AXA Insurance recently gave its life insurance division a tall order: double life insurance business and triple profits in Canada. To this end, the insurer is bringing all of its networks into play, from managing general agents to personal producers, national accounts and the internal network.
Globally, life insurance activities and financial services weigh heavily in the AXA Group’s lines of business. However, in Canada this sector falls short of AXA’s expectations, says Robert Landry, executive vice-president, life insurance and financial services in an exclusive interview with The Insurance Journal.
On the global scale, life insurance, investment and pensions stood at $9.53 billion at Dec. 31, 2006, compared with $30.28 billion in property and casualty (P&C) business. In Canada, although P&C insurance sales figures were more than $1.62 billion, life, investments and pensions were only $144,270 million.
The P&C division of AXA insurance produced close to $130 million in profits in 2006, versus about $7 million for the life division.
To catch up its global operations and to counterbalance its huge portfolio of P&C business in Canada, Mr. Landry says he has ordered AXA intends to double life insurance business by 2012 and get into the Canadian investment sector. “The life insurance sector needs a jumpstart.”
“Following these orders amounts to catapulting a small business to the status of a large company. We have to redo the foundations,” Mr. Landry explains. The cornerstone of AXA’s new foundation for its life sector is what Mr. Landry calls multi-distribution. “We’re open to all the distribution networks. It’s a first for AXA,” he states.
Step one in the multi-distribution plan was a radical transformation of AXA’s largest network: regional directors. Initiated in 2005, the restructuring continued into mid-2006.
The newly renamed “general managers” concentrate their business at AXA. While they are permitted to deal with other suppliers, this proportion of their business rarely exceeds five per cent. General managers are independent companies that concentrate business with AXA, as opposed to MGAs (managing general agents) who do business with several insurers.
“We have reinforced this network by funnelling our business to fewer managers. We have taken steps to support them with business and financing solutions. But we also changed our relations with them. Before, we had a mutually exclusive relationship. Now we are multiplying our networks and they’re all in competition.”
Mr. Landry calls this a huge unprecedented shift for AXA Insurance.
The company is also expanding into new channels of distribution. A first MGA has signed on so far, and another MGA is poised to climb onboard this spring. A third is expected to join the ranks in late summer or early fall.
AXA Insurance is targeting large MGAs that serve markets that complement its current operations. “We want well established MGAs that have affinities with our development culture and that complement our current distribution in terms of target market, clientele segments and territory.”
AXA is also eyeing national accounts in Canada. It plans to sign at least one major agreement in this network in the coming year, Mr. Landry reveals.
The insurer is also overhauling activities in Ontario, which is AXA’s main staging ground for life insurance operations outside Quebec. Sales in Ontario had been limited to whole life. AXA has launched a large-scale initiative to diversify the offering.
“When we entered Ontario, we learned a lot,” Mr. Landry notes. “We arrived with a very competitive whole life product at a time when we were building our network in the province.”
As a result, the network is concentrated in whole life. Profitability, however, has been undermined by slumping long-term interest rates. To diversify its distribution network by making itself better known among financial advisors, AXA put in place a sales campaign in 2006 where it bought every new insurance proposal for $50 apiece. Thirty new advisors were recruited this way, Mr. Landry says.
From June to December 2006, the sales campaign outside Quebec had a major impact: the insurer issued 70% more insurance contracts than in the same period in 2005.
AXA will probably wind up its audacious sales campaign, an Ontario exclusive, in March or April.
Since late 2005, Richard Pyper, vice-president, business development, has been at the helm of AXA’s Ontario operations. He developed his network by adding GAs and AGAs. AXA has 45 distributors in Ontario – MGAs, GAs and some AGAs.
This reinforcement of activities in Eastern and Western Canada should begin in 2008, Mr. Landry says.
AXA signed an agreement with its first general manager in the Maritime Provinces in the fall. Jean-Pierre St-Onge is the general manager in charge of the territory.
The acquisition of La Citadelle, concluded in early 2006, boosted life insurance sales across Canada. It landed AXA over $40 million in group insurance premiums, breaking new ground for the insurer. AXA expects La Citadelle to generate up to 55% of new life insurance business in 2007.
Compared with individual insurance, the group insurance portfolio is more evenly distributed across Canada. Close to 40% of group premiums in force are concentrated in Ontario, compared with about 30% in Quebec. The remainder is split between Western and Atlantic Canada.
A network match-up
Mr. Landry is doing more than just adding networks. He is stirring competition within and even between networks. “General managers will soon be competing with MGAs,” he says.
All the same, cannibalism between networks is off limits. This is the essence of multi-distribution, Mr. Landry explains, pointing out that “our networks are complementary.”
In a bid to stoke competition, general managers no longer have exclusive territories, he reveals. The compensation chart is also being tweaked to stimulate the growth of AXA Insurance’s networks. Now more stringent, it ensures greater uniformity between networks across Canada, ostensibly to raise sales objectives. The new chart is also expected to build loyalty with distributors.
“For AXA to attain its objectives, producers must also reach theirs,” Mr. Landry says.
Compensation based on volume is being reviewed and will increase in line with production. “Qualification criteria for volume within each network are more stringent,” he explains. Producers that do not reach the target levels will feel the tightest pinch. Those that fall below a certain production threshold may even see their contracts terminated. “But this will be done gradually because we will first help them attain their sales objectives,” Mr. Landry adds.
Services and sales incentives are AXA Insurance’s prime levers. Mr. Landry defends his tough stance with advisors. The annual convention – to be held in April in the Dominican Republic – requires annual production of $25,000 in first-year commissions, he says.
“We are more demanding but more accessible. Our three concerns for brokers are to accelerate our service, simplify our procedures and get closer to them,”
In 2006, AXA launched a simplified application form that raked in 15% to 20% of new business quotes. Accessible via the Internet, the application form includes a service where the company underwriter calls the client to complete the medical questionnaire. “Internally, we now process new business in one week. Our objective is to shorten it to 48 hours,” he reveals.
AXA is one of the few players in Canada that has no segregated funds on the market. This will soon change when AXA launches a major foray into the Canadian investment sector this year.
The insurer is targeting the investments and retirement markets, but is steering clear of product development. “We are banking on our international expertise in the management and disbursement of retirement savings. We will translate this know-how into capacity, services, technology and even products.”
For example, the company has accumulated valuable experience in retirement and financial services thanks to an extensive annual global survey: AXA Scope.
Mr. Landry plans to centre this new positioning on products such as annuities and segregated funds.
“We have teams that work full time scrutinizing what our group is doing around the world. We have a very good idea of what we will retain for Canada.” He declined to discuss specific choices and when they would be implemented here.
A first step in the penetration of investment markets is imminent. Mr. Landry announced a major revamping of AXA’s universal life to solidify the new investment positioning. “We’re adapting our universal life to target both families and investors.” The first makeover is scheduled for April, the second for September, he says. In the fall, the line of funds integrated into the product will be extended.
The universal life version aimed at families will feature a more accessible insurance cost. By comparison, the product tailored to investors will include more sophisticated investment options linked to AXA products or those of mutual fund companies.
The insurer is also trying to find ways to adapt its critical illness products to challenges such as mounting health care costs and advances in disease detection. AXA is also looking into long-term care needs, a sector it considers underserved.