2018 07 - CCIR - Comments - Fair Treatment of Customers Working Group

  • 2018 - CCIR - Fair Treatment of Customers Working Group - [link]
    • 2018 - CCIR - Guidance: Conduct of Insurance Business and Fair Treatment of Customer - 28p
    • 2018 07 - CCIR - Comments - Fair Treatment of Customers Working Group  ---  [BonkNote]  ---  110p
  • 1-7 - Advocis
  • 8-16 - Add - French
  • 17-19 - CADRI - Canadian Association of Direct Relationship Insurers
  • 20-25 - CAFII - Canadian Association of Financial Institutions in Insurance
  • 26-27 - CAILBA - Canadian Association of Independent Life Brokerage Agents
  • 28-29 - CAC-CFA - The Canadian Advocacy Council1 for Canadian CFA Institute Societies 
  • 30-42 - CLHIA - Canadian Life and Health Insurance Association
  • 43-46 - Edward Jones
  • 47-61 - Consumer ViewPoints - ?
  • 62-74 - FSCA - Financial Services Consumer Alliance - is an informal alliance of consumers whose sole objective is to increase consumer protection in the financial industry
  • 75-79 - IBC - Insurance Bureau of Canada
  • 80-83 - IFB - Independent Financial Brokers
  • 84-97 - IIC - Insurance Institute of Canada
  • 98-99 - Lloyd's 
  • 100-105 - MFDA - Mutual Fund Dealers Association of Canada
  • 106-107 - SunLife
  • 108-110 - TRG Benefits Group
  • 1-7 - Advocis
    • Members of Advocis are primarily owners and operators of their own small businesses,
    • Professional financial advisors and planners are critical to the ongoing success of the economy, helping consumers to make sound financial decisions that ultimately lead to greater financial stability and independence both for the consumer and the country.
    • We agree with Regulator’s desire to cultivate a consumer-focused business culture that goes beyond strict legal requirements. We also see the Guidance as yet another example of the shift in regulatory focus from solvency regulation to market conduct regulation, which we believe is the right approach to advance the primacy of the consumer’s perspective. 
    • financial advisors and planners are, in many cases, the consumer’s only direct touchpoint with the entire financial services sector, so they must also be the key consumer safeguard.
      • And if a key tenet of financial services regulation is to protect consumers, financial services regulation must be crafted from the consumer’s perspective.
      • The way forward is clear: it is time to elevate financial advice and planning to a profession – by raising the proficiency standards of intermediaries and re-aligning the regulation of advice and planning so that it accords with the modern consumer’s perspective, we could solve more consumer protection issues, more dynamically and effectively than prescriptive regulation ever could.2
      • And as a profession, advisors and planners must be granted the same respect as other professionals and be granted a key role in their own regulation. 
    • Rather than sitting idly by as the Expert Committee process unfolded, Advocis continued the push towards professionalism.
      • In fact, the centrepiece of Advocis’ 2018-2022 strategic plan is to move beyond a membership association of advisors committed to professionalism and become a true professional association.
      • This will be executed via a multi-faceted approach, with one of the key pillars being a new membership requirement: starting on January 1, 2019, all new members of Advocis will be required to achieve a recognized professional credential.
      • [Bonk: 1983 - AP - The Role of the Professional Association in Constructing a Profession: A Case Study of the American Society of Chartered Life Underwriters, by Judith Peavey - 175p
    • Advocis is taking the lead to raise the professional bar for all financial advisors and planners so consumers can trust that they have the knowledge, competence and integrity to provide the high-quality professional service consumers deserve.
    • We urge the Regulator to ensure that stakeholders such as Advocis, which represents the financial advisors and planners who interact directly with the public, be granted a leadership role throughout this initiative.
      • Advocis’ position stands in stark contrast to entities such as the CLHIA which, despite first and foremost representing the interests of their member insurance companies, have previously been trusted by the Regulator to lead the advancement of regulatory and public policy.
    • The Regulator must be cognizant of the competing loyalties that could challenge the CLHIA’s ability to give full effect to the Guidance.
      • Consider for a moment that the senior executives of CLHIA’s member companies have a fiduciary duty to their respective companies and shareholders.
      • Also consider that these same executives direct the actions of the CLHIA, being the trade association for the insurance companies.
      • Further, an insurance company’s duty to the consumer/client is to treat them fairly, which is a far lower duty than the fiduciary duty their executives owe to the company.
      • The potential challenge to fulfilling the spirit of the Guidance is clear.
      • [Bonk: Dinallo]
    • At the other end of the spectrum is Advocis: members of our professional association voluntarily agree to adhere to a Code of Professional Conduct3 that features, as its primary tenet, the advisor’s commitment to serving the best interest of the client.
      • As such, Advocis and its member advisors do not face the competing loyalties that necessarily impair the ability of the CLHIA and its member companies to implement the Guidance.
      • Therefore, it is clear that professional associations such as Advocis must be trusted with a leadership role if the Regulator and consumers are to fully realize the benefits of the Guidance.
    • The question is how to achieve this most efficiently and effectively and without harming the ability of advisors and planners to provide the utmost in service to clients.
      • [Bonk: Change No Damage]
    • Going beyond ‘fair treatment’ to the best interest of consumers
      • We believe the best way to make the concepts in the Guidance meaningful is to animate them through a duty to act in the client’s best interest. However, given the gravity of a best interest duty, such a duty must be implemented in a particular and careful manner:
        • ⇒ Subjecting advisors and planners to a best interest duty without granting them professional standing would be fundamentally unfair.
    • Given this detachment, it is our position that regulators do not appreciate the complete nature of the work that advisors and planners do and are therefore not in a proper position to apply “best interest” principles to their daily practice.
      • This is not intended to be a slight; this is just the reality that regulators are sensibly focused on “macro” issues of laying the groundwork for healthy, functioning and fair markets.
    • It would be manifestly unfair to apply a best interest duty to a professional group while failing to involve them in their own regulation. Critically, we draw attention to the fact that there is no other profession, whether it be law, medicine, or so on, whose members are subject to a best interest duty while not being accorded professional standing and given a voice in their own regulation.
    • Regulators in those other industries recognize that they have an important role to play in setting the framework, but they cannot, should not and do not attempt to regulate the nuances of the day-to-day professional relationship between practitioner and client to judge whether a particular action is in the client’s best interest.
      • ⇒ Instead, they respectfully leave professional proficiency and conduct regulation to accredited self-regulatory bodies, such as the College of Physicians and Surgeons of Ontario or the Chartered Professional Accountants of Canada.
