Individual insurance: whole life drives 2011 results

By Alain Thériault | April 17 2012 08:28PM

Whole life insurance sales fueled life insurers’ annual premium growth in Canada in 2011.
New individual life insurance premiums rose by 5% in Canada from 2010 to 2011 although the number of policies slipped 2% during this period.

2011 got off to a strong start. New annual premiums gained 9% in the first quarter of the year compared with the same quarter of 2010. Yet premium growth slowed in Q4 2011, up 2% from the same quarter in 2010.

Universal life insurance caused the slowdown, Karen Terry, product research manager at LIMRA, told The Insurance and Investment Journal in an interview. Whole life sales surpassed those of universal life, she points out, although UL sales started the year robustly.

Clients seemed to rush to buy universal life before the wave of price hikes announced last year came into effect. Premiums soared by 18% in Q1 2011 compared with the same quarter in 2010 Then premiums dropped by 13% in Q4 2011 compared with the same period in 2010.

Universal life insurance sales faced many challenges, Ms. Terry explains. The pressure of low long-term interest rates is continuing, and insurers revised their level cost product prices upward, she explains.
Low interest rates are also clouding the US waters, she adds. LIMRA found that permanent universal life sales (lifetime UL) fell 7% in 2011 in terms of annual premiums. The influence of rates is palpable. LIMRA attributes the decline of this interest-rate sensitive product to price rises and companies’ exodus from this niche.

In 2011, universal life grew by an anemic 1% compared with 2010, including surcharges. The number of policies sold declined by 7% during this comparison period.

Whole life insurance was the all-around leader. New annual premiums were up 17% in 2011 versus 2010. All suppliers LIMRA surveyed reported growth, mostly in the double digits. Sales in terms of policies rose by 12% during the comparison period.

Ms. Terry cites several reasons for this growth. For one, insurers announced several changes to their whole life products. They also stepped up their advertising efforts and intensified promotion to sell more products in the large insurance amount niche.

Term insurance seems to be recovering after struggling in early 2011. Sales are down for the year overall, with a 3% drop in premiums, but they rose by 1% in Q4 2011 versus the same quarter in 2010. Term policy sales slumped by 4% in 2011 compared with 2010.

Regarding premiums, whole life insurance sales topped universal life for the first time in over 10 years, Ms. Terry says. They garnered 36% of total sales last year compared with 35% for universal life.

Premium growth remained stronger in the independent network than in the captive network in 2011, at 6% versus 3% in 2010. Universal life’s debacles stifled growth for independents in Q4 2011 – premiums stagnated over the reference period. Meanwhile, captives enjoyed steady growth throughout the year, buoyed by whole life results.

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