Managing General Agents (MGAs) increased their sales over the course of 2010, and some of them experienced their best year. Despite a slight slowdown reported by industry research organization LIMRA at the end of last year, MGAs believe that the rate of growth will pick up in 2011.
According to LIMRA, insurance sales in Canada slowed in the third quarter of 2010. But the results still show a remarkable gain in individual life insurance sales during the first nine months of last year. MGAs report seeing good results throughout 2010, and say that 2011 is starting out on the same note.
In its quarterly report on Canadian insurance sales, LIMRA revealed that, for the first nine months of 2010, whole life insurance premiums were up by 23% compared to the same period in 2009. Term life insurance sales were up by 10% for the same period, and LIMRA also reports an increase in critical illness insurance sales.
During this period, universal life insurance premiums increased by 14%. If one includes the amounts that were paid into UL policies as additional investment contributions, the gain was 16%. As for segregated fund sales, they were 14% higher during the first nine months of 2010 compared to the same period in 2009.
LIMRA’s report reveals that individual life insurance sales made through the independent distribution network were up by 15% during the first three quarters of 2010. This channel also increased its critical illness insurance sales by 11% over the same period.
The independent advisor network accounted for the lion’s share of annualized critical illness insurance premiums for the first nine months of 2010, specifically 64% compared to the 36% reported for the career agent channel. In the living benefits market, permanent critical illness insurance was the leading product with independent advisors, with a 13% jump in premiums as of Sept. 30, 2010 compared to the same date in 2009.
Robert Frances, the CEO of Peak Financial Group, says that 2010 was a record year for his firm across all product lines. “People have realized that the critical stage of the [financial] crisis has passed, and that there will not be a double dip recession,” he says.
Mutual funds also made a comeback at Peak, in part thanks to the firm’s acquisition of Promutuel Capital. But the most surprising result for 2010 remains that of Peak’s insurance division.
“We put some effort into it, but we did not expect so much. Permanent insurance premiums grew by 50% last year, while living benefits products grew by 24%. The total amount of insurance issued increased by 35% in 2010 compared to the previous year,” he says.
For a long time Peak had focused on investments, but now the firm is enjoying the fruits of its labour in insurance: about half of its advisors only sold insurance products in 2010. “We have reached the status of a true managing general agent. We have direct contracts with all of the major players. For some of them, we have become their primary distributor in Quebec, which was a surprise to us too,” says Mr. Frances.
According to Mr. Frances, 2011 is also shaping up to be a good year. He believes the early results already indicate solid sales and stability in the financial markets. “What’s more, the population is aging, and the recent years of crisis have made everyone aware of financial risks,” he comments.
Patrick Cloutier is the vice president of sales and business development at Groupe Cloutier. He notes that clients are looking for guaranteed values, which is increasing whole life sales. Mr. Cloutier suggests that this trend applies to participating and non-participating products alike. As for living benefits products, they have kept a steady pace. The firm has also had a great deal of success with mortgage loans.
Long term care (LTC) insurance has a promising future as well, says Mr. Cloutier. Thanks to a change in their distribution model, insurers are doing a better job getting LTC products through the network. “The selection interview with an external specialist posed problems for advisors. The client tended to be disqualified at the outset. The companies have changed that,” he says.
Universal life with an investment option is not the star performer it was before the beginning of the financial crisis, comments Mr. Cloutier. “We do not expect to see the levels we saw ten years ago,” he comments. However, segregated funds remain popular. He expects that guaranteed withdrawal benefit (GWB) products will still be centre stage in 2011.
Don Hart, executive vice president of brokerage development at Qualified Financial Services underlines the strength of permanent insurance sales, which were up 35% in 2010 over 2009. Overall, life insurance sales were up 40% at QFS, he adds.
What explains the increase in permanent sales? “People are looking for guarantees and they also see the value of having permanent insurance in their portfolio.”
