Proceedings of the Standing Senate Committee on
Banking, Trade and Commerce
Issue 8 - Evidence - Meeting of March 10, 2005
OTTAWA, Thursday, March 10, 2005
The Standing Senate Committee on Banking, Trade and Commerce met this day at 11:07 a.m. to examine and report on consumer issues arising in the financial services sector.
Senator Jerahmiel S. Grafstein (Chairman) in the chair.
[English]
The Chairman: Ladies and gentlemen, thank you very much for attending this morning. We are continuing, via CPAC and the World Wide Web, the Standing Senate Committee on Banking, Trade and Commerce's study and examination of consumer protection mechanisms within the financial services sector.
Yesterday we had an interesting round of hearings with witnesses. I asked our last witness, who deals with ombudsperson questions in the investment community and the banking community, to provide us with information. I asked him personally, but I want to put it on record I asked him to provide us with us individual banking institution practices within the bank, which is the first line for consumer protection. I was delighted that Mr. Lauber will present us with the material. We are interested not only in the general policy issues but the specific issues of institutions and the consumers who use the services of those institutions.
Today we are delighted to welcome the General Insurance OmbudService. Madam Lea Algar is the chair and Mr. Pierre Meyland is the independent director from Quebec. We are delighted that both of you could come. We look forward to your evidence with great interest. In our previous evidence, there have been questions about general insurance and so on, so we hope that you will address those.
Senator Kelleher: I wanted to declare a possible conflict of interest. The general counsel for the General Insurance OmbudService is a partner of our law firm. I will sit here, but I will not take part in any discussions or vote on anything. I felt it best to declare the conflict.
The Chairman: Thank you so much.
Witnesses, we look forward with anticipation to your testimony.
Lea Algar, Chairperson, General Insurance OmbudService: Thank you very much, Mr. Chairman. We expected to have Terence Donahoe with us today, but unforeseen circumstances prevent him from being here. He sends his regrets. He is our independent director for the Atlantic region. I too am an independent director, and I represent Ontario.
Senator Moore: Mr. Donahoe is a classmate of mine and a son of the late Richard Donahoe. It is too bad he is not here.
The Chairman: I remember his father with great esteem. You are not declaring a conflict, are you?
Senator Moore: No.
The Chairman: There is not even an appearance of a conflict there.
Ms. Algar: The General Insurance OmbudService began its operation in July 2002. GIO is an alternative dispute resolution service that provides redress for consumer disputes about general insurance, car, home and business. We are part of the consortium that includes the other ombudservices and the Centre for the Financial Services Ombudsnetwork, CFSON, from whom you heard yesterday. We all work in cooperation so that no consumers fall into cracks anywhere.
Consumers are our priority. That is reflected in both our principles and core values beginning with our independence from the insurance industry. Our board of directors is comprised of seven directors, five of whom are independent directors. In addition to Mr. Meyland, Mr. Donahoe and myself, they are Susan Yurkovich for British Columbia, and Roger Smith for the Prairies, Northwest Territories and Yukon.
We all meet stringent conflict-of-interest guidelines to assure the public that we operate independently from the property and casualty insurance industry. We have two industry directors, George Anderson, the past president and CEO, Insurance Bureau of Canada and Diane Strashok, president and CEO of the Peace Hills Insurance Company. They bring to us the industry view.
We have two classes of membership in our organization. Our members are the property and casualty insurers. However, we have voting and non-voting members and the only voting members are the directors. Our members really do not have a say in the operation of the organization. Our organization also takes into account the differences in insurance laws and differing products from province to province. We operate through regional offices in Vancouver, Edmonton, Toronto, Montreal and Halifax.
We support the company-first process. Before a consumer can seek our mediation process, they have to complete the company process. They have to get a final position letter from the company, and in that letter the company is required to refer them to our organization, the GIO.
With the help of professional mediators from the Alternative Dispute Resolution Institute of Canada, or in Quebec, Le Barreau du Québec, consumers and their insurance companies can work toward a solution that is in the interests of both parties, in a fair, independent and impartial environment. Mediation is voluntary and at no cost to the consumer but once the consumer applies for mediation, it is mandatory for the company to participate.
Property and casualty insurance is a pure-risk-protection product. It pays consumers' claims and our process reflects that. It focuses on claims and interpretation of policy coverage. We think the process is working well. It is simple, timely and most of all, fair. We continue to reach out to consumers. Our main goal is to raise public awareness, and we have been working at that since our beginning. Our website, which includes an on-line complaint form, is quite busy. It is updated regularly, and we receive a number of complaints on-line.
We also promote our services in the media and through public speaking engagements. We produce print material in plain language for consumers. As well as consumers, we also reach out to our members and to other stakeholders such as relevant government departments.
As I mentioned, our consumers are our priority. From the inception, we have worked with CFSON and the two industry-level, dispute-resolution organizations. We are also very pleased to be working with provincial governments.
Last summer, the Alberta government developed new automobile insurance legislation that includes a mediation component and entrusted GIO with that responsibility to address disputes regarding accessibility of coverage and calculation of premiums. Consumers in Alberta can now rely on the GIO process within the provincial automobile insurance regulatory scheme, as well as our regular services.
In Quebec, we are working with representatives from CFSON and the other two ombudservices. We are working with Autorité des marchés financiers, the new regulator, to determine what our role might be in that province. We are continuing to reach out further on the successful foundation that the federal government has established, and our role will continue to evolve.
We believe that the process is good, and it is good news for Canadian consumers. It is our hope that you will be able to support us further in our efforts to safeguard consumer interests. Thank you very much for this opportunity to tell you about GIO. We will be pleased to answer your questions.
The Chairman: Can you tell us how a consumer might contact your organization because we now have an opportunity to talk about it across the country and coast-to-coast and via the web. If I am a consumer and I am aggrieved, how do I contact your organization?
Ms. Algar: You can contact us by telephone in all of the regions. We have different 1-800 numbers for each region. You can contact us through CFSON as well. We get a lot of contact through our website.
The Chairman: Are all your numbers on the website region-by-region?
Ms. Algar: Yes, www.gio.scad.org.
[Translation]
Senator Massicotte: I would like to better understand your practices and objectives. When somebody calls you regarding a dispute with a given company, you first inform them that further clarification is required. Why do you not contact the company directly to clarify the situation? Am I right in thinking that this is your initial response to the consumer?
[English]
Ms. Algar: We try to determine what the dispute is, and if it has gone through the company process. If it has and they have the final letter from the insurance company, then they are ready to come to GIO. If they have not gone through the company process, we will provide them with the name and telephone number of the ombudsman for the company so they can contact that person and start to work through the process.
[Translation]
Senator Massicotte: The consumer calls you, and you put him in touch with the company's ombudsman. Do you follow up with a call two or three months later in order to ensure that the consumer is happy with the outcome and that he has received answers to his questions?
[English]
Ms. Algar: We have not been doing follow up because if they are not satisfied they are given information by the company, and they are told about us. We are hopeful they will come to us — there is a brochure in each final letter — but we have not been following up. As you will see from some of the numbers, we get a great number of calls, and have not followed up on those.
[Translation]
Senator Massicotte: Would you not agree that there are many consumers who would like to file a complaint but who do not follow through because the process is so complex that they feel it is stacked against them? If you do not follow up on complaints, is it not true that you have no means of knowing whether people are happy with the outcome?
[English]
Ms. Algar: That is true, we cannot. We hope that consumers let us know if they have a problem. The process is not difficult; they can telephone the insurance company and try to resolve it. We will help them; tell them what they need to try to get an answer from the insurance company. They can work through that process. I hope that if consumers have trouble, they call us back. If they have trouble with the company process, we try to determine what was wrong that they were not being heard.
[Translation]
Senator Massicotte: Your board of directors comprises independent members and two industry representatives. When a director resigns or comes to the end of his term, how is he replaced?
[English]
Ms. Algar: The independent directors are expected to find someone else in their region. Our independent directors come from diverse backgrounds and various regions of the country. One of the responsibilities of the director is to bring forth some names for consideration in their region.
