Wednesday, December 31, 2014

(No.279) " Buying life insurance in Canada: Part 1 - accidental death insurance is a lottery"

"Some informed opinions on buying life insurance in Canada:
Part 1 -- accidental death life insurance is a lottery."

by Alastair Rickard

As one who for years was both employed in the life insurance business and a public critic of it I was also dismissive of both certain journalists writing about it and of several self-appointed 'expert critics' of both insurance products and those who distributed them.

The main reason: they simply did not know that much about the business. In fact they operated (and largely still do) so far below the bar set by Joseph Belth, that longtime American leader in insurance criticism, that reaching it would for most require a rather long step ladder.

I do not aspire to write anything that might be termed a guide to buying life insurance in Canada. However I do have some opinions about insurance products. They are informed by both experience in the insurance business and knowledge of its products. They may be both interesting and useful to some of those who find worth their time.

This is the first of what will likely be a series of occasional columns.


The purchase of life insurance specifically providing death benefit protection in the event of accidental death (AD) generally reflects public ignorance and superstition as well as life insurance company culpability in both selling and shamelessly promoting not just a deceptive but essentially useless form of life insurance: i.e., a benefit payable only in the event of what is actually the highly unlikely accidental death of the insured.

Accidental death life insurance has as much to do with financial planning as does the buying of a lottery ticket -- to which both can be likened. If a life insurance death benefit is needed it is needed IF one dies and regardless of HOW one dies.

For many years I deprecated (both publicly in speeches and in the Canadian Journal of Life Insurance as well as within the life insurance companies by which I was employed)  the sale of accidental death insurance whether such coverage takes the form of an individual policy or an AD rider attached to an individual policy or group insurance.

The sale and ownership of such coverage encourages the illusion among its buyers that genuinely useful death benefit protection has been put in place while appealing to the unfortunate perception among many, perhaps most of its buyers that they have secured comparatively cheap life insurance death benefit protection. Indeed I have occasionally wondered if some AD buyers actually understand that AD coverage will pay off only if death results from a (non-excluded type) accident.

For such reasons as these, combined for some AD purchasers with the 'lottery ticket' appeal [ 'will I die accidentally?'], accidental death coverage has been a partial exception to traditional buyer resistance and to the need for active agent involvement in the sales process, i.e., an exception to the long standing industry axiom that most individual 'life insurance is sold not bought'.

Some life insurance companies have been led to conclude (foolishly in the main) that individual life insurance policies of the more expensive, 'non-lottery' type can be sold extensively and directly and with at least as much ease as, say, the AD coverage with which one of the big Canadian banks graciously informed me annually they had endowed me ['$1000 of free AD for a year -- and wouldn't you like to buy some more of this wonderful accidental death coverage?']

 Not being in the same risk  group as, say. a 16 year old male driving a sports car or a hang glider in the Himalayas, I declined each year's invitation as almost completely irrelevant. 

I have long believed that some deeper psychology is involved in the relatively greater appeal to some buyers of accidental death coverage than of the death benefit protection provided by ordinary individual life insurance policies, something beyond the lottery ticket and cost appeal aspects of AD. The New York Times (May 6, 2008) provided an interesting answer in an article entitled "Appeasing the Gods, With Insurance".

U.S. university research indicated that "tens of millions of people bought life insurance for scheduled flights in the U.S. [although]  not one of the [previous year's] insured passengers died in a crash. At some level they [apparently] believed that their [flight] insurance helped keep the plane aloft....

"We buy insurance not just for peace of mind or to protect ourselves financially but because we share the ancient Greeks' instinct for appeasing the gods... A magical belief in insurance sounds crazy because at a rational level we realize that our decision to forego an insurance policy is not going to affect pilots or mechanics. But ... because calamities are so vivid and easily brought to mind, we tend to overestimate their probability when we intuitively judge what will happen if we tempt fate."

If this sounds far-fetched as buyer motivation, how would you prefer to explain the purchase of life insurance by rational people, coverage that never or very rarely pays anything to anyone and is of financial benefit almost always only to the life insurance company issuing the coverage?

The fact that there are many members of the public ignorant or misguided enough to waste their money buying flight insurance or accidental death insurance (or, for that matter, tickets on government-operated lotteries) does not lessen by one jot or tittle my longstanding disagreement with the fact that the life insurance industry not only takes advantage of such ignorance but actively promotes and sells to it. It is a fundamental ethical question for the industry and one that, in the main,  has been avoided.

If life insurance companies were sincere about meaningful disclosure actually useful to consumers, they ought long since to have taken action -- for example -- requiring that every buyer of accidental death insurance must read and sign a form that requires that buyer to indicate that he or she understands that while everyone dies, relatively few of us die accidentally and in terms of the life insurance coverage he or she is about to purchase, a death benefit will be paid ONLY if he or she dies accidentally?

Such meaningful disclosure could be combined with a clear  statement of the actuarial likelihood of accidental death happening to the prospective life insured based on his or her age and gender?

How about including with this sort of needed consumer disclosure a pithy, attention-grabbing quote to assist the understanding of prospective buyers of accidental death insurance?

For example, something like this [from Discover  magazine]: " if nothing else killed you [excluding old age and disease, then an American adult] would on average live to be 1,743 years old before a fatal accident."

Such disclosure would not eliminate the purchase of accidental death insurance but it would certainly reduce it -- and that would be a positive change. More importantly it would support the proper use of life insurance as part of one's financial planning and, when death benefit protection is needed, its actual purchase instead of a lottery ticket called accidental death insurance.

The bottom line for life insurance buyers:

  • Do not waste on accidental death life insurance financial resources at your disposal for paying premiums on real life insurance -- a core element of a financial planning pyramid.
  • Buy an 'ordinary' life insurance policy that will pay its death benefit to your beneficiary regardless of the cause of your death.
  • Accidental life insurance is, as a product, the life insurance industry's own version of a lottery ticket.




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Saturday, December 13, 2014

(No.278) "Black & white in Savannah GA"

"Black and white in Savannah, Georgia"

by Alastair Rickard

The first time we visited Savannah, Georgia was quite awhile ago and  before the publication of 'the book' (as Savannahians refer to it), an event that transformed the city from a destination for mainly southern day trippers into a magnet for visitors from around the world.

'The book' was John Berendt's "Midnight In The Garden of Good and Evil", now commonly referred to as a non-fiction novel ( q.v., Truman Capote's "In Cold Blood"). 'The book' was published in 1994 and focused on events in Savannah which had occurred in the 1980s.

"Midnight In The Garden of Good and Evil" remained on the New York Times  bestseller list for a record 216 weeks having sold 3.3 million copies by the end of 2004. The book was also loosely the basis of the 1997 movie of the same name directed by Clint Eastwood.

When Pat and I first visited Savannah in the late 1980s the city was attracting fewer than 3 million visitors a year. By 2002 this number had more than tripled to 10.2 million -- because of 'the book'.

Why would a book that has been described as little more than a gossipy tale of a drag queen and some other Savannah characters mixed with a murder mystery have become one of the best selling works of English non-fiction ever? Apparently the answer remains a mystery to many Savannahians.

The central character in the book is Savannah antique dealer John Williams who was tried four times for killing a local male prostitute but not convicted. Williams, who died of pneumonia in 1990, lived in one of Savannah's historic antebellum mansions. We visited his Mercer House although I do not recall meeting Williams.

I do remember visiting the Hamilton-Turner House, also in Savannah's historic district, and being welcomed and squired around by Joe Odom, a gregarious Georgia lawyer who insisted on playing a grand piano for us (and singing) "Hard Hearted Hannah (the vamp of Savannah Ga)". Odom too became a character in the "Midnight" book. He died of AIDS complications in late 1991.

I was reminded recently of our initial 'pre-book' visit to Savannah by a New York Times article (Oct.3, 2014) written by Ron Stodghill: "Savannah, Both Sides".

