Unum has imported an innovative sales strategy from the United States. It’s offering its line of non-cancellable and guaranteed renewable individual disability products on a guaranteed standard issue (GSI) basis to high-income groups. Sales of this product already make up for as mush one third of all new premiums. Unum says it is years ahead of its competition, but it’s not alone in this market.
Canada Life has also been actively selling its non-cancellable disability products on a GSI basis to groups since early 2000. As for sales, Rino D’Onofrio, Assistant Vice-President of Health Par Operation for Canada Life said that the GSI business makes up only a minimal part of sales, but said he would like it to grow rapidly over the next few years.
The other two companies in the non-cancellable DI market, Maritime Life and Great-West Life are staying out of this market for the time being.
Bob Brown, Director of Retail Product Development for Maritime Life said he certainly has had pressure from the field force to look at the product, but the company has no immediate plans to distribute it. “We are a bit wary of the risk,” he said. “The more experience a company has, the more it is comfortable with the product. [Guaranteed issue] is too risky because we are not educated enough, and we do not know enough about the market. Disability relies heavily on underwriting; GSI ignores this and relies on group risk. It’s a completely different kind of risk.”
A spokesperson for Great-West said the company is always looking at new products and opportunities in the market, but at this time has no comment one whether or not it is selling, or even considering to sell, this product.
The GSI policies work like this: The companies simply take their off-the-shelf non-cancellable or guaranteed renewable disability products and offer them to a full-participation group with no medical underwriting. The risk is entirely dependent on the type of group. The minimum number of lives could be as low as ten for some products, and 20 for others depending on the risk of the group.
The market for these products tends to be high-end – lawyers, business executives, business partners, etc., but also covers a whole spectrum of occupations. Most applications, as stated by both companies, are for additional coverage over-and-above the current group benefits (top-ups), and for carve-out plans where the group replaces the current plans to some degree with a GSI product.
The companies look at risk factors such as the group’s previous coverage history, its demographics, and occupation. The risk is calculated and the company makes an offer. This process can be completed in about a week. The group then sends in the necessary paperwork and it is insured within days – as opposed to weeks, if not months, with regular individual DI policies. The discounts and the ease of GSI are very attractive to these groups. The policies are also portable, so if the employee leaves the company, he or she keeps the policy.
This is a relatively new concept in Canada and is just starting to build momentum. Unum has been offering GSI DI in the US for most of the nineties, said John MacIntosh, Assistant Vice-President, Market Development, but Unum has only been focussing its effort in Canada in the last three years.
Unum’s average national GSI sales are now at least one quarter to two thirds of all new individual business, stated Mr. MacIntosh. It is up to as much as half of new business in some regions. "In the US it could be even a larger sales percentage," he added.
"The GSI business is growing a little faster than we thought it might, but still under control," explained Mr. MacIntosh. "The goal," he continued, "was get more people with smaller policies rather than few people with large policies. This is better risk management. The coverage and the average premiums are smaller, but we are selling more policies."
Another reason Unum went ahead with GSI was to attract DI producers. Mr. MacIntosh said that the length of underwriting, as well as integration issues put off many brokers. "This provides a way to have a generous contract and simplifies the sales process. [GSI] is one of our competitive advantages," said Mr. MacIntosh. "Other companies said a while ago ‘It's crazy to do this and you can't make money,' but if you do it the right way it can be profitable."
Canada Life's GSI program was developed in early 2000, also to increase sales, said Mr. D'Onofrio. "I suspect it to be a growing market. It meets a need in the community." It was also developed as a result of requests from brokers, he added. "The requests we've generally had have been from individual producers who have relationships with firms or groups."
Mr. MacIntosh said Unum's group DI producer usually gets the GSI contracts, but because they are not so familiar with the individual products, there is training involved.