[Translation]
Senator Massicotte: Who has the authority to nominate these members? Are independent members the only ones who can nominate new members?
[English]
Ms. Algar: We have a nominating committee which consists of the independent directors only and we nominate the replacement.
[Translation]
Senator Massicotte: Is your organization funded by member companies? If so, who determines the level of funding?
[English]
Ms. Algar: Our funding is obtained from the member companies. That was the reason for the non-voting and voting structure that we have. The funding is based on their asset value and on a percentage. This is an accounting function, so it is a ratio depending on what their volume is.
[Translation]
Senator Massicotte: Other organizations which have an ombudsman also have a mandate to implement and encourage best practices. However, I notice that you focus on finding solutions and organizing mediation for a complaint.
We have all read the vociferous criticism made of your industry in the newspapers. Your members have also being harshly criticized for having given incentives to brokers, who are supposed to be independent. Questions are being raised as to whether brokers truly are independent. These are issues being raised in the United States, and the same thing is expected to happen here in Canada. Does that not concern you? Do you not have responsibility in this field? Could you not encourage best practices? Could you please comment on this subject?
[English]
Ms. Algar: Our business is consumers and their disputes with their insurance companies. We are a dispute resolution organism so we are not concerned with the affairs of what has gone on south of the border. That is something that is best left to the industry and their regulators because they are a regulated industry.
[Translation]
Senator Massicotte: It could happen, then, that a client buys one of your member's products on the supposedly independent advice of a broker. However, we now know that, even in Canada, brokers are often not independent and receive incentives to do business with one company rather than another. That is not acceptable and means that the consumer is not being well served.
[English]
Ms. Algar: Our organization has not received any complaints about brokers. They have been focussed on what the consumer has purchased and whether or not there is coverage. Those are the sorts of disputes and the amounts of the damage also.
[Translation]
Senator Massicotte: Who is responsible in such a case? Who corrects or moves for such practices to be corrected?
[English]
Ms. Algar: That would be a regulatory situation.
Senator Harb: You have a very impressive résumé, and your background in Ontario would be a great asset to your board. Looking at the list of your directors, I cannot, Mr. Chairman, let this go without mentioning the Honourable Gilles Loiselle who is also a very high calibre individual with a tremendous background in the terms of public and, now, the private sector. First, on your submission on page 6 you talk about the percentage or the ratios of inquiries and complaints by region since January 2005. I take you to the top two lines, Ontario and Quebec, in your volume. The ratio is 40.3 per cent for Ontario, and 39.2 per cent for Quebec. Next, we go down to places such as Newfoundland with about 0.9 per cent, and New Brunswick with 1.2 per cent. Why is there such a disparity in terms of the number of people who complain? Is it because Atlantic Canadians are happy or is there a rationale for that?
Ms. Algar: Interestingly enough I have asked our employees in the Atlantic Provinces and they say they are able to resolve things very amicably with their companies, so they do the not have the same problems.
Senator Harb: The second question deals with best practices in that they seem to be able to resolve their cases. Where do you come into the picture? We spoke to the Canadian Bankers Association yesterday. They said that sometimes they share information and do referrals. They have a certain standard procedure when a complaint comes to them. The first thing they do is send them to the ombudsman for the bank and find out if that is resolved. If not, they will go to the next step. Do you have a mechanism in terms of best practices between your customers that are the insurance companies and your members?
Ms. Algar: Yes, we do. One of the first things we did was set up two committees; one is the Standards Committee and the other is the Budget and Audit Committee. The Standards Committee does set standards. We adopted the standards that were set by Center for the Financial Services OmbudsNetwork as our own, and then we monitor those. If a consumer comes to us and they should be somewhere else, we would be happy to make sure that they are sent to the proper ombudservice. Those who come to us now come at the time when they have a dispute and we have time frames for that. When we receive an application for a mediation, which has to be a signed application because there are privacy issues, the mediation has 30 days in which to be resolved, and 10 days after that for the mediator to make a report if the matter has not been settled at mediation.
Senator Harb: Recently, there was talk in Ontario about the insurance rate on cars. One cannot help but think that there are some who are saying if I had a good track record in driving and everything else, that should be reflected in my rate. Where do you stand in trying to indicate how to provide incentives for consumers who may have a good record versus those who may not? Is there a role that you play or is this up to the individual insurance companies?
Ms. Algar: If I could back that up a little bit and explain the rating of auto insurance, each company that wants to write automobile insurance in the province of Ontario must file their rates with the regulator. They must be approved before they can use those rates. In the rate file there are actuarial facts and all the underwriting rules as well. If someone comes to us and says they have a problem and they do not know what to do about it because the premiums have gone up so much, our consumer service officer would try to determine whether they had been rated in the proper categories and so on. If they have, that company cannot do anything about changing its rates. All we suggest is to shop for a better rate. The Financial Services Commission of Ontario, the regulator, has issued a list of companies and what their performance is in terms of claims. There are many organizations that provide a comparison of rates, so they can go there, but we cannot deal with them other than to do that initial checking to make sure it appears to be correct.
Senator Harb: With your permission, Mr. Chairman, a clarification. I somehow end up on the submission of our next witness, Mr. Loiselle. Then I asked you the question but I saw your name here on the board of directors. You seem to be extremely well versed. Our clerk came to me to say, Mr. Harb this is the next submission, but you did flow through it exceptionally well. Did you read it before?
Ms. Algar: No, I did not. I was answering on behalf of our organization, but thank you for asking.
The Chairman: Witnesses, Senator Harb represents the consumer. I must say that senators starting this probe into consumer protection mechanisms are confused by the vast array of different consumer institutions, regulatory, company by company and cooperatively. The consumer is faced with huge choices in the marketplace and how to deal with a complaint. One of the things we are going to look at is how do we simplify the process for the consumer.
The confusion expressed by Senator Harb is felt by all members of the committee as we approach this material. We do not want the consumer to feel alone in his or her confusion because we are sharing it alike. It is up to this committee to make some sense of it all.
Senator Harb: Fortunately, I am no longer confused because Ms. Algar has clarified the matter.
[Translation]
Senator Plamondon: I would like to discuss the commissions which insurance companies give to brokers and suppliers.
For example, following a fire, orders for furniture often go to a single supplier. Suppliers get commissions on volume. If there were to be an inquiry as big as the Spitzer one here in Canada, do you think we should also consider the issue of discounts given to suppliers?
Insurance companies often send their clients to certain service providers and give bulk discounts. Consumers will certainly not complain to your organization about this practice because it does not appear on their bill. A consumer cannot complain if the broker has been given some special benefit rather than a commission. Brokers may get, for example, a trip, special advantages, or a loan to equipe their offices with computers.
I am at the point of wondering whether a broker truly is a broker. Most of the time, although the consumer thinks that there is a range of rates, and that the broker has sought out the best rate for him, there are so many advantages linked to volume that all business is channeled to a single company. Canadian consumers may yet be unaware of this phenomenon, but it is a problem which exists and is currently the subject of an inquiry in United States.
My main question regards the fact that insurance companies are refusing to ensure certain dwellings. More and more people are seeing their application turned down. I would like you to explain the concept of ``redlining'' to the committee.
Why are people being denied property insurance because of their chosen profession, even when their home is in another area of town? This is an important issue for consumers, because once somebody has been turned down once, on grounds other than the safety or state of his home, the next insurance company that he approaches will ask him if he has already been turned down by an insurance company.
The consumer will have to say yes and, because he has been turned down once, he will certainly be turned down again and will thus find himself locked in a pernicious situation. Have you received any complaints about this? What do you think of this situation?
[English]
Ms. Algar: We have not had complaints but we have had inquiries about that. As far as property insurance is concerned, there are no laws that require the kind of scrutiny that is required for auto insurance. As a result, we could call a company to try moral suasion only to help the consumer.
Senator, you had a number of questions in the one. I would like to talk about companies receiving discounts for furniture that they might have replaced, for example. While we do not know what the insurance company pays, because that is not within our venue, the receipt by the consumer of like kind and like quality replacement would be our issue. We have not had complaints about the replacements that were allowed. The industry would be able to answer those questions for you; such information is not part of our mandate.
