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.

Universal life accounted for 64% of single-premium sales in 2001, compared to 49% the previous year. Single-premium whole life comprised 21% of single-premium sales, up slightly from the year before. However, single-premium variable life accounted for 15% of single-premium sales, meaning it had less than half the share it achieved in 2000.

Nevertheless, among recurring-premium products, variable life continues to capture an increasingly dominant share of the bank channel, Kehrer found.

For the life insurance industry as a whole, LIMRA reports that both universal life and whole life sales increased in 2001, while variable and VUL posted sales declined for the first time since 1995. Banks, on the other hand, saw variable life products rise to 73% in 2001, from 58% of total life sales in 2000. In that period, universal life fell to only 3% of sales, from 16%.

In terms of first-year premiums, Liberty Life of Boston, part of Liberty Mutual Group, sold the most life insurance through banks for the fifth straight year, increasing its sales to $94 million in 2001, from $57 million in 2000.

All of Liberty’s bank sales are in single-premium life, and $92 million is in universal life. Liberty, in fact, is a significant factor in the dominance of UL products in bank distribution, Kehrer says.

Allstate Financial Corp., Northbrook, Ill., with $67 million in premiums, was up 90% last year from $35 million in total bank life premiums in 2000. It is the second largest life underwriter in banks and the largest seller of single-premium variable life in that channel, with almost four times the sales of that product as its nearest rival, Hartford Life Insurance Company, Simsbury, Conn.

Single-premium products account for all of Allstate’s life sales in banks, a company spokesman notes.

Aegon USA, Cedar Rapids, Iowa, was third in first-year life premiums in banks as its sales soared 178% to $52 million in 2001, from $19 million in 2000, solely because of single-premium universal life products. A spokesman for Aegon USA, a unit of AEGON N.V., The Hague, Netherlands, reports that the company no longer sells recurring-premium life through banks.

When life insurers were ranked by weighted premiums in bank sales, Nationwide Financial Services Inc., Columbus, Ohio, was on top, increasing sales to $30 million, from $27 million. Hartford Financial Services Inc., Hartford, ranked second, though down slightly from $15.3 million in 2000 to $15.2 million, and CUNA Mutual was third, despite a decline to $13.5 million, from $24 million.