Did Options Consommateurs published a fake report?

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On December 1st, an organization named Options Consommateurs whose mission is supposed to be the protection of the consumers in Quebec published a report (french only) with a title we can translate to “Distribution of insurance products online. Great caution is called for.”

Previously I have addressed the phenomenon of fake studies and fake reports produced by organizations involved in the financial industry in order to push some form of agenda and protect their interests. My study revealed a trend of falsifying data in order to promote a recommendation and conclusion.

I can only qualify the report published by Options Consommateurs as a fake report. In my 25-year career it is the worst report I have ever seen. Hypotheses are turned into conclusions and affirmations. Whole data sets are censored and omitted in order to create a 118 pages dissertation with the goal of misleading the public and legislator. This report is an insult to the scientific method.

These fake reports and studies are then made public through Medias that are very careful in not questioning the used methodology, information and conclusions of these fake reports. Finance and Investissement, is such a news organization, which again demonstrated its lack of journalistic professionalism by publishing a whole slide show to outline the conclusions of this fake report instead of putting the conclusions to the test.

Well, I can’t let this report stand without being criticized. We have written the author of the report asking questions about the material omissions that were made. She did not answer back.

As a result, we are going to take this fake report apart, line by line; the whole 118 pages…

It’s difficult not to gag when JUST going over the 2 pages summary of this report.

REVIEW of the 2 SUMMARY PAGEs OF the REPORT PUBLISHED BY ORTIONS CONSOMMATEURS: “Distribution of insurance products online. Great caution is called for.”

Right from the start the whole premise of the report is wrong. The report states:

1. The Internet has played an important role in insurance since the early 2000s. It is a practical tool for consumers to obtain information and even compare products to one another. Because the Internet is fast and easy to use, we see the possibility of using it for the distribution of insurance products as is done abroad. Let’s say it from the start: opening the door to the distribution of insurance via the Internet without subjecting it to the obligation that there be a representative is something that worries us.

Opening the door to distribution of insurance online? That door has been opened for more than 20 years. We have difficulty to believe that the author does not listen to TV such as the History Channel where Manulife and other companies are offering insurance where you will never be contacted by a representative.

Insurance distribution without a representative has quite a history. You can’t go on the internet without being offered such insurance. You can’t open your mail without receiving such offers. You can’t watch TV without getting such offers.

This report instead of looking and studying at how insurance is distributed in Canada without a representative tries to make us believe this is something new and instead goes to Europe to see how insurance is offered in this fashion. This does not make sense!!! I have listed at how life insurance is offered directly to the consumer in Canada without the involvement of a representative:

a) Mortgage/credit insurance: The law is that a lender when offering a mortgage must also offer life insurance for that mortgage. Options Consommateurs does not explain why it believes the consumer has the ability to buy this insurance directly without a representative but suddenly loses that ability if he wants to buy the same product by shopping online.

b) Employer group insurance: Employees can buy directly supplemental life insurance directly without a representative. Again Options Consommateurs does not explain why it is ok for an employee to buy 200,000 of supplemental term insurance through his employer without the involvement of a representative, but suddenly if he goes online, the same product becomes too complex for his abilities.

c) Insurer offers insurance directly to consumers online: The author should visit this site: Manulife CoverME and see how Manulife is offering all Term insurance online from guaranteed issue, easy issue and traditional issue. As they say, insurance offered online without a representative involvement; well that ship has sailed a long time ago.

d) Insurance offered by stores. Maybe the authors should visit the Canadian Tire Web site and see how this retail store sells insurance online with Canada Life: Canadian Tire Life Insurance. No representative will call.

e) Alumni insurance: The author is a lawyer has gone university and would be able to buy insurance directly without a representative from her alumni association. Maybe she should visit McGill University Alumni Insurance

f) Insurance offered by associations: you are an engineer, pharmacist, doctor, lawyers… well all of these associations offer you insurance without the help of a representative. The author should read this document to see how Manulife offers such insurance online to engineers… engineer life insurance

g) Fraternal societies offering insurance: As insurers, fraternal societies have the option to choose how they will distribute their insurance. Some societies choose to do it through a representative (Foresters, FaithLife…) but others choose to do it without the involvement of a representative (Teacher Life insurance society, Ukranian…)

So the fact is that insurance in Canada has been sold to the consumer directly without the involvement of a representative for 40+ years is not mentioned by Options Consommateurs . How can you not mention this? Also this model of offering insurance without representative has moved online to the internet for more than 20 years. Options Consommateurs state clearly that this is not the case and is representing this as a new trend!

2. “In this domain, the products are complex”. 

Options Consommateurs is making a gross and exaggerated affirmation unsupported by anything. Why is the mortgage is insurance offered by a bank is not complex but becomes complex if the consumer shops for the same insurance online. What about guaranteed issue insurance? What is complex about this product that would require the use of a representative? Why is group term insurance not complex but shopping for the same product online makes the product complex? This is one of the most stupid statements ever made.

