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That building thunder is indexed UL storming the market

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According to the latest count from Wink, the number of indexed life carriers reached 50 by year-end 2013. That’s a number to chew on, especially for industry professionals who are still considering whether to take the market seriously.

That’s up from 48 indexed life companies in 2012, 46 in 2011 and 39 in 2010, according to earlier reports from the Iowa indexed product resource.  It’s also up from just 10 or so carriers in 2004, when indexed life market started breaking out of its training wheels. What’s more, Wink president and CEO Sheryl J. Moore says more carriers will be entering the market this year.

(Note: The numbers reflect actual carriers, not the parent companies that own the carriers.)

An increase from 10 to 50 carriers over nine years is a 400 percent upturn.  But some life industry professionals still dismiss these products as boutique or niche—i.e., not mainline like whole life or term. Perhaps some think that 50 carriers is not a meaningful number. After all, there are an estimated 1,000 carriers in the life insurance business, so shouldn’t there be more carriers if indexed life is to get mainstream recognition?

Not necessarily. The estimated 1,000 companies include carriers that focus more on annuities, disability, long term care and other products than on life insurance. It is as unlikely that all 1000 would sell indexed life as it is that all would sell variable life or universal life.

Besides, a long-standing life insurance industry rule of thumb is that it takes about 40 players to make a market—that is, a sales venue with sustainability and applicability to multiple demographics. Based on that, the indexed life business with its 50 carriers qualifies as an established market.

Some advisors acknowledge the presence but say indexed life sales are just too small to instill confidence. Let’s look at that. According to Wink, total indexed life sales hit $1.4 billion in 2013. That’s up 9 percent from $1.3 billion in 2012. Compared to the product’s newbie days in the late 1990s and early 2000s, when annual sales lurked below $100 million (until 2004), the 2013 indexed life total doesn’t look so small.

Of course, the 2013 number is not anywhere near the $130.6 billion of net written premium for both individual and group life policies reported for 2012 by SNL Financial, Charlottesville, Va.. But indexed life is not a player in the group marketplace, so comparisons with the broader market are questionable.

New 2013 sales numbers from LIMRA are more useful for that purpose.  According to this data, indexed universal life represented 13 percent of total individual life insurance premium in 2013 and a record 35 percent of total individual universal life premium in 2013—a year when traditional universal life was down by 7 percent from the year previous but still held a 38 percent market share.

Bottom line: Indexed life is an established marketplace, where there have been more entries than exits over the years, making for more players than ever. In addition, sales have kept growing, even last year when overall individual life sales were flat.  It may not be mainline in the sense of old line or huge, but it’s not an upstart either.

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Linda Koco, MBA, is a contributing editor to InsuranceNewsNet, specializing in life insurance, annuities and income planning. Connect with Linda →

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