Sales of critical illness insurance (CI) in Canada have been spiking higher thanks to greater demand by a younger demographic, more understanding of the benefit among a higher number of clients as well as the introduction of more simplified CI plans and those with added value.
In fact, CI sales have been steadily growing in Canada since 2015. According to LIMRA, CI premiums rose eight per cent last year in Canada and were up a similar amount for the first quarter of this year. Most of the sales in the first quarter came from permanent products; limited period level products were up slightly, but renewable products were down.
According to LIMRA, sales of CI sales in this country are not even all around, with the independent distribution network and national accounts doing better than career-agent insurers.
While policies vary from company to company, CI insurance typically covers illnesses and diseases such as cancer, heart attack, stroke, blindness, Alzheimer’s, multiple sclerosis, organ transplants, kidney failure and paralysis. The main benefit to clients is that they receive a lump-sum payment on the basis of their illness.
And many advisors are taking it on, although the reasons and markets for the increase are varied. For example, Justine Zavitz, insurance advisor with Zavitz Insurance Inc. in London, Ontario says she’s seeing an increase in her 30-45-year-old group of clients, most of whom are just starting a professional life after a number of years in university. They’ve been looking at friends and family who have become ill recently and don’t want to end up in the same financial position.
The sales are coming despite the fact that Zavitz believes more insurers are making modifications to policies (and therefore higher costs) following the enactment more than a year ago of the Genetic Non-Discrimination Act. The Act makes it illegal for an insurer or employer to require a person to undergo genetic testing or release the results of previous tests as a requirement to get insurance or any other contract agreement.
“When you talk to the insurance companies about this they tell you that no, in fact their rates of approval without modification have gone up…. [but] I look at my own experience, it’s almost like hitting my head against a wall to get contracts issued without modifications for my healthy 35-year-olds who want this kind of coverage. Now I’m telling the 29-year-olds that I talk to get the coverage now …and that their parents, brothers and sisters have to stay healthy too.”
CI sales have been steady in Tina Tehranchian’s office because of her holistic financial planning credo. Whenever there is an analysis or a stress test of a client’s financial plan CI is always on the agenda. “So that’s part and parcel of every financial plan that I do and all of my clients have a financial plan. We do an assessment on the CI and if there’s a deficiency then absolutely we’ll have a discussion about funding that with a [CI] insurance policy.”
Tehranchian, a Toronto-based branch manager and senior wealth advisor at Assante Capital Management Ltd., says CI can cover a wide array of income levels.
She uses CI for middle-income earners because they may be carrying large mortgages but have small emergency funds and would have to dip into their RRSPs and other assets should they fall ill and be unable to work.
But Tehranchian also notes that many high net worth clients don’t have the financial wherewithal to withstand the loss of income if they become sick either.
“They have huge assets but it’s all invested in real estate and hedge funds and things that are not liquid. Then we will discuss critical illness coverage because it provides liquidity and they will not have to sell illiquid assets and sell these assets at ‘fire sale prices’,” she says.
A number of parents and grandparents are also now buying CI insurance for their children. If a child becomes ill, at least one parent needs to take time off to be with the child and the CI benefit will help out, says Dean Chambers, vice president Individual Insurance at Sun Life Financial.
This way, says Chambers, the parents can be with their children without worrying about the fact that their own income has been put on hold.
Meanwhile, Chambers says Sun Life has seen some growth in CI sales over the past year, mostly on the permanent side, with a slight decrease for the term product. Most sales came from the insurer’s career sales force working with the family market and professionals.
“The product continues to see modest growth,” says Chambers. “I wouldn’t say there’s been a lot of innovation in the product to drive significant growth. It’s getting a little more price sensitive than we’ve seen over the last few years.”
Chambers notes that some manufacturers made some price changes earlier in the year and the overall increase in CI sales may be attributed to “a little bit of a fire sale” to get some policies in before the increases went into effect.
CI sales at BMO Insurance were up about 4 per cent in the last year, a situation Steven Cooney, senior vice president, head of Individual Life & Annuities, characterized as “healthy.”
Cooney attributes the rise to some value-added features that BMO has added to its CI product, which gives clients access to Best Doctors and Personal Assistance Services. These benefits allow people to find a medical specialist and a range of assistance services so clients can focus on their treatment and/or grief counselling.
Cooney believes there’s been a greater awareness of CI coverage stemming from advisors who make talking about CI part of their regular conversations when discussing a full financial plan with clients.
“My hypothesis is that we cover all their protection needs and critical illness when it’s appropriate to have the conversation.”
Phil Marsillo, president of IDC WIN, says one reason for the uptick as far as the managing general agency (MGA) is concerned, is that it has been putting more emphasis on living benefits, and CI in particular.
Training sessions have always included a discussion with clients about CI, says Marsillo. In particular, IDC has been telling advisors not to focus on the big numbers when it comes to CI. “In other words, don’t focus on paying off the mortgage. Maybe instead focus on making sure their mortgage payments are covered during the period. So it becomes a little more affordable – it addresses more the need on a monthly basis for the clients. That’s what I think might be happening,” he says.
QFS Canada has also been increasing awareness of CI with an intensive sales training program, says Joseph Trozzo, who at the time of the interview was the MGA’s executive vice president, but has since joined another company.
Simplified CI programs
But another reason has been the recent surge of simplified CI programs: “More and more Canadians are looking at critical insurance because they don’t have to go through the rigors of underwriting. In some cases, family [health] history has been alleviated when some of the simplified solutions are available.”
Carriers vary in what they cover when it comes to CI. Some say four or five conditions have to be met, while other plans, like permanent insurance covers 22 to 25 conditions. The problem for many people is that there is a lot of medical underwriting and tests and many are opting to look elsewhere.
“Simplified has opened up a brand new market for many advisors,” says Trozzo.
Humania Assurance has also seen a spike in CI products recently and it’s been because of its simplified products, says Michael Suska, Humania’s national sales director.
“It’s a great combination of clients who may have been through underwriting or maybe their health has prohibited them from buying insurance the traditional way. They don’t need to go through a long underwriting process to get this product in place. It’s 10 minutes from beginning to end.”
Suska says when Humania offers a standard life insurance policy through its online automated underwriting process, it can also make an on-the-spot offer for CI. “We’re not upselling – we’re saying: ‘Humania likes you, Humania thinks you’re a good risk. They’re offering $25,000 of critical illness insurance – are you interested?’ The person can then make a decision on the spot.”
Humania also distributes its products to independent advisors, who he says are presenting the concept of CI in a more meaningful way to clients.
Suska also says that this fall, Humania will be introducing an online product with CI as its base that is focused on the baby boomer market.
Most advisors are selling CI to their clients who already have other insurance – including disability and life, says Trozzo. The disability provides the client with funds to cover monthly costs, while the lump sum from CI provides them with choices of healthcare or the ability to stay off work a little longer.
Tehranchian says she rarely sells 10-year term CI unless the client cannot afford the premiums. Her experience has shown that level-to 75 works well for most clients on top of which she usually puts on a return of premium rider on death – and if they can afford it – a return of premium rider on surrender.
Like all forms of insurance, no one plans for critical illness and the day they are diagnosed with cancer or suffer a heart attack, says Trozzo.
“But if you can remove the financial stress that just compounds the illness it just improves the chances of survival for them.”