New study shows that the US and Canada are moving in different directions on term and permanent life products
A recent study by LIMRA shows that in the US there has never been more consumers purchasing individual life insurance policies directly rather than through a financial advisor.
Those buying life products directly has grown to 29%, as customers grow more comfortable with using technology. In addition, the study showed that for the first time in its history (conducted periodically since 1960), life insurance policyholders in the US are now more likely to own term life products than permanent life (68% vs 62%).
In terms of buying life insurance directly, a similar trend has developed north of the border, according to Brent Lemanski, AVP Member Relationships at LIMRA and LOMA Canada.
“We only do this study every four or five years – the most recent was in 2013,” he says. “We find the data doesn’t change with a high level of frequency in that time. What we are finding in Canada, like the US, is that more people are buying life insurance directly.”
Of course, life insurance covers a number of different products and this is where divergence occurs for those seeking professional guidance or not.
“People that buy life insurance online are buying relatively small policies, and using a financial advisor for higher value policies,” he says. “Term insurance for example is pretty straightforward and easy to understand, so that’s easy to do online. If you want permanent protection through whole life or universal life, you’re much more inclined to go through the advisor channel.”
In LIMRA Canada’s most recent study on this issue, 76% of respondents said they wanted to deal with an advisor when making a life insurance purchase.
It is clear that more and more people are going online to gather information and do research, but when it comes to actually making a purchase, they still seek expert advice.
When it comes to what products are most popular, Canada and the US show marked differences. While term life products have now overtaken permanent life insurance in the US, in this country it’s a different story.
“In Canada, at the end of Q3 in 2016, term products measured by premium were 22% of all life insurance products in Canada,” says Lemanski. Whole life was 54% and universal was 24% – they tend to move back and forth based on the performance in the stock market.”
Those numbers will have changed somewhat by the final quarter of 2016 as the new tax rules on life insurance came into effect at the beginning of this year.
“At the end of 2016 there was a large amount of sales in universal life over whole life driven by changing CRA accounting practices of the underlying tax income,” he says. “The CRA reduced the amount of tax that can be accumulated in a life insurance contract tax free. There still is a big tax advantage, but it is not as big as it was.”
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