As we approach the end of 2021, ongoing discussions are revolving around the impact of the pandemic on the Canadian insurance and financial landscape, clients, and insurance providers. How do we manage all the recent changes, continue to improve, and tackle any new challenges that may come from initiatives which will be undertaken in 2022?
But first, let us reflect on the last two years and the lessons learned that can be carried forward into the new year. Over the course of the global pandemic, we have seen a prioritization of digitization for carriers, MGAs, and life insurance distribution. Projects that were originally a couple of years out were moved to the front of the line, as they facilitated business maintaining its pace during the pandemic.
There has been an uptick in insurance sales. According to PolicyAdvisor, 44% of Canadians plan to buy or have bought life insurance because of the pandemic, 64% of Canadians believe life insurance is one of the most important types of coverage during the pandemic, and 63% think that owning life insurance is more important to them now than it was prior to the pandemic. Survey results from Life Happens, published by LIMRA, showed that 31% of US consumers were more likely to buy life insurance due to the pandemic, and LIMRA reports indicated that life premiums had a 21% year of year increase in the second quarter.
A Deloitte study found that companies with the strongest digital presence and algorithm-driven underwriting have seen an increase in online life insurance sales from 30% to 50% since the start of 2020. There has been an increased focus on the client, which has involved additional touchpoints with people to see how they’re coping during these times. As insurance and finance are key components to stabilizing the economy and keeping people secure, figuring out how to meet the public’s needs, work efficiently, and leverage digital options to maintain client support and new sales have been emphasized.
There has also been a learning curve for Advisors and clients on how to adjust to online meetings, digital document sharing, and communicating in a non-face-to-face reality. Given all that, Advisors have reported an increase of inbound requests for information from their clients on coverages and how policies work. Companies have reviewed operations and processes that support sales and the administration of insurance and insurance applications, introduced changes to the methods of obtaining medical evidence, and relaxed underwriting requirements by raising non-medical coverage limits.
Consequently, MGAs and Insurers have been committed to maintaining high-functioning operations. These companies not only insure/protect clients but also employ more than 155,000 Canadians (CLHIA Annual Report). As a result of the daily changes the pandemic has caused, the industry has had to ensure operational functionality as quickly as possible.
While the pre-pandemic insurance industry was still a largely paper-based sector, and the client and distribution side typically operated in a face-to-face style, there was an appetite to move to something more digital. The pandemic expedited that transition and made it necessary to reimagine how to sell and distribute insurance. The result of the pandemic has been unique in the amount of disruption and in the reach and degree of change we have seen. Living in unprecedented times has forced us to think about past periods of unpredictability within the life insurance industry.
During times of widespread uncertainty, people typically look at their overall financial status and insurance coverage, and we commonly witness an uptick in insurance sales. Historically, the industry has observed changes in products, buying habits, and distribution methods.
- Buying Habits: Through the years, buying habits and interests change, for instance, migrations from Term insurance to Whole Life products and a maturation to comprehensive needs-based selling. However, in times of disruption, economic instability, and health crises, we see increases in insurance purchases. Client groups may also act differently. We see some purchasing larger policy amounts of insurance and a higher number of the younger demographic purchasing coverage. In times of financial sensitivity, we see a greater proportion of sales that are Term coverage and employee demand for and utilization of group benefits. In general, insurance has extended from solutioning for family needs to business needs, including stabilizing partnerships, efficient tax planning, and promoting wellness.
- Products: With both the influx of digital solutions and a health crisis, we’ve seen recent growth in direct-to-client solutions and online- or call center-purchased life products which involve more awareness, education, and modernization of group health-related products. Currently, employers are promoting the wellness aspect of their group benefits to best support their teams. There is a focus on mental wellness and health applications/services and a shift to having benefits programs actively promote a healthy lifestyle and balance through learning opportunities, additional treatments, health apps, and the availability of medical advice. An area to note is the increasing collaboration between technology/fitness platforms and insurance. You can opt to share your personal data, qualify for preferred rates, or simply be granted additional products and apps as an extension of an insurance purchase. In addition to life and health insurance solutions, we have seen “risk pooling” products and, on the P&C side, the birth of “one-time-use” insurance.
- Distribution methods: Even pre-pandemic, we saw the introduction of direct-to-client sales through digital solutions, insurtech, call center operations, and web-based offerings. The effectiveness of these methods has been underscored during the pandemic. There are many who look to research products and those who recognize the value of seeking a broker’s guidance. As such, we have seen digital improvements in presenting information, more interactive websites and online applications, and both insurance and tech firms improving the tools available for Advisors.
These and other changes have impacted the industry over time and have been driven by factors including
- Innovation
- Consumer needs
- Market differentiation
- Longevity and life expectancy
- Economic trends
One can argue that although behaviors are predictable regardless of the circumstances and contributory factors, the pandemic has accelerated certain activities on the part of both the industry and its customers. Some of the observed outcomes of pandemic activities include
- Net result: As the industry gained more ground in the digital space, making insurance more accessible to the younger generation has led to more exposure to protection offerings, which, in turn, has led to an increase in life insurance sales to that market.
- Our clients: The pandemic has ignited a re-evaluation of how clients spend and save their money, how they take care of others in their lives, and how these factors connect to insurance.
- Digitization: A drastic migration to digital services has occurred across every point of customers’ lives—healthcare, shopping, food, education, insurance, and so forth. Organizations have had to upgrade their digital offerings while maintaining security levels.
- Foresight: Having lived through a pandemic, we cannot know what would have happened if we had not. Still, it begs this question: have we seen greater success, better access to capital, and a wider reach to audiences for insurtech and fintech because their solutions were solving a need for digitization that became urgent? Data indicates that we have seen 20.1 billion in Private Equity for health innovation, which is more than double that at the same time last year. If we look at Canadian innovation and digital growth as an indication of what is to come (not specifically for insurance only), 2021 has marked an explosion of investment and a recognition of Canadian ability. Genome released their 2021 Global Startup Ecosystem Report in September, which noted that the Toronto–Waterloo tech corridor made significant advances and placed 14th in Global Ecosystem Ranking, moving up four spots in 2020. This increase was attributed to gains in performance, funding, and experience. It also ranked in the top 10 of the Global Ecosystem Funding category and in the top 10 of the North American Ecosystem in the Talent and Experience category.
In addition to the above, we have observed that people have learned to adapt and to do so quickly. For the insurance industry, it is yet to be seen how altering underwriting limits, changing selection processes, and modifying distribution channels impacts claims and client distribution in the long-term. What we do know is that while operating in an agile capacity is challenging for many types of organizations, the pandemic has highlighted the need to constantly evolve, change at the pace of our clients’ needs, and function in the most agile ways possible.
