Few providers would risk taking universal life out of their lineup, but Assumption Life took the bet… and won. The insurer kept its sales force and also increased its revenues in 2013, its first year without universal life. From this day forward, the mutual company only plans to develop products that are compatible with its electronic platform.Even if he has to shuttle between Assumption Life’s head office in Moncton and his family home in Montreal, André Vincent, the company’s CEO, does not regret his choice. His new employer allows him to do things he has always dreamed about, “things that no one has done before,” he says. This is something he wasn’t always able to do when he was working for big players like Great-West Life and Desjardins Insurance, he says.
Nor does he regret leaving Medavie Blue Cross in 2013 to take the helm of a player that dared to abandon universal life. This is a move he describes as being an integral part of a significant cultural shift. It wasn’t a question of interest rates or price increases that put an end to the product. What finished it was that universal life no longer fit with the insurer’s distribution strategy. “We want all of our individual life insurance products to be sold from our electronic platform. The fact is that universal life is too complex to suit it,” he comments.
It was Assumption’s small size that allowed him to execute this change in direction, explains Vincent. “We use our small size as leverage, in order to innovate and change course quickly,” he comments. “We employ innovation as a filter that allows us to tackle our challenges constructively.”
Despite the removal of the star product, the insurer’s individual life insurance sales only dropped slightly. Furthermore, most advisors have remained faithful to the insurer, and Vincent says that those who did leave were offset by the arrival of new advisors.
“Younger advisors love the idea of only operating on an electronic platform. Older advisors are a little more reluctant, but they get over their reservations once they have tried it,” he explains. These converts like the immediacy and the built-in safeguards against errors, which refuse to submit an application for insurance if it is incomplete. “In addition, commissions are paid to the advisor in the same week the sale is made,” he says. Managing general agents also like the platform. They are able to save time and resources since they do not have to deal with paper.
Assumption Life also managed to retain most of its advisors because they only do business with other providers when the product they need is only processed on paper. “That’s the case with universal life and portfolio products,” adds Vincent.
There were still a few defections. “We had some producers who only wanted to sell universal life. We weren’t in a position to meet their needs. We don’t believe that it was the electronic application that drove away advisors, but rather the withdrawal of a mass market product,” he explains. “But how do you keep a mass market product in an environment where you cannot compete effectively? We prefer the road less travelled.”
Going off the beaten path
To avoid overcrowded markets, Vincent says the company is going to go off the beaten path, which is to say beyond individual life insurance. “Assumption Life is known among advisors for the ease of its individual life insurance transactions. This is what the company wants to become known for in other product lines as well,” says Vincent.
This mission is the driving force behind the innovations that are due to appear in the second quarter of 2014, including a simplified issue critical illness insurance product. The insurer also has the group insurance market in its sights. Assumption Life plans to register as a Voluntary Retirement Savings Plan (VRSP) administrator in Quebec, and will complement its offering with an Individual Pension Plan (IPP) aimed at those who go beyond the maximum contributions allowed with registered plans.
Other products will make their debut later this year or in 2015, such as a new family of health and living benefits products that the mutual insurer plans to launch. “This platform will not be ready in the next few months. It involves a lot of work and partnerships with reinsurers,” explains Vincent.
There has been a burst of innovation in the industry over the last few years, notes Vincent. Low long-term interest rates and the new International Financial Reporting Standards (IFRS) pose challenges that make products with long-term guarantees less attractive to insurers.
“It has been a gradual trend over the last ten years: move towards non-guaranteed products because it has become less attractive to compromise yourself for the next fifty years with long-term guarantees. It involves a great deal of insecurity, and there is an impact on an insurer’s profitability,” comments Vincent.
André Vincent feels strongly about the IFRS rules. “They put an incredible amount of pressure on insurers. The ones that have come into force have resulted in more complexity and have obliged us to restate some figures in our results as liabilities and assets of the insured, but that is nothing compared to what is coming,” he says. “The future accounting standards applicable to life insurance contracts will result in an enormous amount of uncertainty for insurers. It is expected that they will come into force in 2018. This is quite soon.” The industry is concerned that IFRS will cause a significant amount of volatility from one quarter to the next, when in reality the insurers’ key financial elements will not have changed at all.
One bright spot on the horizon is that long-term interest rates have increased slightly. “Just enough to give insurers a bit of breathing room. We can already see this in insurers’ financial results for 2013,” notes Vincent.
Speeding up development
No matter what the external pressures or their causes may be, Assumption Life intends to continue with the innovations that differentiate it from the competition. “With every innovation, we are always trying to automate as many functions as possible,” he says.
Vincent points out that not everyone can turn on a dime and launch an electronic application. “Several of our larger competitors would like to do it, but it is a huge change to have accepted, both internally and with distributors.” But it is something the Moncton-based mutual insurer implemented in the mid 2000s for a limited number of its products.
“Some big players give us feedback and call us to ask how we succeeded. However, big players like Manulife, Sun Life, and Great-West find that the market that would allow for this kind of platform is too small for them: $3 million a year in annual sales is not much for these players but it is a lot for us. Their strategy means that there are niches open to us.”
Assumption Life also wants to put the emphasis on the client experience. “Our main mission statement is that it is easy to do business with us, so easy that you wouldn’t want to do business elsewhere,” he says. He believes the insurer is at this stage, and a lot of advisors tell him they agree. But for the most part it has reached this stage in individual life insurance. Now he wants to reach it in all business lines.
This client experience is not a question of processes, but of human relationships. “My best feedback, I get it from advisors who like to call us because we treat them like human beings. This has to be the case across all business lines, including group insurance, and for all parties: the advisor, the insured, the employer… The client experience, this is something everyone goes through.”
So Assumption Life will continue to focus its efforts on an expert workforce that concentrates on clients. As was the case with the electronic application, he does not believe that a client experience that is founded on close relationships can be easily reproduced by its largest competitors. “I worked for the large players and what they are experiencing is an enormous pressure on operating costs and profitability. It is a pressure that is forcing them to cut corners in order to provide certain services,” he says.
If André Vincent is now able to do things differently at Assumption Life, he says his mission is also to ask why the company is doing things a certain way. “Can we do it differently? We know we will be copied sooner or later,” he says. “Many have imitated our simplified issue products because they saw they did not have a lot of business in this niche. So it will become crowded and we will have to find other areas. To set ourselves apart in our niche markets, we have to go over and above and offer a level of excellence that everyone recognizes. I can’t claim we are there yet!”
To reach its goals, Assumption Life will have to speed up the development of new products, expand its search for new markets, and also remain competitive. The insurer has therefore decided to hire or promote people from within and have them focus on this task full-time. It will no longer be a matter of having to do two jobs at once, and innovate on the side.
The insurer has therefore established two business units, one for strategic marketing and another for development. They are currently being set up, and will become active during the third quarter. “The development unit is now complete. The people who will work in it have been confirmed in their roles,” says Vincent. In some sectors, people will become involved as needed.
“This is the case with actuarial, where people will participate in the development process during pricing, or to make other contributions at certain times,” explains Vincent. “On the other hand, the technology people will be there throughout the process, for example to conduct tests and illustrations. It is above all in this sector that we lack resources.”
Thus equipped, Assumption Life will be able to speed up its product development starting in the third quarter of 2014. It will be able to use its full-time staff to build on its strategy for the market. “Our competitive edge will improve substantially. We will know what is happening not only in our local markets, but also in the United States, which is an excellent incubator, in Europe, Australia, and in South Africa, which is where critical illness came from,” says Vincent.