Whole Life Insurance: Emerging Challenges in 2024

July 2024

For over 10 years, whole life (WL) has held the largest annualized premium product share. Today, it remains the most popular permanent life insurance product on the market due to its ability to provide long-term coverage, access to cash values, and potential to earn dividends that can help grow wealth over time. LIMRA surveyed WL carriers for a more in-depth look at what is driving trends in this market.

Sales Trends

With WL’s inherent premium and coverage guarantees, this product becomes increasingly desirable in times of uncertainty. Whole life sales grew substantially from 2020 to 2021 when in-person sales resumed after the global pandemic and amidst regulatory changes, including the update to the Internal Revenue Code (IRC) Section 7702. In 2022, the increased consumer demand and mortality concerns brought on by the pandemic began to wane, but in 2023 WL sales hit a record high.

Although WL's annualized premium has jumped up roughly 50 percent since 2013, its market share levels have remained relatively steady as other product lines have also experienced significant gains over the past few years. Whole life products are starting to experience headwinds as the prolonged high interest rate environment is reducing its appeal compared with other life insurance products and investment options.

Product Features

With only four survey participants confirming they have a standalone juvenile WL product and eight confirming they have a standalone final expense product, the majority confirmed using a traditional WL product to sell to the juvenile or final expense market.

The sweet spot for WL sales seems to be in the 35 to 54 age group, for which premiums are the highest, policy sales are strong and policy size is still rather large. It is worth noting that many of the final expense products have a minimum issue age between 40 and 50 and maximum face amount between $10,000 and $25,000, so the average policy size for these two age groups is actually higher when final expense sales are excluded.  

While experience studies have shown that during the earlier policy years, smaller WL policies tend to lapse more often than larger policies, we also delved into persistency rates on these products. Final expense and juvenile products tend to have much smaller face amounts and higher lapse rates. The survey confirmed the majority of traditional WL writers have a 13-month and 25-month persistency rate of over 75 percent.

The most popular type of WL insurance, dividend-paying or participating, is one of the main reasons for WL’s success in the past decade. Paid-up additions are by far the most popular dividend elected, with 88 percent of participating WL policies electing this dividend option. The compounding growth potential of paid-up additions not only increases the policy’s cash value, but may also significantly increase the death benefit.

Dividends can also be used for cash accumulation, the second most common dividend option elected, at 7 percent dividend election share. Premium reduction came in third with 4.5 percent of policyholders electing this choice.

Looking Ahead

With the continued high interest rate environment, one of the biggest questions remains if WL insurance will continue to experience growth in the next few years. In fact, 30 percent of survey participants cited higher interest rates offered on annuity and investment products as their top concern, which may pose a risk to their future WL sales numbers. With participating products being the most popular WL product, dividend scale interest rates are not looking as attractive as they used to when interest rates were low. Although 44 percent of survey participants believe the WL industry will remain flat in 2024, they were a lot more optimistic about their own company sales, with 62 percent anticipating their WL sales to have a moderate or significant increase.

LIMRA looked at first quarter 2024 WL sales and solicited feedback from some of the top WL writers. Companies have confirmed starting to see more people choosing other investment options, or choosing other insurance products, such as indexed universal life (IUL), over WL products, and therefore WL sales are beginning to suffer.