The Financial Services Consumer Alliance (FSCA) announced the launch of its website:
While dealing entirely with the financial services industry, the focus of FSCA in 2015 will be the life insurance industry. The life insurance industry is an anomaly. In the other sectors of this industry such as mutual funds and general insurance, the regulators have not been afraid to intervene directly to protect the consumers. In the life insurance industry all of the regulators have refuse to meet their obligations of applying the law stating that insurers were able to self regulate themselves and were doing a good job at it. FSCA disagrees. The life industry is overflowing with harmful practices to the consumers which are in many cases illegal. If regulators do not want to regulate the life industry and want to transfer their role to a third party, then this role will not fall under the responsibility of the insurers. Consumers will do it. This is why the FSCA has structured itself to be able to investigate complaints and help victims take the appropriate legal action to get justice.
“The FSCA will be unique in one respect,” declared Richard Proteau. “We will not be afraid to make it personal. Behind each illegal commercial practice there is an employee who knows what he is doing is wrong and harmful to the industry, society and consumers. But they believe that behind corporate walls, they are safe beyond responsibilities and accountabilities. The fall of ethics in our society can truly be linked to the rise of the corporation.”
The Insurance Specialist 
Ami Maishlish
President, CompuOffice Software Inc.
Richard, I look forward to reading your comments relating to the following:
a. Disclosure of financing costs: The large majority of life insurers use a financing load factor of 0.09 to determine the Principal + Financing cost amount to finance annual life insurance premiums in monthly installments.
Since life insurance premiums are payable in advance, the financed principal is not the entire annual premium but the annual premium amount minus the first monthly installment which is the “down payment”. Moreover, the financing term is not 12 months but 11, since the 12th monthly installment is paid at the end of the 11th month (in advance of the 12th month).
For example, an annual premium of $1,000, financed with a load factor of 0.09 requires monthly installments of $90. The first $90 is paid at the beginning of the 1st policy month, meaning that only $910, not $1,000 is being financed. The monthly installments are blended P&I and the 12th of 12 monthly installments is paid at the beginning of the 12th month – upon the end of 11 months. The financing rate for a load factor of 0.09 works out to 18.595% (rounded to the 3rd decimal place)
Although I believe that the rate of 18.595% is rather high given present-day historically low interest rates, I’d like to read your comment and perspective relating to the absence of disclosure of the premium financing rate to consumers. Disclosure of financing cost rate is a requirement for nearly all financing transactions. Why is it non existent for financing of life insurance premiums?
b. Insurance age: A major factor in the determination of the cost of life insurance premiums is the age of the person to be insured. Not that long ago, It used to be that the person’s age was the person’s attained age. A major shift occurred since the mid 1990s as multiple company brokerage gained traction and insurance companies needed to compete to retain and gain market share. Competitive market pressure to lower rates produced reductions in premiums; however, concurrently, insurance companies found a way to make it appear that rates were lowered more than they actually were. This lead to the advent of the shift from attained age to “nearest age” for the purpose of the application of the age factor to insurance premium calculations, in other words, a “jump ahead’ of 6 months. OK, that’s “marketing and packaging”, some may argue, but I’ll refrain here from entanglement in a circular argument. Rather, I’ll bring up another matter, the failure of some brokers to make the effort to cease on opportunities for reasonable backdating of the policy date to conserve age and thereby to serve their clients’ best interests by legally and properly reducing their insurance premium costs without compromising on the choice of company, product, face amount and qualitative aspects. I look forward to your comments in this regard.
…continued in the next posting below…
Ami Maishlish
President, CompuOffice Software Inc.
