CLHIA Comments on FCAC's consultation paper, "Toward a National Strategy for Financial Literacy, Phase 2: Priority Groups"Release Date: 12/10/2014 Staff Reference: Leslie Byrnes
December 10, 2014
Ms. Jane Rooney
Financial Literacy Leader
Financial Consumer Agency of Canada
427 Laurier Avenue West, 6th Floor
Ottawa, ON K1R 1B9
Dear Ms. Rooney,
The Canadian Life and Health Insurance Association Inc. (CLHIA) is pleased to provide comments in response to the Financial Consumer Agency of Canada's (FCAC) consultation paper, "Toward a National Strategy for Financial Literacy, Phase 2: Priority Groups".
Established in 1894, the CLHIA is a voluntary trade association that represents the collective interests of its member life and health insurers. Our members account for 99 per cent of the life and health insurance in force in Canada, and administer about two-thirds of Canada's pension plans. Life and health insurance companies contribute to the financial well-being of more than 27 million Canadians through products such as life insurance, annuities and supplementary health insurance. Policyholders and their beneficiaries receive $76.2 billion a year in benefits, or almost $1.5 billion a week, with over 90 per cent of benefits going to living policyholders.
The life and health insurance industry shares your commitment to improving the financial well-being of Canadians through building better financial literacy. Resources, tools, enthusiasm and expert support are needed in a lot of areas, from building understanding of the basics of saving and managing debt and credit, to risk management and planning for retirement. We believe that our industry is best positioned to contribute in helping consumers understand the role that risk management and protection products can play in building their financial well-being. As such, we will focus on three key elements in this submission: (1) clear communication; (2) the role of advisors; and (3) promoting the understanding of workplace health benefits and pension plans.
Clear communication is a key building block. We agree that clear communication objectives need to be vigorously pursued by all in the financial services industry, and that it will contribute to improving the financial literacy of all Canadians, including priority groups. The life and health insurance industry has taken a number of steps to enhance its customer material, including point-of-sale explanatory documents, policies, and policyholder statements and notices. Clear communication refers to not only understandable material, but to how it is presented.
The use of infographics, for instance, is proving to be a compelling way to get messages across, as are videos and gamification. The objective is to make information accessible and relevant. We would also add that making information available in different languages contributes to clear communication objectives. This is particularly true for those in the priority groups whose first language is not English or French.
Advisors play a key role in promoting financial literacy across the kitchen table. They help consumers understand their needs, their options, and how various products can work for them. Of particular relevance to newcomers, many insurers offer multi-cultural services. They have advisors from a wide variety of backgrounds who can work within newcomer communities. In many cases, they offer information, not just in English and French, but other languages as well.
Understanding workplace benefits and pensions — how to use them and how they work for you — will contribute to financial well-being. There are key decisions to be made to ensure that employees are taking full advantage of their benefits. For instance, if two spouses have workplace plans, do they know that they can coordinate benefits to fully cover health expenses for themselves and their children? There are also key decisions to be made with respect to retirement plans. Do employees understand their plans, what their contribution levels are or could be, and how the plans can coordinate with private savings to provide income in retirement? Insurers provide a lot of support in this area, and are continually looking at innovative new ways to ensure they are reaching all working consumers, including those in the priority groups, through seminars, workshops and online support.
We agree that understanding government benefits is also critical to the financial well-being of priority groups, and we support your focus on simplifying communications and application processes, and promoting awareness.
As with any new initiative, identifying appropriate measurement metrics is important in determining whether and how the bar is being shifted. A number of useful suggestions were put forward at the recent Financial Literacy conference in Vancouver. Those that particularly resonate, in our view, were the development of a common set of metrics that could be used by all and focusing on outcomes.
We appreciate the opportunity to comment.
Vice President, Distribution and Pensions