On June 19, FSRA hosted a webinar for life insurance companies on the proposed Total Cost Reporting Rule.
The webinar covered:
- the purpose of the Rule, including key protection benefits for consumers
- what insurers need to know to be compliant with the Rule
- how the Rule aligns with FSRA’s principles-based regulatory approach
210 attendees participated in the webinar and had the opportunity to ask questions directly to our FSRA team.
Proposed Total Cost Reporting Rule presentation
Date: June 19, 2024
Presenter: Tim Miflin, Mike Winter
You can view this video with closed captioning by selecting the “CC” button in the video menu. Note: the closed captioning text is automatically generated and has not been reviewed for accuracy.
0:03
Hello everyone and welcome to today's webinar, FISRA's Overview of Proposed Rule on Total Cost Reporting.
0:14
Before we get started, I would like to go over a few items so you know how to participate in today's event.
0:23
You have the opportunity to submit text questions to today's presenters by typing your questions into the questions pane of the control panel.
0:31
You may send in your questions at any time during the presentation and we will collect these and address them during the Q &A session at the end of today's presentation.
0:42
I would now like to introduce Tim Mifflin, Senior Manager, Insurance Policy at FISRA.
0:49
Go ahead.
0:52
Thank you very much, Clara, and good morning, everybody.
0:55
Thank you so much for attending FISRA's webinar on our proposed total cost reporting rule.
1:01
I understand almost 400 people signed up for today's webinar. So it's great to see so much interest.
1:09
Thank you As I mentioned, my name is Tim Mifflin I'm senior manager of the insurance market conduct policy team here at FISRA and I'm joined by my colleague Mike Winter Who is a senior policy and technical lead with the insurance market?
1:25
Market conduct policy team Mike and I will be your hosts for today We're going to spend some time walking you through the proposed total cost reporting or TCR rule for segregated fund contracts.
1:39
If approved, this will require insurers to provide improved enhanced annual statements to individual segregated fund contract owners.
1:49
We've allocated time at the end of the presentation for any questions you have and responses to we can't get to today will be posted on our website.
2:00
A recording today's webinar and the slide deck will also be posted on our website. I hope you find today's webinar informative.
2:09
Let's get started. So starting with the land acknowledgement.
2:16
It's important to acknowledge that the land we're on is a traditional territory of many nations including the Mississaugas of is now home to many diverse First Nations, Inuit and Métis peoples.
2:32
We acknowledge that Toronto is covered by Treaty 13 with the Mississaugas of the Credit and the Williams Treaty signed with multiple Mississaugas and Chippewa bands.
2:47
So turning to the agenda and the contents that Mike and I would like to cover today, we provide you with background information on the work undertaken to produce and draft the proposed Total Cost Reporting Rule.
3:01
We'll talk about the drivers, the key reasons for the rule.
3:04
We'll focus on the target outcomes and what we're aiming to achieve through the rulemaking process.
3:11
Mike will also present examples of what the new annual statements could look like.
3:16
I will also spend some time discussing the implementation challenges that have been raised by some stakeholders at the date.
3:23
I'd like to highlight some of the questions and additional information that we FISRA are trying to obtain through our consultation process.
3:32
And as I mentioned in the beginning, there will be time for any questions that you have at the back end of the presentation.
3:46
So moving to the slide, moving to the topic of providing additional background information.
3:52
You won't need me to tell you that the segregated funds market in Canada is significant.
3:56
As of June last year, approximately $130 billion was invested in segregated funds, with approximately 50 billion of that amount invested in Ontario.
4:06
Now each year, FISRA publishes its priorities for the fiscal year.
4:11
One of our priorities for the life and health sector in 2024-25 is to introduce changes that will better protect consumers who invest in segregated fund contracts.
4:21
As part of the work we are doing to advance that priority, we want to ensure that when customers receive their statements about their seg funds contracts, it's clear what they have made, but it's also clear what they have paid in terms of costs.
4:36
Now insurers are already required to provide annual statements to customers owning segregated fund contracts.
4:42
The proposed TCR rule would increase and enhance the amount of information provided to customers.
