Life & Health Insurance Consultation Summary Report

• IFB

• CLHIA

• CAFII

• FAIR Canada

• CAP
   

Stakeholders commented on the SOP Life & Health Insurance Priorities as follows:

• Support for FSRA’s objective of protecting consumers through enhanced oversight.
• Encouraged FSRA to focus on areas where there is the greatest consumer risk with the aim of protecting consumers while supporting innovation and burden reduction.
• Noted that they support and participate in initiatives addressing oversight of conduct standards and barriers to fair treatment of customers in the life and health industry and make investments in systems, processes, oversight, monitoring, employee training, and controls to ensure that Fair Treatment of Consumer (FTC) expectations are achieved.
   

• IFB

• CLHIA

Stakeholders noted the importance of harmonizing FSRA’s segregated fund initiatives with other Canadian jurisdictions, through the CCIR and CISRO, and with mutual funds regulation.

Respecting the planned national guidance on total cost reporting disclosure requirements for segregated fund contracts:

• A stakeholder noted their expectation that the guidance will recognize the key features of segregated funds that can make them an alternative and sound investment choice for consumers. 
• A stakeholder noted that the new requirements should be implemented in lock step with the mutual fund industry.
   

FSRA thanks stakeholders for their feedback. FSRA considers the harmonization of segregated fund initiatives with other Canadian jurisdictions, through CCIR and CISRO, and with mutual funds regulation, to be a priority. FSRA continues to work with CCIR / CISRO to effect a coordinated approach for a segregated fund regulatory framework with the securities industry and mutual funds regulation.

• IFB

• CLHIA

• FAIR Canada

Stakeholders mentioned their support of FSRA’s segregated fund initiatives, - namely, Total Cost Reporting, Up Front Compensation, and Deferred Sales Charges – and encouraged FSRA to initiate clear guidance without delay. 

Further, the stakeholders suggest that an outcome for FSRA’s priorities include improved content for consumers. 
 

FSRA thanks stakeholders for their feedback. FSRA continues to lead and support initiatives relating to Total Cost Reporting, Upfront Compensation, and Deferred Sales Charges with clear direction on regulatory requirements, with a view that can help segregated fund products be viable alternatives and sound investment choices for consumers.

FSRA recognizes the importance of clear information for consumers as a key feature of Fair Treatment of Customers and will consider appropriate industry outcomes in its priorities. 

• CLHIA

• IFB

Stakeholders supported FSRA’s planned outcome of stakeholders having clarity and an increased understanding of the regulatory requirements with respect to the role of insurers and managing general agents (MGAs) and seek to work collaboratively with FSRA as it moves forward.

• A stakeholder commented that FSRA’s planned outcome will lead to a stronger distribution system and improve how consumers are served and protected. Insurers look forward to working collaboratively with FSRA as it moves forward with next steps, including developing a regulatory framework to address potential risks and challenges.
• A stakeholder noted that the Priorities focus on independent distribution of insurance. They encouraged an expanded (risk-based) focus for FSRA to be satisfied that high standards of business conduct are being achieved regardless of the distribution channels that consumers interact with, including others that account for a significant portion of sales, such as direct with insurer, career, proprietary and national accounts.

FSRA will continue to consult with stakeholders to obtain feedback on proposed changes to supervisory frameworks. FSRA is committed to an open, transparent, and collaborative approach that involves stakeholders and ensures broad input and perspectives to inform policy direction.

FSRA’s statutory mandate includes promoting high standards of business conduct and protecting the rights and interests of customers across each of the sectors it regulates.

• CLHIA

• CAFII

Stakeholders supported FSRA’s participation in the IAIS, and, where appropriate alignment with the practices of international bodies such as the IAIS, as indicated by the references in the SOP.

• Stakeholders encouraged FSRA to ensure that Ontario’s circumstances are fully considered when applying internationally developed standards. They noted that Canadian business culture is aligned with regulatory expectations and that FSRA and the other provincial insurance regulator members of CCIR have created and operate a professional, proactive, effective, and properly funded regulatory framework.
• Stakeholders encouraged FSRA to play a leadership role in IAIS’ deliberations and are pleased with Mark White’s appointment as Chair of the IAIS’ Market Conduct Working Group.

In October 2022, FSRA CEO Mark White was appointed Chair of the Market Conduct Working Group of the International Association of Insurance Supervisors.

