THE
FAL L 2016
Inside
SINGLE
PREMIUM LIFE
AS AN ANNUITY
ALTERNATIVE
PROSTATE
CANCER –
EVOLVING USE OF
PSA SCREENING
AND TREATMENT
OPTIONS
PRICING
CANADA LIFE
CYBER SECURITY
PROGRAM –
HELPING KEEP
YOUR DATA
SECURE
From the Desk of John Occleshaw
Executive Vice-President, Reinsurance
Hello, and welcome to the Fall 2016 ‘Resource’. It is a year since I last penned the introduction to
‘Resource’ and it has been an interesting one.
O
n the political front, my fellow Brits
decided in June to leave the European
Union and it will be interesting to see
how the exit negotiations play out over the next
two or three years and beyond. There are some
fundamental issues at stake for the large London
based international financial services companies.
As Canada Life’s operation in the UK only writes
UK business, the impact on our global business
should be relatively small. The initial impact on
global interest rates was not welcomed by anyone
in our industry, but it looks like most of that early
concern has tempered and thankfully US interest
rates (at least) have recovered a lot of the ground
they lost in late June and early July.
some of the more glaring weaknesses. In the
US it has been confirmed that PBR will come
in at the start of 2017, and in Canada the final
details of the new capital regime due to be
implemented at the start of 2018 (LICAT) have
been revealed. Insurers and reinsurers have to
analyse and understand the implications
of these changes.
I am pleased to say that through all of this
both Canada Life Reinsurance and our parent
company Great-West Lifeco continue to
perform well. 2015 was a record year for both,
with Great-West Lifeco reporting earnings
of close to 2.8 billion Canadian dollars, and
Canada Life Re earnings passing 300 million
Canadian dollars for the first time. Within the
US traditional life market, we have seen strong
growth in new business market share in 2014
and 2015, and are on track to roughly double
our new business market share between 2013
and 2016. We remain one of the leaders in the
US structured life reinsurance market. Our
ratings remain unchanged and some of the
strongest in the reinsurance world, at AA with
Standard and Poor’s and A+ with A.M. Best.
The recent tragic earthquake in Italy reminded
me again of the perennial problem of under
insurance. Only a small fraction of the
economic loss was insured, leading to a
relatively small loss for P+C catastrophe
reinsurers, but a disastrous outcome for many
of the people affected. We remain committed
to trying to support our clients to address the
under insurance issue in the US Life market,
through supporting accelerated underwriting
programs and other new product and
I would like to take this opportunity to thank
underwriting developments that are aiming to
you for your continued support and the long
make life insurance available to as wide a group
relationships we have developed with many of
of people who could benefit from it as possible.
our clients, which have helped us to grow our
On the regulatory front, Solvency II came in
reinsurance business. I believe that our
as planned in Europe on the 1st of January,
combination of financial strength, long-term
and the fall in interest rates over the first six
stability and proven ability to develop innovative
months of 2016 has already demonstrated it
solutions means that we can continue play a
is not fit for purpose. Changes to reduce the
valuable role in helping to meet our clients’
artificial and extreme sensitivity of long term
reinsurance needs in the current challenging
liabilities to interest rate movements are likely to
and ever-changing environment.
be proposed in the near future to help address
strength ◆ stability ◆ solutions
THE RESOURCE
Rich Tucker
VP – Sales & Marketing, Canada Life Re
Co-Author, Jon Davis
CEO - Innovative Underwriting Solutions
Single Premium Life as an Annuity Alternative
Fixed annuities have been a significant segment of insurance sales for several decades. According to LIMRA, over $100 billion of
fixed annuities were sold in 2015; with over half being single premium fixed indexed annuities (FIA). While fixed annuities were
originally intended as a retirement vehicle, especially for the millions of Americans without employer-sponsored pensions, it is
inevitable that a portion of these assets will be targeted as a legacy transfer to heirs.
Even though a non-qualified annuity
offers income tax deferral of accumulated
gains in the account, those gains are
subject to income tax upon withdrawal.
Upon the death of the annuity owner,
the annuity is treated for income tax
purposes as though a full surrender
occurred, meaning all remaining
accumulated gains are income taxable
to the heirs. However, death benefits
from a life insurance policy pass to
beneficiaries 100% income tax free. So
when assets are identified that are meant
for transfer to heirs, there is an obvious
tax advantage to using a Single Premium
Life (SPL) product rather than an FIA.
