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Decline in sales of permanent life : the insurers are pushing the temporary, without selling at a loss


Kate McCaffery

March 20, 2018 07:00

Photo : Freepik

The new tax rules have forced life insurers to turn to term life insurance in 2017. These ensure however, that they do not sell the product at a loss.

Last month, the Journal of insurance has unveiled the sales figures of the industry in the third quarter of 2017, as reported by the research firm LIMRA. Thus, 57 % of policies sold in Canada are term insurance, compared to 27 % for the whole of life and 15 % for universal life.

The term life products also posted the nominal value is the highest. It was 461 280 $, compared to 298 828 $ for the life insurance universal and 201 $ 925 for the whole life insurance. For the full year 2017, it had sold 415 011 fonts temporary, associated with an average value of 462 000 $, has revealed LIMRA in the Journal of the insurance.

According to the figures of the fourth quarter established by LIMRA, the products temporary 10 years (T10) represent 41 % of the products sold in this category. Insurance products term 20 (T20) represented 37 % of the market in 2017, while all other term plans – grouped in the category ‘Others’ –accounted for 22 % of the total. LIMRA calculates that 63 % of the premium for insurance paid in Canada are from independent dealers, and that 33 % of affiliate agents, 4 % with the remaining coming from direct sales.

The amendments to the rules of tax exemption on the use of fonts permanent in tax and estate planning came into force on 1 January 2017. All this has had a significant impact on the revenue, the advisors as the clients are so eager to get these fonts before the deadline. This has resulted in a surge in sales, which then dropped sharply in the second quarter of 2017.

A year apart

Katrina Lee-Kwen, senior vice president, insurance solutions, Great-West life assurance Company, London Life and Canada Life, pointed out that 2017 was a special year in terms of selling life insurance. “We are seeing, doubtless, that the sales term life insurance exceed those of the universal life insurance and whole life insurance. The modification of the rules for tax exemption has had a significant impact on the sales of insurance participating life and universal life insurance in 2016 and 2017. “

She added that the changes proposed by the federal government to the Law of income tax have elicited a great deal of uncertainty. So many clients and their accountants were not willing to engage in a permanent solution as long as the budget would not have been filed, and a part of these concerns would not have been eliminated. “As the impact of these changes will stabilize, it will be interesting to see how the growth of these categories of products will evolve in the years to come,” says dr. Lee-Kwen.

The side of term life insurance, Great-West argues that the blankets for a duration of 10 years are the most sold in this category, at a ratio of about 2 to 1 compared to its short-term insurance policies 20 years ago. At Manulife Financial, products temporary 10 years and 20 years will sell just as well, whilstai Group financial stresses that are 20 years old that have a tendency to be the most sought-after.

Product less profit

The blankets are temporary and of shorter duration may not be as lucrative to the companies. To prove it, he has to do is compare the annualized premium of each product. In 2016, they totaled over a billion dollars for the entire life. By 2017, this figure is $ 857 million ($M). For term life insurance, there is talk earlier of 369 M$ for the entire year 2017.

The insurers argue, however, that their products temporary are not sold at a loss, like a loss leader. “We believe that it is very important to provide an avenue to affordable meet the needs of our clients and to establish without delay a relationship with them,” said Katrina Lee-Kwen. With the passing of time, there will be opportunities to modify the product and sell to new, which creates a lot of value for our company. “

For advisors, this is a good way to build a block of customers who may be in need one day of a larger coverage, says Alex Lucas, senior vice president and head of insurance at Manulife. The companies also claim that the market price of the term insurance have stabilized.

“We do not see the level of price competition that we have known in the past, acknowledges Mr. Lucas. Companies try to differentiate themselves by the experience offered, the ease with which the transaction is carried out and the various characteristics of the product. “

Price war

It is not clear if the insurer makes money by selling a T10, nuance Louis-Charles Leclerc, director, insurance products, iA financial Group. “This is not a product which you can afford to reduce the premium again and again. I do not see many insurers lower the prices of their T10. However, on the side of the T20 and insurance of a longer duration, it is found that the price war continues. It calms down a little and it is less aggressive than before. It is done with new price changes on the market of the T20 and fonts for a longer duration. “

The insurance companies argue also that it exerts an increasing competition on the side of the sale of the products to be of longer duration, while explaining that she is somewhat mitigated by the price of the products. “The covers of most long-term, as the temporary 30 years, are experiencing some growth. However, the longer the coverage, the higher the premium is high, reminiscent of Alex Lucas. This makes the product less accessible and reduces the price difference compared to a continuous cover. “

Similar Situation in the United States

Although the numbers of LIMRA don’t study the identity of the buyers of products, it is interesting to note that the companies claim that most of their policies term life insurance are purchased by consumers under 45 years of age. This finding also reflects what we see on the side of subscription requests submitted in the United States where, on the whole, they come from clients aged 0 to 44 years.

According to the index the MIB Life Index in 2017, 55.2% of applications for individual life insurance in the United States have been submitted by clients under the age of 44 years. The applications of those aged 45 to 59 years decreased by 0.6 %, rising to 27 % of requests, while 17,8 % came from clients of more than 60 years.

“The age group of under 45 years of age represents the largest percentage of the index of life insurance and it is increasing, said Lee Oliphant, president and general manager of MIB. The group of under 45 years of age increases slowly as the percentage of all applications. For several years, this is the age group with the most solid. “

Mr. Oliphant said that they believe the industry continues to be interested in the incredible sub-assurance that prevails on the market because of this age group. She continues to work to improve the underwriting accelerated and predictive analysis, ” he adds.

Invest to reduce the time it takes to issue a police

“To the extent that the industry may shorten the time necessary to the issuance of the policies, there will be more fonts in traffic and sales, if we talk in a general way. I think that the industry will continue to invest in order to reduce the time needed to get out of a police. It already does in several ways, ” he says.

Although the product remains essentially the same, canadian insurers say that the temporary insurance has even evolved somewhat in our market. Manulife says its rewards programme Vitality is a new way for advisors to interact with their customers. Of new endorsements, consenting to a reduction of premiums at renewal are also offered by companies such as Great-West.

“We are witnessing a lot of changes in the way products temporary are obtained, in particular thanks to subscriptions to the accelerated,” remarked Katrina Lee-Kwen. We have seen the companies evolve the customer experience, in order to provide an added value in terms of customer service, ease and convenience. “

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