Its last five-year plan yielded results that doubled, tripled, or even quintupled sales in certain markets. Now, La Capitale intends to increase the pace of its individual life insurance sales even more between 2010 and 2014. The company hopes to double its in-force business and sales in several business segments. At the same time, it is going to change its look as well as its computer systems.
La Capitale has put its five-year plan into action and the themes are growth and change. The mutually-owned company is treading new ground, and surveying its clients to find out what they think about the firm. Often seen as an insurer to Quebec’s public sector workers, La Capitale wants to let people know that it has changed significantly over the last five years.
Steven Ross has served as president and chief operating officer for La Capitale’s individual insurance division since January, and is responsible for seeing through this plan. Growth is the number one priority.
It will not be an easy task. The last five-year plan came to an end on December 31, 2009, and it set the bar high. Between the end of 2004 and the end of 2009, sales of individual life insurance doubled. If the business acquired through the firm’s purchase of Penncorp is included in the calculations, sales quintupled. In-force group insurance premiums doubled, while individual savings product premiums tripled.
In an exclusive interview with The Insurance and Investment Journal, Mr. Ross outlined the company’s long term goals. “We want to double our in-force business in individual savings and in group insurance compared to December 31 2009, and we want to double our individual life insurance sales,” he said.
Over the last few years, La Capitale has been growing its group life and health insurance at a rate of at least 10% annually, including last year. Its retirement and savings products like LifeAnew, Index Accounts, and the Stow-and-Grow Tax Free Savings Account also performed very well. Sales are growing steadily. Between 2009 and 2010, sales increased by 16% for individual savings products, and new annualized premiums for individual life insurance grew by 17%. Last year, La Capitale collected $740 million in premium revenue.
Whoever wants growth, wants distribution, says La Capitale’s new president. “Advisors are the engine that drives all growth. Clients choose their provider before they choose a product or a company,” comments Mr. Ross. The company intends to increase the size of its distribution network as well as the number of its business partners.
Mr. Ross goes on to suggest that it is not the number of distributors, but rather the quality of the relationship that matters, both with the managing general agents (MGAs) as well as with advisors. Instead of dealing with a large number of small producers, La Capitale would rather have distribution partners who produce a sure and steady volume of business.
“We want to keep building special relationships with our distribution partners, close relationships. Our VIP brokers are a good example.”
La Capitale pays attention to these VIPs, consulting them when developing new products and when making significant changes to contracts or pricing. For example, La Capitale developed its first MGA contract in 2005 with the help of three of these brokers. Distribution partners were also the ones who sparked the creation of the T20:10 product, a 20 year term policy that can be renewed for 10 year periods.
Like the rest of the industry, La Capitale has established volume criteria for its MGAs. With advisors, the firm’s strategy tends to be based on the number of products sold. Through good service and by nurturing niche markets, the company intends to increase the amount of business it receives. “For example, if an advisor is only selling our life insurance products, we would like him to sell savings products as well,” says La Capitale’s CEO.
La Capitale estimates that it has about 1,500 advisors active in the individual life insurance business, with 90% of them in Quebec. The company hopes to increase its numbers outside of the province.
The firm also has a captive distribution channel, consisting of 175 advisors at La Capitale, and another 270 with Penncorp. Mr. Ross says that he intends to double Penncorp’s sales force over the next five years. As for La Capitale, Mr. Ross says that there will be more of an emphasis on the selection, management, and retention of recruits.
In 2005, Mr. Ross orchestrated a significant change in the company’s career channel, which makes 90% of its sales to people in the Quebec public service sector. Previously categorized as employees, these advisors became self-employed. While several left the organization, the productivity of those who remained has increased. “The same year, a third left, but our sales originating from this channel increased by 26%,” notes Mr. Ross.
Since then, the retention rate in this network has remained high. At a conference in Washington last fall, Mr. Ross learned that the four year retention rate for recruits in the industry is 11%. He does not want that kind of turnover at La Capitale.
The firms also aims to increase its presence in the Quebec public service sector, becoming a force to be reckoned with when it comes to developing special plans for this segment. Mr. Ross says that it is difficult to quantify La Capitale’s share of this market, depending on the type of product involved. “It may be between 15% to 35% in some niches, and 70% in others,” he comments.
However, he is still making it a priority to increase the mutual company’s presence in its preferred market. “We want to make it so that someone who works in the public service automatically thinks of coming to see us,” he says.
Blue collar leader
A niche player, La Capitale has made a considerable effort to develop the middle-class market, as well as the self-employed, and blue-collar workers in the public service. “We are concentrating all of our efforts in these markets and want to be the leader. Managing general agents will contribute to our success, since they can gain significant volume in these markets,” explains Mr. Ross.
