Without getting into specifics, the Ontario 2020 budget, entitled Ontario’s Action Plan: Protect, Support, Recover, announced on Nov. 5 that the government is proposing legislative amendments “to ensure this sector (the life and health insurance industry) is not vulnerable to exploitative behaviour by individuals and companies using life insurance policies with side accounts for investment purposes.”

Although the statement appears sweeping, a spokesperson for the Ministry of Finance says the item is specifically related to the issue of side accounts associated with some universal life insurance policies. Side accounts can house contributions that are used to pay future premiums, but they can also earn investment returns, including those derived from guaranteed interest rates, depending on the policy’s terms.

He says institutional investors in Saskatchewan have attempted to use side accounts as investment vehicles in the past by depositing large sums – some of which were rejected by insurers, resulting in litigation.

“Insurers have noted that if large investments were permitted into these accounts, their solvency could be compromised or premiums would have to increase to cover the additional expenses incurred as a result of the investments,” says Scott Blodgett, with the Ontario Ministry of Finance.