The latest LIMRA International studies show that critical illness sales grew 111% from 2000 to 2001 and is stealing market share away from disability insurance. Moreover, the surveys also report that the huge increase in sales is primarily due to the stellar performance of career agents.
The number of new individual critical illness (CI) policies sold was equivalent to 60% of the individual disability sales in 2001 – over double what it was the year before (see tables).
The CI survey states that in 2001 there were 41,638 new policy sales, an increase of 107% over the previous year. Annualized premiums and benefit amounts for new sales grew by 111% and 118% respectively.
LIMRA’s survey on disability insurance shows that the number of new policy sales in 2001 was 66,774, an increase of just 9% over the previous year. Monthly benefits for new DI sales fell 6% while annualized premiums for new sales were just 5% up over the prior year.
Career agents selling CI surged strongly ahead of independent agents in the course of the past year. The average size policy sold by producers in the career channel was $103,121, up 44% from $71,362 in 2000.
The average size policy sold by independent producers, on the other hand, was 86,337, down 6% from $91,894. The number of policies sold by career brokers rose 148% to 13,071, while the number sold by independents rose 40% to 23,899.
LIMRA’s CI report, called the Canadian Individual Critical Illness Insurance Sales Survey, lists the year-to-date results from participating insurers through December 31, 2001. It is important to note that the survey is not statistically rigorous because not all companies take part, but it gives a relatively good picture of industry trends.
DI survey contributors represented only 61% of the total DI market, with two missing contributors, Desjardins Financial Security and RBC Insurance, representing some 9% of the remaining market. In CI, total representation was unavailable because LIMRA could not calculate the total population proportion of those companies surveyed.
Contributors to the CI survey with captive sales forces include La Capitale MFQ, Clarica, Sun Life, and Industrial Alliance (which also contributed numbers for its independent distributors).
Bryan Hunter, Vice-President of Distribution at Sun Life, attributed the surging CI sales to Clarica, noting, “The Clarica career agent force was the main reason behind the large increase in the sales of Critical Illness products.”
A source told The Insurance Journal that Clarica holds roughly one quarter of the CI market, and that the company’s rate of success exceeded that of the industry itself. This could not be confirmed because there is a confidentiality agreement between LIMRA and contributors to the survey.
Sylvie Coulombe, Marketing Director for Quebec at Clarica, will not comment on the LIMRA survey, but confirms that the company is doing “very, very well, and the health insurance sector is in full bloom. There is a lot of energy invested there.” She adds that training and support for the Clarica captive force is extensive, incorporating sales strategies, product packaging, and client profiling to ascertain need.
Tony Poole, Senior Vice-President for Sales and Marketing with Unity Life, also points out that brokers in the career channel are more likely to receive training, and that they are more likely to create product packages. This contrasts with independents, he says, because brokers tend to specialize in certain products and may not think to offer CI insurance as well.
Diane Carruthers, CI specialist and principal at Carruthers Financial Services, agrees. “Independents are going to wake up and smell the coffee. They will lose market share if they don’t see the potential. CI will get you in the door,” she says.
The number of new CI policies sold is roughly two thirds that of individual disability policies. That’s a strong growth in market share for CI insurance over the previous year, and Ms. Carruthers worries that this is because CI insurance is poorly understood and improperly sold.
Ms. Carruthers affirms that CI insurance does appear to be taking over DI, adding “it’s unfortunate because I feel it is an excellent complement.” She says that younger agents tend to go to CI over DI because the underwriting is easier.
What would be nice is to see CI products sold as more of a complement to DI, she says. “If you have a 90 or 120 day wait on your disability income, then you could have critical illness insurance come in right away.”
Barbara Gelling, the analyst at LIMRA in charge of the survey, cautions that while CI sales are growing very rapidly, much of that is due to new companies coming into the market. Since they are starting from zero any sales increase the percentage dramatically. “Although the numbers are very startling you do have to take that into account, that this is an emerging phase of a new product,” she explains.
Denis Ricard, Assistant Vice President for Marketing at Industrial Alliance, supports the statement that new entrants skew the numbers. He points out that his company entered the market only last year, but nonetheless held 8.3% of the total market share in 2001.
In addition, continues Ms. Gelling, “I am hearing from companies that CI is probably easier for agents to sell. It is easier for clients to understand, it is easier for agents to understand, and that makes an easier sell.”
