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Life Health > Life Insurance

UL Sales Soared, VL Plunged Last Year

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In 2001, universal life insurance sales produced the highest growth rates theyve seen since ULs heyday in the mid-1980s, reports the year-end individual life sales survey of LIMRA International.

Annualized premium for the line rose by 18% over 2000 year-end results, says Elaine Tumicki, assistant vice president–product and distribution research, in an interview with NU. And it had a strong 4th quarter, with annualized premium up 25% over the same quarter in 2000.

The survey covers 2001 results of 84 life companies and their 73 subsidiaries, as well as 4th quarter results.

Though UL sales were up, Tumicki points out that overall life sales (for all lines tracked in the survey) were down across the board for the year. “Annualized premium for individual life was down 3%, face amount was down 7%, and number of policies sold was down 5%,” she says.

It was a “very interesting year,” Tumicki says.

Recent hot sellers–like variable universal life and survivorship life products–”cooled off” during 2001, she says. But products that have been in a state of decline–such as UL and whole life–showed “new signs of life.”

After the events of Sept. 11, 2001, the industry did see “some evidence” that individual life sales were surging, she points out. Now, eyes are turning towards 2002 results–to see whether the application increases noted in the 4th quarter of 2001 have translated into paid-for policies.

Tumicki attributes ULs resurgence in 2001 to the volatile stock market, and its dampening effect on sales of individual VUL and VL policies (which had annualized premium drops of 10% and 33%, respectively, compared to 2000).

This helped bump up UL market share from to 21% in 2001 from 17% in 2000, she notes. But “ULs 2001 market share is still well below its high in the mid-1980s, when it was just below 40%.”

As for individual WL, the survey shows annualized WL premium was up 5% in 2001 compared to 2000. Tumicki attributes much of the WL uptick to the stock market related fall-off in VUL sales.

“Perhaps consumers–or, more likely, producers–are more comfortable with the guarantees of WL and UL during the current volatility in the stock market” she says.

However, marketers should keep the WL results in perspective, cautions Tumicki. “Until 2001, WL sales had been down every year for the past 10 years,” she points out. “Also, the strong showing in 2001 was driven mostly by one company, which reported spectacular WL sales for the year.”

With the top WL sellers results removed, total WL sales in 2001 showed only 2% growth over 2000, she says.

Her take on the trend: “The WL industry is on a comeback, but its not as strong a comeback as some had predicted last year.”

The industry wont be able to reach a full assessment until the middle of 2002, she adds. Thats when submitted business in the 4th quarter will have been completed.

What about term life sales? The annualized premium, though down 9% for the year, was actually up by 8% for the 4th quarter, says Tumicki. “This suggests that term sales are back on track,” following the huge increases in sales that were spurred by implementation of Triple-X reserve regulations in 2000.

Many of those sales were made in late 1999 but recorded in the first two quarters of 2000. Then, sales dropped sharply, and by early 2001, “term sales looked horrible in comparison to 2000.” Yet, when 2001s term sales are compared to term sales in 1999, the 2001 results “arent that bad,” she says. “They are more like they were in 1999.”

In fact, she says, a new term insurance study LIMRA is about to publish shows the surveyed companies believe Triple-X has had “little or no” impact on the term market.

As for the survivorship market, Tumicki notes annualized premiums were “down substantially”–by 26%–for all products in that marketplace during 2001. Continuing uncertainty over estate tax repeal probably contributed to this downturn, she speculates.

Where survivorship VUL is concerned, this former top seller saw an annualized premium decline of 39% in the 4th quarter and of 27% in 2001, compared to year earlier results. Most likely, the continuing stock market volatility in 2001 played a big role in this, Tumicki says.

All year long, Tumicki recalls, insurers focused on educating producers about the estate tax repeal. They pointed out it is a “phantom repeal” that makes estate taxes disappear only for the year 2010. As advisors–and their clients–understand that, she predicts, survivorship life sales should begin to rebound, probably later in 2002.

Reproduced from National Underwriter Life & Health/Financial Services Edition, March 4, 2002. Copyright 2002 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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