4:51
Now we recognize that some insurers already provide enhanced information on a voluntary basis, but because there are no requirements for how this information is reported, it may to inconsistencies. Next slide please.
5:13
So further detail why FISRA is proposing the total cost reporting rule.
5:18
It's important to highlight this is not a new initiative and it's certainly not one that's unique to Ontario.
5:24
Canada's insurance and securities regulators have worked hard to establish common standards for producing reports provided to customers.
5:31
On the insurance side the Canadian Council of Insurance Regulators or CCIR published national guidance on TCR in April last year.
5:42
The aim of the National Guidance is to enhance and harmonise across the country how performance and fees should be disclosed.
5:51
The proposed fiscal rule, the proposed TCR rule, is a means by which we would implement the National Guidance Standards for segregated fund contracts here in Ontario.
6:00
If the rule was approved, it would make the statement enhancements a legal requirement.
6:07
I'll now hand over to Mike who's going to talk about the target outcomes we're trying to achieve in more detail. Thank you Tim.
6:17
Now as Tim mentioned the current statement requirements in Ontario do not match what's set out in the national guidance.
6:24
The proposed total cost reporting rule will close this gap and implement the requirements that match the national guidance within Ontario in a legally binding way.
6:32
This ensures customers receive the important information that they need about their own segregated fund contract's performance, costs, and guarantees on a regular basis after the product is issued.
6:43
Customers can use this information then to make the changes to their contract or other investment selections.
6:50
Given the alignment of the proposed rule with the National Insurance and Securities Regulator work, the proposed rule seeks to ensure segregated fund contract owners in Ontario receive statements that have comparable information as other segregated fund and investment fund investors would receive across Canada.
7:07
Within Ontario, customers would also be able to look at statements from both sectors and compare the performance costs and benefits of their products.
7:15
Next slide please.
7:18
At a high level, the proposed total cost reporting rule will require insurers to provide annual statements that contain minimum information that falls under the following categories.
7:28
General information about the contract, information about how the contract as a whole has performed since it was issued, information about embedded fees and other costs that the customer paid for the contract over the last year, information about each segregated fund that the customer holds in the contract over the last year, and information about the customer's guarantees related to their contract, including maturity guarantees, death benefit guarantees, and if applicable, information about guaranteed withdrawal benefits.
8:01
All combined, this information should provide customers with knowledge about their products and help them decide whether to make any changes.
8:08
And with that, we are now going to look at a sample segregated fund statement.
8:12
Next slide, please.
8:17
The statement we're going to walk through now is four pages long and covers the categories we just mentioned.
8:22
It's a sample statement released by CCIR in April 2023 when CCIR published its final version of the national guidance.
8:30
This is not a required format for all annual statements.
8:34
It's meant to act as an illustration to show a type of statement that can meet the expectations under the guidance.
8:41
Now, as the proposed total cost reporting rule has a very similar statement schedule and the elements under that schedule, as you would find under the national guidance, the prototype also works for our discussion today about the proposed rule.
8:55
Before we start looking at the actual statement, it's important to note that when CCIR issued its guidance, they issued three statements, and those statements show what happens for a very specific type of segregated fund contract that has a guaranteed withdrawal benefit.
9:12
These contracts go through different phases including an accumulation phase, a withdrawal phase, and a benefit phase, and the information a customer will receive for each of these phases differs, which is why the guidance has three prototypes.
9:25
The proposed rule and guidance define the phases but for today's presentation a simple way of thinking about the phases starts where someone starts putting money into the contract such as if you have an RRSP a phase where the customer is then regularly taking money out of the contract such as what occurs for a riff and a phase where the contract no longer has any money in it after the withdrawals but the customer or sorry the insurer is continuing to make ongoing payments to the customer due to the withdrawal guarantee.
9:57
And so right now, we're going to look at the accumulation prototype.
10:01
On this first page, there's a reference to the statement time period and several notices that help explain why the customer is receiving the statement, how they can use the statement and where they can go for more information, such as the fun facts, the insurers financial statements or directly contacting their agent or their insurer.
