Insurers adapt underwriting, digital channels in pandemic response

Many insurers are responding by increasing their coverage thresholds for healthy individuals without requiring fluids, so the turnaround is quicker, said Melissa Carruthers, senior manager within Monitor Deloitte’s Strategy Consulting practice in Toronto.

Only the large insurance companies are willing to expand their risk tolerance, she said.

For example, a spokesperson for Canada Life said that it’s “temporarily relaxing” its requirements in order to expand the range of applications it’ll underwrite without vitals or fluids.

David Wm. Brown, partner at Al G. Brown and Associates in Toronto, said coverage in the industry without requiring fluids is “probably hovering around the $2-million mark,” with further adjustments potentially forthcoming. This compares to $1 million prior to the crisis (for healthy clients, depending on age).

While many large insurers have increased their eligibility for fluid-less approvals, those applications won’t necessarily be approved, McKay said.

For clients beyond the age and amount thresholds, a Canada Life document says the firm can help if clients provide a doctor’s report or medical records.

“In the absence of significant adverse medical history, we’ll do our very best to offer coverage on some basis,” the document says.

Brown advises clients with underlying conditions or a clinical history of disease not to exclude themselves from the possibility of obtaining insurance.

“It’s not necessarily true that they’re going to be declined,” he said, though they may be subject to exclusions or other measures.

The Canada Life document says that in some cases it can provide reduced coverage that doesn’t require fluids, with the client applying to increase coverage at a later date once medical visits resume.

Brown sometimes asks insurers for pre-underwriting for such clients, on an anonymous basis, to find out the details.

Ultimately, the pandemic is “going to change the way the industry looks at some of these requirements,” he said, with insurers increasingly relying on artificial intelligence for simplified underwriting.

Doubling down on digital

Most insurers have already invested in technology such as e-applications and e-signatures to conduct business virtually, Carruthers said. The pandemic is forcing insurers who lag on digital to catch up.

However, bringing new applications or tools to the market could take weeks, she said, at a time when some insurers are noticing a decline in sales. The extent of the sales decline is so far unknown, because recently registered sales would have been generated in January or February, she said.

McKay said all of PolicyMe’s insurance partners are promoting electronic applications now and allowing digital signatures, which is new for some.

Many are launching better electronic delivery options for policies, she said.

In an emailed statement, Sun Life said it’s using tech to allow more virtual insurance sales applications through things like tele-interviews, and delivery and settlement requirements. The firm has accelerated some digital processes to meet current market needs.

Sun Life also said it’s focused on improving internal processes to ensure it’s “working in a digital, non-face-to-face manner as much as possible.”

While Carruthers expects overall Q2 life insurance sales will be down, any decline could be offset by an increase in sales in the digital channel.

Montreal-based insurtech Breathe Life, an online distribution platform for insurers and a direct-to-consumer channel, said in an email that its partners are seeing double-digit growth in digital sales. PolicyMe has experienced a 60% increase in life insurance applications since February, McKay said.

Once the crisis passes and people’s incomes stabilize, Carruthers expects to see an increase in life sales from those who felt under-insured or vulnerable during the pandemic.

“Events like these are one of the reasons for people purchasing life insurance,” she said. “You realize your family may not be in the best position should something happen.”

Grace period for premiums

Brown said insurers extended the grace period to pay premiums to 90 days from 30, on a case-by-case basis. “That’s an advantage for [the client’s] cash flow,” he said.

Canada Life’s document confirmed that it offers this option for those impacted by Covid-19.

However, clients should be aware that the premiums are deferred, not erased.

“People have to get back to work in order to have the money to pay for their premiums later on,” Brown said.

Paying premiums is important, he noted, because the client may not be in the same health as when the policy was purchased, so a lapsed policy won’t be replaced under the same terms.

While clients with cash-flow challenges may be thinking about dropping their life insurance premiums, “these are the types of secure investments — the protection for the family — that need to stay enforced at this particular point in time,” Brown said.