LIMRA: Sales of Whole Life Continue Upward Trend in 2Q; Term Life Sees Steep Decline

Total second-quarter U.S. sales of individual life insurance -- measured in new annualized premium -- rose 7% from the same period in 2009, marking the second straight quarter in which sales increased from the prior year, according to LIMRA.

Whole life continued its upward climb, with sales up 23% from last year's second quarter, marking the fourth straight quarter of double-digit growth. Market share for this product now stands at 31% of total sales -- the highest share since 1998, the industry research organization said.

People continue to see whole life "as a good solution during uncertain economic times," said Catherine Theroux, a spokeswoman for LIMRA. Year-to-date, whole life sales jumped 19% over the first half of 2009.

"While we continue to see the majority of the increase recorded by the big mutual companies, it?s encouraging to see widespread sales success across the industry," Theroux said. Sixty percent of writers of whole life, including all of the top 10, increased sales in the first half of this year, she said.

Term life, however, was the only product whose premium didn't increase from last year's second quarter. New annualized premium declined 11% and was down 7% year-to-date. "We have not seen term show a drop in sales of this magnitude since 2001," LIMRA said.

For the first six months of 2010, total individual life sales were up 9% when compared to the first half of 2009 -- a period "which experienced the steepest six-month drop in individual life insurance sales in almost 70 years," said Ashley Durham, senior analyst for product research at LIMRA, in a statement.

After 15 years of sharp price declines, term insurance premiums began to rise in 2009, according to a recent column by officials at Swiss Re Life & Health America (Best's Review, April 2010). Through August 2009, the premium for a $500,000 policy for a 35-year-old man with a rate guaranteed for 20 years rose 5% on average, and the premium for a policy with a 10-year guarantee was up 6%.

Some leading companies raised term insurance premiums by as much 10% to 15% last year, and others have stopped writing long-term business.

Two factors are fueling the current rise in term insurance prices: reserve requirements and fallout from the financial crisis, according to the executives at Swiss Re Life & Health America. Term insurance ultimately must be priced at a level that allows providers to assure their sustainability by covering costs and earning a competitive return on invested capital, they contend (Best's Review, April 2010).