Flurry of year-end changes to insurance products

By Alain Thériault | February 20 2014 07:18PM

Changes abounded in Q4 2013. Online underwriting and electronic applications are gaining ground, and insurance price volatility persists in 2014.Manulife Financial now offers advisors automatic underwriting of its life insurance and critical illness applications. The insurer says this can help it speed up decisions and compensation for advisors.

The Manulife system automatically evaluates potential clients based on a set of rules that let it underwrite applications without the need for an underwriter, the insurer explains on its Repsource website. The system assesses life insurance applications of clients aged 18 to 65, and critical illness insurance proposals for clients aged 18 to 40.

In an information bulletin introducing the automatic underwriting, Karen Cutler, vice president & chief underwriter, Retail and Affinity Markets at Manulife, points out that if advisors choose to use a paper application, they should ensure that the client has answered all the questions before submitting the form.

Missing information

“‘Not in good order” applications have always been a problem in our industry. Unfortunately, about 30% of our life and critical illness paper applications are missing important details. This causes delays as we work with you to complete the missing information,” she wrote.

She added that “each unanswered or incomplete question creates at least nine additional ‘handlings.’ That’s guaranteed to slow down the process and delay your compensation as we stop to create policy amendments.”

Advisors can simplify the process by using the electronic application Ez-app, available online. Because it is less detailed than the paper app, Manulife conducts a telephone interview with the advisor’s client and records the answers. The Ez-app is available for life insurance and critical illness.

Industrial Alliance launched an electronic application in January that eliminates some medical reports and accelerates underwriting. The company notably eased its underwriting rules regarding the physician statement for several illnesses. Questionnaires for sleep apnea, asthma and nervous disorders now require fewer medical reports.

In December, Empire Life went beyond electronic applications. The insurer launched an online quote site called Fast & Full. Financial advisors can use it to find out instantly if a client has been approved for coverage.

This application eliminates the use of paper forms and allows payment of the first premium by credit or debit card. “We know there are many Canadians who don’t have enough life insurance. This new online application will make it faster and easier for them to apply for the insurance coverage they need, while benefitting from the expertise of an advisor,” Sean Kilburn, senior vice-president, Life Insurance, Empire Life points out.

Mr. Kilburn expects advisors to be very receptive to this new method. “They can meet in person, or on the phone, to review client protection needs and complete underwriting questions while looking at the same screens online. They don’t need to be in the same room or city anymore—everything can be done online and over the phone,” he explains.

Humania Insurance also made the shift to online quotes earlier in 2013. Insurers like Assumption Life have been offering this purchasing method for years.

Price volatility in 2014

Low long-term interest rates continue to drive up the cost of universal life insurance products. Manulife changed the cost of insurance rates of its UL100 policies on Feb. 1, 2014.

Level costs of insurance will increase, as yearly renewable costs decrease. The level cost of insurance saw the maximum increased authorized in the policy, mainly owing to persistently low interest rates, the insurer said on its Repsource site.

The average increase of 11% falls within a spread of 0% to 18%. It will affect nearly 2,400 policy holders. Holders of policies that have already reached their maximum will not see a change. Deposits will not increase automatically—advisors should tell their customers to change the amount themselves.

In contrast, the yearly renewable cost of insurance will drop by 47% on average for about 7,700 customers. The rate of the Wealth Enhancer guarantee will also decrease, Manulife says. The rate decrease will reflect mortality rates, the insurer explained. The old rates should be in effect until the end of January 2014.

Disability insurance

On Nov. 23, 2013, Manulife changed its base rates and rider rates for all new Proguard and Venture Series disability insurance policies. The insurer took into consideration current morbidity experience and interest rate assumptions.

Some rates fell and others rose, depending on age and job category. The average base rate declined by 6% for Proguard and 2.5% for Venture Series. In contrast, several rider rates increased, including those of cost of living and own occupation, both up by 5%. The cost of the “4-Back” Premium Refund Rider rose from 40% to 46% of total plan premiums. Manulife no longer offers a 5-Back Premium Refund Rider for Proguard Series, Venture Series and ExpenseComp.

Canada Life lowered the preferred rates for its product Simply Preferred™ Term 20 life in November. The average decrease was 1.5%, and affects the base product and riders. The insurer explains that this decrease will help it remain competitive. In fact, a term insurance price war has been raging for several years.

Industrial Alliance lowered its term prices for the same reasons. The drop affects long-term rates of the flexible term insurance product Pick-A-Term, for insured ages 21 to 34. The average decrease is 7% for all age groups.

Older insured will see steeper drops. For example, T25 for a non-smoking insured aged 40 will plunge by 24%, for all face amounts. Non-smoking insured aged 15 to 39 will see a modest decrease of 3%, for face amounts of $200,000 and lower.

On Jan. 20, Foresters pared its term insurance portfolio. The insurer has replaced its 5- and 15-year preferred products and traditional T10, 20, 25 and 30 products with a line of three products: 10, 20 and 30 year term. At the same time, the underwriting categories were condensed from 10 to 5.

Innovations continue

Since Feb. 1, Equitable Life Insurance has been offering an interest bonus of 0.15% to customers who reinvest in a 36-month guaranteed deposit account and in one of their guaranteed interest accounts, personal investment portfolios (RRIF or lifetime annuity fund) or interest income funds.

Since Jan. 2, Empire Life has let its customers convert T10 into T20 within five years of purchase. The offer applies to Solution 10 term insurance and Trilogy universal life. It extends to policies written since Jan. 1, 2010.

Revamped products and changes announced by life insurers since December 2013
Price cut for Solution 100 and Solution 100 hybrid (nonparticipating whole life)
Online Quotes launched
Conversion of T10 products into T20 for Solution 10 (term insurance) and Trilogy (universal life)
Automatic underwriting of life and critical illness applications
Change in rates for UL100 (universal life)
Change in rider rates on new Proguard Series and Venture Series contracts (disability insurance)
Travel insurance more expensive
Increased home care coverage (group insurance)
Electronic applications launched
Reduced rates for Pick-A-Term (term insurance)
New product in group critical illness
Preferred rates decreasing for Simply Preferred™ Term 20 life (term insurance)

  • Term insurance portfolio streamlined EQUITABLE
    Interest bonus offered to various customer segments
    Launch of Sun Retirement Health Assist (long-term care)
    New features in critical illness


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