Industry Committee on Nov. 27th, 2007

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

You all refer to regulatory issues, yet you don't get that granular in terms of the specific regulations. Many of them are provincial and involve federal-provincial negotiations and issues.

But as to some of the barriers you refer to, if you're calling for less regulation, would you be calling, for instance, for fewer barriers between one of the traditional pillars to enter into another one? Is that one of the areas you're calling for?

For instance, if you look at Western Financial Group, Scott Tannas' operation, it is a bank that emanated initially from the insurance industry and took advantage of a loosening of the traditional four pillars to enter into that industry.

Are you calling for a further loosening of those rules to now enable, for instance, insurance companies to enter into banking more broadly? Alternatively, of course, one would expect banks to enter more vigorously into the insurance sectors. Is that one of the regulatory changes you'd want to see?

[Nancy Hughes Anthony]

I think my comments would pertain as well to the specific issues you raise.

Once again, on the insurance issue, in the last consideration of changes to the Bank Act, the government decided it was not going to entertain that particular situation. The banks understand that and don't necessarily spend a lot of time talking about it.

I was trying to make the point on the regulatory streamlining rather more about the kind of regulation that banks are subject to right now, be they federal or provincial, and the fact that we're not calling for less regulation but for smarter regulation. We're calling for streamlined regulation.

It is a wonder to me that any of our bills get paid in any bank with the kind of regulatory burden that banks have to overcome.

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

And the insurance industry...?

[Frank Swedlove]

In terms of the existing opportunities, in 1992 the government allowed cross-pillar activity, and we've seen that occur. Manulife, for example, owns a bank. All the major banks have insurance subsidiaries and are very active participants in the insurance business--life, property, and casualty. So we have seen that integration occur.

There are still government policy restrictions with respect to large banks and large insurance companies getting together, and that's part of the broader merger issue that my colleague has noted.

[The Chair, Conservative, James Rajotte]

Mr. Yakabuski, briefly.

[Mark Yakabuski]

When I talked about the importance of having a regulatory system that keeps up to date with our competitors, I particularly referred to the need to make sure that any price regulation of any insurance market is as streamlined as possible. That's in the interests of consumers, so that the market can adjust more readily. I look forward to working with provincial governments as well, and it's a message I never stop repeating to them.

You don't have a copy of my slides yet, but look at that pink. That pink represents Canada's federal government capital requirements for property and casualty insurance companies. You can see that it's generally a lot bigger than anything else on this graph. In other words, Canada's capital requirements for property and casualty insurers generally tend to be considerably higher for domestic companies in particular than for the other big insurance markets of the world--the U.S., Japan, the United Kingdom, Germany, and so on. I think it's that scenario that we could work productively with the government on, and I would encourage this committee to take an interest in that.

[The Chair, Conservative, James Rajotte]

Thank you.

We'll go to Mr. Carrie, please.

[Colin Carrie, Conservative, Oshawa, ON]

Thank you very much, Mr. Chair.

I want to thank you for your presentations today.

You brought up a couple of things we've been hearing over and over, one of them being human resources and skilled labour. There seems to be a real shortage in Canada across all sectors, or it's perceived over the next few years that there are going to be real shortages that we have to address.

Could you explain to us today what your industry is doing to help with the human resources issues? What else can the government do to partner with you? What are your ideas on where the government can help in this human resources and skilled labour issue over the next few years?

[The Chair, Conservative, James Rajotte]

Ms. Hughes Anthony.

[Nancy Hughes Anthony]

Obviously I speak for the banking industry, but I know this is a demographic issue that affects all businesses. Certainly the banks are spending a lot on training. We just looked at the 2005 expenditure on training, and it was about $318 million across the country in terms of trying to get resources trained up into the specific qualifications required for banks. I think you'll see banks individually--some of them have different programs--being very much involved with educational institutions, universities and colleges, trying to make sure there is a good link between the needs of the banking industry and the educational institutions.

I do still think, though, that we have a supply and demand problem. I know that the government, and I think members of every party, has been seized with the need for enlightened immigration policies and for doing what we can do to ensure the maximum amount of participation of the underemployed in our society. We're not alone in looking for the best and the brightest. I think a common effort is required between the business community and government to make sure we can fill the jobs we need to fill.

