U.S. Individual Life Sales

Up 4% In First Quarter

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U.S. life insurers are reporting slow growth in individual life insurance sales revenue for the first quarter.

Survey results from LIMRA International, Windsor, Conn., show premium revenue from all new individual life sales amounted to $2.2 billion, up 4% from the total for the first quarter of 2000.

The number of policies sold fell 13%, to 1.4 million, and the face amount of the coverage sold fell 15%, to $255 billion.

LIMRA researchers say the latest figures look soft partly because early 2000 was an unusually good period for term life sales. Revenue from new individual term life sales fell 24% from the first quarter of 2000, to $325 million.

But term life accounts for only 15% of new U.S. individual life policy sales revenue, according to LIMRA.

Variable universal life, the leading product in terms of new policy sales revenue, with a 45% share, continued to do well in the first quarter. Revenue for new VUL sales increased 19%, to $975 million.

The number of VUL policies sold fell 11%, to about 140,000, but the face amount of the coverage sold fell only 2%, to $51 billion.

Holders of VUL policies can put policy assets in stock funds and other investment funds. The recent slump in stock prices may have drawn consumers money to VUL products, rather than pushing it away, according to Elaine Tumicki, an assistant vice president with LIMRA.

“People were buying low, and putting more money into a variable contract at a point when the market was low,” Tumicki says.

Some consumers may have been shopping for bargains, but others may have increased their contributions to stabilize the cash value of their policies, Tumicki says.

LIMRA based its latest quarterly results on a survey of 87 insurers and 61 subsidiaries.

LIMRA researchers have warned insurers and others against relying too heavily on figures for a single quarter as evidence of market trends, because of the possibility of unusual events skewing the data.

In the latest survey report, researchers emphasize the effects of the Valuation of Life Insurance Policies model regulation, better known as “Triple-X,” developed by the National Association of Insurance Commissioners, Kansas City, Mo.

The regulation increases reserve requirements for level premium life products sold on the understanding that issuers will hold rates steady for long periods of time. Many states put regulations based on Triple-X into effect Jan. 1, 2000. Others adopted Triple-X-based regulations later in the year.

Fears that the new reserve requirements would increase term life prices led to a dramatic increase in term life sales in late 1999 and early 2000, LIMRA researchers note.

Although U.S. individual term life sales were much lower than they were in the first quarter of 2000, they were still higher than they were in the first quarter of 1999.

LIMRA survey participants have not yet reported any noticeable increases in term life insurance costs.

The average reported premium for term life insurance actually fell 3% from the first quarter of 2000, to $2.19 per $1,000 of coverage, according to LIMRA.

Meanwhile, the average premium for all types of individual life coverage increased 22%, to $8.50 per $1,000 of coverage.


Reproduced from National Underwriter Life & Health/Financial Services Edition, July 20, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.


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