Consumer expectations for claims payouts are being met by the industry

The experience of Canadians with Credit Protection Insurance (CPI) on their mortgages and Home Equity Lines of Credit (HELOCs) is very positive, with 87% saying it is a convenient way to protect themselves and/or their families against major financial setbacks arising from death, disability, critical illness, or job loss.

Canadians with CPI coverage also report that they are somewhat or highly satisfied with the purchase experience overall (87%), and are confident in their knowledge about CPI products (90% at time of purchase). In addition, CPI holders say their expectations of the claims process are being met by the industry, with 80% reporting satisfaction with their claims experience (94% for those whose claim was paid).

Those are the key findings of new public opinion research by Pollara Strategic Insights that asked Canadians about their experience with CPI on their mortgage and/or HELOC. This type of insurance, also known as creditor’s insurance, is used to pay off or pay down a mortgage or HELOC, or to make debt payments in the event of covered occurrences such as death, disability, critical illness, or job loss. CPI coverage is typically secured through the financial institution providing the consumer’s mortgage or HELOC financing, and it is provided under a group policy, thereby allowing more Canadians to be insured at economical standard group rates.

According to the research, 83% of Canadians with CPI coverage said it is an effective way to protect themselves and their families from unexpected life occurrences.  Furthermore, 71% said that without CPI, they do not know how they and/or their family would be able to cope, should an unexpected life occurrence negatively impact them financially – for example, not being able to work and earn a regular income. And 70% said CPI is an affordable insurance option.

With respect to the purchase process experienced by CPI holders, 87% said they were satisfied with the overall purchase process; 77% reported satisfaction with the product explanations provided to them; and 74% said they were satisfied with the information provided to them to make an informed purchase decision.

Canadians with CPI coverage also expressed confidence in the CPI claims process, and that their expectations for claims payouts are being met or exceeded. For example, 89% of survivors/next-of-kin who made a CPI life insurance claim reported that it was paid. (The 89% level of CPI life insurance claims payouts reported by the survivors/next-of-kin of CPI insureds in the survey is close to the level found in aggregated self-reported data from CAFII members, which shows that 94% of CPI life insurance claims were paid in the 2018 fiscal year.)

With respect to the factors which Canadians believe are the most important when purchasing Creditor Protection Insurance:

  • 93% said benefits and features of the coverage;
  • 93% said price;
  • 92% said benefit payment amount of coverage;
  • 89% said ease of overall purchase process; and,
  • 88% said being able to speak to someone to answer my questions.

Canadians also said they have a reasonable understanding of CPI coverage terms and limitations, and about the amount of coverage. For example, at the time of signing up for their CPI coverage, 90% of insureds said they understood “very well” or understood somewhat their credit protection insurance terms.

The survey also identified some areas which CAFII members and other providers of CPI coverage on mortgages and HELOCs in Canada can look at to improve the consumer’s experience with this insurance.

For example, 25% of CPI claimants said they had made a complaint about the claims process, with the top two complaints being the following:

  • 35% complained about the length of time it took to process the claim; and,
  • 32% complained about the lack of updates during the process.

However, 85% of claimants who made a complaint said they were satisfied with how their complaint was handled.

Furthermore, some 22% of CPI holder respondents expressed a lack of confidence that a life insurance claim would be paid, without even having made a claim. As this level of confidence is well below the actual claims payout ratio, it is an issue that is concerning to the industry.

“We’re pleased that Canadians feel Credit Protection Insurance is a convenient, effective and affordable type of financial protection for them and their families,” said Keith Martin, Co-Executive Director of the Canadian Association of Financial Institutions in Insurance (CAFII), which commissioned the Pollara research. “However, the survey also shows that there is room for improvement. As an industry, we will continue to look for ways to improve customer satisfaction, and enhance the value to consumers of the Credit Protection Insurance products that our members provide.”

These are the key results from a national online survey of 1,003 adult Canadians who have Credit Protection Insurance on a mortgage and/or home equity line of credit. The survey was conducted from October 3 to 16, 2018.

About CAFII: 
The Canadian Association of Financial Institutions in Insurance is a not-for-profit industry Association dedicated to the development of an open and flexible insurance marketplace. CAFII believes that consumers are best served when they have meaningful choice in the purchase of insurance products and services. CAFII’s members include the insurance arms of Canada’s major financial institutions – BMO Insurance; CIBC Insurance; Desjardins Financial Security; National Bank Insurance; RBC Insurance; ScotiaLife Financial; and TD Insurance – along with major industry players Assurant; Canada Life; Canadian Premier Life Insurance Company; CUMIS Services Incorporated; and Manulife (The Manufacturers Life Insurance Company).

