Finance Committee on Sept. 29th, 2011

[Normand Lafrenière, President, Canadian Association of Mutual Insurance Companies]

On behalf of the Canadian Association of Mutual Insurance Companies, I would like to thank this committee for allowing us to present our pre-budget submission.

The main purpose of CAMIC's submission is to talk about demutualization. For the first time in recent history, a property and casualty mutual insurance company has announced its intention to demutualize. This could have a significant impact on the whole mutual insurance industry, which CAMIC doesn't want to see happen.

CAMIC represents 91 Canadian-owned property and casualty mutual insurers, a sizable portion of the 106 mutual insurers operating in Canada. In turn, these 106 mutual insurers represent a third of the 316 property and casualty insurers competing in the Canadian market. In 2010 CAMIC members served 5.1 million policyholders, employed directly and indirectly in excess of 15,000 people, and underwrote $4.9 billion in premiums or 12% of the non-government Canadian market.

Consistent with their democratic values, mutual insurers provide their members with a right to vote at the annual and special meetings of members.

Policy holders elect the board of directors of their company, approve its by-laws and its financial statement, and determine the company's orientation.

Most mutual insurers were formed by farmers between 100 and 170 years ago. At that time, it was difficult for them to find insurance or to find insurance at a reasonable cost. To obtain the insurance they needed, farmers formed mutual insurance companies that were based on a commitment by each participant, called a member, to insure each other against named perils. The objective of the mutual insurer was then, and still is, to provide tailored insurance products needed by the members at the best cost possible.

Each year, as the case may be, the board of directors decides to allocate the profits generated in that year by the insurer to the surplus of the company, or to provide policy rebates to policy holders, or to use the money for social goals. The surplus of mutual insurers is the annual accumulation of the allocations of profits to the surplus fund of the company. That was done over four to six generations.

As may be expected, those companies that successfully built large surpluses over the last four to six generations become vulnerable to demutualization attempts for the purpose of generating personal windfall revenues.

You may recall that, some 11 to 12 years ago, a number of life insurance companies indicated their intention to demutualize to become stock companies traded on the stock market. In response, the government of the day amended the Insurance Companies Act to allow the demutualization of mutual insurance companies, and the Minister of Finance implemented regulations on the details of how the demutualization of an insurance company could occur.

Shortly thereafter, the market share held by mutual insurance companies went from 50% to less than 5%.

In December 2010, the Economical Mutual Insurance Company, a federally supervised mutual insurer, announced its intention to demutualize and transform into a stock company. However, while the company has over a million global insurance policy holders, it allowed fewer than a thousand of them to vote.

In response to Economical Mutual's request, the Minister of Finance announced in the June 2011 budget his intention to develop regulations for the demutualization of property and casualty insurance companies. In July 2011, the Department of Finance held consultations on the issue of demutualization. CAMIC participated in those consultations. However, we would like the finance committee of the House to express its support for the position adopted by CAMIC on this issue.

CAMIC is strongly opposed to creating an environment where advisers, boards of directors, management, and policyholders could withdraw substantial personal financial benefits from the demutualization of P and C insurance companies. CAMIC believes that if the surplus accumulated over many generations by mutual insurers is given to current policyholders or, especially, to a small minority of current policyholders, as could be the case with Economical Mutual, this will create a circle of self-interest amongst stakeholders that will become one of the most significant drivers of the process. CAMIC is of the view that the surplus fund of a mutual insurer is permanent and non-divisible; it is owned by the mutual insurance company, not the members, and it is not destined to be owned by the members. The surplus fund's purpose is to ensure the solvency of the insurer, to provide a high quality of service, and to assure the sustainability of the mutual insurer over future generations.

Recognizing that the Economical Mutual Insurance Company has a surplus of $1.2 billion and about one million policyholders and less than 1,000 voting or mutual policyholders, each mutual policyholder could in theory receive in excess of $1 million upon the demutualization of the company.

[The Chair, Conservative, James Rajotte]

Thank you.

I want to remind our guests that the reason I'm sticking to the time allocated is to give members time to ask questions, which you'll find is a very valuable part of the session here today.

We'll now move to the Canadian Institute of Actuaries.

[James K. Christie, President, Canadian Institute of Actuaries]

Bonjour.

My name is Jim Christie and I am the president of the Canadian Institute of Actuaries, the CIA. We appreciate the opportunity to discuss our thinking on a few areas where actuarial skills, talents, and abilities can help government in the coming budget year and into the future.

