium (where the customer pays the entire amount for the insurance in one lump sum) to a limited pay payment structure (where the customer pays at least two payments but not for the rest of their life) for their combination life products. Generally, LIMRA has found the majority of limited pay combination products have less than 10 annual premium payments.
Whole life (WL) combination premium rose 11 percent, representing 17 percent of the combination market. Variable life combination premium grew 66 percent but only makes up 6 percent of the total life combination market. Despite a decline of 15 percent, universal life (UL) combination premium still represents 77 percent of the market.
WL combination policy count jumped 48 percent and variable life policy count improved 32 percent. UL policy count fell 5 percent. (See Chart)
LIMRA research has witnessed a transition in the long term care insurance market, expanding to three distinct insurance products: individual long term care insurance (ILTCi), the life combination product, and the annuity/LTC product. Long term care coverage differences have diminished among various products with similar requirements to trigger long term care benefits.
Collective sales for the three products in 2014 are estimated at $3.2 billion and roughly 230,000 new lives covered. Due to the cost structure and the added life insurance protection of the product, life combination products account for the majority of the estimated 2014 new dollars, but less than half of new lives.
Of the three distinct insurance products, life combination products are offered by more insurers and continue to see new entrants. More than 20 life carriers are in this market. Currently less than 20 insurers sell in the individual long term care insurance (ILTCi) market, and an estimated 5 insurers sell an annuity/LTC product.
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