10:20
To assist with this contact, the statement includes contact details for the insurer and the insurance agent.
10:26
And just for reference, all notes or explanations in the statement are expected to be in plain language so customers can easily understand material that's provided to them.
10:37
In the middle of the statement, on the left-hand side, we see some general contract information, including details about the specific contract to help the customer identify which of their contracts that the statement relates to, in case they have more than one.
10:50
There's also information about the overall structure of the contract, including who owns it and can make deposits and withdrawals into the contract or out of the contract, who the annuitant is, the person whose life will trigger any guarantee on death or maturity, and the beneficiary, the people or beneficiaries who would receive the benefit payment.
11:12
On the right side of that general contract information is some information about the contract market value.
11:18
The table shows the value of the contract as at the end of the last statement time period.
11:23
And in this case, it's broken down by each of the segregated funds held within the contract and calculated by multiplying the number of units of each segregated fund by the unit price of the funds on the last day of that statement period.
11:36
By adding up each of the segregated fund holdings, you get the total market value of the contract.
11:41
In this case, there's also a note to inform the customer that there may be other fees that could apply upon a withdrawal, such as a deferred sales charge, that would reduce the total amount that they would receive upon a full redemption.
11:54
The last section of this statement page is a personalized rate of return.
11:59
This is one of the performance measures for the contract as a whole, going back to the categories we spoke about earlier.
12:06
It's a dollar weighted measure based on timing in which a customer makes deposits, withdrawals, or transfers among funds.
12:12
It provides the customer with a single number reference for the contract as a whole across different timeframes, including one year, three years, five years, and 10 years, as well as a rate of return going back to when the contract was issued.
12:28
Now, the years that are shown in this section will ultimately depend on how old the contract is.
12:33
Next slide, please.
12:40
On this page, the top table contains more information about the contract performance as a whole.
12:44
It is the same contract value as the previous slide, but it's laid out in a different fashion in this context with more of a historical view instead of a calculation based on current unit holdings.
12:56
It takes all of the deposits, minuses the withdrawals, and adds and subtracts the gains or losses in investments in the contract to arrive at a market value at the end of the reporting period.
13:07
Each of these lines are general categories and not limited in time.
13:10
So, if a customer made a deposit in the first and third years of the contract, both of those deposits would be added together and shown in the deposit line.
13:20
The bottom table shows information about how each segregated fund has performed.
13:25
It does this in a similar fashion to the table above, but in this context, it starts with the previous year's market value, and it adds any deposits made, subtracts any withdrawals made and then either adds or subtracts the change in value for a reason other than the deposit or withdrawal, so gain or loss, and ends up with the market value at the end of the reporting period.
13:47
In this case, there's also a fund expense ratio that's provided with each segregated fund to help the customer appreciate the embedded costs that they're paying for these funds.
13:56
Having this information beside the performance helps the customer understand that the returns that they're making in relation to the costs that they're paying.
14:05
Recognizing customers may not be familiar with fund expenses or fund expense ratios, the statement has a note explaining what the fund expense ratio is and why the customer should care about it, including that the fund expense ratio is already reflected in the current value shown in this table and that a dollar value of the sum of all the fund expenses from each of the segregated funds that are allocated to the customer's contract are provided in the cost table on the next page.
14:30
In this case, there's also a note to inform the customer that there might be a deferred sales chart that applies for a specific fund.
14:38
Next page, please.
14:42
This page contains the information about the customers that the customer paid for the contract as a whole over the previous year.
14:50
There's going to be a breakdown of all the costs on an itemized list that the customer paid for the previous year.
14:55
And this includes any direct out-of-pocket costs that the customer may have paid, as well as any indirect embedded costs, such as those segregated fund expenses that we spoke about in the last page.
15:07
Each of these costs are added up to provide a single dollar amount to help the customer easily understand what their total costs of investing were for the previous year.
15:16
There's also several notes on this page to help describe what some of the costs are, explain where the customers can get more information about costs, explain why the customer should care about the costs, and highlight some actions that a customer can take when using this information.
