This is probably one of the topics being discussed most behind closed doors in the life and health insurance industry: the steady decline in life insurance sales from 2010 to 2022 in Canada. An idea came up during a private meeting at the Canadian Association of Independent Life Brokerage Agencies (CAILBA) conference in Whistler, British Columbia, in June: why not allow Canadian banks to sell life and health insurance in-branch?
Although the meeting of a dozen people was held behind closed doors – and was hotly debated – the Insurance Portal learned of the discussions from a few participants who preferred to remain anonymous.
The insurance policy sales data published by Insurance Portal is sourced from LIMRA. Meanwhile, statistics on the evolution of the Canadian population come from Statistics Canada.
Updated data
With the 2023 data on sales and the Canadian population now available, Insurance Portal has updated its statistics.
The first chart shows the evolution of sales and the Canadian population from 2010 to 2023. During this period, the number of policies (contracts) sold fell from 733,941 units to 667,752 whereas the Canadian population increased from 33.8 million to 39.5 million people. From 21.7 policies sold per 1,000 inhabitants in 2010, sales dropped to 16.9 contracts per 1,000 inhabitants in 2023.
Two other observations can be drawn from the statistics compiled by Insurance Portal: the number of policies that should have been sold and the shortfall during the observed period.
The second chart reveals that based on the sales figures of policies and the Canadian population in 2010, a penetration rate of 21.7 policies sold per 1,000 Canadians was observed. If this same rate had been achieved in 2023, it can be estimated that the Canadian industry would have sold 857,440 contracts rather than 667,752, the actual sales result.
The third chart shows that if this same sales penetration rate among Canadians had been maintained from 2010 to 2023, the industry would have sold 1,117,169 more policies.
Threatened by the banks
During discussions at the CAILBA conference, some participants expressed that allowing banks to sell insurance in branches would jeopardize the life insurance advisor network. Others argued that this threat never materialized in Quebec, where selling insurance in Desjardins' credit union branches has been authorized for decades.
Another comment heard was about the effect banks had on the marketing of registered retirement savings plans (RRSPs). Launched by the federal government in 1957 and then adopted by Quebec in 1959, this tax-incentive savings program remained largely unknown to Canadians for a long time. The entry of banks into this niche democratized this tax savings vehicle, which has become a common term in Canadians' vocabulary.
Increasing premiums
While the number of policies sold in Canada has been declining since 2010, premiums have been rising.
LIMRA statistics indeed show that premiums are increasing. There are more contracts sold with high premiums. In 2023, LIMRA reports that premiums sold reached an unprecedented peak of $1.86 billion. Whole life insurance policies accounted for 68% of all policy sales in Canada.
Some executives see this increase in high-premium contracts as a reflection of the situation in the advisor network and Canadian society. The network consists of older advisors who focus on an older clientele. These clients are necessarily more affluent than younger Canadians and are often in the wealth protection and transfer phase to the next generation. They have passed the phase of wanting to acquire insurance to protect themselves and their family members.
Another observation among senior executives is that the immigration Canada has experienced for years likely masks another reality. Immigrants from Asia, who have been on the rise, have a natural propensity to buy life insurance to protect their families. If they do, it can be concluded that the decline in sales nationwide conceals the fact that native-born Canadians are buying fewer policies.