…continuation of the above posting…
c. Service to the best interests of consumers through optimization of insurance value per premium dollar: Richard, we both know that life insurance premiums rates are not linear. In other words, in many instances – and particularly for “term” insurance and for:
-death benefit (face) amounts of under $1,000,000;
-insurance ages under 40;
and persons who are not surcharged for consumption of tobacco or related substances:
the identical premium amount can be optimized to purchase as much as 200% of death coverage under the identical product by the same company and the identical underwriting classification. Let’s look at an example using one of the large bank-affiliated life insurance companies in Canada for a male, age 35 in the average (“standard”/”regular”) underwriting classification, quoted for $200,000 of the company’s 10-year renewable and convertible term life insurance product. The annual premium per the afore-noted parameters is currently $248.00. However, the identical $248.00 annual premium could instead, and more to the best interest of the consumer, purchase $418,927 in coverage under the identical product offered by the same bank-affiliated life insurer, and under the identical demographic parameters and underwriting classification. That’s more than double the coverage without compromise on the product or choice of insurance company and without any alteration in demographics or underwriting classification.
Yet, if you go to any life insurance sales, quotations or sales lead solicitation website or run the insurance company’s own presentation software the availability of more coverage for the identical cost is not revealed. Of course, life insurance agents and brokers who are familiar with life insurance premium rate tables and calculations could explore for such opportunities. But how many, in your estimate, actually do so? (Disclosure: In effort to provide consumer-interest-focused agents and brokers the ability to explore for such opportunities, there is a feature on LifeGuide, named “OptiValue” that, with a single mouse click instantly reveal such opportunities showing the exact death benefit, down to the last dollar, that can be obtained for the premium. Only LifeGuide has this feature and capability built in and instantly available to the user).
d. Unclaimed death benefits: It is not beyond reason to expect that millions of dollars, and possibly billions of dollars of eligible life insurance death benefits, payable under life insurance contracts that were valid and in-force on the date of death of the life insured, remain unclaimed. The individual circumstances leading to no claim being made vary; however, one primary common denominator is that the onus to submit the claim is put squarely on the beneficiaries and/or the estate administrators for the deceased insured. There is no legislation nor regulation that I know of in Canada and in most states in the US to require life insurers to monitor publicly available information on deaths and to attempt to contact beneficiaries and/or estate administrators for the deceased.
A requirement for life insurers to serve the best interests of consumers through monitoring of publicly available deaths data, to correlate that data with their database of in-force life insurance policy contracts, and to make their best efforts to contact beneficiaries and/or estate administrators would, IMO, make sense and be more fair to consumers. Richard, I’d like to read your comments on this issue.
That’s it for now, Richard. In a future posting, I’ll address the issue of truth and fairness in advertising among others. In the meantime, I (as I am confident others are as well) looking forward to your comments on the 4 issues raised in this and the previous posting.
Cheers,
Ami
Dan Anders CFP, TEP
Principal, Interact Financial Design Services Ltd.
Richard, I am seldom in favour of even more regulation as our industry has become over-burdened with it already. There is so much regulation, in fact, that we may one day soon come to imitate such fiction works such as Animal Farm and Atlas Shrugged.
What I would be far more in favour of is an amalgamation of current regulatory bodies into as few as possible. The consumer NEEDS protection, no doubt about it. But every successive layer of bureaucracy contributes to business interruption and actually adds to consumer expense, doesn’t it? And, like many bureaucratic creations, they arise because a few bad apples spoil the service for the large majority of us practicing what we were taught and doing things right. Predictably however, yet an entire other layer of regulatory oversight, that addresses the very real need for protection from less-than ethical agents not following the letter or spirit of “E Pluribus Unum” (not for ourselves alone) makes life far more difficult for an overwhelming majority who do colour between the lines. Like the effect of many bureaucratic initiatives, the majority get tarred and feathered for the actions of the few. Like war, great catastrophic damage (and collateral damage) is done to address the offences of a comparatively small number of offenders who make life difficult for their victims.
Would your efforts be better spent educating the consumers themselves, as well as ferreting out the few bad apples, I wonder?
Ami, your comments are bang-on, as usual…thank you! They also prove conclusively that it isn’t just the agents but in fact our suppliers who perhaps need some wake-up on long-standing inequities.