There is a rapidly growing marketplace
for SPL products, and many are
designed for agents who primarily
sell annuities. To be successful, these
products need to:
• Utilize non-intrusive underwriting – no medical exam, blood test, or other fluids
• Provide quick issuance
• Minimize underwriting decision disappointments
• Pay commissions competitive
with FIAs
Canada Life Re and Innovative
Underwriting Solutions have worked
together to support clients entering
this product arena. When the client is
primarily an annuity carrier, they may
not have the underwriting infrastructure
and expertise necessary for an SPL
product. Innovative Underwriting
Solutions can design an underwriting
process without the drawing of blood
or urine, resulting in quick turnaround
times. Then Innovative Underwriting
Solutions can provide the day-to-day
underwriting of the cases. Choosing
the right balance of underwriting
information, client experience,
turnaround time, and cost is essential
for success in this market.
In addition, integration of the
underwriting process with expected
mortality levels is critical to obtain
successful product profitability. Given a
specific set of underwriting guidelines,
Canada Life Re can determine the
mortality profile likely to result from the
product block. Underwriting without
medical exams, blood tests and other
fluids is cutting edge and evolving, so
obtaining input from an experienced
reinsurer is highly desirable. A quota
share mortality cover is then typically
provided, as the annuity carrier generally
has little experience, and for that matter
little interest, in retaining mortality risk.
Fixed Indexed SPL products are
currently in demand. For any given
single premium amount, the death
benefit is known and guaranteed for
life. Guaranteed minimum cash values
are provided, with the opportunity
to participate in indexed interest rate
credits. And the Department of Labor’s
new fiduciary standard for qualified
plans is causing annuity agents to spend
more time diversifying their book of
business and the services offered to
their clients.
These all contribute to a current
environment that is conducive to the
growth of SPL products. Canada
Life Re and Innovative Underwriting
Solutions can help our clients take
advantage of this expanding market.
strength ◆ stability ◆ solutions
THE RESOURCE
Bob Weir,
Assistant Vice-President, Underwriting Research
Prostate Cancer – Evolving Use of PSA Screening and
Treatment Options
Prostate cancer is the most common cancer
in American men, with 220,800 new
cases in 2015. It is also the second leading
cause of cancer death in men (behind
lung cancer). Prostate cancer is usually
diagnosed later in life, from ages 50 to 75,
which are prime insurance-buying ages. As
a result, the insurance industry has paid
great attention to developments in the
screening and treatment of prostate cancer.
PSA Testing, the Swinging
Pendulum
The prostate-specific antigen (PSA) test
was approved back in the 1980s and
was quickly adopted by clinicians as a
screening test for prostate cancer. At the
same time, insurance companies also
started requiring PSA as an add-on test
for male applicants over age 50. Prior
to PSA testing, most cases of prostate
cancer were discovered due to symptoms.
Widespread PSA testing led to a dramatic
increase in incidence rates which spiked
in the 1990’s. Incidence rates have since
levelled off, but at a level higher than the
pre-PSA era. Similarly, prostate cancer
mortality has improved to the point where
virtually 100% of men with localized or
regional stage disease are surviving 5 years,
according to SEER (the Surveillance,
Epidemiology and End Results program of
the National Cancer Institute), and most
of these men are surviving much longer.
Much of this mortality improvement has
been attributed to routine PSA testing
which has led to the discovery of more
cancers at an earlier stage.
But routine PSA screening has become
controversial. PSA is not specific to
prostate cancer. Elevated PSAs usually lead
to biopsies, many of which are negative
for cancer. Perhaps more important, many
of the cancers that are found are localized
with a low risk mortality risk. It has been
estimated that between 17 - 50% of men
diagnosed with prostate cancer through
PSA testing have tumors that would not
have resulted in symptoms during their
lifetime. Unfortunately, PSA tests cannot
discriminate between aggressive and
indolent prostate cancers.
In response to these concerns, the US
Preventive Services Task Force issued a
recommendation in 2012 against PSA
screening for men of all ages. This was
based on two large clinical trials of the
effectiveness of PSA screening. The
Prostate, Lung, Colorectal and Ovarian
(PLCO) study in the US failed to show
any survival benefit for prostate cancer
screening. The European Randomized
Study of Screening for Prostate Cancer
(ERSPC) showed a relatively small
benefit to screening. The PLCO study in
particular has been widely criticized, as
most individuals in the control group had
multiple PSA tests similar to those in the
screened group. The recommendation was
met by criticism that without PSA screening
we would be back in an era when prostate
cancer was discovered at advanced and
incurable stages. Since the recommendation
was made, there is evidence of a notable
drop in PSAs ordered by primary care
physicians and a resulting drop in prostate
cancer incidence rates.
