August 11, 1917

LIB

Frank Broadstreet Carvell

Liberal

Mr. CARVELL:

While I entirely agree with the object of the present Bill, I should like to see another clause added to embody the principle of an amendment passed by the Banking and Commerce Committee when the insurance law was under consideration some three or four years ago- to make it a criminal offence for the agent of a bank to engage in the occupation of an insurance agent. I realize that I am raising an entirely new point, but I cannot allow this opportunity to pass without at least calling it to the attention of the committee. I do not know to what extent this has become a grievance in Canada as a whole, but I do know that in the province of New Brunswick we have at least one case that has become a public scandal. The agent of one of the big chartered banks of Canada carries on a private insurance business, and practically controls the entire insurance of a very large section of the province of New Brunswick. No man can do business with, or get accommodation from, this bank unless all his insurance, or that of the corporation to which he belongs, goes to the agent of the bank. It works out in two ways. In the first place, he drives everybody else out of business; no other insurance agent can thrive in that district. He may do a little business with some of his friends, but when it comes to the big business he is driven out. In the second place, to my personal knowledge-I am speaking now from knowledge which I have obtained as solicitor-people's properties are insured for a great deal more than they could be compelled to pay premiums upon, in order, according to my contention, that this parti-

cular insurance agent may receive more commissions on premiums.

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?

Edward Cochrane

Mr. COCTIRANE:

Is there only one bank in the place?

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LIB

Frank Broadstreet Carvell

Liberal

Mr. CARVELL:

No, there are more banks. But this bank has control of practically all the lumber business, and that is the principal business of the community. I am speaking now with an absolute personal knowledge of what is going on. An estate which I have practically closed up, which I have been helping to manage for years- which, I am sorry to say, was not very flush financially-has paid insurance to make your head ache, if you had to help finance it, simply because we were in the hands of the bank, and the banker placed the insurance without asking our leave or anything else. We had not a word to say-we had to pay the premiums; he did not ask us to pay them, but simply took them out of our account. I brought the matter up and got an amendment made to the Act, by the Banking and Commerce Committee, and it came down to this House as part of the Bill, when it left the committee, but sufficient influence was brought to bear on the House to defeat it, I think, on the third reading.

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CON

Charles Joseph Doherty (Minister of Justice and Attorney General of Canada)

Conservative (1867-1942)

Mr. DOHERTY:

That was in connection with the Bank Act?

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LIB
CON

Charles Joseph Doherty (Minister of Justice and Attorney General of Canada)

Conservative (1867-1942)

Mr. DOHERTY:

Was it in connection with the Insurance Act?

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LIB

Frank Broadstreet Carvell

Liberal

Mr. CARVELL:

No, the minister is right. It was in connection with the Bank Act. The Insurance Act was codified in 1910, and this happened in 1912 or 1913. As the minister is dealing with the Insurance law as it refers to insurance companies, I thought it my duty to bring this matter before him. I do not propose an amendment, because if the hon. minister would not accept it it would not carry, but I call attention to the circumstance, and say that matters are getting worse instead of better, although there was a pledge given that this particular condition of things would cease to exist. I know, from talking with members, that this condition of affairs exists to some extent in very many parts of Canada. I do not think it is right for a man occupying the position of manager of the bank, who necessarily has certain direct or indirect control over very many people who do business or get accommodation from the bank, to have the 278i

right to say to them either directly or indirectly, or even by inference: If I give

you the accommodation you require, I shall expect you to give me your insurance. It gives him a very great leverage over the agents of the other insurance companies, and insurance has become a great business in Canada. This is an unjust discrimination. I think the chartered banks of Canada pay their agents pretty good salaries, and if they do not, they should pay salaries large enough so that the agents could get along without depriving other people of a legitimate source of revenue. I think even if there were no cases as extreme as the one to which I have called the minister's attention, the principle is wrong to allow the manager of a bank to carry on an insurance business, and indirectly and surreptitiously take away from other men business which rightly belongs to them.

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CON

Samuel Francis Glass

Conservative (1867-1942)

Mr. GLASS:

The matter to which my

hon. friend refers is not peculiar to the province of New Brunswick. That condition of affairs generally exists throughout Ontario. In my district it is quite a common thing for a bank manager, especially in the smaller places, to have the supervision and control over insurance, which may not only lead to an improper use of it, but which is an injustice to those engaged m that business. I should like to suggest here, also, that the same condition of affairs exists in relation to managers of loan companies. I think they should be debarred from engaging in insurance, as well as the men who are engaged in ordinary commercial banking. I will not say that these large loan companies receive a direct commission, or a division of the commission from the agent, but they arbitrarily direct that, providing a loan is given, the insurance shall be placed with a certain .agent who is known to be closely allied with them. I think that when a man borrows from a loan company, any insurance company which is satisfactory to the Superintendent of Insurance should be considered satisfactory for the requirements and purposes of the individual obtaining the loan. I do not think even the lawyers themselves should have any control or power over individuals and say that they should take insurance with certain companies. If a company is financially sound and responsible, and satisfactory to the Department of Insurance in this country, it should be strong enough and good enough so that a client getting

a loan should be permitted to take insurance in any company he chooses.

