Letters (June 01, 1999)

Dear Editor,

You are to be complimented on an excellent feature article, in the April Underwriter, on the threat posed by the big banks. The Independent Life Insurance Brokers of Canada have many members who also hold a p&c license. We are all brothers and sisters-in-arms in our fight against the intrusion of the banks into our business. Our fear is not the thought of greater competition since all of us know how tough it is to compete with our own colleagues and associates. No — it is the manipulation of the facts and the way in which the deep pockets of the banks are being used to finance customer-based “research”. This “research” asks questions slanted to elicit favourable responses which support the banks’ position.

The inappropriate, behind the door arm-twisting that many bank managers do to generate business should concern us. The client-sharing they are attempting to create indirectly via their wholesale acquisition of the trust and securities industries should also concern us. The temptation to mine their customers’ personal data via automatic debits/cheques identifying the insurance company and the amount of premium being paid, leaves borrowers exposed to uninvited invitation to “consider” bank alternatives. Is this a level playing field? What happened to privacy?

How can a bank loan money to a client for a mortgage, then ask that client to buy life insurance from the bank to insure the mortgage at the same time? (“We would have more faith in you if you showed more faith in us. We see your RRSP and mutual funds have been placed elsewhere.”) Our members constantly provide us with instances where banks have forced clients to move their RRSPs to the bank or risk their credit-worthiness. The big banks are not permitted to sell insurance from their branches — but they can sell mortgage insurance when they arrange a mortgage. Phrases such as: “Of course you’ll want to life-insure your mortgage with us” are commonplace. Where is the competition in this transaction? More seriously: how can the customer refuse? Is this not intimidation and coercion at their worst?

A recent matter has come to our attention. A client made a third party cheque deposit in good faith and began withdrawals on the deposit. The cheque from the third party “bounced” after three months and the bank went back to several of the creditors — including an insurance company — and demanded a refund of their automatic premium payment. The insurance company complied, thus forcing the client’s insurance policy into arrears. It lapsed retroactively for non-payment of three months of premiums.

In the interim, the client’s health had deteriorated thus making him non-insurable. In short, he was swiftly and efficiently destroyed by the bank.

If a bank client’s life insurance application is declined for medical reasons, how soon do you think it might be before this information reaches the bank’s loan department? And how quickly might that loan be surreptitiously declined for medical reasons? Confidentiality of client information becomes a thing of the past when the lines all converge at one source.

We can compete on price. We can compete on service. We even make house calls! We can compete as independent life insurance brokers placing our clients’ needs first. We can continue as small businesses to actively contribute our time, our resources and our commitment to our communities only so long as we stay in business and are able to compete on a level playing field. We cannot do that when banks can manipulate their clients with direct or indirect threats about their loans. It is wrong for the consumer, it is wrong for the community, and it is wrong for over 80,000 tax-paying life and p&c brokers.

Finally, do you remember free chequing? Do you remember free savings accounts? Do you remember free bill paying? The big banks have built their retail sector on “fees for service.” How long before they begin to charge a fee to change a beneficiary, to reduce the policy amount, or place an assignment? The mantra of the big banks is to drive out competition, control the market, then introduce appropriate service fees and cost adjustments that reflect improved profitability for them.

We encourage you all to write your MP and/or Finance Minister Paul Martin before it’s too late.

Sincerely,

David Barber, President

Independent Life Insurance

Brokers of Canada

Mississauga, ON

Dear Editor,

I am writing to you on behalf of the members of CADRI, The Canadian Association of Direct Response Insurers. Members of our association are Belair, Canada Life Casualty, Canada Direct Insurance, CIBC Insurance, HB Group, La Capitale, La Securite, Meloche Monnex, Royal Bank General Insurance Company, and Scotia General Insurance.