In the life insurance setting we still order
many PSAs. The 2015 Life Underwriting
Requirements Survey indicated that
most North American Life Insurance
companies are ordering PSAs at ages
over 50 and amounts as low as $100,000.
Many companies further reflex to “free”
PSA depending on the magnitude of the
PSA elevation. Perhaps most insurance
companies would rather not be the first to
drop PSA testing or they would rather see
more convincing proof of the relatively
small benefit of PSA testing.
Since prostate cancer mortality generally
occurs many years after diagnosis, any
increase in mortality rates associated with
decreased screening rates is unlikely to be
detected for a number of years. There is
a concern that less screening may result
in missed opportunities for detecting
important lesions at an early stage, thereby
missing a chance to prevent some prostate
cancer deaths.
Active Surveillance — an
Option for Localized Cancer
As I have mentioned above, many prostate
cancers are being detected at a very early
stage when there is little mortality risk.
Rather than having immediate surgery or
radiation, there is an alternative strategy of
close monitoring called Active Surveillance
(AS). This option is for men with localized,
well-differentiated tumors. Immediate
definitive therapy is postponed and instead
the patient is monitored by regular PSA
tests, DREs (digital rectal exams) and
biopsies. If there is any evidence of tumor
progression then definitive treatment
would be considered at that time. Selection
of patients for AS is very important.
Typical criteria would include these:
stage T1 or T2, Gleason grade 6 or less,
PSA less than 10, normal DRE, lesser
extent of tumor involvement in the biopsy
cores. This strategy has the twin goals of
reducing overtreatment and still identifying
lethal tumors while they are treatable.
Studies have demonstrated that AS is safe
over at least a 15 year time frame. The
percentage of patients who developed
metastatic disease (2.8%) or died of
prostate cancer (1.5%) are similar to the
experience expected of patients initially
managed with surgery or radiation.
While initially AS was an underused
strategy, this appears to be changing. It was
recently reported that 40 to 50% of men
with early stage prostate cancer are now
opting for Active Surveillance. Many of
these men are of prime insurable age and
we will be seeing insurance applications
from them.
References available upon request.
strength ◆ stability ◆ solutions
THE RESOURCE
Laurie Kolb
Assistant Vice-President, Life Reinsurance Pricing
Pricing
Lapses – North of the Border
Here is the latest data from the Canadian Institute of
Actuaries for Term-to-100 and Level COI Universal Life
Policies published in Sept 2015 that you may want to consider
while setting the goal posts for lapse supported products.
These products offer low cost death benefit protection with
lifetime level premiums (or COI charges) and little cash
value, not unlike level term and universal life with secondary
guarantees in the US.
Term-to-100 Lapse Experience (Figure 1)
There are three studies published over the study period
1994 to 2012. The total overall lapse rate for the guaranteed
policies (base coverage only) has decreased from 5.3% to 1.2%
as the later duration experience has emerged. The lapse rates
are trending down in durations 1-5 and 6-10 and remain
about 1% in durations 11-15. Ultimate lapse rates in duration
16 and later are around 0.5%.
The 2015 study provides further splits on a subset of the
data which excludes joint, rated policies, term conversions
and insurance purchased by guaranteed insurability options.
Experience shows:
•
•
•
Non-smoker lapse rates are approximately 1.1% whereas smoker rates are approximately 1.8%.
Lapses trend down for higher issue age groups although become less credible.
Term-to-100 is lower than Level COI.
Level COI Lapse Experience (Figure 2)
There are three studies published over the study period
1997 to 2012. The total overall lapse rate for the guaranteed
policies (base coverage only) has decreased from 3.5% to 2.6%
as later duration experience has emerged. The lapse rates are
trending down in durations 1-5 and 6-10 and remain about
1.5% in durations 11-15. Ultimate lapse rates in duration 16
and later are around 1.0%.
Similar to the Term-to-100, the 2015 study also provides
further splits on a subset of the data which excludes joint,
rated policies, term conversions and insurance purchased by
guaranteed insurability options. Relative experience is similar
to Term-to-100 which shows:
• Non-smoker lapse rates are approximately 2.5% whereas smoker lapses are approximately double the non-smokers.
• Again, lapses by issue age groups trend down although become less credible.