15:32
About the cost information and the performance information will be comparable to the information that an investor would receive for investment funds.
15:40
But the segregated fund customers, there's also another important product element that they need to consider in assessing the overall value that they receive from their product.
15:47
And that relates to segregated fund guarantees.
15:50
Next slide, please.
15:54
Now, this is the last page of the prototype statement and covers the guarantees under the contract.
15:59
For segregated fund contracts, customers will receive information about the maturity and death benefit guarantees.
16:07
In a simple way of explaining it, maturity guarantees occur based on a specific time in the future, while death benefit guarantees may occur once the annuitant passes away.
16:16
The specific percentages tied to the guarantees being either 75% or 100%.
16:21
And the higher the percentage, the more it costs.
16:24
If at the maturity date or when the annuitant passes away for the death benefit, The market value of the contract may be below the guaranteed amount, and in that context the benefit applies and covers the difference up to the guaranteed amount.
16:39
You will notice that the 100% death benefit guarantee on this page is less than the current value of the contract.
16:46
This is because the guarantee value is generally tied to deposits in and withdrawals out of the contract.
16:52
And just like the contract value can fluctuate below the guarantee amount based on the change value of the segregated fund units over time, the contract value can also go higher.
17:02
And that's the case in this prototype statement.
17:05
A customer may wish to lock in a higher market value for these guarantees through a discretionary reset or an automatic reset, depending on the terms of their contracts.
17:14
This can be relatively complicated, so customers will likely have questions for their insurance agents.
17:18
But the information on this page is aimed to help the customer understand how their current market value of the contract compares to the guarantee values and also decide if they want to consider resetting the guarantee values.
17:32
The bottom guarantee is a guarantee related to the withdrawal benefits, which we spoke about earlier.
17:38
Now these are not available under all segregated fund contracts, but where they do exist on a contract, insurers must provide specific information to customers based on the contract phase.
17:48
As mentioned before, this prototype is for the accumulation phase where the customer's putting money into their contract.
17:54
And there are other two prototype statements that cover the withdrawal and benefit phases with the CCIR National Guidance.
18:00
Now this information about the guaranteed withdrawals informs the customer about how long they will receive the guaranteed payment or get guaranteed withdrawal in this case in relation to a lifetime payment.
18:12
The value that they can expect once they transition their contract to a withdrawal phase at a specific age in this context showing for age 55, 65, and 70, and that the value is calculated based on a number of assumptions, which is covered in the notes.
18:27
And with this information, customers can consider their guaranteed withdrawal benefits that they could receive and plan that in part of their retirement planning phase and decide whether or when they want to transition the contract to a withdrawal phase. And that ends the discussion in relation to these statement prototypes. Next slide, please.
18:49
As we've already mentioned before, there's currently a gap between the current requirements and the proposed rule.
18:55
Practice this means insurers will need to update their computer systems to comply with the proposed rule.
19:00
And the costs for those upgrades can be potentially passed down to customers.
19:06
As we're working through the proposed rule, one of the key outcomes that Fizzray is targeting is minimizing the costs that can be passed on to customers while still enabling them to benefit from the enhanced information.
19:17
By aligning the proposed rule elements with the national guidance, FISRA aims to harmonize the reported elements within Ontario with other insurance regulators and security regulators.
19:28
This enables insurers to share the cost of system upgrades to common third-party systems, reducing their costs and subsequently the cost passed on to customers.
19:36
One example of this is how the proposed rule aligns its detailed and precise definitions and calculations with the definitions and calculations that have already been closely reviewed and refined by the national regulators.
19:48
This means that there does not need to be a unique calculation method built out only for Ontario segregated fund customers.
19:55
The same method can be used across the country.
19:58
With that, I will now hand it back over to Tim to speak about implementation challenges.
20:09
Thanks very much, Mike.
20:11
As Mike mentioned, I'm now going to spend a bit of time just talking about some of the implementation challenges that have been raised to date.
20:20
Now, through our work, some insurers identified specific circumstances where they believed complying with the proposed rule requirements in full would result in excessive costs that would exceed the benefit of the changes from a customer perspective.
