March 1, 2018 07:00
Cedric Thibault, Nathalie Tremblay and Claudine Cloutier
Desjardins financial Security (DFS), will withdraw the products of individual self-insurance long-term care June 15, 2018. This withdrawal and that of other players in the market, such as Manulife, are derived in major part of the withdrawal of Munich Re as a reinsurer.
This niche stagnated, despite more than 20 years of promotion of the product in Canada, has explained in interview to the Newspaper of the insurance Cedric Thibault, senior director, business development, reinsurance, individual, Munich Re. «The long-term care insurance accounted for less than 1 % of insurance sales people in Canada. The sales were not at the rendezvous. Their growth remained low, as the interest of the sales force. «
It is not a repudiation of Munich Re to the suitability of the product, ensures Mr. Thibault. The reinsurer has rather decided to concentrate its efforts towards research and development. Including predictive modeling, risk selection, automated, big-data, in particular.
The withdrawal of Canada is not a question of bad experience. It was also stressed that the u.s. market for long-term care insurance, in which Munich Re continues to reinsure new business, too, has its problems, despite high volume sales.
The 2nd largest player leaves
Desjardins leaves the market when he was the second best seller. The sales were not, however, quite robust to the taste of the insurer.
Nathalie Tremblay, the head of life insurance products and living benefits of DSF, however, specifies that the withdrawal of Munich Re as a reinsurer, is what has tipped the balance in the end. She adds that the insurer had considered other avenues before retiring.
«We thought to bring the pension of the product of 10 000 $ to 5 000 $ per month. Except that our actuaries have told us that without reinsurance, there is more risk management external. Desjardins would have been able to fill this gap, but the reinsurer also provides the research and development. For long-term care, and only have a short history in Canada, it is very important. «
The likelihood that a person will lose his autonomy in his life is part of the experience that is essential to the pricing of this product. «The incidence rates are based on the u.s. data adapted to the canadian market. For example, the average age of loss of autonomy has been fixed at 78 years, according to a u.s. study credible «
Expertise too heavy to fill
Desjardins used tables of Munich Re on the probability of loss of autonomy of a population that is insurable. «They allow our actuaries to price the product. Without these tables, the insurer must itself take charge of the creating, » said Ms. Tremblay. In addition to incidence rates, the reinsurer also provides expertise in the selection of risks, requirements and guidelines, » explains the head of health insurance products.
She added that sales of long term care insurance (DFS had declined by 27 % since the beginning of the year. «We would have been able to invest a lot of resources in financial risk management, research and development and risk selection, but the sales were not there. Munich Re has withdrawn due to lack of volume and the other insurers came to the same conclusion «.
FSD will continue to maintain its presence in this market through its hybrid product Life Option Autonomy, which allows the insured person in loss of autonomy to reach a monthly benefit equal to 1 % of the amount of life insurance. Ms. Tremblay is also a reminder that its product is critical illness insurance individual has protection in the event of loss of autonomy, as is the case with several other products of serious diseases in the market.
Question of price
In an interview with the Journal of insurance, Claudine Cloutier, vice-president of sales and senior manager, living benefits, Group Cloutier, expressed little surprise at this decision. She reminds us that with the removal of Desjardins, it will remain as stand-alone products of long-term care offered in Canada than those of Québec Blue Cross, Sun Life Financial and The Capital.
She points out that given the low volume of sale, insurers have realized that the product could not be sustainable in the long term, without increasing the price. A difficult choice for the insurers, whose sales were not at the rendez-vous in Canada, unlike the United States, where it is a product that is commonly sold. She points out that the premiums of products are not warranties and that insurers have already increased in the past.
Ms. Cloutier continues to believe in the importance of the insurance of long-term care. The focus is on products that combine this protection to another protection of living benefits. It invites counsellors to offer a hybrid product if they are able to do so.
The combined products, the base of which is a disability insurance allows the insured converts his protection in long-term care insurance, when he reaches 65 years of age. RBC and Manulife offer, » said Ms. Cloutier. Desjardins has also announced its intention to continue the sales of its hybrid product that combines life insurance and long-term care, she says.
A product unknown
It also refers to a product that infringed, which is a great alternative : a Tangible, Blue Cross. «It automatically provides a transformation from disability insurance to long term care insurance at age 65, the insured and the insured no longer has to pay premiums by the result «, said Ms. Cloutier.