U.S. looks to Canada to develop critical illness insuranceBy Carine Sroujian | April 20 2009 02:11PM
The United States is learning from Canada when it comes to sales and product development of individual critical illness insurance, say experts in the U.S.
“Canada is six years ahead of the U.S. in both sales and product,” reveals Ken Smith, director of critical illness and disability income at Assurity Life Insurance Company in the U.S. “If you look at the shape the CI product has been taking in Canada, that’s a good indication of what’s going to happen in the U.S. in a few years.”
At the moment, Mr. Smith is working on developing critical illness insurance (CI) at Assurity.
“Mutual of Omaha (where Mr. Smith used to work) is the one company that had some success initially in selling the product in the U.S. market on an individual basis. A lot of the ideas that we used came from Canada. It helped move the product along,” says Mr. Smith.
Although he was a little hesitant to reveal his secret recipe for CI’s success, Mr. Smith says the smart companies in the U.S. will soon realize that following in Canada’s footsteps is the wisest step to take.
One of the advantages the U.S. has, says Mr. Smith, is that companies can learn from some of the mistakes that were made in Canada with the product and avoid repeating them.
“We’re basically in an infancy stage with CI in the States,” explains Pat Hennessy, U.S. accident and health sales and marketing leader at ERC. “And we can draw on expertise and avoid making mistakes by looking at what’s going on in Canada as well as the U.K.”
But unfortunately, not many companies have come to that realization yet. “It takes some patience for the product to be successful. What’s happened in the Canadian market is that the sales moved along very slowly initially and then right around 2000-2001, sales started to explode and the growth has been pretty dramatic over the last few years,” explains Mr. Smith.
Also, the return of premium in the Canadian market has had a positive impact on sales, he adds. “Some producers I know in Canada were kind of moaning a few years back about the cost of CI, and you bring the return of premium in and add premium to it, it’s more expensive, but all of a sudden from their perspective it’s a lot easier to sell.”
Lack of training
Mr. Hennessy says that overall, there is a lack of education on CI in the States. He explains that there are very few CI trainers in the U.S. and very few companies spending time educating their agencies and distribution force on the product.
“Canada has done a very good job of training their agents and really put together an awareness campaign surrounding this topic,” he expresses. “If the carriers in the U.S. do a good job of explaining how there is a gap within the U.S. medical system and how the average consumer, should they get a heart attack, stroke or cancer, is really going to be in dire financial trouble, will show that this product really fits a nice need.”
Mr. Smith agrees that it is an educational process for clients in both countries, and the key is for companies to invest money in the agents to train them to sell the product, and communicate the need of the product to clients.
Agents in the U.S. have product overload, says Mr. Hennessy. There are so many products that they are asked to sell, they cannot possibly be an expert in all of them.
“A lot of insurance agents who have been around a while, who have been very successful at selling either life or disability, or any other mainstream product, will go over and gravitate towards the products that they are at a comfort level with. Therefore, they are not really embracing the CI product and giving it the time and the attention needed in order to really make sure it takes off and becomes a core product like they’re used to,” he explains.
In the past, only the middle-tier companies were marketing CI. Now, there are a couple of large companies that have decided to offer the product, and Mr. Hennessy says that it is going to help bring a lot attention to CI.
“Now we’re seeing larger ones like Met Life and AIG that will be launching a CI product in the U.S. in 2004. Our hope is that once you have acceptance by the largest companies in the business, it will generate some momentum from the larger companies that are competing with them. Now all of a sudden they have an advantage, they have differentiated themselves from the rest and you’re going to see others that are going to try and catch up,” he adds.
Mr. Hennessy says he is hopeful that with the larger companies entering the CI market in 2004, the U.S. will see an uptake of CI sales and agents will start paying attention to this product.
Canada can however learn a thing or two from the U.S. when it comes to selling group CI, says Mr. Smith. “Worksite marketing (group insurance) has evolved much further than it has in Canada,” he reveals. Agents in the U.S. really take the time to introduce the product to the group of employees before meeting them individually and that really is the key, he adds.
Some of the reasons for this slow growth of CI in the States are the different issues that our neighbours in the South have to deal with.
“The big thing with companies in the U.S. right now is strategic direction and staying focused on a couple of products, and companies haven’t been as open in this market to look at new products as they were ten years ago,” asserts Mr. Smith.
He adds that Canadian companies also do not have to deal with the hardships that come with getting a new product approved.
“From a regulatory standpoint, we in the U.S. have more barriers to a company getting into a new product line than any other country around the world. Just the fact that you have to file with 51 regulatory authorities makes a company a little more weary about developing a new product and getting into it just because of the cost that’s involved,” he adds.
Mr. Hennessy agrees that the U.S. CI market has not taken off to the extent that the U.S. expected it to.
“The medical delivery system is different here in the States. If you have a CI need and are diagnosed with it in Canada, you get that lump sum money where you can come over to the States and get immediate medical treatment versus waiting. That’s a big advantage,” says Mr. Hennessy. “We have a different medical system down here. A lot of individuals falsely believe that somehow…their needs are going to be met.”