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September 07, 2009 at 08:00 PM
Historically, the economy has had little impact on individual life insurance sales. Good or bad, individual 
life insurance sales have fared pretty evenly.
Not so this time around.
First, a look back. From 1976 to 2007, total annualized new premium grew on average 4.6% per year. During that period, while the United States experienced four recessions, individual life insurance products emerged relatively unscathed as different products thrived and sustained over sales when other products faltered.
With the recession of 2008-2009, however, things are different. Over the past four quarters, individual life insurance new premium has experienced double-digit declines.
New premium declined 14% in the fourth quarter of 2008 compared to the prior year quarter, the steepest quarterly decline since 1951. And that was just the beginning. First quarter 2009 set new records for declines. Annualized new premium dropped 26%, the biggest quarterly decline since 1943, during World War II. In the second quarter 2009, new premium dropped 20%-giving some hope that the worst might be behind the industry.
The declines did not involve just one or two companies. They were across the board. About 65% of participants in LIMRA’s quarterly Individual Life Sales Survey reported declines, most by double digits.
Over the past decade, universal life insurance has been the dominant product. In 2007, UL experienced record sales and had 42% market share. Yet, in the fourth quarter of 2008, UL sales dropped almost 25%; and in the first half of 2009, sales declined almost 30%.
Variable life products reached their peak of 36% of new premium in 2000. The recession in 2001 resulted in plummeting sales between 2001 and 2003. VL products never recovered from that economic downturn in 2001. Over the past five years, VL has held around 15% market share but the current recession has prompted even further declines for variable products. In the first six months of 2009, variable products posted abysmal sales, down 55% as compared to the first six months of 2008.
Yet despite all the bad news, there are signs that consumers have not completely abandoned life insurance.
Term and whole life insurance remain relatively intact in 2008. Term was only down 1% and whole life, after experiencing a 7% jump in the third quarter followed by a 2% increase in the fourth quarter, was the only product to grow in 2008, ending the year up 2%.