    • ⇒  In short, we support a best interest duty and believe that the duty should be a fundamental part of animating the principles in the Guidance – so long as the duty is interpreted and applied by those Canadian Council of Insurance Regulators and Canadian Insurance Services Regulatory Organizations Guidance on the Conduct of Insurance Business and Fair Treatment of Customers who are connected with the client-facing work of advisors and are therefore positioned to understand the nuances of an advisor’s real-world practice.
    • Only advisors and planners themselves, through their own professional association, can interpret and apply a best interest duty in a manner that is fair to all stakeholders
      • As in the case of any profession, it is the professionals within it who best understand how the concept should be applied to the practice in which they work.
      • Because of the involvement of active practicing members, the knowledge and understanding of the professional body would be constantly refreshed and in tune with the practices of the day. This flexible and evolving approach would be the superior way to address novel situations or changing market conditions.
  • 17-19 - CADRI - Canadian Association of Direct Relationship Insurers
    • Does the guidance strike the right balance between the roles and responsibilities of insurers, distribution firms, agents and representatives?
      • CADRI had previously raised issues about CCIR’s intentions relative to the terms “intermediaries” versus outsourcing to preferred partners in the insurance supply chain.
      • On the question of Agents and Representatives’ responsibilities, we understand that the definition varies between CCIR and the international body, the International Association of Insurance Supervisors (IAIS).
        • Moreover, in the IAIS guidelines – Insurance Core Principles -- there is clarification that the insurer is not the “ultimate risk carrier” (CCIR) but that “the good conduct in respect of the relevant service(s) is a shared responsibility of those involved” (ICP).
      • We, therefore recommend that CCIR revisit the definition to better align with the ICP to ensure that all parties – intermediaries and third-party suppliers – bear equal responsibility for consumer protection.
      • Relative to outsourcing, we have noted that CCIR has qualified the functions against which the guidance may apply. However, the inclusion of “policy servicing” is still broad enough to lead us to question whether insurers are being asked to regulate their preferred partners in health care, auto repair etc.
    • Treating consumers fairly is a principle that underpins the insurer-customer relationship.
      • We continue to urge CCIR to encourage its members to adopt this guidance instead of developing their own codes.
      • In addition, we submit that CCIR’s guidance would greatly benefit from recognition of the respective risk-bearing responsibilities of the players throughout the insurance value chain. In this light, we recommend that CCIR align its definitions with the IAIS Insurance Core Principles.
      • Finally, whether through outsourcing or preferred partner networks, CADRI members seek to mitigate reputational risk from questionable business practices.
        • Therefore, the marketplace encourages ethical treatment of consumers.
      • However, seeking to have insurers regulate these partnerships remains unfeasible.
      • We continue to recommend that CCIR review the guidance as it pertains to outsourcing with the intention of narrowing its scope to a practical framework which applies to activities under direct control of the insurer.
  • 20-25 - CAFII - Canadian Association of Financial Institutions in Insurance
    • General Comments
      • We agree with the basic thrust of the draft Guidance, including that the interests of customers must be paramount and that information about financial transactions must be communicated in an accurate and transparent manner.
      • ⇒  CAFII agrees that treating customers fairly means putting their interests first and taking the time to understand their needs, as well as making every reasonable effort to ensure that they understand the benefits and limitations of the product(s) being considered, along with their rights and responsibilities as customers.
    • “Distribution Firm” and “Agent Firm” – which are not found in the ICPs -- are confusing; and we recommend that they be removed entirely.
    • Even where different jurisdictions’ guidelines have similar objectives, small differences in emphasis and language can produce significant, and often unnecessary, additional burden on the compliance efforts of organizations.
    • Question #2: Does this guidance strike the right balance between roles and responsibilities of insurers, distribution firms, agents and representatives?
      • We concur with the CCIR/CISRO Guidance’s recognition that while insurers bear ultimate responsibility for ensuring fair treatment of customers, and insurers need to have careful oversight of their intermediaries, distributors, agents and representatives, that does not absolve those entities of responsibility for being in full compliance with the expectations of this Guidance themselves. Our insurer members make every effort to ensure that their distributors, agents, and representatives practise fair treatment of customers, including where necessary by incorporating specific language to that effect in their contracts with such third parties.
    • Scope - Life Cycle - Roles and Responsibilites
    • Conduct of Business - "tone at the top”
    • [Advice] - With respect to the 7th bullet in this section -- which states: “take into account a Customer’s disclosed circumstances when that customer receives advice and before concluding insurance contracts”—since not all products have an advice component, we suggest slightly modifying this statement as follows: “take into account a Customer’s disclosed circumstances when providing that customer with advice for applicable products and before concluding insurance contracts.”
    • [Advice - FTC] - Fair Treatment of Customers
      With respect to the 4th bullet and its words “ensuring that any advice given is of a high quality,” since not all products require advice, we suggest alternative language such as “ensuring that any advice given, when applicable, is of a high quality.”
    • Corporate Culture
      • We would encourage greater clarity within the Guidance around what “indicators” refers to—for example, does this include complaints? We would also encourage the use of language that is explicit about CCIR/CISRO’s taking a risk-based approach to the Guidance, consistent, for example, with the approach taken by OSFI in its sound business and financial practices-related Guideline E-13: Regulatory Compliance Management (RCM).
      • We feel that the statement “All levels of the Organization embrace the corporate culture and recognize the risks that could hinder the achievement of expected results regarding the fair treatment of Customers as well as the means to mitigate such risks” could be written in clearer language that is easier to follow.
    • Customer outcomes and expectations
        • We request that clarification be provided with respect to the final bullet which reads as follows:
          • “Remuneration, reward strategies and evaluation of performance take into account the contribution made to achieving outcomes in terms of fair treatment of Customers.”
      • We recommend the following ICP 19 statement which would provide clearer guidance in this area:
        • “Where compensation structures do not align the interests of the insurer and intermediary, including those of the individuals carrying out intermediation activity, with the interests of the customer, they can encourage behaviour that results in unsuitable sales or other breach of the insurer’s or intermediary’s duty of care towards the customer.”
    • Design of Insurance Product
      • In the second bullet, we recommend replacing “Product development” with “The product development process.” Regarding the section which reads “target the Consumers for whose needs the product is likely to be appropriate, while preventing or limiting, access by Consumers for whom the product is likely to be inappropriate,” we would suggest that it is not “access by Consumers” but rather “sales to Consumers” that is the critical issue.
    • Disclosure to Customer
      • We recommend clarifications to two sections, perhaps using the following wording: “The information provided to customers should be sufficient to enable Customers to understand the characteristics of the product they are buying and help them understand whether and how it may meet their needs”; and “be accessible in written format, on paper or another durable medium, such as digital.”
