Canada Life has enhanced its lineup of core participating whole life insurance products, with tweaks made to two existing products and one new product added to the mix.
This is the first time Canada Life has updated its par products in more than six years, said Vikram Malik, senior vice-president of product strategy and solutions at Canada Life.
“Par whole life has continued to dominate a vast majority of life insurance sales in the industry,” Malik said in an interview. “We really took a step back to think about how our products are suiting different client needs.”
The firm said it made updates to Wealth Achiever and Estate Achiever based on advisor feedback.
Wealth Achiever’s minimum face amount was lowered to $25,000 from $100,000 to make it more accessible at the lower end of the market, Malik said, while the cash value of Estate Achiever policies has been optimized for long-term growth, so it has a higher value at death.
Canada Life also rolled out a new product, Balance Achiever, which is geared toward clients looking for long-term growth who might still need access to the policy’s cash value in an emergency, such as job loss. Canada Life developed the product after some distributors and advisors said that Estate Achiever’s cash value was too low, Malik said.
Premiums have gone up in general, he said: “A big portion of the premium is higher because of the investment you’re making in the long-term value of the product, which ultimately gets returned in the form of dividends.”
As well, loading for paid-up additions fell to 7% from 8%, so the payment buys more cash value and the dividend scale interest rate increased to 6% from 5.75%. These changes support long-term outcomes for policyholders, Malik said.
In addition to the product announcements, the insurer increased commissions beyond year 10 and lengthened its par chargeback schedule to better match each product’s lapse risk.
The commission rate from year 10 onwards went up to 2% from 1% to better compensate advisors for servicing in-force policies. Still, first-year commissions for pay to 100 and 20-pay policies remain heaped at 50%.
Earlier this year, Sun Life introduced more level agent compensation for specific participating whole life policies by reducing first-year commissions and increasing compensation in later years.
Canada Life had considered levelized compensation but decided that the current approach was the best way to protect policyholders’ long-term interests, Malik said. The insurer has no immediate plans to change the commission schedule for its other products.
The new par lineup also got an extended chargeback schedule. It previously had a uniform two-year chargeback schedule for all par products, which is now two years for Estate Achiever, three for Balanced Achiever and five for Wealth Achiever.
The industry’s simplified chargeback approach of using a two-year period regardless of account risk isn’t suitable, Malik said, as early value products like Wealth Achiever have a higher lapse risk than delayed value products like Estate Achiever.
“There’s heap compensation in the insurance industry. These chargebacks send a stronger message around alignment of incentives,” Malik said. “From an advisor’s standpoint, selling a product knowing there’s some risk with a five-year chargeback, you can stand behind the fact that incentives are aligned.”