[Translation]
Senator Plamondon: Would you recommend that the Insurance Act enshrine the obligation to explain a refusal? At the moment, consumers have no means of finding out why they were turned down because no such explanation is required by law. This results in a vicious circle. Do you think that the consumer ought to be able to know why his application was refused?
[English]
Ms. Algar: There should be a discussion with the insurance companies to receive answers to those questions. Perhaps guidelines or a mutual agreement with the insurance companies would be appropriate to deal with these. There are ways to deal with risks that might be considered higher than other risks, such as pooling resources. That discussion should be held.
[Translation]
Senator Plamondon: Could you explain to us what is meant by ``redlining''?
[English]
Ms. Algar: I am not familiar with how redlining is used. I believe it is a selection of a risk in an area for which an insurance company does not wish to provide insurance, but I am not too familiar with the term ``redlining.''
The Chairman: I have a supplemental to that. This committee is trying to cope with the question of consumer protection at all levels of society. Senator Plamondon has raised this issue a number of times and it is important for the committee. We want to ensure that, as per the Charter, all Canadians are treated equally, whether they come from a low-income or high-income area. The senator has asked a valid question. If you are not able to respond, perhaps you could provide the committee with written information to that effect. This is a consumer issue.
Ms. Algar: It is a consumer issue that I think the insurance companies should speak to. The industry should answer that question.
The Chairman: Are you saying that this is a regulatory issue, a corporate issue or a consumer issue? The committee is attempting to determine where to apply its focus.
Ms. Algar: I understand. Certainly, it is an issue for consumers who cannot obtain insurance. There should be some understanding with the insurance companies, whether they provide a pool so that the consumer can be insured or whether they have another solution to this issue for the provision of insurance. There is always regulation but that alone does not resolve things. Securing a commitment in other ways might be preferable.
[Translation]
Senator Plamondon: Just because somebody is an artist or works in a bar does not give an insurance company the right to refuse to ensure a dwelling, which is in good condition, on the pretext that it is in an area which the insurance company does not want to cover. In my view, that is a poor reason for turning somebody down. Furthermore, a refusal can have damaging repercussions, and it is for this reason that we must consider this problem in our draft report.
[English]
The Chairman: I would ask Ms. Algar whether she could provide in writing to the committee any information that deals with the cluster of questions raised by Senator Plamondon and of concern to the committee.
Senator Moore: Where is the head office of the General Insurance OmbudService, GIO? Is it in Toronto or Ottawa?
Ms. Algar: It is in Toronto.
Senator Moore: How many staff do you have at head office?
Ms. Algar: We have two office staff.
Senator Moore: In the regional offices, how many people are on staff?
Ms. Algar: We have two consumer officers that work specifically on GIO issues.
Senator Moore: Do you have four on staff in Toronto, then?
Ms. Algar: Yes.
Senator Moore: What is your annual budget?
Ms. Algar: Our annual budget is a little over $1 million. Of that, about $375,000 is our payment to the Centre for the Financial Services OmbudsNetwork, CFSON, for our share of its costs. Those are estimated figures.
Senator Moore: I will touch on an area mentioned by Senator Massicotte in respect of the two categories of members: voting and non-voting. Ms. Algar, you mention on page three of your presentation that you are funded by your 140 member companies, which have two categories of members: voting and non-voting. Board members made up of independent and industry directors are voting members. Non-voting members are comprised of GIO's members. Do you have an annual general meeting of members?
Ms. Algar: Yes, we have an annual general meeting in Toronto where head office is located. Our companies attend this meeting. They know that they are non-voting members and have accepted that term. We still have discussions with them, of course, when issues arise. We have not heard any criticisms of how we operate or about our assessment, which is nice.
Senator Moore: The only people who can vote at your AGM are the seven board members?
Ms. Algar: That is correct. We make that clear and the others seem content with the decision; at least, they do not challenge it.
Senator Moore: The reason for that is to ensure an appropriate degree of separation and independence from the non-voting members who are of the insurance industry.
Ms. Algar: Yes.
Senator Moore: You want to draw the line.
Ms. Algar: Yes, we want to be independent and we have done everything we can to ensure that. That is why we use independent professional arbitrators from the Alternative Dispute Resolution Institute and Le Barreau du Québec.
[Translation]
Senator Massicotte: I would like to pursue a similar line of questioning. According to your financial statement for 2004, you had a $1 million expenditure budget which included $500,000 for the National Resources Centre and $220,000 for the Regional Consumer Center. If I am not mistaken, you had four employees to answer calls.
[English]
Ms. Algar: There are two positions in Toronto, two and one-half in Quebec and one in the Atlantic region. We have two full-time positions in Alberta and one in British Columbia. There are eight positions in our consumer centres.
[Translation]
Senator Massicotte: Looking at your financial statement for 2004, I see that office and administration expenditures total $70,000. I do not understand. You had some 10 employees costing $70,000?
[English]
Ms. Algar: That regional consumer centre cost includes all the required equipment and technology and is $221,800. The salaries for last year were $69,000. It is greater this year because we have added more employees. Many of our employees are part time and that is why I gave the number of positions that we have.
[Translation]
Senator Massicotte: I want to make sure that you have the necessary tools to allow you to meet people's needs. Does your budget allow you to answer all calls? Do you feel that you have a large enough staff?
[English]
Ms. Algar: It would seem so but we will have a supplementary budget for Alberta this year. Members are aware that there will be additional costs for that.
[Translation]
Senator Massicotte: You have a well-structured board of directors with independent members; however, I would now like you to tell us a little bit about your managers and management. Do you have a general manager?
[English]
Ms. Algar: We have had a general manager running our operations. We thought that would be adequate but we have found that it is not. We will make a change this year. Currently, we have a competition for a full-time executive director position. The manager's position was part time. At the outset we thought that would be adequate but we find that it is a full-time position. You will see a change in the salaries for next year because our operations have changed. We need a full-time person to perform more outreach for the organization.
[Translation]
Senator Massicotte: Your general manager has a part-time position. Where does he work? Is he a consultant? Is he independent? Where does he come from? What is his background?
[English]
Ms. Algar: Our general manager works three days per week at head office. Her background is the Financial Services Commission of Ontario where she was Manager of Corporate Affairs.
[Translation]
Senator Massicotte: What are the requisite qualifications for candidates applying for the new position of executive director?
[English]
Ms. Algar: We want someone who is dynamic and an outreach person. We also need someone who has good managerial experience, knowledge of the industry and some knowledge of ombudservices and how they should operate with our consumer focus.
[Translation]
Senator Massicotte: If, by chance, the new executive director were to come from an insurance company, and were he to have previously worked for one of your clients, would that not undermine his neutrality?
[English]
Ms. Algar: We would have to consider how best to handle that. I have been looking at the applications received and there seems to be sufficient distance in many of them. We would prefer someone who has not worked for one of our clients. Otherwise, there would have to be an understanding of our dealings with that company.
[Translation]
Senator Massicotte: Obviously, there is always concern as to the independence of the board. Your board comprises five members who are independent, and two who are not. You have an annual meeting for all members. Given that you are funded by some 50 insurance companies, I would imagine the possible influence of these companies to be an issue of concern for your members. In other words, the member companies who fund you, and with whom you meet on occasion, perhaps gain leverage from this situation, unlike the consumers who are not represented in your system, with the exception, of course, of the independent members. But it is not the independent members who are in charge.
[English]
Ms. Algar: We do not consider it leverage because we are independent. We have rules such that if companies do not abide by the established rules we can publish their names, if we so choose.
Senator Moore: One question is in respect of the budget and the other operations. The budget for the board of directors is $189,000. How much is each director paid per annum?
Ms. Algar: As chair, I receive an honorarium of $10,000 and $2,500 for meetings that I chair. The independent directors are paid a $4,000 honorarium.
Mr. Pierre Meyland, Independent Director, Quebec, General Insurance OmbudService: The annual honorarium is $3,000.
