While life insurance is certainly a valuable product for Canadians to own, unlocking its value can be challenging. Policy owners can find it hard to collect benefits, even when they’re really needed; loans or cash surrender transactions are available to certain permanent life policyholders, but they can only get a fraction of the full monetary value of their policies.
Karen Crozier wants to change that.
“From talking to different stakeholders, I really saw this need to educate consumers and bring a new perspective,” said the founder of the Ontario-based Canadian Association for Life Insurance Policyholders (CALIP). “While we already have other stakeholder groups representing the interests of Canadian retirees, this is an issue that I think they haven’t really highlighted.”
With a mission to be life insurance policyholders’ voice for choice, CALIP has launched its own website www.calip.ca, and has already opened chapters across the country through grassroots initiatives in each of the provinces. Crozier identified Nova Scotia as a priority jurisdiction, as it recently amended its insurance act to prohibit policyholders from engaging in any transactions with their life policies, unless it’s with the issuing company or one of its authorized agents.
“We understand that the industry is concerned about bad actors who may take advantage of vulnerable policyholders,” Crozier said. “But when reverse mortgages were first being discussed, everybody thought that people will be double-crossed or defrauded; now, people are waking up to how, in the right circumstances, they can be a good option for Canadians facing financial difficulties.”
One case highlighted by CALIP involves Warren Horowitz, an insurance industry veteran who has been suffering from multiple sclerosis for over 26 years. Horowitz owns a life policy from Primerica Life Insurance Company of Canada, where he spent 12 years of his life as a former director of Marketing.
As one of the company’s first employees in Canada, he was instrumental in building the business before his illness forced him to resign. Since then, his condition has deteriorated; he suffers from constant, severe pain, and has to take considerable doses of sleeping pills every night. He hopes to undergo a medically assisted death, and has asked Primerica to grant him a terminal illness accelerated benefit.
However, the company denied his request because that type of accelerated benefit is offered only for non-correctable conditions that, with reasonable medical certainty, will result in the policy holder’s death in less than six months.
“I have no idea how he gets through each day,” Crozier said. “To me, Warren’s story represents the struggles of Canadians who can’t get the full value of their policies because they don’t fit the boxes that insurance companies have built.”
Aside from those facing severe health issues, she noted the financial challenges faced by baby boomers, particularly those who are assisting elderly loved ones. Couple that with risks from longer lifespans and delays in life milestones such as marriage, and you have the makings of real financial vulnerability among many Canadian households.
“If there’s a way to assist those families by doing a reverse-mortgage style loan on their life policies, I can’t see why we shouldn’t do it,” Crozier said.
The current coronavirus crisis has also created an unprecedented challenge for many households. As retirees see their investment accounts ravaged, small business owners are forced to shut down, and untold numbers of workers find themselves suddenly without employment, it’s more crucial than ever for people to receive financial relief where they can.
“We’re hoping that the life insurance providers in Ontario will offer something to help consumers,” Crozier said. “We know that auto insurance premiums have been reduced because people are driving much less, and one carrier recently reduced premiums for its group benefits plans as healthcare providers limit their services or move online.”
Critics may be concerned that opening a secondary market for life insurance policies would lead to a Wild West scenario. But Crozier stressed that CALIP is advocating for a controlled, regulated system.
She suggested that insurance carriers would be given the first right to consider a policyholder’s request to engage in a settlement or reverse-mortgage style life loan. If they refuse, the consumer would then set out to monetize their policies through an interested third party, and they would have all the necessary time, information, and advice they need — including independent legal representation during the negotiation of transactions — to ensure that their best interests are not compromised.
“We plan to offer assistance to our members who may need a second mortgage, a bridge loan, or a traditional loan, by connecting them with some of our trusted partners,” Crozier said. “At the end of the day, all we want is for people to have fair use of the products they paid for, and we certainly want to sit down with the life insurance companies so we can find a balanced solution.”