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Individual life insurance sales soar in second quarter

By Alain Thériault | September 22 2015 12:05PM

Preliminary figures shared by research firm LIMRA exclusively with The Insurance and Investment Journal show that individual life insurance sales soared in the second quarter after a quiet first quarter.  

In terms of new premiums, individual life insurance sales in Canada galloped ahead by 13% in the second quarter of 2015 compared with the same quarter of 2014. The number of policies sold climbed 6% during this comparison period.  

This is a strong rebound compared with the previous quarter of this year. In Q1 2015, premium growth was merely 1% and the number of policies sold slid by 2%, according to LIMRA.

The preliminary figures that LIMRA shared with The Insurance and Investment Journal also indicate that the first six months of 2015 saw a 7% rise in life insurance premiums compared with the corresponding period in 2014. The number of policies increased by 2% during this comparison period.  

Last year, term insurance sales were exceptionally affected by the transition of a block of sales between carriers, LIMRA points out. Sales naturally rebounded this year. New products launched earlier in 2015 also influenced results. The four largest carriers of this product drew 54% of new premiums. Three of these powerhouses posted double-digit gains in term insurance in the first half of 2015.

Whole life insurance is still a growth engine. Premium sales surged by 16% in the second quarter of 2015 compared with the same quarter in 2014. The three largest carriers of this product generated 69% of new premiums.  

What’s more, universal life bounced back after a multi-year decline. It posted sales growth of 14% in premiums, which reaches 20% when you add sums deposited by insured in the accumulation funds of these policies. In term insurance, premium sales were up 7% during this period.  

Universal life insurance dominated the second quarter in terms of number of policies sold, 9% more than the first quarter of 2014, compared with a 4% rise in whole life sales during this comparison period. The number of term policies sold increased by 6% during the same period.  

Between the first six months of 2015 and the first six months of 2014, universal life premiums sales outpaced those of whole life, with 10% growth versus 9%. When you include excess premiums, the growth rate is 16%. During the same comparison period, term insurance premium sales stood at 3%.

Universal life shone in Q1 2015 regarding the number of policies sold, with growth of 7% versus the same period in 2014. For whole life insurance, the figure was 1 percentage point lower. Sales of term policies edged up 2% during the first six months of 2015 compared with the same period in 2014.  

“UL recently began a strong recovery, after an extended decline,” says LIMRA research director Karen Terry. “New products introduced late in 2014 have been a factor here, as well as some competitive repricings. The top three carriers represent over half of new UL premiums so far in 2015, and they’re definitely driving overall growth for this product.”  

Terry puts the upswing in perspective. “UL has been declining for so many years, after several repricings due to the low interest rate environment. In 2014, sales were still at 40% of UL’s peak in terms of premium sales in 2007. We’re not quite half of that level of premiums ($421 million) in 2007. Now we’re just under $288 million (year-to-date in 2015).”

Reviving since Q1 

Universal life insurance sales showed renewed vitality starting in the first quarter, with 5% gains compared with the first quarter of 2014, the latest LIMRA report on individual life insurance sales in Canada reveals. Policy sales increased by 5%.  

Overall life insurance sales in Canada in the first quarter rose by 1% in terms of new premiums. The number of policies edged down 2% (see table). The 20 companies LIMRA surveyed represent 94% of the Canadian individual life insurance market.  

Universal life clearly stands out. This individual life insurance product posted robust growth in terms of volume of new premiums and number of new policies.  “Continuing the positive trend over the latter part of 2014, UL sales showed positive growth across the board, the only product to achieve this in the first quarter,” says Rob Kanehl, LIMRA research director.

Slow start

However, the market generally got off to a slow start, Kanehl points out. “Several new products were launched in the new year, with mixed results as advisors adjusted to selling them.”

Whole life, which had eclipsed universal life in the post-crisis years, stagnated in the first quarter. New premium sales barely budged by 1% in Q1 2015, compared with the first quarter of 2014. A year earlier whole life was growing briskly, as new premiums advanced by 25% in the first quarter of 2014 compared with the same quarter in 2013. 

The share of sales for each of the three product categories LIMRA analyzed held steady in the first quarter vs. the same quarter of 2014. Whole life still represents half of total sales in terms of new premiums, the first quarter results confirm.  Next comes term insurance with a 27% share, and universal life trails at 23%.  

The average policy size grew by 12% in whole life in the first quarter compared with the corresponding period last year. It increased by 7% for universal life insurance and 2% for term insurance.  

LIMRA pins this phenomenon on the downward trend in insurance prices “Average policy size increased for all three products. Several re-prices seen at the end of 2014 contributed to these gains as advisors waited to submit sales to lock in the newly lowered rates,” Kanehl says in the LIMRA report. 

Karen Terry explains the link between lower prices and policy size by the fact that customers could afford more coverage for the same price.  

The average price for each $1,000 of universal life insurance was $8.39 in the first quarter of 2015, down 6% from the first quarter of 2014. The average price for each $1,000 of whole life was $23.19 in the first quarter of 2015, down 5% compared with the same quarter of 2014.

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