Senator Moore: How often do you meet?
Ms. Algar: We meet face-to-face three times per year but we hold teleconference meetings as well because they save time and travel. We are a very cohesive, hard-working board. Not only do they attend board meetings but also committee meetings because of the small number of people involved. The board is quite cohesive.
Senator Moore: With regard to the accessibility for consumers, are these offices open nine-to-five, five days a week?
Ms. Algar: They are essentially open, yes, from nine to five. Of course, the website is always up and consumers can leave messages.
Senator Moore: I am impressed by the number of calls, 8,500. Is there a warm body there receiving these calls, or is it a computerized telephone system? How does it work? You mentioned volunteers and so on.
Ms. Algar: There are some warm bodies. We do not have volunteers; we have part-time staff. There are warm bodies. I can explain the 8,500 —
The Chairman: I think what the senator means is a live voice at the end of the phone call.
Ms. Algar: There is.
Senator Moore: It is frustrating for consumers to get a computerized service.
The Chairman: We are frustrated by our own government telephone lines. Senator Moore is voicing a frustration a consumer must have if he gets a machine, as opposed to a live voice.
Ms. Algar: We do not have a telephone tree. The worst that will happen is that someone is on another line and the consumer will have to wait.
Senator Massicotte: Nine-to-five, which means Vancouver time at two o'clock you are closed?
Ms. Algar: No, they are open nine-to-five, Vancouver time. It is rather interesting planning conference calls.
Senator Massicotte: You said the board meets three times a week?
Ms. Algar: Three times a year and maybe twice a year we will have a conference call.
Senator Massicotte: Do you keep statistics? When you call one of your clients with a complaint, do they respond immediately? Is there a standard or expectation that there is a time to respond?
Ms. Algar: Twenty-four hours, yes.
Senator Massicotte: That is a policy of your members?
Ms. Algar: Yes, it is a policy that they are to respond — no, that is our standard.
Senator Massicotte: To respond to complaints. How about when you call your members to say I have a complaint: What has been the response time and what kind of follow up are you getting?
Ms. Algar: They respond quite promptly. I do not think they are very fond of being in our process. They would rather look after the problem. We feel that there is very good success in getting resolution when we call them.
[Translation]
Senator Plamondon: Before asking my question, I would like to confirm something that I said about the relationship between suppliers and insurance companies; it is the suppliers who give kickbacks to the insurance companies, and not the other way around.
When you reply to the consumers, do you tell them how insurance companies operate, and do you inform them of their rights which at times grant them more protection than is offered by the insurance companies?
[English]
Ms. Algar: We do not know that they get kickbacks. We deal with the consumer. If the consumer is dissatisfied —
[Translation]
Senator Plamondon: That was not my question. I was asking a general question.
[English]
On all the complaints, do you rely on directives from the insurance companies, or do you really inform the consumer about his rights?
Ms. Algar: We inform about rights: The policy says this and if they have bought a replacement policy, they can have like kind and quality. They know that. If they need further explanation we will give that to them.
Senator Plamondon: It is their rights, not only directives from the companies?
Ms. Algar: It is their rights that we are concerned about.
The Chairman: Your annual report goes to April 30, 2004. Page 7 shows an increase in the number of calls from the previous period. Do you have any interim numbers about the increase from April 30, 2004, to the end of the fiscal year last year? Has it gone up, sideways?
Ms. Algar: I do not have facts with me, but I can certainly get them for you.
The Chairman: What is your impression? Has the number of calls or complaints increased?
Ms. Algar: I do not think it has increased significantly, with the exception of Alberta where we have a completely new initiative. There are a great many calls. There were 350 calls there, which I do know, over a three-month period. Only one of them became a GIO case for mediation.
The Chairman: Looking at the statistical information, it is interesting but it is not as pointed as we might like. Let me ask you whether or not you have a breakout internally of the various companies and their responses to your complaints. You will notice that I asked the Ombudsman for Banking Services and Investments yesterday if he would supply us with the practices between the various banks and financial institutions and there was a breakout. It was not in our evidence, but he does have that in his annual returns. Do you have that?
Ms. Algar: Yes.
The Chairman: Can you make that available to us?
Ms. Algar: Yes, we have a breakout of how many mediations we held and how many were settled and how many were not.
The Chairman: Company by company?
Ms. Algar: Company by company, yes.
The Chairman: It would be useful for us to have that. To determine best practices, we have to take a look at some of the detail here to see whether or not the system is working. As you know, you are a secondary step in the consumer process, and the bulk of the solutions lie within the self-regulation of each company. We have to take a look at which companies are doing better than others, why some are doing better than others, and why they are not fully cooperating with you. Am I right that some of the companies are more cooperative than others? I do not want to take your evidence out of context.
Ms. Algar: We find, in general, the companies are cooperative.
The Chairman: We are interested in those that are not cooperative.
Ms. Algar: We push the ones that are not and they end up cooperating too.
The Chairman: If you could give us that, that would be helpful.
Ms. Algar: We will be happy to give you that, senator.
The Chairman: Let me talk about consumer knowledge and consumer confusion. You have heard our evidence from the previous witnesses about the array of choices consumers have once they have a complaint; first to know that there is a process and to find and deal with that process. How will the customer who has a complaint know about your service, other than reference to your website? In other words, the customer goes into their insurance office. Is there information available at the counter there about your services, or is there material in the policies or the contracts? How would a consumer find out about you?
Ms. Algar: At the present time, to my knowledge, the only time they would know about our service through the insurance company is when they have a problem they cannot resolve with the insurance company. In that final letter that the insurance company sends to the consumer setting out their position, they must enclose a reference to GIO and our brochure. The consumer would know then.
The Chairman: They would find out about you only after they have gone through an internal process?
Ms. Algar: That is correct.
The Chairman: If they are frustrated because of a lack of response in the first instance, they would not know about you.
Ms. Algar: Hopefully, they would find us on the website or they would know about CFSON and they would find us that way. You are quite right, awareness is one thing we are very concerned about, and we are trying to work at. We do go out and give speeches and try to deal with media.
The Chairman: Are you on the government website; are you on the Industry Canada website?
Ms. Algar: I am sorry, I do not know. We will have to look at that.
The Chairman: We discovered yesterday there is an Industry Canada website and other ombudservices have been given access to that, so there is a hot link for a complaint there. As you know, consumers are searching around for a remedy and part of the time and frustration is that they do not know where the remedy is, or where the process is. Our job is to make it easier for consumers to be aware of their particular ability to process a consumer complaint.
Ms. Algar: Thank you for that information. We will be in touch with Industry Canada.
The Chairman: Would you also check with your insurance people to see if there are other mechanisms they can put in place to make your services more visible and provide more information to consumers. There are many ways of doing that through small inserts — if you are not satisfied, call a consumer agency and things like that. There are many things that can be done cost-effectively. We are not looking at increasing the cost of the premium by increased regulation. We are looking at a cost-effective means of letting consumers know they have rights.
Ms. Algar: We will certainly do that senator, thank you.
The Chairman: I appreciate your time on this. Could you make some recommendations to us about your process, which has been in place for several years? We are providing an oversight review; the Government of Canada will do an intensive review of the Bank Act next year, so there is a preliminary to that.
In the budget just passed by the House, we are delighted that consumer issues are going to be dealt with by the government in its forthcoming review, including knowledge, notice and all the questions that we have raised. We are delighted that the government is embarking upon that. For those in the public that are interested, they can look at annex 6 to the budget, which is on the government website, and which will indicate the whole raft of consumer issues the government hopes to address, including a number that we have raised. We are delighted that the government is listening to the testimony here, and the concerns of the senators.
My question to you is, if you take a look at that annex and come back to us, would you have recommendations about how you think your service can be improved in the interest not only of the industry you serve, but also the consumers? Do you have anything to tell us about that? Perhaps, since we have not heard from Mr. Meyland, he would like to tell us what he thinks could be improved.
