Single Premium Life A Huge Hit, Bank Execs Say
The swift sales surge for single premium life insurance in banks last year was no accident, say two executives whose banks helped lead the trend.
Single premiums make a lot of sense for banks because they make a lot of sense for the typical bank investment customer, says Gregory D. Vacca, first vice-president, CalFed Investments, a unit of California Federal Bank, Sacramento.
Most customers for SP life are in their late 60s, looking to transfer wealth tax-free to children or grandchildren, notes Robert J. Mittel, senior vice president and national sales manager of Dime Insurance Group, Islandia, N.Y.
That group happens to represent a significant market.
A recent survey by Kenneth Kehrer Associates, Princeton, N.J., found that bank sales of SP products rose 70% to $328 million in 2001, from $193 million the year before. Meanwhile, recurring premium life sales actually slipped 18%, from $152 million to $124 million.
“The typical investing bank customer is more mature than the average investor,” Vacca points out. “That segment is looking not so much to accumulate as to spend and transfer assets, so a life product makes sense for them. And for the bank sales force, single premium is relatively simple to sell, and to sell at the platform level.”
CalFed sells SP life products manufactured mainly by Allstate Insurance Company subsidiary Glenbrook Life and Annuity Company, Northbrook, Ill., along with products from Liberty Life Insurance Company, a subsidiary of Royal Bank of Canada, Toronto, and the Transamerica unit of AEGON NV, The Hague, Netherlands.
After starting with Glenbrook, CalFed added Liberty and Transamerica to fill out market niches, says Vacca.
“For instance, one thing that attracts people to single premium is that its ideal for wealth transfer, where they may have a taxable event. Liberty has a single premium immediate annuity, tied to a flexible payment life product.”
Libertys product enables the customer to use the annuity to pay for a single premium life insurance contract out of the gains on the annuity, Vacca explains.
CalFed also sells a Transamerica product that offers an accelerated death benefit as income-tax free income to pay for long term care.
“The products are becoming more and more flexible,” Vacca notes.
In 1998, CalFed did only about $4 million in SP business. The following year, it grew to about $12 million. In 2000, sales doubled to $24 million and last year hit $40 million.
Through May of this year, Vacca reports, Cal Fed has already sold over $30 million of SP life, largely due to a special promotion the bank did in March and April, when it sold close to $18 million. That doesnt include long-term care insurance.
Vacca says over 90% of SP life products the bank submits are issued and placed. The average sale is around $36,000.
In comparison, the premium for the average annuity is in the $20,000 range, he notes.