This enhanced FSRA’s active partnership with insurance supervisors and regulators from more than 200 jurisdictions to share best practices and develop appropriate regulatory policies. IAIS is the global standard-setting body responsible for developing and assisting in the implementation of principles, standards, and guidance for the prudential and conduct supervision of insurers.

• CAFII

• Charles W. Foster
   

Stakeholders supported the references to FTC in the SOP – which is consistent with CCIR/CISRO Guidance, making it clear that a harmonized and coordinated national approach continues to be prioritized.

• Stakeholders noted that without national regulatory harmonization, life insurance agents face increased complexity, costs, and potentially conflicting compliance expectations.
• Stakeholders reiterated appreciation for FSRA setting an example of supporting harmonization by adopting FTC as the document which outlines FSRA’s expectations of industry with respect to FTC without the need for a separate FRSA FTC Guideline.

FSRA thanks stakeholders for their feedback.

• Charles W. Foster

Stakeholder encouraged FSRA to clarify FSRA’s plans for the life agent unit, expectations for life agents and how they can satisfy expectations, and how insurance agents will be risk rated.

• Stakeholder recommended FSRA more clearly distinguish between adopted guidance and strategy; publish the supervisory framework as Guidance; and consider publishing sample policies and procedures (using FSRA CU “Risk-Based Supervisory Framework” as an example).

FSRA has implemented the Life and Health Agent Supervisory Framework and operationalized proactive life agent examinations utilizing available risk profiling. In consultation with industry, FSRA continues to build supervision capacity in insurance distribution under the Framework.

The Framework’s risk profiling utilized internal FSRA data captured through licensing applications, licensing renewals, consumer complaints, LARFs, and life agent enforcement activity reported by other regulatory bodies across Canada. The data allows FSRA to take an efficient and risk-based approach to supervision by focusing on agents with the highest risks.

The examination questions and examination findings published in the supervisory framework could inform development of policies and procedures.

FSRA will take the feedback into consideration as it continues to consult with stakeholders on proposed changes to supervisory frameworks.

• Charles W. Foster

Stakeholder encouraged FSRA to provide clarity regarding insurers’ role in enforcement of CCIR/CISRO guidance.

• Stakeholder encouraged FSRA to clarify whether FSRA’s Fair Treatment of Customers in Insurance approach guidance applies to agents of both Ontario-incorporated insurers and federally-incorporated insurers.
• Stakeholder recommended that FSRA enact a rule incorporating CCIR/CISRO Guidance as a FSRA enforceable rule. 

FSRA relies on insurers’ ongoing fulfilment of their screening and monitoring obligations and holds insurers accountable for them. An insurer’s compliance program should be reasonably designed to ensure its agents are compliant with and generally act consistently with legislation, regulations, and FTC Guidance.

The Fair Treatment of Customers in Insurance guidance applies to Ontario-licensed life agents and life and health insurers, whether the insurers are federally or provincially incorporated.

As noted in FSRA’s Proposed Principles of Conduct for Insurance Intermediaries guidance (published for consultation in April 2022):

“FSRA intends to assess the potential for incorporating the Principles of Conduct into the [Unfair or Deceptive Acts or Practices] rule. Industry participants are expected to be aware of the Principles of Conduct and to conduct insurance activities in a manner that supports fair treatment of customers outcomes.”

• FAIR Canada

• IFB

• CAFII

• Jackson & Associates Limited

Stakeholders are generally supportive of FSRA’s continued cross-sector commitment to strengthening the focus on consumers. 

