Sales of simplified life insurance are multiplying across the country as companies produce new products and easier-to-use applications – even artificial intelligence – and as more traditional life insurers enter the market thanks to refined underwriting.
At Canada Protection Plan, sales rose 55% from 2014 to 2015, says Michael Aziz, the company’s senior vice president of sales. While numbers had not yet been tallied for the 2015-2016 year, Aziz said “it’s well over 55%. And the why is because there is a need and we’re fulfilling that need.”
In fact, just last October, companies like Canada Protection Plan, Humania Assurance and Assumption Life, all came out with simplified products, each with its own twist.
Aziz said Canada Protection Plan’s latest life insurance product removes some high-risk illnesses, including certain kinds of cancers, allowing more people to get a higher level of coverage.
It also increased its maximums from $300,000 to $500,000 with no medicals, particularly important, said Aziz, for those who want to make sure their high debts are paid off should they die prematurely. “If you look at Toronto or Vancouver mortgages, a $500,000 mortgage is not uncommon anymore. So in the past, people who had health issues wouldn’t be able to get insurance to protect their mortgages or family and now they can get $500,000, no medical.”
Canada Protection Plan has also made changes to its deferred elite product. Typically, deferred products don’t pay out for the first two years, but do receive return of premium or return of premium plus an interest component should the insured pass away. Aziz said Canada Protection Plan’s new product offers return of premium plus 3% if the client should die in the first year. Passing away any time during the second year in a non-accidental death will give beneficiaries half the face value. After the two-year deferral period, it’s the regular 100% payout.
“This kind of opened up a new market for us because we wanted to differentiate ourselves from the competition and it made our product that much more palatable – at least there is a payout.”
No-medical life insurance
Assumption Life meanwhile, introduced a whole new suite of no-medical life insurance solutions. A highlight to the new products is an updated questionnaire which it classifies as being clear, simple and fair, using terms like “heart attack” rather than “myocardial infarction.”
Products like whole and term insurance can be layered together, with the same product restrictions, such as face amounts, age requirements and questionnaire, all of which can be submitted with one electronic application.
All of Assumption’s new no-medical insurance solutions are issued within 48 hours and include a living benefit (access to half of the death benefit if the insured is diagnosed with a terminal illness) and a transportation benefit in case death occurs more than 200 kilometres from the insured’s primary residence.
Quebec-based Humania Assurance’s offering introduced last fall is a simplified, instant-issue product, involving artificial intelligence (AI).
Humania began offering simplified products like life and disability about three or four years ago, said Stéphane Rochon, president and CEO of Humania.
But last October it introduced HuGO life insurance, a web-based (paper-free) process with no application signature required, personalized underwriting and no automatic requirements up to $1 million. Fewer than 15% of cases require fluids, depending on the person’s age and there is no doctor’s report required unless there is a reason to ask for one, said Rochon.
One of HuGO’s biggest attractions is that the majority of cases can be completed, including underwriting, in 15 to 45 minutes, said Rochon.
A regular life insurance policy can ask 55 questions with additional drilldown queries if necessary. Rochon said Humania starts out with only five or six questions during a pre-screening questionnaire on its website, then depending on the answers given a specific algorithm that leads to more questions – anywhere from 12 to 24 questions.
“When you’re looking at artificial intelligence and/or web-based underwriting, it means the machine will take decisions and/or specific actions and ask specific questions,” he said. If approved by the AI, the insurance can be issued within 45 minutes.
Rochon said Humania’s goal is to be 100% instant, web-based or simplified issue, with no paper required at all. “We’re moving totally digital on that one. And when you move digital, you go more into instant and simplified issue. Our goal is to get into the instant issue so it’s the usual products but issued right on the spot.”
Advisors still involved
Advisors are still involved – in fact, are often sitting with the client from the time the first questions are asked until the policy comes through.
All companies said they had experienced growth in the simplified market, but that does not mean they’ll replace traditional life insurance products, said David Stewart, executive vice president of managing general agency Financial Horizons Group.
An increasingly aging population has seen major growth in simplified sales simply because many clients, especially aging Baby Boomers, cannot or do not want to go through the hassle of medical procedures. Many may have originally bought traditional life insurance but now years later they’re not as healthy as they once were and so the need for additional, but simplified life coverage, said Stewart.
One of the trends he is noticing is the increasing amount of maximum insurance – from what was usually $25,000-$50,000 now going into the hundreds of thousands. “That’s now a credible amount of insurance.”
Awareness among advisors of simplified and guaranteed products has risen since the end of 2014, he said. “We’ve had situations where advisors were calling us up and saying they have people who are not insurable and what do they do? There were only a handful of products that were once available and [since then] it’s been a growth line for the insurers.”
Many traditional insurers now have simplified products available on their shelves. As well, insurers such as Manulife, Sun Life Financial and BMO Insurance have changed their underwriting requirements on their regular products and with restrictions, now allow occasional marijuana smoking to become a non-smoking designation. Manulife also became the first Canadian insurer to offer HIV life coverage of up to $2 million, saying it now considers HIV to be a chronic condition. Some are following suit.
More refined underwriting and a better understanding of certain illnesses and lifestyles is making all of these changes possible, said Stewart. The traditional way of getting insurance through a paramedical, undergoing tests and going to a physician if necessary has now been deemed too expensive, time-consuming and intrusive to clients.
“Giving blood and urine 10 years from now, in my opinion, people are going to laugh,” said Stewart. “They used to take x-rays on people for insurance and so [giving blood and other fluids] is an old way of doing things.”
Now the industry is going through rules-based underwriting, a similar situation that has taken place in the United Kingdom, said Pamela Kwiatkowski, associate vice president, individual life insurance and investments, at Assumption. “We’ve seen that here: you answer questions that will take you to more questions, which will take you to more questions, which will try to narrow the risk and do a rules-based risk assessment as opposed to attaining blood, urine and so forth. And that will continue to change.”
That doesn’t necessarily mean there are more questions being asked now – but the fewer the questions, the greater the expectation that the rate will be higher or there will be fewer guarantees.
What is crucial, said Kwiatkowski, is that advisors understand the questions.
“In a rules-based process the questions will determine what bucket their client goes into so they need to have a good understanding of what those questions are and what the insurer is asking,” said Kwiatkowski. “And that is pivotal to consumer protection – making sure the consumer gets the right product. Our mandate is to make sure our questions are clear, that we explain any definitions so the advisor and consumer understand what they’re answering.”
Stewart said in addition to the hard-to-insure, simplified issue has become very popular with new Canadians who want to get signed up right away with an easy-to-insure product. Permanent residents with working permits also are part of the growing simplified issue market, especially those who need to travel for more than 13 consecutive weeks, such as international consultants, said Aziz.
Kwiatkowski said there’s an underserviced market in terms of life insurance policies in Canada and it’s a challenge for both companies and industry to make sure they’re serving Canadians well.
She added that statistics have shown that 75% of Canadians want to buy insurance from an advisor – but perhaps over the phone or online rather than face-to-face, as can easily be done with simplified products.
Manufacturers of simplified issue products will continue to add to their roster of products in the future, predicted Aziz.
“We’re still kind of in the evolution phase ourselves. You’ll probably see something else from us by the end of the year with another improvement.”