Canadians Aren’t Confident They Have Enough Life Insurance
It’s no secret that the majority of Canadians don’t really understand life insurance. And now there’s a survey to confirm that trend.
BMO Insurance released a poll in mid-july 2014, showing that 88% of Canadians are not very familiar with the different types of life insurance. In addition, while 74% of those Canadians polled have some type of insurance either through their employer or personal policies, 70% of those people are less than confident that their life insurance will provide enough money to take care of their family and loved ones when they pass away.
Add to that a Deloitte survey conducted earlier this year that revealed that 62% of uninsured individuals have not received an unsolicited offer to buy life insurance in the past year, compared to 44% of insurance buyers. Plus, only 30% of people without insurance say their employer doesn’t offer life insurance as part of their benefits package. Those uninsured also said that 66% of them had not looked for life insurance by their own initiative, while 46% of buyers said the same.
Not only are most life insurance companies not dealing directly with perspective clients, choosing instead to distribute their products through agents and financial planners, but also, advisors aren’t accurately gauging their prospects’ level of insurance knowledge before selling to them.
“Understand where the client is coming from,” Rocco Casullo, BMO’s head of direct-to-consumer insurance, told Investment Executive when interviewed on the survey results. “Are they prepared? Are they not prepared? Does it seem like they’ve done a bit of the research up front on what they’re looking for?”
But it’s not enough to just find out what the client is looking for. Casullo also recommends finding out why potential clients are getting life insurance in the first place and what goals they are trying to achieve with the purchase. For example, is it being used to cover immediate financial concerns or is it more for long-term aspirational goals?
Part of the reason advisors are failing to ask the right questions has to do with not receiving the proper marketing support and education from the carriers.
“Part of the challenge facing carriers is how to work more proactively with their agency force to provide the tools, marketing and advertising support to better educate consumers about everything life insurance can do for them and their families and create more demand for their products and services,” said Sam Friedman, Deloitte’s Research Insurance Leader.
The BMO survey pinpointed the top three reasons consumers buy life insurance: either they don’t want to be a burden to their family when they die (53%), they feel a responsibility to have it (49%), or they were told by their family and friends that they should have it (16%).
But it is very hard for advisors to penetrate the market — particularly when it comes to the baby boom generation who do not respond well to unsolicited sales approaches. About 70% of buyers age 50 and older say that such tactics don’t affect their decisions as much, compared to only 12% of those age 26 and under. The same stats were apparent among the uninsured as well.
“Among a variety of other steps, insurers are getting more involved in social media to highlight to a younger generation especially the importance of financial protection,” American Council of Life Insurers spokesperson Jack Dolan told Insurance Networking News.
In fact, LSM is among those looking to connect on Twitter, so why not follow us and stay up to date? The trend towards social media is an important one, as the Deloitte study showed. About 32% of current buyers and 27% of non-buyers did a general web search about life insurance, while another 21% of buyers and 16% of non-buyers had surfed specific insurer websites. In addition, 8% of buyers and 10% of non-buyers had surfed insurance agency websites.
The survey further revealed that 45% of non-buyer respondents included life insurance among their top five financial priorities and 21% ranked it in their top three. Life insurance ranked even more prominently among those who already have life insurance with 70% putting life insurance among their top five priorities and 34% included it in their top three.
But the importance of working with a broker to coach you through the application process was also highlighted, as its complexity is a major deterrent to people buying insurance. About 26% of respondents found the application and underwriting process too difficult, according to Deloitte.
“The process could be discouraging many prospects from going through the application process because invasive medical tests may be required, such as blood and urine tests,” Deloitte’s Friedman said. “In many instances, insurers can make the process easier and faster by using predictive analytics, eliminating the need for invasive tests for many prospects and speeding up the sale without compromising the integrity of the underwriting process.”
According to the more recent BMO survey, this is especially true in BC, where only 62% of respondents said they had had a life insurance policy. On the other hand, Quebec is the most insured province in Canada, with 85% of respondents to the survey saying that they own a life insurance policy.
But it’s important to note that only 1,005 Canadians responded. So it is by no means the complete picture of insurance ownership in Canada. Still, it does give at least a small picture of the market landscape in this country. The data for the BMO survey was collected from online surveys conducted by Pollara between July 2, 2014, and July 4, 2014.