The Saskatchewan government's pending sales tax on insurance premiums could jeopardize the ability of some individuals to afford life insurance, said Greg Pollock, president of the Financial Advisors Association of Canada, (a.k.a. Advocis), at the Canadian Association of Independent Life Brokerage Agencies' (CAILBA) national conference in Niagara-on-the-Lake, Ont. on Thursday.
In Saskatchewan's provincial budget, tabled in March, the government announced that provincial sales tax (PST) of 6% would apply to all insurance premiums, with some exceptions, such as reinsurance and annuity contracts. This change will be effective Aug. 1 and will not apply to policies in force prior to that date.
"This caught us a bit by surprise," said Pollock during an interview with Investment Executive at the CAILBA conference. "It's the only province that has introduced sales tax on individual insurance products."
Advocis has been lobbying against the pending change to the application of the PST. Pollock noted that life insurance is a vehicle that some clients use to invest their savings.
"A lot of life insurance products are alternative forms of savings, and the government typically doesn't tax savings products," Pollock said. "We've asked [the government] to look at this again and examine this again and perhaps look at some alternatives with us."
Advocis members in Saskatchewan have expressed concerns about the new policy, and members in other provinces are concerned that other jurisdictions could follow suit, Pollock said.
The Insurance Councils of Saskatchewan (ICS) have also heard concerns from licencees in the province, according to Ron Fullan, executive director at ICS. Speaking at the CAILBA conference on Wednesday, he said he has urged licencees to voice their concerns to the government or to their professional associations.
"Our council is mindful of the potential impact of the changes," Fullan said. "We've worked with various industry associations to keep on top of what their lobby efforts were."
In response to the industry's lobby efforts, the Saskatchewan government delayed the implementation of the new policy by one month (from July 1 to Aug. 1 , Fullan noted. The government also changed the application of the PST to new insurance contracts only rather than applying it retroactively, as the budget stated initially.
Photo copyright: miluxian/123RF