After having closed its guaranteed withdrawal product Class Plus 2.0 to new sales on Oct. 31, Empire Life launched version 2.1 on November 3. The current economic environment compelled the insurer to make some changes, Drew Wallace, president and CEO of Empire Life Investments, told The Insurance and Investment Journal. “For us [GWBs] continue to be a critical solution and we wanted to make sure that we can offer the product to the marketplace. But interest rates remain very very low, with no real sign that they’re going to increase back to norms anytime soon. We continue to experience a fairly significant level of volatility. For those reasons we felt that to maintain the product we had to make some changes,” Wallace explains.
For one, Empire Life has eased the pressure by reducing the death benefit guarantee from 100% to 75% in Class Plus 2.1. Wallace discussed this change with several advisors in recent weeks and says they are comfortable with this decision. “The majority of customers are requiring this product for the income, not necessarily for the death benefit guarantee,” he explains.
Empire Life also upped its insurance fee by 0.25%. However, the annual bonus of 5% on base income, the withdrawal amount of 4% at age 65 and automatic reset remain unchanged.
The company revamped other fund series as well, notably its segregated funds with 75-75 guarantees at death and maturity, and its product 100% at death and 75% at maturity. “We had not made changes to most of these products in 18 years,” Wallace points out.
The company planned this move carefully. “A lot of this work took place behind the scenes in the last couple of years. Low interest rates, volatility and increased regulation have been the key drivers behind those changes,” he says.
Wallace explained that solid demand is keeping this guaranteed withdrawal product alive. A growing number of Canadian investors understand the importance of being able to transfer investment risk to a third-party when they retire, he says. “When you lose capital at your retirement, you have fewer years to rebuild it than 30 or 40-year-olds do,” he explains.