Insurance companies are boosting the amount of life insurance coverage that new immigrants can qualify for and relaxing the documentation requirements for these applicants in an effort to attract the business of affluent newcomers to Canada.
Winnipeg-based Great-West Life Assurance Co. (GWL) and its Toronto-based sister company, Canada Life Assurance Co., recently announced changes to their financial underwriting guidelines for new high net-worth (HNW) Canadians. Both companies now enable new permanent residents to qualify for up to $10 million in total coverage without the traditional proof of assets. The previous limit was $5 million.
“[HNW immigrants] are a substantial and important market for us that continues to grow within Canada,” states an email to Investment Executive from Troy Haugen, senior vice president of individual insurance new business, for GWL and Canada Life. “We want to ensure our policies and approaches stay current so that we can continue to meet their insurance needs into the future.”
Other insurers also made changes to their own guidelines for new Canadians recently. Although the guidelines vary from insurer to insurer, life insurance coverage limits for newcomers are trending higher across the industry in general, according to Pankaj Arora, insurance agent and sales manager at Desjardins Financial Security Independent Network‘s Mississauga Financial Centre.
“Insurance companies have now increased the limits on [coverage],” he says.
That opens the door for advisors to sell bigger policies to newcomers to the country – a group that is a potentially lucrative market. A 2013 study by Bank of Montreal’s BMO Harris Private Banking division found that approximately 25% of HNW Canadians – defined as those with investible assets of $1 million or more – are immigrants.
“[HNW immigrants] are a great market,” says Aman Kapur, an insurance agent and CEO of Oakville, Ont.-based associate general agency Clarifynancials Inc., also known by the brand YourInsuranceGuy.ca. “I see a lot of value in it.”
Arora suspects the increase in coverage limits is being driven in part by the rising cost of real estate, particularly in large cities such as Vancouver and Toronto, which, in turn, is creating demand for larger insurance policies.
In addition, he says, he sees growing demand for the tax and estate planning benefits of permanent life insurance among affluent newcomers.
“There are lots of big clients who want to do estate planning and, for them, insurance is the best way of doing this,” says Arora. “They have lots of money. For them, taking a $500,000 policy is not enough. They are looking for more.”
The process of securing life insurance typically has been more intensive for newcomers to Canada than for other Canadians. Since insurance companies can encounter challenges in accessing clients’ medical and financial information from abroad, the underwriting process sometimes involves more in-depth medical testing and requirements for detailed proof of foreign assets.
“The insurance company is going to ask what the insurable interest is, and clients will need to provide some proof of assets,” Kapur says.
The guideline changes at Canada Life and GWL aim to make that process easier by dialing back these documentation requirements.
In particular, the insurers now allow clients to declare their Canadian and foreign assets by filling out a new “financial supplement” form without providing proof, such as property assessments or bank statements, of those assets.
In the case of foreign assets, which previously had to be verified with supporting documentation, Canada Life and GWL now accept the existence of a portion of those assets without proof. Specifically, when calculating applicants’ total net worth for underwriting purposes, the insurers will consider 100% of applicants’ Canadian net worth, 50% of their verified foreign net worth and 25% of their unverified foreign net worth.
The new guidelines aim to address situations in which new immigrants have substantial foreign assets, but are restricted in the amount they’re able to bring to Canada at any one time. As a result, such clients often transfer their assets gradually to be in compliance with regulations.
Even though the new guidelines mean the insurers will collect less hard evidence about the assets that applicants have abroad, Haugen says, the companies are willing to accept the risks inherent in doing so.
“We are comfortable allowing a small amount of their foreign assets to be unverified, recognizing that there is a need for insurance coverage and those assets will eventually move to Canada,” Haugen’s email states. “Our experience has been that the vast majority of applicants eventually substantiate their assets.”
The changes also aim to create an easier process for insurance advisors, according to Haugen’s email: “The advisors in this market need to gather the required financial information, which can be a challenge. Our new financial supplement form was designed to help in this regard.”
Other insurers, such as Toronto-based Sun Life Financial Inc., are chasing individuals who are even newer to Canada in addition to going after wealthy landed immigrants.
The latest underwriting guidelines from Sun Life, for example, indicate that temporary residents working in certain professional occupations, such as doctors, lawyers and engineers, can be considered for life insurance coverage of up to $10 million as soon as they arrive in Canada, depending on their income and net worth.
In addition, guidelines from Toronto-based Manulife Financial Corp. state that certain clients who have been living in Canada for six months and are in the process of applying to become a permanent resident may qualify for life insurance coverage of up to $2 million.
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