Manulife Financial has launched a series of four universal life insurance products with lower management fees. Costs were reduced by eliminating all of the investment bonuses as well as some of the guarantees.In its new Manulife UL line-up, Manulife Financial is offering four kinds of universal life insurance, each designed to appeal to a specific market. In doing so, the insurer has removed some of the guarantees that increased management fees and made the product more expensive for clients. Investment and persistency bonuses have been eliminated, as has the Wealth Enhancer feature.
The insurer is offering two basic versions of the product: one with level cost of insurance and one with yearly renewable term (YRT). Each is aimed at a different market, namely older and younger prospects. The level cost of insurance product is aimed at clients aged 45 to 85 years and can’t be purchased by those who are outside of this age range. On the other hand, only those aged 0 to 60 may purchase the yearly renewable term product.
Different life stages
“Young people are not prepared to pay more for level cost of insurance. They want to direct more cash to investment accounts. Clients age 45 years and older are more inclined to consider permanent insurance rates. Everyone is at a different stage of life,” comments David Baker, assistant vice president of insurance products for individual markets at Manulife, in an interview with The Insurance and Investment Journal.
Each of these two Manulife UL products is available in two versions based on investment choices. One is called Client Investment Select and allows the client to choose from sixty investment accounts. The other is called Gold Investment Account and offers universal life with a single investment account, linked to the performance of a non-participating whole life fund, the Performax Gold Investment Fund.
Once again, each has its own target market. The level cost of insurance product with a single account only offers Term 100 insurance rates. The level product with multiple investment choices offers, among other things, payment terms of 10 or 20 years. The YRT product with a single investment account offers renewable coverage to age 85. As for the YRT product with multiple investment options, it offers renewable coverage to both age 85 year and age 100.
None of these products impose policy fees or contract fees on the insured. Management fees are set at 1% for the Performax Gold Investment Fund. In the Client Investment Select product, the fees vary depending on the type of investment chosen. For example, accounts linked to the Canadian Bond Index and Conservative Balanced Index charge a fee of 1.1% while accounts tied to the Canadian Equity Index and American Equity Index charge a fee of 1.15%. Among the most risky accounts, the European Equity Index charges a 1.55% fee, while the International Equity Index charges 1.45%. Managed accounts have Management Expense Ratios (MERs) that also vary according to the nature of the investment, ranging from 1.59% for the Fidelity Canadian Bond Account to 3.15% for the Manulife China Class.
Manulife has been preparing to launch the product for several years, and says cutting out bonuses to reduce costs made sense. “Costs have decreased significantly in wealth management, and this trend has carried over to universal life. There is an opportunity to provide better customer value by simplifying universal life by removing various bonuses, which results in lower management fees,” explains Baker.
The insurer is offering compensation that is different from its other universal life insurance products. For sales of the new level cost of insurance product, advisors will receive their initial commission over two years, paid at 50% per annum. The usual commission is 85% of first year premiums.
As for commissions on assets in investment accounts, they have been eliminated. However, advisors earn a lifetime commission of 3% on deposits.
At the launch of this new line-up, Manulife terminated its Limited Pay UL product since the Client Investment Select version offers three kinds of fixed-cost pricing: to age 100, for 20 years, or for 10 years. The insurer has also ended sales of its UltraVision product.
The future of its Innovision universal life product remains uncertain. “We envision a transition strategy, but our plans are not fixed yet,” said Baker. The scales are tipped towards ending Innovision sales, but the date remains unknown. As for Manulife’s Security UL product, it remains in place.
