On Jan. 26, Manulife Financial revamped its critical illness insurance product Lifecheque by pruning prices and adding illnesses covered. In doing so, the insurer also adopted the industry’s new benchmark definitions for critical illness insurance.An informal working group of members of the Canadian Life and Health Insurance Association (CLHIA) drafted a new version of the critical illness insurance definitions in 2013, replacing the 2007 version. After organizing meetings of executives of the main insurers and reinsurers, the CLHIA adopted the committee’s conclusions as guidelines.
Active committee member David Baker, AVP of insurance products for retail markets at Manulife, discussed these definitions in an interview with The Insurance and Investment Journal. He says that some definitions of critical illness needed to be clarified, along with their scope, particularly concerning cancer.
He admits that insurers have not been scrambling to adopt these definitions, as they did in 2007. “There was more disparity in the definitions within the industry, if you think back to 2007. This new version is representing some refinements, some improvements and changes to five or six definitions. It’s not like if we were shaking the whole 24 definitions. When the companies look at it, it’s not of the same magnitude than when the companies implemented the first changes in 2008,” he explains.
Unless they plan to overhaul the whole CI product, insurers have little incentive to quickly adopt the new definitions, Baker says. He expects many insurers to integrate the definitions in their next product upgrade. Other insurers have also adopted the definitions (See page 13, Two players could reignite the group CI market).
For Manulife, the time was right. Baker says that Lifecheque was a pioneer product in the ‘90s. It was created by Commercial Union, an insurer that Manulife acquired in 2001. Not only was it due for an update, but Manulife also wanted to make its prices more competitive.
“We wanted to reprice the product and refresh some of its features. We had a great opportunity to be one of the leaders to implement the new definitions,” Baker says. Manulife thought its clout would force the hand of those insurers that have not yet adopted the standards. “It’s a matter of time before the other companies adopt the benchmark definitions,” he adds.
The committee focused on extending some definitions and restricting others. “Medical technology is constantly changing so we need to make sure that the policies are in line with client expectations and our own risk management principles.”
As part of this process, the definition of cancer was reviewed. In fact, some conditions do not require treatment and insured with those illnesses have a good chance of survival when they are detected quickly, Baker explains. At the same time, the committee members upgraded other definitions such as Alzheimer’s and Parkinson’s disease, aorta surgery and heart valve replacement or repair.
24 diseases now covered
Manulife is also covering two new conditions, bringing the scope of Lifecheque protection to 24 diseases. The add-ons are aplastic anemia and bacterial meningitis.
Early Intervention service now covers three more diseases: chronic lymphocytic leukemia (CLL) Rai stage 0, Papillary or follicular thyroid cancer stage T1 and malignant melanoma stage 1. For this coverage, the insurer pays 25% of the insured capital to a maximum of $50,000.
The existing definitions mirror the CLHIA reference document. In its definition of cancer, Manulife added the comment life-threatening, to guide expectations, the insurer says. Baker says this restriction was needed to keep the product profitable for the company and affordable for future clients.
The insurer also clarified this definition to highlight common forms of cancer and establish whether they entitle the insured to the full benefit. As a result, some non life-threatening cancers such as papillary or follicular thyroid cancer diagnosed at an early stage are now excluded. The contract writers reformulated the text on the exclusion moratorium period and cited two reference documents that provide additional clarifications.
The definition of Alzheimer’s disease now includes dementia. It specifically excludes emotional disorders, schizophrenia and delirium. Manulife dropped the need for at least eight hours of supervision per day. It increased the number of symptoms that the patient must present to meet the requirements. The insurer added a reference to the Mini Mental State Exam, a standardized questionnaire that doctors use to detect illness.
Manulife broadened the definition of Parkinson’s disease to include rare but severe conditions linked to the disease, he says. It is now called Parkinson’s disease and specified atypical Parkinsonian disorders.
The definition of aortic surgery was widened to include replacement of any part of the aorta. The larger exclusions section now clarifies some points concerning interventions for which no benefits were payable according to the definition found in the previous version of Lifecheque.
The new definition of valve replacement or repair includes repair of heart valves. The exclusion states that it has been updated and clarified: Manulife does not pay the Covered conditions benefit (100% of the benefit) in the case of angioplasty, intra-arterial procedures, percutaneous trans-catheter procedures or non-surgical procedures.
The insurer also reduced the waiting period to access the long-term care coverage foreseen in the Lifecheque product, called LivingCare, from 180 to 90 days. This benefit is payable monthly to insured who cannot carry out two tasks of daily living. Coverage for care outside an institution corresponds to 1% of the Lifecheque insurance amount, up to $5,000. The benefit amount doubles if care is provided at an institution.
The insurer’s main motive behind the Lifecheque facelift was to regain its market share in the critical illness insurance sector. Substantial price cuts were part of the plan. “We saw our market share in critical illness insurance decline a little bit,” Baker says, adding that he is confident that he can recoup the share with the new Lifecheque.
In an interview with The Insurance and Investment Journal, Guy Couture, regional vice-president, Retail Markets, at Manulife, said that he has seen this dip directly in the field. “From very strong sales growth in this sector in early 2014, my cruising speed slowed toward year end. With the new prices in effect as of Jan. 26, we should be able to bring our sales volume to where it was at the beginning of last year,” he says.
To fuel the turnaround, Manulife has improved the prices of some types of contracts and return of premium guarantees, mainly for young clients. Guaranteed option premiums and return of premium riders are lower for LifeCheque Level (T75) and Permanent (T100). The decrease also applies to 15-year payment option rates.
Couture adds that the premium of the Term 65 contract with guaranteed return of premium on expiry has also been trimmed, but not as much. “The rates of our renewable 10-year and 20-year term will not change because they were already very competitive. We mainly wanted to boost our competitiveness in return of premium,” Couture explains. Notably, the insurer will not apply a surcharge premium to the guarantee. “Before, when a client was charged an extra premium for basic coverage, we also applied the surcharge to the return of premium even though the competitors did not,” he points out. “We lowered the price of this guarantee, particularly for insured ages 20 to 50. The decrease varies from 3% to 21% depending on the age.
Lifecheque specifically targets prospects aged 35 to 50. The product can be issued to clients ages 18 to 60, for insured capital ranging from $25,000 to $2 million. The return of premium at expiry rider is offered on basic coverage and T75. Return of premium at death is offered on all coverage.