Those who are concerned about a decline in life insurance coverage among Canadian households will surely find some relief from LIMRA’s latest research.
In the 2019 Canadian Life Insurance Ownership Study — Household Trends Report, LIMRA said that the number of Canadian households with life insurance coverage has increased since 2013 to reach 12.6 million. With that growth in volume, penetration throughout the population has remained at a decent level, with more than two thirds of households having either group or individual insurance.
“I feel very confident about our report’s findings,” said Jim Scanlon, senior research director at LIMRA. “They’re consistent with trends in the Canadian economy and the population overall.”
The data showed that the number of households with individual life insurance coverage has grown 41% since 2013, while those with group insurance have increased by 35%. From Scanlon’s vantage point, that growth makes perfect sense as the 2013 numbers are symptomatic of a lingering contraction following the global financial crisis; a few years after that, Canada’s economy would be sent reeling by a collapse in oil prices that smothered Alberta’s booming energy sector.
“If you’re an employer facing financial difficulties, you might cut back employee benefits, or reduce your manpower,” Scanlon said. “But as soon as you’re in a better financial position, you’re more likely to hire people, add benefits, and make life insurance available as an employer-paid perk.”
In 2013, the unemployment rate in Canada stood at roughly 7%; as of September this year, Statistics Canada reported the number at 5.5%. With that growth in employment, more households have become not just eligible for group life insurance, but also able to pay the premiums for individual life.
“We also found an increase in life insurance ownership among lower-income households,” Scanlon said, clarifying that the report is silent on coverage amounts. “There’s also been a jump in individual life ownership among those under 35, and we know it’s not just from a broad economic rebound from 2013 because the ownership rate in that segment is actually higher than the pre-crisis 2006 figure we have on record.”
That leap in ownership among the pre-35-year-olds, to Scanlon, reflects the traditional increased propensity to buy life insurance as one starts a family. In line with that, LIMRA found a rising prominence of income replacement as a reason for life insurance ownership; the top reasons — final expenses, seeing it as a necessity, and for wealth-transfer purposes — remain unchanged from the organization’s 2013 study.
“Getting life insurance as an employment benefit has also become one of the top five reasons for ownership in this year’s survey,” Scanlon said. “The fact that it’s become more available in the marketplace for a variety of reasons is a great thing for the industry and the consumers. But it’s only a partial solution; we’ve found that those with both individual and group life insurance have the best level of financial protection.”
Learning that people benefit from two different forms of coverage may sound like a blinding flash of the obvious. But the fact is that only one in four Canadian households surveyed own both individual and group life — the same level as in 2013.
That gap may be due to the inherent complexity of life insurance as a product. According to LIMRA, Canadian consumers struggle to decide on the right insurer, the amount of coverage they need, and whether they should get term or permanent products. The need for qualified education and guidance is also apparent among three quarters of Canadians households with life insurance, who said they bought it from an insurance advisor, agent, broker, or other financial professional.
“There are other sources of life insurance available right now, but the Canadian space has historically relied on agents that provide education and other valuable services,” Scanlon said, acknowledging the use of online platforms by a minority of consumers. In Canada to this date, they largely prefer to work through agents.”
“Over time, the carriers will learn more about consumers’ needs and develop a mix of different distribution options that provides a balance of utility and economy,” he continued. “I think it’s really more a question of consumer preference than technological capability.”