Quebec regulator, the Autorité des marchés financiers, has sanctioned Desjardins Financial Security (DFS) $1 million and the Fédération des caisses Desjardins du Québec $100,000 for breaches to the Act Respecting Insurance and the Act Respecting the Distribution of Financial Products and Services (ARDFPS). In a separate file, it fined DFS another $450,000, for breach of the ARDFPS.
In the first case, DFS and the Fédération des caisses acknowledged that they did not follow sound business practices in distributing a student loan group life, health, and job loss insurance product for students doing business with a caisse Desjardins.
At the end of their studies, when the students came to an agreement with their caisse to pay back their loans (guaranteed by the Government of Québec), those who did not call their student services center to set the terms were automatically insured, without adhering.
Insurance without their knowledge
In the other case, DFS acknowledged that it was in breach of the ARDFPS, "particularly with regard to distribution without a representative in the distribution of its Savings Life Insurance product. The insurer acknowledged that it had not complied with various provisions of that Act and the Act Respecting Insurance by automatically adding and without adherence, as of June 1, 2016, critical illness insurance coverage to the Savings Life Insurance policies of existing policyholders. Cancer Protection provides for a maximum benefit of $ 6,250.
A total of 385,000 insured members had bought Savings Life Insurance prior to June 1, 2016 and were subject to the identified breaches associated with the addition of Cancer Protection to their insurance policy, said the AMF. DFS has promised the AMF that it will provide those affected with written notices by Dec. 31, 2017 to inform them of their rights and of the measures taken to correct the situation, in particular, by allowing them to retain the original product they had, without Cancer Protection.
DFS has also confirmed that the Savings Life Insurance product, including Cancer Protection, as offered since June 1, 2016, now requires a formal application for membership in accordance with the provisions applicable to distribution without a representative, says the regulator.
Over 11 years
In regards to the student loans, the AMF found that the non-compliant practice had been going on for over 11 years. “The information available for the years 2013 to 2015 shows that approximately 127,784 student loan insurance policies were distributed in a non-compliant manner during these years, for premiums paid to DFS reaching more than $22,000,000, and remuneration paid to the Federation of over $1,700,000 during those years,” said the regulator. This represents $172.17 per loan over this period, and a total compensation of $13.30 per loan.
“Desjardins regrets the inconveniences that affected members have suffered and is working actively to correct the situation. On one hand, DFS will reach out to the holders of the Savings Life Insurance policies contracted before June 1, 2016 by the end of the year to inform them of the measures implemented to correct the situation, and, on the other hand, the distribution of the insurance on student loans has temporarily been suspended,” said Desjardins in a press release.