Correction : Please note that an earlier version of this article stated that Derek Schaefer’s life and accident & sickness insurance agent’s license was revoked for one year. In fact, while the earlier decision by the Alberta Insurance Council imposed the revocation of his license for one year, the Insurance Council’s Appeal Board of Alberta decided instead on a one-year suspension as a penalty.
In that decision, the Appeal Board stated: “Revocation is the most serious form of penalty. In these circumstances, the Appeal Panel has determined that a one-year suspension would be an appropriate penalty, given the mitigating factors...A suspension would also recognize the opportunity for remediation and rehabilitation in these circumstances while providing both specific and general deterrence. The Appellant’s evidence and his written Personal Statement show all the steps that he has taken to ensure that this situation does not occur again.”
Agent Derek Schaefer has successfully argued before the Insurance Councils Appeal Board of Alberta that an earlier sanction from the province’s Life Insurance Council — one of the regulatory councils under the Alberta Insurance Council (AIC) — was too stringent. The appeals board overturned the $340,000 penalty and instead levied a $34,000 penalty. It also suspended Schaefer’s life and accident & sickness insurance agent’s license for one year.
The agent is accused of making misrepresentations on 68 client applications as phone numbers and fake addresses were used in numerous instances. Schaefer’s position was that the life insurance council did not interview any of the applicants directly, an omission, which they say goes to the core of the appeal. The insurance council, meanwhile, pointed out that Schaefer admitted to many of the transgressions.
“The Life Insurance Council’s conclusions contained in the decision are based on assumption, hearsay and inferences unsupported by first-hand evidence,” the appeal notes when summarizing Schaefer’s position. His appeal also takes issue with the fact that the decision lists 68 applications and treats them as distinct clients. The agent maintains that only 16 distinct client files were involved. “The rest of the purported applications were standard multi-carrier parallel submissions for the same individuals,” they state. (Although the appeal board lowered the penalty imposed, it still imposed penalties for all 68 applications.)
The council, meanwhile, says “the appellant conceded that many of the misrepresentations were noticeable. If the appeal panel does not find that the appellant was reckless in submitting this incorrect information, it is clear that he failed to do any due diligence to check it.”
They add: “Mr. Schaefer included incorrect information on the insurance applications. There is no dispute this occurred, and the appellant has acknowledged it.” Similarly, they point out that Schaefer also acknowledged making misleading statements.
Mitigating factors
The appeal board, however, also noted mitigating factors in the case, including that Schaefer was a relatively new agent. “He cooperated throughout the investigation and repaid all amounts at issue in full at the earliest opportunity,” the decision states. “He relocated to a situation where there are extensive training opportunities and supervision provided by colleagues.”
The appeal panel ultimately reduced the $5,000 per demonstrated offence, maximum penalty to $500 for each offence reducing the civil penalty to $34,000.
