Life insurance sales, driven by whole and universal life products, reached new highs with $39 billion in sales. However, annuity insurers received $198 billion in sales in 2012, a 9-percent decrease from 2011, according to a new Conning report. In the report, “Individual Life and Annuity Distribution and Marketing Annual Analysis and Developments 2013,” Conning attributes part of the decrease in annuity sales to low interest rates affecting the appeal of fixed annuities.

However, the report states that insurer unwillingness to accept new variable annuity sales also had an influence. Yet, through 2015, Conning forecasts an increase in variable annuity sales, albeit at a slower rate than in prior years. Indexed annuities are forecast to continue to increase as consumers and distributors view them as attractive alternatives to traditional fixed annuities. Fixed annuity sales remain challenged by continued low interest rates.

For life insurers, Conning estimates continued growth, however, it cites the ability of insurers to hire and train new agents as a main challenge. A positive sign is the 1.8-percent increase in agents that was noted in 2012. Technology was also cited as crucial to growth, with the report pointing to online and “big box store” sales as potential disruptive forces.

Overall in the life space, Conning categorized distributor types into three main channels. In 2012, the broker/general agent/independent agent channel accounted for 78 percent of the industry’s total first-year and single premium life insurance sales. Single premium sales were 48 percent of 2012 total sales through this channel, and have averaged 50 percent of the channel’s total sales between 2002 and 2012.

In 2012, the captive/career channel accounted for 18 percent of the industry’s total first-year and single premium life insurance sales. Single premium sales averaged 60 percent of total sales for the captive/career channel from 2002 to 2012. This is higher than the industry average of 50 percent.

The amount of sales generated by the other channel, which incorporates several minor distributor types, is relatively small. In 2012, these other channels produced just over $1.2 billion in first-year and single premium sales.

In terms of advertising, the life industry decreased its life and annuity advertising expenses in 2012 by 17 percent, or $278 million. In 2012, half of the 302 insurers increased their advertising expenses, by a combined $140 million. The other half decreased advertising by $418 million; that number is inflated, as it was many of the biggest spenders that decreased advertising.

In 2012, the 10 largest advertising life and annuity spenders decreased their expenditure by 28 percent or $298 million. In comparison, the remaining insurers increased advertising expense by 3.6 percent to $20 million. However, this decrease was strongly affected by a decrease from one insurer, MetLife.

As with the overall industry, advertising expenses for life and annuity insurers are concentrated among a small number of insurers. The 10 insurers that spent the most on life and annuity advertising in 2012 accounted for 57 percent of the life industry’s total advertising expenses for the year.

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