Disability, Life, and Anti-Money Laundering

Table of Contents

Chapter 1 - Protecting Income: Disability Insurance		1
	Assessing Contributions	4
	Canada’s Disability Insurance Plan	7
	STD and LTD Benefits	9
	Disability Impacts the Family	10
	Historically Speaking	11
	Disability Statutes and Programs	14
	Council of Canadians with Disabilities	15
	Employment Issues Facing Those with a Disability	17
	Disability Costs to Society	18
	Disability and Human Costs	19
	Disability and Physical Costs	20
	Disability and Social Interaction	21
	Disability and the Resulting Financial Costs	21
	Insuring Disability Through Private Insurance	22
	Earned Income is an Asset	23
	Defining Disability for Insurance Purposes	24
	“Regular Occupation” Definition	24
	“Transitional Your Occupation” Definition (TYO)	26
	“Modified Own Occupation” Definition	26
	“Disability in Any Occupation” Definition	27
	Involuntary Unemployment	27
	Can the Policy Be Canceled or non-Renewed by the Insurer?	28
	Policy Elimination Period	28
	Disability Benefit Period	29
	Occupational Classification	29
	General Description of Occupational Classes (Chart)	31
	Benefit Limitations Based on Occupational Classes (Chart)	32
	The Uninsurable	33
	Partial Disability	34
	Medical Underwriting	35
	Financial Underwriting	37
	Guaranteed Future Insurability	38
	Renewability	39
	Policy Pricing	39
	Group Disability Insurance	39
	Disability Insurance and Hobbies	40
	Selecting Financially Strong Insurance Companies	41
	Insurance Rating System Criteria	41
	The Insurance Rating System’s Values	41
	Is the Rating Trustworthy?	42
	Financial Security Ratings	44
	Insurer Risk	45
	Ethical Issues Relating to the Financial Industry	45
	Suitability	49
	Conflicts of Interest	49
	Prioritizing the Needs of the Client	49
	Canadian Council of Insurance Regulators (CCIR)	49
	Face-to-Face Presentations	49
	Adequate Communication Skills	50
	Finding the Right Products	51
	Full Disclosure	51
	Recognizing and Addressing a Conflict of Interest	52
	Placing the Client’s Interests First	53
	CCIR Considers Issues in the U.S.	55
Chapter 2 - Life Insurance		56
	Insurance Agents	56
	Life Insurance Contracts (terminology)	57
	Life’s a Gamble	58
	Defining Risk	59
	Comfort Level	60
	Insurance Risks, Perils, & Hazards	61
	Chance of Loss	61
	Morale & Moral Hazards	61
	Law of Large Numbers	62
	Types of Risk	62
	Investment Risk	63
	Issuance	64
	Insurable Interest in Life Insurance	65
	A Fairytale Case Study	67
	Stranger-Originated Life Insurance (STOLI)	68
	Charitable Use of STOLIs	70
	Life and Viatical Settlement Agreements	72
	Definitions	72
	Understanding the Viatical Product	74
	How do Viatical Settlements Work?	75
	Purchasing Partial Policies	75
	Viatical Participant Confidentiality	75
	Paying the Viator	76
	Buyer’s Remorse	76
	Following Payment for the Life Policy	76
	Checking Health Status through Physicians	77
	Extra Policy Benefits	77
	Other Available Options (Besides Selling the Policy)	77
	What Every Policyowner Needs to be Aware Of	77
	Viatical Settlement Development	78
	Medical Underwriting	79
	Insurance Underwriting	80
	Consumer’s View	81
	Policy Ownership Transfer	83
	Policy Premium Payments	83
	Outstanding Policy Loans	86
	Additional Investment Fees	86
	Escrow Trust Accounts	87
	Viatical and Life Settlement Disclosures	88
	Personal Information Protection & Electronic Documents Act	89
	Insurance Policy Effective Dates	91
	Material Facts	91
	Beneficiary Designations in General	92
	Estate Creation	94
	Changing Social Times	94
	Two Basic Insurance Terms: Premium & Peril	95
	Betting Against the Insurance Company	95
	Good Financial Plans Involve Life Insurance Contracts	96
	The Intent	96
	Estate Planning: Procedures, Not Products	97
	Providing for Others Through Planning	98
	Using Discipline to Achieve Security	99
	Clarifying Client Objectives	99
	The Need for Broader Knowledge	99
	Basic Goals of Life Insurance	100
	Life Insurance Trusts	100
	Trust Beneficiaries	101
	Kinds of Life Insurance	101
	An Estate Planning Tool	101
	Term Insurance: No Money, Just Coverage	102
	Whole Life Insurance: the Granddaddy	103
	Endowment Insurance: Forced Savings	103
	Universal Life: Separating Expenses	104
	Variable Universal Life (VUL): Few Guarantees	104
	Survivorship Life: Insuring Two or More People	106
	Single Premium Whole Life: One Payment	107
	Buy-Sell Agreements	107
	Annuities	108
	Annuity Terminology	109
