Life insurance and annuities made modest gains in the third quarter 2010—gross written premiums were up 6% over the same period 2009—the industry is far from healthy, warns a report from the Aite Group in Boston.

In 2009, new life insurance and annuity premiums hit historic lows as recessionary thinking made buying insurance an unnecessary discretionary purchase. Whether it’ll bounce back is the key question. Boomers’ estate planning needs find a natural fit in life insurance—although the newly voted thresholds of $10 million per couple will mean fewer people will be rich enough to need it—but the more frugal Generation X and Y consumers may buy the cheaper term insurance and invest the rest, rather than buying higher-premium products, partly because the images of both insurance agents and financial advisors took a beating over the past three years.

The report notes that the mass affluent represents a huge sales opportunity. Indeed, LIMRA figures it cites show that only 44% of mass affluent households own individual life insurance. To do so cost effectively, though, insurers will have to broaden their distribution through external channels, such as banks and financial advisors, while streamlining the application process.

“Complexity of sale is a known issue,” said Clark Troy, research director and head of the life insurance group at Aite who is based in Chapel Hill, N.C. “The industry has definitely focused on getting toolkits in place, shortening the submission to commission cycle with online applications, automated underwriting and e-signatures to expedite processing. The question now is how to communicate the need for life insurance to the mass affluent.”