Sweeping innovation continues

By Alain Thériault | April 22 2014 03:00PM

Long-term guarantees are far from long gone. Whole life and several other guaranteed products are also riding the wave of innovation.Ever since long-term interest rates rose slightly the industry has been experiencing pricing rate decreases. These declines extend beyond term insurance. After a lengthy slump, long-term guaranteed products are also seeing rate cuts, among other add-ons and innovations.

Manulife Financial raised the performance credit rate of its nonparticipating whole life product Performax Gold. For the period of March 31, 2014 to March 30, 2015, the applicable performance credit rate will be 6.25%, the insurer announced in a notice to advisors. “We will apply this rate on the policy anniversary to determine the policy's Performance Credit. The Performance Credit helps increase the policy’s cash value and/or death benefit,” Manulife says.

Conditions are improving, so we are lowering prices Transamerica Life Canada announced. The insurer is offering better prices on Term 20 and Term 30 for insured aged 30 to 50, and boosting advisor commissions to 50% for sales of Term 20.

Transamerica is also revamping its permanent insurance. It has eased the rules on its universal life insurance product EstateADVANTAGE. This product is now available at level cost for face amounts of $1 million, up from the previous maximum of $500,000.

Annuities and segregated funds

Lifetime annuities are also being revamped, some in unprecedented ways. Empire Life is offering an annuity payment option that affects all of its life and critical illness insurance products, segregated funds and immediate annuities for which at least one beneficiary have been designated. Customers can now choose a settlement option when they buy the product.

The Annuity Settlement Option lets Empire Life customers choose how their beneficiaries will receive their inheritance. The beneficiary can receive the amount in case of death either in the form of an annuity or as a single payment. The insurer thinks this option meets an important need. It cites the 2013 Household Balance Sheet published by Investor Economics, which foresees that over $670 billion will be transferred between generations in the next decade.

Depending on the circumstances, a large payout amount may not be in the best interest of a customer’s beneficiaries, the insurer explains. “Our Annuity Settlement Option recognizes that many customers want more control over how the proceeds are paid out to ensure their loved ones are taken care of,” says Julie Yoshikuni, vice-president, Retail Investments Products & Marketing at Empire Life.

The payment option in annuity form is highly flexible, Yoshikuni points out. It lets customers choose from a series of periodic guaranteed payments or an initial payout followed by guaranteed periodic payments. “Some advisors had mentioned that their clients were looking for more flexibility when it came to paying out the proceeds of insurance policies,” she told The Insurance and Investment Journal.

RBC Insurance launched the product RBC Payout Annuities through its managing general agency network in late March. Available in three versions—lifetime annuity, definite annuity and reversible annuity— it provides a total refund to the beneficiary of the premium deposit without interest if the annuity holder dies before the first payment. For the reversible annuity, the beneficiary receives a refund if both annuity holders die before the first payment of the annuity.

The minimum premium required to form an annuity under the new product is $50,000. The maximum premium is $1 million. Higher amounts are subject to approval by the RBC Insurance head office.

RBC also finetuned rates for its disability products on April 14. The changes are driven by evolving morbidity rate experience and competitiveness imperatives. Their scope varies according to the insured’s age and job category. For instance, rates are down by 7% on average for the Professional Series and by 1% for the Foundation Series. They are 5% higher for the Quantum series.