Renewal Reports

I think I have some of the best Renewal Reports around. I have never once run into a more detailed renewal report from another adivisor. I produce a 21 page reviwing past claims, future trends, and specifics of each group. This is all above and beyond the base report that the insurance companies always produce. I include industry news, health care surveys, taxation worksheets, important reminders and a wealth of other information.

Sample Renewal (PDF)
This is an actual renewal from this month, I have redacted the name of the client for obvious reasons.

Examples of inserts
Cost Saving Plan Design Tips
Health Care Trend Survey 2009
Benefits Plan Taxation


If you want MORE information in your renewal, so you can make better decisions regarding plan design, carrier, usage etc.; Give me a call

/sales pitch

I'm having a good day today

I just got a negotated renewal back from an insurance company (Sun Life) for one of my larger clients.

Current Premium $17,290.14 per month
Original Renewal $18,704.62 per month (8.2% increase)
Negotiated Premium $17,385.05 (0.5% increase)

Negotiated Savings $15,834.60 over the next year.

I love it when i can save my clients nearly SIXTEEN THOUSAND DOLLARS, it makes me feel all warm and fuzzy inside.

HST on Insurance and Investments

I just received an email from Advocis, the insurance and financial services association I'm a member of. The topic was on GST/HST Notice No. 250

CRA has indicated that trailer commissions, front-end
load commissions, deferred sales charges, commissions on various
insurance products and redemption fees paid by investors do not constitute a
supply of a financial service and will be subject to GST. It is not clear at this
point in time whether financial advisors will be required to register for GST
purposes and remit GST.

Currently the insurance and investment products are exempt from PST/GST/HST. Its been this way for years. In this latest notice CRA has indicated that they have decided to remove this exemption from certain policies. That means any new insurance or investment policies will now be GST-able or in BC HST-able. That means we have gone from no sales tax to 12% overnight. There is nothing in the notice which indicates who gets to deal with this change. Do the insurance companies take over the administration of remitting the tax? Does every advisor now need to register for GST/PST/HST? Unlike some products where the CRA says HST will actually lower prices because there will be a "flow-through" of PST that will not be the case with this change. There has never been GST or PST anywhere in the supply chain so we cannot pass along any savings. Furthermore, as well as the tax, there is going to be added cost in administration of these policies so base costs will be going up as well. 

I think this is a terrible idea, why would the CRA want to discourage people from investing and purchasing insurance? Last time I checked CRA makes buckets off taxes on investments.

CRA has provided some handy dandy examples of when the service would be deemed non-exempt. according to the example below. CRA doesn't clarify exactly how this will apply to real world commissions, does it impact the commissions paid to the MGA? what about overrides or bonuses?

Example 2
In the course of providing services to investors, an investment dealer arranges to purchase units of a mutual fund for an investor. A commission is paid to the investment dealer at the time the units are purchased. In addition, the investment dealer will receive a fee referred to as a "trailer commission or fee" from the fund manager. The prospectus describes these fees as being paid in recognition of the investment advice and ongoing administrative services rendered by the investment dealer to the investors. The “trailer commission or fee” is paid annually subsequent to the arrangement for the purchase of the units. The services provided by the investment dealer, including advice, arranging for the purchase of the units and on-going administrative services for which the investment dealer is paid the commission and subsequent fees would not be a supply of a financial service.

For example, If I were to invest $100,000 of your money in an RRSP, I would be paid a commission of approximately 3% or $3000 (for a back end load policy), however, the MGA I placed the business through would also get paid 2%, for a total of 5%. Now is the 3% taxable or the 5%? We are talking CRA here, so lets assume they are going to be greedy and they tax the 5% commission paid to the MGA and the advisor. In BC the HST will be 12% so we are looking at 12% HST on $5000 of total commission. That is $600 in new taxes you will have to pay. This new tax just cost you 60 base points of return.

Furthermore, CRA is proposing that these changes be effective Dec 14, 2009. a full three and a half months in the past!

