Cover Your Assets: A New Look at Creditor Insurance

Abstract: The 2024 CLA Lenders Summit Panel, “Cover Your Assets – A New Look at Creditor Insurance” explores the evolving landscape of creditor insurance in Canada, focusing on product innovations, demographic trends, and the balance between digital and traditional sales channels. Insights from industry experts highlight the integration of embedded insurance, the importance of customer-centric strategies, and the role of digital transformation in enhancing claims and product customization. The discussion also addresses regulatory challenges and forecasts future advancements in the creditor insurance space.  👉 Check out the full video here.   👀  

Could you both give an overview of the creditor insurance products your organizations offer and how these align with your customer strategies?

Vaishali: Creditor insurance is usually offered when customers get a mortgage, line of credit, or even a credit card. It covers unforeseen events like life, disability, critical illness, or job loss by paying off the debt. It’s particularly valuable for members who might be underinsured or need to safeguard their financial commitments.

Zach: I’ll add that creditor insurance, which began in Canada in the 1950s, is a great example of embedded insurance. While its roots covered only life and disability, today it offers diverse options. It complements other insurance solutions, enabling consumers to tailor protection based on their unique needs.

Could you discuss the demographics most likely to purchase creditor insurance?

Vaishali: It’s a broad base, often tied to the lending instrument. Younger people with their first mortgage or families with prior experience using creditor insurance are common buyers. The product resonates with individuals seeking peace of mind in uncertain times.

Zach: Agreed. Creditor insurance is a mainstream solution, with adoption rates as high as 30-50% for some loans. Pricing often varies based on age, coverage, and additional options like critical illness or disability. It’s a versatile product serving diverse demographics.

How do you educate consumers about how creditor insurance complements other insurance products?

Vaishali: It’s all about conversations. For instance, a double-income family might choose creditor insurance to pay down a mortgage while also securing life insurance for other expenses. The key is understanding the customer’s lifestyle and financial goals.

Zach: Absolutely. Frontline advisors play a crucial role in these discussions. Having the courage and conviction to discuss these products can make a difference, especially in face-to-face interactions.

With the rise of embedded insurance, how do you ensure downstream partners educate customers effectively?

Zach: Embedded insurance aligns with changing consumer behaviors. While compliance and education remain challenges, embedding insurance into platforms provides seamless access and enhances consumer trust.

Vaishali: In the credit union space, we collaborate with partners to promote our brand and products, ensuring consistent messaging and education.

Is pricing for creditor insurance a one-size-fits-all approach, or are there variations?

Zach: Pricing has evolved. While smaller credit instruments often skip detailed underwriting, larger products like mortgages involve distinct underwriting processes. Age, medical history, and optional coverages influence pricing.

Vaishali: Exactly. Flexibility has increased with add-ons like critical illness or disability coverage, allowing consumers to customize their plans.

Let’s pivot to how creditor insurance is sold. How do you balance traditional in-person advice with emerging digital channels?

Vaishali: Both are essential. While simpler products like credit card protection can be sold digitally, more intricate plans benefit from in-person conversations. Advisors help customers navigate their options and understand the relevance of coverage.

Zach: At Co-operators, we embrace a guided omni-channel approach. Whether face-to-face or digital, the customer’s journey should be seamless. Integration with digital banking platforms is a big step in achieving this balance.

Are there post-purchase initiatives to ensure customers are aware of creditor insurance?

Vaishali: Some lenders follow up post-purchase to discuss creditor insurance if it wasn’t offered initially. It’s an effective way to keep the conversation alive and ensure awareness.

Zach: True. Multiple touchpoints, from onboarding to renewals, offer opportunities to engage customers and highlight the product’s value.

What innovations do you foresee in creditor insurance over the next three to five years?

Vaishali: Digital transformation will streamline claims processes, much like group benefits. Simplifying these steps will enhance customer experiences.

Zach: Agreed. Digitalization will lead to more bespoke products, enabling consumers to customize coverage. AI and data-driven strategies will also revolutionize how we tailor solutions and engage with customers.

Daniel: Thank you, Vaishali and Zach, for sharing your insights. And thanks to all of you for participating. Let’s continue this conversation beyond the session! Thank you to the Canadian Lenders Association for hosting this discussion! Check out the full video here.   👀  

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