INSURANCE COMPANIES TARGET MIDDLE-INCOME MARKET WITH LESS COMPLEX UNIVERSAL LIFE PRODUCTS
Marie-Josee Boucher - "Life Insurance Journal"

Universal life insurance is slimming down. A growing number of insurers are launching "light" versions of their universal life insurance products to reach a larger, middle market clientele. The days when universal life insurance was reserved for a high net value consumers are over.

The introduction of pared down universal life insurance (UL) products such as Maritime Life's Essential Solutions in 2003 and RBC Insurance's Foundational Life in February 2004, signal that the tides have turned. Today, insurers are pinning their hopes on UL products with fewer investment options and/or without bonuses.

"It's the next big trend", affirmed Jean-Francois Leroux, assistant vice-president and actuarial consultant at Manulife Financial, at a recent forum for advisors. Bonuses make the product more complex, which may spook some customers, he explained.

Independent actuary Ashley Crozier confirmed this trend. He said that insurers are embracing simplicity to satisfy advisors and clients alike.

Mr. Crozier agreed that the bonus can weigh down UL. "The bonus offers a good outlook when it materializes. In theory, the insured should receive a bonus cheque each year, but in reality there are some years when they don't get it. Eliminating these bonuses inevitably makes the product simpler."

When the bonus is not disbursed on schedule, the projected returns may be off. Customers then conclude that there is not enough transparency.