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Requests for Life Insurance Slowing

Policies: Applications rise in December from a year earlier, but number falls from October peak.

January 10, 2002|LIZ PULLIAM WESTON | TIMES STAFF WRITER

Post-Sept. 11 jitters are still sending more Americans in search of life insurance, but applications appear to be trailing off, industry officials said Wednesday.

Life insurance applications nationwide were up 10.7% in December compared with the same period a year ago, according to MIB Group Inc., a Westwood, Mass., research and database firm.

But the number of applications continued to fall from its October peak, with a 9.9% drop between October and November and a further 4.6% drop from November to December, the MIB figures show.

"People are not plugged in [to the possible need for life insurance] the way they were earlier," said Fran Marinelli, spokeswoman for MIB. Applications in the U.S. and Canada peaked at 1.4 million in October, an increase of 9% from the year before and a 26% rise from September, Marinelli said.

Marinelli said the decline in applications could be a brief, holiday-driven interruption. Some analysts expect life insurance sales to improve this year, while others said the flurry of interest in life insurance may have only temporarily reversed a long-term trend of fewer policies sold each year.

"Obviously, Sept. 11 reminded a few people of their mortality, but it looks like [the sales increase] is a bit of a short-term phenomenon," said Ira Zuckerman, an analyst with Nutmeg Securities.

Increased interest in life insurance may be offset by concerns about the economy, with fewer people willing to commit to policies when their job prospects are uncertain, said Julie Burke, an analyst and managing director with Fitch Inc., a rating agency. Fitch is expecting "moderately higher sales" of insurance this year compared with previous years, Burke said.

"Insurance is at the forefront of people's minds because of Sept. 11, but that may be somewhat moderated by the economic situation," Burke said.

Until last year, the number of policies sold has steadily declined as insurance agents sell fewer policies to middle-class consumers and concentrate instead on wooing the rich--leading to fewer but bigger sales, industry analysts said.

Nowhere is that trend more apparent than in Los Angeles, which topped the nation for the first time in 2000 in the dollar amount of coverage sold, even as the number of policies sold declined, according to figures compiled by LIMRA International, a research association.

Premiums for new policies sold in Los Angeles totaled $569.6 million in 2000, the latest year for which statistics are available. That was a 42% increase from a year earlier, LIMRA officials said.

Meanwhile, the actual number of policies sold dropped 10%, to 264,100.

Analysts said the trend toward bigger premiums here and nationwide was helped by robust sales of cash-value life insurance--policies that combine a death benefit with an investment component. These policies are more expensive--and provide higher commissions for insurance agents--than term insurance, which is pure insurance without the investment component.

Some types of cash-value life insurance, particularly variable policies that allow investments in stocks, suffered last year as equity markets faltered. In the first nine months of 2001, premiums for variable life policies fell by 27%, said LIMRA researcher Elaine Tumicki.

But more-traditional whole-life policies, which offer a fixed return, became more popular, as did universal life policies, which invest in fixed-income securities such as bonds, Tumicki said.

Because premiums for whole-life and universal policies tend to be higher than those paid for variable policies, the total amount paid for policies last year continued to grow, and that growth is likely to continue, said Rodney Clark, director of financial services for Standard & Poor's rating agency.

That doesn't mean cash-value policies are a good fit for most people, warned Martin Weiss, chairman of Weiss Ratings Inc., a rating agency that reviews insurers, banks, mutual funds and brokerage firms. People should first determine if they need life insurance at all, said Weiss, who has written a soon-to-be-published book about money and investing called "The Ultimate Safe Money Guide." Those who have minor children, or whose spouses would be unable to pay the mortgage, typically need coverage, he said.

"If your agent tells you everybody needs life insurance, tell him to take a hike," Weiss said. "Some people need insurance and some don't."

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