The issue you raised in your article (CU April editorial) is not a direct writer’s issue, but an industry issue. Brokers, particularly in urban areas, sell and service most of their business via the telephone. These brokers operate similarly to our members, and do require clients to send letters before they will process the cancellation of policies. This procedure is in place for a number of reasons, the primary one being for the protection of the consumer. Insurers want to provide coverage, and therefore have processes in place to bind coverage in a timely and hassle free environment for the consumer. However, when a call is received to cancel, there is no guarantee that the person calling is the policyholder. Furthermore, neither the client nor the insurer want there to be a possible gap in coverage, and therefore the letter of cancellation ensures that there are no misunderstandings.

We can appreciate that some customers would question this process. On reading your article, I surveyed our members, and some will accept verbal requests to cancel. They ask the client to send a letter as well, but will process the request immediately.

You are right on in your statement that “technology on its own cannot guarantee convenience and quality service”. Our members have focused on more than technology, and have developed well trained and customer focused insurance professionals in our call centers. Overall, our members more than held our own in the 1998 claims satisfaction survey conducted by the Financial Services Commission of Ontario. The brokerage community advertises that direct writers are low cost-low service. We do not agree, but at the end of the day it is the customer who will make the call.

Dave Newton

President, CADRI

Dear Editor,

I can identify with the problems of the customer in your editorial in the April 1999 issue of the Canadian Underwriter, having experienced a similar problem myself recently. I would suggest however that the problem lies not so much with the fact that your customer was dealing with a direct writer and dealing by telephone, as your editorial suggests. Rather, the root of the problem lies with the insurance industry practice of issuing “automatic” renewals, well before the current policy expiry date.

In my own case, the renewal was issued, unsolicited by me, about a month before the old policy expired. The premium had gone up, and the insurance company had already taken the payment for the first month of the coming term out of my bank account! The only reason I knew that a renewal had even been issued was that the insurance company was now taking more money from my account than they had in the past, as at this point I had not had any contact regarding the renewal from my broker, nor had I received any policy documents. I checked the market and placed the coverage myself for the coming term with another insurer and advised the broker to lapse my file on renewal, which was not for another 3 weeks or so.

The broker then advised me that I, and my mortgagee, would be required to sign a cancellation release, as they had already issued the renewal, and that the Statutory Conditions required a release. After some “discussion”, I was eventually able to convince the broker that a release should not be required as 1) I had not r equested the renewal, 2) The old policy was still in force, 3) I had never received the renewal policy, and 4) I should not have to sign a release to “lapse” a policy.

I finally received a refund cheque and the monthly bank withdrawals stopped, but only after the insurance company had taken a second payment for the renewal from my account.

The practice of “automatic” renewals is certainly convenient, but I would suggest the convenience is designed for the Insurance company and the broker, certainly not the customer!

Sincerely,

Howard Sale, FIIC, CRM

Dear Editor,

We do ourselves a great disservice as brokers if we shrug off our competition as inferior based on our own preconceptions about how business should be done. Banks and direct writers remain a threat whether or not we consider them to be so. Anyone that discounts them because they don’t sell insurance the same way it has been done since 1900 does so at their own peril. Technology does not improve service on its own as you suggest.

Improved service, based on good management that is technology driven does.

We had better be careful about throwing stones when our own house is less than perfect — I refer to broker-company distribution system. Brokers I know are hard to reach by phone and sometimes hide behind voicemail. Some can’t use the computer so they go grab the file and leave you on hold for an eternity. Brokers place business with one company due to company pressure when another would better serve his client’s needs. They engage in tied selling at the behest of the company. They even make you mail in written confirmation for cancellation! Bad service is not the exclusive domain of direct writers and those that employ technology.

Come to think of it, the service at my bank has never been better since I stopped using live tellers. Most people under 40 probably feel the same.

When there are no more horror stories about brokers we can all rejoice and bash direct writing procedures. In the interim, I suggest we pay close attention to their successes and learn from their mistakes. Let’s not use their mistakes as a security blanket to protect us from changing business in new and better ways.

Andrew Robertson

Robertson & Robertson

Yacht Ins. ltd.