An open letter to Donald A. Guloien
I recently read the transcript of a speech by Don Guloien delivered at the Canadian Life and Health Insurance Association’s “Advocacy Day,” on November 18, 2014, in Ottawa. The theme of the meeting was, “Investing in Canada’s Health and Prosperity.” In keeping with that theme, I posed several questions in a letter to Mr. Guloien. I raised the following questions based on direct excerpts from the speech. I have also posted the full transcript of Mr. Guloien’s speech at the end of this blog.
My open letter:
I read with interest your speech at the Canadian Life and Health Insurance Association’s “Advocacy Day,” and following from the theme of the meeting, “Investing in Canada’s Health and Prosperity,” I would like to address a few questions.
My wish is to open a dialogue with you and the CLHIA – as I have with a number of elected and government officials – regarding what I consider a critical issue for Canadians and the burgeoning cost of health care, pensions and retirement support for our aging population.
“We’re deeply involved in … and committed to … the health care and financial well-being of Canadians, and Canada’s economy.”
If this is true, why do life insurance companies in Canada continue to oppose the implementation of a well regulated and fiscally controlled life settlements industry in Canada? Particularly when life settlements are a well regulated industry that helps millions of citizens in the United States and other countries around the world.
“From our vantage point, it is evident that Canada’s social programs, such as pension plans and universal health care, are under enormous pressure.
“The life and health insurance industry has the capacity and the expertise to be a strong partner with government and other stakeholders to explore new ways of providing and financing these critical programs. Programs that help make Canada such a compassionate and wonderful place to live.”
Comment: This is an excellent principle, one that is being followed in the United States. For example, in Texas there are bills such as the first Medicaid life settlement law, which allow for proceeds of a life settlement to help fund long-term healthcare needs without barring individuals from enrolling in Medicaid. This helps take the burden off of government funded programs.
Do you not consider Canadian seniors who are struggling financially, and who own life insurance policies, to be “stakeholders” who need the industry “to explore new ways of providing” help? And if laws in the USA allow for proceeds from life settlements to help long-term healthcare needs then why not in Canada?
“We are blessed in Canada with a strong, principles-based regulator in the Office of the Superintendent of Financial Institutions. Canada is well respected in international financial circles and is playing a leadership role in developing sensible regulation. As international financial regulators contemplate new rules governing areas such as capital and accounting, Canada must continue to be at the forefront.”
Comment: Regarding “regulators contemplating new rules,” Canada is not at the forefront in key areas that can financially benefit seniors rather we are trailing the rest of the world by a wide margin.
Why would the life insurance industry not support “a strong, principles-based regulator … playing a leadership role in developing sensible regulation …” that would allow Canadian seniors to access their life insurance asset through a life settlement?
“Our industry is a participant in public infrastructure and has the ability to do more. We have the funds to invest here at home and we are interested in increasing our stake substantially in this important sector. But our involvement in these projects has to make good business sense.”
Does “good business sense” preclude good social sense? To your earlier point regarding “Canada’s economy,” does not the financial well being of a growing senior population have serious, government cost implications that can be eased through public-private efforts like life settlements? (See Texas example referred to above).
Near the end of your speech you state:
“Our industry has the capacity and expertise to play an important role in these areas. In partnership with governments and businesses, we can contribute to effective long-term solutions.”
Why do you not consider well regulated life settlements as a valid, practical and beneficial way of helping Canadians in retirement; thereby, alleviating dependency on social welfare programs?
As one of three key points near the end you say: “We can and want to do more to help Canadians save for retirement.”
Why not assist Canada’s aging population to access what is recognized in most jurisdictions as the accepted, fair market value of their life insurance policies by way of a well regulated, life settlement industry?
It is respectfully hoped that you will accept these comments in a constructive and well-intentioned manner.
I take the liberty of enclosing a copy of my recently published book, Why Are Canadian Seniors Worth More Dead Than Alive? which addresses the subject of life settlements – as does my website www.hereliesyourmoney.com. I trust you will find them of interest.
