Industry News

A steady increase in life expectancy has individuals more concerned about outliving their money than dying prematurely

By Megan Harman |

Far fewer Canadians are buying life insurance compared to three decades ago, and the industry must take steps to simplify products and engage younger consumers in order to boost sales, industry experts said on Tuesday.

At the LIMRA and LOMA Canada Annual Conference in Toronto, Robert Kerzner, president and CEO of LIMRA, LOMA and LL Global, Inc., pointed to statistics showing that the percentage of Canadian households that own individual life insurance policies fell to 43% in 2013, from 59% in 1982. Ownership of group insurance policies fell to 50% from 56% over the same time frame, and total ownership fell to 68% from 78%.

Despite these declining ownership patterns, however, survey results show that 33% of Canadian households would face immediate financial struggle if the primary household breadwinner were to pass away, and another 32% of households would only be able to last a month or two.

"There is still a need," Kerzner said. "You basically have 65% of the households that have an immediate need, and yet less of them are covered for insurance."

Part of the reason that fewer Canadians are buying insurance, according to Kerzner, has been the steady increase in life expectancy over time. In 1900, 75% of people died before age 65; whereas today, 70% of people live past age 65.

With a greater likelihood that Canadians will live well into retirement, individuals are far more concerned about outliving their money than dying prematurely. As a result, life insurance has fallen considerably lower on their list of financial priorities.

"People are much more afraid today of living too long; not dying too soon," said Kerzner.

Another key reason that people don't buy insurance, according to research by LIMRA, is that they think they cannot afford it. In reality, however, that's likely not the case: when asked what they think insurance costs, many consumers cited premiums three to four times higher than the actual cost, Kerzner said.

Other reasons that Canadians are not buying insurance include competing financial priorities, lack of knowledge, and procrastination.

"People are confused," said Kerzner. "There are too many choices, they're not sure what the right one is for them."

The insurance industry must try and simplify products in order to make them easier to understand, and less intimidating, said Louise Mitchell, senior vice president, life and health, TD Insurance.

"As an industry, we've created complicated products," she said. "We need to have simple products. If you want to get at the mass market, the reality is, they are starting out with simple products, and that's where we should be focusing our efforts."

The industry should also take steps to simplify the application and purchasing process, said Rino D'Onofrio, president and CEO of RBC Life Insurance Company.

"Simplification is a critical component to achieving and reaching the middle market," D'Onorio said. "It's not just simplification of the product design. It's simplification of the whole process…how you go through underwriting, how you interact with them. Even things like the policy wording and the marketing materials. It has to be very simple and straightforward."

It's also important for the industry to do a better job of targeting younger consumers in order to halt the downward trend in life insurance ownership, according to speakers at the conference. Although individuals may have limited life insurance needs when they're young, they can become valuable, loyal clients as their needs grow and evolve over time, said Mitchell.

"You have to start them young," she said.

To successfully engage younger consumers, the industry must utilize new channels of interacting with clients, such as online chat tools and social media. However, Kerzner said the industry must not ignore the traditional face-to-face distribution channel in pursuing younger clients.

"Everybody believes the X and Y generations don't want face to face [advice]. In our studies, they're not much behind their parents in saying that they do want face-to-face [advice] for financial decisions," Kerzner said. "They still want advice, they want help."