Transamerica Life Canada plans to fully reimburse all policyholders who may have been charged excess management fees on segregated fund products, promises Paul Reaburn, the company’s president and CEO.
A letter to policyholders dated August 2007 and signed by Mr. Reaburn states that these excess fees may affect a number of insurance contracts. The insurer is now conducting a review aimed at determining how much is involved and which policyholders might be affected. "We want to assure you that, if our review finds that excess management fees were charged to you, Transamerica Canada Life will fully repay excess fees charged to you and to all impacted policyholders and compensate you for related lost fund earnings," the letter says.
"The review stems from our understanding that, during the past several years, Transamerica Life Canada or its predecessor companies (NN Life Insurance Company of Canada and Transamerica Life Insurance Company of Canada) may have increased management fees in excess of the percentages permitted under our insurance contracts or without the proper advance notice of a fee increase," it adds.
The letter goes on to state that due to the number of funds, contract revisions and policyholders involved, it is expected that the review and repayment plan "will take a number of months to implement."
Contacted by The Insurance Journal, Mr. Reaburn explained in an e-mail that the excess fees issue was identified as a result of a client complaint. After determining, several months ago, that there was a problem with the fund, Mr. Reaburn ordered a full review of the company’s segregated fund portfolio. "While we are still in the early stages of the review, we have determined that several funds are affected. We are committed to doing the right thing by our clients and as such we will be making them whole by the amount of the overcharge and lost earnings associated with the overcharge."
At this point, it is hard to say when the review will be completed due to the complexity of the process and the fact that the history under review goes back several years, he added. Asked for an estimate of how many policyholders and how much money is involved, Mr. Reaburn replied that it is too early to say, but reiterated Transamerica’s commitment to reimbursing everyone impacted by the problem.
Asked whether he knows how the errors happened, he answered that "the detailed review will give us more insight into what happened and I am sure there will be lessons learned from it all that we can put controls in place to prevent it from happening again."
Mr. Reaburn says the company’s policyholders, sales channel and federal and provincial regulators (who have been notified about the issue) have all reacted "very positively to the news because we are doing the right thing by our clients."
Transamerica’s products are sold through independent brokers and advisors. "If the overcharge negatively impacted compensation, we will be addressing that as well," promised Mr. Reaburn.