Group of insurance companies launch new long-term care product

By Daniela Cambone | May 20 2011 06:06PM

Small Company Central, a group made up of fourteen life insurance companies, is developing a long-term care product the insurers can share. The insurers would be able to customize the product and label it under their own name.

The group created in August 2001, was founded with the combined efforts of Services, Lutheran Life and Co-operators Life. The three sponsors sat down and created a list of smaller insurers who would be ideal candidates for the group.

Members who have joined include a mix of insurers and fraternals; Assumption Mutual Life, Axa Canada, Blue Cross Life, Cumis Life, Empire Life, Equitable Life, IOF Foresters, Knights of Columbus, PennCorp Life, Unity Life and Wawanesa Life. Small Company Central (SCC) is also interested in adding new member companies to its roster.

The long-term care (LTC) product will be created and sold by group members says Michael Nurse, Senior Vice-President Business Development at Genisystems. He says that surprisingly, many of the SCC member companies do not have a LTC product and may not have the resources to create one independently.

Mr. Nurse says that SCC issued a survey asking the companies the greatest challenges they face. One of the major obstacles found was developing products and bringing them to the market. Therefore, by coming together as a group, the process of developing the product is simplified and more cost-effective, he notes. So far, nine of the 14 SCC companies are interested in adding a LTC product to their portfolio.

The name of the group is a play-on-words of Life Company Central (LCC), the group composed of six major insurers looking to develop a common electronic interface system between suppliers of insurance products and their distributors, says Mr. Nurse. However, he adds that the two groups have no similarities except that they unite a group of insurers.

"We meet quarterly to discuss how we can collaborate on things as opposed to every company going out and doing its own thing," says Mr. Nurse. He adds that there is a representative from each insurer at the meetings, either a president or senior vice-president. As well, outside speakers are often invited to do presentations.

Munich Re was one of the invited guest companies earlier this year and will now act as the reinsurer for the LTC product says Don Thomson, Vice-President of Living Benefits for the company.

"One of the things we bring to the table is that we not only can help train people on how to underwrite LTC...but we are able to come in and do the product development and the pricing for them. We can then bring in a company that would do the underwriting and claims and we would have another company that would do all the administration," says Mr. Thomson.

He explains that Munich Re's American counterpart, Munich American Re, owns LifePlans, a family caring network that has over 15 years experience in underwriting LTC, which would be used for the underwriting aspect of the product.

Mr. Thomson adds that the companies in SCC would be allowed to custom-tailor the LTC product. "We would help develop shelf features that these companies could then look at selecting and they could differentiate their products," he highlights, adding that most of the companies would also want the product to be under their own name. The companies would be responsible for marketing the product.

As for the time the product development would take, Mr. Thomson says that the wait does not have to be lengthy. "When you are dealing with nine companies, these companies in SCC have to make a decision of whether to participate in developing a LTC product or not, once that group has made a decision, it doesn't have to be a long period of time before the product is developed," he points out.

Overall Mr. Thomson stresses that SCC seems to be beneficial for everyone since it reduces the workload all around. "We've got nine companies at the table all working together. It is a more effective process as opposed to Munich going out and meeting with each of the nine companies separately over time," says Mr. Thomson, adding, "We can help SCC bring a product to the street faster."

Future projects

Besides the LTC, Mr. Thomson does not dismiss the idea that Munich Re may also be involved in future SCC initiatives. Overall, says Mr. Nurse, the companies involved in SCC are satisfied that the projects are moving along quickly.

"For small companies the bar is continually being raised," says John Dark, Assistant Vice-President of Product and Actuary for Co-operators Life. He says that the SCC is a forum where the companies can collaborate and share resources. As well, he says that the environment is non-competitive since everyone is serving a different market.

Lutheran Life is one of the companies which will not be participating in the LTC product, however, Richard May, Vice-President and Actuary at Lutheran Life still sees the benefits of SCC. He says that SCC has appeared at a time when technology is becoming a bigger issue in Canada and smaller organizations are facing more and more challenges. Adding, "There is an opportunity for us to gain."