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LIB

Onésiphore Turgeon

Liberal

Mr. TURGEON:

In reference to the

authority of bank .managers to take insurance, I was perhaps the author of that amendment to the Bank Act on behalf of the bank managers in rural districts who *were not getting the salaries they should have from the banks. I remember that I was specially influenced by that consideration, and the Minister of Finance at the time, in accepting the amendment which I proposed, declared to this House that he would use all possible influence upon the banks to have them increase the salaries of their agents to a living wage to take away from them the business which, he admitted, was sometimes conductive to extortion. As I have seen no improvement on the part of the banks since that time, perhaps this might be the time to give effect to the advice of my hon. friend from Carleton (Mr. Carvell). It would be a most influential lever to raise the salaries of bank agents to a fair minimum, and would do away with a practice, which might amount to extortion in some cases.

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CON

Charles Joseph Doherty (Minister of Justice and Attorney General of Canada)

Conservative (1867-1942)

Mr. DOHERTY:

I am very much impressed with what has been said. It appears, at all events on its face, to be a matter that might very well call for legislative action; but such legislation, of course, would affect not merely the business of insurance, but the business of banking. I understand that the question vas up in connection with the renewal of the Bank Act; that a proposal similar to the present one, looking to the prohibition of the combination of the business of banking with that of carrying on insurance, was made, and was dealt with and finally dealt with in the sense of rejection. That leaves the position as regards the banking business determined at that time, at all events. We are now dealing with legislation with regard to insurance, and so far as the present measure is concerned, with a measure simply supplementary to the veneral Insurance Act. That measure has been through the Banking and Commerce Committee, together with this Bill as supplementary to it, and before +hat committee m cmnectior with that Bill, the insurance people connected with and interested in the insurance business, who, as well as the bankers, would be affected by a provision such as suggested, were heard, and I am informed-I was not present at the sitting? of the committee-that this matter was not brought to the attention of the committee

at all nor to the attention of those interested. Under those conditions, I suggest it would hardly be a proper thing, in a Bill of this kind, to insert, without notice to any body concerned, a provision of the character suggested, which must very materially affect the carrying on both of the banking business-with which we are not concerned directly in connection with this legislation-and of the insurance business, those engaged in which had opportunity to present themselves and to make .any representations with regard to any provisions contained in the Bill. With regard to a provision of this kind they would not have the same opportunity as they have had with regard to the provisions of the Bill in general. While, as I have said, it seems to me upon its face that there is a great deal to be said in support of this proposition, I would hardly like, and I could hardly be expected at this moment and without further examination and consideration, to assent to a proposition of this kind. It would certainly be very proper, when we have any further revision of the Insurance Act generally, and when there would be proper occasion to deal with the Bank Act, that this suggestion should receive consideration, but I would hardly feel justified in dealing with it in . connection with the present Bill.

I wish to insert a little amendment in the first subsection of the section. It is simply to make the addition of "persons," a change which has already been made to the general Insurance Act. This is simply to make the 'two measures correspond. I move:

That subsection 1, section 508 C-

which it is proposed to insert in the Criminal Code.

-be amended by inserting in line 14 of the present Bill, after the word "or" the words "of an association of persons."

This is merely to add to the exceptions contained in the Bill an exception for an association of persons formed for the purpose of inter-insurance.

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Amendment agreed to, and section as amended agreed to.


CON

Joseph Hormisdas Rainville (Deputy Speaker and Chair of Committees of the Whole of the House of Commons)

Conservative (1867-1942)

The CHAIRMAN:

Shall I report the Bill?

