The Canadian Life and Health Insurance Association (CLHIA) is urging the Ontario government to avoid putting unnecessary tax and regulatory pressure on the life and health insurance industry as it continues to provide an essential service in the midst of the COVID-19 pandemic.
In its 2020 provincial budget submission to Ontario Finance Minister Rod Phillips, the association acknowledged the province’s need to find ways to rebalance its budget post-COVID. However, it emphasized that the life and health insurance space is the only sector that is subject to premium tax, retail sales tax, corporate income tax, and capital tax, all together resulting in more than $2.8 billion in revenue to the provincial economy.
“Any additional tax burdens will put significant pressure on our members to continue to fulfil their current mandate of providing for the health and financial well-being of all Ontarians,” CLHIA said.
It said the province’s two per cent tax on life, health, and disability insurance premiums and corresponding contributions to uninsured benefit plans results in nearly $600 million in premium taxes, while an eight per cent retail sales tax that Ontario applies to group insurance premiums and uninsured benefits plan contributions costs employers more than $1.6 billion annually.
“Ontario is one of only three jurisdictions in North America that applies a retail sales tax to life and health insurance premiums, thus placing Ontario employers at a competitive disadvantage both within Canada and globally,” CLHIA said, suggesting further that the taxes have a discouraging effect on consumers who may need to get coverage on an individual basis. “We recommend that Ontario develop a tangible plan to reduce, and eventually eliminate, the retail sales and premium taxes on life and health insurance premiums.”
The association also raised concerns that the province’s Financial Professionals Title Protection Act, 2019 could impose an unnecessary regulatory burden on advisors who hold life licenses.
It said such licensees must go through the Harmonized Life License Qualification Program (HLLQP), which includes a course followed by a series of four LLQP comprehensive exams that spans topics such as financial services knowledge, ethics, client outcomes, and technical knowledge as outlined in the proposed rule subsequent to the Act.
“As such, completing the HLLPQ and maintaining a life license indicates a level of knowledge that meets or exceeds the baseline competency of someone who calls themselves a ‘financial advisor,’” the association said. Licensees, it added, are accountable to the Financial Services Regulatory Authority of Ontario (FSRA) as well as the insurers whose products they sell.
“We would encourage continued collaboration with key stakeholders to ensure that changes protect Ontarians, while not leading to unnecessary regulatory burden,” CLHIA said.