In an interview with The Insurance Journal, Peter McCarthy, president and chief executive officer of AIG Life of Canada and chair of the Canadian Life and Health Insurance Association (CLHIA), talked about service, competition, and some of the challenges facing the financial services industry.
Advisors don’t just want competitively priced products, says Peter McCarthy. They want service. And in his opinion, giving acceptable service doesn’t only mean being better than your industry peers. "We are not competing against just Manulife and Transamerica these days, we are competing against Apple. And Apple provides instant service. We are competing against Purolator, who will deliver anything overnight, anywhere," he says. "Our clients are making those comparisons, so we would be foolish not too."
"Now, Apple is a pretty tough target as far as competition goes, and so is FedEx or Purolator, but my view is that clients’ expectations are rising. They view any service provider in the same light as the best service provider they’ve ever dealt with."
Insurers who offer low premiums may get the market’s attention, but Mr. McCarthy thinks that when advisors are choosing carriers they give more consideration to whether or not the insurer will be able to offer long term support. "That is the most important thing for a professional advisor," he says. "Not that they have the cheapest product this year, but that six years from now, when they have a service problem with a client, the company is still there and providing acceptable service levels."
Asked for an example of how AIG is helping advisors meet increasing expectations, Mr. McCarthy points to how the company administers its LifeProvider universal life product. Not only does AIG offer more than 400 investment options inside its universal life contract, he says they are also the only insurer that will send out quarterly statements to anyone who requests them. "If you’re going to have lots of investment choices, you have to treat them like an investment client, not an insurance client," he comments.
The layout of AIG’s www.investmentpro.ca is certainly very similar to the research software available in the mutual fund industry. Launched late last year, the web site allows both producers and their clients to have online access to their universal life investment portfolios. It measures short and long term performance, provides benchmarks and information on the fund manager’s style, and gives details about a fund’s top holdings and how its assets are allocated geographically. AIG has also included a questionnaire to help advisors assess the client’s risk tolerance and generate appropriate portfolio recommendations.
Top five player
Mr. McCarthy thinks AIG is the leading provider of investment focused universal life in the Canadian marketplace, but he is quick to add that’s not the company’s sole focus. He says AIG also intends to be a top five player in term insurance, critical illness, structured settlements, as well as in single premium life annuities, which is a market the insurer only just entered in late 2006.
"We have specialized in the large case market and we have been, for the most part in the last five years, the number one largest average case writer in Canada. We’ve also been successful writing average cases," he says. "But it seems that our reputation has become that we’re a large case writer."
The level cost of insurance option in the company’s new LifeProvider plan is very competitively priced in the younger age 30 to 40 market. In the spring of 2007, AIG also launched a bundled mortgage protection plan that combines preferred term life insurance with critical illness coverage. Do these initiatives represent a shift in priorities for AIG? Is the family market a new target for the insurer?
"It’s not a sea change," answers Mr. McCarthy. "We’ve always wanted to be in that market, and we have been competitive in that market on and off, and we are just recently trying to be competitive in that market again."
He notes that AIG already offers combination term and critical illness products in other countries, and decided to leverage their international expertise and launch one in Canada because advisors were asking for an all in one mortgage insurance solution. While it will be a year before they have any reliable sales figures for Canada, Mr. McCarthy says that the initial reaction from brokers has been very positive.
Are there other life insurance products that should be created? Mr. McCarthy is quick to admit he doesn’t know the answer to that question. "The people seeing clients every day, professional advisors, are the ones who actually see what the problems are," he replies.
Through contracts with 85 MGA, IDA and MFDA firms, Mr. McCarthy says AIG has a relationship with about 15,000 producers. If something new needs to be invented, the inspiration will come from them. "All the good product ideas come from the distributors, not from my actuaries," he says.