Assuris’ Role in Monitoring Industry Risks
As part of its mission, Assuris proactively identifies emerging industry risks, trends and insights to be better prepared in the unlikely event of a life and health insurer’s failure. Annually, we independently assess our member companies’ risk exposures by analyzing regulatory filings with key financial information. We also collaborate with members and industry experts to gain a deeper understanding of the industry landscape. These efforts contribute to enhance Assuris’ preparedness to respond effectively to potential risks.
Methodology: Expert Consultation
During the fourth quarter of 2024, Assuris has gathered the views of fourteen life and health insurance industry experts, focusing on business model trends, opportunities, and challenges. We consulted with insurers, equity analysts, rating agencies, reinsurers, regulators and the Canadian Life and Health Insurance Association. Any confidential information is kept secure and not shared publicly.
Industry Outlook: Neutral to Positive Sentiment
The overall sentiment of the key stakeholders regarding the outlook of the Canadian life and health insurance industry ranged from neutral to positive. Growth opportunities outside of Canada and wealth and asset management opportunities contribute to the positive outlook. However, the limited growth opportunities in Canada for traditional life insurance and the uncertain macroeconomic environment are tempering the expectations for the life insurance industry sector.
Key Topics Influencing the Sector
The main topics and areas of focus raised by the participants were the importance of life insurance product distribution, technology transformation, and the risks related to the macroeconomic environment.
Distribution
Expanding distribution through partnerships and acquisitions remains a key priority. Life and health insurers are observing a protection gap for the middle market and immigrants. Although closing this gap is challenging, it represents a significant opportunity. Additionally, insurers are less optimistic about direct-to-consumer sales because life and health insurance products are still “sold” not “bought”. People’s life and health insurance needs are generally at the bottom of the priority list, making life and health insurance products harder to sell than other goods. The consultation reinforced the need and the importance of financial advisors’ role to help Canadians secure and protect their financial health.
Technology
Technology transformation, such as Artificial Intelligence (AI), will be significant in the coming years. It has the potential to change insurers’ operations, underwriting, product distribution and customer experience. Technology deployment could be challenging for some insurers due to the costs involved and uncertainty about its success. Insurers face the risk of investing in trendy innovation projects rather than technology that delivers real value over the long term. Overall, technology transformation is expected to be beneficial for life and health insurers.
Macroeconomics
Given the uncertain economic environment, macroeconomics remains the industry’s most significant risk. The recession risk in Canada has increased which could negatively impact the financial performance of the life and health insurance sector. On the positive side, the industry is more resilient to macroeconomic risks than before and remains well-capitalized. Overall, we are confident that life and health insurers have the tools and expertise to navigate through these uncertain times.
Evolving Business Models
Life and health insurers play an important role in our society by offering a variety of protections that contribute to Canadian financial well-being. Insurers are diversifying their business outside traditional life insurance, such as health care services and wealth and assets management, which represents a great opportunity for insurers to positively impact the lives of many Canadians.
Strength of the Sector and Assuris’ Commitment
In conclusion, the insights gathered confirm the strength of the Canadian life and health insurance industry despite ongoing challenges. Assuris is committed to protecting policyholders by enhancing its preparedness and engaging with key stakeholders.
