We asked The Insurance Journal’s journalists to share their insight and observations on the challenges facing the industry in the coming months.​

The consumer calls the shots!

In Quebec, Bill 141 has rocked the industry since it was tabled two and a half years ago. With the adoption of the law in June 2018, some aspects of the new legislation have propelled the industry far ahead.

One great stride forward was permission to sell insurance online. This aligned the insurance industry with other business sectors and “democratized” insurance, making it more accessible to all. 

Now at least a certain percentage of consumers can buy insurance contracts online. Brokers and advisors need not worry: in fact, the segment of consumers who shop on the Internet has simply replaced the clients who previously responded to offers received by direct marketing and other channels that bypass intermediaries.

In business the consumer clearly calls the shots. They decide what to buy and from who they buy it. Today, with the explosion of digital commerce, they are also deciding when to buy.

This is nothing new, although many advisors and brokers may think otherwise. As far back as May 2000, 18 years ago, Insurance Journal reported the results of a study shared by President and COO of Desjardins-Laurentian Life Group (today known as Desjardins Insurance), François Joly. The institution had just decided to sell life insurance in caisses populaires credit unions in a bid to replicate its success in P&C insurance sales.

Who should handle these sales, SFL advisors or the Desjardins employees? To resolve this dilemma, the financial institution surveyed Canadian consumers to better understand their behaviour.

They found that:

-          26% of consumers preferred to buy all their financial products and services in one place, namely their credit union, instead of from an intermediary 

-          23% preferred personalized service and wanted to have a representative recommend products and services to them 

-          20% considered themselves independent. They wanted to take the initiative and actively engage in the research process, consulting sources they found credible.

-          8% were receptive to offers by mail, telephone or the Internet.

-          23% were seeking personalized service and wanted advice, but had no preferences for a particular purchasing method.

Are these findings still valid today? More recent studies have clarified and fine-tuned the results.

Many institutions have used the results to bolster their marketing strategies. 

Bought without intermediaries, will these policies suffice to cover consumers’ needs?

It is up to ALL industry players, from the Autorité des marchés financiers to advisors and brokers, to make sure they do. How? The key is competition!

A parallel can be drawn with mortgage life insurance. Is it enough to protect a family after the death of one of the income earners? Certainly not. But it is a first step. The competitors or the institution selling the insurance must demonstrate this to their clients. 

Insurance Journal will explore this issue in 2019 by providing new information tools. 

Reaching out to millennials

A recent study by the Ontario Securities Commission found that Millennial Canadians – those in the 18-34 age range – are more likely than their older counterparts to be optimistic about their standard of living in retirement. However, the study also found that younger Canadians are the least likely to have started saving for retirement.

Another recent study by BDO Canada found that members of the Millennial generation are more likely than others to struggle to make ends meet. Eighteen per cent of those surveyed said they are delaying having children due to affordability challenges, while 64% said they are either poorly or terribly prepared for purchasing a home.

The OSC’s study also found that young Canadians are most likely to report high or very high levels of stress related to their finances. The regulator’s research says many members of this generation are at a life stage “where it is difficult to picture one’s future self”.

But, how are many Millennials both struggling financially while remaining optimistic about their financial futures? The OSC says it may be that younger Canadians – who are often dealing with student and mortgage debt while facing job precarity – believe that their “financial lives can only improve from where they are now.”

The role of advisors

The good news is that financial advisors can help them on the road to preparing for a solid retirement. Investors “particularly those who work with a financial representative or portfolio manager” were more likely to “report thinking and planning over longer time horizons,” the OSC study revealed.

Investing today is a lot more complex than it was a few decades ago when saving for the future would often mean a simple bank account with some GICs, advisor Susan St. Amand pointed out in an article from our April edition, Help your clients overcome financial shame. This means that advisors play a key role in helping their clients improve their financial knowledge, which is the key to empowering them to take control of their financial futures.

Advisors’ business model under pressure

The business model of financial advisors is being rocked by demographic and technological turbulence that has swept through the financial services and insurance industry, an Insurance Journal survey unveiled at the Insurance Convention in Montreal in November revealed. We predict that this high-pressure system will accentuate in 2019!

The insurance and investment industry is evolving, and advisors’ business model must keep pace. To serve all their clients’ needs in one place, advisors are teaming up with more and more professionals. Mortgage brokers have now surpassed accountants in popularity. Sixty-two per cent of advisors work with these brokers or hold a mortgage brokerage permit, versus 50% for accountants. (The survey was conducted among advisors based in Quebec.)

The business model of advisors is branching out and diversifying due to pressure from several factors. An obvious driver is the aging population, but also the needs of younger generations both in P&C insurance and in life insurance and investment.

Thinking like an entrepreneur

Despite this transformation, advisors are far from seeing themselves as entrepreneurs, although half of advisors forgo assistants. In life insurance, 57% of advisors go it alone. Among female advisors the number rises to 66%. Mutual fund advisors are leading the way: only 37% of them work on their own. 

Solo advisors from the independent channel who do not reengineer their business model will eventually be pushed out of the business due to several socioeconomic trends.

Clients at the heart of the equation

The industry has understood that it needs to offer clients what they demand and not take a one-size-fits-all approach. This trend has been apparent in the group benefits space. Instant underwriting and online claims, virtual healthcare and personalized services have surged to the forefront of insurers’ activities.

Manulife surprised the industry at year-end by extending its Vitality program to group insurance. Smaller insurers have not stayed on the sidelines either: At the Insurance Convention in November, Humania Assurance launched 5575, a product that targets baby boomers who lack group insurance coverage.

More than ever, advisors are harnessing technology to their advantage. Manulife Quebec President & CEO Richard Payette mentioned during his presentation at the Convention, the Vitality platform lets advisors multiply their interactions with clients, thus strengthening these relationships.

Technology: fear and optimism

All the same, participants who completed the Insurance Journal survey expressed many fears linked to robo-advisors and online insurance sales without representation. Surprisingly, these fears were shared by advisors of all ages.

However, their technology related anxiety did not discourage them. The advisors surveyed were optimistic that human relationships, the value of advice and their skills and expertise ensured them a promising future in a changing world. As one advisor told us, “Robots cannot replace human and emotional relationships! ... My clients are mainly looking for advice and want to discuss their situation, their plans, and want to ensure that they are making the right choices. The Internet is too impersonal.”