Manulife Financial has ratcheted the hybrid concept up a notch. Instead of a platform of several independent policies or one policy that converts after age 65, Synergy offers three forms of protection rolled into one product.Synergy thus offers inseparable life, critical illness and disability protection based on a single pooled insurance amount. A disability or critical illness claim would reduce the pooled amount available in case of death.
Manulife’s goal was to lower the cost of coverage. As a result, Synergy is tailored to its target market: young people and the middle class segment. Premiums are lower than for similar standalone products, and there are no policy fees.
For example, a 30-year-old non-smoking male who purchases an available insurance amount of $250,000 by choosing 10-year term life coverage would pay $54 per month. The equivalent in individual products would cost $81. At age 40, this insured would pay $79 for Synergy versus $117 for three independent products. Synergy thus generates savings of about 33% in both cases.
The equivalent independent products would be individual T10 insurance of $250,000, an individual critical illness policy of $62,500 with premiums payable until age 65 and regular occupation disability insurance to age 65, with benefits of $1,250 per month.
The coverage ends at age 65, but insured can convert the life coverage into a permanent policy for the available insurance amount remaining, providing they have not made a critical illness claim. Disability coverage and critical illness coverage cannot be converted.
Synergy is specifically aimed at insured ages 18 to 50. “It’s kind of a family and mid-market simplified protection, not designed for older ages, for whom the underwriting would be more difficult,” says Steven Parker, assistant vice president of insurance products.
Incidentally, critical illness and disability coverage are very costly past age 50, and sometimes inaccessible because of the insured’s health status.
Mr. Parker points out that the family and younger clientele is often the least prepared for the financial impact of death, not to mention an illness or accident. On top of that, the public tends to confuse group and individual insurance. According to statistics compiled by Manulife, fewer than 60% of Canadians have individual life insurance. This proportion plunges to 21% for disability insurance and 13% for critical illness.
“Many people believe that a group plan is like having individual policies,” Mr. Parker says.
Launched in June, Synergy offers insurance capital of $100,000 to $500,000, known as the “available insurance amount.” A critical illness claim provides a benefit of 25% of the available amount. A disability claim yields a monthly benefit equal to 0.5% of the original available amount.
Life insurance is offered in the form of renewable T10 until age 65 or level premium at age 65. Joint policies are not offered. The disability product covers work in the client’s regular occupation until age 65, with a 90-day waiting period. The critical illness product covers 22 illnesses and has similar characteristics to the independent product Lifecheque, such as the Health Service Navigator.
Under this policy, insured that purchase the available insurance amount of $500,000 will receive $125,000 if they are diagnosed with cancer, or 25% of the insurance amount. In this case, an available insurance amount of $375,000 will remain in Synergy. The whole amount would be paid out if the insured died by age 65. A disability entitles the insured to collect 0.5% of the original amount ($500,000), which translates into monthly benefits of $2,000. The maximum duration of benefits is the lesser of 150 months ($2,500 X 150 = $375 000) or until the insured reaches age 65.
Manulife is offering advisors a first-year commission of 40% when the product, including riders, is sold, followed by a renewal commission of 3% until the insured reaches age 65.
Life insurance is offered in two formats: T10 renewable every ten years and term to age 65. The latter is more expensive. Manulife is paying a first-year commission of 25% to advisors whose clients change their life coverage from one option to the other.