Financial Institutions Commission of British Columbia

~~ .* -41.,., C BRlTISH OLUMBIA IN THE MATTER OF THE FINANCIAL INSTITUTIONS ACT R.S.B.C. 1996, C. 141

and COAST TO COAST PROVINCES PLAN CORPORATION, CMP CANADIAN MEDICAL PLANS INC., KARL MARIO SCHMIDT, and THE GRAND ORANGE LODGE OF BRITISH AMERICA (DBA THE GRAND ORANGE)

ORDERS UNDER SECTIONS 244(2) AND 238

NOTICE OF RIGHT OF HEARING OR APPEAL UNDER SECTIONS 238(2) AND 242

UPON REVIEWING THE SUBMISSIONS AND EVIDENCE OF STAFF, I make the following findings and orders:

1. There are some historical societies in Canada which offer insurance products to their members. Certain historically licensed societies are able to provide insurance in British Columbia under a deemed authorization.

The parties and insurance at issue 2. Coast to Coast Provinces Plan Corporation (CCPP) was registered in British Columbia as an extraprovincial company on August 9, 2006. The head office reported with the British Columbia Registrar of Companies is S22 . 3. CCPP was federally incorporated on March 14,2000. Karl M. Schmidt is listed as the sole Director.

4. CCPP operates two company websites, at hrtp://ccpp.ca and hrtp://coastprovincesplan.ca. The two websites contain the same information, including the same descriptions,

Superintendent of Mailing Address: Web Address: Financial Institutions 2800 - 555 West Hastings Street www.fic.gov.bc.ca Vancouver British Columbia, V6B 4N6 Telephone: 604660-3555 Facsimile: 604 660-3365

2 photographs, and webpages. CCPP's contact information is provided on each website as telephone numbers 250 468-7780 and 1-800-432-5565, fax number 250468-5705, and email addressinfo@coastprovincesplan.ca.

5. CCPP was licensed as a life agent pursuant to the Financial Institutions Act (FIA) on June 1,2008 by the Insurance Council of British Columbia (Council) and the license was terminated August 3,2016 when it failed to make its annual filing. As at June 5, 2017, CCPP was not licensed with the Council.

6. Council records show that the nominee for CCPP as of June 1, 2008 was Karl Mario Schmidt (Mr. Schmidt). He held a life licence with the Council, which was changed to inactive on August 3, 2016, to coincide with the cancellation of the agency licence. His residential address is the same as the CCPP head office address as registered in British Columbia.

7. The Grand Orange Lodge of British America (The Grand Orange) has an office address of 94 Sheppard Avenue West, Toronto, ON M2N IM5. The Grand Orange was historically licensed and on transition to the FIA in 1990 was deemed to have a business authorization under section (now) 191 of the FlA. Its primary regulator is the federal Office of the Superintendent of Financial Institutions (OSFI) and is authorized by that body to issue life and accident and sickness insurance.

8. The Grand Orange Lodge of British America Benefit Fund a.k.a. Orange Insurance and a.k.a. the Orange Benefit Fund (OBF Product) is an insurance product offered by The Grand Orange.

9. The website for the OBF Product at http://orangebenefitfund.caidentifies its national broker as CCPP, and provides a link directly to the CCPP website at http://ccpp.ca.

10. CMP Canadian Medical Plans Inc. (CMP) was registered in British Columbia as an extraprovincial company on November 30,2009. The head office address is reported as S22 . CMP was federally incorporated on August 8, 2008. The registered office address is reported as S22 . Mr. Schmidt is listed as a Director with the same address and Sabrina N. Schmidt is listed as the second Director with an Ontario address.

