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TORONTO, Canada – September 06, 2018 - PolicyMe, a new digital life insurance advisor, has just launched in Canada. The company offers a uniquely simple way to get a customized life insurance recommendation in 5 minutes. Consumers can also compare quotes and apply for their life insurance policy online.
“PolicyMe is on a mission to make life insurance and critical illness insurance simpler and more affordable for everyone who needs it. That is why we’ve built a platform where life insurance advice is transparent, customized and most importantly, convenient,” says the founding team, Andrew Ostro, Laura McKay, and Jeff McKay.
Today, Canadians can manage their investments, file their taxes and complete a number of their financial transactions online. However, in many ways, the life insurance industry has been left behind. The industry has failed to incorporate even the most basic of technology solutions that have been present in other industries for over a decade.
Buying insurance can involve multiple in-person interactions with an advisor, physical paperwork, and 4-8 weeks to get coverage in place. The new startup believes that a lengthy process that incorporates multiple face-to-face interactions with advisors are deterring younger, working consumers from buying life insurance to protect their families.
The life insurance protection gap, defined as the difference between the resources a family has and what they would need if the primary breadwinner were to die, is more than $20 trillion in the U.S. and Canada, according to Swiss Re.
“In a world where almost anything can be bought with a few taps of a smartphone screen, we believe this protection gap will continue to grow if the life insurance industry does not stay in touch with the expectations of the newer generation.”
PolicyMe’s solution centers on their advice model. “We have designed a proprietary set of algorithms that provide transparent and unbiased advice, guided by actuarial principles. Our advice engine projects a user’s income and lifestyle expenses to identify how much protection they need, both today and in the future.”
“Life insurance prices are high relative to the probability of death. Expected claims (policy pay-outs) only comprise about 50-70% of the premium paid. As a result, life insurance is not a great deal, but it’s an important necessity for many families. We’ve built our algorithms on that very principle and produce recommendations that get consumers the protection they need, but not a penny more.”
The company says that they’ve stripped life insurance back to its core purpose: protection. “The life insurance industry has become far too focused on wrapping affordable pure protection solutions into costly investment and tax efficiency strategies. And when you start to break these strategies down and map out the potential outcomes, we rarely see the value for most individuals.”
PolicyMe is taking a major stance by only offering term life insurance products, a product that is often 3x to 4x times more affordable than a permanent policy. Their recommendation to customers is to “pay for insurance when you need it (most likely in your 30s, 40s, and 50s) and drop it when you don’t.” They believe that the ‘investment feature’ associated with permanent life insurance policies “is rarely as affordable, effective, or efficient as other comparable tools available to do the same thing (like your RRSP or TFSA)”. “If you’re looking for a get-rich-quick scheme, this isn’t the place to find it.”
Insurance is the next important frontier in fintech
While the fintech space overall has rapidly evolved in recent years, insurance has remained a largely stagnant, underserved segment.
The life insurance industry protects over 28 million Canadians through a wide range of financial security products. Life Insurance players have been slower to modernize than their counterparts in home and auto insurance, and especially in comparison to other areas of financial services. Incumbents may be at risk of losing a share of this valuable market as new entrants begin to take notice.
But there are challenges. In-person advisors still remain the primary distribution channel for life insurance. As time has passed, agents have become more and more ingrained as the key sales channel. Existing insurance processes have become far better suited for face-to-face sales than digital distribution channels.
There is also the adverse selection problem — the first people who need a new product often are the highest risk, and digital offerings may attract much higher claims than the industry average.
Despite the challenges, PolicyMe is still confident that there is room for a change. “The millennial generation has tremendous buying power and will soon become a bigger portion of the industry’s customer base. Insurance companies cannot expect to sell the same way to a generation with fundamentally different purchasing habits and expectations.”
PolicyMe is on a mission to make life insurance simpler and more affordable for anyone who needs it. You can take their free, automated life insurance check-up to get a personalized recommendation in less than 5 minutes at https://www.policyme.com.