STANDING COMMITTEE ON INDUSTRY

COMITÉ PERMANENT DE L'INDUSTRIE

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, March 16, 1999

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[English]

The Chair (Ms. Susan Whelan (Essex, Lib.)): I call the meeting to order pursuant to an Order of Reference of the House dated Tuesday, November 3, 1998, consideration of Bill C-5, An Act to support and promote electronic commerce by protecting personal information that is collected, used or disclosed in certain circumstances, by providing for the use of electronic means to communicate or record information or transactions and by amending the Canada Evidence Act, the Statutory Instruments Act and the Statute Revision Act.

I'm very pleased to welcome our witnesses here this afternoon. I apologize for the slight delay in beginning, but we have to wait for opposition members to arrive.

Mr. Stan Keyes (Hamilton West, Lib.): Don't apologize for that, Madam Chair.

The Chair: They have now arrived, so we can begin.

We are very pleased to have with us the Insurance Crime Prevention Bureau, the Canadian Coalition Against Insurance Fraud, the Insurance Information Centre of Canada, and the Council of Private Investigators.

What I propose is that each of the witnesses give their opening statement. I know they've all provided detailed briefs in advance. Perhaps they could try to keep their opening statements to about five minutes, because we'll have many questions, I'm quite sure.

With that, I'd like to begin, in the order of witnesses as listed, unless a different order has been agreed upon amongst the witnesses.

Mr. Garand.

Mr. Gerry Garand (Executive Vice-President and Chief Operating Officer, Insurance Crime Prevention Bureau): The Insurance Crime Prevention Bureau would like to first thank the Minister of Industry and the members of this committee for giving us the opportunity to present our point of view and our comments regarding Bill C-54, the Personal Information Protection and Electronic Documents Act.

The Insurance Crime Prevention Bureau is an organization with the principal mission of helping the insurance industry and the government authorities prevent, detect, and suppress crimes that lead, or may lead, to death, loss, personal injury, or material damage. The Insurance Crime Prevention Bureau also provides constant support to police forces and provincial, national, and international government authorities in crime-fighting.

If Bill C-54 were to be adopted in its present version, numerous jurisdictional conflicts with provincial laws would have to be foreseen. Even if the federal government decided, in application of paragraph 27(2)(d), to exempt a province's organization from the application of the federal law, it would probably continue to apply in many situations, such as personal information transmitted by an organization to its head office or to an office located in another jurisdiction.

It is also foreseeable that it will be necessary to consider two laws when personal information is exchanged between a federal organization and an organization under provincial jurisdiction.

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The Insurance Crime Prevention Bureau believes the current wording of Bill C-54 is likely to give rise to many jurisdictional conflicts for which Canadian business and organizations risk paying the price, to the detriment of all Canadian citizens.

For example, paragraph 4(1)(a) of the bill, which concerns personal information that an organization collects, uses or discloses in the context of a commercial activity, clearly seems to evade exclusive jurisdiction of the province, in our opinion.

The provisions establishing the field of application of Bill C-54 should therefore be revised and clarified to apply exclusively to organizations under federal jurisdictions and to personal information transmitted interprovincially or internationally.

Subclause 7(1) of Bill C-54 establishes the only exemption allowing an organization to collect personal information without the consent of the person concerned. At the underwriting stage, the insurer usually consults the ICPB database that contains information about claims of over $3,000 and claims of a suspicious nature in order to better evaluate the risk they are preparing to issue. Such verifications result in both collection of personal information by the insurer and disclosure of personal information by ICPB.

The obligation for an insurer to request the consent of the insured, at this stage, in order to verify the claimed experience, poses serious difficulties, because in the majority of cases, the damage insurance contract is negotiated over the telephone, and the policy is only transmitted to the insurer at a later date.

To eliminate this difficulty, Bill C-54 should provide that when an organization cannot reasonably obtain advanced consent, express or implicit, for the collection, use and disclosure of personal information, it is allowed to notify the persons concerned at a later date.

In addition, because of its special mission, there should be specific recognition in the law of the ICPB's right to compile data on the claims experience of the insured, for the purposes of disclosure, without consent to the insurers for underwriting purposes.

An exemption currently exists in Quebec for the Groupement technique des assureurs, which performs functions similar to those of the Insurance Crime Prevention Bureau.

Finally, when the insured submits a claim following the theft or loss of any goods, the insurer must generally conduct an investigation or do verifications. To conduct an effective investigation, the ICPB must collect personal information from third parties, insurers' employers, credit bureaus, neighbours, witnesses, etc. Obtaining consent to the collection and disclosure of personal information in this context is not always possible or advisable.

In matters of disclosure of personal information, the rules of consent also apply. However, Bill C-54 provides for a certain number of exemptions to this rule. This list of exceptions appears to be insufficient. An organization should be capable of communicating personal information without consent to a lawyer, a notary or a legal advisor, not only for litigation but also in order to obtain legal opinion.

Similarly, we believe an organization should be able to disclose or exchange personal information with another business or organization in order to prevent, detect, or suppress crime, fraud, or statutory offences, yet paragraph 7(3)(d) of Bill C-54 applies only to the disclosure of personal information to an investigative body on the initiative of the organization that holds the information.

The federal bill recognizes that every person is entitled to study the personal information that an organization holds concerning him. Bill C-54 provides for six exemptions to this rule.

It is the opinion of ICPB that this list of exceptions is incomplete. It should also be provided that an organization is not required to disclose personal information when its disclosure is likely to hamper an investigation that has the object of preventing, detecting, or suppressing crime, fraud or statutory offences.

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In fact, when an investigation is in process, it is impossible to allow the person concerned to study this file without compromising the conduct of the investigation.

Similarly, when disclosure is likely to have an effect on a legal proceeding in which the organization or the person requesting access has an interest, it should be permissible to refuse that access. It will easily be understood that an organization currently or foreseeably involved in litigation should not be put at an unfair advantage in relation to the opposing party. The rules of evidence of the court should apply in such cases.

As for the remedies that may be exercised before the privacy commission, and in the latter's power, the ICPB believes the present time limit for filing a complaint with the commissioner should be 30 days. The privacy commissioner also should not have jurisdiction over the provisions of the CSA code, which contains recommendations.