With me today is Michel St-Germain, a pension expert, who may answer any questions you may have on our views of pooled registered pension plans.

While PRPPs will not be game changers in retirement savings, they are an interesting option for retirement planning. To have a significant impact, we believe that PRPPs need to be subject to simple, efficient, and harmonized rules across the country. We believe that PRPPs should be optional rather than mandatory and that they should be regulated as a form of tax registered retirement savings vehicle rather than through a patchwork of federal and provincial pension legislation. This could be done by adding a separate section to the Income Tax Act similar to those existing for RRSPs.

I'll now comment on how actuaries can contribute to health care. The world is undergoing incredible change, and at a pace that is accelerating. Planning assumptions have been seriously challenged and will continue to be tested into the future. Many countries have failed to adequately take into account changing demographics and market conditions, and they are now paying a price for their neglect by coping with social benefit structures that have become unstable.

Risk is the chance that undesirable events will occur, but risk is also an opportunity. We all know that the future is uncertain and full of risk, and this is precisely where the actuarial toolkit and our deep training can be so helpful in health care. These types of things—risk management, demographics, and forecasting—are items that actuaries do well. We believe that government could use this expertise. Basically, actuaries are risk professionals. We analyze, assess, evaluate, and manage the financial impact of risk and uncertainty. We're experts in evaluating the likelihood of future events and we design innovative ways to reduce the probability of undesirable events happening, and we also suggest how to mitigate the impact of adverse events should they occur. Using our strong analytical skills, business knowledge, and understanding of human behaviour, we can help manage the complex risks facing health care in Canada.

Here are some specific things that actuaries can bring to the health care system. First, projecting forward the financial impact of risk and uncertainty is one of our cornerstore skills. We already do this in insurance and pensions. Our work reflects our expertise in demography, compensation, and benefits. We believe the current projections in health care are often tailored to shorter-term goals and that actuaries, with their longer-term focus, can better identify risks and trends in health care.

Second is planning for the future, in particular the aging population that faces us. In typical budgets, costs are projected to change by specific amounts. Actuaries can lay out scenarios that expose what will happen to budgets if different changes in costs actually happen. We can also quantify what to expect if pieces of the puzzle are tweaked.

Third is working with poor or non-existent data. Often, decision-making comes to a halt because of missing data and information. Actuaries have the capacity to develop conclusions and to get work done in spite of information gaps. As more and better data become available, we develop new scenarios that explain available options and allow better decisions. We handle random fluctuations in plans and results by developing methods for coping with adverse deviations and by creating appropriate margins for the future.

Fourth is modelling. Along with our deep training in mathematics, modelling is a core skill of the profession. It is a key part of what actuaries can bring to health care.

Fifth, actuaries are experts at working within a team. You'll find actuaries in insurance companies, in pension plans, in the energy field, among government regulators, in employment insurance, and in workers' compensation. We are also leaders in the emerging field of enterprise risk management, helping manage risk throughout organizations.

Sixth, actuaries belong to a profession. There is a broad and deep body of knowledge that actuaries have mastered. There is a professional organization, the CIA, that accredits our training and awards our professional designations. Actuaries adhere to standards of practice generated by an independent actuarial standards board. We have firm targets for continuing professional development that each actuary must meet annually. The actuarial profession also maintains and enforces a comprehensive disciplinary process. So actuaries are well educated and highly ethical professionals who are current with best practices.

You are no doubt familiar with the work of the office of the chief actuary within the Office of the Superintendent of Financial Institutions. The chief actuary brings rigour, insight, and professionalism to bear on the Canada Pension Plan, public sector pensions, and social programs.

Canadians deserve the same type of advice in health care.

[The Chair, Conservative, James Rajotte]

Thank you very much, Mr. Christie.

We'll go to the Canadian Nurses Association, please.

[Barb Mildon, President-elect, Canadian Nurses Association]

Bonjour. Good afternoon.

As the president-elect of the Canadian Nurses Association, representing nearly 145,000 registered nurses from across the country, thank you for the opportunity to present the nursing profession's solutions for optimizing the health of our nation while improving the sustainability of health care.

In the context of today's global economic climate, it is clear that action must be taken to find a more efficient way of meeting Canada's health needs. Canada's registered nurses are concerned that our publicly funded health care system still favours a model based on episodic treatment of illness and acute in-patient or out-patient care delivery, rather than a focus on health promotion, disease prevention, and optimal use of health care professionals.