For many years I have kept travel diaries whenever Pat and I go on a trip. Having read Stodghill's piece about the treatment of  black history today in Savannah I dug out my travel diary of our own first trip to the city.

The Stodghill article explains how a visitor today could leave after a week "without a clue about the essential role Georgia's oldest African-American community has played here". I not only do not doubt this assertion but I can state based on our own experience that it was even more the case 25 years ago.

Before going to Savannah back in the late 80s (and of course it was 'pre-Google') I had run across a passing reference in some Canadian publication to a black history tour being available in Savannah. As visitors who usually take tours the first time we visit a place, we had planned to include a black history tour among others.

On this initial visit to Savannah we had booked a stay (one not repeated subsequently) at the centrally located Hyatt Regency hotel overlooking the river front. It is a large modern structure, an architectural excrescence in the historic district, one that stands out like a boil on a baby's bum. Unfortunately the preservationists in Savannah were apparently not yet politically strong enough to prevent its construction and the demolition of historic structures which necessarily preceded it.

We took numerous tours of Savannah and area for which information and tickets were available at the Savannah Visitors' Centre and the tour desk in the hotel. At both places I asked for information and tickets about a black history tour. No matter to whom I spoke the answer was a blank look; they knew nothing of such a tour. Nor was there any suggestion of how I might contact someone who might know.

The history tours were led by charming and articulate white guides who, if they mentioned the presence of blacks in the area, did so only in passing and usually in the context of the Amercian Civil War. Other than such casual references black history did not exist. Eventually after several tries I found a telephone number and reached a person who arranged for us to take the "Negro Heritage Tour".

In his recent New York Times article Stodghill suggests that "the public persona of this city has often seemed -- perhaps intentionally -- stuck in its own kind of gauzy antebellum bubble". It certainly was that in aces a quarter century ago when our historical tours, while interesting, were so one-sided that they scarcely acknowledged the presence of its black residents either then or in Savannah's history.

The Negro Heritage Tour was not only interesting and informative but as we had expected it presented a perspective absent from tours organized by the Savannah Historic Foundation and others. Our tour was led by Walter Simmons, a retired public school principal who for thirty years had been involved in black education in Savannah and had himself grown up when the city was still segregated. He was a guide with a quiet commitment to his subject and much information to share.

There were four others on the tour who rode with us in the van driven by Simmons: two mature black ladies from Los Angeles we had met previously on a visit to the Andrew Low home and a young couple from Washington, D.C.. The husband recorded the tour guide's commentary as part of his research of his black 'roots' and worked hard at remaining distant from the rest of us.

This Simmons' black history tour visited areas where Savannah blacks past and present lived and he discussed at length local history and people, issues and politics. It was a perspective that could not have been further removed than it was from the white history tours we had already taken.

At one tour stop -- the First African Baptist Church built by slaves (on their own time and with resources they had themselves) -- we were welcomed by a church deacon and an elder who showed us around including a hiding place that was used as part of the Underground Railroad before the Civil War.

The deacon, the elder  and Walter Simmons each spoke with great feeling about a former pastor of the church, Ralph Mark Gilbert, who had died in 1956. He had been the church's pastor from 1939 to 1956 and a highly esteemed civil rights leader during the 1940s and 50s. I recall vividly the passion and conviction with which they expressed their pride in Gilbert and indeed their resentment of what they felt was the ignoring by the media of him as a leading father of the southern civil rights movement. In my diary later that day I wrote the following: "they said that Martin Luther King Jr. would stand in Gilbert's shadow by comparison".

After a lengthy tour of Savannah we ended the Negro Heritage Tour at the nascent black history museum located in the King-Tisdell Cottage which, like the tour itself, had been started in the 1980s by black volumteers to try to provide visitors with a black perspective on Savannah history absent from other tours on offer locally.

My impression of Savannah then (as with other visits we have taken since to some parts of the American south) was a continuation of largely separate white and black communities within a larger community.

A final illustration from our visit:

At the Hyatt, which had a large lobby, atrium and staircase, I was in the habit in the early evening during our stay of going to the lobby for a smoke. One evening I watched a steady procession cross the lobby and up the stairs of young white couples arriving for some sort of annual ball. The next night: the same thing was repeated except all the young couples were black.

All in all the symbolism seemed apt.


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Sunday, November 30, 2014

(No. 277) William Glackens, Walker Evans, Julian Schnabel & others: 3 exhibtions

"William Glackens, Walker Evans, Julian Schnabel and 
other artists: three major exhibitions"

by Alastair Rickard

We were in Fort Lauderdale, Florida recently after a cruise and made a point of visiting a place we had missed previously: the Museum of Art Fort Lauderdale. It is currently featuring three large special exhibitions.

The Museum is located in a modern building  just off East Las Olas, an area of precious shops and cafe/restaurants heavily promoted to tourists. The space devoted to galleries on two floors of the Museum is large and forms an appealing setting for visitors to view a trio of exhibitions all of which feature a large number of works.

I have written previously about the marvellous Barnes Collection now relocated in its new Philadelphia home ( see RickardsRead No.214, Sept. 8, 2012).  Albert Barnes as a key part of his ongoing effort from 1912 to 1951 to form a major collection of paintings sent American artist William Glackens to Paris in 1912 to buy paintings for him.

Glackens, himself attracted to and influenced by Impressionist art, played a major role in Barnes accumulating what is today one of the world's great collections of Impressionist amd post-Impressionist-era paintings. It contains, for example, 309 paintings by Renoir, Cezanne and Matisse alone.

William Glackens' own paintings have not received the attention they deserve. Today more than 500 of his works have found a home in the Museum of Art Fort Lauderdale. Currently the Glackens Wing is displaying a selection of 85 works he painted between the late 1800s and the 1930s. Glackens died in 1938.

Glackens has been called the American Renoir. I would not rate him that highly but he had a considerable talent which he used over the decades to display an impressive range of styles and subjects. While influenced by Impressionism his efforts were far from being slavish imitations.

His range was extensive: from family portraits (e.g., "the artist's wife and son", 1911) to still lifes such as "White Rose and other flowers"(1937) to French landscapes like "Along the Marne"(1925) and Renoir-esque paintings like "Lenna at one year"(1919).

This exhibition's selection from among Glackens' own paintings is enhanced by the inclusion of works painted by several American painters associated with him such as Marjorie Organ, John Sloan and Florence Scovel Shinn. Also adding to the exhibition is a gallery with a furnished sitting room as a setting in which to hang several of Glackens' paintings.

As Pat and I toured the Glackens exhibition I was struck by the similarity of Glackens (1860 -1938) as a painter to a contemporary: the Canadian painter  William Blair Bruce (1859-1906) the subject of a fine retrospective at the Art Gallery of Hamilton (Ontario) earlier this year.

Bruce too spent much time in France, was influenced in his style and and subjects by French Impressionism, Monet particularly and painted during his career an interesting range of subjects and styles (see RickardsRead column No.269, posted July 24, 2014).

Last year I purchased a newly published book written by James Agee (1909-1955) with photos by Walker Evans (1903-1975): "Cotton Tenants: Three Families" (Melville House, 2013).

In 1936 they went on assignment for Fortune magazine to Hale County, Alabama to report a story about white tenant farming families and their lives. Fortune never published the article, perhaps because its verisimilitude was too ideologically incorrect for the editors of Henry Luce's magazine. In 1941 Agee and Evans published a 400 page book inspired by their trip entitled "Let Us Now Praise Famous Men".

For fifty years the original unpublished report was presumed lost but a copy of the 30,000 word article turned up among Agee's papers. It was this article that was published in 2013 as "Cotton Tenants" and the volume includes 30 of Evans' photos. The article and especially the photographs depict effectively and with great impact the sort of American Depression era poverty and oppressive lives of the working poor.

This brings me to the second of the Museum of Art's three current major exhibitions: "American Scene Photography: Martin Z. Margulies Collection".

