Life and Health Insurance consultation summary report

• CAFII

• CLHIA

When considering fee increases, FSRA should consider industry challenges, such as inflation, market trends, and compliance costs. 

FSRA proposed a total sector budget increase of 8.3 per cent in 2024-25 compared to 2023-24. The industry would appreciate clarity on whether annual increases will generally be consistent over time and at what level. The industry was concerned that budget increases for FSRA of 7-9% annually will become unsustainable.

As the FSRA budget related to the life and health insurance industry grows, FSRA should examine the assessment methodology to ensure that the cost of supervision is appropriately allocated across participants.

FSRA considered the overall financial impact to the sector when planning the annual budget and selecting the initiatives to pursue to achieve FSRA’s strategic aims. FSRA considered using its corporate surplus to offset fees and mitigate year-over-year fee increases.

FSRA periodically reviewed its Fee Rule to ensure that regulatory fees are aligned with the costs of regulation. FSRA’s 2019 fee rule was recently reviewed and updated in 2022 to ensure such alignment. FSRA’s base budget was stable with increases reflecting rising inflation and mandated salary and benefits increases per collective agreement requirements. Other budget increases related to planned initiatives in pursuit of FSRA’s strategic objectives. In relation to the L&H sector, the budget reflected measures to address identified areas of concern relating to conduct.

• FAIR Canada

• IFB

• CLHIA

• Joel Bennett, World Financial Group

One stakeholder supported FSRA’s key outcomes with respect to advancing the interests of consumers. In addition, it believed the government should consider giving FSRA stronger tools to protect consumers of insurance products, including rule-making authority. The stakeholder also believed FSRA should consider banning advisor chargeback commission.

Two stakeholders were concerned that the phrase “protect consumers who invest in segregated fund contracts” implied that segregated fund investors were not currently protected. One also believed it implied a level of protection that was not realistic in an investment-based contract. The other suggested that to ensure consumers understand segregated fund contracts, FSRA should clearly communicate regulatory requirements related to the design, distribution, and administration of segregated fund contracts.

One stakeholder commented that FSRA should rely on simple and effective consumer protection rules that do not rely on complex disclosure. They believed FSRA must do more to address business conducted in languages other than Canada’s official languages.

FSRA has regular ongoing dialogue with the Ministry of Finance about the scope of FSRA’s rule-making authority, including about the insurance sector. The Ministry of Finance is responsible for proposing any draft legislative amendments that would amend FSRA’s rule-making authority.

CCIR and CISRO announced their position on the advisor chargeback sales charge option in the Discussion Paper on Upfront Compensation in Segregated Funds in May 2023. FSRA will continue its work with CCIR and CISRO to create national Guidance about upfront compensation on segregated fund products, such as compensation under the Advisor Chargeback Sales Charge Option.

Although the insurance industry created voluntary Guidance that explained how agents should sell segregated fund contracts, certain basic elements of consumer protection were not yet mandatory in Ontario.

For example, there was no legal requirement for Ontario agents to gather information about their customers’ personal circumstances, analyze their needs and recommend segregated fund products and investments that are suitable for them based on this information.

FSRA is working to address this gap. However, FSRA recognized the concerns raised by industry regarding the current wording may imply that segregated fund consumers were completely unprotected and proposed to change the wording of the priority to “Strengthen protection for consumers who invest in segregated fund contracts”.

FSRA recognized the limits of relying on disclosure to customers to achieve fair outcomes and recognized that more information is not always better. FSRA remains committed to a principles-based, outcomes-focused approach to regulation rather than creating a detailed and complex compliance regime.

In addition to providing content in English and French, FSRA added a multi-lingual translation feature to its website.

To provide a more accessible and inclusive experience for users, most of FSRA’s website can now be automatically translated into a variety of languages by selecting the Google Translate feature in the menu at the top of each page. This new tool would allow users to navigate the site as well as read, understand, and apply web page content in their own language. Available languages currently include German, Spanish, Hindi, Italian, and Chinese.

• IFB

One stakeholder continued to recommend that FSRA should work with CCIR to align protection for vulnerable insurance consumers with that available for securities consumers.

FSRA is committed to identifying and acting on opportunities to better protect vulnerable consumers and is, as discussed elsewhere in our responses, actively working to achieve greater regulatory harmonization.

• David Allan MacDougall, Hub/Bridgeforce/Sentinel/ National Best

A stakeholder commented that FSRA’s objective to protect the public interests may have an adverse effect on the industry. The removal of DSCs will benefit clients, however, removing DSCs will favour only established agents and discourage new entrants to the industry. The stakeholder believed that this could have severe negative impacts on independent agents.

FSRA carefully considered the impact and potential adverse effects as it developed consumer protection requirements with respect to insurance but supported the decision to cease the use of DSCs.

FSRA continued to work with the Canadian Council of Insurance Regulators (“CCIR”) and Canadian Insurance Services Regulatory Organizations (“CISRO”) in developing national Guidance with respect to sales charge options and associated compensation with respect to individual segregated fund contracts.