Perhaps we could next address the reality that 70% (I have heard) of insurance today is reinsured and the reinsurance industry has now become the tail that wags the dog. When will Canadian Insurers realize that beyond shareholder value, the policyholders of their products and the field distribution agents are the ones actually carrying the load and funding their (sometimes) ridiculous annual bonuses?
When will Canadian Insurers get the courage to start buying back down the reinsurers and once again control our offerings?
And lastly, where oh where were the Canadian Insurer’s Presidents when Budget 2013 bludgeoned our industry’s offerings? These academics have become so pallid that they no longer understood just what Budget 2013 attacked and eliminated; GRANDFATHERING! Stop a few concepts…sure I have no problem with that. Our industry has always been creative and resourceful enough to create new ones according to ITA legislative changes. But what these asleep-at-the-wheel, overpaid administrators allowed the Department of Finance and CRA in the guise of our federally elected officials, to do to our industry what there is no precedent of in our history. It is proof, overwhelmingly that they are not insurance professionals but rather little more than accounting administrators, slave to the almighty shareholder value.
Richard, please look to the corrections necessary at the corporate level too, for making a meaningful difference in our collective lives going forward. Thank you.
Daniel Kahan
Executive Director at ISLSP
Richard, Ami, Dan – first Happy Canada Day and thank you for posting your Discussion and Comments on this small LinkedIn Discussion Group where you are probably preaching to the converted but I assume none of the Canadian insurance regulators have a public Discussion Group or Forum for policyholders or their agents to list their grievances or constructive suggestions – perhaps Richard can arrange this on their behalf and make sure they actively participate.
Daniel Kahan
Executive Director at ISLSP
Yesterday, as the Principal of Ontario Lifeline I received a Registered Letter from a Compliance Officer at FSCO relating to their review in May of two websites http://www.eldercarefunding.com and http://www.life-funding.com which they claim I own. They requested that I confirm in writing within 10 business days that your firm and its staff are NOT trafficking in life insurance in Ontario.
I will post below my email response and how they should be monitoring the life insurers to ensure they comply with the 1993 OIC Guidelines on Living Benefits.
Daniel Kahan
Executive Director at ISLSP
Here is my email to FSCO yesterday where I cc’d Grant Swanson
further to our conversation earlier today, here is a copy of the Letter sent by Registered Mail to me by Manon Azar, who is away until next Monday.
As I advised you, I have NO connection with http://www.eldercarefunding.com NOR with http://eldercarefunding.com/life_care_funding.php which may have created the confusion.
A closer inspection of the two sites would reveal that while http://www.lifecarefunding.com based in Maine do use a Life Settlement approach, my website which currently only for INFORMATIONAL PURPOSES only offers Canadian policyholders the possibility of obtaining a LIFE LOAN secured by the Collateral Assignment of the Life Policy.
We have received a few UNSOLICITED requests from Ontario policyholders INCLUDING one from a lady whose husband has Stage 4 Cancer and has 2 T100 life policies one for $250K with Empire Life and the other for $750K with Canada Life. She was unaware that he could apply for a Living Benefit for his own insurers and subsequent to my suggestion she advised me that both insurers had agreed to give him a $50K Living Benefit.
I then advised her that based on the 1993 OIC Guidelines on Living Benefits she should go back and ask each insurer to increase their Living Benefit to 50% of Face. Perhaps your Compliance Officer might want to take up this NON-COMPLIANCE with the OIC Guidelines with both Empire Life and Canada Life, who you do regulate.
I trust that you will arrange for Manon Azar’s Supervisor to contact me ASAP so that we can set up a meeting THIS WEEK to discuss this matter.
FYI Ontario Life Line is NOT a Corporation but my trading name which I use for my Actuarial Fair Market Valuation of individual life policies and my corporation Canadian Life Line Ltd is based in Nova Scotia and operates out of Nova Scotia.
