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Non-cancellable products continue to dominate disability insurance sales

By Caroline Phémius | February 20 2004 02:35PM

Non-cancellable disability insurance sales are once again leaving guaranteed renewable disability sales in the dust, according to recent LIMRA International findings.

Representatives specializing in Canadian non-cancellable disability insurance (DI) garnered more than $34.2 million in premiums between January and September 2003. In comparison, guaranteed renewable products generated meagre sales of $8.4 million during the same period. Seven insurers participated in the LIMRA survey.

Guaranteed renewable topped the sales growth charts, at an admittedly modest four per cent over the previous year (compared with non-cancellable’s negative four per cent). Munich Re reports that guaranteed renewable products are driving the major trend in disability insurance in 2004.

Sales of cancellable DI, also called “conditionally renewable,” slumped by eight per cent between the first three quarters of 2003 and 2002, edging past the $6 million mark.

Most of the insurers were tight-lipped about their disability sales and market share figures. They did confirm, however that they had reached their objectives.

In 2003, prominent player UnumProvident Canada revamped its product line by eliminating The Solution, which had been on the market since the mid-‘90s. UnumProvident, which was recently acquired by RBC Life Insurance, will now write this type of risk uniquely through the product developed and marketed by the specialized brokerage firm Edge Benefits.

Without yanking its product definitively, insurers such as Reliable Life and Quebec-based L’Internationale significantly realigned their activities in this sector. Both companies declined to contribute their figures to The Insurance Journal’s annual comparison table because they claimed to have completely overhauled their products.

Vast potential

André Therrien, living benefits manager at Peak Financial Services, a large Montreal-based full-service managing general agency (MGA), says that this slowdown may be accentuated by the fact that brokers hesitate to sell disability products because they consider them too complex. “Disability insurance is complex. Many brokers feel ill at ease with this product and end up questioning their own skills. Consequently, they sell less.”

In fact, the target clientele of this wage insurance product – which includes small business owners, blue-collar and self-employed workers – is growing steadily. The most recent Statistics Canada data on the Canadian employment market reveal that the number of independent workers increased by 2.5% in 2003. This growth is fuelled by sectors such as transport, storage and construction, replete with employees that are prime targets for the non-traditional product offering.

Mr. Therrien sees vast potential in this market. “People who take the time to learn about the products and advance their knowledge can surge ahead of their colleagues.”

For her part, Kathryn Giffen, president at RBC Life does not think that brokers are having trouble selling guaranteed renewable disability products. “Our disabilities sales are stable from year to year,” she states.

“Most of our brokers are selling guaranteed renewable, therefore pushing them to sell non-can is not a trend that we see,” explains Ms. Giffen. “Our product is generally aimed at medium market. We do not sell the kind of sophisticated DI products that you might see in a higher end professional market. Our target market would be more the working class. Self-employed workers are not the specific targeted market.”

Getting closer to brokers

Canada Life says it has attained its sales objectives in the guaranteed renewable product segment, says Keith Malkin, living benefits sales manager and consultant. One of the insurer’s strengths, he points out, is that brokers have a product line that lets them meet the needs of blue collar and white-collar workers alike.

Return of premium controversy

As with critical illness insurance, the return of premium option spurs disability product sales. The non-traditional product is no exception. This option helps producers sell the product, Mr. Therrien confirms.

At La Survivance, Stéphane Rochon, vice-president, marketing and sales, individual insurance, described this option as absolutely indispensable for success. “The future lies in low-risk products for customers, such as critical illness products. Customers that get sick will receive benefits, and if they are healthy, they will receive a return of premium. Disability insurance has a similar outlook. Policies with return of premium are becoming the rule, that’s the key to success.”

All the same, others believe that the cost of this option will hamper sales. Daniel Duchesne, senior marketing representative at AIG Canada, pointed out that in this market, customers are looking for the most affordable coverage. This is particularly true of self-employed, seasonal or part-time workers. “I don’t think that adding a return of premium option is an essential factor to sell the product,” he said.

Even insurers that offer assorted non-traditional disability products do not include the return of premium option in their entire line. For instance, only the Plus version of Canada Life’s Independence product includes this option.

The tale behind the table

In compiling the non-traditional disability insurance table, The Insurance Journal grouped guaranteed renewable products with cancellable products.

Admittedly, the two products differ in size. The first offers a premium that increases according to the terms established at the outset. For cancellable, the insurer reserves the right to cancel the policy for any job category.

Yet, because the two products target similar markets, we decided to group them in the same table, while indicating whether each product was guaranteed renewable or cancellable insurance.

Note that these products are generally intended for “non-traditional” workers, which explains the name of the table. This population includes part-time employees, seasonal workers, new entrepreneurs, farmers, freelancers and self-employed truckers.

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