Finally, the privacy commissioner should be required to issue a notice before proceeding with an inspection or an audit of an organization.

Thank you very much for your attention. We are ready to answer questions at the end.

The Chair: Thank you very much, Mr. Garand.

Ms. O'Reilly from the Canadian Coalition Against Insurance Fraud.

Ms. Mary Lou O'Reilly (Executive Director, Canadian Coalition Against Insurance Fraud): Thank you very much.

Good afternoon. On behalf of the Canadian Coalition Against Insurance Fraud, I thank you for your time this afternoon.

We are an organization that was created in 1994 with the mandate to implement a series of actions that would help curb the cost of home, car, and business insurance fraud in this country. Quite obviously our members consist of insurance companies, but we also count in our membership, and on our board of directors, representatives of the Canadian Association of Chiefs of Police and the Canadian fire marshals' association, among others. The Consumers' Association of Canada is a member of our board of directors. Even the Canadian Cycling Association belongs to our fraud coalition.

In the last four and a half years we've worked under basically three large umbrellas of activity. The first is to deal with our own companies, to help in the business practices of those companies, and, I guess most effectively, to fight fraud through those practices.

Secondly, we've conducted a good deal of research about the legal environment in which our companies prevent and investigate insurance fraud, and help with their work in that realm.

Our last area of activity is probably the one in which we've had the greatest success to date—the area of public awareness. We believe the fraud coalition has done a good deal to place insurance fraud in the minds of Canadians when it comes to crime.

For example, when we began the initiative, 20% of Canadians, or one in five, said they believed insurance fraud was acceptable behaviour. Today that number has dropped to 4%. While I grant you there's a growing intolerance societywide for fraud, we would like to think the fraud coalition has made some contribution to that movement in the numbers.

Our organization does not investigate fraud. That definitely is in the realm of the Insurance Crime Prevention Bureau and other private investigators who are here to speak to you today. I can tell you, though, a good deal about the cost and consequence of insurance fraud in Canada.

We place the price tag at $1.3 billion a year. Just to put that in perspective for all of us, that's 10% to 15% of our own premium dollars. All of us pay to fund insurance fraud.

If you pay $1,000 a year for either your home or your car insurance, or both, $100 to $150 of that price tag is going to fund insurance fraud.

Of course, that doesn't include the societal costs, the $1 billion a year paid to fund medical examinations for people who aren't legitimately sick, the crowded courtrooms, or firefighters who risk their lives to fight fires that have been set by arsonists. All of this amounts to a very costly expense for not only insurance policyholders but taxpayers as well.

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We also know that Canadians do not necessarily hold legislators or police officers responsible for solving insurance fraud. In fact, our most recent polling indicates that more than 70% of Canadians say it's the insurance companies that are responsible for solving that problem.

We believe that in large measure the industry has embraced that responsibility. Obviously, they now work within the framework of privacy laws at a provincial level. They've added special investigative units to their own companies. They have increased the training for the people who adjust claims for both their claims staff and their adjusting staff. They help to educate their own policyholders through brochures, videos, and the paid advertising they do. In addition, they have very much supported the existence of our coalition. Most recently, our alliance with Crime Stoppers has been a very effective means for the investigation of insurance fraud.

So we come before you today as a coalition on behalf of those individuals who are on the front line in fighting this very costly crime for Canadians. We ask that you consider a provision within the framework of the bill to permit investigators to act professionally and responsibly in the jobs they currently do.

We are asking for a provision that will allow these investigators to collect, use, and disclose personal information without the consent of the insured—if, of course, this is being done for the purpose of not only detecting insurance fraud but also preventing insurance fraud.

In addition, we would ask that you allow insurers to refuse the access to this personal information if the access is being denied because that information is being used for the prevention and detection of fraud.

Perhaps I could offer a very brief example. When a claim is submitted and there are red flags that would suggest that perhaps this is a fraudulent claim, and an investigation is underway, it is very possible that databases may be checked, witnesses may be interviewed, and the validity of receipts, for example, might be verified. If the insured in the middle of this investigation asks for access to that file, that would permit, of course, the insured to cover his tracks, and I can tell you, in the world of sophisticated fraud, that would certainly stop any investigator dead in his tracks.

When I talked to you about the cost of insurance fraud, it probably offered a bit of an explanation as to why the coalition would be here in the first place. We understand so well that this is not a victimless crime.

When I petition you on behalf of the coalition to make adjustments to the law, I speak not only for myself personally, or professionally for the coalition and its members, but also for the honest policyholders, the people who are in fact the victims of insurance fraud.

The industry acknowledges that insurance fraud is no longer simply the cost of doing business. Our honest policyholders have urged us to press forward, not only when investigating or prosecuting fraud but also when preventing it from the front end. We believe the recommendations we're putting forward in our brief, submitted to you earlier, and the recommendations you heard earlier today from the Insurance Bureau of Canada, and most recently from Gerry Garand, would go a long way toward helping those honest policyholders pay for the product they buy and not for the fraudulent activity of others.

Thank you very much.

The Chair: Thank you very much, Ms. O'Reilly.

We're now going to turn to Mr. Webber of the Insurance Information Centre of Canada.

Mr. Bernard Webber (President and Chief Executive Officer, Insurance Information Centre of Canada): Thank you, and good afternoon.

With me is Carole Machtinger, executive director of government relations at the Insurance Information Centre of Canada, or IICC, and Steven Lingard, legal counsel and secretary of the board of directors of the IICC.

We're glad to have an opportunity to speak with you this afternoon.

As a member of Minister Manley's industry advisory group for the OECD ministerial conference in Ottawa last October, I am well aware of the critical role of electronic commerce for future productivity and competitiveness and of the essential confidence individuals must have in the privacy and integrity of the technology mechanisms and processes that are, I'm sure, bewildering and seem beyond control to many of them.

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In fact, the IICC dwells within the P and C industry, where privacy and confidentiality are a way of life. But you heard about that earlier from my colleagues at the Insurance Bureau of Canada.

The IICC is the primary source and supplier of industrywide P and C information and data for 95% of public and private insurers across Canada. We do not deal directly with the public.

