A ‘Transformational Change’ Recommendation for Canadian Life Insurers

In my March 2014 blog, “One Area Where Our Life Insurance Industry is Failing Canadian Consumers”, I reported CLHIA figures on the number of life insurance policies sold annually, over the last 30 years.  I asked my son (Stuart), who is much better at math than I am, to analyze the CLHIA figures.   His analysis of the period covering 1990 to 2012 indicated a 1.9% annual decrease in the number of cases sold.  This corroborates what I witnessed when I was involved in the corporate life insurance world –  roughly a 2% decrease annually.

So I asked Stuart to take the numbers and project them out to 2021 (7 years from now).  The results show a staggering 61% drop in the number of cases purchased since 1990.  Restated, consumers will be purchasing, assuming no change in the long term trend, approximately 39% of the number of policies that were bought in 1990 – in spite of a significant increase in the number of individuals licenced to sell life insurance.

Changing gears a little…I recently attended the LIMRA/LOMA Canadian Annual Conference.  The theme was “Ants and Rubber Tree Plants – Achieving High Hopes for Sustainable Growth”.  Some key take-aways for me included:

  • Major industry challenges: (1) changing consumer expectations, (2) aging adviser population, and (3) an outdated distribution model.  (I think we can go beyond just three!)
  • The rate of change occurring outside of our industry is faster than the rate of change occurring inside our industry.
  • When it comes to buying life insurance, face to face is preferred across generations and income levels

So after distilling all of this, and layering on my 34 years (ouch!) in the business,  here are some recommendations I have for life companies (not in any particular order):

  1. They need to engage organizations that can help them understand how consumer and distribution demographics are changing, and the implications for their business – now and in the future
  2. If they have not done so already, they need to be undertaking a significant, strategic review of all aspects of their business.  I mean everything – markets, products, distribution, technology, operations, insourcing & outsourcing,  et. al. – there can be no sacred cows
  3. They need to get their minds around consumer market segments – and build (or strategically align) distribution channels to develop them
  4. Their cultures have to change.  Change agents (new blood from outside our industry?) are needed in both senior and mid-management ranks, and they must be given the responsibility and authority to drive the type of change that will result in flatter, more resilient organizational structures.
  5. Hire competent people to assist them in the development and implementation of a social media strategy

What I am talking about is transformational change, and those of us that have led it understand the short-term pain/stress that accompanies the process.  However, the outcomes can be most gratifying.  The unfortunate reality will be that some management teams will be paralyzed by senior management ‘turf-protecting’ or will be blinded by the sheer magnitude of what has to be done, and will continue to just tinker with things. Those companies risk being marginalized and will eventually disappear from the Canadian landscape.

The bright side is that those few companies that remain should not just have high hopes for sustainable growth, they will be realizing sustainable growth.

I would love to hear what you think.  Scroll down and leave a comment!

5 comments on “A ‘Transformational Change’ Recommendation for Canadian Life Insurers
  1. Very good comments but unfortunately most companies will continue as they have.

  2. Very good comments. I would respectfully add the following:

    a. Transparency and disclosure: Fortunately, consumers are becoming better educated and informed and have a vast resource of information literally at their fingertips. Deficiencies in transparency and disclosure to consumers are “negatives” that erode trust and foster skepticism.

    b. Agent and broker education. The current standards for licensing of life insurance intermediaries are a travesty, contrary to the interests of the general public and consequently also contrary to the long term interests of the industry as a whole. Likewise, the (mis?)information of content at many of the insurance distribution websites is woefully lacking and in some cases potentially misleading.

    c. The industry must come to terms and understand the power of social media, for positive image building, as well as its dangers to reputation and trust. It doesn’t take much for an astute consumer to recognize “bought” (fake) endorsements. When recognized as such “bought” endorsements have the potential to cause more harm than good as they dilute the credibility of any real endorsements and positive comments.

    d. Efficiency, Efficiency, Efficiency. The old and outdated systems that involve “turfatitis” but slow the process of policy, endorsement and claim payments need and must be discarded and replaced with consumer-interest focused streamlining. MGAs should refocus on professional intermediary education and performance as professional resources for their affiliated intermediaries.

  3. Mike,

    The wisest point you made in your blog is “The rate of change occurring outside of our industry is faster than the rate of change occurring inside our industry” Similar to life insurance carriers, big retail firms are being turned upside down by folks like Amazon. As far as the insurance distribution model is concerned, take a look at the transformation the travel agency industry has taken. The insurance industry is not isolated from change

    70-80 percent of the economy is driven by the consumer and consumers can make buying changes quickly. The development and distribution of individual risk based products now belongs to those firms that are agile to consumer behavior. Life insurance people are not dummies and for years they have felt the tectonic plates of change shifting under their feet. Despite their hope that things would improve, the rate of policy issues has been flat or declining for years and they know it. Making minor tweaks to the business model that has lasted for decades will hardly move the needle.

    Stephen D. Kendrick
    Managing Partner
    Roswell Group, LLC
    email: sdkroswell@gmail.com
    Office: 908-233-6651\Cell: 908-967-4415

  4. mikenurse says:

    Thanks Stephen – always good to hear a U.S. perspective.

  5. Mike,
    A few more facts. As today’s consumer become more comfortable with digital marketing channels, insurers need to up their game to meet customer expectations. Insurers need help to understand the requirements and priorities of digital consumers. And there is the threat of new players taking a share of the business. Research by Accenture of 6,000 people in 11 countries revealed about a quarter would consider large internet companies – such as Google and Amazon – as possible insurance providers. It showed 67% would consider buying insurance from companies other than insurers. Some 23% cited online service providers as options. A total of 43% said they would consider banks in their buying decision.

    According to research from business consultancy BearingPoint, 90% of insurance firms are yet to implement a company-wide big data strategy and risk being bypassed by new, more agile data aggregators taking advantage of the digital era.

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