As robo-advisors begin to make a foray into life insurance and as traditional life insurers expand their product lineup available online, the digital sales channel is poised to capture a growing share of life insurance distribution in Canada.

That shift could help the industry sell more insurance to Canadians who need it. However, some industry players caution that there are problems associated with selling life insurance online.

In May, Oakville, Ont.-based robo-advisor Invisor Financial Inc. teamed up with Toronto-based Teachers Life Insurance Society (Fraternal) to introduce a new platform that allows clients to buy a term-life insurance policy of up to $500,000 through an entirely online process. For many applicants, their policy can be issued and delivered electronically in as few as 15 minutes.

Vancouver-based WealthBar Financial Services Inc. also plans to add life insurance to its roster of online financial offerings. WealthBar is licensed to sell life insurance in Ontario and British Columbia, but hasn’t yet introduced an online platform through which clients can buy insurance.

Tea Nicola, co-founder and CEO of WealthBar, says there are challenges in facilitating online sales of life insurance, such as ensuring that clients understand what they’re buying.

“Because insurance is a complex product, it needs to be explained,” Nicola says. “There’s a need for advice and an explanation to a much higher degree [with insurance] than for an investment portfolio.”

Even as the online channel becomes more prominent, she says, licensed financial advisors will always need to be accessible throughout the life insurance sales process.

“I think insurance will always be a hybrid model,” Nicola says, “where an advisor is going to be introduced in the process, and some education and advice will be needed.”

The robo-advisors’ move into life insurance comes as many insurance carriers introduce online platforms through which clients can buy life insurance policies directly from the carrier.

“This is the way of the future,” says Maria Winslow, head of product strategy and management, life and health, at Mississauga, Ont.-based RBC Insurance Services Inc. “This is how people want to engage with organizations now.”

RBC began selling simplified life insurance products online in 2012, and online sales now account for 10% of the company’s simplified life insurance sales.

Other companies have made greater strides in the online channel. At Teachers Life, 90% of individual insurance sales are made online, according to Doug Baker, president and CEO.

Although few clients were comfortable buying insurance online when Teachers Life first began offering online sales of insurance in 2007, Baker says, the channel has grown considerably.

“We may have been just a little ahead of consumers when it comes to purchasing online insurance,” Baker says. “But it’s starting to change. We’re starting to see increased business.”

The variety of coverage available online also is growing. Whereas products distributed by carriers directly to consumers used to be limited primarily to simplified issue and guaranteed issue policies with small face value, many insurers now offer fully underwritten term policies with coverage of up to $500,000 or more, which can be bought online without medical testing.

“We’re seeing the simplification of the fully underwritten sales process, so now there is capability to deliver these types of products in a digital setting,” says Matthew Lawrence, manager, consulting and deals, with PricewaterhouseCoopers LLP (PwC) in Toronto.

The variety of products available online is likely to continue to grow as the channel gains more momentum, Winslow says: “We will continue to build a portfolio and a suite of products so that we can continue to offer more products through this space, not less.”

Embracing the online channel is critical in order for the life insurance industry to remain relevant, Winslow adds. If insurance products aren’t available in the format that consumers are most comfortable with when making purchases, she says, many consumers may end up without coverage.

“We have to get to the point, as an industry, where we’ve made purchasing insurance as easy as any other purchase,” Winslow says.

The trend is positive, according to Byren Innes, senior strategic advisor, consulting and deals, at PwC. That’s because the online channel helps the industry sell insurance to a segment of the population that has fairly basic insurance needs – a segment that advisors often neglect. “[Online sales] give [those clients] an opportunity to purchase insurance, so I think this is very positive,” Innes says.

For robo-advisors, such as Invisor, that have been focused primarily on offering online investment portfolios to clients, life insurance is a natural progression, Baker says.

“Insurance is a natural fit as part of an overall financial plan, and if clients are comfortable with online investment advice and planning, I think they’re going to be comfortable with the online purchase of insurance,” he says.

Selling life insurance online is a challenge for independent brokerages, Nicola says, because insurance applications are not standardized across the industry.

Although some carriers have developed digital application and underwriting processes, not all carriers have done so, which limits the products that are available through that channel.

“[Selling insurance online] is a little bit more complex than the investment part, because the application is not as streamlined as it is in the investment industry,” Nicola says. “It is carrier-specific.”

For some advisors, online sales platforms may be a tool they can integrate into their business. Says Lawrence: “There’s an opportunity for agents to leverage this technology in their favour.”

© 2017 Investment Executive. All rights reserved.