You should realize, and probably are aware, that we are appointed by provincial and territorial governments as their statistical agency. Thus, we are an extension of government in this respect. This is in recognition that such statistics are essential to society's insurance operation and pricing.

We are already under close regulation. As a result, we support the aim of this bill, as we recognize the need to apply protections where they don't exist. However, there are three areas of concern, which, if the bill is not improved, will present complex and unnecessary problems for us and the industry. These will ultimately be reflected in costs to consumers.

These areas are detailed in the executive summary of our submission and elsewhere in the submission as well, but briefly I will review them.

The first relates to statistical purposes. Although the bill recognizes the need for exceptions for statistical or research purposes, these exceptions should apply equally across subclauses 7(1), (2) and (3), for the collection, use and disclosure of personal information where getting consent is impractical.

In addition, where information is required by law is an exception that subclause 7(3) recognizes, and it should also apply to subclauses 7(1) and (2).

The second area is in the development and operation of partnerships with governments. Our role is expansionary and goes beyond the statistical agent relationship with governments, as I mentioned earlier.

In this respect, we are developing arrangements with the transportation ministry in Ontario, which will be contracted and will deal with the sharing of large data banks. These involve the broad legislative and social goals we are both supporting.

The objective in one such partnership is chasing uninsured motorists off the road, and the other is aimed at up-to-date driving records to improve fairness of premiums.

These contracted arrangements are being pioneered in Ontario and are governed by freedom of information and personal privacy legislation in Ontario. Because of the advantages that will accrue to both parties, we expect other governments to follow suit.

We therefore recommend and request that subclause 4(2) of the bill contain an exception for such contracted arrangements where we are an agent governed by provincial legislation, as is provided for federal government institutions in that same section.

The third area is one of timing and consistency. If the bill passes in June of 1999, the P and C industry will be subject to it in June of 2003. We request that as an integral part of the industry, we be so treated as well.

The reason for mentioning this, which might seem to you to be self-evident, is that some interpretations would have us covered by June of 2000. This would provide three years before our own industry members were covered.

The phase-in of this legislation must be consistent for the industry or we will be subjected to much unnecessary inefficiency and confusion for three years. This is a period when presumably the federal and provincial officials will be working things out, and we must make expensive investments in new technology and systems during that time, but we won't know which requirements to develop and to implement.

In this context, we note as well that the legislation is unclear on the treatment of information already stored for which it would be impossible to get additional consent. In view of our consistent record of personal privacy protection, we request that this be clarified in legislation to apply on a prospective basis.

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In summary—and briefly—please recognize and harmonize subclauses 7(1), (2) and (3); exempt formal provincial government partnership and agency actions; and treat the P and C industry uniformly so that effective coverage will be three years after proclamation for IICC.

More specific information is provided in this regard in our submission.

In closing, I would merely say that we at the IICC recognize that we're already in the bold electronic age, and we say let's go forward with confidence and compete with all domestic and international rivals with primary concern and compassion for privacy of the individual, and above all, clarity of the rules of the game.

Thank you.

The Chair: Thank you very much, Mr. Webber.

We'll now turn it over to Mr. Mitchell from the Council of Private Investigators.

Mr. Kenneth C. Mitchell (Chair, Task Force on Privacy Issues, Council of Private Investigators): Thank you, Madam Chairman.

My organization, the Council of Private Investigators, is one of the front-line fraud-investigating organizations in Ontario. Frankly, we are where the rubber hits the road. We go out and do the investigations of suspected fraudulent activity.

Other speakers before me have given you some element of the impact of fraud on society, but I want to go a little bit further. Ms. O'Reilly spoke about an insurance fraud study that indicated that up to 15% of insurance claims are fraudulent, costing the Canadian economy about $1.3 billion. In 1997, a Peat Marwick study showed that 57% of Canadian chief executives reported fraud in their organization that year, and 47% of those expected it to increase.

A study by the Association of Certified Fraud Examiners showed that the average organization loses 6% of its annual revenue to fraud.

One of the studies I would really like you to pay particular attention to—and I made copies of it to be distributed—is a 1995 study by Peat Marwick. It was a study of Canada's finest fraud investigators—our chiefs of police. That study showed that 83% of police chiefs believe fraud is a major problem in Canada. More alarmingly, it reported that police can only investigate 21% of those reported crimes. They stated that crimes of violence get priority, and increasingly, Canadians are turning to the private sector, to private resources, to fight white-collar crime and fraud.

I want to put a human face on this, because fraud does have victims. These organizations have talked very well from an organizational perspective, but I think you really need to understand how it affects individual Canadians.

I could tell you about a scheme that ran rampant in Toronto a few years ago, where paralegals working in law firms set up staged accidents, sold seats in vehicles so that phony claims could be processed, and set up phony medical treatment, costing these insurance companies millions and millions of dollars.

I could tell you about another criminal ring that rented cars from different car rental agencies—Avis, Hertz, National and so on—and set up 18 staged accidents. They defrauded not only these insurance companies but also the taxpayers. By the time this investigation completely unravelled, there was Workers' Compensation fraud to the tune of $1.3 million, welfare fraud to the tune of $2.3 million or $2.4 million, credit card fraud, and fencing of stolen goods—all within one criminal organization.

I could tell you about a company in the Niagara Peninsula that developed a process that gave them a 27% cost advantage in the marketplace, but their employees tried to sell those trade secrets to foreign interests. The potential loss to Canadians, had it not been abated, would have been $14 million, with the loss of 250 Canadian jobs.

I could tell you about a company, Nintendo of America, that had a massive problem across the country with copyright infringement. Games and cartridges were being brought in and sold through very sophisticated schemes where the distributors utilized advanced telecommunications systems and counter-intelligence measures to distribute their goods and to avoid detection and arrest, resulting in multi-million-dollar losses.

I could tell you about a woman—I'll refer to her as Jane Doe—who started work with an employer and claimed sexual harassment by a new executive. Her problem was that all the historical evidence of sexual harassment was in the executive's former company.

I bring these up because I can confidently tell you that none one of these schemes could have been successfully fought had Bill C-54 been in place as it is written today.