Coming into force
These proposed amendments would apply to investment management services rendered under an agreement for a supply if any consideration for the supply becomes due or is paid without becoming due after December 14, 2009. They would also apply to an investment management service rendered under an agreement for a supply if all the consideration for the supply became due or was paid on or before December 14, 2009, unless the supplier did not, on or before that day, charge, collect or remit any amount as or on account of tax in respect of the supply or in respect of any other supply that includes an investment management service and that is made under the agreement.

This means every advisor or insurance company has to go back into their records, and somehow collect GST on past sales? lunacy!

More as this unfolds.

Please allow 6-8 weeks for delivery

I recently read somewhere (an now I have forgotten where, DOH) that it takes an average of 39 days to issue a life insurance policy from start to finish. That's a long time, and sadly I would say it is probably accurate, if a little on the optimistic side. I personally have two policies I have been working on for well over 6 months. One of which dates back to August 2009. In the good old days, or so I am told, it used to take a work week to get a policy issued.

Day 1: The advisor meets with the client and writes up the application.
Day 2: The application goes in the mail to the insurance company.
Day 3: The underwriter reviews the application and decides to issue or decline the policy.
Day 4: The policy goes back in the mail to the advisor
Day 5: The policy arrives on the advisors desk for delivery to the client.

These days things aren't so simple or so speedy. We have all sorts of things which add time, complexity and frustration to the process. The modern day time line looks something like this:

Day 1: The advisor meets with the client and writes up the application. The client forgot their cheque book, and since insurance companies no longer accept credit cards as payment no temporary insurance policy can be issued. The client really wants the temporary insurance so will get the advisor a cheque in the near future.

Day 6: The clients cheque arrives so the temporary insurance can be issued. The application is mailed to the Managing General Agency (MGA). The MGA acts as a middle man coordinating, problem solving and expediting between the advisors on the ground and the insurance company head office.

Day7: In the mail

Day 8: The application is received by the MGA, copied, sent to the insurance company

Day 9: In the mail

Day 8: The client completes the mandatory medical examination.

Day 14: The underwriter receives the application and the medical results. There is something missing, or a question, from the medical exam. An Attending Physicians Statement (APS) is ordered.

Day 16: The doctors office receives the information request and promptly ignores it for two weeks.

Day 30: The doctor finally completes the APS

Day 32: The Insurance Company receives the APS report from the doctor. In the meantime, the clients drivers license has expired and proof of the renewal needs to be provided.

Day 35: The advisor receives the new expiry date on the clients drivers license and sends it to the MGA.

Day 36: The MGA forwards the drivers license to the insurance company.

Day 38: The motor vehicle record search with the new drivers license shows a speeding ticket within the last 3 years, a motor vehicle questionnaire needs to be completed by the client. the Insurance company sends the request to the MGA.

Day 39: The MGA forwards the information to the advisor.

Day 40: The Advisor informs the client that a driving questionnaire needs to be completed. The client is on holidays for the next week, an appointment is scheduled for 9 days from today.


Day 49: The motor vehicle questionnaire is completed and forwarded to the MGA

Day 50: The MGA receives the questionnaire and forwards it to the insurance company.

Day 56: All the outstanding items are accounted for. The policy is approved and issued.

Day 58: The policy is printed in eastern Canada, it is mailed to the MGA.

Day 61: The policy is received by the MGA, they make a copy, add a pretty cover and forward it to the advisor.

Day 62: The policy arrives in the advisors office, the date of birth is incorrect. The policy is returned to the insurance company to be corrected.

Day 70: The correct policy is received by the advisor for delivery.

Day 72: The policy is delivered to the client.


