Windsor, CT June 9, 2011- Following a year of record-breaking highs, life insurance distributed through banks fell to a two-year low in the first quarter of the year, according to The Kehrer-LIMRA Life Report.. Although 2010 was a strong year overall, in the fourth quarter sales began to slow. The 30 percent downturn in the first quarter of 2011 marks the second consecutive quarterly decrease. Declines were registered across all product lines and in both modes of payment in the bank channel.
Sales have been adversely affected by actions taken in 2010 by three influential writers: one top carrier dropped out of the market, another dropped their flagship product, and a third implemented an underwriting change that resulted in a significant drop in sales.
Apart from carrier-level actions, overall results have likely been impacted by the resurgence of annuities in the bank channel as the products tend to have an inverse relationship. “Whereas 2010 was a banner year for life insurance, it was the worst year for annuities in the past decade” said Jen ParmeleWitt, Kehrer-LIMRA’s associate research director.
Throughout much of the year low fixed annuity interest rates adversely affected sales of fixed products and a variety of economic pressures reduced variable sales. However, according to the Kehrer-LIMRA Monthly Bank Annuity Sales Survey, annuities sold in financial institutions bounced back 22 percent in the first quarter, boosted by increases in both fixed and variable annuity production.
Based on annualized premiums (planned recurring premium plus 10 percent of single premium), sales through banks dropped 38 percent in the first quarter after two years of solid increases. The bank channel had been the fastest growing distribution channel for life insurance for the past two years, based on annualized premium, according to LIMRA’s U.S. Individual Life Insurance Sales Report. In the first quarter of 2011 the bank channel was the fastest shrinking channel with a growth rate of -38 percent.
“As life insurance sales through banks and credit unions surged in 2010, a lot of their FCs and platform reps got more comfortable selling life insurance and effectively added it to their sales mix,” said Scott Stathis, managing director of Kehrer-LIMRA. “If we, as an industry, don’t leverage the sales momentum gained in 2010 to make life insurance a more permanent and significant part of our product mix then it’s our game to lose.”
While sales were off 29 percent, single-premium life insurance continued to account for most of the bank channel sales in the first quarter at 95 percent of new premium.
Whole life continued to dominate bank sales in the first quarter following an impressive 2010 in which whole life accounted for more than half of the premium sold through banks. Whole life represented 61 percent of the premium mix in the first quarter; universal life products accounted for 37 percent of bank life insurance sales. The remaining balance was split between term and variable universal life.
Kehrer-LIMRA is a provider of best-practices research, benchmarking, study groups and consulting to the bank brokerage industry. Additional information can be found at www.kehrerlimra.com.
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