On the heels of TD Life, Manulife Financial is plunging into Internet-based sales of term insurance. What’s more, it has set its sights on Quebec, a region overlooked by its competitors.

Manulife started selling its T-10, non-preferred term insurance Canada-wide via the Web this October at its site, Manulife Direct.com. Its electronic T-10 can be purchased directly online with no broker required. Clients simply fill-out an application while online, and either submit it online or print it out and send it in by regular mail.

The completed application is then re-sent to the client the next day for a signature. “The application still needs a signature,” confirmed Stephani Risk, Vice-President of ManulifeDirect. She added that the company is keeping a close eye on the electronic signature legislation.

Then application is subject to premium payment and underwriting approval, but is retroactively insured from the time the proposal was submitted. The client receives the policy by mail within a period ranging from two days to four weeks “according to the complexity of the underwriting,” said Ms. Risk.

Online in Quebec

ManulifeDirect is breaking new trails by selling life insurance online in Quebec. Hampered by the French language and by the controversial Bill 188, insurers have been very careful to confine themselves to standard direct, agent, and broker distribution channels.

The now infamous Bill 188, the Quebec insurance and financial services legislation, has well defined limits to the ways in which insurance may be sold. When the legislation was passed in 1998, however, the Internet was still an evolving technology and so the sale of insurance online remained a grey area of the law. Six months ago, the Quebec regulator commissioned a task force to outline the way Internet insurance sales should be done. The task force have met only once so far and its recommendations will only be announced at the earliest next summer.

Manulife said it believes the law on the distribution of financial products and services does not prohibit it from selling life insurance online.

“Section 12 of the Law stipulates that the insurer can invite the public to acquire an insurance product by means of pamphlets, direct mail advertising or any other form of advertising, subject to certain conditions, of course,” said Michel Paquet, Assistant Vice-President and Legal Advisor at Manulife.

Some of these conditions are specified in Chapter 406.1 of the Insurance Act, which states that an insurer cannot accept an insurance proposal “from a person other than the insured, the policy holder, the participant or a market intermediary in insurance business…” (R.S.Q., c. A-32).

Mr. Paquet added that Bill 188 requires that distributors without insurers’ permits know of distribution guides and have one in their possession. “But this mainly concerns travel agencies and car dealers,” explained Mr. Paquet. In addition, non-certified distributors must notify their clients that there are other products that can be procured on the market.

Accepting the inevitable

Mr. Paquet said he considers Manulife’s arrival “will inevitably attract other players in its wake.” They have no choice, he continued, because e-commerce is shaping up as a serious trend in insurance distribution.

Singing from the same sheet music, some reinsurers foresee a bandwagon effect. “There are more sites like this in sight,” said Bill Hazelwood, Vice-President Marketing at Swiss Re.

These predictions are not just hot air, Mr. Hazelwood added, they reflect a widespread feeling in the industry “communicated to me by some insurers.” In fact, insurance companies are beginning to realize that different clients want to buy insurance by different means and through different distribution channels, noted Mr. Hazelwood. “The Internet is a means and there will be sales on those sites.”

Insurance sales via the Internet are already gaining momentum internationally, observed Robert Mallette, Vice-President, Traditional Reinsurance Development, at RGA. “The arrival of Manulife will greatly enhance the visibility of this approach in Canada,” he predicted. “It would not be surprising if one or two other financial institutions do the same within the next six months, maybe the banks. One even spoke to me directly. I heard about another bank indirectly,” the actuary revealed without mentioning any names. He added that other insurers are also thinking along the same lines, but they may not be able to act as quickly as Manulife. Mr. Hazelwood also hinted that a bank might soon launch an Internet insurance sales project.

Whose turn is it?

Given the two reinsurers’ speculations and the fact that banks operating in life insurance are not many, eyes are naturally turning to RBC Insurance and National Bank Life Insurance.

Nothing can be ruled out at National Bank Insurance, where “sales methods are increasingly migrating to e-commerce in step with bank methods,” affirmed Pierre Desbiens, Senior Vice-President Trust and Insurance at National Bank.

But not just any insurance is being targeted, Mr. Desbiens insisted. “For all online sales projects, we are placing priority on auxiliary products, that is those that can attach to another product that customers are likely to seek out,” he explained.

He said he believes that the day when the customers themselves will surf to buy a life insurance product is nowhere near. “It is possible over the short term that we will offer, for example, car loan insurance or mortgage insurance, even T-10 to cover a line of credit.” But, according to Mr. Desbiens, online sales of health insurance products may explode in the near future for financial institutions.

