Adjustable Contracts (Criteria for Changes) Policy

Sun Life Assurance Company of Canada (“Sun Life”) is a company governed by the Insurance Companies Act (Canada) (ICA) that was converted from a mutual company into a company with common shares in 2000. (Such a transaction is referred to as a “Conversion”.)  Clarica Life Insurance Company (“Clarica”) was converted from a mutual company into a company with common shares in 1999 and was amalgamated with Sun Life in 2002. (The amalgamated company, named Sun Life Assurance Company of Canada, is referred to as the “Company”.)

This Adjustable Contracts (Criteria for Changes) Policy applies to all adjustable contracts of the Company.  An adjustable contract (referred to as an “adjustable policy” in the ICA) is defined in the ICA regulations as “an individual life insurance policy, other than a participating policy, that is issued [or acquired] by a life company and for which the company may at its sole discretion directly or indirectly change the premium or charge for insurance, the amount of insurance or the policy’s surrender value”.[1]

Adjustable contracts allow the Company to provide a lower initial price or higher initial contract values in return for retaining the right to modify future contract values under certain conditions.  Contract values mean any adjustable value such as premiums, cash surrender values, cost of insurance charges, and expense charges that will directly or indirectly change the premium or charge for insurance, the amount of insurance or the contract’s surrender value. 

These are the criteria that govern changes to adjustable contracts:

  1. At the time of issue, adjustable contracts are grouped with similar contracts for the purpose of experience and assumption reviews. Post-issue changes in contract classification are not permitted, except as justified or required as a result of external circumstances arising post-issue (e.g. post-issue changes in taxation impacting only some contracts or impacting different classes differently).  Justification for any change in contract class must be recorded and supported, and free from arbitrary bias against any particular group or class.
  2. The Company establishes a schedule for the review of adjustable contract experience.
  3. Experience factors which may result in an adjustment may include, but are not limited to, mortality, contract lapse, expenses, investment returns and tax.  Adjustments will reflect only experience related to non-guaranteed factors.
  4. Unless otherwise specifically permitted by the contract, adjustments to contract values do not permit adjustments (or increases in adjustments) to recover losses incurred prior to the adjustment date.

The criteria will be applied consistently over time and by class of contract.  The resulting changes must conform to contract provisions and be in compliance with all legal and professional requirements.

If an experience review results in a contract value adjustment, the impact will be clearly and promptly communicated to adjustable contract policyholders.  At a minimum, communication will occur no later than specified in ICA regulations.  The Company’s Appointed Actuary reports annually to the Board as to whether the changes made to adjustable products in the preceding twelve months are fair and are in compliance with these criteria.

The Appointed Actuary will establish, and review annually, an Adjustable Contracts Enterprise Operating Guideline which sets out the processes needed for the Company’s Business Groups to follow this Policy.

The ICA regulations exclude the following from the definition of “adjustable policy: (a) a policy under which the premium or charge for insurance, amounts of insurance and surrender values are stated in the policy or a schedule to the policy, or can be determined under the terms of the policy or a schedule to the policy; (b) a group insurance policy including a creditor’s group insurance policy; (c) an annuity contract, including a deferred annuity or a savings, investment or capital accumulation plan under which the life company has undertaken to provide an annuity; or (d) a reinsurance policy”. 

Approved by the Board on November 1, 2023, and is effective immediately. 
Date: November 1, 2023