[Translation]
Mr. Meyland Our current mandate is to resolve complaints filed by consumers. I accepted this position because I myself am a consumer. I want to be able to help consumers. My position allows me to help some consumers, but not everybody. Our mandate is perhaps sometimes too limited. A broader mandate would perhaps allow us to help in more areas. Obviously, it is fairly difficult, because I am not familiar with all the different mechanisms. We have already managed to resolve many problems for consumers, and, if possible, we would like to do more.
Senator Massicotte: How would you like to see your mandate broadened?
Mr. Meyland: Let us take Senator Plamondon's example of property insurance. There ought to be a way of helping these people rather than allowing them to be marginalized by a system where one refusal has the knock-on effect of leading to refusals across the board. This is a truly terrible situation which really leaves people in a difficult position. Our mandate is limited; however, I should point out that we are just starting and that we have already accomplished a great deal. We would like to be able to do more.
[English]
The Chairman: Senator Plamondon, did you want to make a brief comment? I noticed you shaking your head in violent agreement.
[Translation]
Senator Plamondon: I completely agree with what the witness just said.
[English]
The Chairman: Can I raise a personal issue? This is a question of automobile repairs. When I look at your list of complaints, there is only one person that has raised the question — or one complaint out of the 3,000 — about auto repair quality and the cost of repairs. I know from personal experience — and other senators have told me this as well — if they go in for a minor dent in their car caused by brushing up against another car and so on, if they decide that they want to deal with it themselves by writing a cheque and not going to insurance, it will be cheaper than seeking restitution from insurers. Is this a complaint that has come to your attention? Is this widespread, the duality between a non-insurance claim, which is cheaper than an insurance claim, which drives up the costs to all insurers?
Ms. Algar: That has not come to us as a complaint. I am not too sure what the complaint that we had on repairs was about because it is a confidential process. As directors, we do not see the individual complaints. Sometimes, if a company refers to a certain garage and it is not satisfactory, then it comes back as a complaint. In most cases, people choose their own garage and they have their battles with their garage. We do not have complaints about —
The Chairman: Inflated costs.
Ms. Algar: No.
The Chairman: I have one final question, and Senator Harb raised this, about taxicab complaints. All senators now use taxicabs coming in, or back and forth from the airport or the train station, and I always get an earful from every cab driver. It is a consumer complaint about insurance — and it is also the same in Toronto. The cab drivers, who are small businessmen, are working arduously to sustain their families. They work 70 to 80 hours a week and one of their largest increases in their fixed costs is insurance. They tell me — and this is anecdotal — that they have been good drivers for 10 or 12 years, and they find out that the cost to the driver beside them who has had three accidents is exactly the same as theirs. Is this a valid issue? It is a huge consumer issue to small businesses that are in the trucking or taxicab business.
Ms. Algar: I do not know because we do not hear from taxicabs about their insurance rates. I know that there are some associations of taxicabs that may have enough members that they can get a rating for the whole membership, but I really do not know the area at all well.
The Chairman: If there are any Ottawa or Toronto taxicab drivers that are listening, I want them to send a complaint to you so they can get it off our table. It is an issue with them, and we have to respond to our constituents as best we can.
Ms. Algar: Thank you very much.
The Chairman: I have a brief bit of business for the committee. Due to the backlog of studies and bills that we will have to contend with, I would ask the committee to allow me to extend the report for charitable giving from March 31 to November 30 so will somebody would move that, and somebody second that?
Senator Oliver: So move.
The Chairman: Seconded. Contrary minded? Thank you very much.
I wish to put senators on notice. This is not a fixed notice, but it concerns two of the roundtables with which we have agreed to deal. I had hoped that we could deal with it in one-day sessions on April 27 and 28, which is a senatorial break. I am not asking senators for concurrence to that but I would like to put you on notice far in advance so we could have two hearings back to back to deal with two of our major roundtables on demographics and productivity. These issues are becoming increasingly important for the government and the country. If there are any objections, because it will be during one of our week breaks, please let me know and we will reorganize our schedule accordingly.
Ladies and gentlemen, we are delighted to continue our study on consumer issues and we are privileged to have before us Mr. Gilles Loiselle who is well known to Parliament Hill. He has a former career as a Parliamentarian, and a Privy Councillor and we are very honoured and privileged to have him come to our committee. He is familiar with the Senate, familiar with Parliament and we look forward to having the benefit of his expertise. Also, we are delighted to have Ms. Barbara Waters, General Manager of Canadian Life and Health Insurance OmbudService, here. Welcome to both of you. We are delighted that you are here.
Let me just tell you the time frames. We hope to terminate this session by one o'clock because we have to be back in the Senate by 1:30. Please take as little time as possible in your opening comments because the senators are familiar with the subject matter, and they would like to get at the heart of some of the information. Mr. Loiselle, please would you commence.
[Translation]
Mr. Gilles Loiselle, P.C., Chair, Canadian Life and Health Insurance OmbudService: Honourable senators, I am delighted to be appearing before this committee, a committee with which I was in very close contact in one of my past lives. I have even introduced important bills on financial services to this committee. I have not forgotten the important work that we accomplished together at that time.
I would like to thank you for having given me the opportunity to introduce you to the Canadian Life and Health Insurance OmbudService and explain its role in your very important study of consumer services in the financial sector.
[English]
I am the Chairman of the Canadian Life and Health Insurance OmbudService and Ms. Barbara Waters, General Manager is with me. I am pleased to note that the witness you just heard is a member of our board, and we were unfortunate when Senator Plamondon left us to join the Senate.
The Chairman: We did not know about that.
Mr. Loiselle: She left us and we hope we might capture her back. You have before you a submission that was sent to you last week. I do not think I need to go through all the details that are in my presentation. The Canadian Life and Health Insurance OmbudService is a non-profit organization governed by a board of directors independent of the industry. It exists to help consumers resolve complaints about life insurance and health insurance products and services. These products include life insurance, annuities, RRSPs, disability insurance and supplementary health plans. Basically, our submission to you is guided by your mandate. I think you have looked through it, so I do not need to repeat that again. I would rather go to your questions as quickly will as possible. The matter of governance, and our role we have covered.
I have heard questions to the prior witness that concerned me a little. The committee needs to understand what an ombudservice is, and what it is not. It is a crucial, important and essential element of the financial service industry. It is fed by the consumers who come to us with their problems. We do not go out and study problems. There are a lot of issues that do not come to us, and you have rightfully raised some of them this morning. They have to be dealt with somewhere, but in our particular case, our centre of attention is the consumer. We are geared towards helping when somebody has a problem with a company. We are always receiving them. We comfort them in the definition of the problem, because sometimes they do not know exactly what is wrong. We do this before we send them on to the company and we tell them where and we tell them to come back to us to report if they meet a problem along the way. I would prefer to let you proceed with your questions because that is more important than listening to me.
The Chairman: Senator Plamondon, who has no conflict of interest, is anxious to revisit her former colleagues. Perhaps her knowledge and information would be useful not only to your group, Mr. Loiselle, but also to the committee.
Senator Plamondon: My only involvement is as a consumer.
[Translation]
I would like to know how you deal with complaints. Initial complaints are often filed because life insurance contracts are not clear. Furthermore, one insurance company representative told me that no one other than widows know the content of a life insurance contract. Widows find out what a contract stated upon receiving a payout. This is information which was given to me by somebody who sold insurance.
When somebody takes out life insurance, he or she has to fill out a form. The form makes reference to what are termed ``pre-existing'' conditions, and, if somebody states that they do have such a condition, he will have to fill in a more in-depth questionnaire. People are often not told straightaway that they are not eligible for an insurance policy. It is only when they die that it is revealed that there was a pre-existing condition, and that they are not insured because they omitted to say something. If a contract is intelligible, people would be able to know whether they were covered at the time they sign up, and not when they die. This is something which I have seen many times during the dozens of years that I have been helping consumers. Sometimes, people find it difficult to understand the questions.
The Canadian Life and Health Insurance Association has issued guidelines on the clarity of contracts. Is the CLHIA checking whether its members respect these directives? In other words, do you believe all contracts to be clear? What action is the CLHIA taking against members who do not respect the guidelines? Clear contracts would help you to better define the validity of a complaint. It would be easier if contracts were written clearly.
