Traditionally, the insurance industry has underlined the service offered by its distributors. Tomorrow’s consumers, however, will be attracted to the emotional side of the protection they purchase.
This is the vision of Denis Ricard, executive vice president, Individual Insurance and Annuities, iA Financial Group. The Insurance and Investment Journal met with him at the end of September in Quebec City to discuss the future of insurance.
"What happens when a consumer buys insurance? He pays the premiums. Then nothing. We must try to create an interaction with the client. How do we do so intelligently? This will be done through the use of data, a little like Amazon," he said.
It is essential to connect with the emotional side of the client, he says. "When you buy a car, you feel an emotion just by trying it, or even just by seeing an image on the Internet. Same thing when you buy something on Amazon. How do you create an emotion? That is what the representative does. We will succeed online if we create emotions."
The insurer has its part to play in making this happen, says Ricard. "If we collect the data, we could tell advisors working with a young family what percentage of people with a similar profile have purchased a product. It will help them make sales pitches. This is our next challenge. "
For Ricard, it is imperative that insurance does not become a commodity. "It'll end up on Amazon if not. Uber is, above all, a technological platform that connects a customer with someone who has a service to offer. Could such a platform replace an insurance representative? Yes, but for a small part of the population. Not for the majority. "
50 vice-presidents surveyed
Over the past year, iA Financial Group surveyed its 50 vice-presidents across Canada to see how they thought insurance would be sold in the future. A large proportion of them said they expected digital sales to become more significant.
"We have many leaders who expect that it will be sold without a representative," says Ricard. However, this is not the position of the company. What we see, above all, is that consumers want to be self-sufficient in their research. This is especially true in property and casualty insurance. It is also the case for annuities and savings. For life insurance, this is less the case, given the complexity of the product. There is, nevertheless, a trend towards simpler and more accessible products for the customer."
iA Financial Group has also set up a direct sales team for insurance and annuities. Ricard ensures that this is being implemented while respecting the company’s existing distribution networks and that the intention is not to short-circuit them. The initiative is still in its infancy. He says he cannot draw any conclusions for the moment.
However, Ricard says there is a limit regarding what direct sales in life insurance can achieve. "It's a product that we have to convince people to buy. They need their hand held,” he said.
Twice the digital resources
However, consumers’ interest in online sales is growing. As an example, he advised his 27-year-old son, who has just bought himself a house, to buy mortgage insurance. He said he wanted to bring him to see a professional to do so. However, his son asked him if there was any way to do this online, without necessarily meeting someone.
"There are now so many things that can be done online. You can’t miss the boat on this. That is why we have doubled digital development resources over the past two years."
These investments will benefit iA’s distribution networks, says Ricard. "We must provide them with support and help them become more productive."
He added that the launch of the EVO online platform has been a phenomenal success with advisors, both in the insurer’s career network and among independent advisors. The advisor can now close the sale and give the policy to the client at their kitchen table. The policy is issued in 15 minutes."
Within two years, the insurer aims that two-thirds of its individual life policies are issued in this way.
Over the years, iA Financial Group has built a reputation as an innovator in the life insurance market. And this will still be the case in the future, says Ricard. The insurer wants to be a leader in the markets in which it is present, especially the family market. iA also intends to bring this innovation to its distribution networks.
"We also want to help them do an analysis of their own backyard, whether within our career network or the MGAs. We want to simplify their lives. "
One of the issues that advisors should question themselves on relates to their productivity. Ricard says it is not impossible that disclosure obligations imposed by regulators will force life insurance advisors to become more productive.
"They will have to generate more sales. They will have to spend more time with clients. As an insurer, we must give them the tools to do so. "
Ricard give the example of an advisor selling a Registered Education Savings Plan (RESP) to an out-of-town client who needs a signature. The advisor "can now do everything over the phone and online without having to travel, then send it to headquarters. It saves time by doing so. Advisors will have no choice but to be more proactive."
He also gave an example of the kind of tool an insurer can develop. iA Financial Group is working to build an online form that can be used both by the client and the advisor.
