Direct life insurance sales have grown by 50% during the last three years, according to a new report by Rice Warner Actuaries.

The number of direct life insurance products has increased from 109 in 2008 to 164 this year.

“Major insurers have been devoting significant resources to direct distribution and direct life business during the past year,” Rice Warner Head of Life Insurance Richard Weatherhead said.

“This is because they are viewing it as an integral part of most business planning rather than being a ‘blue sky’ venture.”

The report finds direct life insurance constitutes about 17.8% of overall risk insurance sales and 11.8% of inforce business.

For the 12 months ending December 2010, sales were up 3.3% to $403.1 million and inforce annual premiums increased by 9.7% to $1.1 billion.

The increase in sales has been attributed to increasingly sophisticated target marketing and a focus on cross-selling and up-selling to existing customers, Mr Weatherhead says.

Despite the increase in sales and inforce premiums, there was a slight (0.2%) decrease in direct mortgage and loan risk insurance.

This was attributed to a general downturn in housing and a tightening of credit policies among home lenders.

“Mortgage and loan risk insurance is down, reflecting the slowdown in the housing market,” he said. “The tightening of rules for loan approvals and rises in interest rates has made insurance less affordable in relation to borrowers’ overall budgets.”

Mr Weatherhead says the push by the big insurers to use TV campaigns to sell direct insurance will make it harder for newer players to enter the market.

“All distribution channels have seen significant growth in the past year, except direct mail and branch sales,” he said. “Particularly, we’ve seen a high proportion of customers research products online before buying.

“During the past 12 months this has began to translate into real online sales, with $44 million of sales either online or as a result of a telephone call triggered by an online enquiry.”

But despite the growth of direct sales, Rice Warner believes there will be a push back to some engagement with the customer.

“Life companies will be looking increasingly to customer engagement rather than sales as various segments of the market become saturated,” Mr. Weatherhead said.

“Despite concerns arising from advice reforms, we consider the move to direct represents a real opportunity for advisers to build new revenue streams via ‘no advice’ offers on the practice website.”