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July 2015 Canada Life: Term

Canada Life is the largest group life insurer in the UK and a major group risk player and it has introduced this new plan to consciously grow the group life market. To do that, the plan itself has been designed to offer simple cover that is cheap and easy to buy.

The particular opportunity Canada Life is looking to capitalise on is pensions auto-enrolment, which is now up and running for larger firms and is currently being rolled out to SMEs too. So this plan offers simple to buy group life insurance for firms with 2-50 employees.

Using the CLASS platform, the employee’s basic pension data - including name, sex, date of birth and salary - is used to automatically calculate the cost of providing four cover levels. They are 1x or 2x salary plus £25K and £50K of cover. Other quotes are also available on request, but having four commonly chosen options will give a good basis for most employers to consider.

The minimum annual premium for a scheme is £480 and premiums should qualify to be set against tax. Cover is worldwide and the maximum catastrophe cover (to cover single events such as a 9/11 type occurrence) is £5 million. Premium rates are guaranteed for three years and there is no medical underwriting. Cover can last up to the employee’s retirement age. However, there is no continuation option so cover ceases on moving employer or on retirement. Cover can increase in line with the employee’s salary if selected. An employer master trust ensures all policies are written in trust and so all benefits fall outside the employee’s estate.

Additional benefits include a bereavement helpline and face-to-face counselling, a probate helpline and a nomination of wish form can help ensure benefits are paid to the right people.

Comment: This is term insurance that is cheap and easy to buy, with no underwriting and even pre-existing conditions covered. It is aimed at SMEs (which make up a huge part of the UK’s employer base) and capitalises on the pensions auto-enrolment process, which it uses as a catalyst to encourage protection insurance sales too.

Swiss Re estimates that around 9m people have group life cover and Canada Life has set itself the modest target of increasing that by just 1%. But work the numbers through and that adds up to 90,000 new lives a year, which is a significant figure (for comparison, Swiss Re tells us that around 1.3m individual term sales of all types were sold last year).

So, full marks for initiative and for making this simple plan so easy to buy that it should be hard for many firms to say ‘no’. One slight criticism – we have long promoted the word ‘insurance’ as the generic description for protection cover. You can make an argument that ‘assurance’ is the correct term though. We have always thought assurance was all about events that would rather than might happen, whereas insurance is about things that might happen. If you accept that definition, then assurance can be used for products such as whole life and endowment plans, but with term cover, while death is inevitable, it is not inevitable during the term, of the policy so ‘assurance’ doesn’t really work. Which is a long-winded way of saying we think all such cover should simply be referred to as ‘insurance’.

There is a more important reason for suggesting that: consumers (employers as well as individuals) know what the word ‘insurance’ means, but they don’t understand what ‘assurance’ is.

Moreover, when we are trying to build customer trust and understanding, why use a series of words that all mean the same thing? Isn’t it better to unite behind a single word to describe what it is we are selling? Sorry to labour the point – and our criticism is of a great many insurers, not just Canada Life – but such detail is important if we want to win back trust and to avoid being seen as weasel worders and hiding behind smallprint.

Back to this plan: we like it!

Plus points: Cheap term that is easy to buy and run; Capitalises on the pensions auto-enrolment opportunity to encourage firms to look at protection too; Master trust means every policy is written in trust (unlike most individual term insurance plans).

Not so plus points: Some cover limits compared to traditional group or individual term plans; No continuation option; Could do with more third party or additional benefits; We prefer the word ‘insurance’ to the outdated and confusing ‘assurance’.

Website: http://www.canadalife.co.uk.

Rating (max 10): Innovation: 9. Overall:  9. Platinum

Tags: Term, Canada Life