Standard Life leaves individual life market

By Donna Glasgow | January 24 2012 09:47PM

Standard Life Canada is no longer in the business of selling individual life insurance and critical illness products. Instead, it intends to focus on other segments which show the best potential for sustainable growth. In a press release issued on Nov. 29, Joseph Iannicelli, president and CEO of the company said, “This change will help us speed up the growth of the three business segments where we’re most competitive…” The company’s key segments are retail investment funds, group defined contribution retirement plans, as well as group benefits and disability management.

Standard Life will continue to sell life insurance as part of its group benefits offering. It will no longer sell individual universal life, term, whole life and critical illness insurance.

In a message to its sales force, Mr. Iannicelli said the company is committed to delivering the same level of service to distributors and its current policyholders. “We’ll still own the existing block of business after January 1, 2012 and our staff will continue to service it. We shall still offer the possibility of increasing, adding coverage and converting these in-force policies. As in the past, we shall process group insurance conversions to individual life policies.”

In an interview with The Insurance and Investment Journal, Sylvain Messier, Standard Life’s vice-president, strategy and development, said 21 positions have been eliminated as a result of this decision, mostly at head office in Montreal. Three of these positions were already vacant, so 18 people have lost their jobs. He added that more than 60 employees have been retained to service the company’s individual life block.

One reason behind the company’s move is that it has had a low level of sales in the individual life market since it increased its universal life product pricing above the market in 2005.

At the end of 2010, Standard Life’s individual life business accounted for only 1.4% of its total new business and 3.5% of total premiums.

Mr. Messier says the decision to stop selling individual life products also reflects the company’s strategy over the last few years to focus on “capital light products” – products that have lower capital requirements.

In an interview with The Insurance and Investment Journal, Mr. Iannicelli said although it no longer wishes to sell in this market, the company’s block of in-force individual life business is not for sale. “We’re dedicated to servicing our 202,000 policies. It’s mature business, so it’s putting out profit for us…It was really the new business that was the issue with us because it is capital sensitive and it represented two percent or so of our revenues.”

Mr. Iannicelli added that leaving the individual life market is another step that the company has taken as it morphs into a long term savings and investment company. “Individual life insurance, per se, does not fit that strategy.”

Overall, the company’s strategy is to add as many assets as it can to its portfolio and drive as much efficiency as it can within this portfolio to increase value and profits, he explains. “And life insurance – being capital intensive – we just couldn’t get the return on the investment that…would be acceptable to us or to the board. So, we stopped selling it.”

When Standard Life repositioned itself in the individual life market back in 2005 by repricing its universal life product, “in some ways we postponed the inevitable,” Mr. Iannicelli adds. “We said we will have it on our shelf…but we weren’t going to ride that product for any kind of growth moving forward.”

Current market conditions, such as the low interest rate environment, were not among the factors driving Standard Life’s decision to halt sales in the individual life market, says Mr. Iannicelli. The company’s newly approved 2012-2016 business plan has nine key growth initiatives and none of them are linked to life insurance, he notes. Leaving the individual life market was, in part, aimed at tidying up the company’s business portfolio before implementation of this business plan, he explains.

MGA reaction
A few MGAs questioned by The Insurance and Investment Journal said they were not surprised by the decision since the company no longer had much business in the individual life market due to the pricing increases it made years ago. They all added that they believe the company will continue to enjoy strong investment sales through their advisors.

However, John Hamilton president and CEO of Financial Horizons Group, said he was “surprised but probably not totally shocked” by the news. And, even though Standard Life’s sales were low in the individual life segment, he is disappointed with the decision. “I think it’s a shame...You hate to lose any supplier and they’re a brand name company. They’re well known. They have a history, strength, stability and all of those things…”

He says Financial Horizons was Standard Life’s number one MGA and had a significant block of business. Advisors are concerned, he adds. “You worry about your clients…Standard Life says they are keeping term conversions. But you have to wonder, in time, what the product line is going to look like. How competitive is it going to be?” He also says while the company says it is continuing to own the block, “You wonder are they going to sell it somewhere down the road?”

Asked to elaborate on whether it will continue to offer competitive conversion options for the in-force individual block, the company responded that “Standard Life’s intention is to maintain its current offering for conversion options, riders and benefits for all in force policies. However, critical illness riders will no longer be offered as a rider that can be added to life insurance policies. Standard Life will ensure that the offering available for in force policies remains fair from a pricing and design point of view.”

Mr. Hamilton believes that for the independent advisor, there will be no major impact from Standard Life’s withdrawal from this market since they have other suppliers to choose from, but he adds that “I think it is a sign of the times of what we’re facing…”