Analytics tools are helping insurers with underwriting decisions while carriers have simplified the application process and taken more of it in-house.Wipada Wipawin/iStockPhoto / Getty Images
Five years after the onset of the COVID-19 pandemic, Globe Advisor is looking back at how the wealth management industry responded and how it has changed. Read the first article in our series here, the second article here and the third article here.
The life insurance industry hasn’t historically been known for rapid innovation. So, when COVID-19 hit five years ago, putting an end to in-person visits for blood and urine tests, there were fears the industry might struggle.
Yet, amid the initial drop in sales – and decline in stock prices – in the spring of 2020, insurers pivoted, says Jeffrey Cait, an independent life insurance consultant in Mississauga.
“It was a shock to their system of incredible proportions, and they responded brilliantly,” he says. “They came along and said, ‘We’re steady, we’ll just fix this up a bit and do things electronically. We’ll skip blood and urine up to $2-million in coverage.‘”
At the onset, insurers increased premiums, particularly on renewal, which clients paid because of the higher mortality threat COVID-19 presented, says Christie Geiss, advisor and co-owner of Cove Continuity Advisors Inc. in Vancouver.
As a result, life insurance sales grew during this period, with total premiums collected by insurers in 2022 rising to $145-billion, up from $139-billion the previous year, according to the Canadian Life and Health Association Inc. (CLHIA).
As of 2024, according to the CLHIA, the average life insurance protection per household in Canada was $483,000 – up from $458,000 in 2021.
Five years on, that industry-wide pivot has reshaped how life insurance is sold, although some legacy elements remain in place. Many companies continue to offer up to $2-million in coverage with just a phone call and medical questionnaire. Analytics tools are helping insurers with underwriting decisions, while carriers have simplified the application process and taken more of it in-house.
The upside: advisors have seen their roles become less onerous.
New ways of doing business
At Ms. Geiss’s office, insurance applications are now done over the phone and online and in-person meetings have largely been replaced by Zoom and Microsoft Teams.
“I don’t even remember the last time I did a paper application,” she says
These video chats involve verifying an applicant’s driver’s licence, signing forms with digital signatures and confirming the address. Once this information is provided to the carrier, some insurers can approve up to $ 2 million in coverage in mere minutes thanks to new artificial intelligence tools.
In cases in which life insurance limits exceed $2-million, insurers will still often request blood and urine tests, also known as paramedicals, Ms. Geiss says.
But this can also occur in cases in which the coverage limit is lower and applicants have an “immaculate” application and no pre-existing health conditions, she says. She finds these situations challenging.
Ms. Geiss believes that’s because insurers are clinging to outdated methods while ensuring their underwriting is sound.
“The company comes back and says, ‘We want to confirm we’re doing the right thing’ – that’s how they’re positioning it,” she says.
Despite these hiccups, insurers have also taken a big administrative load off advisors’ shoulders, Mr. Cait says.
“One of their big responsibilities is to complete the application, and it puts a lot of pressure on them,” he says. “Insurance companies have taken a big step forward and they [now] say, ‘You can hand over all that responsibility for underwriting and all the medical in the application to us.‘”
Adding to this simplicity, many carriers now have e-apps, digital tools that allow advisors to apply for multiple products and people in one application. They also offer to order lab tests for larger coverage and permit supporting documents to be attached. Payments can also be made electronically.
Glenn Cooke, president of the Term Guy, a life insurance agency based in New Hamburg, Ont., says some insurers are going a step further. They’re working on developing advisor-focused tools that will provide a quick life insurance estimate when the advisor enters client information into the system.
“I have a client this old, this height and weight – here’s his diagnosis, so what’s the likely prognosis?” Mr. Cooke says.
He believes this is invaluable as it takes the guesswork out of the process and empowers the advisor.
“For most companies, we can’t talk to the underwriters, so we’re stuck just applying and seeing what happens,” he says. “If I can get an initial appraisal done using AI without bothering their underwriters, that gives an advantage.”
Ms. Geiss says she believes advisors will continue to play a valuable role, regardless of what innovations emerge from the industry.
“It takes some thought to get the right amount and the right product at the right time,” she says. “An advisor can advise on things [people] might not be aware of.”