It is absolutely amazing to see the amount of disinformation distributed by various parties on the subject of mortgage life insurance. Is this done on purpose?
What are lawyers saying?
Here is a lawyer website discussing mortgage life insurance. It amazes me to see how many lawyers have no clue about the law. This is not surprising. There is no money to be made in the application of the law and in the search for the truth. Law is not about justice.
As a result, lawyers are experts in the application of administrative rules and procedures This is where the money is made. The law is simple and anybody should be able to represent themselves in a court of law. However, the body of legal procedures and rules is so complex that it makes the law complicated, and getting justice a lengthy process impossible to comprehend for the average Canadian. This is advantageous for lawyers as they can extract horrendous fees before you even get into court.
ShareLawyers claims to be Ontario’s Leading Disability Insurance Lawyers. Now you would expect this legal firm to know a thing or two about insurance law and bank law. Based on what is written on their web site they do not have a clue.
Claim 1: Big Business for Banks: Banks are making millions and millions of dollars by selling insurance to clients like you and investing these premium dollars.
Federal law keeping the business of banking separated from the business of insurance would prohibit a bank from investing premiums dollars. This is the role of an insurer which must set aside part of the premium as reserves against future claims. So the bank is only a distributor of insurance and as such it cannot keep the premiums payments made on mortgage life insurance. Banks can only receive commissions from what they are selling.
Also, mortgage life insurance is not very profitable unless you can sell a high volume of this type of product which banks can’t do because other banks will not use an insurer owned by a competitor bank.While most banks own their insurance company which must be operated separately from the Bank, the banks use the mortgage products offered by other life insurance companies. For example, CIBC does not sell the mortgage insurance product of CIBC Insurance. It sells the product of Canada Life.
Claim 2: Post-Claim Underwriting: Yes, you read correctly. The underwriting process occurs after you have signed up for coverage and only in the event that you submit a claim for benefits.
As discussed in my previous text, this is untrue. Post-claim underwriting applies to all insurance issued on a non-medical basis which includes regular term insurance and since most regular term insurance is issued without a medical it is also subject to post underwriting.
Claim 3: Their unlicensed employees are selling this insurance without the proper education or training to help consumers make informed decisions.
The law requires that lenders offer mortgage life insurance when a mortgage is provided. This is not an option. It is the law. However the employees of the banks are prohibited from acting as agents of the insurers because they are not licensed. Helping a client in filling a life application is an agent’s task which a bank employee would be prohibited to do. You can’t blame the banks for obeying the law!
What are journalists are saying:
Rob Carrick is a leading financial journalists for the Globe and Mail. While Carrick knows a lot about the world of investment but the same could not be said about insurance and it shows by what he writes on this topic.
Let’s look at Carrick’s claim:
Claim 1: You can’t avoid insurance talk when you buy a house because your lender will try to force-feed you policies
No Mr. Carrick you are wrong. The law states that banks or any lenders upon offering a mortgage must also offer life insurance. Our government elected by Canadians believe that it important for families to be able to keep their home in the event of an untimely death. So there is no force feeding…
Claim 2: A firm no is the correct answer to such a sales pitch. In this millennials’ guide to insurance, you’ll find out how to do better.
This is one of the most unprofessional statement I have ever read from a journalist. Before giving financial advice to Canadians, you should check the facts. You never never say no to life insurance if you need it. You take it and if the life insurance is not competitive, shop around and replace it afterwards.
I hope that if a family loses their home because they said no to mortgage life insurance that they will sue Carrick. You have to say yes to mortgage insurance. You then have 10 days to see if you can get something better. Let’s think about a young couple with young children who just bought their first home and the day after, the main bread winner dies in an accident and they said no to mortgage insurance because of Carrick.
Claim 3: The reasons why term life sold by an insurance company beats your bank’s mortgage insurance are well summarized in a blog post by banker turned mortgage planner David Larock. The headline is “Why I won’t sell mortgage insurance”
Sadly Carrick did not do his homework. It’s not because he uses an outside source that his responsibility to check facts disappears. What Larock states in his blog is absolutely wrong. Again someone who talks about post underwriting without knowing what they are talking about.
As far as the clarity of questions, it is true that the questions are not clear on mortgage life insurance but this also applies to regular life insurance. Please check my text on Wong versus Manulife. http://consumerights.ca/wp/2014/02/kong-v-manulife-a-field-underwriting-case-study/
This is one of the many lawsuits involving regular insurance where the legal issue is the wording of life insurance applications.
Talk about knowingly and falsely reporting facts. Here is a text written by Smolkin that discussed the decision of the Ontario Superior Court. As a result, the journalist must have read the judgment in question. In the text the journalist SHERYL SMOLKIN states: “Cheetham sued the bank and represented herself at the trial.”
The problems is that Cheetham never sued the bank. Cheetham sued the life insurance companies involved which were TD Life Insurance Company and Canada Life.
When we read this text published by Ellen Roseman we are left with some serious questions. Her text refers the reader to the ScotiaBank mortgage life insurance link where it is states that: “The Bank of Nova Scotia and ScotiaLife Financial are not insurers. All insurance plans are underwritten by independent licensed insurers.”
Despite this Roseman made the following statements in her text:
1) “Scotiabank offers life insurance coverage for mortgage customers under 65, but denied the claim for the couple’s $289,000 mortgage.”
Wrong the claim was denied by Canada Life.
2) Massa answered a health question on his application incorrectly, the bank said. It paid the widow less than $5,000 as a refund of insurance premiums.
Wrong, the bank does not keep premiums received on mortgage life insurance. The premiums are refunded by the life insurance company if the claim is denied by the same insurance company.
3) In fact, Massa had been tested and treated for a liver problem. The bank learned of it after his death, when it asked his doctor for medical records.
Wrong, the bank does not have the power or legal right to review your medical records. This would have been requested and done by Canada Life.
4) Banks are known for providing fast approval of insurance coverage without doing a medical examination or checking medical records. This is known as post-claim underwriting.
Wrong. Banks don’t approve life insurance and don’t conduct underwriting.
In her text, Roseman even quoted an employee of the bank: “I forwarded everything to Sheena Findlay, a Scotiabank spokeswoman, who took two weeks to confirm the original decision. “The insurer declined Mr. Massa’s claim because he was not eligible for insurance coverage based on his health condition,” said Findlay.”
Despite this clear statement of Findlay, Roseman persisted in her text to say that it was the bank who made the decision to deny the coverage or that it was the bank that did the underwriting. Why? Why does she blame the bank for the sins of the life insurer?
And please note that licensed life insurance agents do not tell their clients that by buying a regular term insurance with no-medical that the insurer will conduct a post-underwriting review of the policy in the event of a claim. Why is it wrong for the banks and not wrong for licensed life agents?
Should the risk of post-underwriting be disclosed to clients? Absolutely! But it should apply to banks selling mortgage life insurance and to licensed life insurance agents selling insurance with no medicals or simplified life insurance.
The point is that the quality of mortgage life insurance will never improve until the life insurers which design this product are held accountable for the product’s risks and flaws. Sadly journalists like Carrick, Roseman and Smolkyn who basically are reporting false information in order to protect the life insurers involved are not helping the cause!