Canadian Life Insurance Sales in 2007

Canadians bought staggering amounts of individual life insurance in 2007

• $1.1 billion of premium (up 5% over 2006)
  
• $180.0 billion of face amount (up 5%)
  
• 652,617 policies (down 3%)
  

These figures from research organization LIMRA exclude group life insurance, generally provided by employers.

The Four Products
There are four main life insurance products, each with different characteristics. Here's a ranking by level of flexibility.

1. Term life for temporary needs (no tax-free investment growth)
   
2. Term to 100 for permanent needs (no tax-free investment growth)
3. Whole life for permanent needs and tax-free investment growth
   
• insurer overcharges but provides a refund (called a dividend) if
• mortality is lower than expected
• expenses are lower than expected, or
  
• investment returns higher than expected (the insurer makes the investment decisions)
  
4. Universal life for permanent needs and tax-free investment growth
   
• the insurer guarantees the mortality rates and expense charges for life
• you select the investments, how much you deposit, how often you invest
  

The Distributors
Life insurance is distributed primarily by

• career agents: restricted to products from one company
  
• independent advisors: select products from multiple companies

Let's dig deeper into independent advisors by looking at

1. what Canadians are buying
   
2. the average policy
   
3. growth trends

What Canadians Are Buying
Here is the market share for 2007 by new premium

1. Universal life: 67% (grew 12% in 2007)
   
2. Term life: 22% (grew 13%)
   
3. Whole life: 8% (dropped 4%)
   
4. Term to 100: 3% (dropped 18%)
   

If you look at the spectrum of choices, you see that 89% of premium goes to low-cost simple solutions (term life) and customized high-end solutions (universal life). There's very little in between.

If we rank by number of cases instead, the distribution is term (49%), universal life (32%), whole life (14%) and Term to 100 (5%). This pattern is probably what you expected.

The Average Policy
The average policy in the growing segment has the following characteristics

• term life: face amount of $388,035 and premium of $869
  
• universal life: face amount of $272,025 and premium of $3,947
  

The declining categories are remarkably similar

• term to 100: face amount of $85,806 and premium of $1,085
• whole life: face amount of $84,496 and premium of $1,033

In real life, you'll see wide swings that the averages mask. If available, I would have used medians (the midpoint when items are ranked from smallest to largest).

Growth Trends
If we look at the last quarter of 2007, we can see the momentum in premium growth:

• term life: +5%
• universal life: +20%

That's enough numbers for now. Let's see how 2008 turns out.

Links and Sources

• Canadian Individual Life Insurance Sales - Technical Supplement (LIMRA, 4th Quarter 2007)
  
• Does Warren Buffett Buy Term and Invest The Difference?