"We've been attaining a yearly increase of 5.5% on our investments."
Canada Life, a notable player in the life insurance industry, is making waves by maintaining a full contribution guarantee for its Unitised-With-Profits (UWP) fund. This contrasts with many other insurers who are scaling back guarantees to a range between 60% and 90% due to risk management and cost pressures.
Industry trends are leaning towards partial guarantees as a means to balance guarantee costs and product pricing. The increased risk, capital requirements, and low interest rate environments pose challenges for full guarantees. However, Canada Life continues to offer full guarantees as a unique selling point, appealing to policyholders seeking maximum security, despite the higher cost and capital burden for insurers.
Regulatory and market pressures also play a role in this development. Regulators' focus on consumer protection and solvency standards may influence the design and marketing of guarantees, encouraging transparent communication about guarantee levels. As demographics evolve, and risks like dementia grow, insurers may innovate guarantees and product features to balance affordability with sufficient security.
The coexistence of partial and full guarantees suggests a market segmented by risk tolerance and price sensitivity. Some consumers opt for lower guarantees for lower premiums, while others are willing to pay for full guarantees.
Canada Life's UWP fund guarantee value is reviewed and adjusted regularly to maintain its level. The smoothed value development method used in the UWP fund takes into account the actual value development of the fund, as well as market developments, such as the development of capital markets. This method helps to mitigate potential negative value changes at the end of the term.
Customers of Canada Life's UWP fund are guaranteed not only 100 percent of their contributions at retirement, but also an average annual minimum value increase of 1 percent. This annual minimum value increase is a feature that sets Canada Life apart from some other insurers.
Igor Radović, a prominent figure in the industry, predicts that given the current interest rate environment, the guarantee level on the market will decrease. However, he also states that final guarantees apply at the start of retirement, allowing for investment freedom during the savings phase, and that customers participate in positive capital market results, receiving the fund value if there are good fund results.
In summary, the life insurance guarantee products market will likely feature a mix of mostly partial guarantees in the 60-90% range with some full guarantee exceptions like Canada Life. This assessment aligns with industry observations about shifting guarantee structures to contain costs and manage risks. However, detailed market forecasts specific to guarantee levels in life insurance products beyond current trends are limited in the available search results.
- In contrast to many other insurers who are reducing guarantee levels to a range between 60% and 90%, Canada Life continues to offer full guarantees to its customers, positioning itself as an attractive choice for individuals seeking maximum security in their personal-finance and investing.
- Igor Radović, an industry expert, suggests that the guarantee level on the market will likely decrease due to the current interest rate environment, but notes that final guarantees provided by companies like Canada Life allow for investment freedom during the savings phase and participation in positive capital market results.