We recognize that personal privacy is a valid social value, and has to be addressed, but I want to point out to you that where invasions of privacy take place in our society, it is always in the favour of higher social values.

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These would include law enforcement; crime prevention; deterring criminal elements at home and abroad; public safety; access for all to the judicial system, which is very important; and limiting the cost of fraud that's passed on to Canadian consumers.

The draft of that legislation recognizes the need for an exemption for law enforcement. I would suggest that the legislation is very badly worded, and can be improved.

If you look to the second part of my submission, you'll see all the elements where I find that the drafters of the legislation are trying to address this issue of how we deal with crime prevention and law enforcement.

With respect, I would ask the committee to amend the legislation to spell it out clearly. Don't make the exemptions ephemeral, but spell it out loud and clear. Exempt law enforcement, I would respectfully submit, the way I've defined it in my submission to you. Let the public know, let business know, and above all, let criminals know that in Canada they can't hide behind privacy laws to enact their schemes.

Front-line investigators are not working in a vacuum. Currently there is an abundance of common law torts that control our activities so that we cannot become abusive in invading personal privacy. There are torts of negligence, of defamation, of intentional infliction of emotional distress. There are torts of breach of contract, interference in a business relationship, or bad faith. There are many remedies if we ever step over the line. These are enforced, and we do adhere to them.

There are costs to society, to Canada, if access to personal information is proscribed against broadly defined law enforcement.

First of all, access to the justice system becomes prohibitively expensive. Somebody taking a civil action to court would have to go through a discovery process costing up to $15,000 to $20,000 or more just to get the information they need. That would bar most Canadians from the courts and from the rights to redress. The result would be that criminal, regulatory, and civil claims would be abandoned. People just couldn't afford them.

Despite that—and this is not a paradox—courts would become swamped, because the cases that did get into the process would clog up in the discovery process. Whereas investigations can discover the information that determines whether an action is meritorious, now we would have to go into the discovery process, and courts would clog up.

Criminals would act with impunity. If we have laws, that's fine, but if we can't enforce them, if there's no judicial remedy, criminals would act with impunity. The cost of living, working, and producing in Canada would escalate. Ultimately, business and capital would locate elsewhere, and Canadians, every one of us, would be poorer.

Madam Chairman, I suggest the remedy is a balance. We always seem to find that Canadian balance. If you have total access to all information, you have total security as well. You have total security of the person but you have a police state. On the other hand, if you have total privacy, where all information is totally shrouded, even from law enforcement, then you have anarchy. So we have to find the balance in between, and I would suggest that you may find that in my submission to you.

There are three elements in Bill C-54 that I would ask you to address.

In general, Bill C-54 deals with the collection of information. I would ask that you build in an exemption specifically defined for law enforcement. I would ask you to define law enforcement as I have within my definition in part 5 of my submission to you.

Secondly, Bill C-54 deals with the use of information. I want to be very strong on this point. It's one thing to exempt investigators so that we can legitimately go out and investigate crime, but if the people from whom we want to collect the information don't recognize that we're exempt, and don't recognize that they're exempt from providing the information to us, that won't help us either. They will react in fear and say, no, we can't provide that to you, and the sources of information will close up.

So I would ask you to look at the second recommendation in my provision, to build in specific immunity clauses for those who are providing information to investigators in bona fide investigations. A good faith provision of bona fide investigations—I think that's reasonable.

Finally, on the issue of accountability, I think the legislation does require accountability from those it does make exempt. I would suggest that for anyone you make exempt—private investigators, corporate security departments, special investigation units, or anyone else—you then require them to file personal information protection plans with their regulating authorities. That will build in the protection that Canadians need without creating another level of federal bureaucracy to take care of that task.

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If you give careful consideration to those three recommendations, I think most of the problems in Bill C-54 with respect to the issue of white-collar crime and fraud would be addressed.

Thank you very much.

The Chair: Thank you, Mr. Mitchell.

I want to thank you all for your opening statements.

I'm going to turn to questions now.

Mr. Lowther, do you have any questions?

Mr. Eric Lowther (Calgary Centre, Ref.): I had some questions for Mr. Mitchell and Ms. O'Reilly, but I think his last comments just answered most of the questions I was going to hit them with.

I'm going to pass and catch up on the second round, if I can, Madam Chair.

The Chair: Okay.

[Translation]

Do you have any questions, Mr. Dubé?

Mr. Antoine Dubé (Lévis-et-Chutes-de-la-Chaudière, BQ): Yes, I do. My first question is for Mr. Webber. In your submission, you express some concern that the constitutionality of this legislation might be challenged in court. Exactly what concerns do you have?

[English]

Mr. Bernard Webber: In this respect, we feel that there is potential overlap here in provincial and federal regulation of our activities. If these changes to the bill that we're recommending go through, we're prepared to allow that to work itself out. We figure the three-year period between the proclamation of the bill and the time it would affect us will be a period of time when the federal and provincial officials and ministers would work to eliminate any such overlaps.

[Translation]

Mr. Antoine Dubé: You recommend, among other things, that the federal government consult further with the provinces.

[English]

Mr. Bernard Webber: Yes, that is our recommendation, that this consultation continue until such time as the wrinkles are ironed out, so to speak.

[Translation]

Mr. Antoine Dubé: Appendix B refers to the insurance acts in force in various provinces. However, there is no reference to Quebec. Why is that?

[English]

Mr. Bernard Webber: The IICC collects information as the statistical agent for the provinces listed in the submission—the Atlantic provinces, Ontario, Alberta, and the territories. In the province of Quebec, that role is fulfilled by another organization.

[Translation]

Mr. Antoine Dubé: Which organization is that?

[English]

Mr. Bernard Webber: The GAA. They're usually known as the “groupement” within the industry. So it's done, but not by us.

[Translation]

Mr. Antoine Dubé: Ms. O' Reilly, I enjoyed your presentation on the consequences of fraud. You conclude by recommending that clause 9 be rewritten.

Could you clarify your position for me, because I don't quite understand what changes you wish to see made to this clause.

[English]

The Chair: Are you addressing that question to Mr. Garand or to Ms. O'Reilly?

[Translation]

Mr. Antoine Dubé: To Ms. 0' Reilly.

