It wasn’t so long ago that CNA Canada revolutionized the term insurance market with its low prices and automated underwriting. Now again it is the smaller players pushing the term market forward with innovative products.

Although still on the drawing board, Unity Life is working on a new hybrid term insurance product that would start off as term only, and then it would mix in other insurance options such as critical illness (CI) and long-term care (LTC). The options and balance of the mix would depend on the policyholder’s requirements.

A second company, Assumption Life, is further along with its new product. It now offers a mortgage linked term product with critical illness and disability riders.

The two innovations come following a staid year with few changes.

Hybrid term

Van Campbell, president of the company, says Unity is working on a new hybrid term insurance product that would transform to track individual life cycles. The principle is one where there would be “some recognition for what [policyholders] have already spent,” he says.

“I don’t want to call it cash value,” says Mr. Campbell. “I want to call it sort of a conversion capability where you have earned some rights that you have built up inside the term premiums that you’ve paid. You can now move those on into the next phase of your life, either to a whole life product, or universal life, or a critical illness product. Then have the next phase, which is when you are getting through the working years and starting to worry about long-term care.”

It has never been done before, Mr. Campbell says, but it is a product that just makes sense. The challenge will be to convince brokers of that, he adds. “We have always taken a very discreet approach to any given sort of product. We have put a box around them and sold them in specific situations, but we have never linked them to that emergence of your life cycle.”

There are a couple of ways it might work, according to Mr. Campbell. One is that different portions of the premium would go to each of the insurance types selected. The proportion of premium going to a particular insurance type would depend on the demands of the client. The challenge will be to keep the premium reasonable in the early years when the demand for higher priced products is lower and the focus is on temporary insurance.

Another way it might work is to have a kind of rollover from one product to the next, but with a portion of the previously paid premium being carried forward to help lower the cost of the next product.

The product is still far from seeing the day, according to Tony Poole, senior vice-president for sales and marketing at Unity, but that day is definitely coming. Even as he acknowledges that there are major issues to work out still, he reminds critics that a lot of brokers thought universal life insurance was a pipe dream when it was first introduced.

“The mistake companies make,” he says “is to stop thinking outside the box.”

Group-like features

Assumption Life is unveiling a mortgage term-like insurance product, called FlexOptions, which brings group insurance features to stand alone policies. The product has a base of convertible decreasing term life insurance that can cover 15, 20, or 25 years, and comes with disability and CI riders available.

Clients can get riders up to $200,000 without a medical exam, and have guaranteed level premiums. That is the sort of limit seen in the group insurance usually sold by banks, but it has never been done for individuals, says Joël Drolet, director of sales for brokerage and group insurance.

Sold entirely online, FlexOptions can be bought in any amount, so it can be used to manage a number of financial risks at once. If for example a client has a $100,000 mortgage, a $25,000 loan, and a $20,000 credit card debt, they could purchase a $145,000 term policy and have the coverage amount diminish in step with the debt repayments.

The only time a client will be asked to show proof of mortgage will be if they take the disability rider. Neither the term coverage nor the CI rider requires proof of mortgage. That means they could be used to meet different needs.

Another aspect that lets the product compete with group insurance is price. Mr. Drolet says that, for example, a 40-year-old male non-smoker buying $150,000 worth of term insurance coupled with $150,000 CI coverage and disability insurance to cover $750 per month would pay just $98.51 per month.

The amount of coverage falls to match a mortgage loan at eight per cent interest. As long as one year has passed since the policy started, and no less than five years remain, the client will also have the option of converting the policy to permanent life insurance.

Though traditionally based primarily in Ontario, Quebec, and Atlantic Canada, Assumption has been licensed for sales in Alberta since December and is awaiting approval in British Columbia. If all goes well the company will seek licensing in the remaining Western provinces within the next few months.

For the moment, the company will try to meter its pace by only working with 10 to 15 managing general agents per province. Assumption is a small company with just 85,000 policies in force and annual premiums of about $20 million, so it is being careful not to take on too much risk, says Mr. Drolet.

The coming year will be busy for the company if current interest in FlexOptions is any indication. “The telephone won’t stop ringing,” says Mr. Drolet. “People are calling from everywhere.”