Life insurance payment mix-up exposes gap in resolution protocol

Policyholders run risk of not being covered even after paying their premiums promptly

Life insurance payment mix-up exposes gap in resolution protocol
It’s not unusual for insurance policyholders to have the option to pay their premiums through a third party. But those who have policies with RBC Insurance may want to take note of a risk that can arise when dealing with the firm.

“We had already remitted our annual premium through our bank (CIBC),” wrote Toronto Star columnist Martin Regg Cohn in a recent article. “But the insurance company (RBC Insurance) wasn’t buying it.”

According to Cohn, he received a letter in late September claiming that their annual premium “remains outstanding.” The letter warned that if the payment did not come through by Oct. 6, his policy would lapse.

Cohn contacted the RBC Insurance call centre and reported the reference number of his payment from CIBC. He asked for an extension of the deadline for terminating the policy, since he could prove payment, but was told it couldn’t be done. He called again three days later but was told the same thing.

Cohn was also informed that there was still no trace of his payment, and was asked for more proof. He then retrieved the teller receipt and emailed it, but since he knew the deadline was near, he doubled up on his payment to make sure his policy wouldn’t lapse. “Ultimately, both payments showed up — the original one sent a month earlier, and the second one that I’d just sent — in time to keep my life insurance policy from dying,” he said.

Wanting to know what caused the mix-up, Cohn investigated. He learned that RBC Insurance has four separate categories for tellers or online banking customers making payments to choose from, which include “Home and Auto,” “Group,” and “Individual.” The teller at CIBC had sent the money to the first category by mistake.

Meanwhile, at RBC Insurance, the mistake wasn’t detected right away. According to Randy Singh, senior manager of customer care at RBC Insurance, the company also works with another firm, Aviva General, which processes home and auto payments separately. Because of that arrangement, a customer’s money may not be seen by RBC immediately.

Singh said their life insurance policy accounting department already has a process in place for such cases, but “it’s not very timely … it’s a reconciliation at the end of the month.” Cohn asked if RBC would not pay out any benefit to someone who dies while temporarily uncovered, even if the policy is later restored and found to have been paid for, and Singh confirmed that’s correct.

“My family would have been doubly unlucky (losing me and my life insurance) if I hadn’t doubled up on the premium just to be safe,” Cohn wrote. “RBC later mailed a refund for the backup payment. But there was no apology in the envelope, only on the phone when I persisted.”

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