[English]

The Chair: Ms. O'Reilly, did you understand the question?

Ms. Mary Lou O'Reilly: Yes. I'm sorry, I thought the question was directed to Mr. Garand.

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I am aware of some proposed amendments to clause 9. It is our belief that if those amendments were to move forward, they would be acceptable. The only addition we would like is the fact that while the proposed amendments, as I understand them, include the collection and use of information, they do not address the ability of fraud investigators to disclose that information.

So I understand that there are some proposed changes in terms of how the information can be collected, but this still prevents investigators from disclosing information to, for example, other insurance companies. It's that exchange of information that takes the fraud investigation beyond the collection stage to the exchange of information.

[Translation]

Mr. Antoine Dubé: I now have a more general question for anyone who would care to respond. Should the government not act on your recommendations, would you prefer that the passage of the legislation be delayed or would you be able to live with it?

Mr. Gerry Garand: In response to your question, I would have to say that if the legislation is not amended, it will be difficult for an organization like ours to operate on a day-to-day basis. Everyday, we send information to the United States and to other provinces for verification against their databases. If the bill as presently drafted is adopted, we won't be able to do that.

Would we prefer that the legislation not be adopted? That is not the issue. Rather, the point is that the federal legislation should allow us to verify this information against other provincial or international databases. Currently, we do this four times a day, that is we send information to the United States. If the bill is adopted in its present version, we will no longer be able to do that. At the very least, we would like the legislation to be clearer and we would like to be able to exchange and use information.

[English]

The Chair: Does anyone else wish to comment on that?

Mr. Webber, do you have any other comments?

Mr. Bernard Webber: No.

The Chair: Okay.

Mr. Dubé.

[Translation]

Mr. Antoine Dubé: Thank you.

[English]

The Chair: Mr. Lastewka.

Mr. Walt Lastewka (St. Catharines, Lib.): I'm having a little bit of difficulty understanding, Mr. Garand, exactly your point, what you want us to change. I know Mr. Lowther or someone else was not quite clear on what you recommend the committee change.

Could you just go back to your recommendations and refer us to a clause that you want changed, and how you want it changed?

Mr. Gerry Garand: To answer the question in general terms rather than take specifically each article, what we're asking is that as it's written today, it doesn't allow us to exchange information. It allows us to collect information but it doesn't allow us to exchange it.

As a body that strictly enforces and helps enforce various fraud provisions, when it comes down to insurance-related frauds we need to be able to exchange that information at an underwriting as well as a claims level to be able to prevent somebody who tells us, let's say, he doesn't have any previous claims, and yet when we check against our database.... Today, even in the province of Quebec, where law 68 presently exists, we can exchange information. There is a section in law 68 that permits us, as an organization.

That clause permits what's especially given to organizations like ours; we can exchange information so that we can investigate and prevent insurance crime. We also are involved in vehicle theft, where we exchange information on a daily basis.

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Mr. Bernard Webber: If I may interject on that point, the amendments tabled by the Insurance Bureau of Canada this morning would be very helpful in that respect: “made to an organization for the purpose of preventing or detecting fraudulent activity”.

I think you'll find that there's a consistency in the recommendations from all of us, really.

Mr. Walt Lastewka: I'm just trying to understand the organizations a little bit more.

Ms. O'Reilly, who funds your organization?

Ms. Mary Lou O'Reilly: Primarily insurance companies, both private insurance companies and public, government-run insurance companies.

Mr. Walt Lastewka: Have you seen the amendments we put forward a couple of weeks ago?

Ms. Mary Lou O'Reilly: Yes. I believe I have the complete amendments, although I can't be certain.

Mr. Walt Lastewka: Do the proposed amendments to clauses 7 and 9 satisfy your requirements?

Ms. Mary Lou O'Reilly: As I mentioned earlier, if I'm interpreting the amendments appropriately, there is the question of disclosing information and sharing information.

I might add, there is the entire issue in clause 9 that discusses access to information about an individual within the framework of the contractual agreement. It is a reality, and certainly the legal people who are with us today can address this more thoroughly than I, that the insurance company does not always engage in the contractual agreement with the person who ends up being the claimant.

I can give you a quick example. You may have a homeowners' policy with your insurance company. Certainly your opportunity to give consent may be there, but a totally different individual may slip and fall on your driveway, and that individual may in fact be the fraudster. He may be the individual who has allegedly slipped and fallen on 20 driveways, and he may be collecting from 20 different insurance companies, but he has never had an opportunity, and nor have the insurance companies clearly ever had an opportunity, to extract consent from that person.

So as I interpret it, the law, complete with the amendments, does not permit that investigation or exchange of information to go on about that person, from whom it's next to impossible to get consent.

The Chair: Last question, Mr. Lastewka.

Mr. Walt Lastewka: Mr. Mitchell, is the Council of Private Investigators operating in the province of Quebec today?

Mr. Kenneth Mitchell: No, we're working in the province of Ontario. Every province is provincially licenced. We have consulted with organizations in Alberta and British Columbia. I am speaking for them as well. There is no such organization in the province of Quebec.

Mr. Walt Lastewka: So there is no organization comparable to yours in Quebec.

Mr. Kenneth Mitchell: That's correct.

Mr. Walt Lastewka: Thank you, Madam Chair.

The Chair: Thank you very much, Mr. Lastewka.

Mr. Jones.

Mr. Jim Jones (Markham, PC): Many witnesses who have come in front of us have expressed strong opposition to subclauses 12(1) and 18(1), which will allow the privacy commissioner to enter an organization's premises and obtain copies of documents without prior judicial authorization.

Do your organizations support amending these subclauses to require the privacy commissioner to obtain judicial authorization before he exercises search and seizure powers?

Mr. Kenneth Mitchell: Yes, we would prefer that provision.

A voice: It does provide an extra level of safeguard.

Mr. Jim Jones: Mr. Mitchell, you said in your brief that you wanted your organization exempt from the privacy...or can you...? You said something about wanting your organization exempt.

Mr. Kenneth Mitchell: Fraud examiners, investigators—fraud investigators in general, yes.

• 1625

Mr. Jim Jones: But we want the privacy commissioner to have to get prior authorization; why wouldn't you guys get prior authorization?

