Persistent low interest rates continue to cause problems for insurance companies, with four providers now saying they’ll make changes to products designed to provide guaranteed returns or level premium costs.
“Companies continue to fine-tune their pricing in light of the continued low interest rate environment,” says Byren Innes, senior vice president and director of NewLink Group.
“The current environment is very, very tough for permanent life insurance products or products with long term guarantees; and it won’t get better until we see a return to higher fixed income returns.”
Innes adds carriers are working hard to strike the tough balance between rates and price, policy values and features, guarantees, compensation to distributors and profits.
“Unfortunately these rate levels are the new norm,” he says.
The announced changes take place late this year or early in 2013, according to memos issued by the companies.
Equitable raises premiums
Equitable Life issued an outline of premium changes to three of its products:
- Equation Generation IV universal life will see increased minimum premium rates and Cost of Insurance (COI) charges for Level COI;
- EquiLife Limited Pay universal life will see increased premium rates and COI charges for all COI types; and
- EquiLiving Critical Illness Insurance will see increased premium rates for Level to age 100 and Level to age 75 critical illness plans, Return of Premium on Surrender/Expiry Riders (ROPS), and Return of Premium on Death Riders (ROPD).
“Since interest rate assumptions are a key element in the pricing of life insurance products with long-term investment guarantees and guaranteed premiums,” notes Equitable’s memo, “we are making changes to our universal life and critical illness products to ensure their continued viability.”
Canada Life adjusts dividend scale interest rate
Canada Life, meanwhile, made adjustments to the dividend scale interest rate – the rate used to calculate the investment component of participating policy owner dividends. It will decrease from 6.96% to 6.50% for Canada Life open and closed block policies effective January 1, 2013.
In its memo, the company notes, “The investment environment continues to be challenging because of the volatile equity markets and low interest rates. With yields at historical lows, the Canada Life dividend scale interest rate is very competitive relative to fixed-income investments available in today’s marketplace.”
Empire Life pares shelf; raises rates; drops comp
Citing market conditions, Empire Life has reduced its offerings and raised rates on some insurance products.
As of November 24, 2012, the insurer is making the following changes to its guaranteed Level COI plans:
- 20 Pay Solution will no longer be available
- Rates will rise on Solution 100 (guaranteed whole life insurance) plans by 21%, on average
- Level COI rates will rise within Trilogy and Trilogy Plus (UL) plans by 20% on average
- First Year Commission based on target premium will drop to 50% for the Level cost of insurance for both Trilogy and Trilogy Plus. The same commission for the T10 cost of insurance option will increase to 45%.
Rate increases will hit younger clients harder.
Existing business written and in head office by 4 pm EST on Friday, November 23, 2012 will be eligible for existing plans, rates and compensation. Any applications or requests to reopen an application that has been closed must be received in by the same time.
Desjardins sets earlier deadline for Helios deposits
Back in April, Desjardins Financial Security announced it was suspending sales of version 2 of its Helios GMWB product, effective April 27, 2012.
The company announced yesterday it will only accept additional deposits until 4 pm EST on December 21, 2012, instead of December 31 as previously announced, in order to settle all trades before the year-end closing date.
A $25,000 limit applies to additional deposits made after April 27, 2012.