Provincial government altered insurance regulations at the heart of a legal battle

Provincial government altered insurance regulations at the heart of a legal battle | Insurance Business

Provincial government altered insurance regulations at the heart of a legal battle

An ongoing court battle has brought insurance regulations in Saskatchewan to the forefront, as the provincial government has acknowledged amending regulations to fight against misuse by investors of certain life insurance policies, as reported by the Saskatoon StarPhoenix.

Manulife, which is one of the companies involved in the current case, lobbied the premier and two cabinet ministers at the same time that the government introduced new regulations on which the dispute now hangs. This lobbying effort, as well as the regulations, were front and centre at a hearing that took place last week.

“Why are they running off to the government?” Gordon Kuski, the lawyer representing an investor, said in court, while suggesting that Manulife was asking the Saskatchewan government to determine a winner and a loser. While he acknowledged that there are no inherent issues with lobbying, Kuski added that Manulife “put its best arguments forward at trial last September,” according to the news report, before asking the government to change the regulations.

At the heart of the court case is the question of whether a collection of investors should be able to direct unlimited money into universal life insurance policies, with some purchased in Saskatchewan, and then collect a guaranteed minimum interest rate. On one side, investors claim that the contract terms allow them to do this, but the three firms involved argue that the policies were not intended for this use and could lead to their bankruptcy.

Read more: Dominion Lending Centres hit with $800 million claim over insurance

The three-day hearing concluded on February 14, but Justice Brian Scherman has so far reserved judgment.

In an emailed statement to the StarPhoenix, the Financial and Consumer Affairs Authority (FCAA) said it could not comment on questions about the ongoing litigation, but added that, generally speaking, the potential misuse of policies by investors who wanted to treat them as bank accounts came to the government’s attention late last year “from a number of sources.”

“For the safety of policyholders, we amended the (regulations) to clarify the conditions under which an insurer may accept funds … in relation to certain life insurance polices by setting a cap on the amount of money an insurer may accept for payment of a life insurance policy and its associated side account,” said a FCAA spokesperson.

The recent hearing focused on arguments around whether the new regulations can be applied retroactively to the policies under the microscope, with investors stating they cannot, while the companies argued that they can.

Saskatchewan’s lobbyist registry reveals that Manulife lobbied Premier Scott Moe, Justice Minister and Attorney General Don Morgan, who is also responsible for the FCAA, along with Trade and Export Development Minister Jeremy Harrison. Manulife approached these individuals “to discuss regulations under the Insurance Act and the new Insurance Act,” though the company did not offer up details about its lobbying activities, such as its exact requests from the government and the dates that the lobbying took place.

“As a company in a highly regulated industry, we seek open and transparent dialogue with government and regulatory officials on matters of policy relevant to our business,” Manulife spokesman Wojtek Dabrowski said in an emailed statement to the StarPhoenix.

“We value the opportunity to provide context, answer questions, and advocate for the industry. Our communications comply fully with all applicable laws and regulations, as well as our code of business conduct and ethics, and are reported and disclosed appropriately. At the same time, these are non-public conversations, and we do not comment on their content.”

Current provincial regulations state that corporate executives can lobby elected officials and civil servants for as many as 100 hours per year before they have to register and disclose their activities, and third-party lobbyists have to register and report on their activities right away. Industrial Alliance Financial Group and the Bank of Montreal, the two other firms involved in the case, said that they didn’t lobby the government about the insurance regulations.