The latest LIMRA report reveals that individual life insurance sales in terms of annualized premiums fell by 29 per cent in Q3 2017 compared with the same quarter in 2016. The cause: the new tax laws that took effect on Jan. 1, 2017.
Individual life insurance sales skyrocketed in the third and fourth quarters of 2016. The honeymoon continued in Q1 2017. Not surprisingly, two consecutive quarters of declines followed. The crash landing was particularly brutal in the third quarter. “The Canadian life insurance market in the third quarter of 2017 has run up against the extreme growth that began in the third quarter of 2016 in anticipation of changes in the tax-exempt test,” LIMRA study author Matthew Rubino explains.
Hit hardest, whole life insurance sales in terms of annualized premiums plunged by 37 per cent in Q3 2017 compared with the same quarter in 2016. Universal life insurance sales sank in parallel, at 36 per cent during the same comparison period. In contrast, term insurance sales stagnated during this period.
Despite these setbacks, six per cent growth was achieved in the first three quarters of 2017 versus the same period in 2016, for all products combined. This is due to the effect of the end of the tax rush in the first quarter.
Of all the distribution networks, securities brokers (national accounts) felt the strongest impact: individual life insurance sales in terms of premiums plummeted by 49 per cent in Q3 2017, versus the same quarter in 2016.
Agents attached to insurers (career agents) also saw a major slump in individual life insurance premium sales in Q3 2017, down 37 per cent versus the same quarter in 2016.
During the same comparison period, managing general agents’ individual life insurance sales in terms of premiums shrunk by 21 per cent, whereas those of independent advisors declined by 15 per cent.
Compared with the first three quarters of 2016, the same period in 2017 saw premiums decrease for all products in the career network, by 7 per cent overall. The independent network fared better, with total growth of 12 per cent. Only universal life insurance sales in the independent network edged 4 per cent downward during the comparison period.
The independent network generated most of the premium sales volume during this period, at 72 per cent. In this network, 23 per cent of the sales volume came from universal life, which made up only 9 per cent of the volume of the career network.
Sales volume: whole life reigns
Despite the downswing triggered by the end of the rush, the sales volume in terms of whole life insurance premiums stayed in positive territory for several quarters. From the start of the year until Sept. 30, 2017, the volume of annualized premiums reached $668.8 million in whole life, amounting to a 57 per cent market share, compared with 24 per cent for term insurance and 19 per cent for universal life.
By contrast, term insurance dominated in terms of number of policies sold during this period, at 310,211, leading to a 58 per cent share compared with 27 per cent for whole life and 15 per cent for universal life.
The average term insurance amount purchased during the period observed is twice as high as that purchased in whole life, at $461,280 versus $201,925. It also exceeds the average coverage amount of universal life insurance, which was $298,828 during the first three quarters of 2017.
During this period, Canadians purchased $196.2 billion in individual life insurance coverage, 73 per cent of which went toward term insurance, whereas whole life and universal life garnered 15 per cent and 12 per cent respectively