The Canadian Nurses Association's recommendations support the need for a federally led accountability framework that leverages innovations and new models of health care delivery to address key health systems and health challenges. Our recommendations encompass the three priorities of ensuring capacity, optimizing efficiency and access, and improving quality.

The first of these priorities relates to Canada's health human resources. Health human resources planning enables the matching of available health care providers with the health care needs of the population. Projections of this nature allow decision-makers to plan appropriately for the education, deployment, and evaluation of health human resources to meet the needs of Canadians.

To do this effectively, we need a better system of tracking and deploying our health professionals. Thus, CNA recommends that the federal government lead the creation of a national unique identifier for all Canadian health professionals. A national unique identifier has been described as an “essential piece” of health human resource planning infrastructure. The Canadian Institute for Health Information's feasibility study showed that the implementation of a unique identifier for nine professions would incur a start-up cost of $17.3 million over three years and a subsequent annual operating cost of $5.2 million. This investment would provide governments and regional health authorities with the information they need to monitor trends influencing workforce stability, including the practice, status, distribution, and mobility of health care providers. This would be especially helpful in preparing for and responding to pandemics or the need for rapid deployment of health care professionals.

Our second recommendation addresses the need to bolster community-based health services, such as primary care, school health, ambulatory care, and home care to improve the health of our nation. Far too many Canadians are turning up in our emergency departments or are being hospitalized unnecessarily for health conditions that could and should be managed in the community. As such, CNA recommends that the federal government fund coordination across the national health agencies to advance community-based health services.

We know that chronic diseases are estimated to cost over $90 billion annually in treatment and lost productivity. We also know that chronic diseases, such as asthma, diabetes, heart failure, and hypertension, can be managed in the community. Interprofessional teams that include nurse practitioners, registered nurses, and clinical nurse specialists add value to the health care system by reducing the number of unnecessary and costly admissions and readmissions to the hospital.

For example, teams of mobile emergency nurses who respond to non-urgent calls from long-term care homes reduce the number of transfers to emergency departments. A recent study in Toronto demonstrated that these teams were able to provide the necessary care for 78% of the residents they visited, residents who would otherwise have been sent to emergency departments. The cost of these mobile visits is 21% less than the cost of having their needs addressed in emergency departments.

Greater implementation of these innovative, evidence-based models into practice across the system will result in better care, improved and timely access to the most appropriate health care providers, and will yield better health and lower costs across Canada's health care system. The federal government's leadership is paramount to achieving a healthy population, a productive workforce, and a vibrant economy.

I thank you, and I look forward to answering your questions. Merci.

[The Chair, Conservative, James Rajotte]

Thank you very much for your presentation.

We'll begin members' questions

with Mr. Mai, who has five minutes.

[Hoang Mai, NDP, Brossard—La Prairie, QC]

Thank you, Mr. Chair.

I again want to thank the witnesses for sharing their expertise.

My first question is for the Canadian Conference of the Arts representative. In your brief, you talked about $84.6 billion being contributed to the GDP and about 640,000 jobs being created. We, the opposition, really pushed for tax cuts for small businesses. However, the government said that tax rates for major corporations needed to be reduced to create jobs.

Could you tell us what solutions you have in mind?

[Alain Pineau]

First, I would like to clarify something. During my presentation, I actually talked about $46 billion— the official figure provided by Statistics Canada—in direct contributions to the GDP. The $84 billion includes the indirect impact, according to the Conference Board. I just wanted to clarify that, as the two figures are out there. They are not wrong, but they are in reference to different things.

I was trying to show something as quickly as possible. A substantial part of the cultural sector is made up of small businesses and individual entrepreneurs. I would like to quote the economists who are saying that lightening small businesses' tax burden is the way to create the most jobs. That's not a new discovery, as we've heard it said for many years. It stems from various studies conducted in Quebec, at the federal level or elsewhere in Canada. That's why we suggest that tax measures be adopted specifically for the cultural sector and self-employed workers.

It's interesting to note that creating a single job in the cultural sector requires an investment of about $30,000, while in the heavy industry sector, that figure is more in the neighbourhood of $300,000. If the goal is to have as many Canadians working as possible, I think these arguments are valid.

[Hoang Mai, NDP, Brossard—La Prairie, QC]

Thank you very much.

