Industry Leader Forum: Aviva USA
The latest trend and the biggest driver for life insurance industry growth illustrates the maxim that everything old is new again.
For many carriers, indexed universal life (IUL) is a new product. Ten carriers introduced IUL in the past two years. It’s obvious why so many are jumping into the IUL pool.
Through the first three quarters of 2011, the life industry saw modest 5 percent growth. IUL sales, however, grew a whopping 38 percent over the same nine-month period. The only other life insurance product hitting double-digit sales increase during that time frame was whole life, with a 10 percent jump.
A few select carriers introduced the first IUL products in 1997, and the next year Aviva’s predecessor company joined the market. We became the leading provider of IUL in 2001—a position we’ve held ever since.
As we look back over the past several years, we find some things intriguing about the “reinvention” of a product we helped invent before the turn of the century. If imitation is the greatest form of flattery, we have been flattered frequently in recent years.
Some insurance companies have mocked the IUL design, only to later change their tune. Just five years ago, one national carrier published marketing materials touting their own variable life products and outlining why IUL products were inferior. That carrier entered the IUL marketplace in 2011.
IUL sales approached an all-time high of $800 million in 2011, quite a contrast to the $667 million sold over the six-year period from 2000 through 2005. Since 2005, IUL sales have grown more than 300 percent.
Forty-six carriers now offer the industry’s fastest-growing product, up from just nine players at the start of 2005. We welcome the competition, because it validates what we’ve been saying for more than a decade—this product offers consumers a terrific value proposition.
As anyone with a deep experience in the product line can attest, IUL is perfect for consumers seeking the middle ground in the risk continuum between traditional fixed UL and variable UL. It’s a product with more upside potential than a traditional fixed UL—especially in a low interest rate environment—that also offers strong guarantees, eliminating the downside market risk associated with a variable UL product.
IUL policy performance is typically linked, in part, to a major stock index such as the S&P 500. Generally, these policies include a cap on the upside movement of the index, typically ranging between 10 and 14 percent, as well as a minimum interest rate that is applicable should the index perform poorly during a particular period.
Both producers and consumers are attracted to the product because crediting provides a great chassis upon which to build. IUL offers solid cash accumulation features, and many of our products also offer the option of a lifetime death benefit guarantee. IUL also provides great flexibility through tax-free loans.
The product’s popularity with consumers has resulted in many new entrants in the market trying to do “creative” things to grab market share. Some of their innovations and product features that inflate their illustrated performance may not be sustainable if market conditions change, however.
Our theme for consumers and producers alike is you must understand IUL’s value proposition. Producers who plan to incorporate IUL in their practice should take time to learn about the product, its unique features, and the sales concepts that align with the market. We are not only the IUL market leader, we also lead the industry in providing the training and support producers need to sell it.
Consumer needs and preferences change, and so do market opportunities. Our IUL products are battle tested through all conditions. During two of the worst bear markets in recent history (early 2000s and 2008-09), none of Aviva’s IUL policyholders lost any accumulated value in their policies because of a declining stock market.
Relative to other products in the industry, IUL is fairly new. The IUL landscape has changed considerably since the product was first introduced in 1997. A few of the IUL pioneers dropped out, while many others have jumped on board.
Our IUL policies provide strong guarantees and enhanced flexibility, without using gimmicks and dubious assumptions. We own the patent on our unique IUL risk management process. Newcomers to the IUL market simply can’t match our decade of leadership, expertise and knowledge about these products.
We’ve known for years what many carriers are just discovering—IUL is a great fit for many of your clients. If you want to learn more about the fastest-growing product in the life business and the opportunities it provides, Aviva is the carrier with the deepest knowledge and expertise in IUL. [CJL]
January 2012 Issue of Brokerworld Magazine. Author’s Bio Christopher J. Littlefield CEO, Aviva USA