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Sales continue to decline due to the bursting of the bubble tax

by

Alain Thériault

March 14, 2018 07:00

Sales of individual life insurance in terms of annualized premium decreased by 29 % in the third quarter of 2017, compared to the same quarter of 2016.

The entry into force of the new tax rules on 1 January 2017 is the cause, reveals the research firm LIMRA in its most recent report.

Sales of individual life insurance had experienced a strong growth in the third and fourth quarters of 2016. The honeymoon continued in the first quarter of 2017. However, the tide has turned with two consecutive quarters of decline. The return to reality was even more brutal in the third quarter of 2017.

“The canadian market of life insurance has gone to the opposite extreme of the growth since the third quarter of 2016. It had been driven by the anticipation of change in the test of tax exemption of the police “, commented the author of the study from LIMRA, Matthew Rubino.

Stable sales in temporary

Hardest hit, sales of whole life insurance in terms of annualized premium fell by 36 % in the third quarter of 2017, compared to the third quarter of 2016. This decrease is followed closely by sales of universal life insurance, a decline of 36 % during the same period of comparison. The sales of term insurance has rather stagnated during this period.

Encouraging Point : the period of the first three quarters of 2017 representing a growth of 6 % compared to the same period in 2016, all products combined. It is, however, the effect of the end of rush tax, observed in the first quarter.

Among the various distribution networks, that of securities brokers (national accounts) has been especially hard hit, as sales of individual life insurance in terms of premiums falling 49 % in the third quarter of 2017, compared to the third quarter of 2016.

The agents tied to insurers (career agents) have also seen their sales of individual life insurance in terms of premiums to decline significantly in the third quarter of 2017, declining 37% compared to the third quarter of 2016.

During the same comparison period, sales of individual life insurance in terms of premiums of the general agents have retreated by 21 %, and that of independent consultants 15 %.

The independent network is doing better

In comparison to the first three quarters of 2016, the first three quarters of 2017 have meant a decline in sales of premiums of all the products in the network tethered, either to a global reduction of 7 %. The independent network is doing better, with an overall growth of 12 %. Only the sales of universal life insurance have witnessed a decline in the independent network, or 4 % during the comparison period observed.

The bulk of the sales volume of premiums has been produced by the independent network during this period, or 72 %. This network sees 23 % of its sales volume to come from the universal life, which only account for 9 % of the volume of network tethered.

The whole of life dominates the volume, but not sales

Despite the setbacks caused by the end of the run, the sales volume in terms of premium remains as favorable to the whole life insurance from many quarters. Since the beginning of the year until September 30, 2017, the volume of the annualized premium has reached 668,8 million dollars ($M) in the entire life, giving him a share of 57 %, compared to 24 % for the temporary insurance coverage and 19 % for universal life.

However, it is the temporary insurance dominates in terms of the number of policies sold during this period, 310 211, which gives him a share of 58 %, compared to 27 % for the whole of life and 15 % for universal life.

Term life insurance nearly always exercises his domination in the number of fonts. Its price is lower than other products, even for a insurance coverage greater. It is the product of choice for the needs of partners in a start-up business, or young families who want to secure their mortgage payments or studies of children, in the event of the death of one spouse.

Average amount is higher in temporary than in whole life

Thus, the amount of insurance means subscribed to term insurance during the observed period is twice higher than that agreed in whole life insurance, 461 280 $ 201 925 $. It is also higher than the average amount of coverage of universal life insurance, which amounted to 298 828 $ during the first three quarters of 2017.

During this period, it is written Canada 196,2 billion dollars of insurance coverage to individual life, of which 73 % are coming back to the term insurance, while whole life and universal life share, respectively, 15 % and 12 %.

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