Carriers Tinker With Flexible Terms

By Cyril Tuohy
InsuranceNewsNet

In the face of stagnant sales brought about in part by low interest rates, several big-name insurance carriers have made changes to their term life insurance portfolios in hopes of sparking sales. Call it a big refresh.

In the last nine months alone, Lincoln Financial Group, John Hancock, MetLife and Phoenix Insurance Cos. have announced changes to their term life insurance contracts in an effort to reach younger market segments.

The latest announcement, revealed earlier this month, came from John Hancock. The old-line carrier said in a news release that it had “re-engineered” term life products by delivering “significantly lower premiums in core market segments.”

Face amounts begin at $250,000.

Michael Doughty, president of John Hancock, said the changes to his company’s term life products are designed to shift the perception among consumers that life insurance is too expensive.

The company also announced a “UCheck” illustration tool to help advisors estimate the risk class of their term life customers.

Term is having a tough time, no doubt.

Growth in the number of term life polices measured by annualized premiums, face amounts or number of policies has flat-lined, according to LIMRA statistics.

In the third quarter of 2014, compared with year-ago numbers, growth of term life premiums was zero, growth of face amounts was zero, and growth of policy totals was zero.

LIMRA data also indicate that term life premiums, face amounts and policy totals year-to-date ending in the third quarter of 2014, each shrank by 2 percent compared with year-to-date numbers in 2013.

Historical industry data from the American Council of Life Insurers (ACLI) indicate that individual term policies still make up a huge portion of the life insurance market.

Of the new individual life policies bought in 2012, about 3.6 million or 36 percent were term policies. This totaled $1.1 trillion, or 66 percent, of the individual life face amount issued, the ACLI’s Life Insurers Fact Book indicates.

Longer term trends, however, indicate the number of individual life insurance policies purchased and in force over the 10-year period ending in 2012 is on the decline.

Term life product sales are fighting an uphill battle, and LIMRA late last year forecast more headwinds for term life sales in 2015.

For agents and advisors there’s little or no profit to be made by selling term products. Meanwhile, carriers seem to be channeling term insurance sales through the Internet as technology commoditizes term life coverage.

Still, term is the gateway to selling other, more high-value permanent life insurance coverage. Despite surveys showing consumers underinsured for life coverage — and knowing as much — people stay away because they believe term remains too expensive.

That’s not stopping carriers from trying to find ways to sell more term coverage into the middle market. Carriers appear to be responding somewhat to consumer demands for more flexibility in term products.

In November, Lincoln Financial Group said changes to its LifeElements suite of level-premium term products, which offer death benefit protection for anywhere between 10 and 30 years, will allow policyholders to lower the death benefit beginning in the fourth year in exchange for a corresponding adjustment in premium.

The company said the changes offer policyholders more budgetary flexibility as their financial profiles change.

“We continuously refine the portfolio to ensure advisors can help guide their clients in reaching their desired outcomes during different stages of life,” Michael Parker, vice president of life product management with Lincoln Financial Group, said in a press release announcing the changes.

In October, Phoenix added term life coverage to its insurance portfolio, and tacked on living benefit riders to the policy to boot.

Critical, chronical and terminal illness riders are available to Safe Harbor Term Life policyholders and a simplified underwriting version of the product, Safe Harbor Term Life Express, offers face amounts of as low as $25,000.

Thomas M. Buckingham, executive vice president of product and operations, sounded upbeat about the prospects of higher sales of term life, due to distribution arrangements through independent marketing organizations (IMO) and call centers.

“We expect the term offerings to contribute substantially to growth in our life insurance product line, and the combination of strong IMOs and call center distribution will help us achieve that goal,” he said in a news release.

In August, MetLife announced it was reducing rates on its guaranteed level term product to extend its reach into the market.

In a guaranteed level term contract, premiums remain the same for the life of the policy. Guaranteed level term policies are more common than annual renewal term insurance.

InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at cyril.tuohy@innfeedback.com.

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Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at cyril.tuohy@innfeedback.com.