Mr. Kenneth Mitchell: That's a good point. I would reconsider that on that basis. I think you made a good argument.

Mr. Jim Jones: As well, paragraph 27(2)(b) of Bill C-54 provides that the Governor in Council may, by order, amend schedule 1 to reflect revisions to the Canadian Standards Association model code. Many witnesses feel this clause gives the government too much power to alter schedule 1 without due consultation.

Would you folks support an amendment to Bill C-54 to require a legislative amendment, passed by Parliament, to enact any changes to schedule 1?

Mr. Gerry Garand: Personally, as far as the sectoral codes and so on, first, we would rather that if we go sectoral codes, we go sectoral codes, but if we go through law, if we want to make an act, well, we should have all these sections within the act and not have the adjoining codes.

In terms of the CSA standard, there's a lot of ambiguity sometimes. You're “allowed” to do things, you “can” do things, it's “possible”, or you “may” do. There's a lot of leeway and openness.

When you come to a law, it would be easier if it was within the law and therefore you can't change it, as you said, every second day.

Mr. Jim Jones: The Council of Private Investigators has presented a number of common-sense amendments to assist them in fighting crime.

Mr. Mitchell, I would like to know your opinion on clause 28, and whether you feel the criminal penalties imposed in it are adequate or should be stronger. If so, what penalties would you specifically suggest?

Mr. Kenneth Mitchell: I'll be frank; I haven't addressed the penalty issue. I've been more concerned with the other issues.

I think once you establish a law you have to make sure the penalty is appropriate to the transgression against society. But again, I'll be honest; I haven't studied the penalty issues greatly.

If the penalties were commensurate with, for instance, our licensing organization, which could involve loss of licensing and financial penalties—up to $5,000, I believe, and up to two years' imprisonment—I think that's reasonable. We're already operating under that.

So I think something like that might be reasonable.

Mr. Jim Jones: Thank you.

The Chair: Thank you very much, Mr. Jones.

Madam Jennings, do you have any questions?

[Translation]

Ms. Marlene Jennings (Notre-Dame-de-Grâce—Lachine, Lib.): I merely want to be certain that I understand your recommendation. Each witness has said the same thing, namely that clause 7 should be amended to clarify the meaning of "investigative body".

Furthermore, you recommend that clause 9 provide for the right to refuse access to information used for crime prevention and detection purposes and also, to exempt the organization that collects and discloses personal information for crime prevention or detection purposes from having to obtain consent for such disclosure. Is that in fact what you are recommending?

Mr. Gerry Garand: Speaking for the Insurance Crime Prevention Bureau, yes, that is what we are recommending.

Ms. Marlene Jennings: I see. You have seen the proposed amendments to the bill, but they don't satisfy all of your expectations.

Mr. Gerry Garand: The latest amendments that I have seen—and I can confer with my counsel on this—don't exactly correspond to what we are seeking in the way of changes. We can collect information...

Ms. Marlene Jennings: You have a problem with the disclosure provisions.

Mr. Gerry Garand: Precisely, disclosure for crime prevention and detection.

Ms. Marlene Jennings: I see. If I understand correctly, disclosure sometimes involves databases. You receive claims and send information concerning these claims to the United States or to another Canadian province asking that they verify their databases and to see whether any flags go up.

• 1630

Sometimes, it is a matter of investigating various instances of fraud committed in a province or in a particular sector of activity, for example, vehicular fraud. In one of the briefs, mention was made of...

Mr. Gerry Garand: Yes, of fraud involving vehicle registration numbers.

Ms. Marlene Jennings: That's right. Of 49 vehicles reported stolen, it seems that seven had been sold in Israel even before they were ever reported stolen by their owners. Others were stolen for their registration numbers which were then placed on phantom vehicles with no history.

Mr. Gerry Garand: Exactly.

Ms. Marlene Jennings: I just wanted to be certain about this, because I was a little confused. I don't know if any of the members here have ever worked in the insurance industry. You stated that you verify information against databases in the United States. You didn't specify the exact purpose of this exercise.

Mr. Gerry Garand: Let me try and explain it to you. When a person submits a claim in Montreal in connection with a stolen vehicle, we verify the vehicle registration number with the NICB in the United States. Its database is similar to ours. If it is found that the vehicle has been shipped overseas by the very same person who reported it stolen, this tells us that we are not dealing with a theft at all. In such instances, the insurance company does not honour the claim. This would also be a case of mischief, because a false statement was made to the police.

Ms. Marlene Jennings: Thank you very much.

Mr. Gerry Garand: My pleasure.

Ms. Marlene Jennings: I have no further questions.

[English]

The Chair: Thank you very much, Madam Jennings.

Mr. Lowther, please.

Mr. Eric Lowther: To the presenters, I'm curious; you have the fairly major challenge of trying to detect fraud in your industry. The magnitude of the problem is quite impressive, as you've laid it out to us here.

Now, this whole debate is sort of framed in the technological issue of information movement, which is moving faster and faster. Is it easier with technology now to detect fraud than if it wasn't there?

That leads me into another question. It would seem to me that we have of all these computerized records now, and transmission of what people have done. If you didn't have that, it would be even be more difficult to detect fraudulent activity, right?

To ask a broad-based question, with the advent of technology is it easier or harder to detect fraud? That's probably too simplistic a question, but generally down that road.

Mr. Gerry Garand: In today's world it is probably both easier and more difficult. The more information you have, the more you can detect. Definitely we need today, in the age of technology, these databases. We need these databases to be able to talk to each other. If we didn't have that right to talk to each other on a daily basis, many frauds would go undetected.

We collect information, in the United States they collect information, and in their various areas they collect information. We need the ability to be able to collect the information but we also need the ability to use the information at the level of both underwriting and claims.

The Chair: Ms. O'Reilly.

Ms. Mary Lou O'Reilly: I have one more example of an anecdotal nature that might help shed some light on this.

When I first became executive director of the fraud coalition I recall that there was an adjuster who was asked to adjust the value of a lost ring. The claim was submitted by a gentleman whose wife had lost a ring valued at $35,000. When the claims adjuster first saw this claim, it reminded him of another claim he'd had about six months earlier when he'd worked for another company.

