Evidence of meeting #59 for Finance in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was change.
A recording is available from Parliament.
8 p.m.
Conservative
The Chair Conservative James Rajotte
Okay, thank you for that presentation.
Members' questions.
We'll start with Ms. Nash.
8 p.m.
NDP
Peggy Nash NDP Parkdale—High Park, ON
In our background information from the Library of Parliament, it indicates that in December 2011 the Minister of Finance said there would be a grandfathering of existing life-annuity-like products.
Can you just describe for us why the grandfathering is taking place, and why there wouldn't be a phasing out of that, just to help us understand it a bit better?
8 p.m.
Director, Financial Institutions Division, Financial Sector Policy Branch, Department of Finance
The decision was that the current product holder should have discussions. The decision about the current product should be a discussion between the product holders and their financial institutions or the banks. The terms and conditions of their contracts may determine how those products would be wound up or whether those products would continue to survive, so there was a decision that this change would not be retroactive.
8 p.m.
NDP
Peggy Nash NDP Parkdale—High Park, ON
Okay.
Maybe just for my benefit, because I don't have any life-annuity-like products, can you describe what they are and what differentiates them from regular annuities?
8 p.m.
Director, Financial Institutions Division, Financial Sector Policy Branch, Department of Finance
Just to clarify, you're asking me the difference between an annuity-like product and an annuity?
8 p.m.
Director, Financial Institutions Division, Financial Sector Policy Branch, Department of Finance
Okay. Life annuities have been offered by life insurance companies for many years, and some banks were interested in trying to create a product that would, to some degree, offer the same sort of protection or insurance to a consumer. But understanding that there was the existing prohibition in the Bank Act, the banks attempted to come close, but not to cross the line. The view was that it was not consistent with the spirit of the legislation, so the decision was made to provide this clarification in law.
8 p.m.
NDP
Peggy Nash NDP Parkdale—High Park, ON
Okay. If the prohibition was already in place, how do the amendments change that?
8 p.m.
Director, Financial Institutions Division, Financial Sector Policy Branch, Department of Finance
You will see that the actual changes are fairly technical. They change merely the wording in the existing sections. From a legal perspective, it captures a slightly broader construct than the original wording. The liability in respect of the annuity is contingent upon the death of a person. That is the concept we were trying to capture. In other words, we wanted to be clear that banks could not offer a product that is contingent upon the death of the consumer.
8:05 p.m.
NDP
Peggy Nash NDP Parkdale—High Park, ON
So they were prohibited, and this is saying they're really prohibited.
8:05 p.m.
Director, Financial Institutions Division, Financial Sector Policy Branch, Department of Finance
Really, really.
8:05 p.m.
NDP
Peggy Nash NDP Parkdale—High Park, ON
Okay, thanks.
In answer to my question, you said that there are some products that will be grandfathered, these life-annuity-like products. Can you give us a sense of how many of these have been issued by financial institutions and how many would be grandfathered under this provision from December 2011?
8:05 p.m.
Director, Financial Institutions Division, Financial Sector Policy Branch, Department of Finance
I don't have a fixed number, but in discussions with financial institutions I understand that the number is quite small.
8:05 p.m.
NDP
Peggy Nash NDP Parkdale—High Park, ON
On my bank's website, whenever I bank online, the bank is trying to sell me insurance. Are you saying that will no longer be permitted?
8:05 p.m.
Director, Financial Institutions Division, Financial Sector Policy Branch, Department of Finance
That was already controlled by the existing wording of the legislation. Banks are allowed to promote and sell certain types of insurance, but for life insurance and health insurance, they are prohibited from selling them through a banking branch, or from promoting and selling them on their websites.
8:05 p.m.
Conservative
8:05 p.m.
Liberal
Scott Brison Liberal Kings—Hants, NS
For life-annuity-like products, what are some of the examples, not of life annuities, but of life-annuity-like products?
8:05 p.m.
Director, Financial Institutions Division, Financial Sector Policy Branch, Department of Finance
There was only one institution that was offering a product that was in this category.
8:05 p.m.
Director, Financial Institutions Division, Financial Sector Policy Branch, Department of Finance
I'm not sure that I'm at liberty to say.
8:05 p.m.
Liberal
Scott Brison Liberal Kings—Hants, NS
Perhaps you could describe the actual product. Pretend you're selling me what it was trying to sell to other people.
8:05 p.m.
Director, Financial Institutions Division, Financial Sector Policy Branch, Department of Finance
The characteristic of the product is that it is a product that was designed to provide a stream of income.
8:05 p.m.
Director, Financial Institutions Division, Financial Sector Policy Branch, Department of Finance
It was designed to be contingent upon the death of the purchaser. It was a stream of income that had some characteristic that triggered at death.