In an effort to attract retiring baby boomers concerned about wealth transfer issues, several insurers are expanding their rosters of products that combine life insurance with a traditional asset accumulation product.
Universal life insurance, which combines permanent life insurance protection with a savings element that lets policyholders build cash value, is one such product that has become increasingly popular in recent years, insurers say. Universal life “fills retiree needs and estate-transfer needs,” said John Walters, the president of the U.S. wealth management group at Hartford Financial Services Group Inc.
Hartford is planning to broaden its product menu, he said, though he declined to offer specifics. Last month Hartford introduced a variable universal life policy that includes guaranteed death benefit protection.
Variable life sales in the second quarter last year, the most recent period for which data have been compiled, totaled $630 million, a 2.1% increase from the previous quarter, according to a survey by the Tillinghast unit of Towers Perrin. At June 30 variable life assets held by the 42 companies responding to the survey were $103.5 billion, up 4% from the year earlier.
Demand for variable universal life products was strong in the 1990s, when the equity markets were performing well, said Jim Gelder, the head of U.S. life insurance distribution at ING U.S. Financial Services, the Atlanta subsidiary of ING Group NV in Amsterdam. Their popularity diminished during the market downturn early this decade, he said, but has resurged in recent months.
“People are regaining confidence in the equity marketplace and feeling more comfortable using this type of product design for insurance,” Mr. Gelder said. Insurers have added riders to their variable universal life policies that address investors’ concerns about a new market downturn, he said.
ING has broadened the selection of underlying investment choices for its variable universal life offerings and expanded its menu of asset allocation tools and modeling, he said. It uses third-party marketers to sell the products to banks, which typically sell them to wealthy investors through their private bank units.
“It’s a product that typically requires a one-on-one meeting with a financial adviser to explain the product,” Mr. Gelder said.
Though the complexity of universal life products may make them difficult for bank representatives to understand and explain, Hartford has more than 200 field account executives who can help banks make universal life sales, Mr. Walters said.
“Banks are becoming much better at approaching clients’ complete financial needs,” he said.
Variable universal life is particularly well-suited to investors who want market returns but also want to pass on their savings to heirs, Carmen Effron, the president of the CF Effron Co. bank insurance consulting firm in Westport, Conn., has said. The product can be viable in the bank channel, she said, though it is probably too complex to be sold by platform representatives.
Two other insurers have also launched variable universal life products in recent months, some with streamlined features to encourage sales through banks. The Boston-based John Hancock Life Insurance unit of Manulife Financial Corp. this month introduced Accumulation VUL, which offers a 20-year no-lapse guarantee and an optional rider to protect customers who use their policy cash value for retirement income.
Phoenix Cos., a Hartford, Conn., insurer, also introduced a simplified variable universal life policy last year that lets advisers sell the product without a client medical exam or lengthy underwriting paperwork.