If FSCO has any issues with Ontario policyholders or their agents contacting Canadian Life Line Ltd. in Nova Scotia, please send me a Letter outlining your concerns.
Richard Proteau
CEO and Founder Financial Services Consumer Alliance
truly not very professional. They could not even take the time to check these web sites and see they are in the US targeting US clients. Are these the people who are supposed to investigate fraud…
Now that FSCO has finally committed itself, we will be sending it the TD web site which promotes the hypothecation of life insurance by leveraging cash values.
http://www.tdcanadatrust.com/products-services/investing/investment-lending-services/csv-of-whole-life-policy-loans/csvloans.jsp
What you are doing is exactly the same except you are leveraging the death benefit. So yes I want a letter going to TD asking them to confirm they are not traficcking in life insurance and to add the necessary diclosure to their sites.
Ontario Lifeline
Principal
Richard, they did get the http://www.life-funding.com website right as it is owned by me trading as Ontario Lifeline. But you are right that they didn’t bother to see that http://www.eldercaredfunding.com was clearly a US site, but they were probably scared of a “virtual” repeat of the 1812 US invasion.
However at the end of the day FSCO still has to enforce sec. 115 of the Ontario Insurance Act and the FCSA should be calling on the NEW “progressive and inclusive” Ontario government to honour the memory of the late Jim Flaherty and finally FORCE FSCO to PROMULGATE a “publicly debated” set of Life Settlement Regulations OR ask Joe Oliver and the Federal Finance Ministry to do it and then regulate it on their behalf.
Richard Proteau
Richard Proteau
CEO and Founder Financial Services Consumer Alliance
Dan, there are sectors of the industry which are more regulated than others. Life insurance industry is not regulated at all. For example the role of MGAs are not even recognized by most Insurance Acts of most provinces. This is getting updated however with the solution offered by the regulators is to transfer their power to insurers who would be responsible for auditing the commercial practices of the MGAs. I am against this. Insurers have not been able to deal with their own practices.
40 years of wrongdoings by the insurance industry against consumers, I think justify new regulations.
I do not believe that financial services should be provincially regulated. Insurers and I have proof of this, want to operate using the same commercial practices across the country. They don’t want to adapt their practices to each province. Provincial regulators know this and they are just blind to the infractions committed. So provinces are not strong enough to stand to the insurers and it’s the consumer who is victimized as a result.
In my corporate career of 25 years, I have dealt many times with the reinsurers. I never felt that reinsurers were a problem. I handle treaties, special cases… Without reinsurers this would be small insurance industry. I found in fact that it was Head Office that was reluctant in capitalizing on the flexibility and knowledge of reinsurers.
Education is key and we will work hard at it. In fact education is integrated into our free membership. If you want free membership, the member must provide 2 comments a year on an article published in our newsletter…we want the member to learn and to share his opinion…
The FSCA is not reinventing the wheel in term of consumer protection. in fact we are following the recommendations provided by Alliance for Financial Inclusion (AFI) funded by the Gates foundation with these recommendations contained in the Political Notes about leveling the playing field for the consumers in the financial services.
Finally believe me we will address the corporate level and culture. This is where the problem is. It’s not the advisors. Bad advisors are the exception. Most advisors care about their clients but most corporate executives don’t care about the customer. They set unrealistic sale and profit goals are are willing to do anything to get there…But they are never held accountable for their actions. We will change this. In fact we are preparing a complaint against an insurance executive who lied in the Insurance Journal. The executive is also a lawyer and must follow a code of ethics. We will use his code of ethics to make him accountable for his statements.
As for shareholder value, this was the pitfall of demutualization. We are now starting to pay the price of this demutualization. You can’t run an insurance company on short term profit goals but this is what shareholders want. They don’t want to build and capitalize value…
Richard Proteau
CEO and Founder Financial Services Consumer Alliance
Hi Ami, great comments. I have to say that on the financing cost side I never stopped to look at financing cost on monthly premium. I don’t know why but it never occurred to me to check. I would have expected a financing cost of about 9% to 10% but what you are revealing is quite different. I am disappointed. Certainly there is a need for disclosure. This represents a lot of money on the long term.