Robert Ireland, British e-commerce specialist at Swiss Re, recently dispatched to the United States to act as Vice-President, Marketing, also mentioned auxiliary products. He cited the example of American insurer John Hancock “who is successful in US selling life term over an Internet site.” The site hancock.com offers, on a single page, term insurance, variable pensions (similar to our registered pension funds) and long-term health insurance.

Mr. Ireland explained “there’s one difficulty with selling life insurance on the Net. Life Insurance is not an easy concept for people to understand. To succeed, you have to design a simple, quick to use planning tool for the mass market… The tool should combine needs after death and also if the clients live longer.” Mr. Ireland said he sees these two needs as intertwined in clients’ heads when they are shopping for financial products online.

Unfortunately, RBC Insurance had not returned our calls by press time.

Discretion is the rule among Insurers, several of whom have refused to comment on Manulife’s initiative. But not everyone is slamming the door. Interest was revealed at CNA Life, a Canadian T-10 star. “It is certainly a strategy that we do not want to ignore in the coming year. It is an avenue that we are exploring, but everything is still in the embryonic stage,” said Neil Sirois, Marketing Director at CNA.

Keeping it simple

Mr. Mallette elaborated on the irresistible aspect of the trend. “Many players have the Internet in their focus,” and e-commerce is the latest trend. “People are increasingly open to buying insurance via the Internet.”

For now, consumers are mainly purchasing simple products such as T-10, mortgage insurance and other term products. “Keep it all very simple. That is the key to operating insurance sales successfully over the Internet,” Mr. Mallette insisted.

T-10 is the popular product for the Canadian insurance industry, Mr. Hazelwood stated. “You’ll see a lot of T-10 everywhere: brokers, directs, Internet. T-10 is the most commonly compared product by clients and by brokers.” In this frenzy, Mr. Hazelwood said he believes that T-10 will do very well on the Web owing to its low prices driven by “mortality rates so aggressively low.”

If many agree that T-10 is destined for spectacular success on the Net because of its simplicity, Greg Grant, Assistant Vice-President, Traditional Life Insurance Products at Transamerica, said he believes that buying T-10 is not child’s play. “For sure, term insurance is becoming a commodity. But even if T-10 is not as complex as universal life, it’s not so simple.”

Do you need a product with a conversion privilege or without one, which would make it cheaper? Do you know you can access preferred-rate products and save? Do you shop around for your renewal premium? ”Paying direct doesn’t mean you pay less. Often, you pay more and don’t receive advice. You’re not aware of other products on the market or other characteristics you may need” Mr. Grant explained.

Although T-10 can potentially spread like wildfire on the Internet, the same is not necessarily true of universal life, said Joe Kordovi, Assistant Vice-President, Specialized Marketing and Strategic Initiatives at Transamerica. “I don’t believe that there is a universal life insurance market on the Internet, because the product is too complex. You need the support and the expertise of a broker to buy it. I can tell you that we are years away from selling universal life online,” Mr. Kordovi said.

Mr. Desbiens said he finds it hard to picture a customer “waking up in the morning and navigating to find a good universal life policy, then deciding on his own which investment options will help him reach his objectives.”

Mr. Mallette said he sees selling life insurance over the Internet as theoretically possible “if someone finds the formula to make this product more simple for consumers.” But it will surely not be in the first wave of online commercialization, he added.

Noël Bonnici, Marketing and Operations Director for Quebec at Equinox Financial Group, said “if the idea is to present a simple product that will also serve as a gateway to the broker for the client, it’s okay. But competing with the traditional network is another story entirely.”

And many brokers agree. “I don’t like the idea,” said one Manulife broker, “and I’m not the only one.” This broker did not want to reveal his identity for fear of impacting his relationship with Manulife. He recently closed a deal with hundred of thousands in commissions, he said, and does not want to jeopardize future business.

The general feeling among brokers regarding Internet sales, he explained, is “if they can sell it [online], what do they need us for.” That said, brokers in general do not encourage direct distribution.

In contrast, Mr. Mallette claimed that brokers do not have to fear the emergence of the Web as a distribution channel. “Insurers are using the Internet as a distribution channel to reach a market to which they did not previously have access,” he explained. He feels that a large segment of the Canadian clientele is ready to pay a premium to benefit from the services of an advisor. “Others prefer to shop around themselves for simple products at a low cost. With the Internet, insurers will not replace much of the business that they are currently carrying out through their traditional distribution network.”

Mr. Bonnici agreed that the Internet approach is limited to a specific market. “I think that the insurance clientele of banks are the people that will go seek out insurers that have adopted this approach, and all the better for them,” he said. Clients for whom the advisor adds considerable value will still need to deal with an intermediary for their insurance. He added: “Some clients have needs that only a broker can circumscribe.” For example, entrepreneurs’ need for financial planning and estate planning, which probably cannot be filled very well in cyberspace.