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November 23, 2005 at 07:00 PM
Sales of life insurance in banks were down 13% in the first half of 2005, the first time in years that banks’ life premium revenue declined, according to Kenneth Kehrer, Princeton, N.J., a consultant who tracks the bank insurance market.
He estimates first-half premiums at $550 million, down from $632 million in the same period the year before.
The big decline was in single-premium life, a popular product among affluent bank depositors, which fell from $541 million to $459 million in the period.
“Single-premium sales fell because those products are heavily dependent on interest rates,” says Kehrer. “They are sold more as an investment than as insurance.”
Banks actually reported increased sales for recurring-premium products in the first half, from $91 million in 2004 to $96 million this year.
Banks’ experiences with life insurance sales were pretty much on par with the industry as a whole, Kehrer says. He estimates banks’ share of life sales at 2.3% of the total market, same as the year before.
Annuity sales in banks had mixed results. Although banks benefited from the generally hot market for variable annuities in the first three quarters, fixed annuities slumped.
Small banks and savings institutions sold $3.5 billion of annuities in September, the latest month for which figures are available, down 3% from $3.6 billion in August 2004.
For the first time since Kehrer began tracking bank annuity revenue in the mid-1990s, VA sales actually exceeded those of fixed annuities. Banks normally sell far more of the fixed-rate products.
In September, banks sold $0.84 of fixed annuities for every $1 of variable annuities sold, according to Kehrer. Just a year earlier, banks sold $1.49 in fixed annuities per $1 of VAs.
Kehrer blames low interest rates for a drop in fixed annuity sales from $2.2 billion in September 2004 to $1.6 billion this year. Sales of VAs rose to $1.9 billion, from $1.4 billion.
Just two months earlier, fixed annuity rates fell so low, bank certificates of deposit often paid more. By the end of the third quarter, the average fixed annuity base rate had recovered somewhat but still paid on average only about 0.2% more than CDs.