My question now is for Canada Without Poverty.

We saw in your brief that for each dollar put in, nine dollars are saved in terms of health costs. Can you expand on that?

You also talked about the solutions that were set out in 2009-10 by the Senate and the House committees. Could you maybe summarize the types of solutions they requested to get rid of poverty?

[Rob Rainer]

Sure. I'll take the last question first.

The two reports you're referring to are, first, the 2009 Senate Subcommittee on Cities report, a subcommittee chaired by Senator Eggleton and Senator Segal. They spent several years looking at the problem of poverty and the role of the federal government and came up with a very in-depth report, with many recommendations that get into many thematic areas around housing and income security, and so forth.

Second, the House of Commons report of 2010 was quite similar. Basically a House committee also looked at the federal role and came up with what I think is the most significant House report on this issue ever produced.

In response to both of those reports, the government essentially said, “Thank you for this work. We'll take these recommendations under advisement.” It has not in fact acted on any of those recommendations, to my awareness.

I think the key recommendation coming from both is essentially that the government needs to have a comprehensive plan, because the complexity of this issue demands that you not focus on one or two thematic areas but in fact go after a wide range of things needing attention.

In a few seconds I can't really summarize much more than that, but that, to me, is the key recommendation. It is still out there. Many groups are calling for a comprehensive approach to this issue, with the federal government playing a leadership role in partnership with provinces, territories, municipalities, aboriginal groups, and the NGOs that are standing ready to assist with that process. A great deal of thought has gone into this already and we don't need any more study; we can simply move.

What was your first question again, please?

[Hoang Mai, NDP, Brossard—La Prairie, QC]

It was really regarding the impact on Canada of every dollar we put in to get rid of poverty.

[Rob Rainer]

Just very briefly, we know that the costs of poverty are so high because of the kinds of downstream effects we end up having to deal with. We've heard something about the health care system. Yesterday I learned from Dr. Jeff Turnbull, the immediate past president of the Canadian Medical Association, that 20% of health care costs can be attributed to health inequities--in other words, poverty.

So there's a big savings to be had if we can prevent poverty or alleviate the poverty of those who are experiencing it. You will see better health outcomes, you will see better criminal justice outcomes, and you'll see better productivity outcomes. The evidence on this is compelling.

[The Chair, Conservative, James Rajotte]

Okay, thank you, Mr. Mai.

We'll go to Ms. McLeod, please.

[Cathy McLeod, Conservative, Kamloops—Thompson—Cariboo, BC]

Thank you, Mr. Chair.

To start, I would like to focus on the Canadian Nurses Association, of course near and dear to my heart.

I would want to look backward first, then I want to look forward, and I want to ask just a quick question also around one of your recommendations.

I think everyone appreciates what you've said, and I think Canadians have heard this message consistently in terms of what needs to be done to reform the health care system.

We've had an accord from 2004 to 2014, significant additional dollars transferred to the provinces, significant dollars targeted at primary health care transition to do exactly what you talked about. I'd like you first to reflect: have we seen any changes over time? It sounds like we're still needing to do that same work, in spite of significant dollars over the last ten years towards that primary health care reform agenda.

[Barb Mildon]

My answer is definitely yes. We are seeing influence over time, and I do thank you on behalf of nurses in Canada for the effort put into the health accord and into the upcoming discussion on the new health accord.

Really, what we're saying is that now the federal government can add its voice and its significant weight to creating a comprehensive set of pan-Canadian health system indicators. That becomes the accountability framework that can be used to further leverage the kinds of change you're trying to support.

I believe that the emergence of family health teams in many provinces and territories is making a difference. There is stronger nurse practitioner practice across the country. We are working with the appropriate government organizations to advance nurse practitioner prescribing, which will further put primary health care in action. So we do believe, in essence, that there are indications that it is working.

[Cathy McLeod, Conservative, Kamloops—Thompson—Cariboo, BC]

Okay. This sounds like it's sort of a long, slow, expensive transformation.

[Barb Mildon]

Long, slow, expensive transformation....

I perhaps want to come back to this notion of health system indicators.

The last accord did put measures in place that addressed key waiting list targets. Those are primarily for surgical and diagnostic procedures, but they have had an influence over time. Most provinces will report to you that there is a lower waiting time. So that's one way in which it's happened.