20:36
These implementation challenges include missing historical data where the data that needs be reported simply isn't available, expensive to update legacy systems and changes to reporting performance data after certain transactions or events have occurred.
20:54
The proposed TCR rule includes an exception regarding missing historical data.
20:59
This allows for scenarios where insurers do not hold all historical data, sorry excuse me, this allows for scenarios where insurers do hold all historical data that would need to be included in the statements.
21:12
Now, as part of the consultation, visitors seeking further feedback and information on whether additional exceptions should be considered, take into account other implementation challenges, including implementation challenges included on this slide. Next slide, please.
21:39
Now, one of the implementation challenges that's been raised relates to the information that should be included in annual statements following certain events in the customer cycle.
21:49
This includes changing of tax status, for example, a RRSP to a RIF conversion, a change of contract owner, and a change of securities dealer.
21:59
Security fund contracts can continue after these events have taken place.
22:03
However, we understand these events can lead to a change to the information included in the annual statements provided to customers.
22:12
Current annual statement requirements do not require insurers to provide historical information.
22:18
Where insurers do provide historical information, we understand current insurer practice is to reset reporting of certain historical information to customers as at the date of the event.
22:30
This means that certain historical information from before the event may not be included in the annual statement.
22:38
So, look at the top arrow in the diagram.
22:40
A reset in the annual statement reporting could take place when it reaches the red box phase.
22:47
The red box signifies a particular event has taken place, as listed on the right-hand side.
22:53
From this point, certain historical information from before the event may not be provided to customers.
23:00
This approach or resetting and reporting when these events occur would not be consistent with the National Guidance for Insurance companies, which requires historical information to be consistently reported from the date the contract was issued.
23:20
So FISRA is considering what approach should be taken in response to these challenges.
23:27
And there are several policy considerations for FISRA to work through and determine, so we can determine whether insurers should be required to provide all historical data after these events occur.
23:38
This includes looking at implementation costs, including the costs of system changes and the extent to which these could be passed on to customers.
23:48
How any additional system builds could impact the timing, the overall timing for implementing the overall requirements.
23:56
We're also looking at the security sector and how reporting is carried out on that side and how reporting is managed when these events occur.
24:04
We're also looking at how the approach could impact the amount of detail and information provided to customers in the form of the statements.
24:17
Next slide, please.
24:22
So, to support the work and the analysis we're undertaking, we've included several targeted questions in the consultation materials.
24:31
We're seeking further information and feedback, please, in particular on the implementation challenges that have been raised to date.
24:38
Now, these questions focus on the costs and challenges that are anticipated to ensure full compliance with the proposed rule, how compliance with the proposed rule could lead to outcomes that are not in the best interest of customers, and how any further exceptions would be consistent with the need to treat customers fairly.
24:59
But also, how these circumstances could be addressed and incorporated within any changes to the proposed rule.
25:06
This detailed information will help inform our decision-making about whether any further exceptions are required or needed to manage the implementation challenges that have been raised to date.
25:19
Next slide please.
25:26
In terms of the overall implementation timeline, the securities and insurance regulators communicated that securities registrants and insurers need to deliver the first enhanced annual statements for the year ending December 31, 2026.
25:43
In terms of implementing the rule, FISRA is aiming to be consistent with the timeframe committed to at the national level.
25:50
Our goal is to have the proposed rule coming to a force by January 1, 2026.
25:55
If the rule is implemented, that means customers receiving updated annual statements from early 2027.
26:05
Next slide, please.
26:11
In terms of next steps and the length of the consultation window, FISRA will be accepting responses to the consultation up until Friday, July 26th.
26:24
FISRA publishes written comments received in relation to the consultation, and we'll post them on our website.
26:30
We will consider and digest the comments received, and once we've confirmed our next steps, we will provide an update and publish an update on our website.
26:44
Next slide please.
26:50
This concludes the formal presentation and the content that Mike and I wanted to present to you today. Thank you again for joining us.
26:58
As I mentioned at the beginning, we've allocated some time for questions that have included onto and raised via the chat.
