A perfect storm of factors has put bank sales of life insurance way ahead of overall industry growth for the second quarter in a row.

According to the third-quarter Kehrer-LIMRA Bank Life Sales Report, total individual life sales across the U.S. were flat in the third quarter and fell 11% during the first nine months of last year, compared with a year earlier. But banks were able to rake in 59% more new life insurance premiums in the third quarter, bringing bank life insurance sales growth to 32% through the first nine months of 2009.

Scott Stathis, a managing director at researcher Kehrer-LIMRA says there's been a sea change in the past two quarters. This news surfaced during a study group on bank insurance sales the firm held in New Orleans in early December. "At our spring study group the go-to product was still fixed annuities," Stathis says. "There weren't the signs of life yet that we saw in the second and third quarter of 2009 when things started to take off for bank life insurance sales."

Several factors are driving this trend, says Stathis. As the stock market improved, fixed-annuity sales dropped and variable annuity sales increased, as they typically do when the market rises. But VAs became a harder sale as insurers retrenched on benefits last fall.

Banks sold only 40% as much in variable premiums as they had in the third quarter of 2008, according to Kehrer-LIMRA. "Variable annuity sales are going up slowly, but not enough to make up for the lack of sales in fixed annuities," says Stathis. "So everyone was looking for the next go-to product, which slowly but surely has become life insurance."

Life insurance companies have also helped to boost sales of their products by making them much simpler for bank reps to sell. For example, applications are now shorter, easily filed online and the approval process is streamlined so clients get quick responses.

But not all insurers sell life insurance through banks. New York Life, for example, only sells its life products through its own agents. "While we are a leader in bank sales of annuities, New York Life sells life insurance through a career agent force of 11,500 agents in the U.S.," confirms William Werfelman, a spokesman for the company. "In fact, recruitment of new agents set a new record in 2009, up 2.5% over the record recruitment year of 2008."

However, other insurance companies have slashed their sales forces, increasing sales of life insurance through banks. For the first time, life insurance revenue in the first nine months of last year accounted for almost 6% of investment revenue, according to Kehrer-LIMRA. "Until recently, bank life sales were showing no signs of life," says Janet Cappelletti, Kehrer-LIMRA's associate research director.