Financial advisors have been busy amid the COVID-19 pandemic addressing investors’ growing list of concerns, including one that often ends up on the back-burner during normal times: life insurance.
“In times of crisis, it’s a natural reaction to think about insurance,” says Patrick O’Connor, president of Blackwood Family Enterprise Services, a fee-based boutique financial planning firm in Winnipeg that assists affluent families.
COVID-19 has pushed the often less pressing issue of managing financial risks of morbidity and mortality to the forefront, he says.
In fact, many Canadians are facing unprecedented anxiety about their finances, their physical health and their loved ones’ well-being. The April edition of Morneau Shepell’s Mental Health Index found that 81 per cent of Canadians indicated the pandemic has impacted their psychological well-being negatively.
“People are considering their own mortality much more than they likely have before,” says Dr. Moira Somers, a psychologist and executive coach at Money, Mind & Meaning in Winnipeg who works with high-net-worth families to reduce strife around money.
As such, advisors can play an important role helping clients find a sense of control, she says.
“One way of settling death anxiety is by knowing that you’ve done everything you can to tend to people you care about,” Dr. Somers says, adding that obtaining life insurance can help individuals exert that control.
While broaching the subject with clients can be tricky for advisors as they run the risk of appearing opportunistic, discussing life insurance has more merit than ever before, says Cynthia Kett, principal at Stewart & Kett Financial Advisors Inc. in Toronto.
“I probably bring [insurance] up pretty close to the first meeting I have with potential clients ... [because it’s] one of those defensive financial planning strategies,” she says.
As Ms. Kett doesn’t sell any financial products to clients, she says her advice is generally well received. “If we talk about life insurance, it’s because we think it is a good idea.”
Mr. O’Connor says his clients are typically older with higher net worth, so insurance has often long been part of their financial plans. But for other advisors at his firm who have younger clients, the pandemic has demonstrated the need for life insurance.
Dustin Schneider, insurance solutions specialist at Blackwood Family Enterprise Services, says he has been receiving more calls from 30-something-year-old clients. But applying for coverage today involves new challenges, including getting a medical exam done when public health officials are recommending everybody stays home and engages in physical distancing.
As a workaround, Mr. Schneider says a few major insurers offer life insurance policies for less than $1-million without medical for individuals under the age of 45 with good family and personal medical histories.
“And I’ve been doing a lot of online applications regardless of the situation just to expedite it for clients,” he says.
Still, Ron Sanderson, director of policyholder taxation and pension at Canadian Life and Health Insurance Association Inc., says the pandemic has created “a couple of wrinkles” for applicants.
While most of a life-insurance application can be done online, signatures remain a thorny issue. Mr. Sanderson says that wet signatures – not electronic – along with having a witness sign when the insured is designating a beneficiary are still the norm in the insurance business. In addition, those who require a report from a physician to apply for life insurance could be facing a longer wait.
“Doctors are busy right now tending to patients, so the question for many is do you bide your time and deal with this afterwards or do you get the process going now?”
For advisors, it’s a balancing act to not come across as too forceful with clients regarding the potential need for coverage, nor do they not want to be too casual either – especially as clients without coverage may face rising premiums, Ms. Kett says.
“I wouldn’t be surprised if [insurers] bump premium scales to reflect what’s going on,” she says.
Mr. Sanderson, for his part, says the pandemic in and of itself may not necessarily spark a rise in premiums. “Rather, it’s the recent interest rate cuts that are likely to have a bigger impact.”
Nevertheless, Mr. O’Connor says that while getting clients the coverage they need is important, it shouldn’t be the main focus for advisors right now.
What’s critical is connecting with clients and guiding them through some big decisions.
“You don’t want to come across as ghoulish,” he says. “People want to hear from us. [They want to] know we can update their [financial] plans and help make adjustments given what’s going on.”