Pricing has decreased for non-cancellable individual disability products. Players in this market have recently implemented price reductions.Manulife Financial kicked off this trend late in 2013 and on April 4, Canada Life lowered prices for its non-cancellable disability insurance products. This reduction, which had been announced in January, was soon followed by RBC Insurance’s announcement of price decreases.
Canada Life says it has restored its competitive position in the 4A and 3A job categories by lowering the prices of some disability insurance products. These categories are crucial points in the non-cancellable disability insurance market, a product in which the insurer cannot increase premiums or even cancel the contract for a complete category of workers. It is a field where three separate players are competing in Canada: Great-West Life and its subsidiary Canada Life, Manulife Financial and RBC Insurance.
For the most part, the two categories include professionals who perform non-hazardous tasks in an office environment. In a memo to advisers, Canada Life says that the 4A category applies to most professionals, such as doctors, lawyers, and accountants. The insurer defines the category 3A as professionals whose jobs include little manual work, little dangerous work, and little work outdoors; these may be those who work on computers, office staff, and accounting clerks, among others.
Canada Life has reduced the average price compared to the rates that were in force in May 2013. In the 4A category, the non-cancellable Lifestyle Protection Plan disability insurance product will see its price decrease by 10% for men and 6% for female non-smokers (2% for smokers). Among non-smokers in the 3A category, the drop in price is 3% for men and 2% for women. In the 3A smokers category, the decrease is limited to 1% for both sexes.
RBC Insurance has also lowered the price of some of its non-cancellable disability insurance products. The base rate for the Professional Series has been lowered by an average of 7%. Prices for the Foundations Series are decreasing by 1% on average. Meanwhile the Quantum Series, a guaranteed renewable product with premium that may be level or at a step rate, is seeing its price go up by an average of 5%.
One of RBC Insurance’s motivations for making the changes is similar to Canada Life’s. “Our goal is to ensure that RBC Insurance maintains its leading competitive position in the individual disability marketplace,” commented Mark Hardy, senior manager of life and living benefits at RBC Insurance, in an interview with The Insurance and Investment Journal.
The change is also driven by actuarial concerns. “We have recently made some changes to the pricing of our disability products which reflect our analysis of changing morbidity trends,” explained Hardy. “On average, the base rates for the Professional Series have declined by 7%, but there are a blend of rate decreases and increases that reflect both current and emerging morbidity experience. The price changes to the Foundation Series rates are driven by the same rationale.”
In contrast to Canada Life, Hardy points out that RBC Insurance’s reductions are not focused on particular categories. “The rate change impact on base rates is fairly uniform across occupation classes”, he explains, and notes that the intended market for the Professional Series is made up primarily of occupations that fall within the 4A class.
Rather, it was the price of the Quantum series that had to be increased. “The Quantum Series product is currently available only on a Guarantee Standard Issue (GSI) basis as an add-on to existing GSI plans,” says Hardy. “The nature of this offering does not permit adjustments to future underwriting practices and as a result the price change was designed to account for current experience only.”
For its part, Manulife already re-priced its non-cancellable disability insurance products late last fall. “We fully re-priced our Proguard Series and Venture Series products effective November 23, 2013,” said Manulife spokesperson Beverley MacLean.
“We lowered Proguard Series base rates by 6% on average and Venture Series base rates by 2.5% on average.”
Manulife reviewed its flagship DI products to reflect current interest rate assumptions, its own current experience, and the morbidity experience from the new IDEC table from the Society of Actuaries.
MacLean acknowledged that the individual disability market is quite competitive. She explained that most professionals are highly aware of the need to protect their income. “It’s often one of the first risk protection products that they purchase. Price is just one factor though. The definitions, features and benefits of the income protection solution are the most important consideration.”