IUL Shines Brightest in a Wilting Life Market in Q3

Indexed universal life sales continued to roar ahead in a sputtering life insurance market, according to the latest data.

IUL sales rose 8 percent in the third quarter compared to the year-ago period, market tracker LIMRA reported.

Wink’s Market & Sales Report had similar figures, reporting a 6 percent rise in third-quarter IUL sales to $479.5 million compared to the year-ago period.

Overall new sales of life insurance stalled in the third quarter as premiums fell 2 percent compared to the year-ago period, LIMRA reported.

Policy counts also dropped, by 3 percent in the third quarter compared to the year-ago period, LIMRA reported.

“In the past 10 years, policy count has fallen 21 out of 40 quarters,” said LIMRA CEO Robert A. Kerzner, in a briefing to members. “But at 3 percent, that was a big hit for the quarter.”

LIMRA does not release raw sales numbers.

Low interest rates contribute to sluggish life insurance sales and make some life insurance products such as whole life more expensive.

Whole Life Falls 4 Percent

Third-quarter sales of whole life policies fell 4 percent compared to the year-ago period after a large insurer left the market. Six in 10 underwriters reported lower sales, Kerzner said.

“Whole life is an older, stodgy product and more expensive to a large extent,” said Mary Pat Campbell, vice president of insurance research for the investment and consulting firm Conning.

“Whole life isn’t terribly exciting and that tends to be smaller face value policies compared to the other lines,” she said.

Agents have less incentive to sell a policy the smaller the face value of the policy.

When consumers see how stocks are performing, they would prefer to share in the potential gains of an index-linked product than remained weighed down by a fixed product like a traditional universal life or whole life contract.

Universal Life

IUL’s robust third-quarter sales dipped 1 percent from the second quarter as insurers repriced IUL policies to match actuarial risk assessments, an analyst said.

Sales were affected by how companies respond to new CSO 2017 actuarial risk assessments, said Sheryl J. Moore, president and CEO of both Moore Market Intelligence and Wink.

“Each company will definitely see a decline in sales after implementing the new CSO tables in their repricing, but so far we’ve not seen a lot of companies put their index life chassis on 2017 CSO mortality tables,” Moore said.

Repricing IUL policies to conform to new actuarial risk assessments is an opportunity for insurers to tweak product features.

At the same time, repricing poses challenges for agents and distributors who need time to familiarize themselves with the changes, Moore said.

With the Standard & Poor’s 500 stock index up more than 17 percent this year and the Dow breaking the 24,000-point threshold, equity index-linked insurance policies tend to perform well, industry analysts said.

“IUL’s have been attractive to consumers for a number of years, but especially in 2017 with the equity market run-up,” Campbell said. “The equity market growth headline news helps agents with a sales hook to begin the discussion with prospects.”

Universal life sales were flat in the third quarter compared to the year-ago period, LIMRA also reported.

Third-quarter guaranteed universal life (GUL) premium fell 16 percent compared with the year-ago period, LIMRA reported.

GUL policies, which are getting hit with higher cost of insurance fees, represent only 19 percent of all universal life sales and 7 percent of total life premium.

Third-quarter sales of variable universal life (VUL) fell 9 percent compared to the year-ago period and six out of 10 VUL companies reported declines, Kerzner said.

Term Life Sales Rise 1 Percent

Third-quarter sales of term life rose 1 percent compared to the year-ago period, LIMRA reported.

Term life’s market share held steady at about 22 percent of all life sales, where it’s been since 2011, Kerzner said.

InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].

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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 [email protected].