Critical illness sales: independents overtake career network

par Alain Thériault | August 12 2010 03:30PM

For the first time in three years, critical illness premium sales grew more robustly in the independent network than in the career network.

The latest survey by research firm LIMRA International reports that the independent network sold 22% more critical illness insurance premiums in Q1 2010 than in the same quarter in 2009. By comparison, premium sales in the career network advanced by 16% during the same period.

In terms of number of policies sold, both networks saw identical growth between the first quarters of 2009 and 2010. However, the average premium per policy sold was higher in the brokerage network.

Independent advisors also sold more permanent CI insurance products during Q1 2010. The career network sold more level premium limited term products. The brokerage network garnered the lion's share of CI sales in Canada in the first quarter of 2010, at 69%, compared with 31% for the career network.

Higher growth of the independent network in new premiums does not surprise Mark Halpern, President of the Ontario MGA and a certified financial planner. "CI growth in the independent channel is showing that the message is getting out. With time, there's more awareness among the consumers, advertising, etc. At some point, independent advisors can't ignore the product anymore because clients are asking for it," he says.

Mr. Halpern used radio advertising campaigns and gave expert testimonials on TV to showcase a critical illness product: ELITE U.S. Healthcare. Underwritten by Royal and SunAlliance, this product is aimed at a more affluent clientele.

It covers up to US$5 million in care received in North America, for a US$5,000 or $10,000 deductible. "It's a ‘pull' strategy. Our radio advertising is a call to action that includes the line ‘call your insurance advisor," he explains.

Mr. Halpern adds that the standardization of the definition of critical illnesses proposed by Munich Re in 2006 reinforced advisors' confidence, as insurers signed on. He says disparate definitions were a major roadblock for independent advisors that had to deal with different companies.

André Therrien, living benefits specialist at Peak Financial Services, thinks advisors have adjusted to the market. "Consumers are more aware but advisors also learned to offer affordable temporary solutions," he says.

Mr. Therrien systematically recommends that his advisors propose at least one basic critical illness solution to all their clients, for example ten-year temporary coverage. If protecting retirement savings is important, it is also a good idea for young people to protect their insurability by purchasing an affordable product. They can convert it into a more complete product later, Mr. Therrien points out.

Mr. Therrien takes a three-pronged approach. "Disability for basic expenses, critical illness for additional resources, if necessary, and long-term care for protection during retirement. This approach helps clients make choices and applies to different stages of life. I don't hesitate to talk about long-term care, even to a 25-year-old client," Mr. Therrien explains.

Tried and true

At Manulife Financial, the independent network's CI sales grew by 23%, in line with LIMRA's figures. Steven Parker, Assistant Vice President, life product and marketing, individual insurance at Manulife, attributes these results partly to a return to tried and true methods.

"We organized more than 150 CI sales training workshops, reaching about a thousand advisors. It's back to the old days of sales training," he says.

Mr. Parker adds that the reorganization of his three independent networks has also stoked the growth of CI sales. From 2008 to 2009, Manulife combined the sales teams of its independent advisor, managing general agency (MGA) and securities broker (national accounts) networks. A single team now supports the living benefits sales force rather than three small fragmented teams.

"There's no clear market leader in (CI) pricing and features. Growth is a question of awareness and support. We continue to need to increase our points of distribution. We must reach the advisor as much as we can, one-on-one." Mr. Parker explains.

A change in mentality is sweeping through the sales force, says Stéphane Vigneault, Regional Vice-president Sales, Quebec Region, for the Sun Life Financial MGA network. "The turning point is that advisors are starting to sell the product for the advantages it offers in case of illness, rather than for the premium refund," he says.

Sales of a product usually pick up once advisors start telling their clients about it, Mr. Vigneault continues. "The career agent network quickly got this. The LIMRA figures show that the independent network is catching up. We'll have to see whether this is a long-term trend," he says.

Sun Life's independent network has been working overtime in the last 18 months to broaden its inroads into the critical illness market. "We hired a dozen new living benefits specialists. It's a major investment, made during the heat of the (stock market) crisis. Many insurers made a huge effort to persuade independents to take a closer look at living benefits products. As a result, this sector should continue to grow strongly," Mr. Vigneault explains.

Bruno Michaud, Senior Vice-President, Administration and Sales at Industrial Alliance says this product has been revitalized, in both the career and MGA networks. This rebound took place after the 25% price hike in the critical insurance market a few years ago, "which caused a sales slowdown at the time, he explains.

Since the start of the recession, Mr. Michaud has observed a trend of consumers seeking shelter in secure products. Critical illness insurance products are benefiting from this trend, he continues.

That said, he emphasized that the LIMRA figures hide very disparate results among companies. "In the LIMRA study released to member companies, one insurer saw its CI premiums plunge by 54% in 2009 compared with 2008. Another reported a 25% increase. One company had growth of 60% in Q1 2010, yet sustained a 2% setback in the same quarter of 2009. The very broad spectrum of results may be linked to a limited time promotional offer, price cuts, etc," Mr. Michaud explains.