Life insurance sales boom in first quarter

Risk-averse clients are flocking to products' returns, tax advantages, say broker-dealer execs

Apr 25, 2010 @ 12:01 am

By Darla Mercado

Shaken by the recession and concerned about risk, brokerage firm clients are buying life insurance.

First-quarter sales of life insurance policies at major independent broker-dealers were up by at least a third, compared with a year earlier, executives say.

“Clients are more in a risk-management mode, so advisers who may have not been using life insurance as part of their practice, except in a reactionary way, are now more proactive because of the guarantees in the contract,” said James Swink, a vice president at Raymond James Financial Inc., who manages the firm's life insurance marketing and sales.

Life insurance sales at Raymond James were up 34% in the first quarter, compared with a year earlier.


Sales were especially strong in guaranteed universal-life insurance and 20- to 30-year-term life insurance, Mr. Swink said.

“With these guaranteed fixed contracts, you don't have market correlation, and that goes into the risk management part of the clients' scenario,” he said.

At Commonwealth Financial Network, first-quarter insurance sales were off slightly, reflecting proposals generated during last year's fourth quarter. Applications were up 35% in the quarter.

“This is an area where the clients are receptive,” said Brian Harrison, director of insurance marketing at Commonwealth. “They want to take action, but they're still focused on guarantees and security. Risk management is taking on a new importance. Clients can't control the market, but they can shore up the other risks in their plan.”

The Penn Mutual Life Insurance Co. “came out of nowhere” and is now among the top three sellers of insurance at Commonwealth, Mr. Harrison said.

Penn Mutual's life insurance sales were up 53% in the first quarter, helped by strong sales of universal life and indexed universal-life policies sold through the independent broker-dealer channel, said president Eileen McDonnell, who noted that whole-life sales also fared well as an asset class.

While publicly owned insurers declined to comment on sales of life policies in anticipation of the imminent release of their first-quarter performance data, broker-dealers said that products from Lincoln National Corp., John Hancock Life Insurance Co. Inc. and The Hartford Financial Services Group Inc. have been strong sellers.

Brokerage firm executives point to a variety of different reasons for the jump in sales of guaranteed universal-life policies, particularly following a period when some carriers raised their premiums and others stepped back from offering no-lapse guarantees.

“I don't think the cash accumulation is a driving factor for these clients,” said Mr. Swink, noting that while the cash value of universal-life policies doesn't build dramatically, the policies provide a permanent death benefit at a relatively low cost.


“It's the cheapest way to get a death benefit, and it's fantastic if you're over 55,” said Gregory L. Olsen, a partner at Lenox Advisors Inc., which manages $1.2 billion. However, he added that for younger clients, the low internal rate of return on the product makes it a less worthwhile consideration, since its death benefit won't grow much over time.

At Mr. Olsen's firm, wealthy clients have expressed more interest in whole-life policies, not just for protection but as a way to earn attractive returns.

“People are intrigued by a 4% to 5% long-term rate of return with a highly rated carrier. At a bank, they might get 2% on a CD,” he said.

The tax advantages of life insurance are another consideration.

“These are people who are making at least $250,000 a year and who will be targeted for higher taxes,” Mr. Olsen said. “Cash value insurance is a Roth IRA for rich people, and they can tap that money judiciously.”

But it's not just cash value insurance that has seen a renaissance.

At Edward Jones, for instance, applications for all insurance products were up 30% in the first quarter.

About two-thirds of the company's insurance business come from term life. The remainder of life insurance sales were related to small-business and estate-planning needs, according to Merry Mosbacher, a principal in the firm's insurance marketing unit.

Through a training program, Edward Jones is helping advisers integrate insurance planning into their work and to become more comfortable about talking to clients about insurance, she said.

Certainly, the recovering market has helped.

“The purse strings are looser, and 401(k) balances and investment accounts have come back,” said Mr. Olsen. “Clients are just more willing to listen.”

E-mail Darla Mercado at


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