VUL Set To Take A Bigger Bite Out Of Life Sales, NAILBA Panel Says

While variable universal life represents a small portion of the overall market, it is a slice that is growing bigger each quarter.

VUL sales are being driven by very robust market conditions for the product, agreed a panel of industry executives at the National Association of Independent Life Brokerage Agencies' virtual annual meeting.

"The market conditions are absolutely right. The economic indicators would tell us that VUL is a really good spot to be," said Doug Winkler, vice president of independent distribution for Prudential. "Recently, IUL has been sort of the dominant new product. But with low interest rates, meaning lower option budgets, we think that the opportunity to transition to VUL is very strong."

Five years ago at Prudential, two-thirds of sales were guaranteed universal life and term life, Winkler said. Today, the breakdown is two-thirds VUL and term. Industrywide, VUL sales are up from 6% to 11% during that time, he added, citing LIMRA statistics.

"So I think we're clearly on a trajectory that's going to lead us at some point, I think, closer to 20% of industry sales," Winkler said.

Indeed, LIMRA recently upgraded its forecast to project more than a 20% increase in VUL new premium for 2021.

Roadblocks To Success

With VUL, cash values are invested in the market with the policyholder taking on the investment risks so VUL sales tend to rise and fall with the stock market. VUL sales peaked around the year 2000, but after the dot-com market collapse lifetime guarantee universal life started eating into VUL’s market share.

Guarantee universal life sales rose steadily until 2008 after which market share eroded with the collapse of interest rates.

While VUL is rising again, hurdles remain to fully capitalizing on the strong sales environment, the panel said. They listed several:

Commissions. Regulations are compressing commissions, which has many agents concerned, said Stevan M. Cohen, vice president and national sales manager for Lincoln Financial Distributors.

"We know that agents want to do the right thing for their clients, but they also are looking at what they're being compensated," he said. "And there is a concern around going through a broker-dealer and the reality of the compensation that's out in the street."

Complexity. For brokerage general agencies and agents, there remains complexity around distribution and uncertainty over who they can work with, the panel agreed.

"The biggest challenge that we have is knowing the selling agreements that are out there," explained Kurt M. Thomas, vice president, J.L. Thomas & Co. "I think a lot of reps don't know who they can write variable life through for a brokerage agency. We've had some cases where the rep thinks he can write it through us and we do all the prep work, the quotes, the underwriting, and then we find out you can't write it through J.L. Thomas, because there's a special deal that the BD has."

More transparency and education could go a long way to solve these issues, he added.

Licensing. Another issue concerns agents who let their license to sell variable life insurance lapse, perhaps while the products were not selling as well.

"That's both the case with some producers that sell life insurance as well as with agencies that perhaps had let it go or just never had it," Winkler said. "We have to convince them to come back into the marketplace."

But it might not be that simple if agents see the products as too complicated, with the subaccounts and explain and manage, or if they feel the policies are too difficult to manage. There needs to be education to counteract those thoughts, Winkler said.

"We have new technologies that manage policies like we never had before just three or four years ago," he said. "Now we have the ability to get cases through underwriting in hours instead of months. So some of these new things that we have should be putting at ease financial advisors' willingness to talk to their customers."

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at john.hilton@innfeedback.com. Follow him on Twitter @INNJohnH.

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