Contributing Editor, InsuranceNewsNet
March 8, 2011 -- Independent agents are starting to show some willingness to look at whole life (WL) insurance as a product they might offer to customers.
That is a shift from five years ago when most independents were “locked onto” universal life (UL) with secondary guarantees for clients with permanent life insurance needs, says Robert M. Barnes, a brokerage general agent in Orland Park, Ill. and regional vice president of One Resource Group.
Many agents still prefer the guaranteed UL product, he concedes, noting that he encounters this preference when he is out on the road visiting agents. They say guaranteed UL costs less than WL but still has the guarantees, he explains.
However, he is finding that stereotypes about WL are beginning to break down. For instance, he says, “independent agents are seeing how WL has flexibility. If the policy has cash value built up, for instance, the owner can skip premium payments without the policy imploding.” That’s because cash value will take care of the skipped premium.
The fact that prices are going up for the competing product—guaranteed UL—is also giving independent agents pause. The carriers have had to increase those prices—and also term life prices--in response to the prolonged low interest environment, Barnes points out. Some UL companies have also stopped paying commissions on the excess target premium for UL, he says.
A final—and perhaps more important—factor is that WL products have what many customers want today, says Barnes. “What they want is guarantees, and the presence of guarantees has never changed in WL products.” He points to guarantees in face amount, premium structure and death benefit as examples.
Not just talk
That consumers are interested in WL is not just talk. It’s showing up in sales. Industrywide WL sales results have been increasing for six consecutive quarters, reports LIMRA, the Windsor, Conn., researcher. In 2010, new annualized WL premium was up 15 percent. Numbers of policies sold were up, too—by 2 percent for the year and 6 percent of the fourth quarter.
Altogether, nearly 60 percent of insurers increased their WL premium in 2010, LIMRA says. In terms of market share, WL rose to 28 percent from 24 percent in 2009, the researcher says.
By comparison, UL—the market share leader at 41 percent—saw new annualized premium rise in 2010 as well, but by 10 percent. Policy count was up 21 percent for the year. LIMRA says that the introduction of “term UL” policies (UL with term-like premiums) was influential in the UL sales increase.
Most people assume that the industrywide WL sales results primarily reflect production at the giant mutual life companies with captive agents. WL is a flagship product at some of these carriers.
But WL sales are also up at companies that serve both independent and career agent channels. For instance, American United Life, Indianapolis, saw its 2010 traditional WL sales jump by over 75 percent from 2009, says Jeffrey R. Smith, vice president and executive director of Centers of Excellence. That represents sales in both the independent and career channels.
Ohio National Life saw WL sales grow by 39 percent in 2010 over 2009. “We did see a larger increase in applications for the independent (personal producing general agent, or PPGA) channel versus the career, but premium increase was virtually the same--40% for PPGA and 39 percent for career,” says Karl Kreunen, assistant vice president-life product marketing.
The Ohio National sales were fairly evenly spread between age groups, including the 51-60 age group. The 61+ age group took a small percentage of sales as well, Kreunen says.
Has the WL market heated up to the point that the carriers are flexing their competitive muscle to turn the heads of independent producers as well as career and captive producers?
Not any more so than previously, say executives. As AUL’s Smith puts it, “I think WL has always been competitive.”
Hence, no one is reporting an explosion of constant rate changes, policy enhancements, and incentive programs related to WL. “This is not the term insurance market,” one executive says.
AUL’s Smith puts it this way: “Our company does compete, but it’s not on the basis of ‘my ledger is better than your ledger.’ It’s based on things like underwriting, service and sales.”
Ohio National’s Kreunen believes that, although the market is not highly competitive, “the carriers are developing product at a faster rate than in the past.” Some of this has resulted from the move to the 2001 Commissioners Standard Ordinary (CSO) mortality tables, he adds. The revamping provided an opportunity to change things or add new riders.
The growth in WL sales has more to do with market conditions than to a sudden burst of competition, contends Smith.
During the previous two decades, distributors gave greater attention to UL and also to variable universal life (VUL), he recalls. That was in response to periods of high interest or strong stock market upswings. Producers downplayed WL at the time, saying its returns were “too little,” Smith continues. “They would tell clients, ‘Don’t put your money in there.’”
But the market volatility and low interest environment of recent years rendered UL and VUL less attractive to consumers. That’s when WL’s fortunes began to turn.
The American public today is now more interested in guarantees, agrees Kreunen. Back 10 or more years ago, many people had high expectations for their equities investment in their 401(k) retirement plans, he recalls. But today they see that their asset values are going nowhere. That, plus the fact that home values have also gone down, has triggered a desire in many to look for guarantees, he says.
Some agents use guaranteed UL for this market, especially for older workers, due to its generally lower price, Kreunen allows.
But one WL that his company offers is a low-premium participating policy. Older buyers are taking to it, he says. “They like the guaranteed growth rate, the opportunity for dividends on top of that, and the liquidity that builds up over time.”
Seeing that, agents are also starting to want WL, Kreunen says. That includes agents who sold UL all their lives, he says.
WL products have been sitting in the back seat for a number of years, comments Smith. Now they’re moving up front as the industry returns to positioning life insurance for what it was designed to do. “WL was not designed to be the only piece on the chessboard, and it was not designed to compete against mutual funds and stocks,” he says.
Linda Koco, MBA, is a contributing editor to InsuranceNewsNet, specializing in life insurance, annuities and income planning. Linda can be reached at email@example.com.
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