When a Canadian buys an individual life policy, most assume someone will be there to help them understand things as their life changes. In theory, regulators agree: guidance from the Canadian Council of Insurance Regulators (CCIR) says insurers or their intermediaries are responsible for servicing policyholders over the lifetime of the contract.
In practice, that expectation often falls through the cracks, according to industry veteran Rhona Konnelly (pictured). She has spent the past several years mapping what happens to books of business as insurers merge, offload blocks to reinsurers and shift from career agency forces to brokerage models. The result, she argues, is a growing population of “orphan policyholders” – clients with in-force contracts but no active servicing advisor.
“It exposes advisors to risk, and it exposes the client to risk as well, because they may not understand what they bought,” she said.
One of the structural drivers, Konnelly says, lies in how older portfolios are treated when companies are acquired. When a large insurer buys another, legacy policies are often placed into closed books of business – “parked in the vault,” as she puts it – while the acquirer focuses resources on developing and marketing new products. “It takes more money and effort for an insurance company to create and market a new product than it does to look after their existing book of business,” she said.
“For one reason or another, an executive decision was made not to contact those people.” Over time, as traditional career agents were replaced by independent brokers and managing general agencies, whatever service infrastructure existed around those closed books eroded. Policyholders were left with valid contracts, but no clear point of contact for reviews or advice.
Recent reinsurance activity adds another layer to the servicing question. Konnelly points to a significant transaction approved in 2024 in which Manulife reinsured a block of older universal life policies as part of capital and balance-sheet management. Under the federal rules administered by the Office of the Superintendent of Financial Institutions (OSFI), she notes, insurers are required to inform policyholders if the terms of their contract changes.
However, there is no corresponding requirement to clarify who is responsible for ongoing policy servicing following such transactions. “There was no requirement to contact the policyholder — or the advisor who originally sold the policy – regarding servicing responsibility,” she said. “Who do you call if you need help? Who’s proactively picking up the phone?”
Regulators are not unaware of the issue. In 2018, CCIR’s Fair Treatment of Customers paper set out expectations that insurers and intermediaries should treat customers fairly for the lifetime of their product, including servicing and ongoing information. Similar expectations have been articulated for segregated funds.
But Konnelly argues that, seven years on, the impact on day-to-day practice has been limited. “There needs to be a commitment on behalf of the industry that they believe in looking after the clients that are part of their family,” she said. “Right now, we don’t even have a measure of how many orphan policyholders an insurance company has, and who’s being serviced and who’s not.” Provincial supervisors are beginning to ask more pointed questions.
Konnelly says the BC Financial Services Authority (BCFSA) has reviewed her research and has been documenting her work on orphan policyholder servicing. She has also met with the Insurance Council of British Columbia to discuss potential solutions, including a national servicing framework she has developed.
“Regulators focus primarily on licensing and suitability at the point of sale,” she said. “But post-sale servicing has largely been assumed rather than defined. If we want to change the landscape, we first have to acknowledge what’s missing.”
Konnelly’s proposals fall into three broad buckets. The first is a national servicing standard. She argues that expectations about lifetime servicing should be made explicit, not left to interpretation in guidance documents. In a country where many consumers are wary of the industry, she calls service “the new frontier of trust.”
The second is a requirement for mandatory transition plans when advisors move firms, sell books of business, retire or leave the industry. That would include clear communication to clients about who now holds their personal information, who is responsible for reviews, and how to get help. The third is better data and reporting. Today, neither carriers nor regulators can say with confidence how many policyholders lack an active servicing relationship.
Konnelly believes insurers should be expected to track and report on servicing status across their books – and that industry bodies could help standardise definitions. “Even if we just start with dialogue and measurement, that would be progress,” she said. She acknowledges that any solution will have to balance commercial realities with consumer protection, and that not every policyholder will want frequent contact.
But she sees little downside in giving people a clear avenue for help when they need it. “This is a consumer protection issue,” she said. “Service is the new frontier of trust in life insurance. We have to help people understand what they own, what their options are, and how to get value from something they’ve paid into for years. Otherwise, we’re just quietly letting those policies – and the people behind them – drift.”
