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ORIMS meets leading brokers of Toronto.

Recently, members of the Ontario Risk & Insurance Management Society and the Toronto Insurance Conference, an organization of brokers, met at the Board of Trade in Toronto to discuss several issues. Two topics, efforts to deregulate the financial services industry in Canada and the creation of a federal goods and services tax, topped the agenda.

Participants agreed that the federal government's delay in considering legislation to deregulate financial institutions and to permit or disallow them to venture into other product lines has created many problems and confusion. Banks, for example, had taken advantage of the situation by offering insurance products without licenses. However, Ottawa has since clarified the policy: Banks cannot sell insurance, but they may own insurance companies.

A main concern is that individuals and organizations be qualified to sell financial services and products to the public. At the same time, consumers should not lose the right to choose from whom they wish to purchase their services.

Financial institutions and broker associations across Canada have been actively pressuring local, provincial and federal governments to debate and act on possible legislation. Unfortunately, the federal government appears to be delaying legislation in view of the problems, as well as public reaction to other issues such as the tax on goods and services. Continued pressure on all levels of government should be exerted, maintained Toronto Insurance Conference members.

Situation in Quebec

Quebec, on the other hand, already has a fairly deregulated financial services marketplace. Conference members believe that Quebec acted a few years ago to set a precedence. The federal government, they said, will probably seriously consider Quebec's legislation prior to releasing its own.

Today, many financial institutions are engaged in personal insurance lines in Quebec, where they handle a large volume of business. As a trade-off, conference members explained based on remarks by Quebec's superintendent of market intermediaries, Alain Samson, the province allowed insurance brokers to acquire licenses to handle mortgage loans and sell specified financial instruments. However, conference members pointed out that most Quebec brokers have no desire to expand into these new areas, and their positions, particularly in rural areas, are in jeopardy.

Goods and Services Tax

Participants also tried to better understand the industry ramifications of the federal goods and services tax, which was enacted last month. Conference members confirmed that a broker's placement of property/casualty policies and servicing of claims is tax-exempt, regardless of whether a fee or commission is paid.

Where a combination of taxable and exempt services are provided to a client for a single remuneration, regardless of its form, the mixed supply rule applies. When 50 percent or more of the services provided are tax-exempt, they are considered tax-exempt; if less than 50 percent are exempt, tax must be charged on the taxable portion only.

It is the broker's sole responsibility to determine whether tax is applicable and to bill accordingly. Failure to do so will likely result in the broker having to pay the tax.

Conference members also discussed various rumors on how property/casualty insurers plan to address the applicability of the tax to loss payments.

Market Status

The meeting ended with a discussion of the insurance marketplace. In general it was felt that the current market would continue for some time. Capacity has not decreased, and in fact, London recently showed a desire to increase its property capacity. Competition in some specialty areas, such as professional liability, has increased as a result of more insurers offering coverage.

The Participants

The Risk Managers

Joe Hardy, The Oshawa Group Ltd.

Weldon Wheeler, Royal Trustco Ltd.

Ray Mattholie, CIL Inc.

Jack Taylor, Navistar International

Russ Thomas, Nova Corp.

Eric Fleming, University of Toronto Toronto insurance Conference Members

Greg Belton, Muntz & Beatty inc.

Joanne Brown, Marsh & McLennan

John Chippindale, Marsh & McLennan

Pat Cruickshank, Johnson & Higgins

Robert Paterson, R. James Paterson inc.

Brian Saunders, Sedgwick James Inc.

Bill Toyne, Sedgwick James inc.
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Article Details
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Title Annotation:RIMS/Industry Liaison; Ontario Risk and Insurance Management Society
Publication:Risk Management
Article Type:panel discussion
Date:Feb 1, 1991
Words:646
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