Industrial Alliance has launched an optional critical illness insurance product for group plans that covers three groups of illnesses independently.Industrial Alliance’s new ExtensIA is an optional insurance product that covers 23 critical illnesses for adults and 10 more specific to children. Before the launch of this product, the group CI insurance sector had not seen a major innovation since the explosion in the number of illnesses covered in the mid-2000s.
This optional insurance is grafted to existing collective plans. It is paid and underwritten on an individual, voluntary basis. ExtensIA is reserved for group insurance customers with 50 employees or more. The new line also includes optional life insurance coverage and accidental death and dismemberment (ADD). The three guarantees can be written together.
Industrial Alliance has been offering a critical insurance product to groups for several years. It targets companies with 10 employees or more. Employee participation is automatic. The insurer says that this product is aimed at smaller companies.
The advantage of the new group plan is that it requires no administration by the employer. This process, and billing, are managed by the insurer. The group insurance representative solicits the employees, and the insurer maintains the relationship via an information campaign. Specifically, it provides posters and e-mails that the employer can forward to employees. Coverage is portable and does not change the existing group insurance rate chart because it is billed on an individual basis.
Keeping it simple
“We wanted to make things simpler for the employer, says Jacques Parent, senior vice-president, Group Insurance at Industrial Alliance, when interviewed by The Insurance and Investment Journal. “We saw that administrative charges were a barrier to business development in group critical illness. That’s why we are offering this market an individual guarantee.”
On top of simplification, ExtensIA lets employers circumvent certain delicate situations. “If an employee asks for $100,000 in optional insurance and the insurer turns him down, the employer finds itself with confidential medical information, which creates an uncomfortable situation,” Mr. Parent explains.
For their part, plan participants can receive coverage without having to provide evidence of insurability if they buy the guarantee early. “This offer is part of the campaign: basic group plan participants have 31 days to purchase an optional critical illness insurance guarantee without evidence, for up to $25,000 Mr. Parent says. The offer is also open to new employees who join the group starting today.
On top of this special promotion, the campaign rests on a product exclusive not even seen in the individual critical illness insurance product. It offers multiple event coverage, allowing three different claim settlements, each for 100% of the total coverage amount. A settlement request is thus accepted for each of the following illness categories: cancer, cardiovascular disease and the “other” category (other illnesses covered on the list that did not appear in the first two categories).
“We have developed this guarantee, that is rarely seen in the market with the help of our reinsurer, which drew on its international experience,” explains Parent.
In addition, a benefit equal to 10% of the coverage amount is paid for three cancers without risk of short-term death and for a coronary angioplasty, for a maximum benefit of $25,000 in each case.
Another distinct advantage: insured can keep their coverage even after they leave the group plan or if the employer changes insurers. Coverage ends at age 70. These advantages are also available for spouses and children.
The product will be affordable, Parent adds. “Although the product is purchased on an individual basis, we think the rates are advantageous compared with those of traditional individual critical illness insurance,” he continues. The insurance costs are structured like a one-year term premium that increases only every five years.
The product is directed at groups of at least 50 employees to ensure profitability, Parent says. “With the penetration rate we anticipate over the long term, at 30%, the product would not be profitable below this threshold.” The insurer’s experience demonstrates that this rate is within reach.
“Some of our customers already have optional critical illness guarantees within modular plans, and participation ranges up to 40%. These are groups that already had a specific optional product but with group invoicing (traditional collective plan with life insurance at the basis) It is not a mass product like ExtensIA,” Mr. Parent says.
To reach the 30% rate, ExtensIA still needs support from the employer and a targeted campaign to attract employees.
During a pilot project that began in 2013 with a single group, ExtensIA did not reach the target penetration rate; it hovered around 15% to 20%. “It may be because of the nature of the group involved in the pilot project. We are observing, however, that the participants have purchased critical illness insurance amounts that are higher than $10,000, the minimum amount permitted. ” Mr. Parent explains.
The challenges of penetrating with an optional guarantee are not exclusive to critical illness, Mr. Parent adds. “For many customers, the rate was not higher for optional life insurance.”
In another bid to meet its target rate, the insurer is conducting a pilot project in which enrolment is done via an online form. “The Web process should increase membership rates,” Mr. Parent says.