Interesting Facts about Life Insurance Companies in Canada in 2023

Simon Huften

Simon Huften is the President of Life Insurance Canada.com Inc.

There are a couple of reasons that you may have landed on this page, reading this article.  The first reason is that you were looking for information on why someone may get life insurance in Canada.  The second is that maybe you are researching if life insurance is a ‘scam’ or if buying life insurance is actually worth the money. To answer these in order, people buy life insurance in Canada for a variety of reasons but they all boil down to the fact that someone or something you care about would be severely impacted financially if you were to pass away unexpectedly.  Life insurance is a tool that prevents this from happening. To answer if life insurance is a scam or worth the money I would suggest that we can take a look at the recent data released by the Canadian Life & Health Insurance Association (CLHIA) that provides some details on just how much the life and health insurance industry paid out to beneficiaries and policy owners in 2023.  In this article we cover interesting facts about life insurance companies in Canada in 2023.

In this article: 

• What is the CLHIA?
• Sorry, Life and Health Insurance Companies Paid Out How Much Last Year?
• Why the Increased Amounts?
• But is Life Insurance a Scam?
• What Does This Mean to Policy Owners?

What is the CLHIA?

I want to make sure that we are on the same page regarding the Canadian Life & Health Insurance Association and that they are a reputable source for information.  The CLHIA is a not-for -profit group that has a membership that represents 99% of the life and health insurance companies in Canada.  These companies provide a variety of services, not just limited to life insurance.  Member companies provide investment products, group life insurance, group health insurance, group annuities, disability insurance and personal health insurance plans.  The CLHIA is not linked to, or owned by any individual insurer and as such is a powerful source of unbiased information about the state of the life and health insurance industry in Canada as a whole.  You can see information on who the CLHIA is and what their goals are here.

Sorry, Life and Health Insurance Companies Paid Out How Much Last Year?

Let’s not bury the lead here.  The answer is $128 Billion in total benefits.  The amount is incredible when you first read it.  Life and health insurance companies in Canada paid out a record $128 Billion in benefits in 2023.  This is an enormous number.  Particularly when you consider that according to Statistics Canada the population of Canada was around 40,528,000 people near the end of 2023.  The amount paid out by insurers exceeds what the federal government paid out for old age benefits, employment insurance and child benefits combined for the year.  If we look at two particular product lines, there was $17 Billion in life insurance death claim money paid out to beneficiaries and nearly $10 Billion in disability insurance claims. The life insurance would have helped families and businesses survive financially when they have suffered an otherwise catastrophic loss.  The disability insurance helps families maintain their life when someone is unable to go to work for health related reasons.  This is often overlooked,  but talk to someone where they have been collecting disability income and see how it affected their life.  Traditionally this was something that many Canadians received as a part of their benefit plan at work.  You should make sure to check on your coverage and talk to one of the experts at lifeinsurancecanada.com if you need to purchase a personal policy.

Why the Increased Amounts?

We have talked many times in the past about making sure that when you decide to get life insurance that you also complete a needs analysis that will help you determine how much insurance coverage you need.  Unless you are very disconnected with the news for the past few years you are most definitely aware that the cost of everything is going up, and it isn’t happening slowly. With increased home prices came the increase in the amount of mortgage debt that someone needs to offset when they buy life insurance (remember, even mortgage brokers rarely suggest that you take the mortgage insurance the lender offers).  Add to this the increasing costs of things like post secondary education, debt servicing due to higher interest rates and just general cost of living increases and you can see why people are buying larger life insurance policies than ever before.  In fact, the CLHIA estimates that all told, 23 million Canadians own $5.3 Trillion in life insurance death benefits.  The vast majority of this coverage is purchased by individuals who use an advisor to get the coverage they need.  83% of the premiums paid come from this type of arrangement.  The remaining amount comes from the premiums paid for group life insurance from employers.  This is a great thing to see as well because, while it’s a really nice benefit to have, group life insurance should not be the only source of life insurance that you have.  

But is Life Insurance a Scam?

When I discuss household cash flows with clients it is often the case that they include all of the insurance premiums that they pay in one category in their mind.  They lump life insurance premiums in with what they pay for car insurance, house insurance and any other items that they have insured.  Anyone who has tried to make an auto insurance claim knows that the advice that they will often receive is that if they can afford to make the fix themselves they should because if they make a claim their premiums will go up the next year.  For some reason consumers have decided that if this is the case for one type of insurance claim it must be the same for all types of insurance claims.  This simply isn’t the case with life insurance.  In fact, one of the biggest things consumers need to remember is that life insurance is basically ‘un-fraudable’ for making claims. If your policy is in good standing (premiums paid and no issues with truth telling during the application process), your beneficiaries will receive the death claim from the policy.  Being alive or dead is an all or nothing outcome.  If you have died the insurer doesn’t increase your premiums because you made a claim.  The premiums stop and the death benefit is paid to the beneficiaries.  We don’t try and talk someone out of making a claim, once you pass away the only thing we do is make sure that your beneficiary receives the money as quickly as possible whenever they choose to make the claim. 

 I’ve had people who delayed making claims on life insurance because they didn’t want to seem greedy or felt like it was in poor taste to think of money at such a difficult time.  Remember, the person who took out the policy did so because they cared about you and your financial security in the event that they were no longer alive to help support it.  The whole purpose of the policy is to provide you with financial support at a time when you need it the most.  As insurance advisors we would never judge you based on the timing of when you apply for a life insurance policy death benefit.  No one thinks that you would prefer to have the money instead of your loved one being still alive.  What we do think is that the purpose of the policy is to help alleviate the financial stress you may feel and that is a pretty wonderful last thing someone could do for you.

What Does This Mean to Policy Owners?

When you see a number like $128 Billion being paid out by insurers you may ask the question, ‘can this be sustained?’ Are Canadian life insurance companies able to continue to pay out record amounts of benefits year after year? One key thing to remember is that the $128 Billion amount is across all product lines for insurers.  Some of the payments reflected are from annuities and segregated funds, which are investment products where the amount being paid out includes a portion of return of capital to the investment holders.  It also includes group benefit health claims, which anyone familiar with the pharmaceutical industry can tell you are skyrocketing each year.   As someone who personally owns a life insurance policy, the financial stability of the insurer is not something that generally you need to be concerned about.  All Canadians are familiar with the idea that interest rates rose significantly in the past couple of years.  This is a bad thing if you have debt (mortgages, lines of credit etc.) but is a really positive thing if you have capital to invest and you want stable long term returns.  Life insurance companies in Canada fall into the second category and the higher interest rates is a boon to their investment portfolios, giving them the opportunity to increase the strength of their balance sheets, which were already in really good shape.  Companies maintain strong ratios to cover their obligations and this seems set to maintain itself quite well into the future.  Now that you have all of this wonderful information make sure to reach out to lifeinsurancecanada.com and speak to one of their advisors to help you set up a life insurance plan to protect the financial security of the people you care about.