NU Online News Service, May 22, 4:10 p.m. – Banks increased first-year life insurance sales 31% in 2001, to $452 million, thanks in part to the strong performance of single-premium products, according to a new survey report from Kenneth Kehrer Associates.
“There was a dramatic increase in single premium in banks last year,” says Kenneth Kehrer, head of the Princeton, N.J., research firm. “Both banks and insurance companies are focusing on it, because of the success of a few banks in selling it. As banks became aware of other banks’ success, they began emulating them. So we expect even further increases [in single premium] in the first half of this year.”
Indeed, Kehrer’s survey found that bank sales of recurring-premium life actually slipped 18% in 2001, to $124 million. But single-premium sales more than made up for the difference, rising 70% to $328 million.
California Federal Bank, Sacramento, Calif. and Dime Savings Bank, New York, have had considerable success in selling single-premium products, a fact that has attracted the attention of other financial institutions, Kehrer says.
Bank sales of recurring-premium life products last year dropped to just over 27% of banks’ total life sales, compared to about 44% of banks’ total life insurance sales in 2000.
Although dollar premiums rose substantially in banks in 2001 in absolute terms, by another measure, they actually declined last year, Kehrer points out.
Because the life insurance industry discounts single-premium life 90% in estimating life insurance sales, these weighted premiums actually fell about 8% from the 2000 level, to $157 million.
Figures from LIMRA International, Windsor, Conn., show that total life insurance industry weighted premiums fell last year by 3% to $8.2 billion. Because banks’ weighted sales fell even further, banks’ market share of total life insurance sales in the United States decreased to 1.4%, from 1.5% the year before, Kehrer observes.
Looking at sales figures for various products, Kehrer found that fixed life products continued to dominate single-premium sales in banks, and universal life continued to capture most of the premium dollars.