We think that can go further now in terms of the next round of discussions. To that end, the Canadian Nurses Association is working with partners around a national nursing report card. That national nursing report card further expands this notion of accountability.

[Cathy McLeod, Conservative, Kamloops—Thompson—Cariboo, BC]

Hopefully the support for rural nurses and doctors in terms of loan forgiveness will be one good measure. I certainly know in the communities I represent, especially my rural communities, they're begging for that kind of support.

On your unique identifier for health care professionals, did the provinces tend to support that idea? Is it something that's seen as really valuable in terms of looking at the who and what and where?

[Barb Mildon]

Thank you, a very wonderful question.

I want to take myself as an example. I graduated from a nursing program in Ontario and moved almost immediately to B.C. for my first job. There weren't jobs in Ontario at the time. I have moved back and forth between two provinces over most of my career.

So having a unique identifier would enable us to know where I am, first of all, and what my profile is. It would enable us to more quickly deploy me and my skills in a time of pandemic planning or response, as well as any other kind of situation in which we needed to rapidly deploy health care professionals.

We do know that our provinces and territories are onside with this, from the viewpoint that it would help them in their regulatory activities. Unique identifiers are also in the interest of the public, because if I have an offence against me or some practice issue, that becomes evident in my profile. So I cannot slip through the cracks by simply moving to another province.

[Cathy McLeod, Conservative, Kamloops—Thompson—Cariboo, BC]

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you, Ms. McLeod.

We'll go to Mr. Brison, please.

[Scott Brison, Liberal, Kings—Hants, NS]

Thank you to each of our witnesses today.

I'd like to start with Mr. Rainer and Ms. McLachlan.

In the last few years there have been a number of boutique tax credits provided by the government: a tax credit provided for children's activities; a caregiver tax credit for families looking after loved ones; a home renovation tax credit; a volunteer firefighters tax credit.... These are all non-refundable tax credits. As such, they do not benefit the lowest-income Canadian families.

I'd appreciate your view on whether we ought to make these refundable, such that they can help a broader range, particularly those most in need.

[Rob Rainer]

Certainly anything we can do to increase the incomes of low-income families I think is a good thing.

The broader point, though, is that very micro-targeted measures on discrete populations in the absence of a comprehensive approach is likely to yield, at best, very minor benefits. And I'm not an expert on this, but I believe the evidence so far is that the take-up on these kinds of tax credits is in fact not by those who they are ostensibly meant to help. It's more the middle-income and upper-income households that may benefit from these tax credits. So that further increases the inequity in our society. One of the real intersects around the issue of poverty is the growing inequality we have in this country, and this is increasingly being recognized by many organizations.

So again, we would urge a more comprehensive approach to helping low-income families and individuals and coming to realize that the evidence as well shows that nations that are prepared to invest more strongly in social development and their social security, which may require more taxation overall, actually have stronger economic performance and have stronger social and economic indicators. There's a whole wide range of indicators, and the evidence shows they perform more strongly than countries with lower tax regimes.

[Scott Brison, Liberal, Kings—Hants, NS]

Thank you very much.

Mr. Knight, it's good to have you back at the committee. Speaking from a Nova Scotian perspective, the Nova Scotia community college system does a terrific job in terms of the productivity and prosperity of our province. Kingstec, in Kentville, Nova Scotia, is a great local college that makes a real difference.

Increasingly, countries are measuring what they're referring to as NEET--“not in education, employment, or training”--a group of people who in many ways have fallen through the cracks. And there are a lot of young people in that category. Other countries are measuring that. We don't have those statistics in Canada. Stats Canada doesn't track it, and the government doesn't track it.

Are you able to opine, from your perspective, in terms of the NEET statistic in Canada? Are you seeing evidence that it's increasing, those people who are not in education, employment, or training?

[James Knight]

As you suggest, our statistics in this area are quite weak. We are working closely with Statistics Canada to improve their output in relation to the needs of our institutions.

But on a micro level, you mentioned a particular campus of the Nova Scotia community colleges. The administrators and the managers of that institution would be close to local realities and would be close to local people. This is one of the great strengths of the community college system. They reach out to those who have fallen through the cracks and try to bring them into education, first through adult basic education probably, and then into the main course programs.

I would say that Nova Scotia community colleges do a particularly good job at this, and I think colleges across the country are highly focused on it.

Access is a value of the system. Everybody should have an opportunity to come in and get the skills they need for the education they require.