On March 19, 2024, CAFII held its second webinar of 2024 – Insurance Among Canadian Homeowners. Justeena Zaki-Azat, a lead research analyst at LIMRA, joined CAFII’s Executive Director, Keith Martin, to share and discuss the results of groundbreaking research commissioned by CAFII and conducted by LIMRA on insurance among Canadian Homeowners.

Justeena Zaki-Azat has been with LIMRA and LOMA since 2022, stepping into the role of Senior Research Analyst within the Applied Research Solutions Team. Before joining the LIMRA and LOMA family, J. Zaki-Azat honed her skills and expertise over a rewarding 12-year academic career in the Greater Toronto Area. Her roles were diverse, including developing, executing, and sharing research findings, as well as providing mentorship and guidance to students at prestigious institutions such as York University and Wilfred Laurier University.

Many representatives from CAFII’s 14 member companies and 9 Associates attended the webinar, as did representatives from allied industry Associations such as the Canadian Life and Health Insurance Association, or CLHIA; the Travel and Health Insurance Association, or THIA; the Canadian Bankers Association, or CBA; the Canadian Association of Direct Relationship Insurer, or CADRI. A total of 29  insurance and financial services regulators and policy-making authorities attended as well, including from the following government organizations:

• The Office of the Superintendent of Financial Institutions, or OSFI;
• The Authorité des marchés financiers, or the AMF;
• The Financial Services Regulatory Authority of Ontario, or FSRA;
• The New Brunswick Financial and Consumer Services Commission, or FCNB;
• The Insurance Councils of Saskatchewan, or ICS;
• The Government of Saskatchewan;
• The Government of Alberta;
• The Alberta Insurance Council, or AIB;
• The British Columbia Financial Services Authority, or BCFSA;
• And the Insurance Council of British Columbia. 

After a brief introduction by K. Martin, J. Zaki-Azat began summarizing the findings from CAFII’s commissioned research.

The catalyst for this study was CAFII’s desire to understand the prevalence of insurance products among Canadian homeowners. The goal of the study was to answer the following questions:

• Are Canadian homeowners traditionally uninsured and/or underinsured?
• Do more Canadian homeowners with lower income have credit protection compared to homeowners in other income brackets?
• Is credit protection playing a disproportionately important role in the marketplace for low-income Canadian homeowners?

To answer these questions, LIMRA employed a strict methodology. They sampled 1,175 Canadian homeowners from the following household income bands:

• 34% Low (less than $60,000)
• 37% Middle ($60,000-$124,999)
• 29% High ($125,000 or more)

Participants completed an online survey on insurance ownership, financial attitudes, insurance coverage, and demographics. LIMRA only asked about credit pertaining to mortgages and/or HELOCs. They also categorized participants’ traditional insurance status as uninsured (do not have any traditional life insurance, or TLI), underinsured (have TLI that covers fewer than 7 years of income), and well insured (have TLI that covers 7 or more years of income). Finally, out of the three groups, approximately 55% of each income band had a mortgage, a home equity line of credit, or both.

Following these criteria, LIMRA found that 80% of Canadian homeowners are uninsured (do not have TLI) or underinsured, with 30% uninsured and 50% underinsured. Only 21% of participants were found to be well insured. Furthermore, LIMRA found that significantly more low-income homeowners are traditionally uninsured than other income brackets. Of those insured, 75% are traditionally underinsured with insufficient coverage. Significantly fewer low-income homeowners have employer-benefit life and/or term life insurance than other income brackets.

When it comes to Credit Protection Insurance (CPI), the research found that there were no significant differences between income brackets in terms of CPI ownership, with 55% of all homeowners with credit owning a form of CPI. In fact, low-income homeowners own significantly fewer CPI products than high-income homeowners. Thus, there is no specific CPI product (life, critical illness, disability, job loss, or none) that low-income homeowners purchase more than other income brackets.

J. Zaki-Azat noted that, while the data has shown no significant difference across income brackets in CPI ownership, it is possible that CPI is still playing an important role for low-income Canadian homeowners. This is because more low-income homeowners with credit only own CPI compared to other income brackets. In fact, 10% of low-income homeowners just own CPI compared to 6% of middle-income and 3% of high-income homeowners.

Narrowing the focus on low-income homeowners with no insurance, 46% indicated that they cannot afford life insurance, and 50% said they do not have an emergency fund or other personal savings to access in place of life insurance. This would leave this group of people very vulnerable if the primary wage earner were to pass away suddenly. Thus, CPI would and could be a great solution for the uninsured low-income homeowner but not many utilize it.

Delving into CPI ownership, the top three reasons for those who own CPI were:

• It was good value for the price.
• It was convenient to purchase from my lender/financial professional.
• I only wanted insurance to cover my debt(s).

When asked if they intended to purchase CPI in the future, the majority of participants said no; however, the traditionally uninsured who did indicate they intended to purchase it said they would do so for the protection it provided. Those traditionally uninsured folks who said they had no intention of buying it said they did not want or could not afford the additional cost.

The conclusion, then, is that low-income homeowners are not using CPI as much as they should, while traditional homeowners are using it as additional coverage.

J. Zaki-Azat moved to the Q&A portion of the webinar. The first question came from K. Martin, who asked if the findings were consistent with LIMRA’s other findings. J. Zaki-Azat explained that this was the first study LIMRA has conducted on the Canadian homeowner, a topic which has not been well-studied; therefore, yes, she was surprised by the findings.

K. Martin then asked if, given the rising interest rates, there is a risk for Canadian homeowners who will be renewing their mortgage rates in a few years, feeling that they can no longer afford the optional insurance. J. Zaki-Azat said that, with current inflation, Canadian homeowners are already having trouble affording insurance, so having good protection, like insurance, may be at risk. K. Martin then asked J. Zaki-Azat to comment on LIMRA’s finding that 38% of Canadian homeowners have debt and dependents but are under- or uninsured, thus categorizing them as at-risk. J. Zaki-Azat said that this group is notably at risk.

Moving to the audience, one attendee asked, as more and more mortgage purchases and renewals become increasingly handled online, how will this digitalization of insurance products impact clients’ perceptions of CPI. Extrapolating from the findings, the only thing that can be pointed to as potential evidence of digitalization’s impact is the reason for homeowners to own CPI. One of the top three reasons for ownership was convenience, and this was irrespective of whether the participant had traditional insurance., digitalization could potentially impact client’s perception of CPI and their comfort around purchasing it, but this cannot be determined conclusively, nor can it be assumed that this change will be negative or positive.

Another question asked if there is a way to get Canadian homeowners, especially the at-risk group, to think more about life insurance, including but not limited to CPI. J. Zaki-Azat replied that a good motivator is the protection of family; many folks don’t want to think about death, but they will when it comes to their family’s safety and well-being. This also has connections to financial literacy, which is an industry-wide issue. Many Canadians don’t have a financial advisor, nor do they want one, which is concerning in terms of product knowledge since this is a good avenue to learn about the marketplace.

Before concluding the webinar, K. Martin asked J. Zaki-Azat what three things she would like to leave the audience with. To this, she replied that, for the broader Canadian homeowner, it is important to understand what coverage is available in terms of traditional insurance and CPI. To Canadian homeowners with credit, it is important to consider the consequences of not having credit protection. This is even more pressing for at-risk homeowners who have survivorship.