27:09
I know at a time we've been speaking that some questions have come in. We'll do our best to respond to these.
27:16
It's unlikely we'll be able to get to all of them today.
27:18
When we can't respond to your questions, as I mentioned at the beginning, we will post responses onto our website.
27:26
I'm now going to ask Chris if he could try and conclude the first question please.
27:36
Thanks Tim.
27:37
The first question that has come in is what is FISRA doing to harmonize with other jurisdictions?
27:45
Okay, Mike if you could say one please and talk to the work they're doing with other regulatory bodies.
27:51
Yeah, thanks Tim.
27:52
I think it's important just to start by recognizing that, you know, it recognizes the value of harmonization in this context.
27:59
As we spoke about earlier, it's important to align many of the specific and detailed elements with the national approach.
28:09
If different provinces were to implement different requirements for total cost reporting, then the overall cost of compliance may be higher in a situation where they would otherwise be harmonized.
28:19
So, for example, the calculation methodology, if it's specific to Ontario customers, it might require a unique build and that costs a bit more money.
28:28
So FISR is aware of that, appreciates that, and to support that work that we're doing, you know, FISR has participated in CCIR's work in the development of the national guidance over the last several years, and we continue to be engaged in the implementation committee that's run by a CSA and CCIR at a national level.
28:47
And so while we're still working at a national level, we're also in discussions with each of the individual insurance regulators where they are starting to implement the national guidance within their own local jurisdictions, such as the Authorité des Marchés Financiers, AMF, in Quebec, who consulted on a draft regulation last year.
29:04
So FISRA is still discussing implementation challenges with AMF as we continue with our own proposed rule.
29:16
Great.
29:16
Thank you, Mike.
29:18
Chris, next question, please.
29:20
The next question is, why not just require new contracts going forward to avoid implementation challenges and keep costs down?
29:32
Thanks Chris, I can take this one.
29:36
We understand there are approximately 3 million Canadian or segregated fund contract owners in Canada.
29:44
I think that's as at the end of 2022.
29:48
we want to ensure all of those customers get the benefit of the enhanced statements and that the changes aren't just restricted to new customers on a kind of go-forward basis.
30:02
We're also mindful of the extent to which insurance companies need to update their systems and having a differing approach for existing customers versus new customers could introduce additional costs which be passed on to customers.
30:17
So the aim is to ensure that all customers, both existing and new, get the benefit of the enhanced statements. Next question, please, Chris.
30:31
The next question is, why not grant exceptions where there are implementation challenges?
30:38
Okay, so the CCR National Guidance, it does outline a process for insurers to apply for exemptions in exceptional circumstances where an insurer can demonstrate that compliance and expectation would result in cost to policyholders that would exceed the benefit to those same policyholders.
30:59
Now, FISRA does not have expressed statutory authority to provide exemptions from proposed requirements in the proposed rule.
31:09
This is why we're focusing on understanding any implementation challenges now to where it's appropriate to do so from a customer point of view we can build in exceptions to the rule but as I mentioned only where it's deemed and considered appropriate to do so and that's why through this consultation process it's really important that we get the support and feedback and input on these challenges so that we're at best place and informed to make the appropriate decision from a customer perspective. Thanks Chris. Any other questions?
31:46
Yes we have another question coming in and it's how would the rule impact insurance agents? Mike can you take one please?
31:57
Yep so just to start I guess it's important to highlight that the post rule does not have any explicit requirements on agents right now.
32:06
It only puts requirements on the insurer to provide the annual statements and identifies the content that would need to go into the annual statement.
32:14
But we recognize that it's likely going to have an impact on agents.
32:18
Like customers will have questions about their contracts and they want to make some changes to their contract or their investments after receiving these enhanced statements.
32:26
And there's one part of the rule, I believe it's section seven of the rule that would require insurers at least once a year to remind customers to review their contract, structure its investments and update their agents with any major life events since they last spoke to their agent.
32:42
So that might trigger additional know your customer information or know your client on the agent side.
