Which Canadian Life Insurers Face Being Acquired Within Ten Years?

We know, based on the latest LIMRA Canadian buyer study, that the trend line for sales of individual life insurance is not positive (number of households that own individual life insurance has dropped from 59% in 1982 to 43% in 2013; and 32% of Canadian households have no life insurance whatsoever, compared to 22% in 1982).

When one factors in agent demographics (average age is approaching 60) and other current distribution realities (including the significant impact of the independent (Managing General Agency & Broker channels)), the situation begs the question, “which life insurance companies recognize the need for transformation – a multi-year overhaul of the business – involving a new strategy, operational improvements, innovation and growth,  diversification in their lines of business and distribution channels, etc.?”  Or, perhaps stated another way, “Which companies are seduced that their current business model will serve them well in the future?”

The reality is that there are only two ways to grow our business – organically, and via acquisition.  Organic growth will be problematic, given the exodus of current distributors due to retirement, and the lack of new intermediaries coming into the business.  Acquisition opportunities will be there for those companies that decide to pursue this avenue (keep in mind that there were 90 active life insurance companies left operating in Canada at the end of 2012, compared to 170 in 1980 and 163 in 1990).  The bottom line is that many life companies currently operating in Canada will not be around in 10 years’ time.

Of course there will be winners – I will divide them into three groups:

Group 1:  The ‘big three’ is an obvious place to start – Manulife, Sun, & Great-West Life.  Okay, you can add Industrial Alliance to the group.

Group 2:  The bank-owned life companies – RBC Life, CIBC Life, BMO Life, Scotia Life, and TD Life:  The regulatory ‘wall’ will eventually disappear and the banks understand consumers.

Group 3:  With this group it is easier to identify some of the characteristics of those companies that will survive, and perhaps even thrive.  They include those:

  • Strategically and operationally oriented around a target, consumer and/or business market(s)
  • Investing in social media to communicate with their target market(s)
  • Investing in a ‘direct to consumer’ sales model.  This model will need to accommodate sales facilitated by other intermediaries as well
  • Using ‘controlled’ distribution to navigate their target market(s) (another subject for another blog)
  • That acquire new leadership skills in their organization

I include some Fraternal Benefit Societies in this group.  Why?  Because they have not lost sight of the importance of the end consumer – they have continued to foster their market over the years and I believe they will be rewarded for it.

Those that will not survive – and will be acquired?  The following are some of their characteristics:

  • Narrow lines of business
  • Have a total (or near total) reliance on independent distribution
  • Do not have their minds around the end consumer as the customer
  • Do not have a defined niche/target market(s)
  • Do not embrace social media for reaching and developing their market(s)
  • Are fixated on cost-cutting and do not have the leadership skills necessary for innovation and growth
  • Delay on beginning the transformation process
  • MCCSR challenges

Certainly brings Darwin’s notion of ‘survival of the fittest’ to mind – “It is not the strongest of the species that survive, nor the most intelligent, but the one that is most responsive to change”.

Do you agree…disagree? I welcome any and all comments – leave them below!

Posted in LEADERSHIP
9 comments on “Which Canadian Life Insurers Face Being Acquired Within Ten Years?
  1. PJL 1981 Inc says:

    I just increased your twitter following by 20%! Good summation, the regulatory wall will most definitely fall but Big Insurers are failing the customer. With demutualization the die was cast!

  2. Ted Coia says:

    Mike, great story line and excellent conclusions. Oh, did you overlook RBC Insurance?

  3. John McEachen says:

    Very good article Mike… I agree with your vision of the future !! John

  4. Gary Mooney says:

    Yo, Mike. I was expecting you to name names! Come on now, give us a list.

  5. Richard says:

    very true. A question for you. Do you think the Canadian Life Insurance market is mature? or do you think it just has mature leaders?

    • mikenurse says:

      Richard – that’s a really good question. I do not believe the market is mature, but I do believe that distribution has not evolved to meet market needs. That is very much a leadership issue – both at life company and distributor levels.

  6. Kim says:

    Fantastic article Mike. Very insightful.

  7. David West says:

    Interesting article. I think the big three are probably to big to fail but they will have their challenges. They can’t adapt as well as the smaller players.

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