My second question is on pre-existing conditions. How many complaints do you receive regarding pre-existing conditions?
Mr. Loiselle: I am going to ask Ms. Waters to answer your second question.
As for the rest of your comments, I fully understand your concern, because these are very real problems. However, I do not think that it is up to ombudservices to regulate contracts or relationships between companies. When a consumer contacts us, we endeavour to solve the problem to his satisfaction. If a particular problem is not drawn to our attention, we do not know that it exists.
When we meet with industry associations, and in particular with the CLHIA, we inform them of problems which we have encountered. In general, we do not have access to the legal tools which would be required to change the way in which insurance companies operate. Unfortunately, change is required, and it will probably be carried out by regulatory authorities or in conjunction with the CLHIA. They are the ones who are responsible for such problems.
Senator Plamondon: Section 1436 of the Civil Code of Quebec states that where a clause is incomprehensible to a ``reasonable'' person, he can ask that it be declared null if he does not understand it. He can go to court. I do not know if it is the same in the rest of Canada. You are there to inform people of their options. You cannot force insurance companies to write clear contracts, but you can inform consumers of their options when a contract is not clear.
Mr. Loiselle: You are quite right. We receive all the requests and we try to understand them and help customers find them. They can certainly bring to our attention any incomprehensible clause, in which case we will try to deal with the company to resolve this particular problem and not the general problem.
[English]
Barbara Waters, General Manager, Canadian Life and Health Insurance OmbudService: Senator, with regard to your second question pertaining to the denial of claims for pre-existing conditions, we routinely run into and deal with that because it is extremely common. It is more commonly found under travel insurance claims than under life insurance claims, perhaps because of the way in which the product is sold. Many travel insurance policies are sold over the telephone and include a quick self-response to the questionnaire. Certainly, most of the claim denials that we have received are in travel insurance, where 40 per cent are declined by the company because of a pre-existing exclusion. We routinely deal with those, and we have had some successes as well.
Senator Plamondon: Tell me about the successes and the failures.
Ms. Waters: I will give you a glaring example of a failure, and I am not making a judgment. We were open for about one week when we received our first complaint on that issue. We started to explore because that is our business, to ascertain the facts. That is the first thing we do. We take it upon ourselves to explore, and do not leave it up to the consumer to give us all the information. We ask them to provide all they can, and we take it from there. We uncover to find the facts. In that case, we discovered during the course of our review that the individual had declared a misstatement of his health in many aspects, deliberately so, through alcoholism and drug abuse. He had failed to disclose that. Interestingly enough when we talked to the consumer, he eventually dropped the claim and did not wish to pursue it. He argued that the insurance company had an obligation to investigate him and should not have accepted his word on a self-reported statement of facts. That is something we deal with. It was very clear in that extreme example that we would not be able to have a successful outcome by payment of a claim. However, we were able to help that consumer understand his responsibility and why the claim had not been paid; and he chose not to pursue the matter.
The successes have not been an issue of late. I would say that during our first year of operation we routinely dealt with these kinds of issues. For example, going back to travel insurance, the industry practice is full disclosure, which means disclosure not only over the telephone but also in a written certificate of the terms and conditions of the coverage, to be read and understood by the consumer. We have found in some instances that it did not occur and it was all done by telephone. In those cases misunderstandings occurred that we were able to resolve.
[Translation]
Senator Massicotte: Mr. Loiselle, you were very clear at the beginning when you explained that the role of your office was to respond to complaints. I wonder if your mandate should not be broadened. You could be aware of something being done that is improper. Suppose that commissions were paid, but no one was really aware of it and consumers were not complaining, but you are a knowledgeable observer and perhaps you find out about it. If I understand correctly, you do not see that as being your responsibility. In other words, even if you knew this was improper, it would not be up to you to take action?
Mr. Loiselle: If the problem is brought to our attention by a consumer, we go from there. We agree to discuss it and work through the whole process with the consumer. We can go to the company and try to get the problem resolved and speak out against the practice.
But it is an individual case and the fact is that we have had no complaints over the past three years at the CLHIO — and I used to be with the Consumer Assistance Centre. We never had a consumer raise a regulatory problem.
Consumers always come with a personal problem, often not very specific, that they express in their own words. We first have to help them understand the situation properly, and they often realize that there is no real problem.
Then we continue to work with them to better define the problem. We tell them that the first step is to call this person at this number and call us back if they are not satisfied with the answer. The company is required by law to belong to an independent organization such as ours and it is also required to inform consumers that this recourse is available to them.
In our case, we take great care to tell consumers if there are legal avenues that they can pursue. We tell them to be careful that there is a certain period of time within which to take legal action. Our system is less structured than legal proceedings are, but it is better in some ways, in my opinion. If you tell consumers to take the company to court, they will hesitate because it costs a lot of money to do so. Second, going up against a company that has a lot of legal resources is difficult. It is a bit unrealistic.
In our case, we use informal conciliation. Over the years, we have developed excellent relations with the ombudsman. If our dealings with the insurance company do not produce satisfaction, we have access to the CEO and we can tell him that his service is not working and it takes too long. There really is not any problem. We find a solution that we feel is satisfactory, not necessarily easy to accept for a consumer who would like 45 per cent coverage instead of 35 per cent, but we try to negotiate and find common ground. Generally speaking, people who go through the process feel that they have been treated decently. I feel that it is absolutely crucial that this be protected as an organization.
Mr. Chairman, you mentioned earlier that consumers can feel lost because there is so much choice out there. It may not be a bad thing to have such a lot of choice because the documents can always be made public, and I know this because I used to be Director General of Communications for the Quebec government when Mr. Bourassa was premier.
We published a lot of things on that subject. But a wife does not necessarily read her husband's will until after he dies. At that point the document may have been thrown away or lost. The important thing is that if he had insurance she will go to the insurance company. She has to refer the issue to us. She will go to someone in another sector. And it is a good thing that she has all these avenues, because we need to encourage access so that people can end up with some answers in cases where there is any doubt. Having a single telephone number to call is fine as well, but we must not eliminate the various avenues that already exist and that are a great help to consumers.
Senator Massicotte: I understand, but is your mandate not too limited? After all, consumers are not well informed in many cases. For example, commissions and incentives have often been paid and then this comes to light. Consumers are unaware of the problem because they are not well informed. Do you not see a responsibility there? Do you still feel that the mandate is appropriate as it is?
You may be better informed than consumers and perhaps you should be given a broader mandate and be told that consumers are not properly protected. I know that your members might not welcome a broader mandate, but there you are.
Mr. Loiselle: You are absolutely right in saying this problem needs to be taken into account, but I wonder if we are the right entity to do that. We do have good relations with the insurance companies, but we are not afraid to put pressure on them either. We really are completely independent. But if we end up being a regulatory body, every time that we deal with an insurance company, it will get its legal counsel involved and consumers will be the losers. So we need to maintain this as an informal conciliation service.
This system has its weaknesses, I admit, but it is a tool. There are other tools missing because there are other problems. And the regulatory authorities have considerable resources that are studying all these problems. There are contracts signed but not complied with. But we cannot start policing both systems, or we would risk destroying the specific, crucial, important but very restricted mandate we have as an informal conciliation service.
Senator Massicotte: Concerning the difficulties that have arisen in the United States, the newspapers have said that life insurance companies check the websites visited by people applying for insurance and if they have frequently visited sites about cancer — thus demonstrating a particular interest in that subject — they are turned down. I have been told that it is not clear whether insurance companies in Canada are using that method. Do you know whether that is done in Canada?
Mr. Loiselle: Not particularly. The information that I have as chairman comes from consumers. And I have not had any complaints or questions about that.
That does not mean that there are no problems. I agree with you wholeheartedly. But there are other avenues to deal with that. If we mix the two, we might destroy the effectiveness of a service that has to count on the fact that the insurance company's ombudsman is trying to find a solution. If we tell him that he has to do things right or we will get the regulatory authority involved, he will call his legal counsel and we go nowhere for six months.
