Roadblock to Consumer Protection in the Life Insurance industry: “The Quebec Effect”


The Quebec Effect illustrates the pitfall of a regulatory environment that is applied selectively to different individuals and organizations; a situation which is becoming a standard in the application of justice in Canada and particularly in Quebec.


“Selective justice is a strong reality particularly in Quebec. Just today I listened to the news and I saw Montreal municipal employees breaking the law during their protest making a bonfire in front of a government building and nobody got paper sprayed or arrested. If this had been students or simple citizens, this would have been an entirely different story. This selective justice is very much present in the financial industry, particularly in the insurance industry, and it constitutes the principal threat towards consumer protection. I have called this threat the “Quebec Effect” stated Richard Proteau, President of the Financial Services Consumer Alliance, a newly formed organization created to protect the rights of consumers in the financial industry.


The Quebec Effect was demonstrated through the research conducted by FSCA. This Effect results in more infractions in Quebec in one month compared to the rest of the country in one year. Is this because Quebec has the best and strongest laws in regards to the financial industry? Evidences have proven the contrary. The conclusion reached from this research is that the Quebec regulator named the AMF has allowed insurers to operate and use commercial practices that constitute violations of the law. This means any licensed advisors having a contract with these insurers and following these practices are committing infractions.


Why has the AMF allowed this to happen?


“Because the companies involved such as Manulife want to use commercial practices that are the same across the country. Financial services fall under provincial jurisdiction and therefore laws vary between provinces particularly with Quebec,” answered Richard Proteau. “Quebec is years ahead of the other provinces. Only in Quebec, financial advisors must follow a code of ethics when dealing with consumers. In the other provinces, it’s a choice of the advisor. Therefore Quebec has the strongest laws but instead of applying them, the AMF is turning a blind eye to companies that want to operate in Quebec usually by using Ontario laws. I find this to be cowardly. Distinct society is what they believe in Quebec. If you want to be different, you should have the conviction to stand up for these differences. The same applies to a lesser extent to the other provinces which have laws that are different than Ontario. If provinces want to retain their jurisdiction over financial services, then the regulators must apply the law of their province or let the federal government take over this jurisdiction by having one regulator and one law. For the consumers, we are only protected if the law is applied and really we don’t care if there are one or many regulators for the moment they do their job instead of being blind to the infractions committed by these companies. Finally, when you add this to a justice court system where the law can be applied selectively, this becomes the stuff of a nightmare. Universal Life for example will be sold as an investment by some advisors influenced by the marketing of insurers and it will be ok and they will get a trophy while for others who are doing the same thing, it will be illegal and they will be regarded as having put the industry in danger. However in both cases the final conclusion is always the same. It’s the consumers who are being taken advantage of. This is an intolerable situation.”


There are many examples of the unwillingness of the provincial regulators to regulate the insurance companies. One of the most flagrant examples is when an association of independent advisors in Quebec hired a lawyer to review the legality of the commercial practices imposed onto them by insurers. The conclusion of this legal review was that most of the commercial practices imposed by insurers were conflicts of interest. This did not come as a surprise. Most of these practices had been banned from the general insurance and mutual fund industry. Why would the life insurance industry be different? When the AMF was contacted to address this, its president at the time which was St-Gelais who is now the king amongst bureaucrats in Quebec answered:




A second example is segregated funds. The mutual funds industry is getting to be over regulated if we listen to advisors licensed to sell this type of product. The FSCA should be happy with these regulations but we are not. There is a huge loophole. Advisors can literally opt out of these regulations by cancelling their mutual funds license and instead sell segregated funds which are now exactly the same in terms of risk and management expenses because there are no more insurance elements to these seg funds anymore. With seg funds anything is permitted. No need to know your client; no need for disclosure; no need for risk assessment; everything goes. Why is this happening? Why a commercial practice deemed to be harmful to consumers is considered illegal in mutual funds and not seg funds? Regulators when questioned refuse to answer or their answer is astounding: “We do not regulate insurers as there are no needs since they self regulate themselves.”


“This is why I have so far engaged the AMF in many legal duals. I am now proceeding with a lawsuit against the AMF but the goal is not to obtain justice. This is impossible when considering the bias that judges have towards the AMF which has empowered employees of this regulator to engage in variety of questioning and fraudulent activities. This lawsuit provides me the opportunity to subpoena Yan Paquette a previous employee of the AMF and one current employee named Marie Pettigrew in order to ask three simple questions. Why did you hide a fraud committed by an insurer and who told you to do it? Why were the proofs of this fraud destroyed by the AMF? I will get the answer as to why regulators such as the AMF refuse to regulate insurers by not applying the law,” declared Richard Proteau. These employees will have to commit perjury if they want to deny the truth of my accusations or admit that they indeed protected and are still protecting insurers in a fraudulent act which is now surfacing across Canada.”


FSCA believes the answer to these two questions is crucial in moving toward a regulatory environment that actually protects consumers and not the bottom line of insurers. A wedge must be driven between employees of the AMF and the insurers when we consider the latest statement of an employee of Manulife, Guy Couture, in the Insurance Journal who made public threats against the career of advisors who decide to help their clients in setting up a life settlement which is a legal option in Quebec. Couture gave the impression that the AMF and Revenue Quebec could be used to sanction advisors who would for example help terminally ill policy owners get an advance on their death benefit through a loan settlement. It is clear the insurers would prefer that the terminally ill policy owners cancel their policies to get its cash value since they would not have to pay the death benefit; very profitable but highly unethical. Obviously FSCA considers this to be an unacceptable exploitation of consumers who are facing hard times. As a result, FSCA expected the AMF to refute Couture’s allegations but instead the AMF decided to remain silent reinforcing Couture’ statement.


“The life insurance industry is not well at all. The only medicine is multiple class actions and the FSCA is ready to proceed with two of these in a very near future. It is sad for me to announce that in one of these class actions, the regulators and provincial governments will be included as defendants.” In making this declaration, Richard Proteau added “When laws are a convenience for some and an obligation for others, there cannot be a just society; there cannot be a lawful society; conditions necessary for consumers to have confidence in the free market.”

9 comments on “Roadblock to Consumer Protection in the Life Insurance industry: “The Quebec Effect”
  1. Daniel McKay
    Broker of Record at Global Empire Corporation

    Go nail the banks for post claim underwritten Creditor Mortgage Life Insurance. Other than that I’m sure what other relevance your organization has to do with mortgages and real estate.

  2. Richard Proteau
    CEO and Founder Financial Services Consumer Alliance

    Daniel, I am a bit puzzled by your comment. First I thought the banks are part of the mortgage industry. Credit mortgage insurance is a product part of the mortgage industry. Therefore in stating we should fix up the problems with this product, you just establish our relevance. Now that I am getting the consumers organized, I assure you that we will do out part of the work in dealing with the problems of Creditor Mortgage Life Insurance as we want a change to the disclosure associated with these products. However mortgage brokers such as you have also their responsibilities and have to do their part in changing practices associated with mortgage insurance. However we will also look at other practices. For example, we are investigating complaints regarding the use of mortgage commitments and the representations made to consumers through this document. The complaints we have received certainly creates some worries in our organization. As you can see we intend as consumers to be very relevant in the mortgage industry…

  3. 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..

  4. 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.



  5. Dan Anders CFP, TEP
    Financial Services Professional since 1983

    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.

  6. 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 and 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.

  7. 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 NOR with which may have created the confusion.

    A closer inspection of the two sites would reveal that while 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.

  8. Richard Proteau
    CEO and Founder Financial Services Consumer Alliance
    Top Contributor

    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…

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