• A stakeholder noted that FSRA needs to continue to outline specific deliverables on key consumer protection issues to the greatest extent possible, including, for example, specific deliverables on complaint handling /dispute resolution standards
• A stakeholder suggested the Consumer Office and Consumer Advisory Panel should work alongside counterparts in other financial services, and particularly those in the securities sector. Similarly, a stakeholder also underscored the importance of bringing a shared insurance/securities consumer lens to any cross-sectoral concerns since consumers frequently engage in both life insurance and securities transactions.
• A stakeholder encouraged the Consumer Office to consider the practical insights of life/health insurance advisors who are dealing with consumers everyday.
• A stakeholder encouraged FSRA to continue to engage in independent, third-party consumer research and data analysis, given that consumer preferences are evolving rapidly.
• A stakeholder noted its support for FSRA’s identification of vulnerable consumers given the demographic realities of an aging population, increased cyber security risks, financial fraud, and uncertain economic realities. The stakeholder recommended FSRA work with the Canadian Council of Insurance Regulators (CCIR) to align with work being done by the Canadian Securities Administrators (CSA).
• A stakeholder suggested that FSRA should address potential gaps in the complaint handling framework for consumers who may have complaints against independent insurance advisors selling products such as segregated fund contracts, which are not within the mandate of the Ombudsman for Banking Services and Investments’ (OBSI) and the OmbudService for Life and Health Insurance.
• A stakeholder suggested FSRA would benefit from including specific deliverables in the planned outcome to “Strengthen Consumer Advisory Panel (CAP) engagement” and require engagement with the CAP and other consumer stakeholders on all consumer-related policy work.
• A stakeholder noted support for FSRA’s efforts to educate consumers, and recommended, for group life and health insurance, additional compensation and expense disclosures from insurers and agents to ensure consumers (clients) understand costs and are aware of potential conflicts of interest.
• A stakeholder encouraged regulators to do more to encourage business continuity and succession planning in the life insurance industry, given the rising age of practicing advisors. Industry associations recognize the importance of educating sole proprietors and those operating smaller firms to understand the need for succession planning. Regulators could endorse the development of such plans, without prescribing specific details or requirements.

For complaints regarding life insurance products, including segregated funds, consumers currently have available to them dispute resolution mechanisms that include access to the insurer’s dispute resolution system complaints and internal ombudsperson, including for complaints related to the selling agent. Consumers also have access to the OmbudService for Life and Health Insurance dispute resolution service for complaints submitted to the insurer that weren’t resolved at the insurer stage, including for segregated fund products. FSRA will continue to work with stakeholders on its understanding of the system and opportunities to improve complaint resolution in FSRA-regulated sectors.

As part of FSRA’s research efforts in understanding consumer vulnerability, FSRA has undertaken environmental scanning to better understand work that is being undertaken by other regulators and jurisdictions globally (including the Canadian Securities Administrators) in protecting vulnerable consumers. FSRA will take into consideration your suggestions about working with the Canadian Council of Insurance Regulators to align our efforts in protecting vulnerable consumers.

FSRA’s Consumer Office agrees with the suggestion of the value of insights of persons at the forefront of dealing with consumers daily, including industry members like advisors. The Consumer Office’s relationship development activities, through community outreach, has also included industry members and industry organizations. The Consumer Office’s Consumer Advisory Panel has additionally always had representation from the legal and/or industry communities, who deal directly, or whose colleagues deal directly, with consumers every day, in different capacities. FSRA, more generally, currently has multiple avenues for obtaining direct insights from industry members, such as advisors, including through Technical Advisory Committees and Stakeholder Advisory Committees, and through public consultations for proposed public policy.

We will continue to consider current and new opportunities to directly engage advisors and others who have consumer-facing insights.

FSRA recognizes the importance of clear information for consumers as a key feature of Fair Treatment of Customers. FSRA will engage with the sector and consumers to understand their current and future needs and will conduct research to better understand risks to and opportunities for consumers.
 

• IFB

• CAFII

Stakeholders supported FSRA’s intent to modernize its systems and embrace innovation while maintaining a strong focus on consumer safety and looking forward to learning more about experiences in FSRA’s Test and Learn Environments.

• A stakeholder commended FSRA’s intention to improve the licensing and registration processes for the insurance sector and is supportive of FSRA’s efforts to access data and analytic tools to improve its regulatory oversight and increase administrative efficiencies.
• A stakeholder was supportive of FSRA’s commitment to enhance its own talent management framework as being critical to fulfilling its mission and mandate and commended the calibre of the FSRA management team and employees.

FSRA thanks stakeholders for their support for the Modernize Systems and Processes priority.

FSRA welcomes innovation initiatives by market participants through the FSRA Test and Learn Environment (TLE) and reiterates its commitment on innovation facilitation across FSRA-regulated financial services sectors. Over the next year as FSRA rolls out the pilot TLE, FSRA will share experiences and adapt the TLE accordingly. In the meantime, FSRA welcomes collaboration with sector participants and peer regulators, as FSRA works to ensure the expansion for TLE is done in a responsible and holistic way.

FSRA supports innovation in Ontario’s financial services sectors. FSRA invites stakeholders to review its Innovation Framework and apply to its TLE. The Innovation Office can be reached at [email protected]