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Life Health > Life Insurance

LIMRA: Insurers Sold More Individual Life Policies in Q1

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What You Need to Know

  • The number of fixed universal life policies sold fell.
  • Term life policy sales crept up.
  • IUL policy sales jumped.

U.S. sales of individual life insurance policies improved in the first quarter, according to LIMRA.

Insurers told LIMRA that the total number of policies sold increased 4% between the first quarter of 2022 and the first quarter of 2023, which ended March 31.

John Carroll, a senior vice president at LIMRA, said much of the volume growth was the result of an increase in the number of relatively small policies sold by small and midsize insurers.

“It’s encouraging to see an increase in policies sold with a smaller face amount,” Carroll said.

What It Means

Sales growth for relatively small cash-value policies was especially strong.

That could be a sign that more of your young clients and middle-market clients are improving their protection against the risk of premature death, and putting themselves in a position to build wealth if the value of the assets inside their new policies grows.

Details

LIMRA uses results from insurer surveys to provide quarterly coverage sales reports.

Here’s what happened to the number of policies sold, for five types of coverage, between the first quarter of 2022 and the first quarter of 2023:

  • Indexed universal life: +25%
  • Whole life: +6%
  • Term life: +1%
  • Variable universal life: -17%
  • Fixed universal life: -13%

The summaries LIMRA provides for the general public show percentage changes in the number of policies sold. The summaries do not show the actual number of each type of policy sold.

The Universal Life Product Family

Term life insurance policies are designed to provide a set amount of coverage for a set amount of time. They do not build up cash value themselves, but policy provisions may give the holders a chance to trade the term life policies in for permanent policies that can build up cash value.

A traditional fixed universal policy gives the policyholder a chance to adjust the premium payments and earn a fixed rate of return on the value inside the policy.

A variable universal life (VUL) policy and an indexed universal life (IUL) policy also give the holder a chance to adjust the premium payments.

A VUL policy can tie the crediting rate to the performance of one or more fixed and variable investment funds that resemble the funds inside a 401(k) plan or IRA.

An IUL policy can tie the crediting rate to the performance of one or more investment indexes.

IUL critics have argued that some agents have increased sales of IUL by giving consumers unrealistic descriptions of how crediting rates might perform.

Stronger gains in sales for IUL policies than for VUL policies and for traditional UL policies could also be due to the flexibility the policies appear to offer the buyers and the promises of efficiency the policies appear to offer the issuers.

Like fixed universal policies, IUL policies can protect the holders against the risk of loss of principle due to fluctuations in the stock market.

But, like VUL policies, IUL policies can give a holder a chance to benefit from gains in interest rates and stock prices.

For life insurers, the policies offer issuers a chance to hold down costs by using derivative arrangements to power index menus, rather than using active fund mangers to populate variable policy investment fund menus.

(Image: Shutterstock)


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