Individual life insurance sales have declined for the third quarter in a row, according to a new report by LIMRA on Q4 2017 sales.
In terms of new annualized premiums, individual life insurance sales fell to $1.514 billion in 2017, from $1.852 billion in 2016. This amounts to an 18 per cent decrease, says the report obtained by The Insurance and Investment Journal.
Sales shrunk by nearly half (53 per cent) between Q4 2016 and Q4 2017, from $753 million to $351 million. This marks the third straight quarter of setbacks for individual life insurance sales.
“The end of 2017 for the Canadian individual life market saw significant challenges when compared to last year’s frenzy of sales leading up to new tax regulations,” comments report author Matthew Rubino.
The new provisions of the federal income tax law dealt whole life and universal life insurance products a blow. These products typically dominated sales in terms of annualized premiums. The announcement of a reduction of their tax advantage starting Jan. 1, 2017 sparked a fire sale that peaked in the fourth quarter of 2016. It dwindled in Q1 2017 because insurers received a grace period to issue policies linked to files submitted at the last minute by advisors (Read more on this subject on pages 10-11).
Whole life sales fell precipitously from $489 million in Q4 2016 to $190 million in the same quarter of 2017, equal to a 61 per cent drop. Universal life insurance suffered a similar fate, with Q4 2017 sales at a mere $68 million, a steep decrease of 59 per cent from $168 million in Q4 2016. Term products were not affected by the new tax rules: sales slipped from $96 million to $93 million between the fourth quarters of 2016 and 2017, a four per cent decline.
Term insurance sales
2017 sales with respect to term insurance annualized premiums edged up 2 per cent compared with 2016. Universal life sales sank by 30 per cent and whole life insurance dipped by 20 per cent.
Despite the sales downturn in 2017, whole life insurance once again topped the sales volume. At year-end 2017, whole life insurance captured sales of $859.3 million, equal to 57 per cent of the total volume of individual life insurance sales. The volume of term insurance life sales was $369 million in 2017, or 24 per cent of the total. Universal life insurance sales brought up the rear. At $286.4 million, UL premiums represent 19 per cent of the total individual life insurance sales generated in 2017.
Term insurance accounted for the largest number of policies sold in 2017, at 415,011, equal to a 58 per cent share of the total volume. Whole life insurance ranked second, with 195,114 policies, a 27 per cent share. Universal life insurance closed the market with 108,306 policies, representing 15 per cent of all policies sold in 2017.
The affiliated agent network suffered the most in the aftermath of the 2016 sales frenzy. Sales in terms of premiums shrank by 27 per cent in 2017, versus a 15 per cent downturn for the independent advisor network.
In the affiliated network, sales declined for all products. Between 2016 and 2017, sales dropped by 44 per cent in universal life insurance, 31 per cent in whole life insurance and five per cent in term life insurance.
Sales in the independent network decreased by 27 per cent in universal life and 15 per cent in whole life between 2016 and 2017. All the same, this network achieved five per cent growth in term life during this period.
The experiences of the various channels in the independent network diverged in 2017. National accounts saw a steeper drop in sales in terms of premiums than their counterparts from 2016 to 2017, at 32 per cent. For independent advisors, sales shrunk by 19 per cent during the same period. The managing general agency channel was down 8 per cent.
These three independent network channels were hit harder during the last quarter of 2017 compared with the same quarter of 2016. For national accounts, sales in terms of premiums plunged by 68 per cent, while independent advisers sustained a 60 per cent drop and the managing general agency channel 45 per cent. The exclusive agent network suffered a setback of 59 per cent during this comparison period.
The independent network continues to dominate, controlling 72 per cent of total premiums in 2017.