Tuesday, March 30, 2010

Renewal Reports



I think I have some of the best Renewal Reports around. I have never once run into a more detailed renewal report from another adivisor. I produce a 21 page reviwing past claims, future trends, and specifics of each group. This is all above and beyond the base report that the insurance companies always produce. I include industry news, health care surveys, taxation worksheets, important reminders and a wealth of other information.

Sample Renewal (PDF)
This is an actual renewal from this month, I have redacted the name of the client for obvious reasons.

Examples of inserts
Cost Saving Plan Design Tips
Health Care Trend Survey 2009
Benefits Plan Taxation


If you want MORE information in your renewal, so you can make better decisions regarding plan design, carrier, usage etc.; Give me a call

/sales pitch

Monday, March 29, 2010

I'm having a good day today

I just got a negotated renewal back from an insurance company (Sun Life) for one of my larger clients.

Current Premium $17,290.14 per month
Original Renewal $18,704.62 per month (8.2% increase)
Negotiated Premium $17,385.05 (0.5% increase)

Negotiated Savings $15,834.60 over the next year.

I love it when i can save my clients nearly SIXTEEN THOUSAND DOLLARS, it makes me feel all warm and fuzzy inside.

Wednesday, March 24, 2010

HST on Insurance and Investments

I just received an email from Advocis, the insurance and financial services association I'm a member of. The topic was on GST/HST Notice No. 250

CRA has indicated that trailer commissions, front-end
load commissions, deferred sales charges, commissions on various
insurance products and redemption fees paid by investors do not constitute a
supply of a financial service and will be subject to GST. It is not clear at this
point in time whether financial advisors will be required to register for GST
purposes and remit GST.



Currently the insurance and investment products are exempt from PST/GST/HST. Its been this way for years. In this latest notice CRA has indicated that they have decided to remove this exemption from certain policies. That means any new insurance or investment policies will now be GST-able or in BC HST-able. That means we have gone from no sales tax to 12% overnight. There is nothing in the notice which indicates who gets to deal with this change. Do the insurance companies take over the administration of remitting the tax? Does every advisor now need to register for GST/PST/HST? Unlike some products where the CRA says HST will actually lower prices because there will be a "flow-through" of PST that will not be the case with this change. There has never been GST or PST anywhere in the supply chain so we cannot pass along any savings. Furthermore, as well as the tax, there is going to be added cost in administration of these policies so base costs will be going up as well. 

I think this is a terrible idea, why would the CRA want to discourage people from investing and purchasing insurance? Last time I checked CRA makes buckets off taxes on investments.

CRA has provided some handy dandy examples of when the service would be deemed non-exempt. according to the example below. CRA doesn't clarify exactly how this will apply to real world commissions, does it impact the commissions paid to the MGA? what about overrides or bonuses?


Example 2
In the course of providing services to investors, an investment dealer arranges to purchase units of a mutual fund for an investor. A commission is paid to the investment dealer at the time the units are purchased. In addition, the investment dealer will receive a fee referred to as a "trailer commission or fee" from the fund manager. The prospectus describes these fees as being paid in recognition of the investment advice and ongoing administrative services rendered by the investment dealer to the investors. The “trailer commission or fee” is paid annually subsequent to the arrangement for the purchase of the units. The services provided by the investment dealer, including advice, arranging for the purchase of the units and on-going administrative services for which the investment dealer is paid the commission and subsequent fees would not be a supply of a financial service.
For example, If I were to invest $100,000 of your money in an RRSP, I would be paid a commission of approximately 3% or $3000 (for a back end load policy), however, the MGA I placed the business through would also get paid 2%, for a total of 5%. Now is the 3% taxable or the 5%? We are talking CRA here, so lets assume they are going to be greedy and they tax the 5% commission paid to the MGA and the advisor. In BC the HST will be 12% so we are looking at 12% HST on $5000 of total commission. That is $600 in new taxes you will have to pay. This new tax just cost you 60 base points of return.

Furthermore, CRA is proposing that these changes be effective Dec 14, 2009. a full three and a half months in the past!


Coming into force
These proposed amendments would apply to investment management services rendered under an agreement for a supply if any consideration for the supply becomes due or is paid without becoming due after December 14, 2009. They would also apply to an investment management service rendered under an agreement for a supply if all the consideration for the supply became due or was paid on or before December 14, 2009, unless the supplier did not, on or before that day, charge, collect or remit any amount as or on account of tax in respect of the supply or in respect of any other supply that includes an investment management service and that is made under the agreement.

This means every advisor or insurance company has to go back into their records, and somehow collect GST on past sales? lunacy!

More as this unfolds.

Friday, March 19, 2010

Please allow 6-8 weeks for delivery


I recently read somewhere (an now I have forgotten where, DOH) that it takes an average of 39 days to issue a life insurance policy from start to finish. That's a long time, and sadly I would say it is probably accurate, if a little on the optimistic side. I personally have two policies I have been working on for well over 6 months. One of which dates back to August 2009. In the good old days, or so I am told, it used to take a work week to get a policy issued.

Day 1: The advisor meets with the client and writes up the application.
Day 2: The application goes in the mail to the insurance company.
Day 3: The underwriter reviews the application and decides to issue or decline the policy.
Day 4: The policy goes back in the mail to the advisor
Day 5: The policy arrives on the advisors desk for delivery to the client.