To better serve the middle class, the insurer has created products like LifeAnew, a deferred life annuity aimed at the guaranteed income market. The amount the investor contributes to the plan is based on the monthly income he would like to receive at retirement. More than 1000 clients have signed up since the product first appeared in June 2010, with 90% of them in the public service sector. To date, the product has gathered twice as many deposits as anticipated.
La Capitale also offers insurance that covers debts and even the rent. Another example is La Capitale and Penncorp’s disability insurance products, which do not exclude back problems - an advantage for the blue-collar client. La Capitale classifies the middle-class market as households where the combined annual income is less than $125,000.
Mr. Ross believes that there is little competition blue-collar and middle-class markets, and suggests that they are underserved. “Middle-class consumers have fewer opportunities to buy insurance,” he comments. Several insurers have switched to brokerage distribution, and he says this means there are fewer career agents to approach them.
Group insurance is also a key area for La Capitale. It is one of the cornerstones of the company’s public sector channel. The insurer did not intend to expand its public institutions network outside of Quebec, but Mr. Ross points out that in 2010 La Capitale still sold more group insurance outside of the province than within it, through third party administrators like RWAM.
La Capitale is also trying to develop its share of the individual life insurance market outside of Quebec, using its network of MGAs and its Penncorp career channel.
In individual life insurance, the two biggest areas of focus are the development of savings products in general and the Penncorp product lineup in particular. Steven Ross says that advisors active in the disability insurance business should keep an eye out for Penncorp’s niche income replacement products. La Capitale also expects to launch some new accumulation savings vehicles.
La Capitale has a reputation of being a friendly and accessible insurer, says Mr. Ross. A client survey revealed very high levels of customer satisfaction. But La Capitale wants to go further, and pay more attention to its clients. “We want to take a close look at the impressions they have when they do business with us. We want to gather more data,” he says.
This will be breaking new ground for the mutual company, since it has never conducted a formal study of this kind. For example, clients and advisors will be asked four or five specific questions at regular intervals, for example, “Are you happy with your investment statements? With your commission statements?”
At the same time, the insurer is asking itself about how it appears to clients and how the mutually-owned company is perceived in Quebec. Mr. Ross says that there is clearly a disconnect between the firm’s brand image and how it is perceived by clients.
“We are seen as being ambitious, accessible, unpretentious, and modern. Does our logo really embody these attributes? No. Over the next few months, we will be adopting a new way of presenting ourselves, a new image.” says Mr. Ross. La Capitale intends to introduce the first changes in this direction towards the end of this quarter.
Efficiency is another priority area, and progress will be made thanks to technology. In fact, La Capitale is going to modify or replace several of its systems.
In group insurance, the company will be one of the first insurers in Canada to use Wyde Solutions’s Wynsure platform. This modular, flexible system makes it possible to create a customized portal for plan members. It will be implemented between 2011 and 2012.
In individual insurance, La Capitale intends to change almost all of its administrative systems over a 5 to 7 year period. In 2011, priority will be given to the areas that are of most importance to independent advisors, such as systems dealing with commission statements, and front office illustrations. A client relationship manager program will also be offered to advisors with whom the company has an exclusive relationship.
A back-office system to manage new business will be implemented in the second phase. Programs related to in-force business will be the focus of the third phase.
Increased speed Increased speed is the goal behind of all of these technological changes. “We want to become a faster player, more innovative, and more ambitious,” says Mr. Ross. In a recent survey conducted by Munich Re, La Capitale ranked as one of the ten best companies in terms of limiting delays in policy issuance. Mr. Ross says the company wants to remain on that list.
In addition to all this, La Capitale is open to making acquisitions, but is aware of the fact that there are very few players left to buy. The company is confident that it can obtain a rate of growth that is three to four times higher than the average in the market simply through organic growth. “That is what we have experienced up until now,” says Mr. Ross.
La Capitale’s smaller size makes this kind of progress possible. “We are a niche player, and more aggressive. The big players have a uniform approach to the market. They are predictable”. As an example, Mr. Ross points to the banks, which are leaving smaller regional markets and focusing on large urban centres.
If an acquisition opportunity should present itself, the insurer has enough financial maneuvering room to seize it - both on its own, and thanks to support from it’s French shareholder Covéa. The French mutual insurer assisted La Capitale in its 2009 purchase of Penncorp, and is a now a 30% shareholder of the firm.
In 2012, La Capitale also expects to conduct a $100 million real estate deal for a new addition to its head office in Quebec. The mutually-owned firm also expects to expand the head office recently constructed for Penncorp in Mississauga.