The Canadian insurance industry is looking to make permanent many innovations it adopted last year in response to the Covid-19 pandemic. Digital processes, relaxed underwriting requirements and shifting client expectations are set to reshape the industry in the coming year and beyond.
When lockdown restrictions began last March, insurers adjusted procedures and regulators suspended or relaxed rules so insurance advisors could continue to serve clients and conduct new business. Electronic signatures replaced wet ones, regulatory requirements involving in-person client-advisor meetings were dropped, and insurers’ digital application processes were streamlined and more broadly adopted.
“Covid-19 has forced significant behaviour change,” said Keegan Iles, national insurance consulting leader with PricewaterhouseCoopers LLP in Toronto. He estimated that some insurers “accelerated existing digital transformation plans by five years.”
Stephen Frank, president and CEO of the Canadian Life and Health Insurance Industry Association Inc. in Toronto, said members are investigating how many reforms they can “embed and sustain” in 2021. “Everyone is going to be working really hard on that, both on the broker and the insurer side,” he said.
Byren Innes, managing director and executive consultant with Jennings Consulting Ltd. in Toronto, said the pandemic led to “a huge productivity gain.”
“Insurance advisors will continue to embrace that productivity aspect while maybe adding a bit of face-to-face [interaction with clients] back into the process [post-pandemic],” Innes said.
In the initial weeks of the pandemic, many insurers found it challenging to manage the flood of client inquiries, claims and requests for coverage, said Melissa Carruthers, national life and health insurance strategy and transformation leader with Deloitte LLP in Toronto.
“There was early recognition that self-serve [digital] options need to play a more prominent role in how [the insurance industry] interacts with customers,” Carruthers said. Investment in digital self-serve capabilities “will be a priority moving forward.”
Carruthers said insurers also will focus on the digital transformation of their mid- and back offices, not just their client-facing applications. “You can only be so successful at launching digital tools with a manual backend,” she said. Digitization also will allow insurers to reduce costs.
One of the most significant changes last year was insurers temporarily raising the non-medical limits on life insurance policies to $1 million or $2 million, depending on the client’s age and other factors, from $250,000.
“All of a sudden, a huge percentage of the Canadian population who need life insurance can get it without a nurse having to enter their home or workspace [and] without having to provide a blood or urine sample and answer a lot of questions,” said Cindy David, chair of the Conference for Advanced Life Underwriters and president of Cindy David Financial Group Ltd. in Vancouver.
Innes said he believes the higher maximum non-medical limits “are going to stick,” with insurers relying more on analyzing data they already have to make underwriting decisions. While insurers may be taking on more risk with the higher limits, revenue from premiums will increase and costs will be reduced by eliminating tests.
David said she anticipates insurance advisors will be “shifting or pivoting their businesses” to take advantage of the increased non-medical limits and target underserved client segments, particularly millennials. The higher non-medical limits remove a key deterrent for people wishing to buy life insurance, she said: “It is no longer an arduous process that people give up on.”
The pandemic also changed clients’ familiarity and comfort with virtual communications, including video calls. After the pandemic is finally over, advisors and their clients aren’t likely to revert to previous ways of conducting business.
“There’s no reason to drive an hour to spend five minutes with a client and then drive an hour back to your office,” Innes said. “[Doing that] just doesn’t make a lot of sense.”
Innes said he foresees a continued role for in-person meetings over the long term, though, “especially when you’re establishing a new relationship with a client. It’s good for them to know who you are.”
Frank said he hopes the industry and regulators can come together to discuss which of the temporary changes can be made permanent. The pandemic has provided the industry and watchdog organizations a real-time “test run” of adjusted rules and policies.
“Are we concerned we’ve introduced risk in the system by moving to these new, more virtual approaches? Our view is probably not, in almost all cases,” Frank said.
Lobbying on pharmacare continues
Insurance industry organizations will continue to engage the federal Liberal government about the shape of a possible national drug program.
“We want to make sure that Canadians get to keep what’s working well [through their employer group plans] while we make changes to help those who need it,” said Stephen Frank, president and CEO of the Canadian Life and Health Insurance Industry Association Inc.
Said Guy Legault, president and CEO of the Conference for Advanced Life Underwriting: “We don’t believe in a universal program that will cost $20 billion for Canadians and will cover less than what most people get through their group insurance.”