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Variable Life Is Back!

By Allison Bell

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Variable life products are back.

Premium revenue from new U.S. sales of variable universal life insurance increased 15% in the second quarter, and new sales of variable life soared 31%, according to the latest individual life sales figures from LIMRA International, Windsor, Conn.

The variable product increases compare with a 9% average increase for all individual life products.

LIMRA does not release the dollar value of new sales, but the unit sales figures also paint a bright picture of the variable product market.

Although the total number of all individual life policies sold in the U.S. fell 2% during the second quarter, the number of VL policies sold rose 5%, and the number of VUL policies sold jumped 12%.

The number of policies sold fell 1% for both term life and universal life policies.

Results for whole life were weak, with the number of whole life policies sold and premium revenue from new sales dropping 6%.

The rebound in variable product sales confirms the predictions of Elaine Tumicki, head of LIMRAs product research unit.

Variable product sales climbed in the 1990s, then stock market turmoil began scaring consumers away from the product in early 2001. Although variable product sales warmed up briefly in 2003, they continued to languish in most recent quarters.

But Tumicki noted earlier this year, after disappointing first-quarter life sales results came out, that changes in VL and VUL sales usually lag behind changes in stock market performance by at least one quarter. She predicted, accurately, that the strong 2003 stock market gains would bring about a revival in variable product sales in the second quarter.

To Tumicki and other executives at LIMRA, the revival in variable product sales is good news. But they also say that what life agents and carriers really ought to be focusing on is the 2% decline in the total number of new life policies sold during the second quarter.

In the past 20 years, the percentage of U.S. residents covered by individual life insurance policies has dropped to 53%, from 63%, according to LIMRA figures.

“Millions of individuals and households are either uninsured or underinsured, leaving them highly vulnerable if a breadwinner suddenly dies,” says LIMRA President Richard Wecker. “We want to see a return to growth in the numbers of individuals who own life insurance.”

Reproduced from National Underwriter Edition, September 9, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.