I always hated nearest age. In the end, the profitability and mortality table should be neutral whether the product used nearest or attained. truly when you introduce nearest age, you are capitalizing on the ignorance of the client who will not know the difference and also not knowing about backdating. So as an insurer you are getting additional but unethical profit…
I am puzzled by C. I don’t quite understand it. You must change something to get twice the coverage. Does this apply to all insurers…
Unclaimed death benefits is an accepted anomaly and is linked to orphan policies. You solve the orphan policies problem and you solve the unclaimed death benefit because there will always be an agent who know the client and meets the client every year…
Ontario Lifeline
Principal
Richard, when it comes to unclaimed death benefits I think the federal government should come up with something similar to what they do with “untouched” bank accounts which are transferred after 10 years to the Bank of Canada and the published with the name of the account holder, the bank and branch and the amount.
The simplest solution, which is what the life settlement tracking companies use in the US, is for CPP (or the CRA) to publish the SINs of those who have recently died and get the life insurers to check the SINs of their life insureds to see if they match.
It would be interesting to hear what the CLHIA and their “socially responsible” member companies have to say on the subject.
Ontario Lifeline
Principal
Richard, while we are on the subject of “unpaid” legitimate death claims, perhaps you can take up the 2 YEAR SUICIDE Exclusion Clause for Group Creditor Mortgage Insurance where one spouse commits suicide just before the end of the 2 years (or even worse appears to have committed suicide) and the surviving spouse has the claim DENIED (and literally is left holding the baby and having to continue making the mortgage payments).
I have recently been involved with 2 such cases where neither couple knew that there was a 2 Year Suicide Exclusion Clause until after the tragedy occurred and submitted the claim !!
Ami is also aware of these cases and this is something which the Regulators and the Governments should be addressing IMMEDIATELY !!
Gloria Grening Wolk
Advocate for Wrongly Convicted at Proving Innocence
I know little about Canada’s insurance market but there are some similarities with the US market. For example, the huge interest rate when an insured pays installments instead of paying annually. Joseph Belth, professor emeritus of the Kelley Schl. of Business at the U. of Indiana has exposed this among US insurers in his The Insurance Forum. It was published for more than 30 years and mailed to subscribers. Now he has it online and free to subscribers.
When I was directly involved in the industry I met a widow who fits exactly the description above, by Ontario Lifeline. Her husband’s suicide was one day before the 2-year suicide clause would have expired. That is a horror.
In today’s economy I can see a parent choosing suicide in order to preserve the family home for the family (so many families having lost their homes and living out of cars). That surely would put insurers at far greater risk, if they abandoned the suicide clause, with the result falling on all others through increased premiums.
Ontario Lifeline
Principal
Gloria, thanks for joining the discussion and it looks we have some common insurance related issues on both sides of the border. However in the US you have the Consumers Federation of America taking an active interest in insurance matters. Back in 1995 James Hunt the former Vermont Insurance Commissioner wrote a Letter of Support to the Ontario Standing Committee on Private Bills in support of the Canadian Life Line Private Bill requesting an exemption from sec. 115 of the Ontario Insurance Act to be allowed to offer Ontario policyholders viatical loans just like in Nova Scotia where they were issued a Certificate of Lending by the NS Superintendent of Insurance & Loans.
Until Richard arrived and formed the FSCA there has been no strong consumer voice to counterbalance the CLHIA domination of the life insurance agenda. Hopefully the federal government will start listening and keep the industry in check.
Ontario Lifeline
Principal
Gloria, with respect to the increased cost in Group Creditor Mortgage premiums if the Suicide Exclusion Clause were to be excluded (or reduced to one year) I believe the cost when spread over the entire large Group would be minimal and acceptable to the vast majority of policyholders.