It is a very large display of dozens of photographs  by a number of important American photographers whose work Margulies collected such as William Jenkins, Dorothy Lange and Arthur Rothstein. For me the photographs in the exhibition with the most impact are by a wide margin Walker Evans' pictures of the depression poor and their lives including some taken during his Alabama trip with Agee.

The Margulies Collection of American photographs from the early 1900s to the present are the basis for an impressive exhibition.

The third of the Museum of Art's current trio of major exhibitions has in my view a title that is more interesting than much of the featured content: "Cafe Dolly: Picabia, Schnabel, Willumsen: Hybrid Painting".

One theme of the exhibition which (had I been asked) I would likely have called "A dog's breakfast of works drawn from the work of three artists" is apparently the presentation of 75 paintings "depicting narrative scenes". Some of the works are interesting, some are guaranteed to attract enthusiasm among the trendy and others are simply risible. Indeed Pat's impression, and her interest in art is broader and taste more liberal than mine, was that all three artists (to put it charitably) exhibited certain personal psychological problems in their art.

The trio of artists from whose bodies of work paintings have been drawn are the French painter Francis Picabia (1879-1953), a some time leading light of the Dada movement; the Danish painter J.F. Willumsen  (1863--1958), an artistic rebel who spent most of his career in France; and the American Julian Schnabel (b.1951) who it has been argued -- rather pretentiously --  destroyed the barrier between figurative and abstract art.

That isn't how I would rate Schnabel's work. But then these days we are too often dealing with artistic sensitivity and marketing reality that embrace, for example,  the payment of millions of dollars for Andy Warhol's colour tinting of celebrity photographs taken by somebody else. So, chacun a son gout.

Together these three substantial exhbitions comprise a rewarding experience and are an excellent reason to visit the Museum of Art Fort Lauderdale.

[For details visit the Museum's website]




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Monday, November 10, 2014

(No.276) "Feckless politics"

"Feckless politics"

by Alastair Rickard

The American Centers For Disease Control and Prevention say that 32,000 people are killed each year in the U.S. by guns, 60% of them being suicides.

In this context consider that the latest study of mass shootings in the U.S. (defined as those in which the shooter did not generally know the victims and in which at least 4 people were killed) shows that they have tripled just since 2011.

Over the past 3 years a mass shooting has occurred on average every 64 days while over the previous 29 years a mass shooting happened every 200 days.

Yet following the latest school shooting on Oct.24th there was almost no discussion during a feckless American political campaign leading up to the Nov.4 mid-term elections of need for any new gun control measures.

This reality is all the more pathetic given that these mid-term congressional elections had the lowest voter turnout since 1943 (36%) while at the same time setting records for campaign spending by and on behalf of Republican and Democratic candidates for the House and Senate: $4 billion plus an estimated $200 million in 'dark' (i.e., unreported) money. More than $1 billion of this election spending went to pay for TV ads.

The 2014 American election results reinforce the concerns held by many that the buying of elections (e.g., the cost per vote cast in Alaska measured by election spending was $120) by those with the most money to contribute: 94% of successful House of Representative candidates were those who spent the most; for the other chamber it was 82% of elected senators.

As a Canadian I am grateful, not withstanding further reform needed of our electoral system, for this country's formal limitations on election finances and campaign length.


Canadians are into another flu season. Yet 49% do not intend to get a flu shot.

While 35% of these give as a reason for not getting a flu shot the fact that they "never get the flu",
they seem either blissfully unaware of or indifferent to relevant facts.

These include the reality that 10-20% of Canadians will get the flu during each flu season and that the flu kills 4,000 Canadians a year and hospitalizes 20,000.


Less than a year from now Canadians will have another federal election.

During the recent Oct. 27 municipal elections in Ontario the voter turnout was an average 42% across the province. Even that low average turnout doubtless was increased by the unusually high 60% of voters participating in the GTA's Rob and Doug Ford animated election for mayor of Toronto.

The 2011 federal election produced the second lowest turnout in Canadian federal election history -- 54%.  Mr. Harper formed a government with a comfortable majority of seats having won with slightly less than 40% of the vote. Since then we have been cursed with endless references by both the Conservatives and various political pundits to Harper's "mandate".

I refuse to accept in other than a narrow legalistic sense that a government 60% of Canadian voters refused to support received any sort of meaningful 'mandate from the people'.

Rather, the federal Tories and many other governments of various political stripes ( as an example think of Bob Rae's 1990 NDP majority government in Ontario: 74 out of 130 seats based on 37.6% of the total vote) are the beneficiaries of a first-past-the-post parliamentary system so often unsuited to an electoral system with more than 2 parties.

Not that provincial elections always or even mostly produce results any more generally satisfying to the interests of the will of the majority than does the federal parliamentary system.

 I recall the Quebec Liberals losing in 1990 to the PQ although having received a greater share of the popular vote -- 43.5% & 48 seats vs 42.9% & 76 seats for the PQ. Indeed the PQ won 5 elections and 4 majorities in Quebec without ever receiving a majority of the votes cast. (That too has been the common pattern for decades in Ontario.)

How did this happen in Quebec?

Partly because the 125 Quebec seats are based on widely unequal populations. While it requires 63 seats to win a majority in the Quebec National Assembly, 45% of the electorate can win 63 rural seats while 55% wins the same number in urban areas.

The Jean Charest Liberal government after it first gained power set about studying the implementation of some form of proportional representation to address Quebec's electoral anomalies. After a time, like other Canadian politicians and parties who have expressed interest in fixing our first-past-the-post system, once in office the Quebec Liberal government's interest quietly receded.  


The new U.S. Federal Reserve Chair Janet Yellen has given speeches pointing out certain realities that Republicans in particular are not keen to discuss. In a recent Boston speech she talked about income inequality in the U.S. about which, she said, "the extent and continuing increase ... greatly concern me".

She cited, for example, the fact that 5% of American households have seen their share of wealth increase to 63% of the national total in 2013 from 54% in 1989 while the bottom 50% have seen their share decrease from 3% to 1% [sic].

The average net worth of the bottom half of U.S. households (62 million) was only $11,000 in 2013, 50% lower than the average in 1989 adjusting for inflation and 1/4 of them had zero wealth or negative net worth.

The American political system is self-evidently broken. Many if not the majority in its political class -- elected and unelected -- seem to be living in cloud cuckoo land. Apparently they believe not only that this extreme degree of economic imbalance in American society and the continuing growth in an American underclass can continue without being addressed but also that the U.S. will not ultimately face very serious disruption if it isn't.

Many of those who regularly view (and believe in) the self-constructed reality conveyed by FOX News, the de facto broadcasting arm of the Republican Party and its Tea Party wing in particular, disagree with the need for meaningful action. For the sake of American society's future stability, it is to be hoped that many more Americans will not be so gormless.



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Sunday, October 26, 2014

(No.275) "Performances to remember among the dross"

"Several performances to remember among the dross"

by Alastair Rickard

Among the movies, stage productions and television programs I've seen in my adult life the great majority have been easily forgettable, many others interesting but long forgotten while the fewest are still easily called up in one's memory because of their quality or sometimes because of
memorable performances they contain.

I was reminded recently of how apt to remain in one's memory are certain performances long after seeing them. That reminder came from watching several outstanding performances in two excellent American cable television productions.

Kelsey Grammer's performance as Tom Kane, mayor  of a modern day Chicago in "The Boss", is stunning and deserved to receive major recognition but did not. The series had two brief seasons in 2011-12 (18 episodes) on Starz, a minor American cable network. The series was excellent but was cancelled because of insufficient ratings before a third round was produced. Grammer's performance is dark like the series itself and is worthwhile viewing on DVD.

Similarly memorable is the drama "True Detective", an 8 episode 2014 limited series on HBO, long the cable home of superior drama on television in the U.S.. It was a 'one off' production and features outstanding writing and memorable performances by Woody Harrelson and Mathew McConaughey as two dissimilar and newly paired Louisiana homicide detectives. The story alternates between events in 1995 and 2012. Like "The Boss" the "True Detective" drama is dark but truly absorbing.