About Pollara Strategic Insights:
Founded in 1980, Pollara Strategic Insights is one of Canada’s premier full-service research firms – a collaborative team of senior research veterans who are passionate about conducting research through hands–on creativity and customized solutions. Taking full advantage of their comprehensive toolbox of industry-leading quantitative and qualitative methodologies and analytical techniques, Pollara provides research-based strategic advice to a wide array of clients across all sectors on a local, national, and global scale.

SOURCE CAFII

3 Reliable Insurance Stocks to Buy This Summer

The Excerpreted article was written by Ryan Vanzo | The Motley Fool

Insurance companies make for some of the most reliable stocks on the market. Their business models necessitate this stability.

Insurance companies traditionally make money through premiums, but many are increasingly writing them at breakeven prices. Where’s the profit, then?

Insurance companies get to keep your premiums until they have to pay out claims. This money is called “float.” By investing the float, insurance companies can make a small profit until it needs to return the money to policyholders.

As insurance companies need to constantly service policy claims, they’re typically not investing a huge chunk of the float into risky assets like stocks. Instead, most portfolios are invested in low-risk securities like government and corporate debt.

By investing in an insurance company, you’re essentially betting on a company that can invest “free” money into low-risk assets. It’s now understandable why insurance stocks are so stable.

Want to get in on the action? Here are three top-ranked picks for your portfolio.

Growth plus income

What greater way to begin this list than with Great-West Lifeco Inc (TSX:GWO), which has a fortress-like business?

Since 1995, shares have risen more than 1,000%. It’s also paid a steadily rising dividend along the way. The dividend payout now results in a 5.5% annual yield.

With five subsidiaries targeting regional opportunities in North America, Europe, and Asia, the company has never been more diversified. It has investment-grade ratings from every credit agency and recently bumped the quarterly dividend from $0.389 per share to $0.413. The payout ratio is still under 60%, so there’s plenty of cushion.

A $2 billion share buyback program should allow the company to return capital to shareholders in a tax-efficient manner.

If a bear market hits, expect this stock to easily outperform the market.

Even more diversification

Sun Life Financial Inc (TSX:SLF)(NYSE:SLF) is one of the largest life insurance companies in the world. Given that it was founded in the 1800s, it’s also one of the oldest.

With a 4% dividend and a valuation of just 8 times forward earnings, now looks like the ideal time to pile into this slow-but-steady stock.

On nearly any metric, the company is growing. Over the last four years, earnings have grown by 13% annually while the dividend has grown by 7% per year. Return on equity recently popped to 14.2%.

Management has been incentivized to ensure that this growth remains on track. In the next few years, the company is targeting annual EPS growth of 8% to 10% while maintaining a payout ratio of 40% to 50%.

Due to its diversification, Sun Life is better positioned than most insurers to avoid a share price collapse in the face of recession. Just one-third of profits come from Canada, with the rest split between Asia, the U.S., and the U.K.

Plus, only 3% of the company’s portfolio is invested in equities, making its float one of the most reliable on this list.

Bigger isn’t better

With a market cap of $5.6 billion, Industrial Alliance Insurance (TSX:IAG) is by far the smallest stock on this list. The dividend is also smaller at just 3.4%.

Don’t stop reading, though—there’s real value here.

If you invested $10,000 in 2000, you nest egg would now be worth more than $70,000. That’s a better return than the larger peers on this list. Sometimes smaller really is better, as it allows a company to grow faster for longer without hitting structural limitations due to size.

Since 2004, book value has increased by 9.7% per year. The stock has largely followed suit, but not always in perfect tandem.

Today, shares trade at around book value. Buying at this valuation has consistently produced market-beating returns for investors.

At 1.1 times book, this is your opportunity to buy this long-term winner on the cheap.

BRAND NEW! For a limited time, The Motley Fool Canada is giving away an urgent new investment report outlining our 5 favourite stocks for investors over 50.

So if you’re looking to get your finances on track and you’re in or near retirement – we’ve got you covered!

You’re invited. Simply click the link below to discover all 5 shares we’re expressly recommending for INVESTORS 50 and OVER. To scoop up your FREE copy, simply click the link below right now. But you will want to hurry – this free report is available for a brief time only.

Source: The Motley Fool

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