Bank life insurance sales soared to a record high in 2010, although sales declined sharply in the fourth quarter, the first quarter over quarter decrease in seven quarters, according to the fourth quarter 2010 Kehrer-LIMRA Life Report released on Thursday.

Kehrer-LIMRA reported that banks sold $1.8 billion in life insurance premium in 2010, almost, a gain of 40 percent over the 2004 record of $1.3 billion. Nonetheless, sales slumped 21 percent in the fourth quarter to $406 million, down from $512 million in the third quarter, partially due to the fact that Allstate recently left the bank market to increase focus on their property and casualty business. This move meant life insurance was distributed as part of a tri-line strategy (auto-home-life) through Allstate agents. At the same time, Transamerica dropped their single premium universal life product from the bank channel. Single premium policies were behind a substantial portion of the recent uptick in bank life sales, according to Kehrer-LIMRA.

“Over the past several years carriers have done a good job supporting the bank rep’s transactional culture with simplified products and processes, especially single premium wealth transfer products. The hope is that this strategy serves as a ‘gateway drug’ which gets bank reps comfortable selling other types of life insurance as well,” said Scott Stathis, managing director of Kehrer-LIMRA, in a statement. “If you’re an optimist the recent 31 percent increase in bank recurring premium sales from Q3 to Q4 2010 could be an indicator of this evolution,” Stathis added.

Meanwhile low interest rates have continued to take a toll on fixed annuities sales, which are “a typical go-to product in the bank channel,” according to Kehrer-LIMRA, and has pushed representatives to focus on selling life insurance. “Simplified single premium life products have filled the void left by diminished fixed annuity sales” said Stathis.

In 2010, universal life products represented 46 percent of bank life insurance sales, while whole life represented 52 percent of the premium mix, the first time in the last decade that whole life contributed more than half of the premium sold through banks, Kehrer-LIMRA reported. The remaining two percent was split between term and variable universal life.

Bank whole life premium sales skyrocketed by about 90 percent in 2010, on top of a 30 percent year-over-year increase in 2009. From an annualized premium standpoint, which is planned recurring premium plus 10 percent of single premium, the bank channel has been the fastest growing distribution channel for life insurance for the past two years, jumping 22 percent in 2009 and 14 percent in 2010, according to LIMRA’s U.S. Individual Life Insurance Sales Report. The wirehouse channel was the second fastest growing channel in 2010 with a growth rate of 11 percent.