Indexed universal life is hot — so hot, perhaps, that it is creating a drought for some other life insurance products. IUL continues to effectively exploit the sweet spot between safe, low-rate permanent life insurance and riskier variable life insurance. Clients just love the value proposition of a greater potential upside in stock market growth accompanied by the protection from downside risk afforded by IUL.
While sales figures from 1Q 2012 won’t be available for awhile, it is easy to expect IUL to maintain the momentum it has held in the past six years. Particularly strong IUL sales helped insurance companies issue 2% more individual life policies in 2011 than they did in 2010 (according to LIMRA). That’s noteworthy because it marked just the fourth year in the past 30 that annual policy sales increased (1984: 14% growth thanks to the introduction of UL; 2002: 3% due to 9/11; 2004: 1% attributed to new guarantees). IUL policy sales grew by 30% in 2011 while premiums increased by 38%. Between 2006 and 2010, sales of IUL grew 192% — an average of 38% annually (again, according to LIMRA statistics).
In LIMRA’s First Quarter 2012 Industry Briefing call back in late February, LIMRA CEO Bob Kerzner, CLU, ChFC, said about 25% of all UL premium sold in 2011 came from IUL.
“We expect indexed UL sales to remain strong. It’s proven to be a good fit in an uncertain economy, and companies continue to produce new products and/or enter the market. It’s getting its fair share of product development resources,” Kerzner said.
Due to the tax code, the product has found receptive audiences among affluent professionals, such as doctors, lawyers and CPAs, who are often taxed as sole proprietors, S Corporations or C Corporations and are, therefore, limited in retirement account choices. While some available IRA and 401(k) options have maximum annual contribution limits that affluent professionals can hit early in the year, there is no limit on how much money you can contribute to an IUL.
If you are experiencing success with indexed universal life products, I would love to hear about what type of clients are buying and the methods you are using to make them aware of the product’s benefits. Please use the comment tool below to share your insight.
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