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This article was published 14/3/2013 (1365 days ago), so information in it may no longer be current.
TORONTO - Canadian insurance companies need to refocus their business strategies if they want to stay competitive amid a slow economy and a changing customer base, says a report released Thursday by auditing firm Ernst & Young.
The 2013 Canadian Life Insurance Outlook cautions that insurance providers need to adjust the products that they currently offer, and assess whether they are the most cost effective given current low interest rates.
"They have to change the products that they're selling, stop offering long-term products, reprice the products they have or shift that risk to the policy holder," said Doug McPhie, author of the report and partner at Ernst & Young.
McPhie said low interest rates impact insurance companies because premiums will not yield anticipated returns when invested, thus making it less profitable for the companies to offer large policies.
Last week, the Bank of Canada announced it was leaving its overnight policy rate at one per cent.
The annual study also encouraged insurance companies to offer diverse products, given their size.
For instance, it suggested that smaller firms carve out a niche for products such as critical illness insurance, longevity insurance and universal life insurance, as opposed to larger companies who may have more flexibility in offering a gamut of insurance options.
McPhie said the report also found that the companies need to change with the times and look at how they sell insurance to a younger demographic.
In the past, firms would use insurance brokers, he said, but nowadays they should be moving into more online sellers and creating a social media presence to attract a more tech-savvy clientele.
Additionally, insurance typically purchased by an older client may be focused on wealth accumulation, such as a diversified portfolio of insurance and investments, whereas younger clients are often more interested in policies linked to wealth protection, he said.
Compared with their U.S. counterparts, the report found that Canadian insurance companies fared better in 2012, largely due to less regulation and a better economy.