[Mark Yakabuski]

I would reiterate what Nancy has said. It's very important to have better established links between not just the universities but also the community colleges and the insurance sector, and to work harder at integrating new immigrants who are coming to Canada so that they feel insurance is a good career for them. Perhaps most of all the biggest challenge is to make insurance sexy. If you've got any ideas in that regard, I'd be happy to hear from you.

[Colin Carrie, Conservative, Oshawa, ON]

No.

[The Chair, Conservative, James Rajotte]

Mr. Carrie, Mr. Swedlove would like to answer.

[Frank Swedlove]

I would support these comments and note that a number of our members are active in working with universities and colleges. I know of a program at George Brown specifically related to insurance administration. We're looking at other opportunities in community colleges across the country to support the development of training and education, so that we have the people we need in our industry.

[The Chair, Conservative, James Rajotte]

Mr. Carrie.

[Colin Carrie, Conservative, Oshawa, ON]

I was going to say that we're still trying to make manufacturing sexy. That's going to be a tough challenge too.

One of the things for government with our science and technology strategy was to increase research and development and the type of partnering you're talking about with academia and industry and government. Do you see how the science and technology and the government policies are affecting your industry now? What positive effects are you seeing with that? How much research and development are you doing as an industry right now? Where do you see that in the future?

[The Chair, Conservative, James Rajotte]

Mr. Witol.

[James Witol]

If I could add a point, currently the Government of Canada is reviewing its research and development tax credits, particularly in the IT area. The life insurance industry has found it very difficult over the years to access these tax credits. The conditions for getting them have been such that we're just not perceived as providing leading-edge activities here. We're hoping we will get greater access as a result of this review to R and D tax credits.

[Colin Carrie, Conservative, Oshawa, ON]

The other thing you brought up was internal trade barriers, and it seems that we hear about this over and over as well. How unique is Canada when it comes to these internal trade barriers compared to other countries? How much of a difficulty is it for your competitiveness internationally?

[The Chair, Conservative, James Rajotte]

Go ahead, Ms. Hughes Anthony.

[Nancy Hughes Anthony]

This is kind of a favourite file of mine. There are many aspects to it that just defy any kind of logic. I think it's always interesting to see new investors coming to Canada and realizing the hoops and hurdles they have to go through, even to move certain manpower across the country and get re-licensed and so forth. I think we need to be bold and brave.

The Agreement on Internal Trade has clearly not worked. It's dysfunctional. We now see some leadership from some of the provincial premiers. I'm very happy to see that. I think as opposed to chipping around the edges, they should just declare free trade among the provinces. As I mentioned with respect to a common securities regulator, Canada is the only country, along with Bosnia and Herzegovina, that has individual provincial or state securities regulators. So we're way behind.

[The Chair, Conservative, James Rajotte]

Thank you.

We'll go to Mr. Yakabuski.

[Mark Yakabuski]

In the same way, Canada is almost unique, along with Australia and the United States, oddly enough--countries that normally are considered good places to do business, frankly--in having an insurance system that.... Here in Canada we have basically 10 different auto insurance products. Every insurance company, for property and casualty insurance, has to be licensed in each province, separately, with all the costs and compliance costs that implies.

I certainly understand the need to make sure that companies are regulated. But the provinces need to get together and recognize their common expertise, and do this in a coordinated way, in the same way that we say the federal government and the provinces need to get together to look at a common way of dealing with solvency regulations.

[The Chair, Conservative, James Rajotte]

We're going way over time here with our questions and comments, so if we are going to have time for all members to ask questions, we're going to have to shorten the answers.

We'll go now to Monsieur Vincent, please.

[Robert Vincent, Bloc, Shefford, QC]

Good morning, everyone.

My question is for the entire group. What is the impact of plant closures, job losses and problems in the manufacturing sector in each of your sectors? Does that have a definite impact on the banks or on insurance? We know that the first thing that people who have been laid off cut is insurance policies. I don't know how things are for mortgage loans. Has that had a direct impact on your sectors in the past two years?