Canada Protection Plan launches hybrid life insuranceBy Alain Thériault | March 30 2015 10:00AM
On March 25, Canada protection Plan will be expanding its simplified product line, increasing its range of term products and offering a product that straddles simplified underwriting and complete medical underwriting.
Distributor and designer of life insurance products for the hard to insure segment, Canada Protection Plan (CPP) is launching an enhanced version of its simplified non-participating whole life insurance product and term insurance on March 25. These improvements shaved the price of all CPP products by 15% on average.
In term, CPP will be debuting a conversion rate. It is also expanding its line of T25 and decreasing term. Only the decreasing product is not convertible. The firm created this product for clients who want to cover a mortgage. It already offers T10, T20 and T100.
Canada Protection Plan is also introducing a product it calls a hybrid. Clients in good health can choose between a simplified product or undergo traditional medical underwriting to qualify for a preferred rate or an additional insurance amount up to the limit offered without medical examination
The new product is called Simplified Preferred, vice-president, Olivier Courteaux, Underwriting and Education, and Michael Aziz, vice-president Sales, told The Insurance and Investment Journal in an interview. It mirrors the current Simplified Life Plus, which lets insured obtain coverage of up to $250,000 without medical exam. The other products in the existing line are Acceptance Life, Deferred Life and Simplified Life.
“Our preferred product is the most like standard term, but is a simplified issue product,” Courteaux points out. Depending on their age, clients in good health can obtain up to $500,000 in insurance coverage if they meet certain medical requirements.” There will automatically be medical requirements for people ages 66 and over: a paramedical test and a blood test.
Although Canada Protection Plan is still targeting hard to insure clients, the latest preferred product is designed to appeal to younger clients in better health “but who are not necessarily athletes,” Courteaux says. “The new product is aimed at people without major health problems who want to benefit from the speed of simplified issue. That is why we are talking about evolution to a hybrid product,” he explains.
CPP products, including the new one, are insured by Foresters. The insurer takes the risks and pays out the claims. “For our preferred plus product, we negotiated one of the most aggressive medical requirement charts in the industry, with our insurance partner. In traditional products, an applicant age 55 or older who wants $250,000 in insurance usually must take a paramedical exam and urine test. A client over age 50 who buys more than $100,000 will be asked to take a paramedical exam and a urine test. We don’t ask for any of this until age 65,” Courteaux explains. Applicants ages 66 to 70 must undergo tests for amounts of $51,000 or higher.
In addition, Canada Protection Plan created an insurance application form that covers all products. This means that clients who purchase both term and permanent protection will only have to fill out one application.
Michael Aziz considers these additions to the term insurance portfolio as key elements that will differentiate the insurer from the competition. Beyond additional products and the conversion right, he points out that his company has also reduced the minimum age for term policy issue from 20 to 18. For several products, the maximum age has been extended to 80 instead of 70.
Compensation has also changed. Before rejigging the line, the first-year commission was higher but Canada Protection Plan did not pay a bonus. The company trimmed its first-year commission but tacked on a bonus pegged to volume, Aziz says. “Advisors often tell us that our pay system is complicated. It now looks more like those of the competition.”
Electronic application form
An electronic application form should be launched on March 25, Aziz adds. CPP will implement it in two phases. First, on March 25, it will post an online application where sales can be done remotely by smart phone or online. No physical signature is required from applicants. MGAs that distribute these products can access an electronic copy of the application online.
In the second phase, advisors can access the electronic application both online and offline. It will be fully integrated with CPP’s back-office and illustration software. Information entered in the illustration software will be automatically uploaded in each new e-application.
Canada Protection Plan has fine-tuned its application, Olivier Courteaux says. “We have made the questions in our application simpler. For products that target the hard to insure, it is important that clients understand the questions well, so that they can answer them correctly. We also improved in risk management because risk selection is done based on the clients’ answers.” This process minimizes problems when claims are filed.
CPP has a good track record so far. “Among non-contestable claims, which are those that pass the two-year grace period for contestability, 97.5 % were paid out in 2014, which is comparable to the rate for traditional products,” Courteaux says.