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Only 5% of the taxes and fees collected by the states (US) or the provinces (Canada) is used to regulate the insurance industry. 95% of what is left goes into general revenue and can be considered as profits to the states or provinces. It is therefore simple to conclude that the states or provinces have no stake into protecting the consumer. The states or provinces profit substantially when the insurance industry succeed at the expense of the consumers…
The Insurance Specialist 
Ami Maishlish
President, CompuOffice Software Inc.
Richard, the consumer is not better protected in the US than in Canada; I’d venture to say that, if anything, the consumer is subject to more exposure in the States than in Canada. “The grass is greener across the fence” as the proverb goes… but: The perceived impression that regulatory protection is greater in the US than in Canada is a mirage, an illusion.
Richard Proteau
Founder Financial Services Consumer Alliance
Ami, since you do not provide any facts your statement is unsupported. However I do have facts for you. Since 2002, the NAIC has introduced a model law ” Managing General Agents Act” in 2002. Where are we at in Canada? Well in 2014, for the first time because of an article in the Globe and Mail, regulator were surprised to learn of the existence of the MGA. This means and its even stated in the paper produced by the regulators that the public was left unprotected because MGA were not regulated… Currently in 2014, the NAIC sent a letter to all insurers regarding IUL illustrations and there is currently a big discussion on the appropriate rate of return for an illustration and required disclosure. It is quite an interesting discussion which i will touch on my next text. Where are we at in Canada regarding UL illustrations. Are the insurers and regulators have discussed the subject. In the US, an illustration cannot be done at 12% for example while in Canada it is still an accepted practice by the insurers. So who is protected the most? The Americans or the Canadians. I think the grass is indeed greener south of the border…
Richard Proteau
Founder Financial Services Consumer Alliance
Ami I also forgot to mention that the whole purpose of my text was to demonstrate that in the US there has been a long legal discussion about what is Universal Life; is it a security or is it insurance? Therefore there is a legal definition of what constitute a security or what constitute insurance which means that the consumer knows what he is buying.(a TUL and IUL is insurance and a VUL is a security) In Canada, this discussion never happened and our UL is undefined legally…. and can be marketed outside of any regulatory guidelines…
Ami Maishlish
President, CompuOffice Software Inc.
Richard, you bring an interesting perspective angle to the subject; however, it’s the practical facts on the ground that count. This is not just for actual practice relating to the sale of various permutations of UL.
You note in reference to your presentation of facts that:
“In the US, an illustration cannot be done at 12% for example while in Canada it is still an accepted practice by the insurers.”
In that regard, I’m not questioning the first part of that statement, “In the US, an illustration cannot be done at 12%”; however, I’d appreciate it if you would substantiate the second part, “in Canada it is still an accepted practice by the insurers.”
Yes, in the 1990s illustrations of UL at a net 12% regretfully existed and I recall voicing my objections to projection of such rates; however, I haven’t run into any life insurance company illustration having 12% net ROI, set as the default in insurance company illustration software now nor since quite a number of years ago. Likewise, I haven’t seen a single agent illustrating UL at 12 net ROI or anything near that in recent years. So, if illustrations at 12% net ROI on UL “is still an accepted practice by insurers here in Canada, I’m certainly curious to know who such insurers may be.
You also note that ” our UL is undefined legally…. and can be marketed outside of any regulatory guidelines…” Richard, I appreciate your wealth of knowledge and would appreciate if you would expand on this.
Thanks.
Richard Proteau
Founder Financial Services Consumer Alliance
Ami, first contrary to the US there has been no discussion as to what is a suitable rate for a Universal Life illustration and what process is used to select that rate. I would suggest your read the NAIC paper on rate for IUL that has been produced in 2014. Also for all of the insurers that I have worked with there is absolutely no process to review an illustration. The only check that is done is to ensure the illustration is signed. So an illustration at 12% would not raise any questions from an insurer. In Quebec we have such a case which are the illustration done by Thibault at 11%+. He did this in 2000+. This should have been questioned when you consider that already insurer knew he falsified life insurance applications.
Is a UL an investment or is it insurance? In the US, you had the regulators looking at this with federal regulators disagreeing with States regulators which meant the issue went into the Court with the Supreme Court creating a 4 test process to determine whether a product is insurance or investment. Again this did not happen in Canada.
Please note that in the States, recommended illustration max rate for UL is 10% for UL. However in the States policy charges are not linked to high MER and their MER are less than 1% since their policy have a lot more of fixed charges (charges that are reflected in the illustration contrary to MER). For example a 10% maximum illustration rate in the State (when adding up the MER of 1%) is equaled to a maximum projected earned rate of 11%. Now translating this to a Canadian illustration rate based on a 3.5% MER our max rate should be 7.5%… no software should be allowed to illustrate above this rate.