This follows on from Bill 162 passing its second reading at the Ontario Legislature last week – the bill seeks to amend Section 115 of the Ontario Insurance Act preventing individuals from selling their own life insurance policy.
Susan Murray, vice-president, Government Relations and Policy at the CLHIA outlines why the association stands against this bill passing into law.
“It is a great market for the settlement agencies, but it is not the best option for seniors,” she says. “You open this up in a big market like Ontario, you will have potential for abuse. You have lots of that in the United States, where there has been all kinds of problems; it’s been a very detrimental market for seniors.”
It is the same argument that was put forward by NDP MPP Paul Miller at the second reading last week, but Ontario lawmakers instead voted to pass the bill onto The Committee of the Whole. The proposed amendment will now face another vote, and if successful, will go forward for royal assent to become law.
Speaking to LHP last week, Leonard Goodman of the Life Insurance Settlement Association of Canada (LISAC) stated the case for giving seniors the option to sell their own life policy. Goodman believes that with adequate regulation, abuses in the system can be minimized, but Murray is not so convinced.
“There is a track record of fraud and abuses that is an intrinsic part of the industry, it’s not an exception,” she says. “In the US the life settlement industry promotes its services almost exclusively to seniors, regardless of health. Even though it is regulated in the States, it is still characterised by fraud and abuse, with disclosure issues and payments that constitute just a fraction of the face value of the policy.”
In her view, a better option already exists for consumers in Ontario, one that means the policyholder does not need to sell their plan to another source.
“We don’t see a lot of calls from consumers for this,” says Murray. “If they need the cash, they can already go to their insurer and negotiate a loan on their own insurance policy. They get access to cash and retain the face value of the policy for the beneficiary down the line.”
For those that are of ill-health and struggling financially, Murray identifies advanced death benefits as another option.
“In a new market you would have potentially vulnerable seniors being called by an advisor or someone from a settlement agency, who would give them just a fraction of the actual value of the policy … In some cases they are only getting 30% of the face value of the policy, so their beneficiaries are losing a lot of money.”
While Bill 162 concerns Ontarians principally, the issue of life insurance settlements is gaining traction nationwide. Presently, four provinces allow for individuals to sell their own life insurance policies – New Brunswick, Nova Scotia, Quebec and Saskatchewan. That number will be reduced next year as the effects of Saskatchewan’s Insurance Act come into play, prohibiting life insurance settlements by any entity outside of a life insurer. In addition, Quebec will introduce its budget implementation act next month, where restrictions on life settlements are on the table.
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Canada’s life and health insurance body has reiterated its opposition to a secondary market for individuals selling life policies. The CLHIA argues that following the US model would ultimately leave seniors at risk of predatory sales practices.