11. As at June 22, 2017, staff was unable to locate a company website for CMP. 12. CMP does not hold a business authorization from FICOM or an insurance agent license with the Council to carryon insurance business within British Columbia. The investigation 13. On May 29,2017, a complainant contacted Council via email to inquire about a mailer (Mailer) he received at his home the week prior. The complainant's email raised the following concerns:

3 a. The Mailer appears to be from an insurance company soliciting clients. b. The content of the Mailer discusses Canadians receiving additional benefits on top of the Canada Pension Plan (CPP), stating that recipients must register to take advantage of such benefits. c. The Mailer contains a copyright for Coast to Coast Provinces Plan (CCPP), which the complainant identified as a private insurance company based on Vancouver Island that is selling health care plans. d. The Mailer mimics the look of an official government letter. The letter has the same font and type of paper used in government correspondence. e. The Mailer included a form asking for personal information and a postage-paid return envelope (Return Envelope) addressed to the OBF-CCPP National Business Centre with a PO Box in Victoria.

14. The complainant's email included seven photographs of the Mailer. On May 31, 2017, the Council forwarded the complainant's information to FICOM. 15. The Mailer includes the following information: a. The Mailer's content prefaces the solicitation for benefits with references to the need to supplement government health and benefit programs and plans. b. The Mailer describes its benefits as a low-cost, non-taxable benefit to Canadians nationwide to cover health and living benefits not paid by the Canada Pension Plan. The Mailer goes on to state the consumer must register to take advantage of all benefits available. c. The Mailer describes insurance coverage for both medical and final funeral expenses. d. For example, the second half of the Mailer states, "Provincial cutbacks have made it necessary to carry Extended Health Care ... " to "bridge the gaps in your Provincial Health Care." The "National benefit" offered by this Mailer will protect the consumer against the high cost of medical expenses. e. The Mailer advertises benefits with "Guaranteed Emollment for ages 0-90", and adds there are no medical exams or doctor reports required. f. The form, called a "registration card", included on the Mailer requests the personal identifying information of the consumer, including name, date of birth, spousal name, and contact information. The form asks the consumer to tick a box next to the insurance coverage they are interested in. g. The section of the Mailer discussing health care benefits provides a contact number of 1-800-357-3205. h. The return envelope is addressed to OBF-CCPP National Business Centre, Benefits - Administration, PO Box 8772 Stn Central, Victoria, BC V9W 9Z9. 1. The back of the Mailer contains a copyright in small font stating, "© Coast to Coast Provinces Plan". CCPP is not identified elsewhere on the Mailer. J. The Mailer and return envelope do not refer to The Grand Orange. 16. CCPP was licensed with Council as a life agent from 2008 to July 2016. Its licence was terminated after it failed to make its annual filing in 2016. CCPP was notified of this by way ofletter from Council dated August 3, 2016 confirming that CCPP's licence had been

4 terminated and CCPP was no longer authorized to conduct insurance activities effective August 3,2016. The letter also noted that the authority of all licensees authorized to represent CCPP had been automatically ended.

17. A letter was also sent from Council to Mr. Schmidt dated August 19, 2016, advising him that his licence status was changed to inactive, effective August 3, 2016. The letter stated that Mr. Schmidt could not engage in any insurance activities in British Columbia while his licence status is inactive.

18. CCPP did apply in March 2017 for a new licence; however, Council closed the file after CCPP failed to respond to two deficiency letters. CCPP's principal and previous nominee is Mr. Schmidt. Mr. Schmidt attempted to be licensed in March 2017 but his applications have been incomplete and not processed by the Council.

19. The 2017 licence application and related correspondence from CCPP (Licence Application) was received by Council on March 27,2017. The Licence Application was signed by Mr. Schmidt. Attached to the Licence Application were the following letters:

a. A letter to Council, in support of CCPP' s application, dated March 21, 2017 from Michael Strain, CEO of The Orange Benefit Fund stating "Please accept this letter as approval of Coast to Coast Provinces Plan as an authorized entity to write all product offerings provided by The Grand Orange Lodge of British America Benefit Fund". b. Two letters from Council to Mr. Schmidt and CCPP, dated April 6, 2017 and May 9, 2017. These letters identified the applications submitted in March 2017 were incomplete. The letters go on to advise that until all outstanding requirements have been met, CCPP's application is not approved and therefore, CCPP is not licensed under the FlA. c. A letter from Council to Mr. Schmidt and CCPP dated May 31, 2017, stating since CCPP did not provide the information required to complete the application, it was deemed incomplete and the application file was closed.

