Early Election?

Rumors are awash in the political corridors of Ottawa that the ruling Liberal federal government is set to call an early general election, presumably riding on the recent successes achieved through the provincial health accord funding agreements. Should this be so, the consequences could prove a fatal eleventh-hour development in the workings of insurers and independent brokers in their bid to keep banks from retailing insurance through branches.

Broker-supporting insurers and the independent brokerage community have fought a long battle since the release of the MacKay financial services task force report released in 1998 which recommended deregulation of insurance distribution (thereby advocating allowance for the banks into direct selling of insurance). After much heated debate and plenty of lobbying from all parties affected, the Finance Ministry released its white paper on financial services reform last year July — the net effect for the insurance industry being the all important exclusion of the banks from retailing insurance business through their branches. The government’s white paper was packaged under Bill-38 and set to go before parliament for approval this past spring, which, due to minor technicalities, was held back for the current fall sitting.

Very recently, Kevin Umlah, president of the Insurance Brokers Association of Canada (IBAC), cautioned brokers not to regard Bill-38 as a “done deal” until passed into legislation. The reason being is that rumors have abounded since the spring of this year of a potential early federal election call — the result of which would push virtually all matters on parliament’s slate to the side. Should this occur, the financial services bill will be subject to a Senate review before being repackaged for parliamentary approval, presumably for next year — thus allowing for additional commentary which could see the content of the bill change drastically.

The interests of the insurance industry face two real threats in this regard. Firstly, a review of the proposed financial services legislation would spark yet another lobby war (possibly protracted) between the banks and insurance groups. And, secondly, the recent legislative enactment of the U.S.’s Financial Services Modernization Act (which has deregulated the business areas of financial services in that country) is expected to have significant sway on future government legislative reviews of Canada’s own financial services environment (which insurers and brokers had hoped would not happen for another three to five years following approval of Bill-38).

This editorial was written prior to the commencement of parliament opening its doors for business — therefore the rumors of an early election could not be confirmed. However, several media sources suggest the timing could not be better for the Liberal Party based on polling popularity. In addition, the mainstream media observe that the recent leadership reorganization of the opposition Alliance, and the blight of disasters which have struck the Conservative Party over recent months, may well have opened up a window of opportunity for the Liberals to take an early initiative. That said, some advisers to Prime Minister Jean Chretien are reported to be cautious of jumping the gate, for fear that the voting public will see an early election as a straight-out political maneuver which could result in lost virtue.

I will not put my rump on the line by attempting to predict the government’s next move. However, I think it is safe to say that, should Bill-38 die before parliamentary reading this year, a renewed lobby battle will ensue between the banks and insurers. Several months ago, several key bank lobbyists indicated to CU that they were prepared to take the battle on once again, although none were overly optimistic that Bill-38 would not make it to the table. At the recently held IBAC annual general meeting, Umlah says no “red flags” have gone up along the association’s information pipeline into Ottawa to suggest that the legislation could be under threat. However, IBAC will be keeping a close eye on developments, he adds. Regardless of how the dice fall, the next few weeks should be interesting.