Simplified issue insurance was once the preserve of the hard-to-insure segment. That is no longer the case, with more and more consumers embracing the reduced underwriting that goes along with these products. Lorne Marr is director of Business Development at LSM Insurance and simplified issue has become a major focus in recent years.
“We have been in this market longer than most of the other MGAs,” he explains. “We work with all the major insurers, but on the simplified issue there are a few really strong players –Assumption Life, Industrial Alliance, Canada Protection Plan.”
The reason these products have grown in popularity isn’t down to the fact that Canada now has more sick people that insurers are reluctant to cover. Rather, it appears convenience is the main factor. There aren’t enough hours in the day for many people, so making the application process for life insurance shorter will obvious curry favour with a large percentage of the population.
“Especially with millennials, they don’t want to have to meet with a nurse and spend a lot of time on cumbersome medical tests,” he says. “A lot of them like the idea of getting coverage without having to give a blood or urine test. The turnaround for an application could be anything from 24 hours to maybe a week.”
The coverage available has also increased in recent years, although the policy amount is proportionate with the underwriting process. The longer the process, the more questions involved, the higher the premium.
“Simplified issue now goes up to $1 million in coverage, but as that goes up there are more questions in the application,” says Marr. “Premiums are also a little more than a traditional policy, but for a million dollars they might ask 35 health questions. They can do a lot of underwriting with 35 health questions.”
Making life insurance more attractive for the public should be a positive for brokers, but Marr explains this might not necessarily be the case. Technology offers brokers great potential to reach new clients, but also offers the potential for carriers to do the same.
“A lot of larger carriers are trying to bypass the brokers,” he says. “RBC has a direct offering through their website because if it is yes/no answers it gives them the opportunity to bypass the broker. It’s not necessarily cheaper, because they still have to call a call centre, so there’s still distribution costs, but they won’t have a broker shopping rates for the client.”