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CON

Charles Joseph Doherty (Minister of Justice and Attorney General of Canada)

Conservative (1867-1942)

Mr. DOHERTY:

I beg to move:

That the Bill be further amended by adding to section 1 the following provision, to be inserted in the Criminal Code as 50S D :

Any insurance company, or any officer, agent or representative thereof, who

(a,) makes or permits any distinction or discrimination in favour of individuals between the insured of the same class and equal expectation of life in the amount of premiums charged or in the dividends payable upon any policy of life insurance issued by or on behalf of the company; or

(b) makes or assumes to make any stipulation or agreement which is intended to operate as a part of any insurance contract to which the company is or is to become a party, whether in respect of the amount, terms or conditions of the insurance, the premium to be paid or otherwise, except such as is plainly expressed in the policy issued in the case; or

(c) pays, allows or gives, or offers to pay, allow or give, directly or indirectly, as inducement to insure, any rebate of the premium stipulated by the policy to be payable, or any special favour or advantage in the dividends or other benefits to accrue thereon, or any advantage by way of local or advisory directorship unless for actual service bona fide performed, or any paid employment or contract for service of any kind or any inducement whatever intended to be in the nature of a rebate of premiums; or

(d) gives, sells or purchases as such inducement or in connection with such insurance any stock, bonds or other securities of any insurance company, or other corporation, association or partnership ; and any person who knowingly receives as an inducement to insure any rebate of premium or any such special favour, advantage or inducement as aforesaid,

shall for a first offence be liable to a penalty of double Vhe amount of the annual premium chargeable upon the application or policy in respect of which the offence is committed, such penalty not to be less than one hundred dollars, and for a second or subsequent offence to a penalty of double the amount of such annual premium, the latter penalty not to be less than two hundred and fifty dollars.

2. Moreover every director, manager or other officer of any insurance company who knowingly consents to or permits the violation of any of the provisions of this section by any agent, officer, employee or servant of the company shall be liable to a penalty of five hundred dollars.

3. The penalties provided for in this section may be recovered either upon summary conviction under Part XV of the Criminal Code, or in any court of competent civil jurisdiction at the suit of any person suing therefor as well for His Majesty as for himself; one-half of any such penalty when recovered to be paid into the Consolidated Revenue Fund and the other half to belong to the informer or person at whose suit the same is recovered.

4. No director, manager, agent, officer or

servant of any insurance company shall be indemnified, either in whole or in part, from the funds of the company for any penalty or costs which he may be adjudged to pay on account of any offence committed against this section. .

This is to make it a criminal offence to give a rebate of premium, or to effect any combination or arrangement whereby one individual will be able to get his insurance at a cheaper rate than another.

I may say that these provisions are contained in the general Insurance Act. The

principle reason why it is necessary to insert them in the Crimial Code is that the Insurance Act as' such may apply, and does apply, only to such insurance companies as the Parliament of Canada has legislative jurisdiction over, which, speaking generally, may be said to be companies incorporated by the Dominion, and foreign companies. But provincial companies, or the agents or officers of provincial companies, could not be reached by the general Insurance Act. I think the committee will agree that the different operations which are hereby prohibited, namely, the offering of rebates and undue advantages, discrimination between the insured, attempting on the part of the an agent to make undertakings which are not contained in the policy and which operate to the deception of the insured, and the giving of any inducement for the insurance in the way of direct benefit or advantage-all these things are just as objectionable and are just as detrimental to the public. interests when done by a provincial company, or the officers or agents of a provincial company, as when done by a foreign or Dominion company. It is further to be pointed out that unless legislation of this kind be applicable to all companies carrying on the business of insurance, without distinction of their source of incorporation, you have a most unfair situation as regards the Dominion and foreign companies, in that they are subject to the present Insurance Act and are bound to comply with these requirements, whereas provincially-incorporated companies would entirely escape and would be enabled thereby to carry on a most unfair competition, and to resort to those practices which, I think it will be generally agreed, are most objectionable and most unfair.

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LIB

Frank Broadstreet Carvell

Liberal

Mr. CARVELL:

I can quite understand the necessity of [DOT] amending the Act so that an agent of a provincial company shall be under the same law and subject to the same penalties as the agent of a Dominion or foreign company. But I have never quite understood the reason for this law, anyhow. I do not see why an insurance agent should not be allowed to canvass business and sell insurance as cheaply as he likes; that is a matter between him and the purchaser. It seems to me we are drifting into-I do not know whether it is socialism; I think it is these public-ownership faddists getting their work in again. Why in the worldi should not an insurance company he allowed to sell me insurance for a price which I am willing to pay, regardless of the price they

sell to any one else? You might just as well interfere with the man who sells sugar and pork, which are juet as necessary to my family as insurance is. If you say that an insurance agent cannot sell me insurance except at such a price, you have just as much right to say that a grocer cannot sell me sugar or pork except at such a price. I was never able to understand the reason for these provisions at the time the Insurance Act went through. It seems to me we are simply drifting in the direction I have indicated, and unless a stop is put to it no man can tell what the end will be. After a while they will be telling us we cannot do anything except under the instructions of some public authority; individual action will be taken away entirely. If the Government would go a little further and say that the munition makers and profiteers could make only so much money, there would be some sense in that. They fight shy of touching these people, however, but when it comes down to the average man who is trying to get a living, they make legislation of this kind. I do not know that I can object to the amendment, because it makes the law uniform, but I object to the principle of the whole thing.