Frequently a performance is more memorable than the drama or comedy in which it appears. Often it is not even a leading role.

In this latter category was a particular favourite of mine: Peter Seller's cameo role as Dr. Pratt in the Bryan Forbes-directed 1966 English comedy "The Wrong Box". Sellers, as a venal man of medicine had only two scenes, both with Peter Cook. It is a very witty performance the dialogue of which I can still repeat along with Sellers.

The 1981 11 part British television dramatization of Evelyn Waugh's 1945 novel "Brideshead Revisited" was wonderfully dramatized by John Mortimer. It is a genuine classic of English language televison with a superior cast and many fine performances. Three in particular stand out in my memory, none of them among the drama's major leading roles:  John Gielgud as Edward Ryder, Laurence Olivier as Lord Marchmain and Nickolas Grace as Anthony Blanche. Recalling these performances I cannot imagine each of these roles being performed by anyone else.

Jane Austen's "Pride and Prejudice" has within the past several decades been dramatized in various television series and movies. The one most widely viewed and enjoyed on both sides of the Atlantic was the 1995 6 part English television series partly funded and later shown by the U.S. A & E cable network. Yes, that's the same "Arts & Entertainment" network that today shows almost nothing except cheap 'reality' series about red neck duck hunters and similar subsets of American society.

The performance from the series that made an acting career was Colin Firth's as Mr. Darcy. But the series included two performances by lesser characters that are true gems: David Bamber as the vicar Mr. Collins and Alison Steadman as Mrs. Bennet. It is a finely presented drama greatly enhanced by these performances

The English actor Alan Bates had several roles over his long career that have remained with me and are among my favourites. He played Jimmy Brewster, an ambitious young clerk in an upscale City firm, in Clive Donner's dark English comedy (1964) "Nothing But The Best". On stage in Stratford Ontario Bates impressed me in the title role of Richard III in the Festival's 1967 production (far more I regret to say than he did in Peter Hall's 1995 production of Ibsen's "The Master Builder"when it played at Toronto's Royal Alex).

Another performance jewel in Bates' long career was in a one hour BBC drama in 1983 based on a real incident in Moscow in 1958 where Guy Burgess, the MI6 English traitor Bates played, had fled and taken up residence. The story is based on the experience Australian actress Coral Browne had with Burgess in Moscow. The script was written by Alan Bennet as "An Englishman Abroad". Bates' performance as Burgess was superb.

Another performance that remains vivid in my memory is Michael Gambon's as the mystery writer Philip E. Marlowe, the lead character in Tim Potter's "The Singing Detective" of 1986.  Potter's brilliantly written 6 part series for English television became a classic and was rebroadcast in the U.S. to great acclaim -- as was "Brideshead Revisited".

Although some critics of the stage and cinema often pretend their reviews are not merely the product of their subjective reactions shaped by what they bring to watching the movie or play, others are more honest about it.

Memorable acting performances of the sort to which I have referred here (a few of those I have been fortunate to enjoy over the years) very often receive no awards or even critical notice much less praise.

For me they are often not the sort which tend to attract critical notice nor the kind in which the actor delivers a showy, scenery-chewing performance so beloved by some  drama critics.

Nor do one person's favourite performances necessarily or even probably strike the same note with others; individual taste -- as with music and cuisine -- always comes into such things. I encourage readers to take a few minutes to reward themselves by taking a quiet moment to savour the memory of performances that have made an impression and remained with them.

It can be rewarding to revisit something memorable in this age of entertainment jammed not just with the mediocre but with dross.

[All of the television and movie productions to which I have referred are available on DVD.]




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Sunday, October 19, 2014

(No.274) Banks selling insurance & the Supreme Court of Canada

"Banks selling insurance and the decisions of the Supreme Court of Canada:
a new development?"

by Alastair Rickard

Has there been an important development affecting the involvement of Canada's big banks in the sale of individual insurance -- as some apparently believe?

Canada's banks selling individual insurance coverage inside the branches of their huge national networks (other than long permitted types of insurance, e.g., creditors' group) -- and able to use their leverage on bank clients to 'persuade' them to buy through/from the bank -- have long been a competitive concern of the insurance industry (both life and property & casualty).

I have written extensively on various aspects of banks and insurance in both the Canadian Journal of Life Insurance and in columns for RickardsReadI argued for many years in articles, editorials, speeches, life insurance industry committees and internal company memoranda that if the insurance jurisdiction of the provinces over agency matters was challenged by the federally regulated banks (as it related to their insurance activities as banks selling insurance) that the Supreme Court of Canada would ultimately side with the provinces. 

In my view that result had been presaged long before by a House of Lords decision which forced Ottawa to come up with new federal insurance legislation in 1932. This was the core of a modus vivendi involving insurance regulation going forward between Ottawa and the provinces to deal with the federal government having over-reached its powers involving the regulation of insurance.

I confess that I longed for the big banks to indulge their happy combination of arrogance and ignorance and challenge provincial insurance jurisdiction vis-a-vis bank insurance activity. They did so first in British Columbia but in a case which did not really focus on the core constitutional/jurisdictional/regulatory issue -- and won.

Then, bless the banks' high-priced 'legal experts', they made the fundamental error I had awaited for years involving a clear cut question of provincial insurance jurisdiction: the Canadian Western Bank v. Alberta. They ultimately lost. Much to the surprise of many pro-federal power and pro-bank 'experts' this 2007 decision of the Supreme Court of Canada (SCC) was a victory for the provinces.

And do not be misled, as many were when the decision in the Alberta insurance case was appealed to the Supreme Court, by media reports of what "most experts" think would happen. When it comes to financial services matters the so-called experts have been wrong or just uninformed much of the time -- indeed since long before the onset of the west's financial system crisis.

Of course I was not alone in holding a negative view of claimed bank immunity from provincial insurance jurisdiction but that reality was not widely appreciated outside a relatively small club of informed opinion inside the insurance business and certainly not acknowledged by the Finance Minister's mandarins who are the banks' regulators and in any case have -- in the view of some insurance people, including me --  a long standing reputation of being pro-bank, banks being their favoured federally regulated constituents.

Indeed it was not uncommon for supposed expert and high-priced opinion to take a pro-bank view: i.e., banks are federally regulated financial institutions; whatever banks do they are entitled to call banking; hence the provinces have nothing to say about banks' insurance selling activity in those provinces.

This sort of federal-centric bias in the Department of Finance was once again on display when Ottawa decided not so long ago to try to impose national securities regulation on the provinces, a move the big banks liked since they dominate the Canadian securities business. The Supreme Court said no.

Why was the 2007 SCC decision in the Alberta case of great interest not just to the provinces but also to insurance companies and licensed insurance intermediaries (the latter being provincially licensed and regulated)? The answer to the question lies with the issue of who gets to measure the dimensions of the regulatory playing field on which various institutions and their people sell insurance.

In one of my columns on ["(No.33) Banks, insurance & the internet"] I explained why in its competitive implications the Supreme Court decision in the Western Bank case reduced to comparative insignificance the later federal regulatory decision by the Office of the Superintendent of Financial Institutions (OSFI) which supposedly (according to a breathless June 10, 2009 article in the Globe and Mail) heralded the "crumbling" of the barriers to an expansion of bank branch retailing of insurance. In fact it did nothing of the sort as would subsequently have been evident to business journalists -- had they bothered to follow up.

All of this had returned to my thoughts with another loss by the banks in the so-called Marcotte decison in 2009 in Quebec Superior Court. The banks had tried to be excluded from new provincial consumer protection laws.

The court agreed with Quebec's Attorney-General that provincial laws intended to protect the consumer should apply to banks on a broadly defined basis -- as indeed I agree they should; in fact it is desirable and appropriate that they should apply to any and all financial institutions including insurance companies doing business with Quebec consumers.

