Insurance companies raising premiums in the midst of COVID-19
May 19, 2020
Nearly everyone has been impacted negatively by the COVID-19 pandemic, and life insurers are no exception. Amidst the uncertainty surrounding the current situation and the decade-low interest rates in Canada, some life insurance companies have begun to raise their premiums. Just like for many individuals, the volatile market is threatening yield and investment losses – however, in the case of insurance companies, the lower interest rate market is compressing their profit margins. Further to this, the insurance payout risk due to COVID-19 has also risen. Increasing the premiums is one way to offset these losses.
One company which has raised their premiums so far is Sun Life Financial Inc – as of Monday, May 11th, 2020, they have raised premium rates on some life and critical illness insurance products by up to 27% for new applicants. Canada Life (Parent Company of Great-West Life and Sun Life) also has plans to start increasing the cost of insurance starting mid to late May. As these companies raise rates, there is no guarantee that additional rates may not also occur in the near future.
These increases could be indicative of a mass shift in product prices for the whole industry. Currently, the increases are applied to more specialized products, such as those which are more interest-sensitive, but could rapidly become a baseline for product price hikes.
If you already have a life insurance policy, your premiums are likely guaranteed.
If you are thinking of applying for a new policy, you should be aware of these imminent program changes. Working with a broker means you will have access to all Canadian insurance companies and their products – meaning we can set you up with the best rates and products with companies that may have not raised rates to date. Now is a good time to lock in a policy when proceeding with companies that have not yet raised rates.
One positive through all of this, is that most insurance companies have increased the amount of insurance they will allow an insured to apply for before imposing medical testing. In most cases, applicants can apply for up to $750,000 of insurance without doing medical testing. Standard insurability questions would still need to be answered.
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