The US individual life insurance market has stayed stable in the second quarter, though that topline figure obscures a possible shift in consumer appetites amid interest rate challenges, according to new data from Limra.
Sharing preliminary results from its latest US Life Insurance Sales survey, Limra said total new annualized premium reached $3.97 billion during the second quarter of 2024 which was level with the same period last year. Policy count also didn’t budge compared to the same time a year ago.
By the first half of 2024, new premium totaled $7.7 billion, down 1 percent year over year, while the number of policies sold remained stable.
“Whole life sales, which represent the largest proportion of the U.S. life insurance market, have struggled under a higher interest rate environment in the first half of 2024,” Karen Terry, assistant vice president and head of Limra’s Insurance Product Research, noted in a statement sharing the results Tuesday.
Limra says sales in whole life insurance as a category have softened in the face of interest rates, with buyers turning away from high-face or short-pay life insurance in favor of other products that hold at least some promise of a stronger return.
Whole life new premium fell 7 percent in the second quarter to $1.46 billion, with policy count dropping 6 percent. Year-to-date, whole life premium decreased by 7 percent, reaching $2.92 billion – accounting for 38 percent of total new annualized premium sold in the first half – and policy count was down 5 percent.
“If the Federal Reserve reduces interest rates in the fall, LIMRA expects whole life sales to rebound in the second half of the year,” Terry said.
Term life insurance seems to have done better, with new premium growing by 2 percent in the second quarter to $786 million. This marks the sixth consecutive quarter of growth in both premium and policy sales, reportedly driven by improvements in online platforms and competitive pricing.
“Eight of the top 10 carriers posted premium gains,” Limra said. During the first half of 2024, term premium rose 3 percent year-over-year to $1.5 billion, representing 20 percent of the market.
The fixed universal life segment saw a 5 percent rise in new premium in the second quarter, totaling $279 million, while variable universal life grew 10 percent to $536 million. Indexed universal life premiums remained stable year-over-year at $913 million, though policy sales climbed 11 percent, reflecting increased demand in the mid-to-lower market segments.
IUL policies have some similarities to indexed annuities. The policies offer a cash benefit paired with a cash account, whose value is linked to a stock market index and capped to the upside. In the event of a down market, insurers can’t give less than 0 percent interest. It’s that appeal that led the category to similar levels of double-digit growth during the third quarter of 2018.
On a year-to-date basis, Limra said IUL insurance appeared to gain strength as premium rose 2 percent to reach $1.78 billion, with the number of policies sold spiking 12 percent. For the first half of 2024, IUL premium accounted for 23 percent of total new annualized premium.
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