Thursday, June 4, 2009

The lobbying by Canada’s LifeCos reminds me of a bad Sci-Fi movie from the fifties

After months of behind the scenes lobbying in Ottawa, Canada’s life insurers are rolling out their latest exercise in fear mongering to the public, by telling Canadians that our health care system is about to fall into a state of complete disrepair. See today’s Globe article (below) entitled; “Insurers call for health-care reform?”

Gee, I wonder why?

Being the enormously civic minded organizations that they are, these life insurance companies are also offering a solution to this problem of their own self definition. How very kind and thoughtful of them.

Rather than allowing the tentacles of these Monsters from the Blue Lagoon and the Blobs from Bay Street to extend into yet another key area of Canadians lives for which we don’t require their services or their cost overlay, I think Ottawa should be investigating curtailing the activities of Canada’s life insurers rather than expanding them and launch a formal public examination into their practices in areas that they have recently entered such as the issuance of variable rate annuity products.

Life insurers who entered the product area of variable rate annuities are described by Warren Buffett as “crazy”. Meanwhile Ottawa should be troubled by the words of Professor Kin Lo of the Sauder School of Business who said Canada's top insurance companies had strayed from responsible business practices."Insurance is about protecting people from risk and what we have seen is the insurance industry going out and seeking risk," he said."It is in the nature of insurance that these companies should be fairly conservative in how they go about their business. "What we saw in the last few years is insurers getting away from conservatism," he said.

What is Ottawa doing about these types of warnings and to ensure the integrity of Canada’s life insurers? Presently, nothing.

We have already witnessed how the Canadian Life Insurers where able to feather their own nests by engaging in the false fear mongering about income trusts as the means to kill a formidable competitor of their in the arena of retirement savings vehicles that was witnessing a decline in the sale of life annuities and which resulted in Canada’s life companies getting into the “crazy” field of variable rate annuities,. Products that were not being properly hedged or “insured” by these life companies and which has now seen the federal government use taxpayer resources and the credit worthiness of the Canadian government to provide cheap, below market rate, borrowing for these life insurers under Flaherty’s recently announced Canadian Life Insurers Assurance Facility, that will provide taxpayer assistance to underwrite the cost of borrowing to Canada’s life insurance companies. Why? Why are taxpayers subsidizing the shareholders of viable companies? This makes no sense. Meanwhile these very same companies are now looking to Ottawa to expand the area in which they can operate? That makes even less sense, especially since the life companies have proven themselves willing to enter new areas of late that other knowledgeable people consider to be
“crazy” or straying from responsible business practices.

Where is the oversight from Ottawa? Or has the insurance industry oversight become an over sight?

Talk about a bad Sci- Fi movie from the fifties. Meanwhile this is 2009, and Ottawa seems to be a handmaiden to every wish of Canada’s LifeCos, from killing income trusts, to lax or non-existent oversight of their variable rate annuity business to credit facilities that see taxpayers underwriting the lifeco’s borrowing costs to this latest venture in bespoke public policy all designed to enrich the lifeco’s via a process of public fear mongering.

Make sure you read the readers comment as well as the article. It would appear that the public is not as gullible on this issue as the politicians in Ottawa seem to be, and whom the Lifeco Blobs from Bay Street have been lobbying for the past couple of months on this latest venture of theirs. See comments.

Insurers call for health-care reform

In an usually public position, industry presses governments to use business practices to improve efficiency of current system

Tara Perkins
Globe and Mail,
Thursday, Jun. 04, 2009

Canada's health-care system is not sustainable, the life-insurance industry says.

In a report issued Wednesday, it called on governments to embark on major reform, including devising new partnerships with the private sector and creating incentives for Canadians to put aside money for their own long-term care.

It's an unusually public stance for the industry, but insurers are planning to become more vocal about actions that governments should be taking on a range of issues affecting their business, including pensions.

Challenges in the health-care system are real, even more so now that governments and individuals are struggling financially, said David Paterson, a spokesman for Manulife Financial Corp.

Insurers are “responsible, essentially, for the supplemental health care in this country, and if you don't have a good primary system, it's going to be harder to have a good secondary system,” Frank Swedlove, president of the Canadian Life and Health Insurance Association Inc., said in an interview Wednesday. “We don't think the solution is just to throw more money at it.”

In fact, despite high and rising expenditures, Canada's system is only performing “moderately well” compared to other developed countries, the association argued in its report. For instance, Canada has fewer physicians per capita, and fewer acute-care hospital beds, than most other OECD countries.

If current spending rates continue, health care will rise to 17 per cent of gross domestic product by 2025, from about 10 per cent today, the association said.

The private sector is already a key element of the system, with insurers paying out tens of billions each year for benefits such as dentistry, prescription drugs, optometry, ambulance charges, critical illness and longer-term care. Federal, provincial and territorial governments should develop a list of services that could be delivered in partnership with the private sector, and that may be funded privately, the industry argued.

It also called on governments to use business practices to improve efficiency. For instance, it recommended that funding for hospitals be based on patient usage rather than just an annual budget. That would encourage hospitals to improve the quality and speed of their services, Mr. Swedlove said.

Other recommendations include more collaboration between governments, reforms to drug pricing, and increased investment in wellness and disease prevention.

Canadians are not going to have the money they need to meet their long-term care requirements, and the government will face pressure to step up to the plate down the road, added Mr. Swedlove, who was a senior official for a number of years in the Department of Finance.

“That's obviously going to cause even more fiscal challenges for government,” he said.

Governments could create a registered savings plan program to encourage Canadians to save for long-term care, or subsidize private insurance, he said. Such a move would directly benefit the industry.


Dr Mike said...

Frank Swedlove , the guy doing all the yakking here & spokesperson for the Life-cos , is another ex-Finance department hack.

Why is everyone linked to big business in Canada "connected" to the Finance Department giving them direct access to the the purse-strings of the country.

It is no wonder they have all the say & we have zip.

Dr Mike

Anonymous said...

You certainly have hate on for the life insurance industry.

Why? Is it because you were both at the same committee meeting?


CAITI said...

Hate on for the life insurance industry?

More like they have a hate on for us, our savings, Canada's tax base, Canada's economic sovereignty, accountable governments, public input ete. etc.

The insurance industry epitomizes everything that you probably find distasteful about the word and concept of "lobbyist". Well, maybe not you, but certainly 99% of Canadians.

Did you read the comments to the Globe article as I suggested?