Fueled by traditional products as well as relative newcomers, individual life insurance sales increased 4% in new annualized premium in 2011, marking the second consecutive year of growth, according to LIMRA International.
A sustained resurgence in whole life sales, driven largely by a growing consumer appetite for safer permanent products with premium and cash value guarantees, has been accompanied by stronger sales of emerging life insurance products, such as indexed universal life and term universal life, observes Kathy Ho, a research actuary at LIMRA. Which products are seeing the most growth?
Whole life premium increased 9% in 2011 compared to 2010, according to LIMRA, the sixth consecutive year of what Ho terms “phenomenal growth.” Consumers are flocking to whole life not just for safety but for simplicity, she says. “There are not a lot of ins and outs with the product.”
Overall in 2011, according to LIMRA, insurance companies issued 2% more individual life policies than they did the previous year, just the fourth year in the past 30 that annual policy sales increased. Strong universal life (UL) sales were a big reason, and much of that strength came from indexed universal life. Premiums for indexed UL increased an impressive 38% in 2011, in tandem with a 30% rise in policy count. Consumers, especially those in the 60 to 70 age bracket, like the indexed UL proposition of greater potential upside accompanied by protection from downside risk, says Ho. As a result, she and LIMRA expect indexed UL sales to remain strong in 2012, with more carriers entering the fray to give buyers a broader product selection.
Another UL product, term universal life, is carving out a niche in the life insurance market, notes Ho. It, too, is finding appeal among older, 60-something consumers, but it's also establishing a foothold in business planning and wealth transfer applications. Affordability is a key selling point, as term UL premiums tend to be “much cheaper” than those of traditional UL, she says. Giving policyholders the flexibility to convert into a permanent policy via a relatively straightforward process adds to the allure of term UL.
Obscured by the buzz surrounding indexed UL, term UL and whole life, variable universal life (VUL) experienced a resurgence of its own in 2011. A huge 36% jump in the fourth quarter of last year led to an overall 22% increase in VUL premium in 2011, according to LIMRA. Still, the number of VUL policies sold dropped 9% last year, part of a broader trend in which VUL policy count hasn’t increased in 29 quarters.
Despite the premium surge in 2011, “variable universal life is now more of a niche market,” says Ho. “Consumers just are not interested” in riskier life insurance products. As a result, VUL is losing market share to products like indexed UL.
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