Sales of simplified life insurance are brisk as on-demand millennials join many older Canadians and opt to skip medical tests required for traditional products in favour of a quick issue and less-stringent qualifications.
Simplified products were at first aimed at the seniors and hard-to-insure market, many of whom had health issues and couldn’t get traditional coverage. But insurers and managing general agencies (MGAs) say simplified products have now also attracted those who find the underwriting and doctor’s appointments arduous, those who don’t like to get blood drawn or those who are interested in extreme sports and can’t get insurance through traditional carriers.
“There’s a trend now and a change where the simplified issue market is also being geared toward the consumer who says: ‘I’m healthy but I don’t want to go through a medical, I can answer these questions and have my policy issued [quickly]. So it now covers both ends of the spectrum,” says Pamela Kwiatkowski, associate vice president, life insurance and investments, at Moncton, N.B.-based Assumption Life.
A number of insurance companies have taken a space in the simplified issue market, whether for the difficult-to-insure market and/or the younger crowd wanting fast and quick access to insurance. These insurers include: Assumption Life, Blue Cross, Canada Protection Plan, La Capitale Financial Group, Desjardins Insurance, Equitable Life, Foresters, iA Financial Group and Manulife. Some of the banks have also entered into the business.
Like some other MGAs, IDC Worldsource is a big proponent of simplified issue and is holding training sessions and orientations to familiarize advisors with the products, says Don Hart, IDC’s vice president of training and development.
Hart says IDC noticed only a gradual increase in sales of simplified products until a couple of years ago when product availability suddenly seemed to become more widely known. In 2014, IDC advisors sold about $34 million in simplified issue products, jumping to $87 million in 2015, he says.
IDC does business in the hard-to-insure market, so the growth in simplified issue is not out of step with the growing number of aging Canadians who can’t get traditional insurance. “Today, those advisors have a solution to that problem and they have been able to provide their clients with better products,” says Hart.
Unlike much rarer guaranteed issue policies which have no medical tests and no medical questions, simplified life hopefuls do have to answer a short medical questionnaire.
Easier sales process
What makes it simplified is the number of questions and relative ease of knowing almost immediately whether clients qualify. As the market for simplified issue has grown, so too has a much easier process, with many carriers now offering a non face-to-face, online system designed to attract the younger internet-savvy crowd. Carriers are also taking time now to seek the 20- and 30-year-olds who prefer to search and buy online and who are interested in insuring their mortgage or other debt, says IDC sales support specialist Sarah Fiorino.
The products have many similar characteristics – but also their differences. For example, premium payment periods and payouts vary as to issuing ages and whether they also offer joint life and other products, including critical illness. Limitations differ among insurer carriers, but can include terminal illnesses and Alzheimer’s, as well as cancer, heart attacks and stroke that don’t fall into a required term of stability.
Some companies like Assumption and Canada Protection Plan (CPP) have a series of laddered products with different levels of coverage. For example, CPP offers a plan for serious or other risk factors in which the client can receive a maximum coverage of $50,000; it does not pay out in the first two years unless death is accidental, says Michael Aziz, CPP’s vice president of sales.
Its deferred coverage is intended for clients with serious health conditions or who were previously declined for coverage; they can receive up to $250,000 coverage and again no payout in the first two years unless death is accidental. Two other simplified products – aimed at those with less serious health conditions, relatively good health or who enjoy extreme sports – offer up to $300,000 coverage and they pay out from the first day. If someone wants to offer blood and other samples, payout can be up to $500,000.
Some plans also allow the client to convert to a permanent policy without providing additional medical evidence under certain stipulations.
Simplified issue insurance policies have higher premiums than fully underwritten policies and some have reduced benefits. But Kwiatkowski says with seven different simplified products, Assumption’s aim is to ensure that most people who want a form of life insurance can get it.
“Our goal is to always ensure that when the client has that policy that, barring fraud, they have a promise to pay,” says Kwiatkowski. “That’s very, very important to us.”
Policies do ask if clients have been declined for any kind of life insurance coverage and if so, that generally means clients will get less coverage, if at all, or wait out a time period, depending on the situation. It may also mean they have to go the guaranteed route, where the payouts are not as generous.
Some advisors have also started leveraging simplified life insurance. Take an advisor who fears her client may be declined for a traditional product or has to wait out a term of stability. The advisor will suggest to the client that he buy a simplified product now and down the road try to purchase a traditional product for greater coverage. If the traditional route holds, the advisor can cancel the simplified life product.
“A lot of advisors use that strategy,” says Aziz. “We have seen (cases) that had the people come to us prior to being declined by a traditional carrier they would have qualified for a [different CPP] simplified product. But because they were declined by a traditional carrier, they have to answer yes to that question and they are only going to get deferred coverage.”
Fiorino says advisors also sometimes use simplified insurance as an interim measure for adventuresome clients who like to scuba dive, go bungee jumping or travel to dangerous parts of the world. When they finish their trip, they may come back and opt for a traditional carrier, says Fiorino.
Joseph Trozzo, vice president of sales with Qualified Financial Services (QFS), says his MGA – and others – are being proactive about selling simplified insurance products. “We have a formal program now that if we see a decline…then we will seek out if there is a solution for the advisor and go back and say: ‘you couldn’t get this plan, but here’s a solution that makes sense,’” says Trozzo. “We want to be proactively promoting a solution for a client that outlines the need that they want some insurance coverage.”
Even though many of the simplified products are sold on a non face-to-face basis, most carriers prefer sales go through advisors who will help guide clients through the various simplified and traditional offerings.
Advisors typically meet with clients beforehand to conduct a needs-analysis and determine the best course of action. They should use the time both before and during the sale of a simplified issue product to determine whether other family members may need some kind of life or living benefits insurance, says Kwiatkowski. With the growing number of products in the simplified issue space, clients may now have access to products they couldn’t previously.
Trozzo also says it’s critical for advisors selling simplified insurance to make sure they are disclosing to potential purchasers what the policy will and won’t do, particularly when the policy will pay out and when it won’t.
The good news for the industry is that many believe simplified products will only gain in popularity with the two largest demographics: the aging baby boomer and the real estate-hungry millennials. “We are underinsured in this country and consumers have a lot of debt that needs to be protected through life insurance policies. With the awareness of these products the sales will follow,” says Kwiatkowski.
And sales will not only continue to rise at home, says CPP’s Aziz. He believes that simplified products for CPP, which currently has about 40% of its business in Quebec, has great potential south of the border.
“We actually have huge growth opportunities in the States. I think you are going to see a lot of good things coming from CPP in the next six to nine months.”