I have had each and every one of the problems listed above happen, though not usually all on the same policy. The example above is exaggerated for comedic effect, but not by much. The system in place is so slow, chaotic and error prone it makes my head hurt at times. With MGAs, AGAs, different insurance offices and the like; the time it can take to get a policy issued can seem like eons. I know why they got rid of 5 year term, by the time the policies were issued, they had already expired. I harp on MGAs sometimes, but they do keep me on track and up to date on the progress of my clients applications. The insurance companies and MGAs aren't all to blame, I screw up sometimes too. My most recent disaster involved writing up an application with a client, only to find out that the paper form was out of date, and was invalid. a second appointment with the client had to be scheduled to go through the new app which I swear was exactly the same as the "old" one. How embarrassing.

So what can be done?

Every few year there seems to be a big push by one company or another to embrace electronic applications, but they always flop. Scanning and email are great for removing postal delays, but electronic signatures are still not accepted. The incredibly low rates for insurance we enjoy these days are due in part to extra diligence of the insurance companies. This extra diligence takes extra time, be it medical records or additional questionnaires. I have started the habit of sending two copies of everything, originals to the insurance company and a copy to the MGA. This adds time and effort on my end but has thus far improved my turnaround time slightly.

I honestly don't have an answer, problems occur all throughout the chain

• Advisor
• Client
• Courier
• MGA
• Doctors
• Insurance company
• Paramedical company
• Reinsurance companies

If there is anyone working in logistics at UPS or FedEX and you want to earn a bundle in consulting fees please help us fix our system, it's broken.

Critical Illness Insurance Stats

The below is copied verbatim from a stats package I recieved from Industrial Alliance Pacific on Critical Illness Insurance. I thought the page was very informative so I have simply posted it below. Original PDF is available here.

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Whether it’s cancer, heart disease, multiple sclerosis or stroke, it’s difficult to predict who will be affected by these diseases.

Statistics, however, have a lot to say about those who fall ill and can be a cause for concern.

• In 2007, 2,933 cancer cases were diagnosed each week
• 70% of cancer-related expenses result from indirect costs
• In Canada, one woman in nine will be stricken by breast cancer during their lifetime
• One in four Canadians will suffer heart disease during their lifetime
• One person in 20 will be the victim of a stroke
• 60% of strokes cause long-term disability

Luckily, statistics also show that medical advances and improved lifestyles are contributing to patient recovery from these and other illnesses in addition to helping people live longer lives.

• 55%* of people afflicted with cancer will recover
• 82% of people will survive their first heart attack
• 75% of people will survive their first stroke

* Statistics can be higher or lower depending on age, sex, and the type of cancer.
Sources: Canadian Cancer Society, Heart and Stroke Foundation of Canada

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TL;DR Critical Illness is Cancer Insurance.

Renewal maths

I was talking to a rep in another company about the Manulife renewals and they looked at the blog post. He commented that I had used very very simplified math to determine the renewal. This is true, I didn't feel like getting into the nitty gritty at the time of the post. We went back and forth on how their company actuaries price renewals and how I as the advocate of the client price renewals. We have some differences but here is the email exchange to clarify how we each do it.

I originally responded with a more detailed explanation of my process, and he then responded with his comments in red.

Company rep is in RED, I am in BLUE

More detail on the math I use for renewals

Incurred Loss Ratio = incurred claims / paid premium

Incurred Loss Ratio – TLR = over-under for the year.  

this one should actually be ILR / TLR = over/under for the year.  Again, it'll show us making more on the good years, losing more on the bad years. 

Manulife case I used in the blog

Incurred claims = 6583

Paid premium = 10411

ILR = 63.23%

ILR – TLR = over-under

63.23%-75% = -11.77%

So Manulife made profit of 11.77% this past year. The client overpaid, so they should get that back next year.  

Based solely on the 63.23% number, there's actually 15.7% "extra" in last year's premium if you go by ILR / TLR.  If last year's claims were 6583 with a 75% TLR, overall premium should have been $8,777 to hit the TLR, instead of 10,411.  (10,411 - 8,777) / 10,411 = 15.7% excess premium instead of 11.77%.   

Adding in trend factor  of 8%

Past claims were 6583 x 1.08 = 7109

Next years claims should be 8% higher at $7109 if they follow trend. 

