Though a majority of Canadians say they consider insurance an essential part of their financial health many cost-conscious consumers are taking the axe to their coverage. That's not the way to go, warns TD Insurance.
Forty-two per cent of Canadians are less likely to purchase a new policy or buy enough insurance due to the economic environment, according to TD Insurance's annual "State of Insurance Report".
This second annual report also found:
- Canadians have decided not to make claims in order to keep their premiums low (33 per cent) or to avoid a high deductible (29 per cent).
- Even more alarming, 21 per cent of Canadians have cancelled or forgone insurance altogether in an effort to save money.
- As a result, one-in-five Canadians now admit they don't think they have enough insurance (19 per cent versus nine per cent in 2011).
"If you want to save money and preserve your personal finances, the last thing you should be doing is curbing your insurance coverage," says Dave Minor, vice-president, TD Insurance in Toronto. "Especially in an uncertain economy, insurance is an important part of financial planning … Canadians seem to be taking a step back or a step sideways perhaps with regards to managing their own personal risk."
A few years ago, especially with regards to discretionary insurance (read: life and health insurance), Canadians weren't adequately insured, Minor says. Now, the situation appears to be worsening — despite the report finding that the majority of Canadians (79 per cent) say they consider insurance an integral part of their financial planning, an estimated 39 per cent don't have any life insurance.
"Folks are making decisions around their discretionary income because economic times are putting pressure on that income and they're making the decision to forego the insurance coverage they would've normally thought about purchasing," he says. "That's very concerning. That's folks' financial safety net and people are making the choice to forego that safety net in more and more cases."
Rough economy means more insurance fraud
Meanwhile, it shouldn't come as a surprise that when the economy goes down, the threat of fraud rises. To that end, one-fifth of Canadians admit they have not been completely truthful or omitted information when filling out an insurance application, compared with only 13 per cent in 2011. According to the Insurance Bureau of Canada, organized insurance crime costs insurers and policyholders about $542 million annually.
"Generally speaking, Canadians are not dishonest. When you're filling out an insurance application you have to be honest and it's in your own best interest to do so," he remarks. "Often times it's due to being careless or they don't understand the questions (on the application) and they don't go into enough detail. That's what we see mostly."
Insurance industry ignoring low-income Canadians
Minor also highlights a potentially disturbing development on the insurance brokers' side of the equation: many brokers are increasingly targeting the wealthy with necessary health and life insurance while neglecting mid- to low-income individuals and/or families.
"The number of life insurance providers — brokers, agents — are declining and they tend to service more affluent Canadians more than the average or middle income Canadian," he says. "What you find is, affluent Canadians are better insured because they get the attention of the broker whereas middle or lower income Canadians don't get that attention. They're not seen to be as profitable, therefore the brokers and agents out there are moving upstream if you will."
To combat this, Minor says insurance providers need to do a better job of making insurance accessible to all Canadians.
"Not only do people find insurance confusing, but they also don't know what to buy, where to buy, who to trust, or how to go about getting information," he remarks. "Most insurance companies' websites are fairly informative … there are online calculators that will help take you through a needs analysis so you can get a better sense of what your personal insurance needs are."