9 minute read 16 Feb 2021
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How the pandemic impacted Canadian customers’ insurance needs

By Bernhard Klein Wassink

EY Global Insurance Customer and Growth Offering Leader

Experienced financial services professional. Digital strategy enthusiast.

9 minute read 16 Feb 2021

Evolving customer priorities create new opportunities for insurers, according to the EY Insurance Consumer and Small Business Owner Survey.

In brief
  • Canadian insurance customer behaviors and priorities are evolving as a result of the pandemic.
  • Insurers must adapt their products and distribution methods to remain relevant.
  • Insurers have a unique opportunity to support and provide value to those most financially impacted.

Prior to the COVID-19 pandemic, macroeconomic factors, such as the digital revolution, improvements in online shopping experiences and the desire for more personalized products and services, were shifting insurance customers’ preferences.

Since the pandemic began in early 2020, there have been significant changes in the value customers expect from their insurance products and how they prefer to interact with carriers. In addition to testing the financial health of many, the pandemic has accelerated changes in customer preferences and how insurance carriers respond. The pandemic also transformed the global business landscape, suggesting a long-term impact on the way we work.

In late 2020, EY Insurance conducted a survey of insurance consumers and small business owners across five global markets (Canada, US, France, Italy and the UK) to understand how the pandemic has impacted their lives and affected their insurance preferences for personal lines and life and retirement products.

While the pandemic has financially impacted some parts of Canadian business and society more than others, we found financial anxiety is widespread among insurance consumers and small business owners alike. 

The insurance sector has a clear opportunity to help customers navigate this new environment and restore their financial security. The insurers’ role entails developing solutions that meet evolving needs, supporting customers by providing a “cushion” to protect against future financial risk and harnessing the trend toward digital channels. Insurers also need to better educate customers about their products and the value they provide in order to remain relevant.

Emerging concerns of consumers and small business owners

Our survey revealed that 72% of Canadian life insurance consumers are concerned about their financial well-being, and two-thirds of small business owners either partially or completely shut down their operations during the pandemic.

EY Insurance Consumer and Small Business Owner Survey

72%

of Canadian consumers are concerned about their financial well-being.

Consumer concerns relevant to life insurance and retirement center around wellness: their top concern was financial well-being, closely followed by fear of losing a loved one. From a personal-lines perspective, changes brought about by the pandemic are causing new worries for consumers. Given more time is being spent living and working at home, consumer concerns are growing around cybercrime and paying insurance for a vehicle they’re driving less.

customer concern graph

These fears are also influencing potential future behaviors. A significant portion of consumers said they will place greater emphasis on planning for the future, with many planning to save more and pay off debts to mitigate future uncertainty.

Small businesses in Canada have faced unprecedented and unanticipated risks as a result of COVID-19, with the pandemic acting as a stress test to their financial resilience. Some of the hardest hit businesses are those that are customer-facing, including the hospitality, travel and retail sectors.

The most financially impacted (see methodology) Canadian small business owners have seen a revenue downturn of at least 40%, with many seeing an 80%–100% decrease in revenue. Conversely, the least financially impacted small business owners have seen minimal effects on their revenue, with 65% of this respondent segment experiencing no change. 

Key concerns among all small business owners are similar, regardless of how financially impacted they have been by the pandemic. However, the most financially vulnerable place a greater emphasis on survival: their top concerns include remaining open and coping with the loss of revenue they experienced.

Consumers’ product appetite

So, what do consumers’ overarching concerns mean for insurers? With increased uncertainty about the future and the impact of COVID-19, there is a clear appetite for accessible insurance products that protect against existing and emerging risks.

Consumers’ future appetite for insurance products falls into three primary categories: flexibility in purchasing insurance, protection against lost income and lowering the cost of insurance through innovation.

Are your insurance solutions in tune with new consumer needs?

EY’s Global Insurance Consumer Survey reveals how insurers can support the needs of those impacted by the COVID-19 pandemic.