	General Policy Provisions	112
	Planning for Increased Life Spans	113
	Longevity Risk	114
	Variable Annuities (Segregated Funds)	114
	Maturity Guarantees / Death Benefit Guarantees	115
	Performance of Funds is Not Guaranteed	115
	Types of Contracts	116
	Registered Retirement Savings Plans (RRSP) Section 146 of the Income Tax Act	117
	Non-Registered Annuities	118
	Prescribed Treatment / Non-Prescribed Treatment	119
	RRSP Types	120
	Contributions	121
	Spousal RRSP	122
	Taxation of Deferred Annuities	122
	The Decision to Buy	122
	Life Income Funds	123
	Immediate Annuities	124
	Payout Options	124
	Single Life Payout Option	125
	Joint-and-Survivor Payout Option	126
	Installment Refund Life Payout Option	126
	Variable Annuity Payout Option	127
	Term Certain Payout Option	127
	Other Products	127
	Dollar Cost Averaging	128
	Annuity Beneficiary Designations	128
	Annuity Contingent Beneficiaries	129
	The Insurance Contract	130
	Deposits	131
	Surrender Penalties	131
	Retirement Savings Plan (RSP) Endorsements	132
	Switches	132
	Investment Options	133
	Product Suitability	134
	Saving Adequately	134
	The Reason for the Goal (the Reward)	134
	Determining Goals	137
	Basic Product Information Requirements	139
	Determining Product Suitability	139
	Product Replacement	141
	Identifying Suitability Issues	142
	It is Not a Liquidity Issue, But Rather a Suitability Issue	143
	A Comprehensive Financial Plan	144
	The Investment Industry Regulatory Organization of Canada (IIROC)	146
	Overview: Our requirements are not “one-size-fits all”	146
	Know-your-Client	147
	What is the KYC obligation?	147
	What types of KYC information must be collected?	147
	What specific KYC information must be collected for suitability determination purposes?	149
	Is the KYC obligation the same for all accounts?	154
	Who carries out the KYC process?	155
	Interactions with the client	155
	Use of one set of KYC information for multiple accounts	157
	Additional considerations for managed accounts	158
	What questions should be asked when inheriting a client relationship?	158
	What if the client won’t provide the information?	158
	How often must client information be updated?	159
	Is there anything that should not be done?	160
	Suitability	161
	What is the suitability determination obligation?	161
	How should a suitability determination be carried out?	163
	What is the difference between account appropriateness and suitability?	165
	When must a suitability determination be made?	167
	Can suitability be assessed on a combined basis for multiple accounts?	169
	What are the obligations when a client has accounts at multiple dealers?	170
	Under what circumstances can household account suitability determinations be performed?	171
	What are the obligations when a client has accounts in separate business lines at the same dealer?	171
	Who can assess suitability?	173
	What if a client wants to make an unsuitable trade?	173
	Is there anything that Dealers and Registered Individuals should not do?	173
	IIROC review of a Registered Individual’s or Dealer’s suitability determination	173
	Applicable Rules	174
	Previous Guidance Note(s)	174
	Annuity Surrender Values and Penalties	174
	Financially Sound Insurers	175
Chapter 3 - Anti-Money Laundering		176
	Client Due Diligence	178
	Determining Identification in a Face-to-Face Interview	178
	Identification of New Business Clients	179
	Confirming the Client’s Business	180
	Collection of Beneficial Owner & Director Information	180
	Not-For-Profit Organizations	180
	Exceptions to Requirements for Business Clients	181
	Third-Party Determination	181
	Politically Exposed Foreign Person (PEP) Requirement	182
	Retention of Client Records	182
	Suspicious Transactions	182
	“Red Flag” Indicators	183
	Tipping Off	183
	Large Cash Transaction Reporting	183
	The Proceeds of Crime and Terrorist Financing Administrative Monetary Penalties Regulations	183
	Terrorism Produces Insurer Risk	184
	Proceeds of Crime and Terrorist Financing Act	185
	Object of the Act	185
	Company Objectives	187
	Policy Application	187
	Restricted Businesses and Entities	188
	AML Education	188
	A Change in Thinking	188
	Product Identification	190
	Money Laundering Indicators Not Unique to Insurance Products	194
	Characteristics of the Money Launderer	194
	Last Page	196

United Insurance Educators, Inc.

PO Box 1030

Eatonville, WA 98328

(800) 735-1155