Life insurance sales through banks, which set records in 2010, are now trending downward.

In the first quarter of 2011, sales fell 30%, according to research firm Kehrer-LIMRA. That follows a decrease in the fourth quarter after an otherwise-robust 2010.

Life sales appear to have been driven down in part by annuity sales’ resurgence, says Scott Stathis, managing director of Kehrer-LIMRA.

"In the first quarter, annuity sales broke records," says Stathis. “That’s why life insurance sales broke records in the other direction.”

Life insurance sales through banks totaled $299 million in the first quarter of 2011, down from $405 million in the fourth quarter of 2010 and from $512 in the third quarter of 2010, according to Kehrer-LIMRA.

Annuities’ difficult 2010 in the bank channel was due to low interest rates, which hampered fixed annuity sales, and a variety of economic pressures that crimped sales of variable annuities. But annuities sold in financial institutions bounced back 22% in the first quarter, with both categories posting gains, according to Kehrer-LIMRA.

“There’s an inverse correlation between annuity sales and life insurance sales,” says Stathis.

If rebounding annuity sales were one factor in life insurance’s dip, another has to do with actions taken by insurance carriers.

In recent months, Allstate, Transamerica and Nationwide have made changes in distribution and underwriting that have negatively impacted their sales of life insurance through banks, notes Stathis.

The moves seem similar to the shakeout among companies selling annuities through banks, he adds. “The bank channel sometimes gets thrown under the bus because it represents smaller distribution (than carriers’ other sales channels),” he says.

Life insurance declines were registered across all product lines and in both modes of payment in the bank channel, according to Kehrer-LIMRA.

Life insurance’s recent setback in the bank channel comes after two years in which that channel boasted the fastest distribution growth for the product category, the research firm says. In the first quarter of 2011, the bank channel was actually the fastest-shrinking channel for life insurance sales.

While overall life insurance sales were off significantly, single-premium life insurance continued to account for most of the bank channel sales in the first quarter, with 95% of new premiums.

Whole life continued to dominate bank sales in the first quarter following an impressive 2010 in which it accounted for more than half of the premium sold through banks. Whole life represented 61% of the premium mix in the first quarter.

Meanwhile, universal life products accounted for 37% of bank life insurance sales, and the remaining balance was split between term- and variable-universal life.