While it is possible for someone contemplating suicide to take out individual life insurance for their family and therefore need a 2 year deterrent (or cooling off period), I cannot believe the husband of a young couple buying their first house would be contemplating suicide when their bank offered them life insurance on their mortgage. If later on when drunk or depressed he commits suicide “accidentally” why should the poor innocent wife and children suffer?
Have the “socially responsible” banks or their PR departments never heard of the concept of an “ex gratia” payment ?? Do you think they are really short of funds to pay an additional $200K death claim instead of giving the widow a “miserable” $10K to shut up her young daughter when she wrote a letter to the bank manager!!.
Where are the regulators and the Ombudsmen ???
Dan Anders CFP, TEP
Principal, Interact Financial Design Services Ltd.
Richard, from what I can tell of all the comments in this discussion, the problem to focus on isn’t protection if the consumer from the small minority of rogue agents doing harm, but rather the companies and banks, perhaps even other regulatory agencies, wouldn’t you agree?
Richard Proteau
CEO and Founder Financial Services Consumer Alliance
You have it right Dan. The problem are not the advisors. The problem are the financial companies particularly insurance companies. This date back to the vanishing premium scandal and fraud. The insurers denied their responsibility stating it was the advisors who were responsible. However now documents are surfacing showing clearly its the insurers who taught and told advisors to sell this concept. Advisors should have said no but they trusted the insurers. The executives at the insurers who came up with the vanishing concept were not help accountable. In fact they stayed in the industry and got promotions and applied their brand of lack of ethics to a new product which was the Universal Life… and now we have a terrible mess with UL with most people who bought this product having lost their money…Regulators should have stepped in during the vanishing premium but they were afraid. In fact information is now surfacing that the regulators were afraid of the insurer’s exposure to the vanishing premium and that liabilities could bring down the industry. The regulators had no interest in protecting the public. This bring a troublesome question. Did this have an impact on letting demutualization go through? A source told the answers are available under the access to information act but the cost would be about $40000 to get the documents to know what really happen and transpire.
Richard Proteau
CEO and Founder Financial Services Consumer Alliance
Daniel, to be fair to the Banks, the group insurance is offered by the insurer. The banks are only the distributor in most cases. They do not handle claims. When banks first started to offer this product, banks did not own insurance companies. So they would not have question the need for the suicide clause. Still today, even if banks own insurance companies, there is still a barrier between institution which prevents innovation.Should we remove this clause from mortgage insurance. In fact the answer is whether this product is closer to individual insurance or is it closer to group insurance…It’s a good discussion…
Daniel Kahan
Executive Director at ISLSP
Richard, you are conceptually right but it appears in practice based on these two cases that the bank is also acting as the TPA and the claims adjudicator !!
Gloria Grening Wolk
Advocate for Wrongly Convicted at Proving Innocence
Daniel, the Consumer Federation of America studies facets of the insurance industry and prepares authoritative reports, often submitted to governmental hearings. But insurance in the US is regulated by the states, not the federal government. That makes regulation highly political. The National Conference of Insurance Legislators (NCOIL) is extremely political. I am certain that the recently elected insurance commissioner in Georgia received substantial funding support from the sleaziest settlement companies–at least two of which were run out of Florida for fraud, and welcomed by Georgia. Probably welcomed for their tax dollars.
Many settlement companies received licenses in a number of states, and should not be licensed–for consumer protection. J. Robert Hunter of the Consumer Federation of America pointed out in a report several years ago that insurance companies rarely are audited by the state regulators. If the regulators don’t know or don’t care what the insurers (or settlement companies) are doing, the statutes enacted with the intent of protecting consumers mean nothing.
Dan Anders CFP, TEP
Principal, Interact Financial Design Services Ltd.
