Variable Universal Life Back In The Game

Take a guess at which was the fastest-growing life insurance line in the first quarter? Variable universal life.

The line, long ago eclipsed by faster-growing insurance product lines, appears to have stirred back to the life and outpaced even hot-selling indexed universal life products over the past two quarters, data show.

With VUL, cash values are invested in the market with the policyholder taking on the investment risks so VUL sales tend to rise and fall with the stock market, said Ashley Durham, assistant research director of LIMRA Insurance Research.

VUL sales rose 10 percent in the first quarter over the year-ago period and policy count rose 8 percent, LIMRA also reported.

In the fourth quarter VUL sales rose 17 percent over the year-ago period.

Indexed universal life sales rose 8 percent in the first quarter, the sixth consecutive quarter of growth for IUL, LIMRA reported.

The line now represents 63 percent of all universal life premium and 23 percent of all individual life premium.

Strong equity markets have spurred interest in VUL and sales are expected to increase for the full-year 2018 over 2017, LIMRA analysts.

VUL sales rose 2 percent last year over 2016.

But come 2019, VUL sales are forecasted to fall due to an economic slowdown as predicted by LIMRA’s economic forecaster Oxford Economics, Durham said.

VUL Once a High Flier

VUL sales peaked around the year 2000, but after the dot-com market collapse lifetime guarantee universal life (LTGUL) started eating into VUL’s market share.

Guarantee universal life sales rose steadily until 2008 after which market share eroded with the collapse of interest rates.

Changes in reserving requirements also made guarantee UL more expensive.

Whole life also captured some market share from VUL in the wake of the 2000 market downturn as agents and consumers moved toward products with less volatility, Durham said.

Whole life, with its straight-forward design, was easier for agents to sell and for consumers to buy and the potential for policyholders to benefit from dividends also help whole life nibble away at VUL share, she said.

Then came IUL without the risk of market-related losses to which VUL contract holders were exposed.

VUL declined further and accounted for 6 percent of all insurance premium at the end of last year, LIMRA said.

InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at cyril.tuohy@innfeedback.com.

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