He says QFS takes the approach that permanent insurance is another asset class and a valuable part of a financial planning. “It is a great vehicle that protects your estate for pennies on the dollar.”
QFS also saw some clients in their fifties buying large amounts of term insurance, a product traditionally sold to a younger clientele. These clients were buying term with the idea of converting to permanent insurance down the road.
The firm’s holistic planning approach may also explain why permanent sales are doing so well at QFS, he says. About 60% of the cases are permanent insurance and 40% term.
In terms of GWB products, QFS was up 125% on investments in 2010. Part of this increase is due to the market recovery and part to clients fleeing to the guarantees of GWBs.
During the past year, many companies offering GWBs made significant product changes. This didn’t slow sales, but these revisions did cause advisors to shift their sales from one insurer to another throughout 2010. Now Mr. Hart believes the guaranteed withdrawal benefit products in the market are very similar. “They’re all at 5% (bonus).”
John Lutrin, executive vice president and chief marketing officer of Hub Financial and Hub Capital calls the product sales at Hub “encouraging” both in terms of the level of business activity and in the types of products being sold.
From an organic growth point of view, excluding acquisitions, Hub saw positive growth in 2010 over 2009 across the board and this growth is continuing in early 2011. “Organic growth in premium on CI, on UL and on general life premium is probably up to the extent of 15%.”
Mr. Lutrin has noticed a definite increase in appetite for universal life. At the end of 2010 there was a flurry of universal life sales as advisors rushed to sell the product before Manulife and others raised rates (see page 30 and 31). “There was definitely a rush to beat the deadline so to speak and many advisors used it as an opportunity to offer clients products that would very soon thereafter be more expensive. So that certainly helped our numbers last year,” explains Mr. Lutrin.
But even with many carriers increasing UL rates, Mr. Lutrin thinks the market is optimistic enough to sustain the upwards UL sales momentum.
From a product pricing standpoint, Mr. Lutrin believes the rate increases were inevitable and came at a time when the market can handle it. “Had it been at a time when sales were tough, an increase in rates would have probably added salt to the injury.”
In terms of UL sales, Mr. Lutrin says Hub is seeing not only more universal life being written, but an increase in large case activity in the corporate and high net worth markets. In particular, he is seeing an increase in the strategic deployment of UL for tax and estate planning purposes. “That market seems to have revived nicely and is back on track. It came to a little bit of a halt during 2009 where we didn’t see the big premiums as much and we saw the flight to cheap cover and temporary insurance more.”
Term sales remain strong, adds Mr. Lutrin. “Of course there is still the value of temporary insurance from a pricing point of view and that remains core. We’re doing a lot of term insurance.”
Mr. Lutrin says the tougher market experienced in late 2008 and 2009 helped to underline the value of guarantees and products such as whole life and par. He hopes the lessons learned will be remembered. “I hope we can take that with us as we move forward.” At present, par sales are holding steady, he adds.
Living benefits is also showing encouraging signs, Mr. Lutrin adds. Critical illness sales are slow and steady, but Hub is seeing its marketing efforts with the advisor community on the value of critical illness gathering momentum, Mr. Lutrin says. “Of the living benefits arena, certainly CI is the one we’re seeing most traction on. We’re seeing increased awareness on the value of long-term care insurance, but I don’t think we’re seeing that really translate into tangible sales yet.”
He says carriers seem to be showing more creativity in CI product design, such as integrating CI coverage into life products. He believes this will help advisors feel more comfortable with the product. Mr. Lutrin explains that the comfort zone of most insurance advisors is insurance, and in their minds CI is a more expensive and tougher underwritten product. “The odds of getting it placed are less than for a life insurance policy, so bang for buck, it is easier to sell a life insurance policy to a client.”
He adds that as the carriers become more aware of this and become more aggressive in how they design and package their CI products, he believes sales will grow. Other countries have had success selling CI as part of a packaged product, he notes. “I think that has been part of the challenge in Canada – that it is a standalone product.”