Purpose of the consultation

The first proposed UDAP rule’s (“First Proposed Rule”) comment period launched on December 18, 2020 and concluded on March 18, 2021 (“First Comment Period”). The Financial Services Regulatory Authority of Ontario (“FSRA”) analyzed stakeholder feedback received during the First Comment Period and amended the First Proposed Rule, resulting in the second proposed UDAP rule (“Second Proposed Rule”).

FSRA held a 4-week second comment period (“Second Comment Period”) on the Second Proposed Rule, which launched on July 14, 2021 and concluded on August 11, 2021. FSRA analyzed stakeholder feedback received during the Second Comment Period and amended the Second Proposed Rule, which was approved by FSRA’s board of directors.

The Second Comment Period included 19 submissions, 4 comments and 3 questions from interested members of the public. Respondents included insurers, industry associations representing insurers, agents, health care professionals and consumer advocates. FSRA also held several follow-up meetings with stakeholders to provide further clarity on the Second Proposed Rule.

Stakeholder submissions were generally supportive of the Second Proposed Rule and no substantive issues were identified upon a review of all applicable comments. FSRA has considered the feedback and comments provided and made immaterial amendments to the Second Proposed Rule.

This document summarizes the feedback received during the Second Comment Period and FSRA’s responses. A full list of respondents to the Second Comment Period is provided in Appendix A of this document. Submissions, comments and questions are available on FSRA’s website.

Background of second proposed Rule and context for stakeholder feedback

FSRA’s response to stakeholder feedback and amendments to the Second Proposed Rule continue to be guided by the original objectives and principles set forth in FSRA’s Notice of Proposed Rule and Request for Comment (“Notice”).

The Second Proposed Rule has been drafted in support of FSRA’s broader transition towards principles-based regulation. Although based on the UDAP Regulation, the Second Proposed Rule provides a regulatory framework which better aligns with the FSRA Act and current market conditions. Outcomes-focused drafting and criteria are intended to provide FSRA with the discretion to determine whether a UDAP has occurred based on clear legal tests and upon consideration of all relevant circumstances. Furthermore, a principles-based approach avoids the use of prescriptive tests that may not be efficient in identifying harmful behaviour. Principles-based regulation can strengthen consumer protection, enhance choice, competition and innovation in the insurance sector, and will enable FSRA to examine particular circumstances to achieve desired regulatory outcomes.

To advance FSRA’s mandate and statutory objects, the Second Proposed Rule holds the insurance sector to a high standard of business conduct in keeping with the UDAP Regulation and in further alignment with certain sections of the joint Canadian Council of Insurance Regulators’ (“CCIR”) and Canadian Insurance Services Regulatory Organizations (“CISRO”) Guidance on the Conduct of Insurance Business and Fair Treatment of Customers (“FTC”).  FSRA expects regulated entities to bear greater responsibility for ensuring compliance with the Second Proposed Rule, including exercising judgment regarding appropriate conduct on matters of public interest such as potential UDAP violations. Using a principles-based approach to regulation and supervision, FSRA expects regulated entities to treat consumers fairly, which includes accountability for fair conduct in cases where the law is subject to interpretation and all ambiguities have not been removed through prescriptive drafting focused on prohibiting or permitting specific business activities.  

FSRA expects insurers and other market participants to undertake any necessary work to ensure compliance with the Second Proposed Rule before it comes into force. FSRA will continue to take an outcomes-focused approach to monitoring compliance with the Second Proposed Rule, including supervision, deterrence and encouraging proper market conduct to ensure public confidence and safety. FSRA will continue to apply a methodical and criteria-based approach to assessing potential compliance issues with the highest impact and priority, which may be subject to further investigation and review, to ensure the fair treatment of customers.

Summary of comments

Appendix A: list of respondents

  • Canadian Association of Direct Relationship Insurers (CADRI)
  • Canadian Life and Health Insurance Association (CLHIA)
  • Insurance Bureau of Canada (IBC)
  • Ontario Mutual Insurance Association (OMIA)
  • Advocis
  • Canadian Association of Financial Institutions in Insurance (CAFII)
  • Canadian Association of Independent Life Insurance Brokerage Agencies (CAILBA)
  • Independent Financial Brokers of Canada (IFB) 
  • Canadian Society of Chiropractic Evaluators
  • College of Chiropractic Orthopaedic Specialists
  • Ontario Psychological Association
  • Ontario Rehab Alliance
  • Ontario Trial Lawyers Association (OTLA)
  • CAA Insurance
  • Desjardins
  • The Co-operators
  • Wawanesa Life Insurance Co.
  • Wawanesa Mutual Insurance Co. 
  • FAIR Association of Victims for Accident Insurance Reform.