Life insurance applications down across North America, report shows

Data collection organisation shows changes in government policy affecting life insurance rates

Life insurance applications down across North America, report shows
Life insurance applications have declined right across North America in 2017, according to the industry’s authority on data collection.

The MIB Group has just released its latest MIB Life Index, measuring individually underwritten life insurance activity in the United States. The index has declined in every month of 2017, and year-to-date has fallen by 3.1%. Things are a little better in Canada, where rates bounced back in July after months of decline. David Aronson, director, Marketing and Corporate Communication at MIB explains how the North American neighbours compare on life insurance applications.

“The United States has lost ground every single month of 2017, but in Canada that did not start until April,” he says. “The Canadian drop-off happened after the first quarter and wasn’t as steep as the US. In the US, we are off by about 3.1% year-to-date through the end of July. Canada had a couple of bad months but is recovering, so it is only off 1.9% for the same period.”

The MIB is industry owned and has approximately 430 member companies, both in the United States and Canada. With offices in Toronto, New York and Braintree, MA, it works to detect fraud, errors and omissions on insurance applications, as well as analyzing industry data to reduce financial risks and make regulatory reporting more efficient. It’s an important function for an industry where fraud is a major issue.

“MIB is involved with virtually every transaction of individually underwritten life insurance in the US and Canada,” reveals Aronson. “When a life insurer gets a fully underwritten application, they check it against our database to understand the veracity of the medical statements made on the application.”

With data analytics now a central pillar of the life insurance industry, it means people that submit misleading applications are much more likely to be found out.

“Underwriters report medical conditions on applicants that have previously applied to MIB, then we check against the name to see if the medical impairments are as they should be or did somebody forget their high blood pressure – really it’s fraud detection,” says Aronson.

Another major function is keeping track of just how many people are in the process of purchasing life insurance. Rates have been declining for years and providers are constantly working on ways to educate the public on the merits of these products. There are certain outside factors that contribute to life insurance uptake too, specifically policy emanating from Washington and Ottawa.

“At age 60-plus, if estate tax policy is changing and people are using life insurance as part of their estate tax strategy, then you will see all sorts of straddling strategies involving life insurance,” he says. “In the United States, the volume is much less now with the ceiling of estate taxes being $5 million.”

In Canada, the new rules governing tax sheltering in life insurance policies that came into effect on January 1 also had a clear impact on applications. This was especially the case for the older demographic, as Aronson explains.

“Canada finished 2016 up 7.3%,” he says. “The larger number of applications in the Life Index is 45 and under, but for those 60-plus they was upwards of 15% year-over year growth for 4Q16, which was very high. In the first quarter of 2017 we saw growth of 2% and then it started going negative in March.”

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