In an echo of the Alberta insurance decision the Quebec Superior Court refused to accept the banks' argument that they should not be subject to provincial consumer protection legislation because they operate under federal law.

In a June 2009 column on I offered this comment about the case and the decision: " Don't bet against the banks eventually taking the Quebec decision to the Supreme Court of Canada to try to get it reversed on appeal. ... I hope the government of Quebec can make its recent court victory hold up."  It did -- and yet another big bank challenge of provincial jurisdiction before the SCC went down the porcelain convenience.

In a Sept. 2014 decision on the very same Marcotte case the Supreme Court ruled in favour of provincial regulation. This brings me to a comment on the website "For Advisors Only" forwarded to me recently about the SCC's Marcotte decision. The comment, posted by an Ottawa lawyer, offered a view of the Marcotte decision as being somehow decisive in the matter of banks selling insurance in branches.

"We all know (he wrote) that the chartered banks sell insurance to customers, both inside (so-called "incidental" insurance such as mortgage and credit insurance) and outside the branch.

"The Marcotte decision of the Supreme Court means that these activities (including incidental insurance) are governed by the provincial regulators. The Supreme Court's clear statement (which I believe is a repetition and clarification of earlier decisions) is a resounding “Yes must comply”. This includes both Consumer Protection Legislation and the provincial Insurance Act.

"In Ontario, for example, bank branches must comply with FSCO regulations when dealing with customers. If any of the people in the branch provide insurance advice including incidental insurance, then that teller, mortgage advisor, credit consultant etc must be trained, licensed and registered within FSCO requirements.

"Unless the provincial law specifically exempts banks or the banking activity is a "core" activity (enumerated under the Bank Act), the Supreme Court of Canada has established that the law of general application in the province covers banks. That is the take away from this decision." [end of quotation]

I was not alone in my view that this perspective on the SCC's Marcotte decision endowed the decision with an importance vis-a-vis insurance selling by banks that it does not possess. Subsequent to the "For Advisors Only" posting I received the following comment from a veteran observer responding to the comment (above):

"I hate to criticize a member of such an honourable profession as the one to which the "For Advisors Only" writer belongs but I find his comments a bit too broad in scope and somewhat out of date. The “take” he suggests about insurance was well established in 2007, in the case of Canadian Western Bank et al v. Alberta, (2007, 2 SCR 3),  and the recent Marcotte case is no “clarification” on this count.

"Banks have a nagging tendency to believe that because ‘banking’ falls under exclusive federal jurisdiction, they need not bother with provincial legislation. Once again, they were reminded by the Supreme Court that we live in a federation (hopefully Harper is listening) and provincial contract law applies to their contracts.  

"In a nutshell, the Supreme Court gave another lesson in “co-operative federalism” to the banks, and in doing so, simply applied what it had said in CWB et al v. Alberta, a case that dealt with insurance (in this instance, the right of a province to require licensing of bank employees selling or advising about insurance).  

"The Marcotte judgement, which had nothing to do with insurance, is full of references to the 2007 insurance case, to rebuke the banks’ position that they did not need to comply with the Quebec Consumer Protection Act (CPA), asking for disclosure of bank charges on credit card transactions, because of the doctrines of interjurisdictional immunity and of federal paramountcy. The requirement of the Quebec CPA applies to all lending contracts, and is thus akin to the general rules of contracts stated in the Quebec Civil Code, said the Supreme Court. 

"There is no federal civil or common law other than that established by the provinces under the 1867 power respecting “property and civil rights”.

"This CPA requirement does not impair the banking power nor “significantly trammels” the manner in which Ottawa exercises its banking power, so the doctrine of interjurisdictional immunity does not apply.  Nor does the requirement make dual compliance impossible, nor frustrate the federal purpose, and we must aim at “co-operative federalism” in these matters, said the Supreme Court  referring to what was already clearly said in the Canadian Western Bank case of 2007.  

"By proclaiming its attachment to co-operative federalism the Supreme Court means that, in the absence of the legislation of one jurisdiction emasculating that of the other or clearly conflicting with the other, the Court will lean toward giving effect to both. 

"In any event the net result for the banks was clear: for a second time, off with their heads!  The provincial consumer legislation applies to bank loans, as do the Mortgage Act and the Insurance Act of each province, to such contracts that are entered into by banks. Nothing new here, just a re-affirmation of what the banks have a hard time to understand.

"(An interesting point of the Marcotte decision is that each member of a class in a class action need not have a cause of action against all the defendants, contrary to what the Quebec Appeal Court had said. In layman’s terms, in a class action case Marcotte and the other members did not need to have a credit card with each of the banks they were suing and there was no need to have separate cases -- a separate case of all the holders of bank X credit card suing bank X, etc.-- as this would greatly complicate and encumber the judicial process, said the Supreme Court.  Wise guys who preferred to simplify their work! But this is procedural.)

"I think the writer on "For Advisors Only" is a bit late in celebrating the Marcotte case of 2014 as a great victory for provincial insurance legislation.  I see the case as simply an application of the principles already clearly enunciated in the Canadian Western Bank case of 2007 to consumer legislation." [end of quotation]

I agree although I suspect Canada's big banks may well have to suffer another Supreme Court defeat or two (or three) before they begin to assimilate both the idea and the reality of provincial jurisdiction in this country.




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Tuesday, September 30, 2014

(No.273) "Manulife's purchase of Standard Life of Canada: sensible or not?"

"Manulife buys Standard Life's Canadian operation:
some comments about obsequious insincerity and other matters"

by Alastair Rickard

I have written a number of columns with Manufacturers Life (Manulife), the Toronto-based Canadian life insurance company, as a subject. Going further back I wrote a good deal more about Manulife in issues of my Canadian Journal of Life Insurance [CJLI].

Therefore I was not surprised to receive a couple of requests to share my views about the purchase for $4 billion by Manulife of the Canadian subsidiary of Standard Life of Edinburgh. a transaction to be completed early in 2015.

I have never stood among those members of the media or life insurance industry who would cheer the supposed superior activity while ignoring the deficiencies of Manulife and its senior management. As editor of CJLI I once gave the then CEO of Manulife the Sir Mackenzie Bowell Award. It was an award I created specifically to recognize an absence of excellence by someone in the Canadian life insurance industry. I named it so because Bowell (an Orangeman from Belleville Ontario) is arguably the least distinguished prime minister (1894-96) in Canada's history.

Had I still been bestowing the award post-2008 when Manulife ended up in a financial ditch I would almost certainly have given it to the company's then CEO Dominic D'Alessandro.

As for Standard Life's Canadian operation long based in Montreal I formerly had a somewhat higher regard for it than I have in more recent years.

Standard, a mutual company long based in Scotland, had successfully resisted in 2000 and in 2003 attempts by two different carpet-baggers to force its demutualization. However that changed in 2006 when Standard in Edinburgh finally succumbed -- as the result of altered financial regulatory requirements combined with poor management and inferior performance -- to pressure to change from a mutual to a stock company.

The Canadian operation of Standard Life had already been changed by Edinburgh from a branch operation to a subsidiary. Even before that Edinburgh had tried unsuccessfully to 'patriate' a big chunk of the Canadian branch's surplus.

Standard's Canadian operation had much to recommend it at one time including some quality people in management. Also I confess to having a soft spot for Standard Life's Canadian operation if only because the real starting point of the life insurance business in Canada can be dated from the appointment by Standard Life in the 1830s of an agent in Quebec City.

Not so long ago Standard's Canadian operation gave up competing even for its declining share of the individual life insurance business in this country. Here Standard had long operated a career agency distribution system, then gave it up (like many other life companies) in favour of chasing individual life sales via brokerage. That was thought to require the offering of products carrying certain features with high up front commissions.

There was a significant distribution-related life insurance policy fraud on companies some years ago  in Ontario, the investigation of which (dubbed Operation Lion as I recall) reached a certain point and was quietly shelved in order -- as far as I could determine at the time -- to avoid public embarrassment of both regulators and certain life insurance companies taken in by some unscrupulous sales people. They had taken advantage of policy designs and compensation ready made by companies to be taken advantage of.

