Level COI continues to increaseBy Alain Thériault | September 21 2011 07:29PM
One of the last companies to hold out against increasing their level cost of insurance (COI) rates has given in to the widespread industry trend. BMO Life Insurance has increased its level cost of insurance in three of its universal life insurance products.BMO Life’s actuaries had been prescient in adjusting their level cost of insurance prices last year, well before Manulife Financial set off a wave of changes in December 2010. This is why its rates did not move at the height of the pricing increase storm last spring. However, the insurer was not able to hold out any longer, and the level cost of insurance will be increased for all universal life products as of October 3.
As with most increases made in the market since last year, it is mostly younger policyholders who will suffer. “Our level cost of insurance increases were largely restricted to the 18 to 50 year old market,” says Stephen Carter, executive vice president at BMO Life Insurance. “For the Life Provider UL plan (face amounts $100,000 or more)increases averaged between 4% to 14% for non smokers and 3% to 9% for smokers, ages 18 to 50. For the Life Dimensions UL plan (face amounts $100,000 or more) increases averaged between 3% to 6% for non smokers and 3% to 4% for smokers, ages 18 to 50,” he explains.
The increases also affect BMO’s Universal Life Investment Loan Plan and its UL T100 riders.
Top competitive ranking
“The important message to advisors is that despite these increases, BMO has maintained its top competitive ranking at these ages,” says Mr. Carter. According to research conducted by the insurer and based on software illustrations of nine of its competitors, BMO Life Insurance still has the lowest level cost of insurance in most age groups, both for its Life Dimension and Life Provider policies, individual or joint. The comparison is based on the illustrations of the minimum level COI premium of the following insurers: Canada Life, Empire Life, Equitable Life, Industrial Alliance, Manulife Financial, RBC Insurance, Standard Life, Sun Life Financial and Transamerica.
As for Empire Life, it has increased the cost of its level whole life products. In an interview in the June-July edition of The Insurance and Investment Journal, Empire CEO Les Herr said this was a necessary measure for products with guaranteed premiums.
The Optimax 100 and Optimax 20 Pay participating products are affected, as well as the non-par Solution 100 (with cash surrender values) and 20 Pay Solution. Empire is no longer accepting applications for the legacy version of the Optimax III par product. The increase worked in favour of Solution products with cash surrender values which are now becoming available 10 years earlier, namely on the tenth policy anniversary.
In a list of frequently asked questions circulated after notice was given to advisers, Empire attributed the price increase to persistently low long-term interest rates. The insurer says the change was essential to the viability of its products.