When critical ill-ness insurance was introduced in Canada 13 years ago, reinsurance companies played a vital role in its development. With no experience in the market, Canadian insurers relied heavily on the reinsurers for their guidance and expertise.

The reinsurance companies, primarily Toronto-based Mercantile and General Reinsurance Co. of Canada Ltd. , provided insurers with assistance in the incidence rates, covered conditions, underwriting training, definitions, sales training, development of applications, additional policy wording, manuals and claims adjudication. Originally M&G helped create the market. Then Toronto-based Swiss Re Life & Health Canada came on strong (it has since exited CI), followed by Toronto-based Munich Reinsurance Co. of Canada.

Today, there are two reinsurance companies in the Canadian CI market: primary reinsurer Munich Re, and Optimum Reassurance Inc. of Toronto. They bring global experience, expertise and extensive background data and analysis to the table — all of which are essential to product development, pricing, sales, underwriting and claims.

While there has been some frustration within the reinsurer and insurance companies at the slow growth of sales and advisor acceptance, there’s a discernible feeling of optimism for the product’s future. The industry recognizes that the Canadian marketplace remains underserved and largely untapped. The companies say they are committed to rectifying the situation and to promoting CI to advisors and clients.

One of the biggest obstacles to growth of the CI business in Canada seems to be a reluctance among advisors to sell the product. “One of the main issues remains the limited number of advisors who are actively marketing and selling CI insurance,” says Hélène Michaud, director of marketing at Munich Re.

The industry estimates that only 15%-20% of advisors are actually selling CI insurance. The insurers are re-examining their methodologies for training and education — with the encouragement and support of the reinsurers.

“We need to encourage managing general agents and advisors to sell CI,” says Gary Mooney, vice president of business development at Optimum Re and president of actuarial and marketing consulting firm Actel Resources Inc. “Producers see something new and there’s a resistance to embracing it. There’s something new to learn, so there’s a loss of productivity. And there’s no significant pressure on advisors to get into this market.”

Tami Dietrich, manager of marketing services at Waterloo, Ont.-based Equitable Life Insurance Co. of Canada, acknowledges that getting advisors to buy into CI is a challenge. She points to the aging advisor population as a possible explanation: “Advisors tend to sell within their own demographic. With aging advisors selling to older clients, their clients may be less likely to qualify as they have too much his-tory.”

Look to younger clients, Dietrich advises. She suggests selling to clients who are at an age at which they are healthy and probably will qualify for CI.

That’s what the banks are doing. TD Canada Trust’s TD Insurance, in particular, is outselling the insurance industry when it comes to CI. The banks have a simplified product and are selling to a specific need: mortgages. It’s a market on which advisors and insurers have failed to capitalize.

The high premium costs also have affected sales and growth. The Canadian marketplace has fixated on continuing to offer guaranteed premiums. But it isn’t the only one. “In Britain, 80% of policies are fully guaranteed, usually for mortgages,” says Mooney. “Israel has fully guaranteed rates, which are mandated by law. And in Korea, Samsung Life has two million policies with guaranteed rates.”

With only Munich Re and Optimum Re agreeing to offer guaranteed rates, the opportunities are limited. And as long as advisors and insurers insist on the guarantees, and as long as they continue to rebuff guaranteed renewable plans, it is expected that no new reinsurers will enter the market.

There has been some concern voiced by advisors that having only two reinsurers underwriting CI reduces competitiveness and flexibility. The insurers disagree, saying they have the latitude to build products with varying features, riders and covered conditions. Software, marketing support and materials also can provide companies with recognition and presence, heightening their competitive advantage.

Insurance companies now realize that they haven’t treated CI as a start-up line or as a reason to initiate a conversation with clients. Instead, CI has been seen as an add-on product. Now insurers recognize they need to concentrate on sales training that is focused on identifying the clients’ needs rather than on selling product. By doing so, they believe, more advisors will sell CI and it will raise the public’s awareness of the product.

@page_break@“If producers are getting phone calls from clients asking about CI, then producers will get into production,” Mooney says. He reminds advisors that liability could be an issue for those who don’t discuss or offer CI to their clients.

“Advisors have a legal responsibility to tell all clients about CI insurance,” says Mark Halpern, a Top of the Table producer and principal of Illness Protection in Markham, Ont. Some industry experts speculate that regulators could step in and start mandating that CI be part of every needs analysis.

The reinsurers and insurance companies remain committed to selling CI insurance. Michaud points to Munich Re’s recently introduced MR Edge, a new online underwriting manual for life insurance, disability income insurance and CI, as evidence of the firm’s commitment to its clients.

“The CI manual was completely reviewed and updated to provide underwriters with a leading-edge tool to help speed up the underwriting process,” she says.

Underwriting remains a serious challenge for insurers; advisors say it is one reason they are reluctant to sell CI. With family history and personal medical history as necessary components of underwriting CI, it can take weeks for applications to go through the process.

“The disappointing thing about underwriting is that the industry hasn’t been able to solve the turnaround time problem,” Mooney says. “This can be helped by advisors making clients aware of the important role their physicians play in the underwriting process.”

The role of reinsurers will continue to evolve and grow with their clients (the insurers), as they work together to improve sales and market share. Their commitment is strong. Munich Re’s recent CI survey, which represented 97% of the individual CI market in Canada, found that insurers remain optimistic for the potential of CI.

Most insurance companies, including the reinsurers, foresee a slow, steady increase in sales. They expect that as new advisors enter the industry, they will sell CI to younger clients and embrace the product as an integral part of their practices. This is expected to result in the product gaining in popularity and public awareness. The companies also expect there will be a new focus on improving advisors’ knowledge.

Guaranteed premiums are probably here to stay for a while yet. The reinsurers and the insurers don’t rule out the possibility of future premium hikes. In fact, price increases are predicted as claims experience increases and understanding improves with regard to the incidence rates of covered conditions.

The new mantra across the industry seems to be: let’s get back to the basics.

“We need to return to simplicity,” says Alison Stemp, director of traditional markets at Unity Life of Canada, in Mississauga, Ont. “If we focus on a simplified approach and focus on the main issues, overall sales will have a slow increase.” IE