New life insurance premiums sold through banks in the third quarter hit $512 million, up from $225 million in the third quarter of 2008, the year the market collapsed, according to Kehrer-Limra.
All told, the first nine months of 2010 brought in $1.4 billion in life insurance sales, topping 2004's high-water mark of $1.3 billion, and premiums were up 61% compared with the first nine months of last year.
"That growth is pretty impressive," said Scott Stathis, Kehrer-Limra's managing director. "It shows insurance companies' focus on banks is finally showing rewards, and they're really happy about that."
There are several factors underpinning banks' recent success in selling life insurance, not least the simplified single-premium policies insurers developed primarily for the bank channel. "They've certainly tried to make their products more transactional and easier from an application and processing standpoint," Stathis said. "These products look, smell and taste like a fixed annuity, but they're not effected by spreads, so this interest rate environment has really helped them gain traction."
To be sure, single-premium insurance and fixed annuities are different animals — the former is a wealth transfer product and the latter is supposed to provide an income stream. However, "when a customer is frustrated by low rates [on fixed annuities] and a capable rep asks what the money is for, oftentimes it's wealth transfer, which is something life insurance currently does with a better growth rate than an annuity. A significant amount of assets in fixed annuities is intended for wealth transfer."
Up to this point, most reps have not been interested in selling life insurance when they can sell an annuity, but with interest rates so low, advisers have had to fill the void caused by low-yielding fixed annuities.
Life insurance filled that gap and while Stathis suspects sales will slip as interest rates rise, many advisers have now cut their life-insurance teeth and may make it a permanent part of their mix.
"It's not as hard a sale as they thought, and they've begun to realize they're not doing a good job for clients if they don't ask about life insurance," Stathis said.
