RBC is suspending new sales of its permanent insurance products effective June 23, 2012, citing the current economic and regulatory environment.
The decision comes on the heels of similar changes made by some insurance companies, and confirms a pattern of companies trying to de-risk their long-term offerings.
“All the insurance companies are under pressure because of the regulatory changes and the consistent low returns on fixed income,” says Jason Pereira, Financial Consultant, IPC Investment Corporation.
This is the first time a company has decided to discontinue selling permanent insurance to new clients.
Byren Innes, senior vice-president and director of NewLink Group Inc, says he’s not at all surprised by RBC’s decision, which only follows what’s been happening in the insurance industry for the past 20 months.
“This is the strongest statement any life insurance company has made on the state of the life and critical illness insurance in Canada,” he says. “I was anticipating this would happen. This is the first time we’re seeing critical illness products that have long-term premiums being withdrawn. It’s a matter of time before we see price increases or other changes or withdrawals by other carriers.”
According to a document obtained by Advisor.ca, RBC indicates it will pull the following products:
RBC Universal Life
Long Term Care Insurance Plan
Critical Illness Recovery Plan Term 100
Critical Illness Recovery Plan Term 75 paid up at 65
Critical Illness Recovery Plan – Return of Premium on Surrender/Expiry riders
Term 100, Universal Life and Long Term Care will continue to be available for conversion.
RBC was not immediately available for comment.
Manulife has also announced it will raise premiums on life and health insurance as of June 16.