Indeed, I would welcome an opportunity to have further discussions with you on these matters that are so important to Canadians.
Leonard H. Goodman
Transcript of Mr Guloien’s speech
(see link to CLHIA site and a 17 minute video of the speech)
Innovation and Collaboration: The future direction
of Canada’s life and health insurance industry
Donald A. Guloien
Chair, Canadian Life and Health Insurance Association
and President and Chief Executive Officer, Manulife Financial Corporation
November 18, 2014
Fairmont Château Laurier
Thank you for your kind introduction, Peter [Braid].
Honourable Members of Parliament, Minister Holder and distinguished guests, I want to welcome everyone on behalf of the Canadian Life and Health Insurance Association. We are delighted that you could join us this morning.
Over the years, our industry’s Advocacy Day has become a highlight of our ongoing dialogue with federal policymakers. CEOs from several CLHIA member companies are here today as part of the 5th Annual Advocacy Day:
- Yvon Charest, President and CEO of Industrial Alliance
- Kevin Dougherty, President of Sun Life Canada
- Douglas Baker, President and CEO, Teachers Life
- Doug Brooks, President and CEO, Transamerica Life Canada
- Rino D’Onofrio, President and CEO, RBC Insurance
- Dave Johnston, President and COO, Great-West Life/London Life/Canada Life
- And Alka Guatam, COO and CFO, RGA Canada
This year’s theme is Investing in Canada’s Health and Prosperity.
We will be talking with Parliamentarians and officials about what we see as the challenges facing Canada and Canadians in areas such as:
- saving for retirement
- health care, and
- funding and sustaining the public infrastructure that will ensure Canada’s future development.
The life and health insurance industry is involved in all these areas. We believe we are making a significant contribution toward finding solutions to these challenges. But more can and needs to be done.
How our country addresses these challenges will help determine Canada’s continued success.
That’s why we are taking an active role in public policy discussions on these issues … and that is why we are here today.
Although our roots are in life insurance, innovation is very much part of our industry’s DNA. As a result, we have been successful in adapting to the changing financial landscape, both at home and abroad.
Today, Canada’s life and health insurers:
- provide financial security and supplementary health care products to more than 28 million Canadians,
- manage about two-thirds of Canada’s private retirement savings plans,
- pay out over $1.5 billion in benefits to Canadians … every single week, and
- employ more than 150,000 Canadians, including close to 97,000 agents and advisors.
The industry is also:
- one of the largest investors in the Canadian economy, with $650 billion in domestic assets, and
- active in over 20 countries worldwide, where we hold assets of another $658 billion.
We’re deeply involved in … and committed to … the health care and financial well-being of Canadians, and Canada’s economy.
From our vantage point, it is evident that Canada’s social programs, such as pension plans and universal health care, are under enormous pressure.
Canadians … from all walks of life …. are rightly concerned about the future well-being of these programs.
The life and health insurance industry has the capacity and the expertise to be a strong partner with government and other stakeholders to explore new ways of providing and financing these critical programs. Programs that help make Canada such a compassionate and wonderful place to live.
The life and health insurance industry already plays a role in two important areas that touch the lives of millions of Canadians:
- The first is workplace retirement savings plans. These include:
– defined-contribution pensions,
– group RRSPs, and
– Pooled Registered Pension Plans, or PRPPs, that will increase access to workplace retirement plans for millions of working Canadians.
– Overall, our industry administers over 70% of all pension plans and over 90% of group RRSPs.
- The second area is workplace health benefit plans. These help employees and their families with medical costs not covered by provincial plans. They include:
– dental care
– vision care, and
– prescription drugs
For many businesses, extended health benefit plans are effective tools to attract and retain high-quality employees.
Yet employers who offer fully insured benefit plans may face some difficult decisions. For instance, one of their employees could be diagnosed with a rare disease requiring a drug treatment costing thousands per month. This alone could make an employer’s health benefit coverage unaffordable, and that may force them to reduce or completely drop drug coverage.
