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Employee Group Benefit Specialists
Personal Insurance Products - Changes are coming
I’m writing this article in the hopes that Canadians will wake up to the changes that are coming. Life insurance has been around in one form or another forever but how will it look in the future? It is my goal to get you to look at dealing with your estate plan and long range life insurance needs today.
For the past four years the insurance industry has been going through a period of change that is radically eroding many of the guarantees that Canadians, until now, have taken for granted. Already a number of the larger insurance carriers are taking a number of guaranteed products off the shelf.
History in the making:
In the fall of 2008 markets fell all over the world. In a matter of days, ten years of market growth was wiped out. At the heart of the matter was liquidity. Did banks and governments have the money on hand to meet their current and future obligations? It became clear that they did not. In that instant the world changed. New rules were soon implemented which demanded that all financial institutions across North America carry larger reserves.
It meant life insurance companies were now having to put more money away in low yield investments creating an almost lose-lose situation for all insurance carriers. The result was a change in how life companies viewed long term products like Term to 100 and other permanent products. In some cases the changes were dramatic as in the case of RBC which stopped selling long term insurance all together. Other carriers reduced the type of products they sell to the consumer or increased the pricing to the point that the cost is now starting to be ridiculously over-priced. And it is just going to get worse.
Almost every carrier on the market will have raised its rates three times in the last two years. If this was gasoline, consumers would be demanding someone’s head. But quietly the insurance industry has been increasing their rates with very little notice by the consumer.
So where are we heading: I believe in the next few years long term life insurance will simply out-price itself. Once that happens the insurance companies will take this guaranteed product off the market and the only long term insurance you will be able to buy is Annual Renewable Term, a product that is both expensive and complicated to maintain.
If you believe I’m overstating the situation think again. In the United States today long term insurance such as T-100 is a product of the past. In almost every part of the USA, you cannot purchase this product.
My recommendation is simple. If you have an estate problem or an insurance need that requires a long term insurance product to solve the problem, today is the day to deal with it.