Richard; odd that you mention the Vanishing Premium scandal. I have my own personal experience and understanding of the event and some of it agrees with some of your commentary. I didn’t have a single client affected by it, as my practice at the time was, “if this is a legitimate tax shelter and you need the insurance, why would you want to stop putting money into it?”
Should the insurers be fully responsible? No. Should the agents be fully responsible? No. Should the consumers be fully responsible? No. At the end of the day we were all in it together. And, at the end of the day, the life industry did make the policyholders whole, did they not? Albeit through a court class action lawsuit.
I realize now my attitude then may have been a tad juvenile and know today that many people just want a policy that has a level face amount and a guaranteed premium deposit period, this we have Gtd. 10/20/30 Pay UL.
Again, I fail to clearly see how your new creation helps anyone, but I am willing to listen. My standpoint as of now is that the last thing we need is yet another level of bureaucracy, and there isn’t any commentary herein that convinces me of the need for or difference of your approach. I do believe that ethical agents can and do police themselves and work for the protection of the reputation of the Canadian Life Insurance Industry. It seems the notable problems we uniformly face are at the corporate and governance level, and only slightly at the consumer level.
Gloria Grening Wolk
Advocate for Wrongly Convicted at Proving Innocence
Daniel, your comment about eliminating the exclusion for suicide–how can I argue with an actuary? You would have a far better grasp of the numbers.
As to paying the widow, regardless, I saw that occurred in a STOLI lawsuit. The husband used premium financing and this became clear. In fact, it was a pivotal issue. He died suddenly of a heart attack, before the closing date that required him to either turn over the policy or repay the loan. The insurer could have argued against paying but it did not. The widow received millions.
So, sometimes insurers do have heart and compassion takes precedent over the profit motive
Daniel Kahan
Executive Director at ISLSP
Dan, I think you make some great comments and I don’t think anyone, not even the actuaries predicted 2008 and the ridiculously low interest rates since then. So provided the UL projections showed a Worst Case Guaranteed scenario I don’t think anyone is to blame, just like no one is to blame for the recent Ice Storm.
However why can’t the industry not offer their own policyholders a Living Benefit of up to 50% of face and charge them 8% pa like I can do with a Charity who are allowed to sell their own Charitable Annuities? I recently wrote to the CLHIA suggesting that I become the “authorized agent” of Assuris and process these life loans on behalf of the industry. So far ZERO response !!
I made a similar proposal to Mark Daniels in the early 90s and again ZERO response !!
If the industry were more CONSUMER friendly (rather than SHAREHOLDER friendly) there would be no need for Life Settlements in either the US or Canada.
The unfortunate reality is that Executive Management (with their huge salaries and share options etc.) don’t care or want to care, and we need an activist like Richard and the FCSA to give them a good shake up !!
Ami Maishlish
President, CompuOffice Software Inc.
Richard and all. This is becoming an interesting thread.
In reference to disclosure of the financing costs for other than the annual premium payment mode, IMO this is a substantial and material fair disclosure issue and matter. In fact, in my view, it is directly related to the requirement for “utomost good faith” in insurance transactions and contracts.
For the beneift of consumers, we have included my Modal Premium financing Cost Rate calculator at http://www.planner.ca/gen_calcs/modal_pre_cost_rate.htm It should be noted that insurance premiums are normally paid in advance rather than in arrears. Hence, that is the default setting for “Periodic Payment Timing” option.
Relating to “age nearest”: A change in age, based on “age last” is easily perceived by the human mind, and hence the opportunity to backdate the policy date when indicated and merited. On the other hand, a change in age for “age nearest” is far less likely to be perceived by the human mind and therefore the indication for the opportunity to backdate the policy date to “save age” is far less likely to be recognized unless automatically prompted for by consumer interest oriented software.