    • Advice [vs not advice]
      • Not all channels offer advice; yet the Guidance, as written, does not adequately recognize the marketplace reality that some alternate distribution channels are not advice-based. We encourage alignment with ICP 19.8.4, which notes that “the supervisor may wish to specify particular types of policies or customers for which advice is not required to be given.” In addition, the sentence “Before giving advice, appropriate information should be sought from Customers for assessing their insurance demands and needs” would be more easily understood if “demands” was replaced by “objectives.”
    • Concluding Observations
      • We believe that a critical building block for enhancing the fair treatment of customers is raising their level of financial literacy. Customer education around financial literacy is a shared, multi-stakeholder responsibility. While customers are ultimately responsible for their purchase decisions, governments and regulators have an important role to play, alongside the industry, in providing education which can help customers better understand the benefits and limitations of products and improve their financial literacy.
      • In that connection, we believe that in their communications, CCIR and CISRO should emphasize, where appropriate, customers’ responsibilities with respect to financial and insurance products, in addition to their rights.
        • CAFII members are committed to playing their part by ensuring that communications are easy to understand and written in plain language wherever possible.
        • Our members will continue to make efforts to ensure the ease of understanding of our communications, but we believe it is also important to emphasize that customers need to read their policies, understand their features, and ask questions if there is anything they are uncertain about.
    • We provide comprehensive and rigorous training to our own employees and to the staffs of suppliers we may engage to interact with consumers and customers on our behalf, such as third party administrators.
  • 26-27 - CAILBA - Canadian Association of Independent Life Brokerage Agents
    • We foster best practices across Canada in order to better the insurance industry and build unity in the MGA community nationally.
    • The ‘Advice’ principle outlines specific accountabilities for insurers & intermediaries, then within that, specifically for Insurers & Distribution Firms.
    • Regarding the reference to ‘completing file reviews after the fact’, CAILBA would like clarification that CCIR/CISRO expects these reviews would be risk-based, consistent with existing industry guidance and approaches.
    • CAILBA would like to take this opportunity to ask for CCIR/CISRO’s formal support of industry best practices, like The Approach. For example, we like the references used at the top of pg. 23, Privacy protection.
    • Similarly, more specific language could be added under ‘Advice’, in the text box at the top of pg. 19: “CCIR and CISRO expect that, when advice is given, it is done so under the parameters of industry best practices such as The Approach, and that Customers receive relevant advice before concluding the contract, taking into account the Customer’s disclosed circumstances.”
  • 28-29 - CAC-CFA - The Canadian Advocacy Council1 for Canadian CFA Institute Societies 
    • We strongly support the dialogue started by the CCIR and CISRO to reiterate their expectations and align with best international practices.
    • Consumers of financial products, including products in the insurance industry, should expect to receive reasonably consistent advice and information, regardless of the delivery channel.
    • We agree that the industry’s focus must be on delivering strong consumer protection throughout the life-cycle of an insurance product.
      • Consumers are directly impacted by improper advice from distributors that may lack appropriate training, and thus public confidence in the industry is undermined.
      • The ability to access independent insurance advice is very important, especially given factors such as the aging population and other vulnerable investors.
    • One of the stated goals of the guidance is to find a balance between the roles and responsibilities of, among other parties, insurers and distribution firms.
      • We agree it is a difficult balancing act, but note that many end users of insurance products rely heavily on the advice provided by insurance representatives, and may have little interaction with the insurer or any other party.
      • With respect to outsourcing of tasks, the guidance explicitly notes that both insurers and distributions firms retain full and ultimate responsibility for those outsourced functions.
      • To the extent issues for consumers are caused by intermediaries, the party who retained them should, in most cases (absent fraud or other circumstances that could not have been foreseen or controlled) remain responsible for those issues.
    • We look on a global basis at consumers of financial services holistically, including consumers of banking, securities and insurance products.
      • We have previously provided comments to other regulators, including the Autorité des marchés financiers with respect to their review of potential conflicts of interest relating to the sale of insurance products. <WishList>
      • Insurance products play a large role in the financial well-being of retail investors.
      • Canadian securities regulatory authorities have already mandated a number of changes in the distribution of securities products to address issues such as conflicts, and we believe these changes can and should be harmonized to the insurance sector.
      • We note in particular that sales of insurance products are often made by dually licensed salespersons, which exacerbates potential conflicts in that the salesperson might be incentivized to sell the lesser-regulated product.
      • In addition, there are a number of hybrid investment products currently in the market which combine features of both securities and insurance products, leading to investor confusion with respect to the regulatory regime and realistic expectations of their advisors.
  • 30-42 - CLHIA - Canadian Life and Health Insurance Association
    • CLHIA represents life and health insurers accounting for 99% of the business in Canada.
    • The industry also plays a strong role in support of the Canadian economy.
      • Almost 155,000 Canadians work within the sector (as employees or independent agents).
      • The industry is a major investor in Canada with more than $810 billion in assets, over 90% of which comprise long-term investments, providing an important source of stable capital for the federal and provincial governments and businesses.
    • Many of our comments build on our March 9th pre-consultation submission to the CCIR, a copy of which is enclosed for convenience.
    • The life and health insurance industry supports the principle of the fair treatment of customers. Insurers in Canada provide a service that benefits Canadians, and view the fair treatment of customers as central to their mission.
      • We believe the fair treatment of customers is evident in insurers’ current market conduct compliance practices and company specific policies and procedures.
        • For example, insurers have integrated needs based methodologies into their sales practices, and insurers make use of consumer centric practices in all distribution models, product development and design, and in dealings with consumers.
      • Many of these market conduct practices are codified in CLHIA Guidelines, which set standards of practice for life and health insurers.
    • 3. To the extent that there may be overlap in some of these activities, we believe that certain intermediaries like MGAs could help to coordinate reviews
    • Comprehensive Oversight
      • Throughout Canada today, insurers are expected to have practices in place that support fair outcomes for customers.
      • In many cases, insurers rely on the work done by intermediaries to assist with these practices and, over the years, the industry has taken steps to clarify roles and responsibilities for oversight and to standardize industry practices (e.g., CLHIA Guideline G18, Insurer-MGA Relationships).
      • Such standards reflect the industry’s belief that, in some cases, intermediaries may be in the best position to fulfill these activities.
        • ⇒  However, we note that, for the most part, the activities of intermediaries are not the subject of a regulatory licensing and oversight regime that requires them to treat customers fairly.
        • If regulators have specific expectations of intermediaries beyond their current obligations (i.e. to maintain an agent license and sometimes continuing education, and errors and omission coverage), the law may need to change to support those expectations.
        • That said, we believe that setting regulatory expectations for intermediaries through the draft Guidance is a positive step.
    • ⇒ In recent years, the industry has called for a regulatory licensing and oversight regime that would place certain oversight requirements on intermediaries – particularly those acting as distribution firms (i.e. managing general agents) – in order to ensure more robust and consistent practices.
