CRA illustrates when the services of intermediaries to insurers may be GST/HST exempt

CRA has issued a Notice outlining its position on when services provided by intermediaries to insurers may be exempted as financial services. Examples covered include:

• Example 1: the services of a managing general agent to an insurer of marketing the insurer’s policies through independent sales agents, are exempted “arranging for” services under para. (l) of the financial services definition.
• Example 2: a third-party administrator (“TPA”) designs and handles employee benefit plans, which it markets to employers, with coverage from insurer who pays it a commission which is exempted under para. (l).
• Example 4: this is similar to Example 2 except that the contract with the insurer is split into two contracts, one of them for admin services – but this makes no difference to the result in light of the single-supply doctrine.
• Example 6: a non-licensed insurer covers any major collision or theft loss of new car purchasers who enter into a contract with it – given that it is not a licensed insurer, this contract is not considered to be the provision of an exempt insurance service (although such corporation’s coverage, in turn, from the insurer is exempted). (Under Example 5, there is a better result if the corporation distributes insurance coverage of the insurer to the car customers.)
• Example 7: an insurance claims adjudication and settlement system of the corporation is provided to the insurer on a taxable basis (predominantly admin services).

Neal Armstrong. Summaries of GST/HST Notice 325 Services Provided by Certain Insurance Intermediaries July 2023 under ETA s. 123(1) – financial service – para. (l), para. (d).