32:49
And that might change the advice that the agent might give in terms of what is appropriate or beneficiaries to be assigned to the contract or even what investments might be appropriate for the customer given their current circumstances.
33:06
Thank you, Mike.
33:08
Any other questions, Chris?
33:12
Yes.
33:12
The next question that came in is, Will banks, securities and mutual funds have the same rules?
33:21
Okay, good question.
33:22
Mike, you say it one as well, please.
33:24
Yep, I think the short answer is no.
33:27
While CCIR and CSA were working collaboratively as we were working on the total cost reporting enhancements, they have different regulatory frameworks.
33:36
So on the insurance side, the CCIR doesn't have a national instrument framework.
33:41
We developed a guidance on the insurance side And that's what FISRA and its work with the segregated fund contract and the proposed total cost reporting rule is aiming to align with.
33:53
On the security side, they do have national instruments and they've got their own process involved.
33:57
So while both regulator groups were working collectively to align what the specific expectations or requirements are, whether you're talking about on the insurance or security side, they are different regimes and will continue to be different regimes.
34:13
All right. Thank you, Mike.
34:15
Chris, next question please.
34:19
I think the last question that has come in is, is there some ability to improve the cost of investing table?
34:26
The matter in which the table is set out makes it appear as if there are additional charges to the investment account above and beyond the charges, the MER charges they are aware of.
34:41
All right.
34:41
Thank you Chris.
34:42
Mike, can you speak to that one please?
34:44
Yeah, so I think the key point to take away is that last page dealing with that the table of costs is meant to reflect all of the charges fees or costs that the customer could pay over that last period of time.
34:55
So that would include their management expense costs, but it might include other items as well like if they incurred a deferred sales charge or anything else, it's just meant to provide a reference point for the customer so they can have a full line of sight of all the costs that they incurred over the previous year.
35:09
That said, the total cost reporting rule is setting up minimum content that all insurers must include in their annual statements.
35:16
The statements themselves could be improved on or additional information could be added to the table as well.
35:24
Great, thank you, Mike.
35:25
Chris, I know you mentioned that's the last question.
35:29
So I'll now move to make some closing remarks.
35:33
Thank you again for taking the time out of your mornings to join with us today.
35:40
please take the time, if you can, to submit your written feedback with respect to the rule.
35:46
As I mentioned before, the consultation window period will close on July 26th.
35:52
I'd also like to remind you that today's webinar was recorded, the recording will be available on the FISRA websites in the following weeks.
35:59
And as always, as and when you have any questions, please feel free to reach out us.
36:05
I very much hope you found this morning's session helpful and informative and I wish you a wonderful and fantastic day. Thank you very much.
Questions & Answers
Question | Response |
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1. Do you have information about the number of segregated fund contract holders and the average and mean amounts of their investments? |
In November 2022, the Canadian Life & Health Insurance Association (CLHIA) responded to the Canadian Council of Insurance Regulators (CCIR) and Canadian Insurance Services Regulatory Organization (CISRO) Discussion Paper on Upfront Compensation in Segregated Funds. In its submission, CLHIA calculated there were approximately three million segregated fund policyholders across Canada. CLHIA indicated approximately half of the segregated fund policyholders at that time had less than $50,000 invested in their contracts. |
2. What is the process to apply for an exception to the TCR rule? |
Stakeholders are encouraged to reach out to FSRA if they have concerns with complying with the proposed Total Cost Reporting (TCR) Rule and to provide a consultation response to FSRA with the details requested under the Notice of Rule. |
3. The focus of this rule ultimately appears to be to highlight fees. Fees are not the only important factor in determining the type of investment for a client. Is FSRA planning on ensuring that clients are aware of the key differences between a mutual fund and a segregated fund? |
The proposed Rule would provide annual statements to customers that contain improved information to customers about their contract's performance, costs and guarantees. This information should help customers make more informed decisions about their contracts. |
4. Will the requirement not put banks at a competitive advantage, since they are not fully disclosing their fees? |
Fee structures for other products fall outside the scope of this Rule consultation. The proposed Rule sets requirements on insurers who provide a specific insurance product. |