Variable universal life sales fell to 12% of total life insurance premium for 2005, according to the 2006 report on U.S. Individual Life Insurance Sales from LIMRA International. That is down from VUL’s 14% level in 2004.
Meanwhile, universal life saw its best sales year ever at 40% of premium, surpassing its previous best years which tied at 38% in 2004 and 1985.
What happened? Variable life commanded almost 40% of all new premium in 1999 as the red-hot stock market continued its unrelenting ways. Now that the market actually has rebounded, at least to five-year highs, why haven’t VUL sales followed suit?
There are two primary reasons for this:
o Agents are feeling they were “burnt” by selling VUL when the market declined, and customers became very unhappy with their subaccount performance; and
o Companies are increasing their focus on indexed universal life designs, which are sold as providing upside potential with downside protection.
So, should the industry write off VUL as its own form of Betamax?
Absolutely not. VUL still holds a tremendous place in the industry, especially since insurers have taken steps in the past couple of years to update the product. In particular, VUL insurers have:
o Instituted better positioning of the risks of variable life in general; and
o Developed contract riders providing something that was unheard of in previous VUL versions–guarantees.