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CON

Charles Joseph Doherty (Minister of Justice and Attorney General of Canada)

Conservative (1867-1942)

Mr. DOHERTY:

We are not introducing these provisions now, because they have been the law since 1910, and are applicable now to all companies under the jurisdiction of this Dominion Parliament. Moreover, may I say this, as a reason for differentiating between selling insurance and selling sugar and pork and other things of that kind? The insurance business, of course, has to be carried on in such a way that the premium charged shall provide the means to make up the losses; perhaps that is especially true with regard to life . insurance. Now, when you let one man contribute for the same risk less than another to the creation of that general fund that is to pay all the losses, you necessarily make the cost to that other man or men larger than it otherwise might be. The fact that you have given to one man insurance at a price less than it is necessary to charge in order that according to the actuarial calculations the business may be carried on so as to sustain itself, makes it necessary in order to make up that deficiency to Charge some other man something extra. It creates an absolute inequality between people, who-this is the case referred to in the section-are absolutely in the same class of risk, and enables one man to get covered at a price lees than be ought to

be charged on a business basis, inevitably necessitating that some other man be charged more than he ought to be charged.

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LIB

Frank Broadstreet Carvell

Liberal

Mr. CARVELL:

I can quite understand that argument. It is very plain, and I think it is perfectly logical. At the same time, this amendment goes a great deal further, and is aimed at the insurance agent who is willing to divide up his commission on the first premium with the insured. We all know, a very large proportion of the first premium goes to the agent as his commission. I do not think any one ever heard of the insurance companies charging anything except the uniform rate of insurance governed by the age, the mortality tables, and other considerations which enter into the fixing of the premium. The intention is to reach the insurance agent who, in order to do business, makes a little cut to the insured. That cut comes out of the agent, and does not impair the fund out of which the policy will ultimately be paid. It merely reduces the agent's profits by that much. This Bill simply prevents the agent from dickering, or doing business at all. It makes every insurance agent practically an automaton. So far as concerns the premium which goes to the company, of course that should be uniform, but why an ordinary insurance agent cannot make a discount of fifteen dollars, or twenty-five dollars, or fifty dollars, out of his commission on the first premium is something I cannot understand.

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CON

Charles Joseph Doherty (Minister of Justice and Attorney General of Canada)

Conservative (1867-1942)

Mr. DOHERTY:

I do not profess to he an expert in the matter, or to be able to explain it absolutely. At first glance, it would certainly seem as if there might be something in what my hon. friend says. I understand, however, that in the carrying on of the insurance business it has been found that if the practice is allowed, the agent, in his zeal to get business, is exposed to do it very largely, and there is a great temptation to the companies to use that method of getting business, which leads them not impossibly-and I believe in practice it happens quite often-to give some compensation to the agent in lieu of that rebate. However that may be, I may tell my hon friend these practices are legislated against universally, throughout North America at all events, and so legislated against as the result of inquiries made in different countries at different times as to the abuses that might arise in connection with the insurance business. This having been our law since 1910 as we all understood applicable to

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XI, 1917


all insurance companies, and being still our law unquestionably as applicable to insurance companies incorporated by this Dominion, I think we would be leaving the law in a very anomalous condition, and producing a most unfair state of things if we did not do as is sought to be done by this legislation, that is make it of general application.


CON

Samuel Francis Glass

Conservative (1867-1942)

Mr. GLASS:

I do not see an analogy

between the merchant doing business, who is allowed to sell his goods at any price he likes, and an insurance company doing business. According to the mortality table's, insurance companies are actually collecting a very much larger amount than is necessary from policyholders on the 3 per cent or 3i per cent reserve generally prevailing. As is shown by the reports, in cases they are earning a great deal more than 7 per cent on the total amount of their investment's, including bonds and everything else. The policyholder has a real live interest in the earnings of the company and the only way to compensate him adequately for what he has to contribute as exorbitant premiums, is to repay to him a division of the profits as they occur. My hon. friend has very rightly pointed out that in a very great many cases the agent receives his compensation as commission on the first premium. Many companies, however, have adopted the practice of paying their agents straight salaries, and this practice is becoming much more prevalent. Of course the salary a man gets is based on his power to produce business, and men vary in their ability in that respect. If an agent on salary gives a rebate to the insured, surely the money comes directly out of the funds of the company, and the earning power of the other participating policyholders, who are simply partners in the large business, must necessarily be impaired to the extent to which those rebates or commissions may be allowed. The matter of rebating in insurance has always been a serious evil, and I think has been an injury to the insurers themselves. It has always been understood that the old law did not apply to anything but life policies.

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August 11, 1917