Because of Standard's then product and high early commission system designed to attract brokerage sales, it was a company that would certainly have stood out as a leading example of victimization had there been any any real media coverage of Operation Lion.

In the modern era Standard's Canadian operation has long been more successful as an asset product/pensions/group player than as a player in the individual insurance business. Therefore, insofar as Manulife is seeking to bulk up its individual life business in Canada, the addition of Standard's Canadian subsidiary won't do much except for the addition of what's left of its declining block of in force individual life insurance policies.

Leaving to one side the price to be paid for the Standard business here it does make sense for Manulife to add substance to its operation in Canada (and especially in Quebec) where, given intelligent product pricing and distribution -- and in Manu's case that is hardly a given --  the company can add some real profits to supplement its excessive focus on chasing 'pie in the sky by and by' profits outside Canada.

For an excellent recent example of the potential financial benefit to a Canadian life insurance company's bottom line from an appropriate acquisition in Canada one need look no further than the reliably significant proportion of Sun Life's annual worldwide profits arising from its Canadian operation after it acquired Mutual Life/Clarica Life's Canadian operation in 2002 with its leading, national career agency system, an effective national distribution system for both insurance and asset products.

As both an industry 'insider' as well as an editorial critic of the life insurance business I have long been sceptical about the actual basis and degree of substance behind certain of the revenue/profit numbers from the foreign operations (especially in Asia) of North American life insurance companies. There is nothing quite so malleable as the actual and especially projected numbers involving product pricing and distribution and retention in some foreign markets put out by some life companies.

One example: I remember one senior Manulife executive confiding to me what a real mess a particular Asian operation of the company was while what I could read regularly in the financial press (as their 'reporting') was the Manulife spin of how great things were in that very operation. And of course there is always the possibility in a company's numbers of the inflation of profit figures through unrealistic product pricing, distribution costs and other self-serving assumptions. Of course some in a company's senior management inevitably respond that a life company's actuaries are entitled to make assumptions. Rather weak tea.

While the Manulife attempt to bulk up in Canada makes sense, the $4 billion price it is paying for Standard's Canadian operation seems excessive to me. In terms of real value going forward in the Canadian market there is no comparison with what Sun Life obtained to boost its market presence in Canada from its purchase of Clarica Life (the demutualized Mutual Life of Canada) in terms of size, quantity, quality, diversity, market position in every province and most significantly a very large national proprietary distribution system.

Of course there is precedent provided by Manulife itself for paying too much for an acquisition. Manu received the sort of uncritical media attention to which it became accustomed prior to its entry into the financial ditch ca 2008 when it bought John Hancock Life for $10.3 billion in stock in 2003. Hancock, formerly a mutual company, had demutualized in 2000.

At the time Manulife bought John Hancock I was far from being an industry loner in my view that Manulife overpaid for John Hancock. Indeed when Manulife bought the 141 year old Boston-based company there was a view held by more than a few within the industry that Manu had bought a company in decline.

Nor was I alone in being amused by Manu going round to American state insurance regulators within a a comparatively short period of time pleading its case for a 40% average raise in the premiums on its (i.e., Hancock's) in force Long Term Care policies (in some cases a 90% increase ws needed). The sale of LTC business was something Hancock pursued with the sort of vigour, poor judgement and questionable basis that Manulife itself later did involving the promotion and sale of that oxymoronic product: the guaranteed variable annuity.

It wasn't all that long before Hancock's enthusiastic leap into the LTC market was shown to be (to those who actually wanted to take notice) less than fortunate: its group LTC premiums had been increased by 25% in 2009, having already jumped 14% the previous year. For a sense of the magnitude of the Hancock LTC mess (amongst other facets of Hancock's operation) for which Manu had overpaid not long before the U.S. LTC market, pricing and claims really tanked, consider that by 2010 Hancock had 1.2 million LTC customers with seriously underpriced coverage and had already paid out more than $3 billion in LTC claims on just a small fraction of the coverage it had sold.

Boys and girls: can you write a sentence including the words "have you done your due diligence"?

One of the problems with much of the 'expert' analysis of life insurance companies and their operations is the often inadequate understanding of the realities of the business, including the failure to understand the importance to a company's mix of new and in force individual business of product design, pricing and distribution. Let me repeat for the umpteenth time in a RickardsRead column: active life insurance companies are in the business of selling stuff.

Manulife provides a case in point. Before Manu hit the financial ditch following the 2008 financial meltdown in the U.S. you would rarely see anything in the media or from 'experts' about Manulife that wasn't favourable. More often than not so-called analysis was laudatory, even after Manu stopped in 2004 hedging the huge risk associated with its sales tsunami of variable policies.

What is the real story behind Manulife's financial crisis?

The root cause was not the Wall Street-related financial meltdown. It was not even the fact that Manulife ceased hedging its variable annuity risk in order to increase company profits and hence senior management's already excessive compensation.

The Manulife financial problem's root cause was the absolute stupidity of senior management in proceeding to sell truckloads of variable rate product with contractually guaranteed rates of return (and moreover highly unrealistic rates over the longer terms involved in these policies). Many people experienced in the business and not willfully blinded by visions of corporate executives' sugar plums or easy commissions knew this and acknowledged the risks -- at least  among themselves.

After the financial heifer dust hit the fan at Manulife it did not take long for the company's top management to go crying to Ottawa begging for regulatory relief to help provide a bit of traction with which to try to extricate the company from a financial mess of its own making. Manu's senior management got substantially less assistance than was wanted -- and rightly so.

This sort of corporate tale is only one example out of many of misguided management in financial services. The careers of too many CEOs contain far more financial compensation than achievement.

In my experience and observation some of the lousiest decisions made in the financial services business have been prompted by a couple of tendencies. Warren Buffet has remarked on one of them: people in the financial community would rather be wrong as a group than right on their own. This feeds the other tendency.

Career management considerations by executives are too often the first priority when offering opinion within the councils of a company. Indeed for too many executives the best personal tool to be relied upon is obsequious insincerity. It has certainly assisted some would be CEOs to clamber up the greasy pole.

Executive rank has been shown again and again to be no prophylactic against the allure of bad ideas. While every senior executive in a life insurance company has the right to be mediocre even stupid some have certainly abused the privilege.




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are listed chronologically in the margin beside each column
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Saturday, September 6, 2014

(No.272) "Reading Off The Beaten Path: Alistair MacLeod, Daniel Woodrell & others "

"Reading Off The Beaten Path: novels by 
Alistair Macleod, Daniel Woodrell and others "

by Alastair Rickard

Many of the novels I have reviewed in RickardsRead columns have been commercially successful although not 'bestsellers'. However all have been books I enjoyed reading, some consumed as readily  and with as much lasting nourishment as cotton candy at a fall fair, others savoured over time like a bottle of good wine.

Recently I have been spending some time reading (or rereading) several novels that have never made it to bestseller lists. They are off the literary beaten path and all the more deserving of attention because of that.

While the tastes in fiction of followers of RickardsRead will not necessarily or in some instances even probably match mine, those who in the past have liked novels I have recommended may enjoy reading those listed below. All are still in print.

1. "Out" by Natsuo Kirino translated by Stephen Snyder (originally published 1997; English translation first published 2003; Vintage).

Natsuo Kirino has been published in North America as a writer of crime fiction -- and she is, in part. But "Out" is more than a crime novel involving several lower middle class Japanese women who work together  on a night shift packaging lunches. The novel is also an ode to a rather depressing way of life, to the economic and social plight of many women in today's Japan.

In this story these women get caught up in a grisly crime and its unexpected aftermath. The novel is not easy reading but it has real substance.

2. "Banished Children of Eve" by Peter Quinn. (Originally published in 1994, Penguin).

