Variable life products have seen better days. After hitting a peak of 36% of annualized new premium in 2000, VL sales have dropped by double digits for 3 years in a row, with declines of 12% in 2001, 24% in 2002, and 33% in 2003.
The VL line, which includes variable universal life and fixed premium variable life, accounted for 16% of annualized new premium in 2003–less than half their 2000 share. So, if your VL sales are down, youre not alone. In the last 2 years, 18 of the top 20 VL companies reported sales declines, according to LIMRAs quarterly survey, “Individual Life Insurance Sales in the United States.”
Even so, some people are still buying. VL products brought in nearly $2 billion in annualized new premium in 2003. The product seems to do better than average in the Eastern and upper Midwestern parts of the country, based on data in the “LIMRA Life Buyer Study and MarketMap” (see map, based on 2002 data).
The high penetration regions have a higher share of VL products than the country as a whole, with 25% or more of new annualized premium coming from these products. The West South Central and Mountain regions have lower penetration than the country as a whole, with less than 20% of new premium from VL. Overall, VL products accounted for 22% of new premium in 2002 in the United States.
However, overall regional penetration levels mask some differences by state and within states. For example, the Pacific region has a moderate VL penetration rate. But within the 5-state region, 3 states have low penetration (Alaska, Oregon and Washington) while the other 2 (California and Hawaii) have moderate penetration.
Furthermore, within California, 4 of the states 25 Metropolitan Statistical Areas (MSAs) have higher than average penetration. These include the largest MSA in California (Los Angeles) along with San Jose, Orange County and Santa Rosa. Balancing these are 14 MSAs with lower than average VL penetration.
Penetration rates also seem to be related to income levels. Four of the lowest 5 states in median household income also have low VL penetration rates. Similarly, 4 of the top 5 states in median household income have high VL penetration rates.
In line with higher incomes, new VL policies are much larger on average than other permanent policies. The average VL policy size is $366,000, nearly double that of universal life and more than 5 times the whole life average size, according to LIMRAs quarterly life sales survey.