"So it must be very simple. This is our vision. We do it on the RESP side. Of course it will only work for simple products. We can’t do it for a more complex product like universal life."
He says that the consumer will want, above all, to get what he paid for. "It brings transparency that was not required before. Representatives should justify their remuneration. At iA, we are in favor of this transparency. However, care must be taken not to create a situation that could bring unintended consequences. "
Ricard said he is particularly fearful about banning embedded commissions. "It is clear to me that if this goes ahead, there will be people who will no longer be served. There is a big risk: that there would be fewer advisors.” People who are no longer served by an advisor would go to a bank to be served by the person at the counter. This is a major problem, and I remain convinced that there is a way to find a solution. "
He said he hopes that regulators will take note of what has happened in other jurisdictions, especially in the United Kingdom where an embedded commissions ban has led to a decrease in the number of advisors and the number of people with access to financial advice. He would like regulators to be open to discussion on this point.
"The better the communication, the better the solution,” he says. “The great danger here is that the regulator will act without understanding the consequences."
Ricard gives the example of the United States where there are many rules regarding what can be sold in a car dealership. "It's hard to sell insurance there, whereas here we sell a lot of extended warranties. This was an unintended consequence for US regulators. Is the client there better served? Clearly not. By also regulating the pricing, this made the insurance product no longer available. "
Online sales not cheaper
Ricard says he disagrees with those who say that online sales or robo-advisers are cheaper than the services of an advisor. He suggests a reason to explain his theory.
Acquiring the client costs as much if they come via the Web, he says "Google Ads are not free. Is the product sold cheaper online? Of course not. Because the cost of acquiring the client remains the same."
Ricard acknowledged that this may change in the future. The change will not be major, however, he said.
Regulation: banks and insurers are not treated in the same way, says Denis Ricard
Denis Ricard says regulation imposed on banks is much more lax than that imposed on insurers. Who oversees the bank? he asks.
There is the Ombudsman for Banking Services and Investments, but it has a much less teeth than the range of regulators in the insurance industry. "Fair treatment of consumers is very important for our regulators. We are very much in agreement with that.” However, the weakness of banking regulation compared to insurance regulation is unfair, says Ricard.
He underlines that several new regulations that have been implemented, particularly on the accounting side with IFRS rules, put insurance products at a disadvantage. "They become more expensive. That's why in Canada, all insurance companies have started to do wealth management. This is also why there is a stronger emphasis on acquiring companies, including distributors."
Ricard adds that iA Financial Group is not looking to acquire another life insurance company at the moment. As for its own MGA, National Financial Insurance Agency Inc. (NFIAI), he wants to continue to grow it, especially in individual insurance.
Access to distribution
Should insurance companies own their distribution? “We asked ourselves this question,” admits Ricard. When Financial Horizons Group was up for sale, he says they wondered who was going to buy it. He did not comment on whether iA Financial Group was one of the bidders. Financial Horizons was bought by Great-West Life last May.
However, Ricard says access to distribution is key. "When you have the distribution, it has great advantages. You have access to the product shelves of other distributors. You also secure your own product shelf. Nobody is going to pull the rug out from under you. Having all this, you can attract advisors to your MGA. This is why it will be more difficult for small MGAs in the future, who will not have as much access (to products)."
Doesn’t ownership by an insurance company raise questions about the independence of an MGA? Ricard says that NFIAI remains very independent. He acknowledges that not all MGAs are in this situation.
A major challenge MGAs face is recruitment. "They do not work enough on succession. Some do, but not enough. Canadians remain under-insured. Yet at the core, the MGA should build a business. In addition, consolidation is happening. Prices have never been higher among MGAs."
As for disclosure, he says the insurance industry is ahead of the game, compared to the mutual fund sector. He also says that the Client Relationship Model, Phase 2 (CRM2), on the mutual fund side, is a disaster.
"The information there can be misleading. Only part of the remuneration is disclosed. The playing field is not level at the moment, because banks do not disclose the same thing."