Individual life insurance sales in the first half of 2000 appear to have rebounded from years of poor performance, according to a new survey from the life insurance industry group Limra International in Windsor, Conn.
According to the survey, new premiums grew 16% in the first half of 2000, compared with the first half of 1999, while the number of new policies sold was up 4%. Face values of the policies sold increased 34%.
While these numbers are positive, they represent only an uptick after a lot of bad years for life insurance sales, said Maria Dynia, assistant scientist at Limra and conductor of the survey. This is just a quarter where were seeing some growth, she said.
Ms. Dynia listed the factors that caused the downturn in life insurance sales. First, she said, consumers arent being approached by agents as much as they used to be, as there are fewer dedicated life agents, and they have fewer opportunities to approach clients.
Second, she said, theres a lot more competition for dollars, notably from other investment vehicles. People worry more about outliving their assets than about dying young, she said, so they are more likely to invest in 401(k)s, IRAs, and mutual fund accounts than to buy life insurance.
The increases were primarily driven by strong sales of variable universal life, with new premiums up 41% for the year so far. Face value was up 34%, and new policy sales were up 12%. Limra said that of the 53 companies it surveyed that sell variable universal life, sales had increased at 49. Variable life sales grew as well during the first half, with premiums up 20% from 1999 and face value up 15%. The number of policies sold increased 3%.
Term life sales also saw increases, with new premiums up 38% in the first half of the year compared with the first half of last year, and face values up 37%. The number of term life policies sold grew 16%.
One factor Ms. Dynia said influenced term life sales is regulation Triple X, a model created in the early 1990s by the National Association of Insurance Commissioners which has been passed by 30 states. Triple X requires companies to hold more reserves for some life insurance policies. Some experts believe this law will force prices to go higher for term policies, Ms. Dynia said, so consumers are buying policies with 20- to 30-year terms to lock in lower rates before all of the states ratify that regulation.
Other life insurance lines surveyed did not fare as well. In whole life, new premiums and face value declined 9% and the number of policies sold fell 5%. Universal life premiums also fell 9%, face value of those policies dropped 2%, and the number of policies sold was down 13%.
Michael A. Cohen, a life insurance analyst with A.M. Best & Co., in Oldwick, N.J., agreed with Limras overall picture of the industry. He said sales are growing because insurers are getting better at reaching the life insurance market. But, he added, some of the decrease in whole life and universal life sales represents a shift to variable products that allow consumers to invest in stocks through their policies.
Changes in distribution have also affected sales, Ms. Dynia said. Youre seeing a shift to sales through independent sources like stock brokers, and away from career agencies, she said. In addition, she said, some insurers are forming distribution relationships with CPAs and lawyers, while others have pursued direct distribution.
The survey of 94 life insurance companies and their 57 subsidiaries is conducted each quarter by Limra International. The group said its survey captures about 76% of the industry.