      • For example, the CLHIA’s 2016 public policy paper, Improving Advisor Oversight, proposes a model where intermediaries acting as distribution firms would be licensed and have a role in oversight, especially in areas where an individual insurer may not have a full view of an advisor’s insurance book of business.
      • We believe that, without such a regulatory structure in place, there is a real risk that some intermediaries may see their activities as outside of the scope of the draft Guideline, which can ultimately place customers at risk.
      • We would strongly encourage the CCIR and the CISRO to clearly state their expectations of intermediaries to treat customers fairly in the draft Guidance.
    • Proportionality and the Risk Based Approach
      • We believe that some parts of the draft Guidance may be written to address the principle of proportionality, but are concerned that it is not more explicitly set out in the document.
        • This is particularly relevant to supporting a risk-based approach and range of activities that intermediaries and insurers may adopt in helping to ensure fair outcomes for customers.
        • As stated in our pre-consultation submission, many intermediaries are small businesses and they may not have the capacity to implement costly processes, but they can still meet the objectives of the proposed policies by using methods relative to their capacity.
        • We would suggest that the CCIR and the CISRO include language relating to the principle of proportionality in the “Supervision of the Conduct of Business of Insurers” or the “Scope” section of the draft Guidance.
        • This language could draw from the International Association of Insurance Supervisors (IAIS), which allows for flexibility in implementing supervisory and oversight requirements to achieve the desired outcome.
    • Harmonization
      • In developing regulatory expectations for the fair treatment of consumers, we believe the CCIR and its members should work together to ensure a harmonized approach to regulatory oversight. Further, we support policy harmonization based on the Insurance Core Principles 18 and 19 of the IAIS, as the CCIR and the CISRO have done with this draft Guidance.
      • We are particularly concerned that at present, there is the potential for at least three differing sets of regulatory expectations for the fair treatment of customers in Canada.
        • For example,
          • there are those that are set out by the CCIR and the CISRO in this draft Guidance;
          • those set out in FSCO’s draft guideline;  and those set out by the
          • AMF’s Sound Commercial Practices Guideline.
        • We note that the CCIR and the CISRO are in positions to coordinate harmonization of regulatory expectations for the fair treatment of customers through the regulatory guidance and leadership they provide.
        • We strongly recommend that the CCIR and the CISRO work with their member jurisdictions on a coordinated approach to developing regulatory expectations for the fair treatment of customers. Harmonization increases the understandability of expectations and subsequently supports the fair treatment of customers.
        • Moreover, we believe that consumers would be best served by a national approach, which would provide them with similar rights and expectations, regardless of where they live in Canada.
      • Below, we provide section-by-section comments on the draft Guidance. - Definitions
        • We believe this section can be further refined to better reflect current regulatory requirements and common industry terminology, as suggested below.
          • Intermediary
          • Distribution Firm
          • Agent Firm
          • Organization
          • Consumer and Customer
            • We are unclear about the difference between a “customer” and a “consumer” for the purposes of the draft Guidance, which appears to use the terms interchangeably.
            • In life and health insurance, generally, the process of advice giving is the same, regardless of whether someone is a potential or existing client.
            • It is the expectation of insurers that advisors selling their products act with integrity, professionalism, and competence whenever they are working with a prospective or existing client.
            • Having one definition would add an element of clarity and we would recommend the term “customers” as is used in the ICPs.
      • Supervision of the Conduct of Business of Insurers
        • Points of Clarification
          • In the second paragraph we understand the “customer-outcomes” assessed by supervisors to pertain to sales suitability, and the client’s needs being met. It may be clearer to use more precise language in this section and refer to sales suitability if it is what is intended.
          • In the third paragraph we have noted the term “firm-specific”. We understand this to mean insurer and intermediary specific. The term “firm” has a specific meaning in Quebec.
          • Unless the intention is for this Guidance to only apply in Quebec, we would suggest that “intermediary-specific” be used.
        • Information Sharing
          • As stated in our pre-consultation submission, the draft Guidance notes that all jurisdictions have a framework in place for supervisory purposes.
          • To support robust communications between insurers and regulators, we encourage all CCIR member jurisdictions to adopt a self-evaluative privilege, as is the case in Alberta and Manitoba.
      • Conduct of Business
        • As noted in our pre-consultation submission, we believe the bullet that states “have contractual arrangements between each other, which ensure fair treatment of consumers” should refer to an insurer’s requirement for intermediaries to follow policies and procedures as opposed to ensuring an outcome.
          • This approach would align ICP 19.2, which calls on insurers “[…] to establish and implement policies and procedures on the fair treatment of customers, as an integral part of their business culture”.
          • It would also align with the Sound Commercial Guideline in Quebec, which focuses on the performance of specific actions when it states: “Among the best practices identified by the AMF, institutions can refer to the following: the development of objectives, strategies and initiatives in line with the institution’s fair treatment of consumers vision and values”.
          • We suggest this bullet in the draft Guidance be amended along these lines: “have contractual arrangements requiring intermediaries to follow policies and procedures that are intended to ensure customers are treated fairly.”
      • Fair Treatment of Consumers. We agree and support this principle.
      • Corporate Culture. We agree and support this principle.
      • Relationships with Regulatory Authorities
        • The second bullet states that there needs to be reporting to regulatory authorities in the event of “a major operational incident” that could jeopardize the rights of consumers.
          • We are unsure of what is meant by an operational incident in this context.
          • We also note that, for life and health insurers, obligations exist in regulations and legislation on steps to take regarding an operational incident and, for the most part, we believe that in such cases insurers would work with their prudential regulator.
          • To avoid overlap and possible confusion with existing requirements, we suggest removing this point.
      • Customer Outcomes and Expectations
        • We support this principle.
        • In addition, we wish to reiterate the comments from our pre-consultation submission related to the final bullet, which deals with advisor remuneration.
          • While insurers expect sales today to be suitable, advisors are compensated based on sales.
          • Under CLHIA Guideline 13, Compensation Structures: Managing Conflicts of Interest, it is an industry standard to consider the influence that sales-related compensation has on advisors’ sales practices, and to monitor to make sure that sales practices are not unduly influenced by sales-related compensation.
          • We trust that such practices would meet the expectations set out in the draft guidance.
          • [Bonk: UL Premium = Target Premium, LIRP]
      • Conflicts of Interest
        • The industry supports this principle. As stated in our pre-consultation submission, we believe aligning this section of the draft Guidance more closely with the CCIR and the CISRO’s three principles for managing conflicts of interest would provide greater clarity, and could address both managing and avoiding conflicts.
          • For example, the boxed principle could be expanded along the following lines. “CCIR and CISRO expect that any potential or actual conflicts of interest must be properly managed and not affect the fair treatment of Customers. In particular:
            • the interests of the consumer must be placed ahead of those of the advisor;
            • actual and potential conflicts of interest must be disclosed; and
            • the recommended product must be suitable to the needs of the consumer.
