The Canadian life and health insurance industry is witnessing some dramatic developments. Barely a day after Standard Life’s announcement that it would discontinue its individual life insurance and critical illness products, there is word that Sun Life Financial has dismantled its long term care insurance (LTCI) specialist model.
“After carefully reviewing the existing LTCI specialist model, we have determined that the current LTCI specialist model does not support our long-term vision and strategy,” the company said in a message to MGAs. “As a result, we have made the decision to end the LTCI specialist model and LTCI specialist contracts.
“All LTCI referral addendums signed by advisors and firms are officially terminated effective December 28, 2011.”
Sun Life will retain offered “a small number of successful specialists,” who will be available exclusively to the company’s career force of advisors. The company says it will transition to a wholesaling model based on those in place for other product lines.
“This was arguably the best model for selling LTC in Canada and got SunLife a major market share,” says Byren Innes, senior vice-president and director of NewLink Group Inc.
The LTCI specialist program provided advisors with access to experts on the product who could help smooth the underwriting process. The specialists were also available to help clients understand and quantify their need for LTCI.
“They can work through the entire underwriting process for you, and if you prefer, even deliver the policy once issued,” a Sun Life advisor support document explained earlier this year. “They help you to earn commission on LTCI coverage while staying focused on your other lines of business.”
When contacted Sun Life confirmed the change to its distribution system, but affirmed the importance of LTCI to its business.
“We did make some changes, but all we did was refine the support model to operate more efficiently in today’s economic climate,” said Frank Switzer, vice-president, corporate communications at Sun Life Financial. “LTCI remains an important product in Sun Life’s portfolio and we fully expect to maintain and grow our leadership position in this product.”
On being asked what he meant by “refined the support model”, Switzer said that “a handful of people were let go.”
In a message sent to advisors earlier in November, Sun Life said: “We’re making a new investment in the growth of this business by creating a smaller elite group of LTCI specialists who will be equipped to succeed in the environment that has emerged.”
Carriers are focusing on reducing expenses and enhancing profitability and given the tough economic environment companies will continue to look for opportunities to do so, said Innes.
“You cut fat, and then unfortunately after a while you have to cut muscle and eventually you get to bone,” Innes said. “We’re not out of the economic problems globally, so companies are getting out of capital intensive business.”
Reducing costs, increasing price and boosting profits will all prove to be wise decisions in the long run and will strengthen to companies and the industry, he added.
This, he said, has been going on for quite some time and that Standard Life’s announcement yesterday wasn’t really a surprise to him.
“The death actually occurred six years ago, they just finally got around to writing the obituary now,” he said. “Standard Life made a big decision about 5-6 years ago to really focus on their investment business in Canada and to really back off on their life insurance business [and decided to] drop a lot of their life insurance wholesalers in Canada and kept the investment wholesalers.”