Life Insurance Trends to Watch in 2012

When the final annual sales figures start rolling in for life insurance sometime this quarter, theyre expected to show that 2011 was a solid, if unspectacular, year. Experts who track the life insurance industry say overall sales were trending upward, portending not only a strong fourth quarter but also positive momentum for 2012. An impressive turnaround, considering how bleak things looked in certain segments just two or three years ago. From hot products and sales channels to innovations on the product development front, heres a look at some of the key trends the experts see fueling life insurance markets in 2012: Consumer concerns: Total individual life insurance premium grew 5 percent in the first nine months of 2011, according to LIMRA, due in large part to surging sales of whole life, indexed life and guaranteed universal life products. But theres much more to the story than that, say market watchers like Robert Kerzner, LIMRAs president and CEO. What consumers are telling us is that they are far more concerned about retirement [issues such as income] and living too long than they are about dying prematurely. Theres a message there. The message, he says, is that consumers want life insurance products that offer the ability to build cash value, but in uncertain economic times like these, theyll sacrifice a measure of upside in exchange for greater certainty in terms of premium, death benefit and principal preservation. Hot products: Through the first three quarters of last year, whole life premium grew 10 percent, reflecting the publics appetite for the certainty of premium and cash-value guarantees, along with lifetime coverage. An overall 6 percent year-to-date increase in WL policy count gives WL policies a 46 percent share of total life insurance policy count, according to LIMRAs calculations. Indexed UL sales also are surging. Its the right product for the times, says Kerzner. People want a safe harbor in the storm and indexed products give them that downside guarantee and at the same time, you end up with more dollars in the till for retirement. Indexed UL premium was up 35 percent through the first three quarters of 2011, according to LIMRA. Indexed UL is finding appeal particularly in the expanding 60 to 70 age group, observes Randy Rowray, AAPA, vice president of marketing at the National Benefit Corp. in West Des Moines, Iowa. More insurers are entering the indexed UL marketplace to serve that fast-growing customer segment, resulting in richer participation rates for investors. Niches to watch: Action is heating up in the term UL segment, Rowray says, due largely to its attractive pricing relative to traditional UL. Business planning and family wealth legacies are among the areas driving demand for term UL, he adds. Guaranteed UL is another fast-growing segment of the UL market, says Rowray. People see it as a way to provide legacy protection for their families. Youre solving for death benefit. Opportunity knocks: More clients are using RMDs and qualified retirement funds to purchase life insurance, according to Rowray. What kinds of policies are they acquiring with those funds? Were seeing more clients looking at single-premium universal life options now, he says, attracted by return-of-

premium and long-term care riders, plus other features that provide flexibility and access to contract dollars. Sales strategies: These are challenging times for life insurance producers, with the market penetration rate for life insurance having plummeted to an all-time low, according to Kerzner. Kerzner and LIMRA have some firm ideas about how producers can rise to the challenge, based on findings from the organizations 2011 U.S. Buyer-Nonbuyer Study: Conduct a needs analysis with clients and prospects. Consumers who get one are considerably more likely to buy than consumers who dont. Whats more, notes LIMRA, producers who recommend an amount of insurance to buy ultimately close more deals, at a 60 percent higher coverage level. Meet directly with clients. Face-to-face meetings lead to closed deals 70 percent of the time, LIMRA found. Raise the issue. One-quarter of life insurance shoppers consider life insurance only after an agent or advisor initiated the discussion. Be persistent with follow-up. More than one-third of shoppers said the producer should have followed up with them while they were still deciding whether to buy.