As it turned out, five different brothers had submitted five different claims, for exactly the same ring, to five different insurance companies.

• 1635

Now, the only reason that fraud was detected at the time was that it just happened that the claims adjuster had moved from one company to another. That was a fluke, but with technology, of course, and the ability, as Mr. Garand has pointed out, to exchange information, it would be detected. Five years ago it would not have been detected.

So we only have this story to tell because one person changed jobs.

Mr. Eric Lowther: That's a good example.

I guess I'm going towards Mr. Mitchell's recommendations, on page 14 of his submission, with regard to some of the principles that could guide the investigators in getting access to information.

How far down this continuum do we go with the Big Brother approach? If we watch everything, record everything, and have access to everything, gee, there's no fraud, because we have everybody locked down tight. At the other end of the extreme, where we don't let anybody get access to anything, there's all kinds of fraud in the interests of privacy.

I think what we're struggling with here is trying to find that place or that point where we're respecting people's privacy but still using the information to protect against fraud.

When I look at your recommendations here on page 14, they all seem fairly reasonable, but I still wonder, for the person who has been accused of fraud and who somehow, in this great information engine, has been tagged incorrectly, where he can go to appeal his case. Where does he go? Is it the privacy commissioner, or some type of court? Is there no ombudsman this person can go to and say, gee, the gung-ho fraud investigators to whom we've given the licence...? And they call themselves “fraud investigators”, but maybe sometimes they spill over into going further than they need to; I'm not accusing anybody, but it can happen.

So where does that individual go? How does he protect himself? It seems to me we're missing that component.

Mr. Kenneth Mitchell: With respect, I think perhaps we're not. I think it's out there, and it's spread. The checks and balances are there.

For instance, our industry is regulated by the Solicitor General for the Province of Ontario, and we're regulated under the Private Investigators and Security Guards Act. The Registrar of Private Investigators may enter our offices at any time, without a search warrant, and examine any files. Anyone can complain about our activity and an investigation will be conducted. We can lose our licences if we transgress.

Beyond that, we are very concerned about civil liability. We can be sued under a number of provisions, as I indicated earlier in my comments.

Our clients who hire us are extremely concerned about our activities, and if our investigation of fraud related to an insurance claim, then a complaint could be made to the Ontario Insurance Commission, who would deal with our clients, who would deal with us. So the penalties are very much in place.

Our organization was very concerned about fraud and privacy issues, going back as far as 1991, at a time when the Ministry of Transportation in Ontario was looking at restricting access to Ministry of Transportation databases. At that time, our industry adopted very strict privacy codes and codes of conduct.

I didn't make them part of this brief but I would be happy to provide them to you.

Mr. Eric Lowther: If somebody breaches them, what's the sanction? What happens?

Mr. Kenneth Mitchell: I'm sorry?

Mr. Eric Lowther: If someone breaches those codes of conduct, who cares?

Mr. Kenneth Mitchell: These are our own professional organization codes that we've adopted, so the sanction would be expulsion from our professional organization. That's as far as that can go.

I was prefacing that, though, to say that we took our self-enforcement programs to the ministry and actually entered into contracts with them. So we have a contractual arrangement with the Ministry of Transportation that requires us to meet our own standards that we put in place. If we don't, then our access to that one data bank of information would be removed.

So our industry is very concerned about these issues, as are you, and we have taken steps within our own organization to address a lot of these concerns.

Mr. Eric Lowther: Do you ever get rid of information you have? Maybe not you specifically, but as an industry in fraud, are you dealing with people in the insurance industry where, sooner or later, you say, gee, we don't need this any more, let's purge this? It's so easy to keep stuff forever and ever now, with cheap storage. Do we ever get rid of it, or is it out there forever?

• 1640

Mr. Gerry Garand: I can answer that. We have a database whereby we collect probably most of the information for the insurance industry, non-statistical, strictly on fraud, and stuff like that.

We have purge policies whereby we keep information, certain types of information, for certain periods. Ordinary claims, we keep only five years. Other claims that are of a dubious nature, we can keep ten years or longer, depending on if the individual concerned has a claim in, say, the ninth year. If he again comes up for another fraudulent claim, then we would maintain that.

On the question you were asking Mr. Mitchell previously, in the ICPB we deal, of course, all across the country, and we've been dealing in the province of Quebec since law 68 was initiated in 1968.

We have a policy whereby, say, if anybody says the information is incorrect, if that person comes back to us we will investigate the information and rectify the files, change them, or cancel them if they are wrong.

So we do have, within our own organizations, policies whereby we can correct these mistakes. It could happen, but it would be very rare that information would be kept in a file that's erroneous.

The Chair: Thank you very much.

Ms. Mary Lou O'Reilly: Madam Chair, perhaps I could add one point.

Aside from the access to the courts, which Mr. Mitchell referred to, you may be interested to know that each P and C insurance company does have a designated ombudsman. Sometimes it's an individual who is also a vice-president. Sometimes it's an individual who is only the ombudsman. But within the framework of the company itself, there is that access to a hearing, aside from the civil courts, of course. There are some provincially appointed ombudsmen in the country as well.

The Chair: Thank you.

Madam Jennings, do you have a question?

[Translation]

Ms. Marlene Jennings: I have a question for Mr. Mitchell.

[English]

Mr. Mitchell, I went through your brief and listened very carefully to your presentation. Did I miss something? You didn't make any comments on the privacy commissioner's powers under Bill C-54.

Do you think they're adequate? Do you think they're less than adequate? Are you satisfied that your members would be able to function adequately with the powers as they are described?

Mr. Kenneth Mitchell: No, frankly.

Thank you for asking the question. I felt there was only so much I could accomplish in one submission.

Our members are often one- or two-man businesses. We do represent small business, although there are larger companies. The powers would essentially allow an individual to make a claim for information, once being denied appeal, and take it through a regulatory process that would really be burdensome to a small businessman or practitioner. One could conceivably take hours and hours out of every working week to comply with a single complaint.

I can give you an example from my own company where we conducted an investigation for an insurance company. It was a fraud. It was a case that went to the Ontario Insurance Commission. It was one of those rare cases where the commissioner said it was the most flagrant case of fraud they'd ever seen.

