Services of managing general agent ("MGA”) to insurer of marketing their policies
Example 1
- An MGA agrees with an insurer that, through its employees and independent insurance agents, it will promote, sell and submit completed applications to the insurer in consideration for premiums calculated as a percentage of premiums paid.
- The corporation is required to have an agreement (Agreement A) with each of the independent agents to promote and sell the insurer’s policies
- The corporation, in turn, agrees with the respective independent agents for their promotion and sale of the insurer’s policies.
- The insurer is required to pay separate commissions directly to the independent agents.
Results
- The commissions received by the MGA are predominantly for the sale of the insurer’s policies with sufficient direct involvement of the MGA, so that the supply made by the MGA to the insurer is exempted under para. (l).
Third-party administrator (“TPA”) designing and handling employee benefit plans, which it marketed to employers, with coverage from insurer who pays it a commission
Example 2
- A TPA, which has developed an employee benefit plan to market to employers that has its own branding, contracts with an insurer to provide the coverage.
- It is appointed by the insurer to sell the policies (in consideration for commissions), which it does directly and through licensed agents, whom it recruits and trains.
- It also handles the processing of applications from employers, billing the premiums, and processing and paying claims.
Result
- The predominant element of the supply by the TPA to the insurer is arranging for the sale of the policies, which is exempted under para. (l).
Similar to Example 2 except that the contract with the insurer is split into two contracts, one of them for admin services
Example 4
- A TPA enters into two agreements with a Canadian insurer.
- Under the first, it agrees to solicit customers for, and to distribute, the insurer’s group life and health insurance policies, through its independent insurance agents and, in this regard, to solicit and receive applications for the policies from customers (e.g., employers) and submit them to the insurer.
- In the second agreement, it agrees to administer the policies it has distributed for the insurer, handle billing and collection, and claims management.
Result
- Notwithstanding the two agreements, there is a single supply of an arranging-for service under para. (l).
Taxable supply of drug benefits claims adjudication and settlement services to the drug benefits insurer
Example 7
- A Canadian corporation owns an insurance claims adjudication and settlement system that enables it to adjudicate drug benefit claims made by insured employees under group health insurance policies issued by insurers and to arrange for the employees to receive the drug benefits from pharmacies at the point of purchase, with the corporation paying the pharmacies the amount of the drug benefits provided to the employees at the point of purchase using the insurers’ funds.
- The corporation does not take on any financial risk associated with the payment of the claims through its system. For the corporation’s services, the insurer will pay a fee to the corporation for each claim adjudicated regardless of whether the claim is approved, rejected or voided by the insurer.
Result
- The predominant element of the supply to the insurer is an administrative service (taxable), and the exclusion under s. 4(3) of the Financial Services and Financial Institutions (GST/HST) Regulations also would apply.
