$20 trillion life insurance ‘protection gap’ needs addressing, says Swiss Re Canada CEO

by David Keelaghan28 Sep 2016

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.” 

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  • by Sean Long 2016-09-28 6:32:46 PM

    All too true indeed, BUT good agents need training and nurturing and as every field agent has heard for the last 10 years or so "There is no money in the budget for training". So you have an older generation retiring and a younger generation whom are given quick computer courses and taught to sell on rates only and SURPRISE you get what you get..Almost 20 years ago SwissRe Canada embarked on the most successful training and marketing of critical illness insurance ever seen. With seminars in every city across Canada showing not only the product but concepts that most advisers had never thought of or seen.Prior to that the product languished as too hard to sell and too expensive.Yet when advisers were educated and given concepts that were new to them sales soared and the CI product was outselling disability insurance for awhile..Then individual insurers jumped in and started investing capital into training all of their field agents, and brokers soon jumped on the bandwagon seeing new opportunities to see all of their clients all over again.Then the bean counters came, and shareholder return and new lower budgets set as the NEW GOALS, with little or no room for any education.Shareholder return was everything. Software was the answer to everything, price comparison became the be all, the new "Term Wars" was declared and all education came to a screeching halt.Of course advisers still get education credits to remain licensed by what only can be seen as Mickey Mouse courses that are short on content and mostly can be done online...So as all of the companies have raced forward to do more with less,why are you so surprised by the outcome? I spoke on this very outcome more than 10 years ago and nothing has changed.These are the short term gains that every reinsurer and insurance company wanted,lower costs more profits for the shareholders...This disparity will only continue until again some reinsurer takes the lead and agrees to help out their clients,"The carriers"into a new era of cooperation and partnership that will lead to better retention rates of advisers and a much more focused and dedicated field force..The time is right and you do not even need a new product to do it.But who or will anyone step up and do it,or are we still going to keep looking for even cheaper ways to sell less insurance over the next 10 years?? Or is another 10 year LIMRA study necessary to show us what we already know. Life insurance is still sold it is rarely bought.

  • by Delaney 2017-05-23 10:57:59 AM

    Your point about messaging is absolutely key here. To help people get the protection they need we have to simplify the way life insurance is explained, we have to reshape our communication in a way that resonates with them.