Insurance advisors shake off recession

By Mark Noble | June 15, 2009 | Last updated on June 15, 2009
3 min read

A life insurance licence has proven its worth during this recession. Individual life insurance sales in Canada specifically held up remarkably well in what has been an extraordinarily bad recession, according to LIMRA.

“Canadian life insurance sales were relatively level, actually. With only a 1% decline for annualized premiums in the first quarter of 2009,” James W. Kerley, president of the U.S.-based LIMRA told a group of assembled distribution professionals at LOMA’s annual conference in Toronto.

Canada’s retail insurance sales force may be aging, but it has not lost its sales edge. U.S. life sales had double-digit declines, as clients continued to let their universal life contracts lapse and no new sales replaced these policies. The same situation with universal life exists in Canada, but Canadian advisors have done a good job of offsetting those losses with new sales in term and whole life policies.

“The biggest concern for the Canadian life insurance industry was the universal life product. Sales were down about 14% compared to the first quarter of last year,” Kerley says. “Term and whole life products continue to do well despite the recession. We hear from a number of companies that it’s a great time to be adding those types of products to the portfolio. It’s a great time to be a mutual insurance company, and it’s a great time to be a term insurance provider.”

The Canadian market share of UL policies has declined year over year to 36% from 42%, according to LIMRA. Meanwhile, whole life has seen its market share grow to nearly 30% from 27%, accompanied by an 11% jump in annualized premium growth. Term sales saw about half that growth rate, climbing by about 6% in annualized premium growth.

When it comes to whole life sales, producers are having success selling volume. Policy counts are up in term and whole life, but the average policy size tends to be relatively small. Whole life policy size declined by 4%, with the average policy size at roughly $100,000, generating on average a premium of $17.33 per $1,000.

Whole life policy sales were the bread and butter of the career sales forces, representing 43% of their sales for the first quarter, a 3% growth from the same period in 2008. This may account for the superior sales success of career insurance sales forces, which saw a substantial annualized premium growth versus independent agents, who saw a decline in their market share of sales.

On the independent side, term policies were the go-to product, accounting for about 45% of sales. What’s interesting to note about these sales are the demographics of those who buy term policies — most notably affluent clients.

Term policies saw a 3% growth rate in premiums per policy. The average term policy size was $378,000. Kerley says LIMRA expects to see an even greater proportion of high net worth clients buying term coverage based on the preliminary numbers gathered for the second quarter of 2009.

“Policy counts are going up, but face amounts are tending to be smaller in the U.S., and that’s probably going to be true in the Canadian marketplace as well,” Kerley says. “We’re also seeing a lot of term insurance being sold to the high net worth market. They are recognizing the need for insurance, but they are not buying a lot of universal life or whole life policies.”

The recession is also proving a blessing in terms of recruitment, and many insurance companies have ramped up their recruitment efforts. Both the relative market stability of insurance sales and a larger labour pool are allowing insurance companies to attract higher-quality recruits, Kerley says.

“It’s actually a great time to find really good candidates; that’s not unusual in economic downturns to be doing that,” Kerley says.


Mark Noble