The government of Nova Scotia has amended its insurance act to prohibit trafficking in life insurance policies — a move that protects consumers, especially vulnerable seniors, from potential exploitation.
Bill 238 received royal assent yesterday, amending the act and clarifying the definition of premium for life insurance, which reinforces the separation of insurance and banking.
The Canadian Life and Health Insurance Association (CLHIA) applauded the new law. “Insurers have been urging governments to take these steps to protect policyholders from exploitation,” the CLHIA said in a release.
Life insurance trafficking, also known as life settlements, occurs when life insurance policies are bought by third parties from terminally ill policyholders — often seniors.
The life settlements can result in seniors “losing the full value of their insurance policies to unregulated third parties” who offer cash payments at rates below the policies’ face values, the CLHIA said in the release.
“Nova Scotia’s legislation will protect vulnerable consumers while ensuring that life insurance continues to fulfil its purpose of providing financial protection to individuals and their loved ones,” said Stephen Frank, CLHIA’s president and CEO, in the release.
With the amendments, Nova Scotia joins seven other provinces that already have anti-trafficking provisions for life insurance.
The province also joins New Brunswick in clarifying the definition of premiums for life insurance. Alberta has also introduced legislation.
“It’s becoming increasingly clear that legislators across the country are committed to protecting Canada’s longstanding public policy, which differentiates insurance contracts from deposit-taking accounts,” Frank said. “We will continue to work jointly with all remaining provinces to help them clarify their rules where necessary to enshrine this important principle.”