20. After receiving the complainant's information, Council staff contacted Mr. Schmidt on June 1,2017 via his British Columbia cell phone number listed in his Council file to verify his activities. Council staff advised Mr. Schmidt that they received information that led Council to question whether CCPP and/or Mr. Schmidt were engaged in unlicensed insurance business. Mr. Schmidt stated he had not been conducting insurance activities in British Columbia. He explained he was working as a marketing subject matter expert. Council staff asked Mr. Schmidt to confirm his activities in writing.

21. He did so by email on June 1, 2017 and acknowledged that he was aware his agency licence had lapsed in 2016. Mr. Schmidt wrote that he failed to file the annual filing for CCPP in 2016 because his father had passed away. He advised Council staff he intended to submit the required applications and fees for both he and CCPP. In his email.Mr. Schmidt stated "Coast, meaning me, is an employee of the Carrier. This has been in the works for some time as I am Semi-retired." Mr. Schmidt further stated that CCPP is only acting for The Grand Orange as a marketing arm, and they have been using the same

5 Mailer for approximately ten years in British Columbia. He stated that the Grand Orange Lodge is the insurance carrier involved with the Mailer.

22. In an email from Mr. Strain, CEO of the Orange Benefit Fund, to Council on June 2, 2017 Mr. Strain states that The Grand Orange Lodge of British America Benefit Fund is licensed to sell life and health insurance as a fraternal society. He stated: Coast to Coast is purely a marketing agent for me right now. They are not involved in selling insurance in any manner whatsoever. In the past Coast was licensed to engage in insurance activities in BC but that has lapsed. They are in the process of getting it reinstated but knowing that the license is not current we ensured that Coast is only doing marketing for us right now. The insurance activities are being handled by a fully licensed agent in your province who works directly with The Grand Orange Lodge of British America Fund (i.e. no interaction with Coast whatsoever) to market our products as well as products for other carriers. I can provide the name of that agent if that would help. I would also point out that we are a Fraternal Benefit Society and do qualify for an exemption but have not relied on it as we have the fully accredited individual.

In terms of the materials the return envelope included with the lead clearly identifies us as the carrier and the application provided also clearly identifies the carrier. My understanding is that some of the envelopes used in the first mailing may have been Ontario envelopes which was a processing mistake. I am currently conducting an internal audit to identify what happened and immediately implemented a ceasing of any mailings in BC until that is resolved.

23. Insurance agents acting on behalf of extraprovincial fraternal benefit societies are not exempt from the licensing requirements in British Columbia. 24. The licensee later identified by Mr. Strain has not been not associated with CCPP since 2008.

25. The Grand Orange is not identified anywhere on the Mailer or Return Envelope. the return envelope is addressed to a PO Box in Victoria, British Columbia. Nanoose Bay are both located on Vancouver Island. Coast Provinces Plan on the back, and the addressee is "OBF-CCPP".

26. As at June 13,2017, the CCPP websites at http://ccpp.ca and http://coastprovincesplan.ca provide a link to a webpage for consumers to "Request a Quote". This link, which is part of the CCPP websites, asks for an applicant's contact information, and inquires what type of insurance they are seeking. The options listed include life insurance, travel medical insurance, and funeral insurance, amongst others. All of the webpages contain a 2017 copyright for CCPP at the bottom of the page. It would appear that the website owner has kept the sites up to date.