As one whose university education involved historiography I enjoy an historical novel the period of which interests me, that has a realistic and interesting plot and the 'history' the story calls upon is referenced accurately. I have no time to waste on historical novels that can't meet those criteria but too many of what are presented as such these days do not. "Banished Children of Eve" meets and exceeds these criteria.

Set mainly in New York City during the 1840s to 1860s it delivers a very effective portrait of the city and in particular the living conditions of its residents as the city received -- but did a lousy job of absorbing -- a flood of Irish immigrants after the various rounds of the potato famine drove Irish emigration to New York and Boston.

Peter Quinn, an Irish-American, tells the story through Irish and Irish-American characters' intersecting plot lines culminating in the American Civil War's effects on the economy and the lives of New Yorkers rich and poor. The climax of the novel involves the 1863 "draft riots" in the city which saw not only civil unrest and destruction of property but loss of life and serious confrontation between the Irish immigrants and blacks whom the former blamed for loss of jobs and declining wages.

This is an absorbing historical novel.

3. "No Great Mischief" by Alistair MacLeod (McClelland & Stewart, 1999).

Alistair MacLeod, the Canadian writer and teacher, was known best for his short stories. Rex Murphy called them "miniature masterpieces". His career as a superb wordsmith made him a bright light in the Canadian literary firmament.

Macleod, who died in April of this year, wrote only one novel: the award winning "No Great Mischief". Its focus was on the tightly knit families who came to Cape Breton from Scotland in the 18th century and then on a particular family in the later 20th century directly descended from them.

The story is told mainly through the voice of one modern character, Alexander MacDonald, who carries the narrative of the lives of various family members. MacLeod's own Cape Breton experience and heritage clearly informs the narrative.

The novel has an uncanny resonance particularly for Canadians of Anglo-Scots/Nova Scotian background and indeed for those who share aspects of this Canadian picture.

A personal example: I ended up working as a labourer in a mine/refinery in Thompson Manitoba in the 1960s before one could drive in and while it was still mainly a rough  and tumble mining camp with many strange characters among its denizens. When I read MacLeod's account of Alexander MacDonald surviving in a similar setting and time frame in northern Ontario I was impressed by its verisimilitude and by the memories his narrative called up for me.

There is not a false or contrived note or poorly constructed sentence in "No Great Mischief". It is writing at its most accomplished.

4. "The Maid's Version" by Daniel Woodrell (Little Brown, 2013).

Daniel Woodrell is a novelist whose talent far exceeds his public profile in the U.S. I have written in these columns about him and his skill at writing, especially about people who, like him, lived in Missouri and the Ozarks. For me his three novels set in Louisiana now republished as the "Bayou Trilogy" rank for reading pleasure alongside the first three of Philip Kerr's Bernie Gunther novels later issued in a single volume under the title "Berlin Noir".

Woodrell's latest novel, "The Maid's Version", is set in a Missouri town called West Table during the early decades of the 20th century. Its central characters are Alma DeGeer Dunaheu, a dirt poor day worker in the homes of the local wealthy and various members of her family. Central to the novel are the economic class system and the links to an an earlier town 'disaster', supposedly an accident claiming dozens of lives.

The Irish novelist Roddy Doyle has called Daniel Woodrell "one of the world's great novelists". I share his opinion.

5. "Cold Winter In Bordeaux" by Alan Massie (Quartet 2014).  

Alan Massie is a Scottish journalist and novelist with more than 20 novels published. One of my favourite novelists Robert Harris called the first of the Bordeaux quartet ("Death in Bordeaux"} "both a thriller and a literary novel: a difficult trick but in my book the greatest to bring off".

The second in the series is "Dark Summer In Bordeaux" and with the publication of "Cold Winter In Bordeaux" Massie is three quarters of the way through the writing of a quartet of novels set in the French city of Bordeaux during the Second World War and the city's occupation by the German military.

This third novel is set during 1942-1943 and is, on one level, a murder mystery to be solved (with the Germans looking carefully over his shoulder) by the city's lead homicide detective Superintendent Lannes. He co-operates with the German occupiers no more than he is forced to do by circumstances but they are always looking out for any persons or acts they regard as relevant to their occupation or Nazi ideology.

But the novels are as much the chronicle of the Lannes family's challenges and tribulations during the war and Supt. Lannes' reaction to them. For example one son ends up working for the Vichy government while the other leaves the country and becomes a member of the French Resistance while the daughter falls in love with a young but politically naive Frenchman who has embraced the German war effort.

Lannes himself wrestles with trying to protect his family from the negative forces at play in the city and in France while doing what he can to assist Jewish or homosexual acquaintances who are trying to avoid the attentions of the Gestapo. All the while he must officially report to superiors appointed by the German occupiers.

To appreciate fully the quality of Massie's writing in these novels one should read them in the order they were written. They are as much one long narrative as three separate novels.





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Sunday, August 31, 2014

(No.271) "Joe Oliver's omelette: a demutualization regime for the Economical Insurance Co."

"Canada's federal Minister of Finance Joe Oliver and
a demutualization regime for the Economical Mutual Insurance Company"

by Alastair Rickard

Since my most recent column (No. 268, posted July 15, 2014) on the subject of a yet to be created Canadian federal government regime to govern the process of demutualizing a Canadian property and casualty ( P & C) insurance company, I have been asked my opinion by several correspondents about this:
will the appointment of Joe Oliver as federal Minister of Finance in Stephen Harper's Conservative cabinet likely make any substantive difference to the eventual result?

It's true that Oliver's predecessor, the late Jim Flaherty, was far more politically experienced than Oliver as well as more independent-minded and with a background connection to the insurance business and related law. I think Oliver, with his sophomoric attachment to Bay St. capitalist myths and verities, is less politically sophisticated than Flaherty and more susceptible to pleas to hurry up and produce the draft of a federal regime to govern P & C demutualization.

But will the Prime Minister's Office (PMO) be as accommodating? Is this Finance file really even on the political radar of the PMO yet?

The most strident and whining of the supplicants are to be found among the fewer than 1000 'voting' policyholders who control and seek to divide among themselves the equity of the Economical Mutual Insurance Co. of Waterloo, Ontario, the company whose announcement in December 2010 that it intended to demutualize made necessary the creation of a federal regime to govern that process for federally regulated P & C mutual insurance companies.

A real question is whether the federal government of Canada and its regulatory Office of the Superintendent of Financial Institutions (OSFI) will continue a pattern going back decades under both Liberal and Conservative governments: slighting what ought to have been regarded and enforced as key rights and interests of insurance company policyholders (participating policyholders of life insurance companies in particular, q.v. life insurance company demutualization) in favour of corporate desires and interests lobbied for by the life insurance industry and particularly the senior managements of the life companies seeking to demutualize ca. 2000 -- Mutual Life, Sun Life, Manulife, and Canada Life.

The biggest winners over time under the feds' life insurance company demutualization regime have included major shareholders and senior executives, but certainly not the participating policyholders --especially under the post-demutalization policy dividend approaches and related matters with which OSFI and of course the demutualized companies' managements have been happy.

Indeed one gauge of OSFI's interest in looking out for par policyholders' interests was their rubber stamping of the financial injustice borne by London Life par policyholders in the Power Corp./Great-West takeover. It was a major fault that took a decade for a class action led by former London executive Bill Rudd seeking redress for policyholders to have the courts identify and demarcate.

To review more about that class action case and related issues (about which Canadian business media  reported pathetically little over ten years) the interested reader may consult, for example, the article I wrote for Joe Belth's "The Insurance Forum" -- an American periodical -- in its Dec. 2010 issue (Vol. 37, No.12). See also various RickardsRead columns including Nos. 118,185,195 & 206.

The inadequate record of successive federal governments when it comes to stepping up on behalf of  the rights and best interests of all or even a majority of an insurance company's policyholders is not one that encourages me to be all that optimistic about what will emerge as a regime from Joe Oliver's Dept. of Finance.

