Fewer Canadians are buying insurance today than in 2010. Why and how can this be remedied? To close its 27th edition, the Congrès de l'assurance de personnes (Life Insurance Convention) invited five speakers to address these issues, in a panel entitled The industry’s challenge: regaining consumers’ trust.
Serge Therrien, President of Insurance Journal Publishing Group, moderated the panel. He set the stage for the discussions with a worrying overview of the situation:
- The number of insurance policies sold continues to fall. Based on sales statistics compiled by LIMRA, between 2010 and 2022, sales dropped by some 100,000 insurance policies in Canada.
- Meanwhile, the Canadian population grew from 34 million in 2010 to 40 million in 2023, according to Statistics Canada.
- The penetration rate of insurance policies per thousand Canadians fell from 21.7 to 16.9.
- LIMRA's results show that this gap persisted in 2023.
In the co-design workshop organized by Insurance Journal Publishing Group on Sept. 5, 30 leaders reflected on the reasons for this decline in the penetration rate of individual life insurance, Therrien explained to the convention session audience. “Is it possible to recover these 100,000 lost sales?” he asked the four panelists.
Education and diversity
To regain the same penetration rate among Canadians as 10 years ago, we need to educate consumers about insurance - Ivana Magdic
“To regain the same penetration rate among Canadians as 10 years ago, we need to educate consumers about insurance,” responded Ivana Magdic, Regional Vice-President, Sales, Quebec, for Desjardins Insurance. To illustrate the lack of education, she pointed out that the personal finance course taught to her daughter in high school does not include insurance as a topic.
Increasing the penetration rate will also require “a greater number of active advisors and greater diversification of the distribution network,” added Magdic. She says that a consumer will prefer to be served by an advisor of the same origin or culture as him or her: “8.3 million Canadians were not born in Canada,” she underlined. This figure, from Statistics Canada data, refers to the population in 2021.
Women still occupy only a minority position within the independent individual life insurance distribution network, Magdic also pointed out. “I congratulate all the women here for surviving the obstacles,” she told the audience.
Digital sales
Three years ago, many of our clients doubled their sales volume - Luis Romero
Luis Romero, founder and president of insurance technology firm Equisoft, echoed the sentiment about financial education. “Education can help increase sales volume,” he observes. It took COVID-19 to remind everyone that no one is immortal, says Romero. “Three years ago, several of our customers doubled their sales volume. There was a demand for a product that is usually sold, not bought.”
Romero says simple, online products can help close the 100,000-policy gap. He has one caveat to these products: selling these less expensive products does not pay well for advisors.
However, he points out that an American property and casualty insurance company has succeeded in making the sale of simplified life insurance policies profitable, by linking it to the representative's home and auto insurance offering. The representative has several opportunities to contact his customer, and the sale of a simple product, such as life insurance for funeral expenses, becomes much easier, explains Romero.
In a survey conducted by IG in collaboration with the IG Wealth Management Chair in Financial Planning, nearly 67% of respondents said that technology would have an incredible impact within five years, said Carl Thibeault, Senior Vice-President, Quebec and Atlantic, IG Wealth Management. More than 1,600 practitioners responded.
Embracing technology could enable us to serve a larger share of the population and perhaps find the 100,000 policies - Carl Thibeault
For his part, he believes that technology can resolve complex details much more quickly. “Embracing technology could enable us to serve a larger share of the population and perhaps find the 100,000 policies,” he says.
Reviewing compensation
Growth will not come from high net worth policies; it will come from smaller policies. - Mathieu Charest
Mathieu Charest, Head of Products and Pricing, Individual Insurance, Manulife Canada, echoed Romero's comments. “Growth will not come from high net worth policies; it will come from smaller policies,” he said.
To enable this growth, Charest says we need to rethink how advisors are compensated for selling smaller policies. “We often apply processes adapted to larger policies to smaller policies. It won't work,” he stated.
He suggests quantifying the relationship between the average premium in the mass market, the average advisor commission and the income an advisor needs to earn “to live.” Do you have to sell 15 policies a week to make a living, and is that sustainable? If the answer is no, we need to change compensation or allow the necessary volume, said Charest. “Do we have the processes in place to support this volume? Not yet,” he admits.
Multidisciplinarity
Carl Thibeault takes issue with the silo approach, and suggests strengthening multidisciplinary teams in the distribution network. “In investments, insurance and mortgages, we find practitioners who could be working on a complete coverage approach, but are cherry-picking.”
In his view, customers need to be approached by multi-disciplinary, multi-generational teams. “One of the most pressing concerns is estate planning,” said Thibeault. He points out that 76% of owners of small and medium-sized enterprises (SMEs) in Canada plan to leave their business within the next ten years. This statistic comes from the Quebec SME survey report published in April 2024 by the Canadian Federation of Independent Business.
And what about the consumer?
There's a lot to learn from related sectors, like property and casualty insurance - Louis Regimbal
Louis Regimbal, Senior Advisor, Insurance and Asset Management at multinational consultant Oliver Wyman in Canada, underlined the need for the panel discussion to look at the issue from the consumer’s perspective. “We haven't heard much about the consumer, their needs and preferences,” noted Regimbal, who knows the life and health insurance industry well, having previously held the position of Beneva's vice president of strategy and innovation from 2016 to 2023.
“There's a lot to learn from related sectors, such as property and casualty insurance,” Regimbal stated. “P&C insurers recognize that individuals have preferences about how they want to be reached and work with them. Connecting with a policyholder via a platform and then developing that is not out of the question,” he said.
Regimbal urges the life and health insurance industry to think about how to engage with consumers “based on their preferences…If we rely only on the advisor approach, we may be missing something, because that may not be the only way to reach the consumer,” he added.
Mathieu Charest said that an advisor should always be part of the equation, if only to convince someone that it's better to save than to buy a car that's too expensive for their means. “The advisor is a bit like a guide who tells the customer if he's going in the right direction,” he added. According to him, trust needs to be established in the process.
Ivana Magdic observes that the advisor's role has evolved from selling 500 policies a year to that of a financial coach. “Maybe that's why the number of policies is falling, but the customer has coverage that's more in line with his needs.”
Carl Thibault pointed out that covering basic needs is a collective role, not that of a single individual or organization. “Could we give a fixed remuneration with a variable portion to a group of young advisors equipped with the technology that enables them to carry out basic analyses for simpler needs? We've started testing this option and it works,” revealed Thibault.
