Mr. Philip Howell
Chief Executive Officer and
Superintendent, Financial Services
Financial Services Commission of Ontario
5160 Yonge Street, Box 85
Toronto, ON M2N 6L9
RE: FSCO Statement of Priorities for 2014
Dear Mr. Howell:
I am writing to you on behalf of the Canadian Association of Financial Institutions in Insurance (CAFII) with respect to FSCO’s 2014 Statement of Priorities.
CAFII supports FSCO’s over-arching emphasis on risk-based regulation and its four main strategies. Below we comment on initiatives to be undertaken that are of particular interest to CAFII; and thereafter we address some matters of general strategic focus.
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Conduct life insurance and mortgage broker product suitability reviews (Initiative 1.4)
CAFII has appreciated its involvement as a key stakeholder in the continuing life insurance product suitability review initiative, launched in Spring 2013, including our April 9, 2014 meeting with the project team to provide feedback on the Interim Report stemming from the review.
We acknowledge FSCO’s prudent decision, rooted in risk-based regulation, to narrow the scope of the review to include only face-to-face sales of term life, whole life and universal life insurance. Thereby, the electronic commerce, contact centre, and incidental sales of insurance (ISI) alternate distribution channels through which CAFII members offer insurance were excluded from the review.
In keeping with the comments we shared with the project team on April 9, CAFII offers a caution to take care to avoid unwarranted inferences and generalizations not justified by the data generated from the Life Agent Questionnaire completed by a random sample of captive and independent life insurance agents involved in face-to-face sales. It is important to understand both the differences and the advantages of the contact centre environment – one of the key alternate distribution channels in which CAFII members operate. CAFII member contact centres are controlled, monitored environments where all required disclosures are set out in scripts and where interactions with the consumer are recorded and thereby documented.
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Develop and implement an information technology Enterprise Development Program (Initiative 2.2)
CAFII supports this initiative and commends FSCO for the business case and project plan progress it has made on this system, intended to create one window access to check or renew licenses, submit filings, pay fees, and do other related tasks. We support ongoing improvements to electronic licensing systems.
In keeping with the priority of fostering a co-ordinated, national approach to licensing and regulation, we recommend that FSCO pursue compatibility of its electronic systems with those of other jurisdictions. That focus on co-ordination and integration should include the Canadian Insurance Participant Registry (CIPR) currently being rolled out by the Alberta Insurance Council, given its breakthrough potential as a platform for a nationally harmonized licensing system.
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Implement fraud awareness stakeholder engagement strategy (Initiative 3.1)
CAFII congratulates FSCO for undertaking to work with insurance stakeholders and consumers to implement an anti-fraud awareness strategy, and provide information to consumers on fraud in the insurance sector. Should FSCO decide to pursue an industry partnerships approach to this initiative, our Association stands ready to co-operate and assist.
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Promote consumer access to financial literacy information (Initiative 3.3)
CAFII supports FSCO’s intention to promote consumer access to educational materials that can strengthen financial literacy in all regulated sectors.
Our Association recognizes the importance of initiatives to improve the financial literacy of consumers and their access to and understanding of information about products and services in the market. We are reviewing our priorities to ensure that this component is reflected throughout our approach to industry issues, recognizing that it is a win-win goal that is good for consumers, for business, the economy, and our society. We are interested in discussing opportunities with FSCO to pursue joint objectives in this area.
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Develop harmonized life agent licence qualification national standard (Initiative 4.1)
CAFII supports this initiative and commends FSCO for its participation in CISRO’s Life Licence Qualification Program (LLQP) project. This critically important initiative will develop a national qualification standard that aligns with the Agreement on Internal Trade, the Ontario Labour Mobility Act, and the Ontario-Quebec Trade and Cooperation Agreement. We continue to participate with keen interest in the LLQP Committee’s Industry Stakeholder Consultation meetings and processes.
As you may know, in response to a request from the Chair of CISRO’s LLQP Committee, CAFII recently provided a formal letter of support for the LLQP modernization effort.
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General Matters
Improved Disciplinary Model to Regulate Insurance Agents and Adjusters
CAFII commends FSCO for the transparent, thorough, and effective consultation process it conducted in 2013 around modernizing the disciplinary process for insurance agents and adjusters, which led to the introduction of legislation in March 2014. We trust that that legislation – which died on the Order Paper with the calling of a provincial election – will be re-introduced soon after a new government takes office.
In a similar vein, CAFII also supports the proposed legislation that would see authority for the dispute resolution system related to FSCO moved from FSCO itself to the Ministry of the Attorney General’s Licence Appeal Tribunal.
International Insurance Core Principles
CAFII congratulates FSCO for achieving recognition from the International Monetary Fund in 2013 for a high level of adherence to the International Association of Insurance Supervisors’ Insurance Core Principles. Should any follow-up be required as a result of the IMF’s assessment, we stand ready to co-operate and assist FSCO and other members of the Canadian Council of Insurance Regulators.
Regulatory Co-ordination and Harmonization
CAFII extends kudos to FSCO for playing a leadership role in the development and launch of the Canadian Insurance Regulators Disciplinary Actions (CIRDA) database. In this and other initiatives, CAFII appreciates FSCO’s leadership in fostering a coordinated national approach to regulation.
As you know, CAFII members offer insurance coverages in multiple jurisdictions and it is very important that regulations are as similar as possible across all jurisdictions. Co-ordination of regulations is also important for ensuring that consumers have consistent satisfactory experiences in each jurisdiction.
CAFII encourages FSCO to continue to work diligently with other regulators to reduce the red tape and overlap/duplication that exist in the current inter-jurisdictional licensing system, in order that contact centre and other multi-license distribution channels are better able to focus their resources on client service. In that connection, our Association is looking forward to an opportunity to make a presentation to CISRO in September 2014 on Multi-Jurisdictional Licensing Issues and Compliance Challenges.
Risk-Based Regulation
Risk-based regulation involves monitoring, identifying, focusing and allocating resources toward the highest risks in each regulated sector. One important tool of risk-based regulation is the self-evaluative questionnaire. Industry is increasingly being asked to supply information in response to such questionnaires. We believe that necessary protection for respondent companies related to such questionnaires will be provided if the information they submit is protected by “self-evaluative privilege.”
This was a position recommended by the Canadian Council of Insurance Regulators and adopted by Alberta and Manitoba in their recent Insurance Act reviews. Given Ontario’s focus on both risk-based regulation and harmonization, we recommend that self-evaluative privilege also be adopted in Canada’s most populous province.
CAFII also recommends that a risk-based perspective be extended to any market conduct regulatory changes under consideration, e.g. distribution of insurance over the internet. Electronic channels can help ensure that insurance is made available to uninsured and underinsured consumers, and we therefore recommend that regulations should support electronic distribution.
CAFII appreciates the opportunity to comment on FSCO’s priorities and looks forward to continued communication and input on policy matters.
Yours truly,
Jennifer Hines
CAFII Secretary and Chair, Executive Operations Committee
Document
Recipient
Financial Services Commission of Ontario
Submission Date
Respondent
CAFII Secretary and Chair, Executive Operations Committee