27. Archive pages show that these pages were live in March and October 2016, with no changes made to their content.

In fact, Victoria and The return envelope refers to Coast to

6 28. The telephone number listed on the Mailer for extended health care inquiries is also identified on CCPP's websites at http://ccpp.ca and http://coastprovincesplan.ca. 29. On June 19,2017, staff placed a pre-text consumer call to 1-800-357-3205 and spoke with a female identified as Krista. Krista stated the caller had reached "Coast to Coast". When asked what the company does, Krista stated "We do life insurance and health insurance". On June 20, 2017, staff again called 1-800-357-3205 and the call was answered by a female stating, "Coast to Coast, this is Krista". The following discussion took place: a. Staff advised she had received a Mailer and was interested in obtaining further information for extended health care as she did not have a plan. b. Staff asked for a quote for an extended medical plan. She was asked for her location and advised Vancouver, and asked if she is under 65 years of age, to which she replied yes. Krista repeated these two points, that staff is in Vancouver and under 65, and then stated the premium would be $63.60 per month for extended medical. c. Krista explained the extended medical coverage includes the following limits: 1. $350 per year for prescriptions. 11. $350 per year for dental. 111. $200 per service per year for paramedical, which includes chiropractor, massage, naturopath, and physiotherapy. The plan covers $20 per visit, for a total of 10 visits per year. IV. $100 every two years for eyeglasses. v. $50 every two years for eye exams. VI. $500 for ambulance. vii. $1,000 for home care nursing and medical equipment. d. Krista confirmed that staff would not need a medical exam or require a doctor to sign off on the application. e. Krista offered to send out an information package. Staff noted the Mailer did not identify a company name or website address, and asked for this information. Krista identified the company as "Canadian Medical Plans" and provided a website address of ccpp.ca. Staff indicated the website address did not make sense considering the company name and asked to confirm the information provided. Krista confirmed the company name and website as previously provided. f. Krista stated she is located in Ontario, but clarified they are a Canada-wide company. g. Krista advised they also do travel insurance, which can be applied for directly online at ccpp.ca. h. Staff queried as to the name of the insurance company and who she would be dealing with for any claims. Krista replied, "The plan is under Canadian Medical Plans". She went on to explain that staff would only deal with CMP, adding "we process the claim". CMP then sends the information to a company in Mississauga identified as ESORSE, who handles the deposits for reimbursement.

7 1. Reimbursements are handled either via direct deposit if premiums are paid with a chequing account, or a cheque is mailed out if premiums are paid with a credit card. J. Staff asked whether an application should be submitted by telephone or mail. Krista explained the information package she can mail out contains an application. The completed application along with either a void cheque or credit card number can then be mailed back.

Legislative Provisions 30. Section 1(1) of the FIA defines insurance business: "insurance business" means (a) undertaking or offering to undertake to indemnify another person against loss or liability for loss in respect of a certain risk or peril to which the object of the insurance may be exposed, (b) soliciting or accepting any risk, ' (c) soliciting an applicationfor a contract of insurance, (d) issuing or delivering a (i) receipt for any contract of insurance, or (ii) contract of insurance, (e) in consideration of any premium or payment, granting an annuity on a life or lives, (f) collecting or receiving any premium for a contract of insurance, (g) adjusting any loss covered by a contract of insurance, or (h) advertisingfor any business described in paragraphs (a) to (g), whether or not the person undertaking an activity or activities set out in paragraphs (a) to (h) can or does distribute any gain, profit or dividend, or otherwise disposes of the person's assets, to a member or shareholder of the person other than during winding up or on dissolution,·

31. Section 1(1) of the FIA defines "insurance company": "insurance company" means (b) an insurer incorporated by or under another Act, or and includes (g) a society that is named in an order of the commission made under section 193 (2) of this Act to which society section 59 applies because of section 193 (3),

8 but does not include (i) a society deemed under section 191 to have a business authorization issued under Division 5 of Part 6,

32. Section 1(5) of the FIA provides that where the risk covered by the insurance is located in BC, the activity referred to in the definition of insurance business is deemed to be activity inBC:

1(5) An activity referred to in paragraph business" in subsection (1), whether or not the activity is conducted in British Columbia, is conclusively deemedfor carrying on of insurance business in British Columbia if the risk or peril is

located in British Columbia.

