Life Insurance Headwind?

Seemingly contradictory reports are coming out on the life business, making it hard to tell if the business is gathering steam or not.

Some reports say consumers are backing away from life insurance–by not buying new coverage at key life insurance buying ages, canceling existing policies and/or not seeking new coverage.

For instance, a study from the National Association of Insurance Commissioners says 2% of consumers have fallen behind on life insurance payments, and 3% have canceled life insurance policies altogether. The MIB Group, Inc., Braintree, Mass., says U.S. life insurers used MIB databases to check 0.2% fewer individually underwritten life applications in July 2008 than in the comparable month a year earlier.

Meanwhile, 2nd quarter reports from various publicly traded life companies put out statements that could be viewed more positively. For instance, some say that persistency is up (could be good or bad, depending on how the products were priced); underwriting costs are down (if from improved efficiencies, good; but if from declining applications, bad); and/or sales in certain markets are falling (ouch).

Because those 2Q reports are from individual companies, varying views are to be expected. Still, some type of industry headwind usually emerges from the mix of company results and industry data. Right now, though, this is a bit hard to discern.

Could the headwind be in the sales of the newest kid on the life insurance block, the indexed universal life policy? A report just out from AnnuitySpecs.com shows that 2Q 2008 sales of these products rose 6.3% from 1Q 2008 and 12.7% from 2Q 2007. But, at $130 million, the 2Q results are skating below the quarterly record of over $160 million in 4Q 2007. So, it’s too early to call a headwind here.

Do new product rollouts have anything to say? Well, new universal life policies and new term policies or upgrades dominate the new product roster I keep on hand. New variable universal life policies show up, too, but not en masse, while new whole life contracts are few and far between.

Hmm. That’s worth a closer look. Many of the new ULs sport the ultra-modern features like no-lapse protection, lifetime benefits, and even a few long term care provisions. A few VULs do the same. Such features and products are very appealing to people seeking death benefit protection, guarantees of various kinds, flexibility and features they can use in their own old age.

There could be a gentle breeze there, if not a headwind.