Sales of universal life insurance will not be stunted by the increase in level cost, the main industry players predict. Yet few insurers can replicate their feats of Q1 2010.
Karen Terry, senior analyst at LIMRA and author of the report on life insurance sales in Canada in 2010, expects universal life insurance sales to stabilize. “UL lost some of its momentum at the end of last year and the first quarter of 2010 was a very strong quarter (in total and for UL), so I wouldn’t expect to see as large of an increase for the first quarter of 2011. Pricing increases could certainly have a negative impact on sales. I’m not prepared to use the word ‘plunge’ yet,” she explains.
In 2010, universal life insurance sales in terms of annualized premiums advanced by 14% compared with 2009. At the same time, the number of policies sold dipped by 4% in the same period. “Average policy size increased for all products last year, which results in higher premiums on average for the policies that were sold,” Ms. Terry continues
To date, the increase has not stifled level cost universal life insurance sales. There has been no flight toward annual renewable term universal life insurance, a product spared from the increase. “We are still seeing good UL level COI sales. Advisors are focusing on client needs, that didn’t change,” says Steven Parker, assistant vice-president, product marketing, life individual insurance and living Benefits, Canada at Manulife Financial.
Paul FryervVice-president, individual insurance at Sun Life Financial points out that most advisors choose level cost protection for estate planning needs and wealth protection. “UL yearly renewable term COI sales tend to be more of saving type products.”
Quebec MGA, BBA Financial Group reports vigorous sales this year of universal life insurance, among other products. Life Insurance director, Pierre Morais, is keeping a close eye on the BMO Insurance product. BMO’s level cost universal life is very strong in what he calls the small market (for example $100,000 in insurance amount with level cost and minimum premium), he says. “On LifeGuide, their product stands out from the others in this niche.”
Mr. Morais explains that advisors differentiate between the needs met by level cost and annual renewable term. For example, many advisors will use the Empire Life annual renewable term product, currently the cheapest, to compete with the banks, and Desjardins Group’s mortgage insurance. Empire Life’s universal life renewable T100 policy costs $31.56 per month (minimum premium) for a non-smoker age 45 who has $500,000 in insurance. Mr. Morais stresses that this type of policy primarily satisfies clients’ investment needs.
A healthy increase
Joe Kordovi, vice-president and pricing actuary, life products at Transamerica Life Canada, sees the increase in level costs positively. It fits well in the insurer’s plans, he says. Transamerica’s strategy is to promote “layered” insurance coverage. This entails selling less permanent insurance and more term insurance.
“We see lots of opportunity to help advisors do business differently. There are opportunities to consider other solutions such as selling what we call ‘layering’. This is a solution that involves smaller amounts of permanent insurance together with term riders (T10, 20, 30). We have found that most middle market Canadians have a decreasing need for insurance as they pay off their mortgage and debts and their children get older,” Mr. Kordovi says. This multi-level option reduces the insurance cost and gives clients more manoeuvring room to invest, he adds.