Learn more

Flexible cost structures and income protection

With many focused on their financial security, there is appetite for insurers to reduce the cost of insurance. Seventy percent of consumers said they would exchange personal data for lower premiums, and 67% said they would install smart sensors in their home and share real-time data in exchange for a discount. In addition, demand for insurance policies that cover loss of income is high, including those that pay mortgage costs for three months or cover other existing financial commitments (e.g., credit card bills).

Likelihood of consumers to purchase loss of income insurance graph
The case for a diversified distribution strategy

Significant shifts toward online purchasing behaviors reinforce the need for Canadian insurers to focus their digital strategy around future innovation. Our findings suggest significant appetite for digital insurance channels, with both consumers and small businesses expressing greater interest for dealing with insurance brokers online. 

Likelihood of purchasing insurance product online
Small business owners’ solution needs

Similar to consumers, Canadian small business owners are interested in products that lower costs while protecting against new risks.

Three-quarters are interested in a product that pays their fixed business expenses for three months in the event of a pandemic-related shutdown or insurance that covers them from the liability of employees or customers catching disease in their place of business.

There is appetite for insurers to innovate around the new behaviors developed as a result of the pandemic: 78% are interested in commercial vehicle insurance that only charges them for miles driven, 81% are interested in cyber insurance to cover additional exposure from employees working offsite and 55% of small businesses are also interested in insurance that assists them with adjusting to the new business environment (e.g., online delivery).

How can insurance protect the small businesses that need it most?

EY’s Global Insurance Small Business Owner Survey reveals how insurers can innovate to support the needs of those impacted by the COVID-19 pandemic.

Learn more

Interest in social responsibility

Our survey revealed that consumers place value on products and services that meet social responsibility criteria. Both respondent groups were asked about the extent to which an insurer’s response to environmental issues and growing inequalities would influence their purchasing decisions. Their response was emphatic, with a majority claiming that an insurer’s response would impact their decision when selecting a provider. 

Social responsibility factors in insurance graph

The way forward for insurers

The pandemic environment presents critical opportunities for insurers to reengage with customers and support them in a time of need. The challenge for insurers is to create truly customer-centric products tailored to evolving customer needs and budgets.

Delivering traditional insurance products through digital channels is no longer a viable approach for insurers to succeed in the long term. Carriers need to develop new solutions that reflect consumers’ changing priorities and help them achieve financial security.

We believe there are three core customer needs insurers should focus on providing to both consumers and small businesses:

  1. Use technology to offer more personalized products, services and experiences
  2. Diversify distribution channels to accommodate different consumer needs, with a special focus on digital
  3. Focus on creating long-term value that reflects your customers’ values — and effectively communicate your efforts to them

The pandemic speaks to the very purpose of insurance: to protect individuals, families, business and communities against disasters and unforeseen events. Insurers must be bold in living their purpose and demonstrate tangible value from their products and solutions. We believe those insurers who commit to strategic change during and after a crisis will emerge as winners.

 

Please reach out to Janice Deganis, EY Canada Insurance Leader, if you are interested in learning more about the Canadian findings.

  • Methodology

    In late 2020, EY Global Insurance and EY QUEST surveyed more than 2,700 consumers and 1,200 small business owners throughout North America and Europe. The objective was to gather insights about how the COVID-19 pandemic has impacted their lives and insurance needs.

    To better understand their concerns and preferences, we grouped our population of survey respondents into three segments based on the degree to which they were financially impacted: upper third (most financially impacted), middle third and lowest third (least financially impacted).

    Financial impact was measured by a composite scaled score made from seven sub-questions about matters related to financial security, lost wages and reduced employment hours. There is a sizeable difference between the mean amount of impact reported between the most and least impacted groups.

Summary

The distress caused by the pandemic will be felt by Canadian consumers and small businesses for years to come. To meet customers’ evolving needs and restore their financial well-being, insurers must reimagine their products and solutions.

About this article

By Bernhard Klein Wassink

EY Global Insurance Customer and Growth Offering Leader

Experienced financial services professional. Digital strategy enthusiast.