Critical illness insurance sales are growing steadily, but the price hikes of 2012, sparked by low interest rates, will probably cause a downturn, LIMRA predicts.The LIMRA report on individual critical illness insurance sales in Canada at Sept. 30, 2012 shows that this sector grew steadily in its three main business lines compared with the same period in 2011. Premiums and number of policies both advanced.
Despite the solid performance, sales may soon falter, the LIMRA researchers caution. “The effects of low interest rates and price increases will continue to be felt through the end of 2012. The aftershock of these changes may bring a more restrained start to 2013, as the market cools following this recent surge,” analysts Karen Terry and Rob Kanehl predicted at the start of the year.
For now, the most vulnerable product of the bunch is holding its own. The permanent policy shone in Q3 2012 with robust growth of 48% in new premiums, the LIMRA analysts report. They add, however, that this product has seen several price hikes that have persisted into the new year. In fact, the product is very sensitive to lingering low interest rates.
In Q3 the market continued its momentum initiated in early 2012. Overall, new annual individual CI insurance premiums rose by 19% in the first nine months of 2012 compared with the same period in 2011, for a total of $88 million.
Total premiums in force were $623.7 million for this product at Sept. 30, 2012. The number of policies climbed by 15% during this period, to reach 81,894. The number of policies in force stood at 581,807 at September 2012.
In the first nine months of 2012, new limited-period level insurance premiums rose by 24% versus the same period in 2011. The number of policies increased by 14% during this comparison period.
Also in the first nine months of 2012, new premiums for permanent products were up 21% compared with the same period in 2011. The number of policies of this product type grew by 18% during this comparison period.
Renewable term continues to lag. New premiums for this product edged up only 3% between the first nine months of 2011 and 2012. The number of policies increased by 9% during this comparison period.
Limited-period level product benefited the most from the slowdown. In the first nine months of 2012, the share of new premiums sold in the renewable term product category declined by 2% compared with the same period last year; limited-period product single-handedly picked up this 2%. The share of term policies sold in the first nine months of 2012 also dipped by 2% versus the same period in 2011. This share was split between the limited product and the permanent product.
Concerning sales of individual CI insurance premiums in the first nine months of 2012, the limited product accounted for 45%, the permanent product 38% and the renewable term product 17%. As for term policies sold during this period, the limited product generated 42% of sales, renewable term 35% and the permanent product 23%.
The career distribution network posted growth of individual critical illness insurance sales that far surpassed that of the independent network in terms of new premiums. It boasted a vigorous growth rate of 31% in the first nine months of 2011 and 2012. The independent network grew by 10% during this comparison period.
The independent network, however, continued to capture the majority of individual CI insurance sales. In the first nine months of 2012, it reaped 54%.