          • Where they cannot be managed, conflicts of interest should be avoided.”
          • With respect to the examples provided, we are concerned that, as written, the draft Guidance may not fully consider how the potential for conflicts of interest can be managed. In particular, the second example is very broad stating that “conflicts of interest may arise from inducements as benefits offered to an insurer or intermediary or any person acting on its behalf, incentivizing that firm/person to adopt a particular course of action”.
        • ICP 19.3.8 talks about the use of disclosure to manage the potential conflicts of interest. While it notes that disclosure cannot manage all conflicts that arise, we firmly believe that potential conflicts around an advisor’s pay, in normal circumstances, can be effectively managed by disclosure. Current insurer processes help to ensure that appropriate disclosure has been made by the advisor and are outlined in the CLHIA Reference Document, Advisor Disclosure.
        • We understand that the public policy objective of this section is for advisors to put their clients’ interests ahead of their own.
          • Similarly, we understand the public policy objective to refer to situations where the advisor has an interest outside of their normal remuneration from which they would derive a benefit for the sale of an insurance product. However, we would note that where ICP 19.3.3 suggests that compensation structures should align with the interest of consumer, it does not mean that compensation cannot be volume based.
            • Instead, it means that aggressive sales practices should not be encouraged.
            • It also examines scenarios where the advisor has an interest other than their remuneration that creates a conflict, or where they have an additional ability to exert influence on their clients.
        • Outsourcing
          • We support this principle.
          • However, we note that that there is overlap between this section and the section “Relationships between insurers and intermediaries”.
            • As stated in our pre-consultation submission, we believe that the scope of this section should be limited to outsourced activities that could ultimately impact a client. For example, an outsourced activity such as data analytics or computer support is sufficiently removed from the customer, and it would not make sense for a contract to contemplate fair treatment of customers as it is not foreseeable that the customer would be impacted by the outsourced activity.
            • We suggest the second bullet under “Expectations to achieve this outcome” should be revised along these lines: “insurers only deal with third parties who have policies, procedures, and processes for the fair treatment of Consumers when the work outsourced could foreseeably impact the fair treatment of a customer”
        • Design of Insurance Products
          • We support the underlying principles of this section and appreciate the wording changes made since reviewing the pre-consultation draft.
          • Under expectations to achieve this outcome (intermediaries), the notion remains that intermediaries would inform insurers with target market information.
            • As noted in our pre-consultation submission, this is not currently common practice.
          • Certainly, insurers may use a variety of research approaches, such as focus groups, surveys, and advisor consultation, when developing products.
            • We see these activities as essential to a highly competitive insurance marketplace and do not support formalizing such processes under regulatory guidance.
        • Distribution Strategies
          • The life and health insurance industry supports the application of distribution strategies that allow consumers to have access to insurance products that meet their needs.
          • As noted in our pre-consultation submission, we believe the draft Guidance should be expanded from expectations of insurers in this area to also include expectations of intermediaries.
          • We suggest mirroring some of the language adopted in ICP 19.0.8 which states that where more than one party is involved in the design, marketing, distribution and policy servicing of insurance products, treating Customers fairly in respect of the relevant services is a responsibility that is shared amongst involved insurers and intermediaries.
        • Disclosure to the Customer & Disclosure to the Policyholder
          • As suggested in our pre-consultation comments, we believe these two sections of the draft Guidance should be combined to avoid duplication and confusion.
          • In the second bullet of “Disclosure to Customer”, there is a reference to a durable medium. ICP 19.7.5 also includes the example of a durable medium being one that is electronic. We suggest similarly including electronic mediums as an example so that this draft guidance supports the use technology to better serve customers.
            • A revised bullet along the following lines could achieve this: “be accessible in written format, on paper or another durable medium (electronic,
              for instance)”
        • Advice - [Advice vs Non-Advice Sales / FTC}
          • We support this in principle. For when there is an advice giving relationship, the industry has developed best practices for needs-based selling outlined in our reference document The Approach: Serving the Client Through Needs Based Selling.
          • ⇒  Also, circumstances where advice is not provided (e.g., creditor’s group insurance) the life and health insurance industry follows standards to help ensure that customers are treated fairly, such as those set out in CLHIA Guideline G7, Creditor's Group Insurance.”
        • Complaints Examination and Dispute Resolution
          • Outside of Quebec, insurers are the only party involved in the process of distributing insurance products that have a statutory requirement to have a complaints process. This requirement can be found in the Insurance Companies Act (federal) and provincial legislation.
          • We suggest that the draft guidance could be made clearer by referring to the precedence of insurers’ obligations under the law.
          • We would also note that it is useful for intermediaries such, as MGAs and advisors, to have complaints processes in place through which a complaint can be properly investigated.
          • This draft Guidance may be an opportunity to set an expectation for complaints handling among all those that are engaged in the distribution of insurance products.
  • 43-46 - Edward Jones
    • Edward Jones is a limited partnership in Canada and is a wholly owned subsidiary of Edward D. Jones and Co., L.P., a Missouri limited partnership. Edward D. Jones and Co., is a wholly owned subsidiary of The Jones Financial Companies, L.L.L.P., a Missouri limited liability limited partnership.
      • Edward Jones Insurance Agency and Edward Jones Insurance Agency (Quebec) Inc. are subsidiaries of Edward Jones and have agreements in place with Manulife, Canada Life and Sun Life to distribute Life and Accident & Sickness insurance products in the provinces of Canada.
      • All Edward Jones advisors are dual-licensed for the sale of securities and insurance.
      • We support any efforts to foster the fair treatment of customers and further inspire confidence in the insurance industry.
    • Market conduct
      • There is a benefit for customers and the insurance industry with having Distribution Firms and Agent Firms assume greater responsibility for the supervision of the market
        conduct of representatives -- along the same lines as is found in the insurance industry in Quebec and the securities industry in Canada.
    • Relationships between insurers and intermediaries
      • We believe that the relationships between insurers and intermediaries are quite healthy.
      • There is an opportunity for insurers to review and update their agreements with intermediaries on a more frequent basis in order to refresh the servicing and fair treatment requirements for customers.
    • Design of insurance products
      • We agree that the customer's best interest should be at the core of the development and design of insurance products and compensation structures by insurers.
      • Conflicts of interest with customers are to be actively avoided and where this cannot be done, disclosed and managed by the insurer and/or intermediary.
    • Disclosure to customers
      • We note that compensation disclosure has not been specifically addressed in the Proposal. We recommend compensation disclosure in support of customer transparency.
