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Was Tamara Pierson Duped into Buying Mortgage Insurance?

'It wasn't the coverage I needed,' says Victoria homeowner.

By Andrew MacLeod 16 Apr 2015 | TheTyee.ca

Andrew MacLeod is The Tyee's Legislative bureau chief in Victoria and the author of A Better Place on Earth: The Search for Fairness in Super Unequal British Columbia (Harbour Publishing, April 2015). Find him on Twitter or reach him here.

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Tamara Pierson of Victoria bought mortgage insurance in 2012 from a company now facing three class action suits.

Tamara Pierson said she feels she was tricked into buying overpriced mortgage insurance that didn't give her the coverage she needed.

"I don't think it's fair for big companies, they seem trustworthy, they're almost taking that trust and abusing it," said Pierson, who runs a Victoria dog-walking company called Adventure Dog. "I don't know if I'd go as far as to say it's white collar crime, but it's certainly in that genre."

Pierson, 38, was one of an estimated 170,000 Canadians who bought the Mortgage Protection Plan and helped generate tens of millions in revenue for the companies that sell the product.

Last year British Columbia fined three companies behind the plan -- Manulife Financial Corp., the Manufacturers Life Insurance Co., and Benesure Canada Inc. -- for breaking laws that govern British Columbia's insurance industry.

The companies are also among those named in class action lawsuits filed in B.C., Quebec and Saskatchewan courts, all of which are awaiting rulings on whether they can proceed.

NDP justice critic Mike Farnworth has said the B.C. government should have notified the public when it fined the companies. "People should have a right to know," he told The Tyee. People could then decide for themselves whether or not they wanted to continue to do business with companies that the regulator had found to use fraudulent practices, he said.

Nobody harmed, says de Jong

However, B.C. Finance Minister Mike de Jong has said there was no need to notify the public about the fines since the provincial regulator believes nobody was harmed. A spokesperson for Manulife has said the company stands behind the Mortgage Protection Plan and that it doesn't think anybody was harmed either.

But Pierson says that's not the case. "It wasn't the coverage I needed, plus I was paying two or two and a half times the [market] price," she said.

She bought her house in the fall of 2012 and used a mortgage broker to find financing. Her parents were co-signing on the mortgage, but it would be up to her to make the payments. She wanted insurance so that if anything happened to her the mortgage would be covered and her parents wouldn't be stuck having to make payments they couldn't afford.

While arranging the mortgage, she was offered the Mortgage Protection Plan, but turned it down thinking she would research other options.

But a month later, she received a letter that appeared to be from her mortgage broker. It strongly advised her to buy the Mortgage Protection Plan. "I hadn't done anything yet," Pierson said, explaining why she agreed to purchase it. "It was readily available."

'Safety catch' victim

Lawsuits related to the Mortgage Protection Plan refer to letters like the one Pierson received as "safety catch letters" and allege they didn't actually come from mortgage brokers, but from Benesure, which was not licensed to sell mortgage insurance.

Pierson said her first few payments were for more than $100 each. After reviewing her application, the company decided to reduce her coverage so that it would only pay if she died in an accident, she said. The change reduced her premium to about $70 a month, but would leave her uncovered if she died from an illness or anything other than an accident.

She later learned similar coverage normally sells for about $25 a month.

"I'm not big into insurance and that kind of business," said Pierson. "There are a lot of people out there who don't understand how insurance works and I'm one of them really." She said she assumed the product was legitimate and that the companies offering it were trustworthy and regulated by the government.

Some 18 months after taking the Mortgage Protection Plan, Pierson was having dinner with a friend who works in the insurance industry who told her about the problems with the product, she said. She decided then to change her coverage.

She hasn't participated in the class action lawsuits, but said she's watching them with interest.

"I'm really grateful I didn't find myself in a situation where I wasn't adequately covered," Pierson said, imagining what it would have meant for her parents. "It would have been devastating."  [Tyee]

Read more: Housing

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