It’s Life Insurance Awareness Month in the United States, but the reasoning for the campaign is equally relevant here in Canada.
Organised each year by the non-profit Life Happens group, the goal is to promote the need for families to be properly protected against unforeseen events.
Global reinsurance giant Swiss Re is a member of Life Happens and is working to address this reluctance by the public to purchase life insurance.
President and CEO of Swiss Re Canada, Veronica Scotti, believes this is a growing problem right across North America.
“Both the U.S. and Canada markets have had a decline in the penetration of insurance, particularly on the life and health side,” she says. “People are protecting their life and health less, and that’s a worrying situation. The only explanation we can come up with is that people are not understanding the value of that protection, or they find it very difficult to engage with insurance companies.”
This phenomenon is known as the protection gap, which is defined as the difference between the resources a family has and what they would need if the primary breadwinner were to die. According to head of New Solutions Group, Swiss Re Americas, JJ Carroll, this shortfall is immense.
“The protection gap in the U.S. and Canada is more than $20 trillion,” she says. “We have to ask how we create value for consumers with the products that we offer. The question is what is the cost of insurance? That’s not a dollar amount, because in reality it’s really quite cheap. It’s that friction in actually buying insurance.”
With wages stagnant and the cost of living rising sharply, it’s not surprising that many consumers are being more frugal when it comes to their spending. Some costs are essential, however, and life insurance is one such expense, in the opinion of Swiss Re Canada’s CEO.
“We all have cognitive bias and these biases drive consumer behavior,” says Scotti. “Some people think nothing of spending $100 a month on Starbucks coffee, but to get protected is even less than that. There is a positioning problem, so we need to make insurance a lot easier to engage with and then keep that protection over time.”
Is Manulife class-action settlement a sign of the low-interest times?
New app may help avert health budget crisis