    • Advice
      • We concur with the CCI R's and CISRO's position that clients must receive relevant advice before concluding the insurance contract, taking into consideration the client's disclosed circumstances.
      • The expectations set out for insurers and intermediaries to achieve this outcome are reasonable for the fair treatment of clients as a financial services profession and directly align with the practices required today in the securities and mutual funds industry.
      • Given that many advisors are dual-licensed in Canada for insurance and securities or mutual funds, the Proposal effectively supports harmonization amongst the financial services industries.
  • 47-61 - Consumer ViewPoints - Jean-Pierre Bernier and Christine Nicoll, Consumers in the Greater Toronto Area
    • Financial institutions, insurers included, agent firms, representatives, distribution firms and intermediaries cannot speak on behalf of the consumer without encountering conflicts of interest.
    • Conduct risk and culture are now the focus of financial consumer protection enhancement.
      • 2008 financial crisis
      • Conduct risk can be defined as the risk arising from market players conducting their business in a way that could harm policyholders, borrowers, investors, annuitants, depositors and group insurance members or that does not ensure fair treatment of customers.
      • Culture, in turn, is generally understood to be a system of shared values which govern how people behave in organizations or professional groups. By and large, they reflect core ethical values towards consumers, and reputation is inextricably intertwined with them.
      • March 2017 exemplary guide of the Central Bank of Ireland is a case in point.
    • In February 2011, the G20 called on the OECD, the Financial Stability Board and other relevant international organizations, such as the International Association of Insurance Supervisors (IAIS), to develop common principles on consumer protection in the field of financial services. These principles were endorsed more than six years ago at the G20 meeting on 14-15 October 2011. Principle 3 regarding FTC and Principle 6 dealing with Responsible Business Conduct, among other relevant G20 high-level principles, are highly pertinent to how culture is managed and (mis)conduct risk is mitigated.
    • jurisdictional warfare and boxchecking exercise
    • At present, some regulated entities are mandated by law to (a) treat customers fairly and (b) act responsibly; others are not. This state of affairs is troublesome for the insurance buying public in that it adversely impacts enforcement for jurisdictions, like Ontario, that expect and rely on good corporate governance.
    • Culture Stressing Integrity, a key issue
      • Because significant misconduct is evidence of a culture that undermines, or even supplants, the written rules, the Office of the Superintendent of Financial Institutions (OSFI) has “come to see conduct as a prudential issue”.
      • The 2017 draft Corporate Governance Guideline of the OSFI (yet to be adopted) specifically provides, as framework enhancement, that the board of directors ♦is responsible for the institution’s culture, ♦approves and oversees the codes of ethics and conduct, and ♦promotes, with senior management, a risk culture that stresses integrity (emphasis added).
      • ...newly established CCIR Framework for Cooperative Market Conduct Supervision rightfully provides for specific-entity reviews of ethical standards and their adherence, away from a ‘sales-focused culture’ and closer to consumer protection risk.
    • Viewpoint on Culture / Integrity
      • 10. Integrity and fairness matter most in effective conduct risk management. This was highlighted by the FCAC of its recent findings of insufficient controls by domestic larger banks to prevent sales of products that are misrepresented or unsuitable for customers.
      • No insurance customers in Canada should be harmed by conflicts of interest, inadequate conflicts management or complacency in thinking that, because something hasn’t happened yet, it won’t happen.
    • Viewpoint on Conflicts of Interest
      • 14. With respect to outsourcing, training is highly relevant and should have been mentioned in the new Guidance (on page 14) as a reminder to all readers that without training, conduct risk as well as reputation risk are much higher. At the federal level, regulation making authority in regard to “the training of a bank’s employees, representatives, agents and other intermediaries” (Bill C-29 of 2016) is being contemplated for enhanced financial consumer protection.
      • 15. In its latest (2014) detailed assessment report on Canada’s financial sector, the International Monetary Fund recommended that OSFI guideline (B-10) on outsourcing of business activities, be amended to more clearly establish the requirement that the screening processes in place, when the financial institution is entering into outsourcing relationships, will ensure high ethical and professional standards.
    • Incentives Management, a key issue
      • March 2018 supplementary guidance on the use of compensation tools to address misconduct, the Financial Stability Board strongly suggests that ▪incentives should be aligned with conduct risk and ▪related processes should include, at a minimum, non-financial assessment criteria such as the quality of risk management, degree of compliance with applicable rules and broader conduct objectives of the firm, including FTC outcomes, into individual performance management and compensation plans at all levels of the organization and as part of the broader governance and risk management framework.
      • The suggestion is also made that such processes be supported by ongoing programs including formal training courses that reinforce appropriate standards of behavior.
      • No insurance customers in Canada should be harmed by variable rewards and compensation for sales performance that elevate the risk that consumer protection measures would be flouted by unsound commercial (market conduct) practices.
    • Viewpoint on Incentives Management
      • 19. Consumers believe that supervisory reviews that include the effectiveness of incentives management encouraging ethical behavior, acting in good faith and the prohibition of
        abusive practices can, in turn, help (i) support firms’ efforts to prevent misconduct, (ii) ensure products are suitable for clients, and (iii) safeguard both market and firm integrity.
      • 20. The stated CCIR/CISRO’s expectation (on page 22 of the new Guidance) that individual complaints be analyzed for root causes identification and correction is particularly critical for effectively managing incentive risks that may lead to legal violations or consumer harm.
    • Conduct Risk Training Programs, a key issue
      • By way of comparison, the Consumer Financial Protection Bureau of the United States reminded supervised entities, in a compliance bulletin dated November 28, 2016, that they are expected to implement “comprehensive training” that addresses “expectations for incentives, including standards for ethical behavior”, among several other topics.
      • No insurance customers in Canada should be harmed by weak conduct risk training programs or by supervisory findings and/or expectations that are not proactively pursued.
    • Viewpoint on Conduct Risk Training Programs
      • “Tell me and I forget, teach me and I may remember, involve me and I learn” - Benjamin Franklin + “Leadership and learning are indispensable to each other” - John F. Kennedy
      • 24. Consumers query who between CCIR/CISRO (the provinces and the territories) and the OSFI and the FCAC (the federal authorities) is responsible for overseeing the banks’ training programs in regard to the banks’ authorized types of insurance.
    • “Trust, but Verify”, a key issue
      • With legislation helping, the head of OSFI has put the “trust but verify” approach to supervision in practice.
      • Pursuant to Canada’s Insurance Companies Act, insurers have a legal obligation to send to the federal prudential regulator a copy of their participating (insurance) policies and related (corporate) policy respecting the management of each of the participating accounts. In a speech on June 2015 on culture, conduct and the effectiveness of regulation, the Superintendent stated:
        • “If we saw repeated major misconduct in the institutions that we supervise, we would have to ask ourselves if our “trust but verify” approach was really reliable. We would be drawn toward, and perhaps ultimately obliged to implement, a rules-based approach characterized by detailed and inflexible requirements and independent verification of every item on the checklist. And that would be a real loss for us, for the financial services industry, and, most importantly, for the public interest.”