The biggest caveat I have to my pessimism is that even Mr. Oliver and the senior Finance mandarins working for him on this file should be able to sense the political danger and legal challenges from going too far in the direction of enriching the few at the expense of the many. Even if they don't the antennae in the PMO may.

The mainstream media may even do what it has conspicuously failed to do thus far in this whole matter: wake up and show some journalistic interest, and do so in a form that would be useful to more than a million policyholders of Economical and potentially millions more policyholders in other mutual companies. Thus far there has been a near total absence of published critical analysis and opinion.


Also as a response to my previous column on this subject I received some comments from an Ontario lawyer with a particular interest in the subject.

He referred to the federal government's omnibus Budget Bill which included (among many other non-budgetary matters) amendments to Section 237 of the Insurance Companies Act, highlighting that "... regulations may be made …. concerning the fair and equitable treatment of policyholders under a conversion proposal ...."

"I understand" he continued, "the argument that 943 policyholders do not deserve the fruits of demutualization because their risk respecting contributions was minimal in relation to those fruits, and that all policyholders contributed to the current surplus.

"The key question will be who is given voting rights regarding demutualization? Will there be any consideration proffered to policyholders who did not have the risk of contributions?"

I replied (in part) that "as I have indicated in previous columns on this topic what has been prospectively interesting to me among other points was not that the govt. would have to provide itself with certain powers in order to create (as it did for life insurance companies) a regime to govern P & C demutualization; or whether that govt. would likely bow in the direction of genuinely "fair and equitable" treatment of all policyholders but whether that proposed regime would directly and specifically set forth how and to whom the value of a converted P & C company had to be distributed.

"Will the govt. try to deal with the subject of equity among policyholders consistent with the comments of the Conservative-controlled Senate Standing Committee on National Finance?

"Briefly, in its 12th report re Bill C31 (June 17, ref Part 6, Division 14, Insurance Companies Act), the Senate Committee recommended that 'The Minister of Finance should, after consulting the parties involved, consider establishing principles concerning property rights on accumulated surpluses BEFORE [emphasis added] establishing the rules for the demutualization of Economical or of any mutual property and casualty insurance company because property rights on accumulated surpluses are not clearly defined at this time. If the courts are asked to intervene, they should make sure that all stakeholders (among others, mutual property and casualty companies, cooperatives, insurance brokers and their associations) are able to present their case on the divisibility of these surpluses since the community as a whole could be impacted by any such rulings' [end of excerpt]."

"If [I continued] the Harper government -- and I think the key decisions on what a P & C demutualization regime will and will not embrace will come from the PMO not the Finance Minister's office -- actually wants to address the fairness issue head on it might decide to do so not through regulations but with greater strength by statute. It could for example use legislation to give voting rights to all of Economical's policyholders (and other companies which may want to follow its lead) and it could also use this avenue to set the level of the bar at which the shares of companies that demutualize must be widely held.

"I would not be surprised if the Tories used the public comment period on a draft set of regulations/legislation -- and the media and public reaction -- to set the stage for the final form in which action will be taken (and perhaps even the final decision on actual content and approach).

"Since those 'entitled' in the company's view to vote on the demutualization of Economical have done so in favour of it long since, I foresee no further vote on whether or not to demutualize per se UNLESS it is mandated by Ottawa or the courts.

"However the Economical board and CEO are currently going through the motions of declaring that THEY will not decide whether or not to act on the previous vote to demutualize by  the voting policyholders (i.e., to proceed with demutualization) until after THEY have assessed what comes down from Ottawa in terms of a P & C regime.

"Short of a P & C demutualization process so extremely negative vis-s-vis the financial expectations of the corporal's guard of policyholders who forced demutualization on Economical I think I have a better chance of being asked to serve as an Economical director than the chance that Economical will not at least try to proceed to convert."




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Wednesday, August 13, 2014

(No.270) CNN -- promoting ignorance

"CNN (and some others) and the promotion of citizen ignorance"

by Alastair Rickard

Given the discouraging level of ignorance of both history and current affairs of many if not a majority of North American adults, it is hardly surprising to see popular media (cable news particularly) contributing to that ignorance by, for example, fastening on an event involving the deaths of a few people or even several hundred people, over-egging an event in order to have it appear to approach a level of almost unprecedented gravitas.

It's so much easier and more appealing in terms of television ratings to provide pictures of, say, family members of the deceased in their public grief than to pull back and provide some proportionality and factual context.

An example: in referring to the (murdered?) occupants of the Malaysian Airways flight 370 out of Singapore, some of whose passengers were Indonesians, it could have been apt to point out that in 1965-66 an estimated 500,000 Indonesians were murdered by their country's military government and its various proxies settling different scores. This anti-Communist pogrom has been called one of the great unpunished crimes of the 20th century, a bit grander a reference point than the fate of a single aircraft (q.v., Elizabeth Pisani, "Indonesia Etc.").

Or consider the fact that CNN, the American cable news network, has not devoted 1/1000th of the airtime it spent nearly 24/7 for two months on the March 8, 2014 disappearance of Flight 370 ( coverage presenting for week after week little more actual news than was known a couple of days after it vanished from radar) to the long standing and still occurring deaths of more than 2 million civilians in Africa's Congo wars.

But of course for ratings-driven news executives that's no reason not to fill the broadcast schedule with hour after hour of talking heads and their repetitive opinions and endless speculation involving the fate of fewer than 300 people.

After all, media executives are convinced that they know how interested (or not) potential viewers will be in the historical facts and context which provide definition and establish importance for news events if only because they expect interest will be determined in part by the level of knowledge viewers have with which to frame what they see and hear.

That knowledge level or its absence will involve not merely what the citizens of a country are taught of their own history and that of other countries but also (as in today's Canadian school system) whether they are required to be taught anything at all beyond a few politically correct platitudes and generalizations under the rubric of "social studies". Even in those Canadian provinces that still require high school students to take at least one history course in 4 years most will graduate inadequately informed about their country's history and political system.

The Pulitzer Prize-winning American historian David McCullough refers to today's younger Americans as a generation of historical illiterates (I doubt Canada can claim any superiority on that score). Apart from public broadcasters in the U.S. the American commercial and cable news networks are not just not helping, they are a negative factor.

Another example: today the majority of Americans would if asked deny that their country for years operated as a European-style colonial power, one responsible for the deaths of tens of thousands. It is unlikely that they will as students have learned that the United States, having taken the Philippines away from Spain in 1899, faced a Filipino insurrection.

By 1902 the insurrection had been largely put down, a major military effort requiring the use of 3/4 of the U.S. Army at great cost in blood: the deaths of 4,200 U.S. troops, 20,000 Filipino fighters and an estimated 200,000 Filipino civilians who died from famine and other causes (q.v., Stanley Karnow, "In Our Image: America's Empire In The Philippines"; Doris Kearns Goodwin, "The Bully Pulpit").

Is it likely that an informed citizen would today argue that there is a significant qualitative difference between the U.S. suppression of the Filipino Insurrection and, say, the war waged by the French between 1954 and 1962 to keep its Algerian colony, a war that cost the lives of 400,000 Algerians and 35,000 French, an effort in which torture and execution were widely and freely used by the French before De Gaulle eventually pulled France out of Algeria? (q.v., Bejamin Stora, "Gangrene and Forgetting"; General Paul Aussaresses, "Battle of the Casbah: Terrorism and Counter-terrorism in Algeria, 1955-57").

Today one encounters with depressing frequency the views of people who talk as if the world only began when they first appeared in it. Or that knowledge of anything that happened before last year is -- if not quite ancient history -- unimportant. Or that another survey of Canadians' historical knowledge  reveals (yet again) an alarming proportion of respondents who can't identify Canada's first prime minister and/or think that George Washington was somehow involved with Canadian Confederation.

Doubtless I belong to that group whose members are regularly described in certain media editorials as cynical but I have not forgotten the best defintion of a cynic: it is what an idealist calls a realist.




previous columns & blog archive:
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are listed chronologically in the margin beside each column
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a recent column and use the links

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