Michael Hutchison

  • Crown Life
  • I believe that there is an urgent need for the life insurance industry to answer the accusations of its critics who say that its failure to disclose accurately the price of its products to its policyholders has led to a noncompetitive situation detrimental to the interests of policyholders and the public.

--  Michael B. Hutchison, [Bonk: Crown Life]

1969 - SOA - Life Insurance Net Cost Comparisons, Society of Actuaries - 34p

  • Some background information about my company is necessary in order to understand our approach.
    • Crown Life actively markets insurance in nine different countries.
    • I. We believe that we are a marketing organization rather than a planning organization.

--  Michael B. Hutchison, Crown Life

1977 - SOA - Marketing Strategy and Planning, Society of Actuaries - 14p 

  • 1969 - SOA - Life Insurance Net Cost Comparisons, Society of Actuaries - 34p
  • 1977 - SOA - Marketing Strategy and Planning, Society of Actuaries - 14p 
  • 1980 - SOA - Treatment of Existing Life Insurance Policyholders in Times of Rapidly Changing Economic Conditions, Society of Actuaries - 16p
  • 1980 - SOA - Treatment of Existing Life Insurance Policyholders in Times of Rapidly Changing Economic Conditions, Society of Actuaries - 16p
    • Let me take you back in history to offer my view of the evolutionary manner in which competition created this product. 
    • The problems encountered with the introduction of this product were many and varied.
    • I suppose that it is likely that an agent will put more emphasis on possible premium decreases than on increases, but the risk of misrepresentation is certainly no greater than with the sales presentation of dividend scales especially with regard to new money products.
    • With par insurance, if expectations wane, the actuary can decrease his future dividend scales without anyone really noticing, the natural increase in dividend scales tends to mask minor adjustments. Thus, an actuary can fine tune his dividend scale with little difficulty.
    • All told, l must wonder whether the pioneering has been worth the trouble.
      • Only now that all the respectable companies have entered the market have our sales finally taken off.
    • Some Canadian companies have extended this concept to areas where they are different. One of the very popular ones is to move away from a portfolio interest assumption to a new money interest assumption.
      • We have something in Canada called a "new money" whole life plan which operates essentially the same way as our Lowcost, except that the continuation of the coverage depends on the continuation of a current "new money" interest rate. If the "new money" interest rate falls the death benefit will be reduced accordingly, subject to the policyholders option to pay additional premiums to keep the death benefit up.
      • This produces very attractive numbers and the inability of either agents or policyholders to really differentiate between the new money investment risk and the portfolio investment risk has made this product very popular on the street with strong endorsement from banks, accountants, lawyers and the media.
      • This "new money" concept also has some uses in single premium form, which as you can imagine, can be a very useful replacement tool. But aside from the replacement problem, the real questions are whether the buyer understands the investment risk he is assuming, and whether he really should be exposing his insurance program to that risk.
    • Other developments in the aberration of the traditional whole life policy in Canada include the equity linked policies (called Variable Life in the U.S.) issued a dechde ago at the time when the market was peaking.
      • They were easier to introduce in Canada because of less red tape but they were not any more successful in Canada than they were in the U.S., where you couldn't even get them into the market place. 
      • Coming at it from the other direction, it will protect companies from the long term risks that are now causing some problems. It's all a matter of who assumes the risk. We seem to be moving into an era when the assumption of at least the investment risk by the policyholder is acceptable and even preferable.
    • Replacement artists love all these product innovations as they can have a field day improving the policies of other companies' existing policyholders.
      • This kind of replacement activity creates an interesting secondary effect.
      • The loyal hard-working agent finds his clients attacked with both misrepresentation and also with some mathematical demonstrations that are hard to refute. He finds himself in a dilemma of whether to be loyal to his company by preserving the existing business, or to protect his status with the client by brokering a replacement policy before somebody else does.
      • Aside from the motivation of the commission it is pretty hard to blame them for taking the latter course if the company is going to lose the policyholder anyway.
      • Also, a good many agents feel either confused or resentful or both