      • No insurance customers in Canada should be harmed by regulated entities that cannot be trusted by the regulatory authorities to do the right thing (being ethical) and to do things right (being compliant).
    • Viewpoint on the Trust-but-Verify Approach
      • The CCIR/CISRO’s stated expectation (on page 11 of the new Guidance) that any serious harm due to a major operational incident that could jeopardize the interests or rights of customers and the organization’s reputation be reported to the involved regulators is proactive, warranted and welcomed.
    • FTC Strategies, Policies and Procedures, a key issue
      • no legal obligation to report to the federal Superintendent any unsound commercial practices.
      • Moreover, compliance failure with a voluntary code of conduct and ethics cannot be enforced by the federal market conduct regulator.
        • Unlike treatment of non-compliance with a legislated “consumer provision”, breaches of a code are not subject to administrative monetary penalties and do not form part of the insurer’s compliance history.
          • The same is true for banks.
      • In its March 2018 report on domestic bank retail sales practices the FCAC recommended that “banks establish a formal sales practices governance framework that clearly defines roles and responsibilities to ensure all elements of sales practices risk are effectively managed, including the effective monitoring and reporting of mis-selling and market conduct obligations”.
        • Additionally, indications are that Canada’s Bank Act will be amended to expand the duties of the board’s conduct review committee to oversee compliance with the long-awaited enhanced consumer protection measures, 10 years after the financial crisis.
      • No insurance customers in Canada should be harmed by delays in consumer protection reform that are now beyond the limits of fairness.
    • Viewpoint on FTC Processes
      • 30. In full adherence with ICP 19, the new Guidance (on page 11) provides that insurers and distribution firms are expected to make their FTC strategies, policies and procedures available to the regulatory authorities for compliance assurance.
      • 31. Proper FTC processes are likely to be particularly important with respect to retail customers, because of the greater asymmetry of information that tends to exist between the insurer or intermediary and the individual retail customer.
      • 32. The remarkable progress made by CCIR/CISRO in implementing, via the new Guidance and ahead of banking and securities, the G20 high-level Principles 3 (FTC) and 6
        (responsible business conduct) should be recognized by the IMF when it assesses again (this year or next) Canada’s regulatory regime and supervisory practices against the international standards. Without the leadership shown by CCIR/CISRO, Canada would probably be farther behind the call for enhancement of consumer protection in the field of financial services.
    • Intermediaries, a key issue
      • The G20’s renewed policy and regulatory focus on financial consumer protection are unequivocally clear: licensed/certified agents, whether tied or independent, brokers, advisors, intermediaries, and other authorized representatives, across all financial market sectors, should be subject the internationally endorsed duty to treat customers fairly. Contrary to certain advocacy groups, the G20 Leaders did not endorse the so called fiduciary duty.
        • What is expected is fair and full consideration of the client’s interests.
        • By way of contrast, a fiduciary must act solely and selflessly in the interests of the beneficiary.
      • The International Monetary Fund (IMF) recommended in 2014 to the Canadian insurance regulators that they consider establishing proportionate expectation tailored for intermediaries, focusing on achieving fair treatment outcome for customers.
      • No insurance customers in Canada should be harmed by intermediaries who are not acting responsibly by neglecting their fiduciary-like responsibilities (such as being trustworthy, which is a condition of licensing/certification in every Canadian province and territory).
    • Viewpoint on Intermediaries
      • 35. The eleven core principles guiding the conduct of business of all intermediaries across Canada (on page 7 of the new Guidance) really amount to a comprehensive code of professional values.
        • These values/responsibilities are known to be high priorities with the insurance buying public and they are outlined at the end of this submission.
      • 36. Most intermediaries demonstrate their belief that “Ethics is good business”. They are the people safeguarding trustworthiness in the industry.
    • FinTechs, a key issue
      • The federal government published Bill C-74 is giving more flexibility to insurers and banks in their technology-related activities, including customers’ data sharing with technology companies.
        • This openness is significant for all parties concerned because digital is the new norm for customers. The CCIR/CISRO members are consistent throughout Canada in their common description of conduct risk which basically means operating ethically and responsibly and having the customer’s interests at the heart of the business. In consequence, regulatory arbitrage, whereby regulated insurers and/or intermediaries are able to benefit from differences in regulation in different jurisdictions, is not an option.
          • However, many FinTechs are acting like financial service providers but are not supervised like regulated entities thus fueling shadow banking as well as shadow insurance and, in the process, creating regulatory arbitrage concerns.
        • These unsupervised operations become a source of systemic conduct risk, both directly and through its interconnectedness with the regular financial markets.
      • No insurance customers in Canada should be harmed by inconsistent frameworks that generate regulatory arbitrage concerns and systemic risk of regulators’ creation.
    • Viewpoint on FinTechs
      • 39. Financial institutions themselves may use shadow entities to circumvent their prudential and/or conduct requirements (guidelines included) and take on additional risks.
        • It is also noteworthy that new regulations or changes to existing laws can create new regulatory arbitrage opportunities, and may lead to innovation or mutation in the shadow system.
      • 40. According to recent surveys, FinTechs are now beginning to leverage new technologies with the goal of enhancing their customer experience.
        • In doing so, they are creating new underwriting, claims, distribution, brokerage platforms, product descriptions, quotation service and integrating automation, among several other applications.
    • Changing Customer Expectations
      • FinTech
    • Concluding Viewpoint
      • Unfair customer outcomes and poor commercial practices impact the lives of large numbers of financial consumers from coast to coast.
      • Effective conduct supervision and management of conduct risk therefore also have wider social and economic benefits that go beyond the supervisory framework.
      • Where poor practices are widespread, consumer trust in the sector as a whole is undermined, with resultant impacts on sustainability.
        • Effective monitoring and management of conduct risk therefore also supports the broader objective of financial stability.
      • Equally, promoting stability of the financial sector, including supervisory action, enhances both consumer trust and consumer protection.
        • The interaction between conduct risk and solvency risk means that addressing these risks through supervision requires appropriate coordination and cooperation among market conduct and financial soundness authorities.
  • 62-74 - FSCA - Financial Services Consumer Alliance - is an informal alliance of consumers whose sole objective is to increase consumer protection in the financial industry
    • To achieve this goal, FSCA has taken a different approach by empowering former and current insurance executives and other parties in anonymously sharing information about the financial industry. We then corroborate the information received through two independent sources of information. Because of the possibility of retaliation, FSCA protects its anonymous sources of information by ensuring these sources cannot be identified even by FSCA.
