After a rocky start, critical illness insurance sold in group plans is catching on with employees. Between 2005 and 2006, the number of insured that purchased a group critical illness guarantee grew by 54% in Canada.
The group critical illness insurance (CI) market in Canada was merely treading water a few years ago. In 2002 there were 38,914 insured, for total premiums written of $9.3 million, according to figures published by the Canadian Life and Health Insurance Association (CLHIA).
Things have changed dramatically since then. More players, more products and, especially, lower premiums are motivating group insurance advisors to sell their clients more CI guarantees.
In 2005, the industry had about 252,727 insured, but the total a year later had increased to 558,611, the latest CLHIA data reveal.
New premiums down
In contrast, during the same period total new premiums plunged considerably. Between 2005 and 2006, as 305,884 employees were covered by their employer’s CI plan, new premium revenue plummeted by 36.8%, from $23.5 million to $17.1 million.
According to the CLHIA’s figures, from 2005 to 2006 the average premium decreased 67%, from nearly $93 per person to slightly over $30 per person.
Premiums could well continue to slide, says Dick Gilbert, president of GCI Insurance Services Inc. and Megacorp. The more the product sells, the more premiums will be compressed by experience, he points out. Insurers that have sold this product to groups for some time have already witnessed this effect.
Mr. Gilbert has launched a new group CI product. He already expects the projected price to be adjusted downward in a few years. "As we get more and more people and the economy of scale gets bigger, we may even see our rates go down," he says.
For Yves Millette, a senior vice-president at CLHIA, this gap between premiums written in 2005 and 2006 is partly due to a growing trend among insurers of offering lower coverage amounts, as low as $5,000, he points out.
Early results for 2007
AXA Assurances Canada, which experienced a boom year as new business in group CI soared by 90% between 2006 and 2007, sees the decline in premiums in a different light.
Michael Finnegan, vice-president, group accident and sickness, told The Insurance Journal that it is the sudden interest in this product that put the squeeze on premiums. "Insurers are paying particular attention to group CI products and the competition is becoming fiercer. This pushes prices down," he explains.
All the same, AXA has no intention of tossing its hat in the ring and lowering its premiums. With several years of experience in the market behind it, AXA considers its product to be very well priced. "The rates we offer are adequate, and we do not plan to lower premiums," Mr. Finnegan concludes.
At Sun Life Financial, sales are also vigorous, says Josée Dixon, regional director for Eastern Canada, business development, group.
Ms. Dixon stopped short of revealing the number of new clients that purchased CI in 2006-2007, simply saying that the insurer sees a clear difference between 1998, the year the product was launched, and 2006. "We’re seeing marked growth since 2003, and it has gained momentum since 2006."
Manulife Financial, a newcomer to the group CI market, says it is satisfied with the response to its product and its sales. Since 2006, advisors have increasingly hinted that this product would be welcome, says Dustin Coté, assistant vice-president, business expansion, group insurance marketing. Consultant firm Watson Wyatt also sees an upsurge in interest. Michèle Boisvert, Eastern Canada group insurance and health care management practice leader, confirms the growing trend toward adding a CI guarantee within the group plans managed by Watson Wyatt.
"The product does not sell easily, but demand is increasing. In our Canadian database, 11% of companies offered it in 2006, and this figure is rising, Ms. Boisvert says.
Overall sales may be surging, but Quebec and Ontario are lagging behind, Mr. Finnegan says. His company is still trying to figure out why.
Alberta alone powered about 50% of the growth of AXA’s group CI sales in 2007. Interest is growing in the Maritimes as well.
The economic boom in Alberta in recent years, coupled with the labour scarcity, has made the province fertile ground for new insurance products where employers are in strong competition to attract new workers. One example: AXA signed a contract with an oil company that offers its 5,500 employees free group CI. "The employer is picking up the $656,000 tab," Mr. Finnegan points out.
Weak sales in Quebec
In Quebec, anemic interest is dampening some insurers’ interest in revamping this product. Desjardins Financial Security (DFS) mentions that group critical insurance is not a star product and that the insurer does not plan to invest in it for now. "It was launched several years ago but didn’t take off," says Isabelle Truchon, communications consultant. Other insurers, better established outside Quebec, want to intensify their offering in la belle province. "We haven’t done a lot of marketing [in Quebec] in 07, but we will be doing more in 08," explains Eddy Levy, vice-president, sales and marketing at Ace Life.
Ace Life revamped its product in 2007 and gave presentations with "great fanfare" in other parts of Canada. The product has not been officially launched in Quebec, but the French version is ready, Mr. Levy says.
"For Ace this product represents ‘the’ growth," he emphasizes.
This is good news for group insurance advisors. For its part, the insurance advisors Sansregret Taillefer & Associés inc. will systematically offer CI in 2008. "Up to now we were reticent to sell it because group insurance costs were rising," explains
Michel Taillefer, president of the company.
He does not doubt his future success in sales because he considers the product the way of the future. "When you believe in it, it’s easier to sell," he says.
Just being able to tell entrepreneurs that CI is available for them and their employees is already a great stride forward, he continues. "People will ask questions about the descriptions of guarantees. It will then become common knowledge that the product exists and that it is affordable,"
Mr. Taillefer explains.