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Mr. and Mrs. D. each purchased a segregated fund investment for a 10 year term. The principal amounts invested were 100% guaranteed if held to maturity.

The investments were placed in Registered Retirement Savings Plans (RRSPs) and therefore governed by the terms of the federal Income Tax Act (“the Act”) pertaining to those investments. The Act requires that an annual minimum withdrawal be made from the RRSP from the date the consumer attains 71 years of age. This annual minimum payment is known as a “RIF Payment.”

The consumers retained their investments until maturity. Several months later, they contacted OLHI alleging they had not received the full guaranteed amounts because their insurer had taken their annual RIF payments immediately prior to maturity, contrary to their instructions. The complaints were escalated to an OLHI OmbudService Officer (OSO) to obtain further information. He obtained copies of the relevant contracts from the insurer and undertook research into the RRSP provisions of the Act. He also spoke to both the insurer and the consumers.

The insurer acknowledged that there had been a reduction in the guaranteed amounts paid to the consumers. However, it believed the Act required it to take the annual RIF payment prior to maturity. It also relied on provisions in its contract which stated that any withdrawals prior to maturity resulted in a proportional reduction of the guarantee based on the current market value.

When our Officer spoke with the consumers, he learned that they had instructed the insurer to transfer the entire guaranteed amounts at maturity to another financial institution and to pay their annual RIF payments after maturity. These instructions, if followed, would have resulted in the consumers retaining an additional $5,000. The insurer did not reply to these instructions. The couple found out that the RIF payments had been taken prior to maturity only when they received their final investment statements. This prompted an immediate complaint to the insurer.

Thereafter, our OSO attempted to reach a settlement between the parties. He pointed out that the Act does not require withdrawal of the annual RIF payment prior to maturity of the investments. The insurer, however, contended that its contract required it to do so. OLHI believed that the insurer’s contract was unclear on this key issue. A settlement was not reached and the complaints were transferred to OLHI’s Senior Adjudicative Officer.

In accordance with OLHI’s complaints procedures, our Adjudicator reviewed all documents and interviewed the parties. She then delivered a written report containing findings and non-binding recommendations.

She concluded that Mr. and Mrs. D. purchased the segregated funds because they were guaranteed investments. They also knew it was not in their interest to take out any money before the maturity date and no withdrawals were made, except the minimum annual RIF payments from age 71 onwards.

The Adjudicator found that it was not appropriate for the insurer to take Mrs. D.’s annual RIF payment before maturity. By contract, Mrs. D. had elected this annual payment to be made 9 months later and, in all prior years, the insurer had made the RIF payments during the agreed month. She concluded that Mrs. D. was entitled to the full guarantee amount and recommended that the insurer pay the shortfall.

However, in the case of Mr. D., the chosen date for his annual RIF payment was two months before the maturity date of his investment. The insurer had not taken this annual withdrawal by the date the investment matured. It was therefore appropriate for it to take the annual RIF payment at maturity, and to reduce the guaranteed amount proportionally as per the contract, as this adjustment in the guaranteed amount should have occurred two months earlier. Accordingly, no compensation was recommended.

The insurer promptly agreed to comply with the Adjudicator’s non-binding recommendations and paid Mrs. D. the shortfall amount. Although he was disappointed not to receive any compensation, Mr. D. also accepted the recommendations of the Adjudicator.

Disclaimer: Names, places and facts have been modified in order to protect the privacy of the parties involved. This case study is for illustration purposes only. Each complaint OLHI reviews contains different facts and contract wording may vary. As a result, the application of the principles expressed here may lead to different results in different cases.

Mr. T. contacted OLHI to seek assistance with reinstatement of his retirement group life insurance benefit. The Dispute Resolution Officer who took the call learned that this benefit had been allowed some years ago as part of an early retirement package negotiated with his employer. The employer was a life and health insurer, and OLHI Member Company.

OLHI learned that all had proceeded smoothly for several years until Mr. T.’s former employer sent him a letter which he did not receive because it was mailed to an out-dated postal address. This letter contained a notice advising the consumer that a medical certification of total disability was required to maintain his life insurance benefit. That letter was followed by another from his former employer, a month later, advising that his life insurance benefit had been cancelled for lack of the required medical certificate. This second letter was sent to Mr. T.’s current address.

OLHI was told that Mr. T. had immediately called his former employer to address the situation, at which point he learned that the letters had been sent to different addresses because separate databases had been used to locate his contact information. As it turns out, the database used to send the first notification letter had not been appropriately updated. Upon learning of this administrative glitch, Mr. T. sought written confirmation that his life insurance benefit would continue as part of his retirement package. Much to his dismay, several months later, the company confirmed that it would not continue the benefit on the basis that there was no commitment to do so.

Fortunately, Mr. T.’s former employer elected to treat the situation as an insurance matter, rather than an employment issue. As a result, it provided Mr. T. with a “final position letter,” inviting him to contact OLHI if he was dissatisfied. As is customary, the insurer’s final position letter provided OLHI’s contact details and a brief explanation of OLHI’s independent role in assisting life and health insurers and consumers to resolve their differences.

Following the conversation with Mr. T. and a review of the insurer’s final position letter, it was decided that the facts of the case warranted further investigation by an OLHI OmbudService Officer (OSO). The OSO reviewed the information collected to date and then spoke at length with the consumer. He ascertained that the agreement to provide Mr. T. with early group retirement benefits had indeed been made some years ago and that it was an oral commitment made with his employment superiors of the day. The consumer was very concerned because he now believed himself to be uninsurable and because some of the subscribers to the original agreement were no longer with the company.

Subsequently, the OSO prepared a written submission to the consumer’s employer, setting out the facts and issues as he understood them. He suggested that, although there was no written confirmation on the part of the company to provide Mr. T. with retirement group benefits, the fact that coverage had been provided for many years was evidence of that commitment. It was suggested that the commitment could not be voided by a notification error for which the consumer was not responsible.

In due course, the consumer’s employer replied, advising that it had reconsidered its original position and had arranged with the employer’s group benefits insurer to reinstate the consumer’s group life insurance benefit. As before, the life insurance benefit was subject to ongoing medical certification of total disability.

The employer thanked OLHI for bringing the issue of conflicting address databases to its attention and confirmed that it had undertaken an internal review of its employee address records. This review resulted in the company changing its policy on record keeping practices for employee addresses so that problems of this nature would not occur in the future with Mr. T. and other current or former employees.

Disclaimer: Names, places and facts have been modified in order to protect the privacy of the parties involved. This case study is for illustration purposes only. Each complaint OLHI reviews contains different facts and contract wording may vary. As a result, the application of the principles expressed here may lead to different results in different cases.