After lagging, life insurance sales on the increase

After an extended period of lagging life insurance policy sales, the industry may be forging a comeback, at least according to several accountings.

While total annualized premiums are still on the decline, the number of U.S. retail life insurance policies sold increased 4% in the first quarter of 2023, representing the highest policy sales growth in more than two years.

Sixty-one percent of the total policy growth was from whole life and term sales driven primarily by small to mid-sized companies, according to industry trade group LIMRA.

Rise in smaller face amount policies 'encouraging'

“Last year’s premium was elevated due to changes in IRS tax codes,” said John Carroll, senior vice president of LIMRA. “This year we are seeing premium growth normalize. It is encouraging to see an increase in policies sold with smaller face amount, possibly signaling continued interest from middle-market consumers.”

The growth in numbers perhaps correspond to similar findings by the MIB Life Index, an underwriting resource. It said this week that U.S. life insurance application activity returned to growth in May, up 7.5% compared to the same month last year, and up 6% compared to May of 2021. Year-to-date sales increased 4.2%, MIB said. Experts said the growth in application is likely as bellwether for continued sales increases.

Variable and fixed universal life sales continued to struggle, according to LIMRA. Variable annualized premiums fell 4%, to $421 million in the first quarter, with sales falling 17%. Fixed universal life policies experienced double-digit declines, with premiums dropping 16% and sales down 13% for the first quarter of 2022.

Whole life premiums total $1.5B in Q1

Whole life new annualized premiums totaled $1.53 billion in the first quarter, down 4% from the previous year, but the policy count increased 6% year-over-year.

“Although half of whole life carriers reported a decline in the number of policies sold, a few mid-size and small carriers, focused on guaranteed issue and smaller face amounts, propelled the overall growth in whole life policy sales,” said LIMRA.

Term life insurance was the only product line to experience growth in both premium and policy sales. In the first quarter, with new annualized term premium and policy count both increased 1%, compared with first quarter 2022.

Over the long term, pre-COVID, we had seen policy sales decline for many years,” said Karen Terry , assistant vice president of insurance research for LIMRA. “While we had seen premiums increase, some of that was due to things like larger term policy sales, some of that was related to higher premiums for some of the more flexible premiums, like universal life and that type of product.”

Pandemic impacted life insurance sales

When the pandemic hit, Terry said, there was a shift in the trend of premium dollars, vs. volume sales.

“With a pandemic, we have a lot of consumers suddenly focused on their own sense of mortality,” she said. “So, pandemics and other crises like that tend to bring that point home. So, during the beginning we saw a turnaround, and had an increase in policy sales, which was something we hadn't seen for a while.”

Inflation and other economic factors may have contributed to the lower premium sales numbers, however, the gap between dollar sales and policy numbers may be closing, Terry said.

Doug Bailey is a journalist and freelance writer who lives outside of Boston. He can be reached at [email protected].

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Doug Bailey is a journalist and freelance writer who lives outside of Boston. He can be reached at [email protected].