For better or worse, 2020 has been a year of disruption in the life insurance industry. The COVID-19 pandemic has forced a revolution – some might even call it an evolution – in technology as widespread lockdowns created immense pressure for carriers to go beyond conventional face-to-face sales and distribution models.
“The pandemic really pushed people to step on the gas pedal,” said Henry Auyeung, president at Canada Protection Plan. “Just based on the number of fintech companies that have gone up in the past year, you can see there was no lack of awareness of the need to change the way insurance services are delivered.”
As the coronavirus crisis created widespread impediments to paramedical services, in-person insurance sales, and other aspects of the conventional insurance distribution process, it became clear that the industry had to pivot to remote sales models. Up to now, carriers who were late to the digital party have been optimizing their systems to connect with insurance advisors, and advisors to connect with prospects, in an electronically connected fashion.
But even as insurers get to grips with online application and simplified underwriting processes, Auyeung said they will have to grapple with a whole host of other issues and challenges. Focusing on compliance as an example, carriers will have to take a hard look at how they confirm the identity of an applicant, and what they will accept from an e-signature perspective.
“Starting in April last year, a lot of companies started waiving or relaxing underwriting requirements,” he said, noting how applicants were no longer asked to submit fluid and blood samples. “Now, I expect that every company is looking at the quality of their business coming in under those relaxed rules. If people find that the experience isn’t as bad as they might have thought, I can tell you that the industry’s focus on fully underwritten insurance will be a thing of the past.”
Even as the industry navigates an evolution in sales and distribution processes, it will also have to watch the continuing evolution of the coronavirus itself.
From an underwriting perspective, the public’s collective experience with the pandemic has brought about more questions than answers. In the early months of the crisis, COVID-19 mortality rates appeared to be linked with old age and comorbidity with other diseases. However, the past several months since the opening of the school term in Canada have suggested increased risk among younger demographics, as a lot of those infected were 40 years old and under.
“Even after almost a year, the industry is still learning the implications of COVID-19 to the mortality of mankind,” Auyeung said. “In Canada, we’ve documented over 660,000 infections, and more than 560,000 recoveries. But we still don’t know if the virus has a long-term effect on mortality. How does this virus impact the immune system of the people that survived after getting it? I think it will take the industry many more months or even years to fully understand that.”
With so many unknowns surrounding the novel coronavirus, insurers have changed their questionnaires to ask applicants to provide more specific details related to it. Through these “COVID questionnaires,” insurers are finding out whether an applicant has recently travelled to a foreign country, if they’ve been in contact with a person confirmed to have the disease, or if they themselves are displaying symptoms of the disease. That information, Auyeung said, serves as the first line of defence for insurers to gauge how much risk they’re willing to tolerate for specific cases, with some possibly requiring a 14- to 21-day waiting period before they move forward with a life insurance policy application.
Adding to the complexity of the situation, variations of the coronavirus are starting to emerge around the world. For those in the insurance industry, that creates other risks to consider. Are those who contracted and survived the original strain of Sars-COV2 vulnerable to the newer variants? Perhaps more importantly, will the vaccines that are being rolled out be robust against a mutating coronavirus?
“One positive thing we can count on to happen is the widespread inoculation of the population with the vaccines that have been developed,” Auyeung said. “As pharmaceutical companies continue to do research and develop vaccines, and people who get the vaccinations develop antibodies, we’ll hopefully get to the point where it’s no different from a seasonal flu.”
After nearly a year of suppression through lockdowns, travel bans, and business closures, the majority of Canadians are eager to get immunized and get on with their lives. Still, the past year has taught everyone a harsh lesson on uncertainty; immunity from the coronavirus is no guarantee of protection against future calamities or health scares. That means more than ever, consumers have to recognize how essential it is to get life insurance coverage.
“I believe the latest statistical report I looked at showed around 50% of Canadians have either no insurance or inadequate insurance protection, and a big reason is the myth about how costly it is,” Auyeung said. “But when you think about how the industry has evolved over the past many years, I think a lot of people will find that it doesn’t cost as much as they think. With the ongoing focus on simplification as well as expense management, insurance should be more accessible than ever for consumers.”