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Growth in life and health insurance sales

By Alain Thériault | January 24 2012 07:52PM

In the third quarter of 2011, insurers experienced solid sales growth in their lifeand health product lines.Volatility and interest rates continue to undermine insurers’ profitability, and they had to increase the price of their long term guaranteed products once again this fall. However, in its report on sales results for the third quarter, LIMRA indicates that these products were not seriously affected by these increases.

LIMRA compiles quarterly sales results for the entire Canadian insurance industry. The U.S.-based life insurance research firm measures insurers’ sales in terms of new premium volume and by the number of new policies sold.

The Canadian industry collected $779 million in premiums during the first nine months of the year. Sales growth in terms of premiums has certainly slowed since the first quarter of the year, but the number of policies sold has increased.

New life insurance premiums grew by 5% in the third quarter of 2011 compared to the third quarter of 2010. Premiums grew by 9% during the first quarter of 2011 versus the first quarter of 2010, and by 6% in the second quarter compared to the same period last year.

As for policy sales, they increased by 3% in the third quarter compared to the same quarter in 2010, while they were down in the first quarter of 2011 and were stagnant in the second.

For the first nine months of the year, a measurement that LIMRA favors in its reports, premiums sold increased by 7% over the same period in 2010. During this same comparison period, the number of policies sold declined by 1%.

At the same time, whole life was front and centre in all categories (see table). Universal life products were also on the rise during the first nine months of the year. While insurers have raised the price of level cost of insurance (COI) products on several occasions, LIMRA notes that sales still increased during this period.

Annual renewable rate universal life insurance posted some surprising results. LIMRA found that despite a quiet September, this product experienced strong growth in the third quarter.

In contrast to other products, term insurance seems to have experienced a setback during the first nine months of the year. But things could be picking up. Measured by new premiums, term insurance did see sales increase by 5% in the third quarter of 2011 compared to the the third quarter of 2010. The number of new policies sold increased by 1% during the same period.

Critical illness insurance
Critical illness insurance sales increased during the first nine months of 2011 compared to the same period in 2010.

Canadian insurers sold $74.3 million of new premiums in this market. This is an increase of 8% for the first nine months of the year, compared to the same period in 2010. Insurers sold 72,458 critical illness policies in the first nine months of the year, up 7% over the same period last year.

Permanent CI sales were also robust. The product saw its highest sales by all measurements in the first nine months of the year compared to the same period in 2010 (see table). Limited pay products also enjoyed solid performance.

Term critical illness insurance experienced mixed results, but LIMRA points out that sales of this product improved in the third quarter.

The critical illness market has reached a respectable size. In force premiums came to approximately $565 million in the third quarter of 2011, an increase of 11%. More than 528,000 policies were underwritten in the same time period, which represents a 10% rate of growth.

«If insurers maintained their pace until the end of the year, the disability insurance market would have experienced growth as measured by both premiums and number of policies sold for the first time in three years.

This was revealed by the LIMRA report, which calculates disability sales for the first nine months of the year. During this period, sales in terms of new premiums increased by 5% compared to the the same period in 2010. As for the number of policies sold, this increased by 14% compared to the same time period.

In the third quarter alone, sales of disability insurance as calculated by premium increased by 10% over the same period in 2010. Measured by policy count, DI sales increased by 28% for the same quarterly period.

Disability insurance
Non cancellable disability insurance has managed to outstrip the growth of guaranteed renewable products when measured by new premiums (see table). Premium sales of this product had been trending down for several months. But the industry is not expecting a miracle when it comes to sales of this luxury product; the market for it reached maturity several years ago.

On the other hand, there have been several innovations in the guaranteed renewable disability insurance market in recent years, and sales usually follow. The product has caught up when it comes to policy count, posting a 17% gain for the first nine months of the year, compared to the 10% increase reported for noncancellable products.

Drop in seg fund sales
Segregated fund sales for the first nine months of the year totalled $6.3 billion, according to LIMRA. This is a 7% decrease compared to the same period in 2010.

Despite this decline in segregated fund sales in the first nine months of 2011, the third quarter ended on a positive note, with sales growing by 1% over the third quarter of 2010.

Fixed annuities sales continue to collapse. During the first nine months of the year, sales were down by 24% compared to the same period last year. The situation was hardly better in the third quarter, with sales down by 28% compared to the third quarter of 2010. As of Sept. 30, fixed annuities sales break down to 56% payout annuities, 36% of deposit annuities, and the balance in registered retirement accounts or in life income annuities.

Products that combine both deposits and segregated funds saw their sales decline by 2% in the first nine months of the year and 7% in the third quarter. These have, however, exceeded sales of term deposits when measured by volume. As of Sept. 30, 87% of combination product sales can be allocated to segregated funds, with the remaining 13% going to term deposits.

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