3. Since they are often sold to lay people by experts, there is a real risk of informational asymmetry between the parties. This is all the more true given that a significant proportion of Quebec consumers experience serious reading difficulties or have low levels of financial literacy.

I love this statement and as a Quebecer I feel insulted. Quebec is populated by illiterates who can’t read if we believe Options Consommateurs. This is what I call turning an unsupported hypothesis into an affirmative statement and conclusion. It is so wrong!

First, I would make the hypothesis that those who shop online (the younger population) would not have reading difficulties. So Options Consommateurs must be talking about another segment of population; maybe an older segment? Unless it is the position of Option Consommateurs that the education system in Quebec produce people who can’t read. If this is the case, the solution is to change the education system and not prohibiting the sale of insurance online. Come on!

Also Options Consommateurs by this statement seems to regard low levels of financial literacy as being terminal. What about raising educating the consumers? Is this a waste of time?

What about the AMF removing the requirement that a life insurance representative in Quebec has a DEC. I will make the hypothesis that because of this, life insurance representatives in Quebec have a lower education level than the general population. If the level of illiteracy is a concern for Options Consommateurs, then they should look at the lowly educated insurance representative!

4. “Without the presence of this representative, the consumer may be misinformed and, in so doing, run the risk of purchasing insurance that he does not need, that he already has (overinsurance) or that is simply not adapted to his situation. It may also opt for insufficient coverage (under-insurance). All this can have important consequences for him.”

The author as a lawyer should be careful to write about something that she has absolutely no knowledge of. If she had consulted a real expert such as me (I did offer my services to Options Consommateurs free of charge but they decline).

In most countries around the world, we are faced with the insurance gap. This trend is increasing and not decreasing. In the USA, it has been recognized that the insurance gap represents an economic risk for the country. Basically, in most countries, the income of those who are employed is not adequately insured and they are under insured. In India, to address this trend they are looking at other ways of distributing insurance such as micro-insurance. The same trend exists in Canada. The statement from Options Consommateurs assumes that those who use a representative are adequately insured. This is disproved by the increasing insurance gap. The distribution through representatives has failed Canadians and I don’t see how restricting the availability of insurance would solve this. The statement that Canadians would opt for insufficient coverage is ridiculous considering it is already happening with or without a representative. The author should educate herself on the insurance gap prior making such erroneous statements.

5. “Thus, they put the price in the foreground, sometimes to the detriment of other characteristics. They are not always transparent – the criteria they use to select their MOUs, business ties and remuneration are not always indicated. They sometimes prompt consumers to buy quickly, without taking time to think.”

Again in Canada, most insurance sold directly by consumers is done by insurers. Most quoting sites in Canada provide quotes where they try to get your contact information in order to generate a referral to a representative who will call you. The author should have visited sites such as: ratehub, insureye

You can’t get an insurance quote without giving your contact information in order for a representative to call you. The author mentions that they found that in Europe, consumers are pressured in buying rapidly. This is not happening in Canada. Instead the author should have reviewed the trend here and her conclusion would have changed to promoting the sale of insurance online since most shopping sites promote the use of a representative and try to steer you towards a representative.

6. “We are aware that some consumers want to buy PALs without being obliged to speak to a representative. We also have to admit that, as one Quebec expert pointed out, if insurers and traditional players in the industry are not able to adapt to the Internet, there is a risk that other players, as peer-to-peer insurance companies, which are increasingly popular with our neighbors to the south, are trying to attract these consumers and in doing so put them at even greater risk.”

There it is; the true reason behind this report. It is not about consumer protection. It is about trade barriers. It is about stopping the entry of new insurance players in Quebec and Canada. Hiding trade barriers behind consumer protection is very dangerous. Quebec and Canada have signed trade agreements which are usually kept secret from the public for our own good. These trade agreements allow foreign corporations the right to sue the provincial and federal governments. Preventing foreign businesses to do exactly what Canadian insurers are doing in Canada, offering life insurance online without a representative, will most likely be a breach of these trade agreement allowing these foreign corporations to sue us. If this happens, it is not the insurance industry that will pay up. It will be the tax payer. So if we are to restrict trade and restrict the sale of insurance online in order to prevent the entry of foreign participants in our market, it better be done on the correct information. This is why the fake report produced by Options Consommateurs in order to influence the legislators is so dangerous.

Conclusion

It is interesting to note that I approached Options Consommateurs three years ago to solicit their help to address consumer issues such as the use of misrepresentation to sell Universal Life and the existence of orphan policies. Options Consommateurs refused to get involved.

Now, is it the position of Options Consommateurs that the consumers do not have the ability to buy insurance without a representative but that same consumer magically acquires the ability to manage the life insurance policy by himself for the next 40 years without a representative who disappears with his commission? Orphan policies where there are not licensed representatives have existed for 40+ years. If having a representative is so important why has Options Consommateurs refused to address the issue. Why were they so silent?