CLHIA Comments on FICOM's bulletin on creditor's group insurance (CGI)Release Date: 12/04/2015 Staff Reference: Leslie Byrnes
December 4, 2015
Ms. Carolyn Rogers
Superintendent and CEO
Financial Institutions Commission (FICOM)
555 West Hastings Street
Suite 2800, P.O. Box 12116
Vancouver, British Columbia
Dear Ms. Rogers,
I am following up on our recent conversation with respect to FICOM's bulletin on creditor's group insurance (CGI). As we discussed, the bulletin sets out regulatory expectations of practices that we support and promote. But it also introduces an expectation, based on a new interpretation of effecting creditor's group insurance, that creates challenges, both in the time needed to review contracts and in the viability of a CGI distribution channel.
The bulletin states that FICOM expects the creditor to play "an active and substantial role" in contract procurement, product design, and negotiation of the terms and conditions under which the insurance is offered. This differs from insurers' interpretation of "effecting creditor's group insurance" and also from CLHIA Guideline G7, Creditor's Group Insurance, which was last updated in 2007 with the participation of the Canadian Council of Insurance Regulators, and does not specify a role for the creditor beyond what it has been in the past. It states:
“Creditor's Group Insurance” means insurance effected by or on behalf of Creditors in respect of the lives or well being or both of Debtors and other persons essential to the ability of the Debtors to meet their obligation to the Creditor, whereby they are insured individually under a single contract.
It is not clear to us what public policy objective is met by the new expectation. The purpose of creditor's insurance is to protect both the consumer and the creditor in the event of the death or disability of the consumer, forgiving the consumer or his/her estate of the loan obligations and making the creditor whole. The creditor generally does not have expertise in risk management and product design. Rather, that lies with the insurer...