Manulife Financial is releasing a new UL product next month, and says it has the industry’s lowest average investment fees.
The new product, called Manulife UL, “represents a back-to-basics approach to life insurance,” says David Baker, AVP of insurance products for retail markets.
It eliminates life and policy fees, wealth enhancers and the bonus/no bonus structure. Its contracts are written in plainer language.
Baker calls the bonus structure “a bit of a shell game, because to access an account with a bonus, you had to pay a higher UL management fee. We’re trying to move away from that.”
Part of that move involves lowering MERs.
“There’s been reduction of fees in the wealth space, and that hasn’t always translated through to those same accounts in insurance portfolios,” he says. “So this is our endeavour to pass some of that through.”
Manulife UL comes in four versions:
1. Two types of level cost of insurance (LCOI) policies, aimed at policyholders aged 45 to 85
2. Two types of yearly renewable term (YRT) policies, aimed at policyholders aged 0 to 60
For LCOI and YRT, clients choose between two investment options:
1. A single balanced investment account managed by the insurer, similar to whole life; or
2. Managed and indexed accounts that clients choose, which are available on the existing UL chassis.
For the balanced account, the MER is 1%, which Manulife says is the lowest in the industry. The insurer is also offering a 1% rate enhancement on managed equity accounts, and a 0.25% rate enhancement on managed bond accounts.
This is possible partly because Manulife UL has fewer features and options than traditional UL. “We’ve reduced the complexity of the plan,” says Baker, “[so] effectively everybody is getting the benefit of lower management fees or the rate enhancements. The performance of the plan is higher.”
The product will be available May 26, 2014, and is meant to replace the insurer’s flagship UL product, the 20-year-old InnoVision. “We’re looking at removing InnoVision for sale in the fall of this year,” Baker says, adding the firm will continue to support existing policies. The company will publish detailed transition rules should clients wish to switch to Manulife UL.
Advisor commission changes
The insurer has also changed its commission structure for Manulife UL “to provide advisors with incentive to service the business long-term,” says Baker.
Since most policyholders pay premiums over the full life of the policy, “we’ll continue to pay the deposit commission as long as people are making deposits.”
As well, YRT insurance tends to cost less than LCOI, which means lower compensation. That “can serve as a disincentive to advisors” to sell YRT, Baker says. The new product will bring YRT compensation “closer to what it would be on a level cost plan. We’re paying effectively first-year commission for the first two years, and we’ve got a tiered system whereby the commission isn’t solely based on the cost of the insurance, but on a targeted premium.”
Clients can add a Child Protection Rider and a Term Insurance Rider. There are also single life and joint last-to-die cost-to-last-death coverage types.