Prior to the COVID-19 pandemic, life insurance wasn’t necessarily a major concern for Canadians. But the new coronavirus has done a stellar job of showing us just how quickly our financial security can be disrupted.
According to a recent Globe and Mail article, life insurance is now a priority for many financial advisors’ clients. Something that was once at the bottom of our collective to-do list has suddenly shot straight to the top.
“Risk is now in our face every day,” says Rona Birenbaum, a financial planner and founder of Caring for Clients in Toronto. “Everybody is much more tuned into how risk can show up in an unexpected way and, therefore, how vulnerable they are financially to it.”
As a result, more and more of us now have the mindset of wanting to cover that risk. And that’s changing things at Birenbaum’s practice, where “the conversation around the importance of life insurance is now a shorter conversation.”
But the new coronavirus hasn’t just changed our mindset about the importance of life insurance. It’s also changed the way we apply for it, and the way insurance companies underwrite policies.
Increase in online/mobile applications
Before this pandemic, Birenbaum says she was doing more and more life insurance applications for her clients online — namely for the sake of convenience.
“Of course what’s happened since the pandemic is that really it’s the only practical and safe way to take an application now," she says. "Insurance companies have ramped up their online application processes because they don’t want to be left out of the opportunity.”
According to recent data from LIMRA, the majority of Canadian life insurance companies reported a decline in face-to-face applications in March — when Canada’s lockdown measures were put in place — while 30% reported an increase in online applications.
But not only is the new coronavirus changing the way we apply for life insurance; it’s changing the way life insurance companies approve our applications.
Relaxed underwriting requirements
According to LIMRA’s release, many Canadian life insurance companies “have made—or are planning to make—changes to their underwriting practices. Most are waiving paramedical requirements for some cases, and half are postponing exams until they can be conducted.”
That would mean, for example, no visit to the doctor or a home visit from a nurse to conduct a blood and urine test.
“But having relaxed underwriting requirements doesn’t mean that you can hide health issues,” says Birenbaum. The online application is still incredibly thorough, and if there’s anything in your answers that constitute a red flag for your insurance company, it has the right to request more information from your doctor.
Still, these relaxed requirements represent a unique opportunity, particularly for those phobic of needles and medical exams, and for young couples with children or with plans to start a family.
“There’s this short-term window of opportunity,” says Birenbaum. People are in the buying mindset and the approval criteria are relaxed. It’s one of those right-place-right-time moments.
In Ontario, these relaxed underwriting requirements are in force until the end of May. If the lockdown continues past then, Birenbaum says they may get extended, but there’s no guarantee.
COVID risk not yet reflected in premiums
Life insurance is all about health risk. And with a highly contagious virus running rampant across the globe, with no approved vaccine yet in circulation, one might assume that life insurance premiums would increase.
So far, that’s not the case.
“What we’re seeing right now is that there’s no COVID-19 related exclusions in new life insurance applications,” says Birenbaum. But insurance companies can always change the terms of new policies. “So there’s always the possibility that if the trend went the wrong way, if the spread was not able to be contained, and the mortality rates were rising or higher than they are now,” says Birenbaum, “they may need to add an exclusion where maybe you can get coverage for COVID but it would be an extra rider.”
But you’d be hard-pressed to find a life insurance company willing to be the first one to do so.
“If one insurance company says ‘we don’t cover COVID unless you get this extra rider,’ guess who doesn't get the business?” says Birenbaum. “It’d have to be a lot of the major carriers band together, because otherwise they really have a competitive disadvantage.”
For now, she says, insurance carriers are focussed on capturing new business as a result of people’s renewed outlook on risk.
“Insurance is an emotional purchase,” she says. “Here we are at home thinking about our physical and financial vulnerability and maybe just maybe, that’s enough to motivate someone to get the insurance that they know they need.”