Criticized by numerous financial advisors who have observed a decline in service levels in recent months, Manulife Financial intends to address the situation. In an exclusive interview with The Insurance Journal, Dominic D’Alessandro, the company’s president and chief executive officer, admitted that service to advisors has suffered in the aftermath of the Maritime Life acquisition, but added that Manulife is working to resolve this problem.
During the interview on August 16 at Manulife’s Toronto headquarters, Mr. D’Alessandro asked for patience and good faith, while acknowledging the problems. “We have had some service issues over the last while (that) we don’t like and we’d ask for your forbearance,” he said. “We have identified what all of our weaknesses (are) in terms of service to you, and speed to market and the quality of our systems, and we’re working on them all.”
In the past months, a number of financial advisors have voiced their complaints to The Insurance Journal about Manulife’s service problems, some even suggesting they would no longer handle Manulife insurance products.
Veteran brokers, some with decades of experience in dealing with Manulife, called their moods – in their own words – frustration and dissension.
Although unhappy with service, their opinions on the insurer as a whole are mixed. On the positive side, they pointed to the comprehensiveness and quality of the company’s product line, its stability and strong brand recognition amongst consumers.
Generally, advisors believe that problems first appeared when Manulife took over Boston-based John Hancock Financial. The deal was first announced in September 2003 and approved by regulators in April 2004. In the United States, the deal meant that Manulife merged with John Hancock. In Canada, it meant that Manulife merged with Halifax-based Maritime Life, a wholly-owned Hancock subsidiary.
Underwriting delays have occurred, admitted Bruce Gordon, senior executive vice-president and general manager, Canada who joined Mr. D’Alessandro at the interview. Mr. Gordon added that he believed that Manulife’s underwriting time lines have returned to what he described as industry norms: 10-11 days for smaller cases and between 40-41 days for large and more complex cases, such as insurance for buy-sell agreements.
With respect to underwriting, if Manulife has the apparent reputation for being “more difficult than others, ”said Mr. D’Alessandro, then “that’s not necessarily a bad thing.”
‘Difficult’ may be a relative term. After the Hancock deal, Manulife’s size in the marketplace worried its competitors and led to other underwriting difficulties, Mr. D’Alessandro suggested. “This has disturbed a few other people and so there has been a very aggressive competitive marketplace.” He added that there have been all kinds of incentives and special programs by competitors aiming to attract customers away from Manulife.
These incentives challenged both the company and its advisors, he recalled, pointing to underwriting and price-setting decisions on some products that Manulife would not undertake. As an example, he said a producer might find that he can get his client insured with a competitor for $100 whereas Manulife wants $120.
In this scenario, however, the competitor’s lower price would be unrealistically low and therefore not conforming to Manulife’s profit requirements.
Addressing comments about confusion and lack of information connected to legacy products, Mr. D’Alessandro acknowledged the validity of the issue, attributing it partially to two factors connected to Manulife’s merger with Maritime Life.
The integration of the two companies – Manulife and John Hancock – in the United States was relatively trouble-free, since the companies had complementary product lines and relatively little overlap in other areas, explained Mr. D’Alessandro. By comparison, in Canada the integration process between the two companies – Manulife and Maritime Life – was “a more challenging undertaking,” due to factors such as duplication of product lines.
In addition, Maritime Life had not fully integrated its own earlier takeovers (including Liberty Health acquired in 2003, Royal & SunAlliance Life Insurance Company of Canada, acquired in 2001 and Aetna Canada, acquired in 1999). This situation accounted for much of the difficulties surrounding legacy product issues, he said.
Legacy product problems appear difficult to avoid since policies sold under one set of terms and conditions cannot be unilaterally altered to fit the terms and conditions of an acquiring company.
“I don’t like it that we didn’t meet our service standards and that we don’t have producers who are 100% happy. I’m 100% committed to returning them to that state but I understand why that is… it isn’t because people didn’t want to service them. It isn’t because they didn’t care. It’s because we took on a very, very big job putting together all these companies,” said Mr. D’Alessandro.
Outside of Canada, Manulife has steadily marched toward Mr. D’Alessandro’s long-stated goal of becoming an international powerhouse. The Hancock deal included strategies such as rebranding of Manulife products under the better-known Hancock name. In the last twelve months, John Hancock was the number one seller of life insurance in the United States, more than Metropolitan Life based in New York-City and more than Newark, New Jersey-based Prudential Insurance, he pointed out.
With the merger now complete in the United States, other acquisitions become possible, with no particular preference about size but with a stated preference towards takeover targets with companies licensed across the country.
Clearly not in Manulife’s acquisition plans is the South American market; it holds little market appeal and would present huge resource problems. Manulife has proven roots and expertise in Canada, the United States and the Far East but none in South America. “We’ve wanted to grow in areas where we have some expertise,” he said. “We don’t have any expertise in South America, quite apart from the fact that it’s been a graveyard for a lot of people.”
In the Far East, Manulife’s strategy continues showing success with the kind of cost-control strategy that one would expect of Manulife. The company now has 16 licences in China, all of them with a joint venture partner. While the arrangement has opened up a potentially lucrative market, it is not without some drawbacks. It owns 51% of the venture and uses profits from existing branches to invest in new ones, creating a situation in which the annual profit seems small because of the costs involved in rapid expansion of operations there.
By comparison, India’s current limitation of foreign ownership to a 26% stake precludes it from Manulife’s consideration. A relaxation of this restriction by the Indian government – which Mr. D’Alessandro sees as entirely possible – would lead to a re-assessment of Manulife’s decision to sidestep that market.
The remainder of Asia, including Indonesia, Vietnam, Singapore, and Hong Kong, will pre-occupy Manulife’s Far East energies for the foreseeable future, a task increased by its acquisition of operations in Malaysia and Thailand as a result of the Hancock deal. “Not all of these businesses are at the level that I would like them so I’ve got to concentrate our human resources mostly in maximizing the initiatives, the opportunities that we currently have.”