Here is a summary of the three studies for Term-to-100 and
Level COI Universal Life for Guaranteed policies, base coverage
only (exposure in $M and lapse rate by amount):
Figure 1: Term-to-100 Lapse Experience
Duration
CY: 1994 to 1998
CY: 1999 to 2004
CY: 2005 to 2012
1-5
128,644
6.5%
37,330
4.8%
52,421
3.3%
6-10
47,224
2.6%
99,440
2.1%
54,749
1.8%
11-15
5,296
1.1%
95,481
1.0%
87,001
0.9%
18,421
0.6%
103,681
0.5%
857
0.8%
45,120
0.6%
251,529
2.0%
342,973
1.2%
Exposure / Lapse Rate
16-20
21+
Total
181,164
5.3%
Exposure / Lapse Rate
Exposure / Lapse Rate
Figure 2: Level COI Lapse Experience
Duration
CY: 1997 to 2001
CY: 2002 to 2004
CY: 2005 to 2012
1-5
165,812
4.0%
167,074
4.7%
622,895
3.8%
6-10
36,737
1.7%
114,184
2.4%
419,488
2.1%
11-15
2,145
1.4%
23,628
1.8%
268,324
1.5%
91,491
1.0%
12,829
1.1%
1,415,026
2.6%
Exposure / Lapse Rate
Exposure / Lapse Rate
16-20
21+
Total
204,694
3.5%
304,885
3.6%
Exposure / Lapse Rate
It is important to consider the impact of the distribution
channel and inherent policy options on emerging lapses. And
although this experience is from north of the border, consider it
another source when reviewing US products with long duration
guarantees.
Source Data is located on the CIA website:
•
•
Lapse Experience Under Term-to-100 Insurance Policies, Oct 2007 and Sept 2015
Lapse Experience under Universal Life Level Cost of Insurance Policies, June 2003 and Sept 2015
strength ◆ stability ◆ solutions
THE RESOURCE
Dale Krauss
Vice-President, Client Service Center
Canada Life Cyber Security Program — Helping Keep
Your Data Secure
Surely a day doesn’t go by without a mention of Cyber activity in the news. For a comment on the program developed at Canada
Life Reinsurance (and our parent company Great West Life Co), I’ve asked John Towns, of our Information Services area, to
provide some detail on our efforts to curtail Cyber activity. I hope that you enjoy the read.
The statistics are alarming. Some
estimates suggest cyber crime will cost
the global economy $2 Trillion by 2019,
with 5 out of 6 large companies being
targeted by advanced cyber attacks.
capabilities that will help us safeguard
the business and personal information
that’s trusted to us by you.
The reality is that strong cyber security
measures are necessary for everyone —
individuals and businesses alike — and
we all have a critical role to play.
Initiated in 2014, with input from
industry experts and many of our
internal and external stakeholders, our
program delivers dozens of new and
expanded internal services focused on
preventing, detecting, responding to,
and recovering from cyber attacks. We
are not only upgrading our technology,
but also ensuring the necessary staff
and processes are in place to ensure a
resilient and adaptable cyber security
system that can respond to the everchanging threat landscape that
exists today.
That’s why cyber security is a key area
of focus for our business, and our
goal is to detect and respond to cyber
threats as quickly and effectively as
possible. Through our ongoing Cyber
Security Program, we’re implementing
As part of this continuing program, we’ll
be regularly refining our cyber security
protections to ensure we continuously
provide the best possible defense for
both our systems and data. Additionally,
our processes will be regularly revisited
Cyber security threats used to be
primarily mischief-driven attacks
carried out to gain notoriety. Now
they’re a thriving criminal arena with
increasing levels of sophistication aimed
at stealing from, or disrupting, the
business of organizations and the lives
of individuals.
to ensure timely and effective response
to and recovery from cyber attacks, and
our staff is being trained on current and
emerging cyber security best practices
including how to respond to cyber
threats appropriately – both inside and
outside of the office. Starting soon we’ll
also be offering some helpful tips and
tricks on our website that you can use to
stay secure and minimize the impact of
cyber crime in your personal life.
As more and more business moves into
the digital arena, the reality is that
cyber security needs to be a front-andcenter concern for every organization.
We recognize that and are absolutely
committed to continuing to protect the
information you’ve trusted us with.
strength ◆ stability ◆ solutions
THE RESOURCE
AHOU Annual Meeting in Orlando
Canada Life Re hosted a chef ’s competition dinner at last spring’s AHOU annual meeting in Orlando. As you can see, the
atmosphere was festive and the attendees enjoyed good food, drink, conversation, drink, camaraderie and drink. A good time was
had by all.
strength ◆ stability ◆ solutions
THE RESOURCE
Editor’s Corner
L
ike many of you, when I was growing up my mother used to tell me “If
you don’t have anything good to say about someone or something, don’t
say anything at all”. Bearing that in mind, what follows is my take on our
upcoming Presidential election.
