Universal life sales propel growth in national accounts channel

By Alain Thériault | September 21 2011 07:36PM

Canadian insurance sales in the national accounts channel rocketed during the first six months of this year. Boosted by customers who wanted to get ahead of rising level premium costs, universal life insurance stood out in this channel. Whole life also experienced strong sales.
However, this channel’s growth eclipsed that of MGAs in the first half of 2011. During this period, growth in universal life sales rose 38% in national accounts compared to 6% for managing general agents. As for whole life, sales increased by 32% in this network, versus 25% for MGAs. These preliminary figures are from the research group LIMRA’s report on life insurance results for the second quarter of 2011.

National accounts also surpassed MGAs in terms of sales in the first quarter. The overall growth in life insurance sales was 34% for national accounts compared to 8% for MGAs and 2% for captive agents.

“The national accounts channel had the highest growth in the first quarter. This significant increase was driven by successful universal life and whole life sales,” says Karen Terry, manager of product research at LIMRA. She believes, however, that sales from this channel will slow. In an interview with The Insurance and Investment Journal, she noted that sales growth in national accounts was a little slower in the second quarter than it had been in the first. She points out that several companies have increased their pricing, and the industry is beginning to see the effect.

Most insurers increased the price of their level cost of insurance because their products were no longer profitable.This shift affected both universal life policies and T-100 policies. Some insurers made the change in the first quarter, and others during the second. As a result, customers who were already toying with the idea of buying a policy were spurred into action in order to beat the price increase (See the article in the May 2011 issue of The Insurance and Investment Journal).

National accounts sell more universal life than any other product. Data compiled by the Canadian research firm Investor Economics (IE) reveals that the national account network sold $208 million of life insurance premiums in 2010. Of these sales, 63% were for universal life, for a total of $132 million in premiums. Universal life sales made by national accounts accounted for more than 20% of all UL sales in Canada during 2010. Lastly, universal life sales in the national accounts channel grew by 37% in 2010 compared to 2009.

Investor Economic’s Insurance Advisory Service report for 2011 tallied results from the 10 largest insurers in Canada. This sample represents over 85% of the market, notes Goshka Folda, senior managing director at Investor Economics. “The national account channel remains one that is centered on the wealthier and baby-boomer demographics. Higher wealth and higher income clients are typically looking for permanent policies,” she comments.

IE analyst Karol Kalejta highlighted data from another study focused primarily on national accounts. The figures from IE’s spring 2011 Retail Brokerage Report show that national accounts sold 1750 universal life insurance policies in 2010. The average sum insured through these policies was $1.5 million.” In 2010, only 3.3% of universal life policies in force in Canada had a face amount of more than $1 million,” says Mr. Kalejta.

Sales of universal life insurance will continue to grow in 2011, according to this study. “In the first quarter of 2011, 484 UL polices were placed at the big five brokerage firms, an increase of 17.8% over the first quarter of 2010,” notes Mr. Kalejta. The study tracked the results of the five major national accounts in Canada, namely BMO Nesbitt Burns, CIBC Wood Gundy, RBC Dominion Securities, Scotia McLeod and TD Waterhouse.

Insurance is a marginal activity for stock brokerage firms but insurers believe in this network. “Despite the fact that insurance revenues typically account for well below 5% of total revenues at the big five full-service brokerage firms, insurers continue to view the full service brokerage channel as a strategically important gateway to reaching the wealthier baby-boomer demographic,” says Mr. Kalejta. “In this context, UL policies remain the highest insurance revenue-generating product at the Big Five brokerage firms, accounting for $15 million dollars in revenues during the first quarter of 2011.”

It is a profitable channel for insurers. The average premium for products sold by national accounts is significantly higher than in other distribution networks. However, Mr. Kalejta points out that insurance executives realize that this lucrative business comes at a price, since clients and advisors in this channel demand choice and exceptional after-sales service.

National accounts are an important channel for Sun Life Financial. “It accounts for 40% to 45% of sales in our independent network,” says regional vice president Stéphane Vigneault. “Our national account network has grown steadily for many years but especially during 2010 and the beginning of this year,” states Mr. Vigneault. Due to the increase in level cost of insurance prices, the national account channel brought a significant number of sales to Sun Life during the early part of this year. “We have seen phenomenal universal life sales. It’s a bubble. Our sales in national accounts during the first six months of 2011 doubled compared to the first six months of 2010, across all products. We can not maintain that performance throughout the year,” he concludes.

Whole life stands out

Sun Life is also seeing strong whole life sales in its national accounts. This is what the insurer wanted to achieve when it reintroduced its participating whole life product a few years ago.” Whole life went from nil to very strong sales in our national accounts,” comments Mr. Vigneault. Sun Life Financial intends to maintain this focus on whole life in the national account channel.

Investor Economics has also noticed a trend towards whole life in the national accounts channel. In 2010, sales of whole life accounted for 22% of total sales in national accounts, and they accounted for 21% the previous year. National accounts brought in $44.8 million of whole life sales in 2010, an increase of 22% over the previous year.

Among his company’s main competitors in the national account channel, Mr. Vigneault counts Canada Life and Manulife Financial.

He says that Sun Life serves the major Canadian banks through national accounts, as well as Desjardins Securities and Assante. He also points out that Sun Life has an inter-corporate agreement with Investors Group that is similar to a national account.

Vice president and managing director of BMO Nesbitt Burns, Gérard Taillon is also president of BMO Nesbitt Burns Financial Services, BMO’s national account. Mr. Taillon expects the trend toward integrated insurance planning to continue, noting that it is easier to manage a private wealth management client when all of his needs can be met in the same place.

BMO Nesbitt Burns Financial Services has forty exclusive insurance advisors across the country, notes Mr. Taillon. He says the company only allows dual licensing for segregated funds, and points out that insurance sales go through the firm’s insurance specialists after investment advisors have referred their customers to them. In its insurance activities, the Nesbitt Burns national account is supplied by BMO Life Insurance, Manulife Financial, Sun Life and Industrial Alliance.

Anatomy of a national account

While it is often categorized as a managing general agent, the national account is not actually one, says Mr. Vigneault of Sun Life. In a national account, the insurer only deals with the investment dealer. “The dealer is the one who signs the contract with the insurance advisors and supervises them,” he explains. In a national account, the client’s file belongs to the dealer rather than the advisor, he adds.

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