To help these employers hold on to their plans … especially small- and medium-size businesses … our industry took action. On January 1st last year, all life and health insurers worked together to launch the Canadian Drug Insurance Pooling Corporation.
Through this pooling arrangement, participating insurers share the costs of very expensive and recurring drug treatment claims. This innovative approach is keeping plan costs affordable for employers. At the same time, it shelters their employees from the full financial burden of the prescription drug treatments they may require.
In 2013, the new pooling mechanism paid more than 4,000 prescription drug claims of over $25,000. Several individual claims exceeded $500,000. One was over $1.2-million.
Another area where we see a much greater role for our industry is ensuring Canada has the public infrastructure in place so Canadians can continue to enjoy a high performing economy and a high standard of living. I’m talking about infrastructure such as:
- transportation networks,
- schools, and
- green energy
Canada, like so many other countries, has financial challenges when developing and maintaining public infrastructure projects. In fact, estimates suggest we currently have an infrastructure deficit of more than $350 billion.
This infrastructure deficit must be addressed if Canada is to realize its full growth potential in the coming decades.
Sustained long-term growth needs predictable long-term investment. The long-term nature of the insurance business is well suited to this type of investing as our obligations to policyholders often span several decades.
The importance of encouraging long-term investment in public infrastructure has also been recognized internationally by the G20 and the OECD.
The G20 Finance Ministers called for the creation of a Global Infrastructure Initiative to increase quality investment, especially in infrastructure. The CLHIA strongly supports this international initiative and Canada’s role in it.
These countries, Canada among them, are looking closely at how they can encourage Public Private Partnerships, or P3s, and better ways to engage the private sector in these projects.
P3s, for their part, have been effective in delivering infrastructure projects on time and within budget.
The Canadian government has played a very proactive role in promoting P3s across Canada through the creation and funding of a Crown Corporation called P3 Canada. We applaud the government for this, but believe more can be done.
Our industry is a participant in public infrastructure and has the ability to do more. We have the funds to invest here at home and we are interested in increasing our stake substantially in this important sector. But our involvement in these projects has to make good business sense.
We invest in infrastructure to support our liabilities on long-term products. Therefore, we should ensure that changes to financial and capital standards do not constrain our ability to offer long-term products, as otherwise our need for infrastructure investments could see a dramatic decrease.
We must continue to ensure that accounting and capital rules do not penalize investments in infrastructure assets that typically provide stable cash flows to support our liabilities.
In such projects, as in all our activities, the future direction of Canada’s life and health insurance industry will depend in no small measure on the regulatory environment in which we operate.
As financial institutions emerged from the 2008-2009 financial crisis, there’s been an unprecedented leap in the level of regulation.
We understand … and fully support … the role of regulators in protecting the public interest and ensuring the conditions that led to the financial crisis do not occur again.
We are blessed in Canada with a strong, principles-based regulator in the Office of the Superintendent of Financial Institutions. Canada is well respected in international financial circles and is playing a leadership role in developing sensible regulation. As international financial regulators contemplate new rules governing areas such as capital and accounting, Canada must continue to be at the forefront.
Our industry requires a regulatory environment that does not substantially increase the cost of financial services to Canadians or stifle innovation, growth and competitiveness.
Canada has a very bright future. And it boasts a vibrant life and health insurance sector that remains at the economic forefront internationally and domestically.
Our industry will continue to innovate by building on the solid foundation we have developed over more than 150 years.
1) We can and want to do more to help Canadians save for retirement.
2) We can and want to help sustain Canada’s healthcare system.
3) We can and want to invest more in public infrastructure at home.
Our industry has the capacity and expertise to play an important role in these areas. In partnership with governments and businesses, we can contribute to effective long-term solutions.
We look forward to continue working on these with governments and other organizations, such as those represented in this room.
I am confident that, together, we can create the innovative solutions essential to making Canada even more healthy and prosperous.