Matching our incentives to the families we serve

There is a lot to feel good about in Canadian life insurance. New annualized premium set a record in 2025, rising 9 per cent to C$2.3 billion. Application activity in 2026 has been stronger still, with term applications up sharply year over year. Our industry is selling with real energy.

There is also a number that makes me pause. In 2010 we sold roughly 734,000 individual life policies in this country. In 2024 we sold about 635,000, while our population grew from 33.8 million to 41.5 million. Policies per 1,000 Canadians fell from 21.7 to 15.3.

I wrote in this space in August that we have work to do at our front door, that we need to get back to recruiting the 24-year-old advisor and putting them in front of the 29-year-old teacher. I still believe that. But I have spent the time since inside our own numbers, and I have come to think there is a second opportunity sitting right behind the first.

The family market does not just need more policies sold. It needs more policies kept.

The opportunity we have not picked up yet

We benchmark nearly every measure that matters: applications, placement ratios, new premium and market share. These figures are widely shared at conferences across the country. Ours is an industry that loves to measure.

What we do not measure publicly, or often enough privately, is how many mass-market policies sold this year will still be in force in year three. That number matters more than any of the others to the family on the other end of the policy, and most of us would agree it deserves more attention than it gets.

Most carriers do reach out when a payment is missed. A notice goes out, the advisor gets a flag, and often the client sometimes reactivates. That system works, but it is also reactive by design. It kicks in once the policy is already in trouble, and by then the relationship between the advisor and the family may have gone quiet. The family has not heard from the person who sat with them and explained why this policy mattered. They hear from a head office they have never met, about a bill they may have forgotten about, at a moment when money is already tight. Some of them reinstate. Some of them do not.

The gap is not in the notice. It is in the months before the notice, when nobody was incented to stay close to that family, checking that the product still fits, and making sure the next payment was going to land. We built a system that pays for the (sometimes virtual) kitchen table conversation and then goes quiet, and we are surprised when the family goes quiet too.

The good news is that this is fixable, and some of the fixes are well within reach.

What Sun Life showed us

Earlier this year, Sun Life levelized the advisor compensation on one of its participating whole life products, lowering first-year commission and paying more across the life of the policy. The reasoning it set out was practical rather than philosophical. It explained that pairing high early cash value with high upfront compensation was creating pressure on its participating account, and that aligning compensation more closely to the life of the policy would help protect participating policyholders and support stable dividends.

I think that is worth paying attention to, not because it is a model everyone should copy, but because it is a carrier thinking deliberately about which compensation structure fits which product and which client outcome. That is the conversation I would like to see more of.

Both models have a place

Here is where I want to be clear, because I am not arguing that heaped compensation is wrong or that levelized is the answer to everything. Heaped compensation has real strengths. It helps advisors build a practice, especially early in their career when they have no book to draw renewal income from. It supports product designs and markets where the relationship with the client is naturally front-loaded. There is nothing inherently wrong with paying well for a sale well made.

What I am suggesting is more modest. We should be offering both heaped and levelized options, or variations of them, and we should be thoughtful about which structure we attach to which product.

A simplified issue policy sold to a young family on a tight monthly budget, where the risk of early lapse is real and the margin for administrative error is thin, may be better served by a commission structure that rewards the advisor for keeping that policy in force. A permanent policy sold to an affluent client with a long planning horizon may be perfectly well served by a heaped structure. The point is that these are different relationships with different persistency profiles, and our compensation design should reflect that.

The overriding priority is simple. We should be incenting advisors to do the right thing for the family they are serving. Sometimes that means rewarding the sale. Sometimes it means rewarding the relationship. Most often it means giving the advisor a choice of both and trusting them to match the structure to the client.

The cash flow question we need to solve

I recognize the obstacle. Levelized compensation only works if someone bridges the advisor's cash flow during the transition, and no advisor can support a family on a fraction of first-year premium while waiting a decade for the balance. That is the real reason this has stalled for so long, and it is a solvable problem. It is a financing problem, not a values problem.

The business I lead was founded on levelized compensation, funded by capital partners, before it moved to a heaped model. We are now moving back toward levelized on certain products, while keeping heaped where it makes sense. I have had both ledgers open side by side. The first-year difference can be smaller than many people assume, and the long-run economics are not close. But I also understand why an advisor building a practice today would not make that jump without support, and I do not blame them.

There is a conversation starting in our industry, including a recent Vision 2035 initiative led by Insurance Journal Publishing Group, about what it would take for Canada to write a million individual life policies a year. I think that is the right ambition, and I think we get there faster if we stop treating compensation design as a binary choice and start treating it as a toolkit. Both models have a place. The question is which tool for which job.

Our front door decides how many Canadian families we reach. Our back door decides how many we keep. Getting both right is the opportunity in front of us, and it is a good one.