The main challenge with using past claims is it doesn't reflect any of the demographic changes through the year and isn't very accurate.  Don't get me wrong, EVERY group advisor uses this method ... but the only time it's correct is when you haven't had ANY demographic changes to a group over the year.  Let's use an example of a 10-life group that ran right at break-even last year.  So, last year they paid 10K in premiums and received $7,500 back in claims, to run right at 75%.   If we had only those 10 people on the plan throughout the year with no changes and we have only those 10 on at renewal, this method works.  But, let's use an extreme example of this group adding 5 new people the day before the renewal is run.  Well, our claims would still be $7,500 last year, but we now have 50% more people on the plan who will use it next year.  If we just said this group needs 7,500 x 1.08 for trend, we'd be 50% underfunded because of employee changes.  Because of constant employee changes, it's hard to say that claims were $7,500 last year, they'll just be 8% higher next year.  What we can say is the group ran right at break-even last year, so what %age change to rates next year is required?  This is an extreme example for sure, but illustrates the point.

If the TLR is 75% that means they need 25% admin on top of $7109  

If TLR is 75%, that actually means 33% admin is required on top of $7,109.  The 75% represents how much of each dollar of premium you collect you want to pay out in claim.  So, for every dollar collected, the insurer wants to pay out 75 cents.  What that means is top pay out a dollar of claim, 1.33 (1 / .75) needs to be collected. 

7109 / 75% = $9478 in annual premium for next year.  

This is correct, but again $9,478 is actually 1.33 of $7,109. 

Drop the 11.77% the client overpaid from last year

9478 x(0.8823) = 8362

Correct, assuming NOemployee changes at all throughout the year or for next year. 

So the next years premium should be $8362 (assuming I did all my math right... it’s been a long day and im kinda sleepy)

Odds are the claims will be higher than TLR but that is just the ebb and flow of the over-under funding that is going on, rates will go up the following year and vice versa, in the long run it will even out. Manulife made a profit this year, so next year it is only fair for the client to be in a winning position.  That being said I know Manulife will never provide a discount that I am asking for as they know it means they will take a loss in the next year, but if I go in low they will usually give me their best rate, with their biggest discount. I don’t always get what I am asking for but as long as I get every cent they have to offer I am content with that. When I crunch all the numbers I usually end up with a lower rate than the quick/easy way, but that said even the quick way shows the client should be getting a discount, and they were asking for a double digit increase.  

Again, I think your philosophy of getting what you can for the client is very solid.  And, speaking purely from my perspective, when an advisor asks me to review a renewal, I'm always a lot more amenable to revise rates if the advisor actually has some form of reasoning for asking!  Some still show up saying "drop your rates or I'll move the case" which usually garners a pretty quick "Have a nice day" from me, but having someone put some thought into it and saying "your rates are too high because..." usually gets a lot more love.  I'm assuming it's the same with other group reps as well, so I think the way you approach it is the best way, regardless of whether the math would pass the actuary exam or not!

Its a lot of numbers but thats how I do it. Still not taking into account credibility, past experience etc but for a year over year renewal thats the process I use more or less. Again, its been a long day, and I had to fix a few mistakes I made so I might have done something wrong.

So that's my process more or less, if there are changes to the demographics or certain oddities like a sick employee or odd claims I will adjust how I do things accordingly. 

TL;DR the manulife renewal I commented on previously should have ended up with a new annual premium of $8362 which is a 19% decrease, like I say above I don't expect to get that from Manulife or any carrier for that matter but I do expect close to the $9478 number which is a 8.9% decrease, a larger decrease than my original post I might add. Manulife proposed a rate increase of +10.95% which is simply not acceptable.

I do have some good news though, after talking with my Manulife rep, we were able to settle with a final rate change of -5%.

Thanks Manulife.

Look in the mirror and say their name three times: Manulife, Manulife, Manulife

I think they were listening, from Google analytics of the blog. Lets see if they do anything about it. They haven't contacted me yet.