2016 - CLHIA - Insurance Distribution in Canada: Promoting a Customer-Focused System - 14p

  • 2016 0422 - InvestmentExecutive.com - Big changes afoot for life agents?, by Megan Harman - [link]
  • 2016 - CLHIA - Insurance Distribution in Canada: Promoting a Customer-Focused System  ---  [BonkNote]  ---  14p
    • Guideline G18, Insurer-MGA Relationships, clarifies the roles, responsibilities and accountabilities within
      insurer-MGA relationships - 4p
  • IAIS - Core Principles
  • FTC - Fair Treatment of Consumers
  • Distribution Channels
  • (p1) - IAIS defines treating customers fairly as promoting positive customer outcomes such as:
    • Developing and marketing products in a way that pays due regard to the interests of customers
    • Providing customers with clear information, before, during and after the point-of-sale
    • Reducing the risk of sales which are not appropriate to the customers' needs
    • Ensuring that any advice given is of high quality
    • Dealing with customer complaints and disputes in a fair manner
    • Managing the reasonable expectations of customers
  • (p1-2) - Canadian environment
  • Market conduct regulation is the responsibility of the provinces. The raison d'être of insurance market conduct regulation is customer protection.
  • It is reflected in the mandate of provincial insurance regulators, and in legislative and regulatory provisions that, among other things:
    • Prohibit unfair and deceptive practices
    • Require the licensing of insurance advisors
    • Require that advisors be screened and monitored for suitability, and that unsuitable activities be
      reported
    • Require insurers to belong to an independent third-party dispute resolution service
    • Require that customers be provided with material facts about the contract
    • Require that claims be paid promptly
  • (p2) - These regulatory approaches are reinforced by the work of the Canadian Council of Insurance Regulators (CCIR) and the Canadian Insurance Services Regulatory Organizations (CISRO), to which insurance superintendents and/or insurance councils belong. CCIR sets out a number of expectations about industry behaviour through the following:
    • Principles for Consumer Protection, which set out standards for disclosure, educated and ethical
      intermediaries, consumer education, consumer remedies and effective regulators
    • The National Complaint Reporting System, which requires insurers to report escalated complaints
      to regulators
    • Risk-based Market Conduct Regulation, which promotes the benefits of risk-based regulation and
      sets out regulatory principles for this approach
    • Managing Conflicts of Interest, which sets out principles that the customer's interest take
      precedence over the advisor's, that the advisor disclose conflicts or potential conflicts of interest,
      and that the product sold is suitable for the needs of the customer
    • Strengthening the Life MGA Distribution Channel, which makes recommendations to improve processes and clarity around insurer and MGA roles.
  • A list of CLHIA Guidelines is attached as Annex A.
  • (p4) - Customer complaints involving advisors
    • With respect to addressing customer complaints about advisors, provincial insurance regulation allows for sanctions to be taken against advisors, but does not provide the authority for regulators to recommend an advisor to pay restitution to the customer. This contrasts with the powers accorded to the OmbudService for Life and Health Insurers, to which life and health insurers belong. To remedy this imbalance, consideration could be given to expanded powers for Councils in this area, so that they could recommend restitution by advisors to customers. Any recommendation for restitution should be voluntary, as is the case with Ombudsman systems that apply to other types of advisors (e.g., Ombudsman for Banking Services and Investments). "Ethical walls" would need to be established between this and the regulatory functions of the Council.
    • Recommendation 5: We recommend that the power of Councils be expanded with respect to addressing customer complaints about advisors so that, in addition to taking sanctions against the advisor, Councils could recommend restitution by advisors to customers, as appropriate.