33. Section 75 of the FIA prohibits unauthorized insurance business: 75 A person must not carryon insurance business in British Columbia unless the person is

(a) an insurance company or extraprovincial insurance corporation that has a business authorization to carryon insurance business, (b) a company registered under the Insurance (Captive Company) Act, (c) a member of a reciprocal exchange as defined in Section 186 for which a permit under Section 187 has been issued and is in effect, (d) licensed under Division 2 of Part 6 as an insurance agent, insurance salesperson, insurance adjuster or employed insurance adjuster and is carrying on the insurance business only in that capacity, (e) the deposit insurance corporation, the Canada Deposit Insurance Corporation or the Insurance Corporation of British Columbia, (f) an insurer (i) [Repealed 2004-48-48.} (ii) that administers an insurance compensation plan designated by regulation for the purpose of Section 66 (2), (g) a society described in Section 193 (1) (a) to (g) that, immediately before September 15, 1990, was carrying on the business of insurance, (h) a credit union that is carrying on insurance business only by making or participating in contracts of insurance as permitted by Section 82 of the Credit Union Incorporation Act, or(i) a central credit union that is carrying on insurance business only by providing or arranging insurance as permitted by Section 90 (2) of the Credit Union Incorporation Act. 34. Section 91 of the FIA provides that an insurer's identity must be clearly indicated:

(a) of the definition of "insurance the purposes of this Act to constitute the

9 Disclosure of identity in advertising, etc 91 In all advertising, correspondence, application forms, evidences of indebtedness and other documents in its control relating to its business, a financial institution must ensure that its identity is clearly stated. 35. Sections 168 and 171 of the FIA provide that licenses are required for insurance agents: Definitions 168 In this Division, unless the context otherwise requires, "insurance agent" means a person, other than an insurance company or an extraprovincial insurance corporation, who solicits, obtains or takes an application for insurance, or negotiates for or procures insurance, or signs or delivers a policy, or collects or receives a premium;

"licence" means a licence issued under this Division; "licensee" means a person licensed under this Division. Prohibition of unlicensed agents and salespersons 171 (2) A person must not act in British Columbia as an insurance agent or insurance salesperson unless the person is licensed as an insurance agent or insurance salesperson, as the case may be.

(3) Subsection (2) does not apply to aperson or class of persons exempted by the regulations.

36. Sections 191 and192 speak to which provisions of the FIA apply to The Grand Orange for certain purposes including disclosure and enforcement, including section 91 of the FIA (in Division 6 of Part 3):

Deemed business authorization for certain existing societies 191 A society that immediately before September 15, 1990 (a) was within a class described in section 286 (1) (a), (b) or (c) of the Insurance Act, R.S.B.C 1979, c. 200, and (b) was a corporation and licensed under the Insurance Act, R.S.B.C 1979, c. 200,

is deemed to have a business authorization issued under this Division on September 15, 1990 authorizing the society to carryon insurance business, but only to the extent necessary to allow the society to exercise the powers it has on that date, and that it continues to have after that date, to

10 (c) make contracts of life insurance under which more than $400 may be paid, (d) make contracts under which more than $400 may be paid by way of funeral benefit or relief, or (e) undertake to pay benefits or render services in the event of accident, sickness or disability or by way of pensions or annuities and to carry out the undertakings.

Provisions applicable 192 (1) Sections 1, 11,59, 62 to 64, 70, 75 to 81, Division 6 of Part 3, sections 112,127,129,132,133,135 to 143,159, Part 5, Divisions 1 and 3 of Part 7, Part 8 and Part 10 apply to and in respect of a society that, under section 191, is deemed to have a business authorization, as if the society were an insurance company as defined in section 1.