That did not stop this individual from bringing action against my firm, against the insurance company, against the doctors who gave independent medical evidence, and against witnesses who gave witness statements and so on. It was a clear abuse of power and process, but simply in defending the action, it's taken incredible resources.

If you put this kind of administrative process in the hands of a vexatious person, it can be tremendously burdensome, particularly to the small individual. That's why I'm not happy with that. I cannot tell you that I've come up with remedies, but it would be a problem for our industry.

Ms. Marlene Jennings: When I'm talking about the privacy commissioner's powers under here, I'm talking about power of the privacy commissioner, under clause 18, to be able to constrain someone to make a statement, to be able to go to the premises of an organization that is the object of a complaint.

• 1645

It sounded to me as though the powers described in clause 18 are exactly the powers you described of the investigator of the Solicitor General of Ontario.

Mr. Kenneth Mitchell: Again, thank you for asking the question, because I think it bears on what Mr. Jones asked me. I very quickly gave a response that I thought, yes, I would want the commissioner to have to seek a warrant. Mr. Jones said, well, why? You don't want the same thing.

But it has occurred to me—I'm not always the quickest of thinkers, but I get there—that it is the difference between a request and a demand. No matter what provisions you build into Bill C-54, we as investigators can still not go into any organization or business, go to any person, and demand information. We are still investigators. We can “request”. The difference is that once it becomes a government authority, it becomes a “demand”, with no right of refusal.

That's where perhaps the oversight that would be involved in the obtaining of a warrant might be a reasonable oversight.

Ms. Marlene Jennings: Are you aware of the oversight mechanisms that exist in Ontario for investigations of public complaints against the police that come under Ontario provincial government jurisdiction—that means the OPP—and the municipal police, that they have had those powers without requiring a warrant since Ontario has had oversight; that in Quebec those powers have existed since 1968, with the creation of the Quebec Police Commission, which was abolished in 1990 with creation of its replacement, the police ethics commissioner; and that B.C. and every single province has that power?

Whatever oversight body investigating a public complaint against a police officer has the power to visit, for instance, the police force—and it's independent; they're not part of the police—and require copies of any documents that they wish. Normally, or in many cases—not in each jurisdiction but in most, particularly in Quebec—they have the power to constrain someone during an investigation to come before them to make a statement.

Those powers are there, have existed, and have never been declared unconstitutional. They've been contested and they've withstood constitutional challenges. So I would wonder why you would want to exempt those kinds of powers to the privacy commissioner.

Mr. Kenneth Mitchell: I'm wondering if the powers you're ascribing to the various police special investigation units and so on—

Ms. Marlene Jennings: No, the police ethics commission is not police. It's an administrative organization. They're civilians.

Mr. Kenneth Mitchell: But I'm wondering if it's one government agency designed to investigate another government agency, and thus it's all in the family.

Ms. Marlene Jennings: No, it's not. In Quebec we would have the police ethics commissioner. An investigator would have the power to require any person to make a statement in the course of an investigation—

Mr. Kenneth Mitchell: Not just the police officer.

Ms. Marlene Jennings: —not just the police officer.

For instance, if an incident took place in a public or commercial mall and in order to investigate the complaint they would have to go and visit commercial operations there, they could require the individuals who work there to provide a statement as to what they saw or didn't see. That's just as an example.

Mr. Kenneth Mitchell: I think your comments are fair. They're well taken.

The point I made to Mr. Lowther was that we operate under that practice anyway.

Ms. Marlene Jennings: Okay.

Mr. Kenneth Mitchell: Registered private investigators can walk into our office and demand access to files. We do live in that world. It's not my favourite world, but we can live with that.

Ms. Marlene Jennings: Okay. Thank you.

The Chair: Thank you very much, Madam Jennings.

[Translation]

Any further questions, Mr. Dubé?

Mr. Antoine Dubé: Yes. On looking at your submission, Mr. Garand, I note that you often refer to Quebec's legislation. Earlier, you mentioned some reservations that you had or changes that you would like to see made to the bill. Do the changes that you are requesting to Bill C-54 correspond to what is contained in Bill 68?

Mr. Gerry Garand: We are quite happy with Bill 68.

• 1650

Several of the recommendations contained in our submission draw their inspiration from Bill 68. We have been working under this legislative regime since 1994 and we haven't encountered any problems. I'm not saying that we want the federal legislation to be exactly the same, but a number of the provisions, particularly those respecting access to and the sharing, distribution and use of...

Mr. Antoine Dubé: Even information shared through ordinary telephone calls.

Mr. Gerry Garand: Correct. There is also the matter of refusing a person access to information when a case is in litigation or under investigation.

Mr. Antoine Dubé: I note that in your conclusion. You are concerned that overlap may occur or that problems may arise in Quebec as a result of the possible application of the two regimes.

Mr. Gerry Garand: we make a number of suggestions regarding this matter. Specifically, we recommend that the provincial legislation take precedence wherever information is collected and that the federal legislation apply when information is being exchanged between the provinces and an international body.

Mr. Antoine Dubé: Are you suggesting that there be two separate fields of application?

Mr. Gerry Garand: Yes.

Mr. Antoine Dubé: To further clarify these legislative provisions?

Mr. Gerry Garand: Yes, and to simplify the process as well.

Mr. Antoine Dubé: I see. Thank you.

[English]

The Chair: Thank you very much, Mr. Dubé.

Mr. Jones, do you have any further questions? Mr. Lastewka? Mr. Lowther?

Mr. Eric Lowther: I have just a comment.

I think the presentation today has been a good one in the sense that it has brought to light some of the realities of the world out there, where you're faced with the need for access to information and the benefits of getting it as a trade-off to the protection of public privacy.

I thought it was a good bunch of information brought forward, and I thank you.

The Chair: Thank you very much, Mr. Lowther.

On behalf of the committee, I want to thank all the witnesses for their very detailed briefs and presentations, and for participating in our discussion today. We definitely have some more thoughts in terms of our revisions to Bill C-54.

If you have any further comments, we'd appreciate them by the end of the week. We're planning to go to clause-by-clause next Tuesday.

The meeting is now adjourned.