Online insurance sales no threat to advisors


IFB Summit:

Given its complex nature, the majority of consumers need advice when purchasing insurance

By Megan Harman | November 05, 2013 16:25

Although Canadians are increasingly going online to research products and services, the Internet does not present a threat to the face-to-face sales of insurance products by financial advisors, according to Rick Forchuk, special advisor, retail insurance distribution at Empire Life Insurance Co.

Speaking at the Independent Financial Brokers (IFB) fall summit in Toronto on Tuesday, Forchuk said there will always be a role for financial advisors in the sale of insurance products.

“[Consumers] need you far more today than they ever needed you before,” Forchuk told the audience of insurance brokers.

Although some life insurers allow Canadians to purchase certain insurance policies online, which has prompted concerns that online sales could steal market share from the advice channel, Forchuk said these concerns are overblown. He noted that given the complex nature of insurance, the majority of consumers need advice when purchasing this type of product.

“The perceived threat of the Internet, of what it’s going to do us, of what’s it’s going to do to our business,” Forchuk said, “is all smoke in mirrors.”

He pointed to research from LIMRA showing that only 2% of Canadian consumers had purchased life insurance online.

Although industry players generally assume that younger clients would be more inclined to buy insurance online than through a licensed professional, Forchuk argued that this is not the case. In fact, he pointed to a study in which 80% of Canadians in their 20s said they prefer to buy insurance through a financial advisor – an even higher proportion than the 70% of Canadians in their 40s and 70% of Canadians in their 60s who said they prefer to buy insurance through an advisor.

Even though younger clients tend to be more technologically savvy, and are more likely than their older peers to research products and services online, Forchuk concluded, they’re actually more likely to seek advice at the point of sale.

“Our perception of those younger people is that because they’re so technologically literate, they must be buying life insurance – if they’re buying it at all – on the Internet,” he said. “Their perception is that this is such complicated stuff that [they] really don’t feel comfortable using [their] own acumen to try and figure it out. [They] want to talk to someone.”

A bigger threat to the advisory channel than the Internet, Forchuk said, is the shortage of new advisors entering the business, and the failure of the channel to target younger clients. He noted that the decline of the career sales channel has meant that the industry is recruiting and training far fewer new advisors compared with several decades ago.

As a result, advisors are getting older, on average, and many haven’t taken the initiative to implement a succession plan.

“We aren’t bringing younger people into our businesses to work with the adult children of our existing older clients,” Forchuk said.

Unless the industry more aggressively recruits younger advisors in order to target younger clients, Forchuk warned, the channel will certainly begin to lose business