Online insurance sales threaten advisors

Although most clients will probably continue to rely on advisors for life insurance, the online channel holds appeal for many. Thus, advisors may have to find new ways of adding value and demonstrate the importance of buying insurance as part of a comprehensive financial planning process in order to attract and retain clients.

Compared with other players in the financial services industry, life insurers have been somewhat slow to introduce digital transactions. Although quoting technology and research tools have been available for some time, the complex nature of life and health insurance products – along with the medical underwriting process that typically is involved – presents challenges in facilitating actual online sales.

However, as clients have begun to demand the same online access to these products as they have for other goods and services that they’ve become accustomed to buying online, some insurers have begun offering online purchase capabilities in recent years. The products available online typically are basic term-life or critical illness policies providing limited coverage.

As Allan Buitendag, leader of the insurance consulting practice at PricewaterhouseCoopers LLP in Toronto, points out: “You can buy a $250,000 term product online from a bank with a click, with about two questions for underwriting.”

Toronto-based BMO Life Assurance Co. (BMO Life) allows clients to buy certain life and health insurance policies online. After seeing steady growth in the volume of sales in this channel, BMO Life recently expanded its online platform with the launch of a mobile website that allows customers to buy insurance on the go.

“We wanted to be accessible anywhere and at any time,” says Julie Barker-Merz, vice president and chief operating officer with BMO Life. “And simply having a website is just not good enough anymore because it’s very hard to navigate [websites] on different devices.”

Some consumers are gravitating toward the new mobile platform, Barker-Merz says. In particular, she says, individuals who already have decided on the type and amount of coverage they need tend to be inclined to make a mobile purchase.

“If you know that all you want is a term insurance product for $300,000,” says Barker-Merz, “then being able to do it from the comfort of your commute or your living room … that’s where people are going. They want it to be really easy and simple.”

Other insurers that offer insurance products online also report growing online sales volumes. Toronto-based Scotia Life Insurance Co., for one, reports that its online insurance sales have doubled in the past six months.

Similarly, Toronto-based Manulife Financial Corp. has seen a growing number of clients go online to purchase its brand of CoverMe insurance policies, which are specifically designed to be easy to buy online. Online sales now represent 30%-40% of all of Manulife’s direct-to-consumer sales, according to Bob Doyle, director of direct-to-consumer marketing for affinity markets at Manulife, up from just 8%-10% about four years ago. The remaining 60%-70% of Manulife’s direct sales are conducted via telephone.

“We’ve seen very strong growth [in online sales] over the past number of years,” Doyle says. “I think people are becoming more and more comfortable with the online approach.”

The focus on the online channel is part of an effort by insurers to ensure they’re engaging younger consumers – a critical future market for the insurance sector, and whose members are especially likely to go online for products and services.

“If we don’t make it easy for that younger generation, who are used to texting and instant gratification-type solutions,” says Barker-Merz, “we’re going to miss the boat.”

But it’s not only young people who are going online. Doyle says many of Manulife’s clients making online purchases are in their late 50s and early 60s.

Insurance companies insist that the online channel is not intended to compete directly with advisors. Rather, they suggest, the channel is able to co-exist alongside the advisor channel as a convenient alternative for consumers who have fairly straightforward insurance needs.

In particular, the online tools generally cater to clients who typically aren’t targeted by the advisor channel anyway, Barker-Merz says, as the policies are fairly basic and the coverage is limited.

“Advisors aren’t going to want to spend their time with [these clients],” says Barker-Merz, “because [the policies] are not for large amounts, and they’re not complex conversations.”

But the high volume of clients turning to the online channel is bound to affect the businesses of at least some insurance advisors, Halpern says: “I think [buying insurance online] will even be more mainstream, and it will become a much more common occurrence. That’s why a lot of companies are looking at it.”

It’s a concerning trend, Halpern adds, as the clients who choose to go this route will not be getting professional advice on their insurance needs: “Consumers will be really missing out by not having advisors who can help them with holistic or comprehensive tax or insurance or estate planning. Nobody is going to be looking after [these consumers’] overall needs.”

Despite the growth in the online channel, the majority of clients will continue to seek out advice, says Doug McPhie, partner and Canadian insurance leader with Ernst & Young LLP in Toronto: “There will always be a role for insurance agents, just because of the complexity of insurance. There’s a whole series of factors that might fit into it. The advisor is definitely an important part of it.”

Nonetheless, as advisors find themselves competing with a convenient sales channel that has clear appeal among busy consumers, they may have to work harder to demonstrate their value, says Halpern: “Unless they differentiate themselves as being more than just a salesperson, they unfortunately are going to be carved out of the market.”

© 2013 Investment Executive. All rights reserved.