This Guidance was intended to protect customers while supporting the provision of advice by licensed agents.

• CAFII

One stakeholder recommended CCIR and FSRA gather CCIR’s Annual Statement of Market Conduct data in a way that is consistent, comparable across businesses, and that would lead to prompt reports.

FSRA will continue to work with other members of CCIR to refine the ASMC questionnaire as needed.

• Desjardins

Stakeholder supported harmonization of federal and provincial regulatory frameworks and FSRA’s work with CCIR and CISRO to create Guidance for segregated funds.

FSRA will continue its work with CCIR and CISRO to develop consistent national Guidance about the design, distribution, and administration of individual segregated fund contracts.

• FAIR Canada

Stakeholder supported FSRA’s work with CCIR and CISRO to create a consolidated national Guidance regarding the design, distribution, sale and administration of segregated funds and its plan to develop rules and Guidance in Ontario to address related gaps in consumer protection.

FSRA thanked the stakeholder for its submission.

• Joel Bennett, World Financial Group

FSRA should provide specific, measurable rules for use of technology by agents and agencies to store client data, particularly through cloud storage, consult with the Ontario Privacy Commissioner, and hold advisors liable for ‘leakage’.

While FSRA does not regulate privacy, it recognizes the issues relating to cybersecurity that affect insurance companies, agents, and customers. In November 2023, FSRA issued relevant Guidance with respect to Information Technology Risk Management. FSRA will continue to monitor cybersecurity developments to determine whether additional measures are appropriate.

• IFB

One stakeholder would welcome improved processes around licensing, particularly turnaround times for individual and corporate insurance licenses. The stakeholder suggested that FSRA should better communicate proposed changes to licensing requirements to reduce incomplete applications, which contributed to delays.

FSRA recently completed a project to improve the visibility of current processing dates for licensing on FSRA’s website. In addition, FSRA appreciated this practical suggestion of a way to reduce turnaround times for insurance licence applications.

• CAFII

One stakeholder supported FSRA’s supervision of life and health insurance MGAs but emphasized the difference between distribution through the MGA channel and credit protection distribution.

FSRA recognized the differences between the distribution of life insurance by licensed agents associated with the MGA channel and individuals who are exempt from licensing in connection with credit protection insurance. However, FSRA expected that customers will be treated fairly regardless of the channel through which they purchased insurance.

• IFB

• Joel Bennett, World Financial Group

Stakeholders commented that FSRA should expand its supervisory focus beyond MGAs to ensure high standards of conduct are achieved in all distribution channels.

Some stakeholders believed FSRA should address the entire MGA market and not only the high growth MGAs. Since other MGAs engaged in unfair practices, FSRA should also focus on those. 

FSRA’s Life & Health Insurance supervision initiatives were risk-based and evidence-informed. Priorities with respect to oversight of insurers, agents, and distribution entities, such as MGAs, were based on FSRA’s assessments.

This enabled FSRA to focus its supervision activities in the areas or on the distribution channel participants where the greatest risk of consumer harm existed.

FSRA's proposed Life Insurance Agent & MGA Licensing Suitability Guidance will help set high standards of business conduct for insurers, MGAs and sales agents who deal with life insurance.

• CAFII 

• CLHIA

• IFB

One stakeholder supported FSRA’s focus on vulnerable consumers, enabling innovation and modernizing systems and processes. The stakeholder also agreed with the importance of Diversity, Equity and Inclusion.

One stakeholder agreed with FSRA's strategic priorities regarding advancing the consumer interest, enabling innovation, and modernizing systems and processes.

FSRA thanked the stakeholders for the comments.

• CAFII 

• CLHIA

• Desjardins

• Joel Bennett, World Financial Group

One stakeholder was concerned that lowering the consultation period for FSRA Rules to 60 days will make it harder for industry to comment and suggested FSRA should advise of consultations as early as possible to accommodate.  

One stakeholder emphasized the importance of stakeholder input into regulatory requirements regarding the role and obligations of insurers, life and health insurance MGAs, and advisors with respect to the distribution of life and health insurance products.

FSRA should ensure transparency as it broadens its powers. One stakeholder supported more proactive and detailed communication about potential changes to the regulatory framework to enable regulated entities to prepare and adapt to new requirements.  

FSRA should be inclusive and engage more with MGAs and agents to include them in policy and information gathering processes.

FSRA recognized the challenges associated with reviewing and obtaining industry consensus with respect to proposed changes to FSRA Rules, but also noted the importance of implementing consumer protections promptly. FSRA will continue to work with industry and other stakeholders to obtain their input in advance of changes to its regulatory framework. 

FSRA appreciated the input from industry with respect to proposed regulatory changes and will continue to engage with all stakeholders in advance of changes to its regulatory framework. 

FSRA will continue to consult and gather input from MGAs, the insurers and agents who work with MGAs, and other stakeholders such as consumer advocates. FSRA also has a dedicated Insurer Oversight of MGAs Technical Advisory Committee (“TAC”).