8. Who was the last Whig elected
President?
A.Martin Van Buren
B. William Henry Harrison
C. John Tyler
“ D. Zachary Taylor
E. Millard Fillmore
.”
9. Who was the first President to
But for those who think it’s never been worse, consider what the historian Henry
be born in a hospital?
Adams had to say about the election of 1892 between Grover Cleveland and
A.John F. Kennedy
Benjamin Harrison. “Men fled them as though they had the evil eye”.
B. Lyndon Johnson
In any event, our four-year carnival of campaign cacophony is almost over. And to
C. Richard Nixon
celebrate, I thought it might be fun to have a Presidential quiz. If anyone should get
D. Jimmy Carter
a perfect score I urge them to run for the oval office in 2020.
E. Gerald Ford
1. What was Ulysses S. Grant’s
first name at birth?
A. Buford
D. Lester
B. Hiram
E. Ulysses
C. Jeremiah
2. Who was the only President to
be born on the Fourth of July?
A.John Adams B. Thomas Jefferson
C.Rutherford B. Hayes
D. Calvin Coolidge
E. Harry S. Truman 3. How many times did Franklin
Roosevelt run on a national
Presidential ticket?
A.2 D. 5
B. 3 E. 6
C. 4
4. Who was the only President
to serve at least one full term
without nominating a single
person to the Supreme Court?
A.John Quincy Adams B. James K. Polk
C. William McKinley D. Herbert Hoover
E. Jimmy Carter 5. Who is the only Republican
President since William Howard
Taft in 1908 to be endorsed by
the New York Times?
A.Warren G. Harding
B. Calvin Coolidge
C. Herbert Hoover
D. Dwight Eisenhower
E. Gerald Ford
6. Who is the only person to be
endorsed for President by the
New York Times in three or
more consecutive elections?
A.Grover Cleveland
B. Theodore Roosevelt
C. Woodrow Wilson
D. Franklin Roosevelt
E. Harry S. Truman
7. Horace Greeley (“Go West,
young man”) lost a Presidential
election to whom?
A.James Buchanan
B. Abraham Lincoln
C. Ulysses S. Grant
D. James A. Garfield
E. Chester A. Arthur
10. What President lived to the
oldest age?
A.John Adams B. Herbert Hoover C. Gerald Ford
D. Ronald Reagan
E. George H. W. Bush
Special Bonus Question
11. Who will be elected President
next month?
A.Hillary Clinton
B. Gary Johnson
C. Dan Johnston
D.Jill Stein
E. Donald Trump
Answers on the next page
Dan Johnston
Vice President, Sales & Marketing
strength ◆ stability ◆ solutions
Contact us at:
U.S. Headquarters
1787 Sentry Parkway W.
Suite 420, Building 16
Blue Bell, PA U.S.A. 19422
Phone: 215-542-7200
Fax: 215-542-1295
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Toronto, ON Canada M5G 1R8
Phone: 416-597-1456
Fax: 416-343-8488
Client Service Center
1901 Scarth St.
Regina, SK S4P 4L4
Phone: 800-431-0714
Fax: 800-627-4458
European Headquarters
Block C, Irish Life Centre,
Lower Abbey Street
Dublin 1, Ireland
Answers:
1. B (He was born Hiram Ulysses Grant, but one story goes he had it changed because he didn’t like what
his initials spelled.)
2. D
3. D (In addition to his four Presidential victories, FDR was the Vice Presidential candidate on the
Democratic ticket of 1920.)
4. E
5. D
6. A (Cleveland was endorsed in 1884 (he won), 1888 (he lost to Benjamin Harrison) and 1892 (he
defeated Harrison). The Times endorsed Wendell Willkie in 1940, FDR in 1932, 1936 and 1944.)
7. C (Greeley was the candidate of the Liberal Republican Party in 1872 and lost heavily to the
Republican Grant. The Democratic Party cancelled its convention without nominating a candidate and
supported Greeley.)
8. D (Fillmore was the last Whig President, ascending to the office upon Taylor’s death in 1850.)
9. D
10. C (Ford lived to a slightly older age than Reagan. Both died at 93. Jimmy Carter and George H. W.
Bush both have a chance to overtake Ford within the next couple years.)
11. Please, God, not C
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omissions are possible. Individual circumstances may vary and specific legal, tax and
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