(April 28, 2005) Insurance specialists are expanding their activities – they are looking for a wider range of investment products for their clients. This creates an opportunity for third-party fund providers in the insurance channel, but only the best-performing companies should apply, Credo Consulting research suggests.
Credo surveyed executives from several of Canada’s largest insurers to gain insight into current trends. They found that investment products are growing at the expense of traditional insurance products, and this trend is expected to continue for the vast majority of Canadians focusing on retirement planning.
“On the other hand, few people freely talk about their own death and other reasons for purchasing insurance,” the study found.
The insurance channel also has the advantage of having “more durable” assets compared to retail investment funds, Credo emphasizes. “The guarantee in segregated funds acts as an anchor to hold assets and limit customer churn, as does the fact that insurance customers were sold on both the concept of guarantee and other benefits.”
Many insurance companies, such as Manulife and Sun Life, also have subsidiaries in the mutual fund world, but that doesn’t mean there isn’t a place for third-party funds, Credo says.
“While there is a clear preference for using proprietary products when internal and external funds have similar mandates and performance, insurance companies are willing to use third-party funds if they meet the selection criteria,” the study says, as top performers or those who fill the gap in the company’s composition.
“Consolidation in the insurance industry means that the ability to sell third-party funds in the insurance channel will be largely limited to top performers and managers.”
The most successful funds in the insurance world are those with recognizable brands such as Fidelity, AIM Trimark, Mackenzie, CI and AGF, says Credo. “The brand also helps insurance agents in the sales process when investors recognize an investment fund company.”
However, once they reach the insurance threshold, mutual fund companies must not let down their guard, warns Credo, noting that insurance companies have shown a willingness to remove underperforming funds from their shelves. Manulife, for example, recently resigned from eight seats in the nearly $900 million AGF fund.
|
Rexcited Npossibly STories |
|
|
Insurers may also be wary of four funds included in a recent market timing investigation by the Ontario Securities Commission, Credo says. Damage is expected to be limited, but insurers with significant assets in AIC, Investors Group, CI and AGF may be concerned about how such holdings could undermine their credibility.
Submitted by Doug Watt, Advisor.ca, doug.watt@advisor.rogers.com
(28/04/05)