We want to try to regulate statistics; for example, disability insurance is a very complex area. The doctor sometimes has to be contacted, and that may take a month. We have to inform consumers of the steps that we are taking, and they are glad when the process is completed. But if we say that the answer has to be given within 24 hours, we will have to tell consumers that the process is not working and that we have no solution to offer. That is the difference.
So we need to be flexible enough to enable the service to work effectively and grease the wheels so that consumers are well served. There will still be a lot of external problems such as the ones you have raised, of course.
Senator Massicotte: Do you have standards for best practices? For example, a certain type of call will be referred to the companies, but are there standards that consumers can count on, and if not, does a bell ring when the time is up?
[English]
Ms. Waters: We do all have voice-mail, but we try not to use that as much as possible. I would say 99 per cent of our calls are answered by a person. That is what our board wants and that is what our consumers want as well. We have no telephone trees. You get a real person and you are transferred immediately to speak with someone who can listen and talk to that consumer. If that is not possible and all the counsellors are engaged, that call will be returned usually within two hours and occasionally within one day but never longer.
[Translation]
Senator Massicotte: What I am particularly interested in are the companies. If you receive a complaint and you do send it to the ombudsman and it comes back to you, is there a formal agreement with the members stating that, for example, a response must be sent within 38 hours or seven days and that the process must be completed within a month? Or else an official report will be issued?
[English]
Ms. Waters: We have very good cooperation with the companies. First, we do not deal with what you might call their front-end. We have senior contacts within every company. Even if a consumer has been lost in the customer service area, we will try to assist them. Perhaps that is where they need to be. Depending on the issue in question, we get back to the company and they respond to us and act on it immediately. We have never had a real problem.
[Translation]
Senator Massicotte: If there is a disagreement or the position is less palatable, is there something more formal that happens after the four-week period has expired?
For example, is a report issued in cases where the consumer is not satisfied?
[English]
Ms. Waters: Our process includes immediate discussion and review by our counsellors at the front end. They assist and may contact the company on the consumer's behalf if the consumer is incapable of, or uncomfortable with, doing so. If that is unsuccessful, we do not necessarily take the company-first approach. Rather, we will contact that company for the consumer. If that is unsuccessful and the consumer wants to pursue the matter, then we proceed to obtain their personal information file. First, we obtain their written consent to that effect and we provide them with material containing cautionary advice about legal limitation periods and so on. Once we have the material that we need, we engage in informal conciliation with the company. That has proven to be very successful for us.
If that is not successful, we have the capacity to take it to our final step in our process: the issuance of a report with non-binding recommendations. Very few complaints go that far. We are still relatively new but it has been our experience that companies are resolving the matter. They do not want to take it through the entire process. Most are resolved at the outset.
[Translation]
Senator Massicotte: Is the report public? What incentive is there for companies to resolve problems even before the final report is issued?
[English]
Ms. Waters: The motivation of companies, it seems, is that they do not want to take a chance on what that report might contain. It is an impartial process. If, at the final phase of the process, the consumer wants to pursue it, a retired judge we have retained will review the matter. If the company still chooses not to resolve the claim, then a report will be issued with non-binding recommendations. Then, if the company does not implement the recommendation, that fact will be made public at that time. We have not had that happen.
[Translation]
Senator Massicotte: Is there a time limit to get to the report stage?
[English]
Ms. Waters: That is a good question. We have had only one instance when we realized that we had to provide a time limit. In fact, that has not been developed because most companies provide an immediate resolution. We had one instance when the company was slow to respond. We chased the company for a response and it came back within about six weeks with an offer for the consumer that all were happy with.
[Translation]
Senator Massicotte: It took six weeks to respond? I do not understand.
[English]
Ms. Waters: We issued a report with a non-binding recommendation. That report went to the company and to the consumer. The company took six weeks, in one instance, to implement the recommendation.
The Chairman: I have a brief supplemental. Does that report go to the president of the company or to their internal ombudservice only?
Ms. Waters: Mr. Chairman, it goes to the senior individual at the company with whom we have been dealing. However, there has been discussion about sending it to the president of the company as well for his or her awareness.
The Chairman: In the new era of Sarbanes-Oxley, they should know everything that is going on in their company.
[Translation]
Senator Massicotte: Six weeks is a long time, especially after a series of other steps, is it not?
Mr. Loiselle: Most complaints dealing with disability insurance are very complex and require a lot of outside calls. For consumers, the important thing is to be able to put pressure on the company, but above all they want the company to come to a favourable conclusion.
We are not there to attack insurance companies: we have to give them time to react. We always hope that a settlement can be reached in line with our recommendations and that is what companies always do. I do not believe that there is really any problem there.
Consumers' issues must be dealt with quickly, of course, but the final outcome may be negative, so we prefer to take a bit slower and more effective approach when necessary.
Senator Massicotte: Your annual report contains a table showing where the complaints originate. It is interesting that 62 per cent of the complaints come from Ontario and 12 per cent from Quebec.
Mr. Loiselle: Yes. Before the CLHIO, there was an organization called the CAC that dealt with complaints. The CAC no longer exists and was replaced by us. Now 40 per cent of the complaints come from Ontario and 39.2 per cent from Quebec.
Senator Massicotte: You say that 39.2 per cent of the complaints come from Quebec. Why?
Mr. Loiselle: Because the complaints used to be dealt with by the other organization. That is why there were a lot of things that we never heard about.
Senator Massicotte: Why do 39.2 per cent of the complaints come from Quebec? People will say that Quebecers are complainers.
Mr. Loiselle: There are various factors and the situation changes from year to year. Everyone likes to complain, but sometimes there is a good reason.
[English]
Senator Kelleher: I have a few simple questions. How often does your board meet?
Mr. Loiselle: It meets roughly each quarter and we have telephone conferences as needed.
Senator Kelleher: Your organization is independent and I accept that. How do you choose a replacement? I assume that at your annual meeting there are seven people present. What is the process?
Mr. Loiselle: The independent directors have the privilege of forming a nominating committee to select a replacement. That has occurred once. A member, for health reasons, had to resign and that was the procedure. The independent members make the selection. We seek suggestions from all areas and from just about all regions. We replace regionally so that we have a balanced representation. For example, currently we do not have a member from western Canada but we are working actively to recruit one. Over the next few days we should be able to complete the process.
Senator Oliver: Mr. Loiselle, we are fortunate to have someone with your background and experience to provide the committee with testimony. You used to be a public policy-maker and now you are in the ombudservice business. I have a philosophical question. Having been in the ombudservice business, which is looking after the complaints and concerns of Canadians and policyholders in the insurance business, do you feel that the ombudservice business is the right way to resolve these complaints? As a public policy-maker, is there a better and more efficient way for Canadians to have their concerns about the industry dealt with? Is the industry effective?
Mr. Loiselle: I think the ombudservice is working surprisingly well. We do not have many complaints or many difficult issues. We are prepared to deal with more should they arise. The ombudservice is extremely precious for the consumers. I will again stress the importance of protecting it as an informal ombudservice. I am also aware that there are many difficult issues that need to be looked at. I think that is the role of the government and the department to do that with the regulators. They are aware; they are specialists in these areas. They know all about contract-making, about funny games that may occur behind the curtains and things like that. They know them much better than I do. Their role is precisely to ensure that the consumer is protected.
Philosophically, I understand that there are dishonest people so it is very difficult to deal with them. The rules have to be continuously improved. We may start hiring lawyers but it will throw us off our path, which I think is one fundamental element of the solution but it is not the only one. There are many other ways with the companies, the association, laws and regulations. If we are thrown off, we become too much part of the game. We lose our capacity to deal in an open and calm way without saying we will go to the courts. It does not preclude going to the courts and doing harsher things but it is not for us to do that.
Senator Oliver: Given the mandate, you feel that the ombudservice as presently constituted, does give protection to consumers, Canadians and policyholders?
