Insurance products that combine life and living benefits insurance are gaining a foothold in Canada.

Earlier this summer, Toronto-based Manulife Financial Corp. launched Synergy, the insurance industry’s first single-premium product that rolls critical illness, disability insurance and life insurance into one package.

More combination products are expected to follow, as insurers have discovered that multi-faceted products are the most effective way to expand health insurance product sales among middle-market clients because of these products’ affordability and broad coverage.

“It’s the ‘make it a combo’ concept, like what you see at McDonalds,” Peter Wouters, director of tax and estate planning and retail insurance products and marketing for Kingston, Ont.-based Empire Life Insurance Co. “Like [in] other industries, clients are [more] likely to buy when a product comes as a part of a package.”

In the U.S., sales of combination insurance products jumped by 62% in 2010 to US$1.2 billion, according to LIMRA, a subsidiary of Windsor, Conn.-based LL Global Inc. , a global life and health industry association that provides operations and management training and education to insurers.

And although Manulife may be the only company in Canada able to launch three-in-one combination coverage because of the sheer number of products on its shelf, adds Wouters, other insurers in Canada are likely to unveil two-in-one products.

Toronto-based Sun Life Fin-ancial Inc. is already in the market with its Sun CI with long-term care conversion product, which it introduced earlier this year.

“Whether it’s disability with life, or CI and disability,” Wouters says, “the more combination solutions an insurer can offer, the broader market it can reach.”

After conducting client studies, Manulife had found that although most Canadians have life insurance, they don’t have CI or DI. And although many clients understand the need for broader coverage, they won’t necessarily buy three separate, stand-alone policies.

Manulife surveyed 1,000 Canadian homeowners between the ages of 30 and 50 with incomes ranging between $50,000 and $150,000 in its most recent online poll. Among the survey respondents, only 8% had all three types of coverage; less than 60% had a life insurance policy; 21% had disability coverage; and 13% had CI coverage.

Manulife’s Synergy product was born out of the need to streamline coverage and package it as an all-in-one solution, says Steven Parker, Manulife’s assistant vice president of insurance products: “Prior to Synergy, the Canadian marketplace didn’t have a packaged all-in-one solution to cover the everyday risks.”

Adds Parker: “We also wanted to make it easier for advisors to present that product to clients where they only need to have one risk-management conversation, one illustration of how the product works. And have one application to fill out vs having to go through that process three times for three separate types of coverage.”@page_break@In the Synergy program, clients between the ages of 18 and 50 can purchase coverage of $100,000-$500,000 that pays out a benefit until age 65. This product covers all three types of insurance needs in allocated amounts: CI makes up a maximum of 25% of the pool; monthly DI payments represent 0.5% of the pool; and the remaining portion is the life insurance component.

For example, if a 30-year-old, non-smoking male with $250,000 coverage under Synergy gets ill at age 50 and is approved for a CI claim, he will receive a benefit of $62,500, leaving $187,500 in the pot for life insurance and DI.

If clients require more life coverage, they can buy an additional term life rider for up to $2 million, which will give them $2.5 million in potential life coverage when buying a $500,000 policy (assuming they have not made any claims for CI or DI before purchasing the rider). However, this would not extend the CI or DI coverage in the original $500,000 pool.

One of Synergy’s main advantages, says Parker, is potential cost savings for the middle market. For example, the same non-smoking, male 30-year-old could save up to 34% on his premiums vs buying separate policies for CI, DI and life insurance.

From an advisor’s perspective, says George Hartman, president and CEO of Toronto-based Market Logics Inc. , combination products are easier to sell to clients because they open the door to talking about multiple insurance needs at once: “Combination products make it more convenient for advisors to address the multiple insurance needs a client has. Instead of having two or three conversations, they’re having one.”

Combination products also make it easier for you to educate your clients at a younger age about the various health-related insurance products they will need over the course of a lifetime, says David Baker, assistant vice president, individual health insurance, with Sun Life: “Advisors no longer have to wait until a client is in his or her 40s to talk about [LTC]. With the conversion option, [the advi-sor] can introduce LTC to a client in his or her 30s who is buying a CI policy.”

However, there are trade-offs with pooled insurance products that you should consider. One issue is that the list of medical conditions for which people can make a CI or DI claim may be shorter than it would be for a stand-alone policy, says Wouters: “In stand-alone policies, you will have [longer] lists for the types of conditions you can claim under; in pooled products, [product providers] hack it back.”

Limitations in combination products are precisely why advisors should not be married to a one-size-fits all solution, says Hartman — even if the conversation starts off that way.

“[Advisors] may use a combination product to start a conversation about risk,” he says. “But it’s important to remember that in complex cases, an individual solution may still be best.” IE