Relating to optimization of value for the premium dollar, Richard, you note that you “don’t quite understand it”, and that something must be changed to get twice the coverage. To show this, I cited the example pasted below in my earlier posting:
“Let’s look at an example using one of the large bank-affiliated life insurance companies in Canada for a male, age 35 in the average (“standard”/”regular”) underwriting classification, quoted for $200,000 of the company’s 10-year renewable and
convertible term life insurance product. The annual premium per the afore-noted parameters is currently $248.00. However, the identical $248.00 annual premium could instead, and more to the best interest of the consumer, purchase $418,927 in coverage
under the identical product offered by the same bank-affiliated life insurer, and under the identical demographic parameters and underwriting classification. That’s more than double the coverage without compromise on the product or choice of insurance company
and without any alteration in demographics or underwriting classification.”
Note that I’ve spelled it out, nothing, rien, nada, and zilch needs to be changed, as stated: “under the identical product offered by the same bank-affiliated life insurer, and under the identical demographic parameters and underwriting classification.”
Now, in some situations and cases the advantage to the consumer of dealing with a knowledgeable and properly research-equipped advisor could be as high as 200%+ and in some cases it’s not as significant. However, why should a consumer pay for insurance
that (s)he is not receiving, regardless of what that percentage or amount may be?
If other participants on this forum are interested, I’m prepared to give you a brief online webinar on the subject. Just let me know.
Relating to unclaimed death benefits, Daniel and I discussed that subject shortly after my return from my business trip to Israel last year. In fact, Daniel’s response on that topic reflects the points that he and I discussed. In Israel, insurers and pension fund custodians are required to monitor the death registry and to act proactively to contact beneficiaries and/or the estate of the deceased life insured. This is not a challenge from an administrative or process design perspective, so it’s a puzzle that we don’t have this either in Canada or most of the states in the US.
Relating to the inquiry relating to life settlements received by Daniel, it surprises me for more than one reason. To start with, I wonder why apparently nothing was done by FSCO when, not all that long ago, an Ontario life insurance agent setup a website specifically designed to prospect for life settlement business.
Richard Proteau
CEO and Founder Financial Services Consumer Alliance
Ami, I am not surprised by FSCO. Dealing constantly with regulators, I have found that complaints are dealt based on who make the complaint. let’s just state that we are all equal under the law more some have more access to the regulator. In fact some insurer act like the regulator is their own enforcer and sadly regulators often take a complaint from an insurer as granted and don’t verify the facts…
For the benefit doubling for the same premium, it may be because during my career I was always a one company man. As a result we use our own software and use software such as lifeguide for competitive analysis purposes. However i never observed what you are stating.
Maybe you could send me print screens of your scenario. i am a visual type of guy and sometimes you do have to paint me a picture. it’s not getting better with age..
Ami Maishlish
President, CompuOffice Software Inc.
Richard, just noticed your request above. Please see the image at this link, with brief explanation:
Note that the example given is by no means a single occurrence or limited to one carrier or only to one product. Actually, it is quite common at FA of <$500K and ages $500 and/or >age 40.
Richard Proteau
CEO and Founder Financial Services Consumer Alliance
tks Ami. In passing I would like to thank you for your contribution that you have made to the industry through Lifeguide. The industry owes you a debt of gratitude. every advisor should be using such a software and should never solely use the insurer software only. If as an advisor you only use the insurer software you have no right to call yourself a professional. You are just a peddler.Rash statement? Maybe it is but this is me, i call it as i see it and I am too old too change. Anyway what you shown me in the picture should be studied carefully by advisors. For me a picture is worth a 1000 words because I am very visual. Just by looking at the picture I understood it all. The results are created by the admin fee and the banding of life insurance usually starting above 250,000. By buying more insurance it cost you less and lets just say that your example shows it is not proportional. Also the admin fee is a constant which in this case represent maybe 120$ per year so out of $280 its a good share of the premium. so if buying a little bit more insurance, it reduces the admin fee, this will have a tremendous impact on the total premium. I would warn advisors it’s your job to get the most insurance for the premium for the client. if you don’t optimize as show in your example, you have not only failed the client but you are responsible through your error and omission for the shortfall..