Mr. Loiselle: Yes, to the consumers who feel they have a problem; they have an access that is free and easy, French and English, across the country. Consumers will be sure to meet somebody who will be extremely attentive, which is something you do not find everywhere, who will accompany them in defining their problem and to get a solution. If need be, we will intervene to try to get a balanced approach and sort it out in a reasonable way. It works. It does not mean that there are not things that are left out somewhere else, but this area of CFSON and the ombudservices have to be protected in my view.
[Translation]
Senator Plamondon: I would like to talk about another problem that you have certainly had complaints about: the substitution of insurance policies. We know that life insurance representatives receive a so-called ``high-low'' commission most of the time. The commission for the first year is high and may be as much as 100 per cent of the premium. When the policy is replaced, the person doing the substitution has to do a comparative analysis to prove that the consumer will be getting a better deal than before. But the consumer does not realize that clauses concerning suicide, ``insurability'' and incontestability are being lost. Have you had complaints about replacement policies?
I know how you process these complaints, but it might be good to explain to the committee your whole network for referring complaints to the proper authorities in such cases.
[English]
Ms. Waters: Yes, we have not had that many, surprisingly but we have had some, and every one is important. I do not care if we have lots; it just means it is the flavour of the week. The fact is that we have had some issues on that subject. For instance, most of those will end up in informal conciliation because of the seriousness of the complaint. As an example of how we would deal with it, the first thing we try to ask the consumer not to write to us unless it is necessary. A situation like that would be necessary because we need to see what the consumer was given and what their understanding was. There will be an interview. Even if the consumer is represented by someone, we would like to speak directly with the consumer so that we can have an understanding of what they were told and the discussions, aside from the paperwork. We examine the paperwork and then our officer will go back to the company and get the same material from the company. Then they start with the informal conciliation exercise. Some can be very difficult. It is difficult sometimes in retrospect to go back and have a good understanding of who said what to whom. In fact, we are usually able to get a good feel for that. Our main objective is to determine, the best we can, what happened, what was the consumer's understanding and was the replacement in their best interest? That would probably be our number one question to determine where we go from there.
[Translation]
Senator Plamondon: I would like to make a comment on that. Consumers often feel that they have a very good insurance agent and that their insurance policy has been replaced three times in five years. But what they do not know is that they are losing benefits each time and the insurance agent receives a fat commission each time. The consumer is always the loser if the agent cannot prove that the policy change was in the consumer's best interest. It is relevant to wonder if the needs were evaluated properly the first time around before the policy was changed.
[English]
The Chairman: That is an important question. What you are saying is the consumer is unaware of a reduction in benefits. Is there an obligation from a consumer standpoint, if I can phrase it in other terms, for the company to inform the consumer of the change, the reductions in the benefits? Is there an obligation for the company to do that if the premium remains the same or higher? Is that your question in a nutshell?
[Translation]
Senator Plamondon: I would like to add something to your answer, since I know that if consumers can complain to them, they will then be referred to the regulatory authority to make the complaint. The ombudsman service is in a position to refer the complaint to the right place as well as to informal mediation.
Mr. Loiselle: The senator has answered the overall question. Yes, if the problem arose, we would try to work through our system and get it to the right place. We are working with our CFSON colleagues and other ombudsmen services to try to better define the work of agents, who are the intermediaries. That is a problem; the companies have a structure and we have a recourse and know where to go.
The intermediaries in the insurance sector tend to be more scattered, with groups that are less static. We are trying to set things up so that practices will be much more consistent. We are dealing with that as we find time.
[English]
Ms. Waters: Using the example you provided, if our review indicated that there had been three replacements in a short period of time, we would advise the company of that. We would also suggest that they review that particular agent's actions and, if necessary, go up to the regulator. By the way, we may also do a mutual review along with the regulator. There is nothing to stop us from doing our own review along with the regulator.
The Chairman: Could you turn to the statistical complaints on page six of the study you submitted to us? Let me see if I have this correct. Since your inception in 2002, the total number of complaints you have received is 2,762. Is that correct? That is to January 31, 2005?
Ms. Waters: Yes, it is.
The Chairman: What percentage of Canadian are also covered by life insurance or disability insurance? It is an overwhelming number, I know.
Ms. Waters: I am sure it is. We do not gather that type of statistical information. The association would probably have it.
The Chairman: My point is that based on anecdotal evidence, you will agree that Canadians are insurance conscious?
Ms. Waters: Yes.
The Chairman: Life-insurance conscious. My own late father-in-law was in the insurance business and so I understand this. I am also concerned about disability insurance.
As Canadians, we are preoccupied with insurance — medical insurance, disability insurance, auto insurance and certainly life and term insurance. We are insurance obsessed. I assume from that we will get those numbers. They are available because a large proportion of Canadians are covered by some type of insurance.
Having said that, why are there such a small number of complaints over a three-year period? It is less than one-tenth of one-tenth of one-tenth of 1 per cent.
Mr. Loiselle: You are right, except most of the problems — and we should be happy about this — are solved before they come to us.
The Chairman: We would have to then find out from the insurance companies what the total number of complaints is. These are not the total complaints; these are complaints that you get after the process.
Mr. Loiselle: You are right.
The Chairman: It is not a fair analysis, therefore, to take a look at your number; we have to look at the total number.
Mr. Loiselle: Exactly.
The Chairman: I will go to the next question that impinges upon that, and we have talked to other witnesses about this; that is the knowledge of the consumer about the complaint process. Is there any way that we can expand the awareness of the consumer? Again, every senator here feels, based on their questions, that the knowledge of the consumer is limited in terms of your services and this process that is available. Is there any way that we can improve the process by making the consumer more aware of your services?
Mr. Loiselle: We have to keep working at it. We are trying to identify all the groups or organizations that come in contact with consumers, so they are made aware. We try to advertise as much as we can.
The Chairman: For instance, when somebody gets a policy, do they get a piece of information in their policy about their services if they are not satisfied?
Mr. Loiselle: It would be helpful, but having been involved in this kind of operation at the sales level for a government trying to tell people, we find out that whenever they need it, it is not there anymore. Whenever there is a process, it is better to have some information sent to them at the time of the process. I am not against having —
The Chairman: We are concerned this is an issue that is emerging, about lack of knowledge and confusion. If you have any recommendations to make to us, we would be very interested in how to expand the knowledge of the consumer as it applies to your sector.
Mr. Loiselle: I do not think we should underestimate the capacity of Canadians to fight for their rights.
The Chairman: Canadians are rights-obsessed, we know that.
Mr. Loiselle: That is why we must not close the various doors of access. If somebody has a problem with insurance, that person will call the insurance company and the insurance company has to tell the consumer that we exist, or the consumer will call us because that person sees us as an organization that supervises. If the consumer has a problem and does not know where to go, there is central number. The consumer can use all the doors.
The Chairman: I understand that. Are you hard-lined to the Industry Canada website?
Mr. Loiselle: We are on the Industry Canada website.
The Chairman: The other thing about your information, and I do not know if you have this internally, is best practices between various companies. We take a look at the numbers. Can you give us an outline of which companies have had more complaints than other companies as a percentage? It would be very useful for us. We have it from the banking ombudsman, we have asked it from the General Insurance OmbudService; it would be interesting if you have it internally — the number of companies. Thermust be some companies that are treating their complaints better than others. We would like to know which ones they are to give us some insight as to actual best practices.
Mr. Loiselle: I think we can provide that. However, that is a bit tricky because some companies deal with certain types of products where there are few complaints but others deal with products where there are many.
The Chairman: Put all the asterisks beside that. We do not want to distort the information, because there are statistics and lies. We want them to be statistics and not lies.
Is there anything else you would like to recommend to the committee about how you might improve your process?
Mr. Loiselle: I will say one thing. I am very pleased that the Senate committee has decided to look into that, because there are problems out there that have to be dealt with. I am glad that you have given us a chance to explain what we are about, and that you feel somehow we should pick up all these problems. I would like to do that but I do not think it would be valid. However, there are other ways that have to be explored, and they should be explored.
The Chairman: We are here to do that. If you have anything else to suggest to us after some reflection, please do so. Thank you for your attendance.
Mr. Loiselle: Thank you, Mr. Chairman.
The committee adjourned.