The commission ratio for nearly all types of life policies was up in 2024 from the previous year, with term life sales leading, according to the Canadian Council of Insurance Regulator’s (CCIR) 2024 annual statement on market conduct. The findings included both direct and independent sales channels.
The commission ratio, or commissions paid compared to total direct written premiums, was higher for term life policies than whole or universal life. Term policies sold directly had a ratio of 21.4% (up from 19% in 2023) with policies sold independently at 22.5% (up from 21.6%).
Whole life policies sold independently saw a significant rise in commission ratio to 10.1% in 2024 from 6.7% in 2023. However, directly distributed whole life policies was the only category in which the commission ratio fell, to 4.6% last year from 5% in 2023.
Commission ratios for independent distribution were higher than direct distribution for universal, whole and term life.
Term life insurance also led in monetary incentives paid as a proportion of premium volume, at 22.1% ($928 million) last year, compared to 11.6% ($502 million) for universal life and 9.7% ($1.7 billion) for whole life.
At the same time, non-monetary incentives were minimal for universal and whole life, but 9.6% (or $403 million) of premium volume for term life.
In total, Canadian insurers sold 481,052 life and health policies in 2024, up 38,424 compared to the year prior. The claims ratio, or the amount of claims compared to direct written premiums, fell steadily for individual life insurance to 35.5% last year from 37.4% in 2023 and 44.3% in 2022. The claims ratio remained stable at 51.8% for group life insurance.
Annuities’ claims ratio fell for both individual (to 12.9% in 2024 from 37.9% in 2022) and group annuities (to 9% last year from 19.9% in 2022).
The claims rejection ratio remained stable for all categories of individual policies from 2022 to 2024. Last year, the individual life rejection rate was 1.1%, 23.8% for accident and sickness and 0.6% for annuities.
However, the rejection rate for group life policies ticked up to 3.6% in 2024 from 2.7% in 2022, as well for group accident and sickness policies, which increased to 14% from 11.3% in the same period.
The average number of days it took for an individual life insurance policy to make a final payment increased to 37 in 2024 from 26 in 2022, with the comparable figure for group life insurance rising to 37 days from 34 days.