These days things aren't so simple or so speedy. We have all sorts of things which add time, complexity and frustration to the process. The modern day time line looks something like this:

Day 1: The advisor meets with the client and writes up the application. The client forgot their cheque book, and since insurance companies no longer accept credit cards as payment no temporary insurance policy can be issued. The client really wants the temporary insurance so will get the advisor a cheque in the near future.

Day 6: The clients cheque arrives so the temporary insurance can be issued. The application is mailed to the Managing General Agency (MGA). The MGA acts as a middle man coordinating, problem solving and expediting between the advisors on the ground and the insurance company head office.

Day7: In the mail

Day 8: The application is received by the MGA, copied, sent to the insurance company

Day 9: In the mail

Day 8: The client completes the mandatory medical examination.

Day 14: The underwriter receives the application and the medical results. There is something missing, or a question, from the medical exam. An Attending Physicians Statement (APS) is ordered.

Day 16: The doctors office receives the information request and promptly ignores it for two weeks.

Day 30: The doctor finally completes the APS

Day 32: The Insurance Company receives the APS report from the doctor. In the meantime, the clients drivers license has expired and proof of the renewal needs to be provided.

Day 35: The advisor receives the new expiry date on the clients drivers license and sends it to the MGA.

Day 36: The MGA forwards the drivers license to the insurance company.

Day 38: The motor vehicle record search with the new drivers license shows a speeding ticket within the last 3 years, a motor vehicle questionnaire needs to be completed by the client. the Insurance company sends the request to the MGA.

Day 39: The MGA forwards the information to the advisor.

Day 40: The Advisor informs the client that a driving questionnaire needs to be completed. The client is on holidays for the next week, an appointment is scheduled for 9 days from today.


Day 49: The motor vehicle questionnaire is completed and forwarded to the MGA

Day 50: The MGA receives the questionnaire and forwards it to the insurance company.

Day 56: All the outstanding items are accounted for. The policy is approved and issued.

Day 58: The policy is printed in eastern Canada, it is mailed to the MGA.

Day 61: The policy is received by the MGA, they make a copy, add a pretty cover and forward it to the advisor.

Day 62: The policy arrives in the advisors office, the date of birth is incorrect. The policy is returned to the insurance company to be corrected.

Day 70: The correct policy is received by the advisor for delivery.

Day 72: The policy is delivered to the client.


I have had each and every one of the problems listed above happen, though not usually all on the same policy. The example above is exaggerated for comedic effect, but not by much. The system in place is so slow, chaotic and error prone it makes my head hurt at times. With MGAs, AGAs, different insurance offices and the like; the time it can take to get a policy issued can seem like eons. I know why they got rid of 5 year term, by the time the policies were issued, they had already expired. I harp on MGAs sometimes, but they do keep me on track and up to date on the progress of my clients applications. The insurance companies and MGAs aren't all to blame, I screw up sometimes too. My most recent disaster involved writing up an application with a client, only to find out that the paper form was out of date, and was invalid. a second appointment with the client had to be scheduled to go through the new app which I swear was exactly the same as the "old" one. How embarrassing.

So what can be done?

Every few year there seems to be a big push by one company or another to embrace electronic applications, but they always flop. Scanning and email are great for removing postal delays, but electronic signatures are still not accepted. The incredibly low rates for insurance we enjoy these days are due in part to extra diligence of the insurance companies. This extra diligence takes extra time, be it medical records or additional questionnaires. I have started the habit of sending two copies of everything, originals to the insurance company and a copy to the MGA. This adds time and effort on my end but has thus far improved my turnaround time slightly.

I honestly don't have an answer, problems occur all throughout the chain
  • Advisor
  • Client
  • Courier
  • MGA
  • Doctors
  • Insurance company
  • Paramedical company
  • Reinsurance companies

If there is anyone working in logistics at UPS or FedEX and you want to earn a bundle in consulting fees please help us fix our system, it's broken.

Wednesday, March 17, 2010

Critical Illness Insurance Stats

The below is copied verbatim from a stats package I recieved from Industrial Alliance Pacific on Critical Illness Insurance. I thought the page was very informative so I have simply posted it below. Original PDF is available here.



Whether it’s cancer, heart disease, multiple sclerosis or stroke, it’s difficult to predict who will be affected by these diseases.

Statistics, however, have a lot to say about those who fall ill and can be a cause for concern.
  • In 2007, 2,933 cancer cases were diagnosed each week
  • 70% of cancer-related expenses result from indirect costs
  • In Canada, one woman in nine will be stricken by breast cancer during their lifetime
  • One in four Canadians will suffer heart disease during their lifetime
  • One person in 20 will be the victim of a stroke
  • 60% of strokes cause long-term disability
Luckily, statistics also show that medical advances and improved lifestyles are contributing to patient recovery from these and other illnesses in addition to helping people live longer lives.
  • 55%* of people afflicted with cancer will recover
  • 82% of people will survive their first heart attack
  • 75% of people will survive their first stroke
* Statistics can be higher or lower depending on age, sex, and the type of cancer.
Sources: Canadian Cancer Society, Heart and Stroke Foundation of Canada



TL;DR Critical Illness is Cancer Insurance.