Double-Digit Increases For New Life Premium In Banks Last Year
Banks and thrifts had new life premium of $643 million during 2002, up 42% from 2001 and 90% better than the level achieved two years ago.
Banks continued to emphasize single-premium life products, increasing sales by 48%, to $484 million. First-year premium in recurring or flexible-premium products like term, whole and universal life and variable life was up, too, after slipping in 2001. Bank sales of recurring-premium products were up 28% in 2002 but were only 9% above the 2000 level.
Life insurance industry statistics generally discount single-premium products, because historically they have been much less profitable to insurers than recurring-premium products. LIMRA International uses the weighted-premium method to report industry sales, discounting premium from single-pay products 90% in its sales statistics.
Under the weighted-premium method, banks had just $207 million in life sales during 2002 ($159 million in new recurring-premium plus 10% of $484 million of single premium). Weighted premium sold through banks was up 34% in 2002, after falling 8% in 2001.
Using weighted premium enables us to compute bank market share, because life industry sales statistics generally are based on weighted premium. U.S. life industry sales increased 3% in 2002 to an estimated $11.4 billion, according to LIMRA. Thus, bank market share reached 1.8% in 2002 after slipping slightly in 2001.
While still small, banks life sales are growing, and their market share is starting to increase.
Our analysis of bank life insurance sales monitors whether the increases in life insurance sales come from more banks starting to sell life insurance or from improvements in sales by banks that already sell life.
The dramatic growth in bank fixed annuity sales from the mid-1980s until 1992 was the result of more banks starting to sell fixed annuities each year. Each bank used a similar methodology and had similar sales penetration.
On the other hand, the growth in bank VA business was driven by improved sales penetration in banks that were already selling VAs.