Trends in Canadian Life Insurance
Tuesday, March 19, 2013
The life insurance industry is one of the largest contributors to the Canadian economy, with over $570 billion in assets held in Canada and with a workforce of approximately 140,000 people. It also insures a large number of Canadian lives and allows numerous families to survive financially when a loved one passes away.
The Canadian life insurance industry is undergoing some changes, a few of which will be described below:
- Canadian governments are placing more regulatory pressure on life insurers. For example, pressure is building to have more detailed audits of life insurers’ accounts, and for insurance agents to fulfil more stringent conditions to become licensed.
- Following the worldwide economic downturn of 2008, the Canadian life insurance industry is on the recovery path with an increase in the number of policies sold in 2012 over 2011.
- More life insurers are beginning to offer Non-guaranteed Permanent Plans in order to remain competitive. These are plans that cover the whole of the insured person’s life, but with premiums being adjusted up or down depending on market conditions.
- Correspondingly, to stay competitive, many insurance companies have increased the cost of their permanent or universal life insurance policies. These are policies that cover the insured person’s whole life, but with premiums whose rates are fixed upfront. Since market conditions like low interest rates render these policies unprofitable for insurers, many companies have either increased the cost of the policies or discontinued them altogether. This is likely to remain the case for as long as Canada’s interest rates remain at an historic low.
- More life insurers are starting to sell directly to the public instead of through brokers alone. They can reach the public directly especially through their websites, where they can explain their policies and make it easy for potential customers to contact them directly.
- Following widespread publicity of the practice of caregivers taking money from their elderly charges, many Canadian insurers now offer life insurance packages especially geared towards older people. These policies allow the elderly person to insure her life to guarantee that her final expenses are covered and that her designated persons can benefit from her final legacy.
- With the increase in life expectancy and long-term disability due to heart conditions, strokes and many others, Canadian life insurers are devising a whole range of more creative schemes that pay out not only upon the insured person’s death, but that can also serve as income replacement schemes in case of serious disability or critical illness.
- While the sale of life insurance policies to third parties is still prohibited in the majority of Canadian provinces, companies in the rest of the country have started to sell settlement policies. They first buy the life insurance policy of someone diagnosed as terminally ill, pay out a lump sum to that terminally ill person, continue to pay the premiums to the original life insurer and then collects the proceeds when the insured person dies. This allows the terminally ill person to live her last few years in dignity.
As can be seen here, the Canadian life insurance industry is adapting to consumer demand and other market conditions to remain competitive and to continue to provide the Canadian population with the plans that suits their needs.