THE INSURANCE Brokers Association of Canada is calling on its sister associations and members to contact members of Parliament with concerns over the federal government’s proposed tax review.
IBAC president Robert Harrison told Thompson’s that many small business owners — not just brokers — are concerned with the review.
“Many of the 36,000 brokers across the country are small business owners and many of them save money in their corporations and companies for when times are not as profitable,” said Mr. Harrison, who is an account executive at Toronto-based brokerage Martin, Merry and Reid.
“Putting that capital at risk . . . we are not certain that some of the proposed changes aren’t going to have a negative impact on lots of small business owners.”
The federal government announced proposed tax reforms as part of its 2017 budget this summer.
It said it wants to crack down on private corporations gaining unfair tax advantages.
Three main tax reduction strategies used by private corporations are under review: ‘sprinkling’ income using private corporations, which enables private corporations to transfer funds via dividends or capital gains to family members who are subject to lower personal tax rates or no tax at all; holding a passive investment portfolio inside a private corporation, which may prove financially beneficial for owners of private corporations because corporate income tax rates are generally lower than personal rates; and converting private corporation’s regular income into capital gains to take advantage of lower tax rates on them.
“From an IBAC perspective, I think there is a collective concern that (brokers) are really going to take a hit,” Mr. Harrison said.
“Some professionals are going to be taking a 30% to 35% reduction in income — can you really expect them to continue in business?”
Mr. Harrison said IBAC doesn’t plan to meet with the finance minister to discuss this because it is more effective if a grassroots movement occurs.
“We are encouraging members to (contact) their MPs, explaining that small businesses are the backbone of the country and brokers are the same thing,” Mr. Harrison said.
Meanwhile, IBAC is planning to continue its consumer protection advocacy this year under the leadership of new ceo Peter Braid, the association’s incoming president said.
Scott Treasure, founding partner of Excel Insurance Group and ceo of Edmonton-based Treasures Insurance and Risk Management, told Thompson’s that the conversation with government officials still revolves around maintaining the current Bank Act provisions that protect consumers.
“We continue to view that the prospect of being sold something at the point of granting credit . . . is a situation that creates an implied pressure,” he said. “It’s pretty simple and a message that all political parties have been able to get behind.”
He said brokers are eager to compete with banks but granting credit and selling insurance should remain separate transactions.
Mr. Braid, former member of Parliament and parliamentary secretary for infrastructure and communities in the Stephen Harper government, replaced longtime IBAC ceo Dan Danyluk last February.
“Peter was a very well respected MP on all sides and that was one of the things we were happy to know going in,” Mr. Treasure said. “That is certainly a benefit to brokers.”
It was his other skills — consensus building and passion for the broker channel — that secured him the top spot.
“He was so interested in the challenge and taking it on, wanting the job and had that passion for it,” Mr. Treasure said. “He has also worked with similar groups and dabbled in the insurance field.”
Mr. Treasure said IBAC will balance its various provincial members’ different motivations and interests.
But the essence of the association’s work will continue to be raising awareness of the broker value proposition.
“We offer choice at the point of purchase, advocacy at the time of claim and advice throughout the life of the policy. And really no other distribution channel can do that,” he said.
“It’s good (for consumers) not to be talking to the same company that is paying the claim and have that be your only outlet.
“We hear that from our broker members and insurance company partners.”
And while insurance companies all approach direct selling differently, IBAC’s message will remain the same.
“I do not begrudge what certain companies have done — certainly the industry is changing,” Mr. Treasure said.
“But our best plan is focusing on the broker value proposition and that really answers all the questions.”