After several years of lethargy, individual life insurance business in Canada skyrocketed in 2006 compared with the previous year. New premiums surged while the number of policies advanced at a more sedate pace. Insurers confirm that the momentum continued into first quarter 2007.
The LIMRA International report on individual life insurance sales in Canada in 2006 states that new premiums rose by 10% between 2005 and 2006.
The data in LIMRA’s 2006 report originates from 18 companies that represent 86% of insurance face amounts purchased. The big three, Great-West (Great-West Life, Canada-Life and London Life), Manulife Financial and Sun Life Financial are included in this study.
The industry ended the year at full throttle. Growth in new life insurance premiums reached 18% in the last quarter of 2006, compared with the same period in 2005.
The number of policies sold increased less dramatically, at 3% in 2006 compared with 2005. Taken together, premium and policy unit figures point to a net advance in business volume in individual insurance in Canada.
After several years of mitigated growth and even downslides, these results are definitely encouraging.
Earlier LIMRA reports found that new individual life insurance premiums in the Canadian industry advanced by only 5% between 2005 and 2004.
This figure was an improvement from the 2004-2003 comparison, when premiums edged up by barely one per cent. Between 2003 and 2002, the industry actually experienced a decline in sales of individual life premiums.
In terms of number of policies sold between 2005 and 2004, the Canadian industry sustained a 4% decrease.
In 2006, universal life insurance policies drove growth. New premiums swelled by 15% between 2005 and 2006. During the same period, term insurance premiums other than T100 climbed 6% and whole life 5%. For the same comparison period, new T100 premiums shrunk by 8%, the LIMRA report reveals.
The number of universal life policies also rose considerably in 2006 compared with 2005, at 8%. As for other products, term policies saw the only growth in sales, at 3%. The number of whole life policies sold in 2006 slipped by 3%, and T100 policy sales were down 5%.
In distribution in Canada, the LIMRA report notes that the career (captive) agent channel had an excellent year. In 2006 the network achieved 8% growth in annual premiums produced compared with the previous year. The independent broker channel, in contrast, grew by a meager 1%.
Career agents’ success is attributable to the exceptional growth of their universal life insurance sales. Annual premiums from the captive network for this product rocketed by 25% between 2005 and 2006.
All the same, the brokerage network dominates in terms of total universal life insurance sales in Canada, LIMRA reports. It cornered 68% of the sales in 2006, compared with 32% for the captive network.
Career agencies prevail in whole life sales, with a 39% share of total sales in 2006, versus 9% for the brokerage network.
Individual term insurance is a more even playing field: the captive network garnered 28% of sales of this product in Canada in 2006, compared with 20% for the brokerage network, LIMRA reports.
Overall, the five insurers that topped the seller charts in 2006 achieved growth of new premiums of 10%, mirroring the Canadian industry overall, LIMRA concludes. Yet the leaders’ growth in number of policies sold tops the industry average, at 5% versus 3%.
These five players captured 60% of new annual premiums of individual life insurance produced in Canada in 2006.
According to the LIMRA data, growth in new individual life insurance premiums peaked at year end for several players. In its annual report, Manulife boasted of a vigorous year end 2006 for individual life insurance salesé
Within individual insurance, customer service initiatives designed to reduce response time and improve communications contributed to sales growth and market share gains, with record quarterly sales achieved in the fourth quarter of the year.
Great-West’s annual report says this sector grew by 28%, as total purchases of these products rose from $6.172 billion to $7.904 billion. In its annual report Great-West stated that in Canada it holds 25% of individual life insurance premiums in force and 31% of living benefits premiums.
At Sun Life, Mark DeTora senior vice president, Individual Insurance and Investments said that his company has achieved similar results as those disclosed by the LIMRA report for 2006. He added that the career channel (previously named Clarica) has maintained very strong sales, and the independent channel experienced strong growth. “ A large part of our total individual life growth came from the MGA channel in 2006,” said Mr. DeTora.
Sun Life experienced growth of 20% with its individual life new annualized premium sales in the fourth quarter of 2006 and Mr. DeTora has observed a continuation of this momentum in the first quarter of this year.
Universal life new premium sales have led the pack in 2006, he said, followed closely by term insurance.
What helped universal life sales results is that Sun Life did not have to increase its level cost of insurance, as many did in 2006, and doesn’t plan to do so, says Mr. DeTora.
Aware that the “big three” are becoming more and more international, Mr. DeTora nevertheless believes that the Canadian market still holds growth opportunities. “A large part of the Canadian market is underinsured,” he underlined.
The Industrial Alliance report boasts of record individual life insurance sales in 2006, at $153.6 million in premiums. This amounts to 9% growth in annual premiums despite pricing adjustments made to products.
These adjustments dampened the insurer’s first quarter results in 2007. Individual life insurance premiums were down 6% compared with the same quarter in 2006. In its Q1 report for 2007, Industrial Alliance attributes the setback to solid sales in 2006.
President and CEO of Industrial Alliance, Yvon Charest clarified the pricing adjustments to The Insurance Journal in an interview “We corrected our universal life insurance prices by increasing our level cost and decreasing our annual renewable term cost. These adjustments triggered a 6% drop in individual life insurance sales in first quarter 2007.”
The Quebec insurer’s report also provides details on market share. Industrial Alliance ranks fourth in Canada for individual life insurance sales, with a market share of 12.7%. It is the Canadian leader in universal policy sales, with a 16.1% market share.
For smaller players, superior results can be found in specific niches.
AIG Life Canada said that it had an excellent year in 2006. Its success is holding steady in 2007, with a 61% rise in the amount of premiums invested (cases that result in firm sales) in the first quarter of 2007 compared with the first quarter of the previous year. The insurer has made a name for itself in the corporate and high net worth markets.
AIG vice-president, sales, Daniel Dessureault pins this staggering leap on the conclusion of more “large cases” than on the previous date last year.
Mr. Dessureault admits that AIG’s preferred niche sometimes generates unusually large, non-recurrent sales figures. “This niche is more volatile, more cyclical. It is one of the reasons that we are trying to expand our distribution networks and reach more advisers,” he explains.
In May, the insurer launched the universal life insurance line LifeProvider, a product intended for a much broader clientele, including young families and self-employed workers.
By diversifying its clientele, AIG can continue to spur its individual life insurance sales while stabilizing its results, Mr. Dessureault says.