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October 21, 2001 at 08:00 PM
Bank Sales Of Life Insurance Gained Momentum In First Half
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The evidence is mounting that banks are making progress in building their life insurance sales.
According to the Kehrer Report semi-annual survey, banks increased their life sales to $77 million during the first half of 2001, a 45% increase over the same period last year. Actual new life premium was up 76% to $218 million, but almost three-fourths was in single-premium products.
Life insurance industry sales statistics discount single-premium products to 10% of the actual cash premiums in toting up life sales. Thus the bank weighted-premium total of $77 million was only 35% of the $218 million in premium from new life sales that banks actually produced between January and June.
Banks had $157 million in single-premium life sales, almost twice the level achieved during the first six months of 2000. The lions share was placed in single-premium universal life contracts (62%), with 20% in single-premium whole life contracts and only 14% invested in single-premium variable life.
Banks have been more successful in building single-premium life business than traditional recurring-premium life business, because single-premium products share some of the characteristics of annuities and are an asset-transfer sale.
In contrast, recurring life products are more like a savings product, requiring the purchaser to reduce consumption of other goods and services over time to make the recurring premium payments.
Bank sales of recurring premium life products increased 36% to $61 million during the first half of the year.
Variable products account for most recurring-premium sales. Variable life and variable universal life captured 74% of first-half recurring-premium life sales by banks. Term life products attracted 16% of first-year premiums, with 5% going to universal life and 5% to whole life.
Meanwhile, other life insurance distribution channels were actually experiencing shrinking sales. LIMRA International reports total life insurance industry sales (or weighted premium) were $4.2 billion in the first half, down 3% from the same period last year. The decline occurred in the second quarter, after first quarter sales were essentially flat with the first quarter a year ago.
Consequently, banks increased their market share of U.S. life insurance sales to 1.8%, a two-thirds increase over the first half of last year. While still small, bank life sales are becoming increasingly important. Last year, banks accounted for 11% of the increase in life sales from all channels. So far this year, the growth in life sales in banks has helped to offset the decline from other channels.