    • ... since the term intermediaries has such a broad meaning encompassing many terms such as agent, representative, broker...; terms that have different meanings across different provincial jurisdictions.
    • ⇒ Each regulator of each province should come up with a certification program for Insurance Branch
      Manager, MGA Directors, Insurance Wholesalers... It is amazing to see that an agent or representative, in order to pass their license, must take an exam on the Insurance Laws of the jurisdiction where they will be licensed WHILE anyone with absolutely no knowledge can be put in charge of managing agents or representatives selling insurance.

      • It seems the only qualification required is the ability to entertain agents and representatives.
    • In the Mutual Fund Industry, anyone designated as a branch manager or alternate branch manager of an MFDA member must pass the Branch Managers' Examination Course where the objective of the course is to develop a skill set and knowledge base that supports an individual responsible for supervising mutual fund dealing representatives.
      • Why is this not a requirement in the insurance industry?
    • How can you expect the best from insurance agents and representatives when the worst is allowed to lead these agents and representatives?
      • promote products and services in a clear, fair and not misleading manner
      • When it comes down to the sales of Universal Life, this requirement is simply ignored.
        • We have evidence in writing demonstrating the willingness of insurance executives to ignore this rule because they believe that the insurers are fully protected against any civil claims because consumers have to sign a disclosure page stating that the values showed on a Universal Life illustration are not guaranteed.
      • Many insurers believe this give them the right to build illustration software to produce illustrations that are absolutely imaginary and where the cash values showed on the illustration cannot be achieved even if the illustrated rate of return is achieved by the consumer.
        • Insurers have used fictitious illustrations to promote the sales of Universal Life as an investment.   ---  We have proof of this.
    • To be fair to consumers, Universal Life illustrations should:
      • Allow the agent and representative to illustrate a variable rate of return instead of a constant rate of return when investing in an equity type of investment where volatility will determine the gains or losses of the consumer.
      • If the option of doing a variable rate of return is not made available, an additional disclosure page should be required explaining to the consumer that the use of a constant rate of return, when in fact the rate of return will vary on a monthly basis, could result in the cash values showed on the illustration being overstated by as much as 40% even if the consumer achieves an average rate of return that equals the constant rate of return used on the illustration.
      • On the illustration, it should be clearly indicated that the illustration rate does not include the cost of the Management Expense Ratio (MER).
      • If a Bonus exists and is credited for the Universal Life, and this Bonus is used to return part of the MER back to the consumer, this Bonus cannot be included/credited in the illustrated cash values if the MER is not also included/debited.
    • provide Customer s with timely, clear and adequate pre-contractual and contractual information;
      • Insurers want to sell Universal Life as an investment and use this product to compete against Mutual Funds and Segregated Funds.
      • However there are absolutely no regulations applying to Universal Life such as the requirement to provide a prospectus for a Mutual Fund.
        • In fact, segregated fund contracts are exempt from the prospectus requirements of securities laws because of their guarantees.
        • Such guarantees do NOT exist under Universal Life and therefore they should be considered securities and a prospectus should be required if the Universal Life is sold as an investment.
    • take into account a Customer ’s disclosed circumstances when that customer receives advice and before concluding insurance contracts.
      • Our research shows that the consumer is getting no information on the investment he is selecting for his Universal Life.
        • The illustration provides no information.
        • The information is usually found in the policy contract.
        • However this contract is provided to the consumer at policy delivery when he has been approved for insurance which can be up to 6 months after the illustration has been produced and application submitted.
        • This is not fair for the consumer and this practice cannot be tolerated any longer.
        • [Bonk: Timing]
      • Illustration software allows the agent and representative to print a commission page allowing the agent or representative to disclose his remuneration associated with the sale of a life insurance product.
        • Up to 50% of the remuneration of the agent or representative comes from the Sales Bonus that will be paid to him by the insurer.
        • You would therefore assume that this bonus would be shown on the Commission illustration page.
          • However it is not included and therefore this page misrepresents the level of commission that will be paid by the insurer.
    • avoid or properly manage any potential conflicts of interest, before concluding an insurance contract;
      • We have great concerns about the increase number of MGAs owned by insurers.
        • There is a risk of a conflict of interest and it is not clearly disclosed to the consumer
      • In fact, we have documented the practice of some insurers of not paying a Commission Bonus if the agent or representative does not sell the insurance product of the insurer owning the MGA. Also if the agent sells the products of another insurer, his sales credits are not accounted in various incentives such as qualifying for a sales conference in an exotic location.
      • [Bonk: Eric Olson / WFG - World Financial Group / TransAmerica]
    • Recommendation #7: It is not a surprise that we recommend that the industry do away with incentives solely based on sales such as qualifying to exotic trips under the guise of a conference. MGAs should be required to state if they are owned in whole or in part by an insurance company and the MGA should not be allowed to implement a remuneration scheme that would favor the insurer which owns the MGA.
    • [Bonk: <MORE>
  • 106-107 - Sun Life
    • Sun Life is proud to help clients achieve lifetime financial security and live healthier lives. Treating clients fairly is the cornerstone of our ability to fulfill that purpose. It is also why Sun Life is actively working with our industry colleagues to implement standards and best practices in this area.
    • Work by provincial regulatory bodies, the FSCO (draft guidelines), and the AMF (sound commercial practices guidelines) highlight the importance of this topic and the critical need to create a common framework to avoid inconsistencies or contradictions across the jurisdictions. Financial consumers should be treated fairly throughout Canada, regardless of their provincial or territorial jurisdiction. We believe a common, harmonized regulatory guideline would help achieve that objective. We urge the CCIR to seize this opportunity and lead its member regulators in this direction.
    • License, regulate distribution firms (e.g. MGAs)
      • The distribution of life insurance products has evolved over the years and distribution firms, such as Managing General Agencies (MGAs), have taken on an increasingly important role in the life and health insurance market.
      • Today, it is far more common for a licensed advisor contracted with an MGA firm to sell a variety of products issued by several different insurers.
      • Given this reality, the MGA is often in a much better position than the insurer to assess and oversee the advisor's overall sales practices.
      • We encourage CCIR to take a leadership role in working with the jurisdictions to formalize the responsibilities of MGAs and other distribution firms and institute a licensing regime.
      • In our view, this fundamental change would improve the oversight of advisors and help ensure the many clients served in this growing distribution channel are treated fairly.
  • 75-79 - IBC - Insurance Bureau of Canada
  • 80-83 - IFB - Independent Financial Brokers
  • 84-97 - IIC - Insurance Institute of Canada
  • 98-99 - Lloyd's 
  • 100-105 - MFDA - Mutual Fund Dealers Association of Canada
  •  
  • 108-110 - TRG Benefits Group