Insurance sales in the securities brokers network were hit hard by the financial market turmoil in 2002. Some insurers confessed that sector sales plunged by up to 40% since 2001.
The national account network began to flourish in earnest in the past five years; growing frenetically at some insurance companies. Yet the burst of the tech bubble and the confidence crisis that devastated financial markets acted like a cold shower on this distribution network.
Industrial Alliance’s most recent data available shows that sales through the securities network fell 40% in 2002 compared with 2001. In the first six months of 2003, sales had already plunged 43% compared with the same period in 2002. These figures include both activities of the parent corporation, considered marginal, and those of National Life, which are much more substantial.
Industrial Alliance’s national account sales leaped by 40% in 2000, followed by a 26% advance in 2001, a difficult year in the investment sector, said Jacques Carrière, Vice-President Investor Relations at the insurer.
Despite this major decline in 2002, Industrial Alliance is undaunted. “This network still has potential. In 2002, sales from the network made up 12% of our total sales. We are sticking to our profitability objectives,” Mr. Carrière said. The insurer’s figures at June 30, 2003 show, however, that sales from the network now account for only nine per cent of the company’s total individual life insurance sales.
Other insurers contacted were unwilling to reveal figures related to the growth of sales linked to their national accounts networks. Securities brokers were equally silent. The main firm that compiles figures on this distribution network, Investor Economics, agreed to supply The Insurance Journal with some data from its Retail Brokerage Report.
We learned that sales of the star product at national accounts – universal life insurance – were down 40.8% in the industry between March 2002 and March 2003 in terms of premiums. At March 2003, the decline for the year stood at 13.4%.
The report also showed that Manulife Financial was the main supplier of universal life to national accounts, with a 28.4% market share, followed by Standard Life Canada, Canada Life, National Life and Sun Life Financial, with 20.8%, 11.5%, 10.9% and 10.3% of the market respectively.
For other products distributed by national accounts, Manulife and C.I. Mutual Funds rank among the largest suppliers of segregated funds. In annuities, Manulife is one of the top suppliers, on a par with Standard Life and Canada Life.
According to sources in possession of the complete Investor Economics data, Manulife is the top ranked supplier of national accounts for all products combined, followed by Standard Life, Sun Life and National Life.
“All insurers that distribute life insurance through securities brokers have suffered setbacks. Anyone that says the opposite is lying. I have the figures in front of me to prove it,” said Bruno Michaud, President of Solicour, the brokerage subsidiary of Industrial Alliance, referring to the Investor Economics report.
All the same, some players are putting a positive spin on their national accounts activities, without specifying their sales growth figures.
All insurers that distribute life insurance through securities brokers have suffered setbacks. Anyone that says the opposite is lying. – Bruno Michaud
During a presentation in June, Manulife executive Vice-President and General Manager of Canadian operations Bruce Gordon, revealed that between 1998 and 2002, the proportion of national accounts doubled, from 13% to 26%! This growth is nearly twice that of business generated by the managing general agency (MGA) network.
National accounts thus receive enhanced support. We are now doing business the way the national accounts division wants. – Bruce Gordon
Manulife’s main distribution network, made up of independent advisors, accounts for 49% of the insurer’s sales. In contrast, the MGA network controls 14% of the company’s sales.
Mr. Gordon attributed this growth to the creation of a division dedicated to national accounts distinct from current operations. “National accounts thus receive enhanced support. We are now doing business the way the national accounts division wants.”
Maritime Life was also satisfied with the growth of its distribution network among securities brokers. “For the past five years, our market share has increased significantly. We were one of the first to create a national accounts section,” said David Gray, Vice-President of National Accounts.
He admits that the current economic context, characterized by slumping stock markets and rising investor prudence, is adding to the national accounts challenge.
Of the products that Maritime Life sells through national accounts, Mr. Gray noted, critical illness generates the most sales, while segregated funds have remained stable, and permanent life insurance is regaining popularity.
National accounts themselves are optimistic. François Morin, Vice-President, Quebec and Atlantic Provinces at Investors Group, described a very encouraging trend in the network. He noted that between 1996 and 2003, Investors doubled its life insurance sales, but he stopped short of supplying specific figures.
He added that Investors is ranked second for national accounts. Sales are carried out through the subsidiary I.G. Insurance Services.
Mr. Michaud pointed out that in the national account world, “Investors Group is in its own league because of its distinctive sales structure.” The Solicour president singled out the captive sales force of Investors Group and its perfectly integrated relationship with Great-West Life and London Life. Investors also offers products from Sun Life and Manulife.
He considers the securities brokers of the six large banks, such as RBC Dominion Securities, CIBC Wood Gundy and BMO Nesbitt Burns, more conventional national accounts players.
The investment culture specific to the securities representatives explains the industry decline, along with that of Industrial Alliance, Mr. Michaud continued. “The tax-free investment portion is a strong selling point for insurance. As a result, when the securities sector goes through a difficult stretch, insurance follows.”
For his part, André L’Espérance, National Director of Insurance Activities at National Bank Financial, stated that sales through this network generally declined last year.
In contrast, 2003 looks good for insurance distribution by National Bank representatives. “This year we are seeing 30% growth in our insurance business,” he confided.