In recent years, there has been an increased focus by insurance regulators across Canada on the fair treatment of customers, as well as on market conduct oversight of insurers and intermediaries.
In October 2018, the Canadian Council of Insurance Regulators (CCIR) and the Canadian Insurance Services Regulatory Organizations released a joint guidance applicable to insurers and intermediaries on the fair treatment of customers. Shortly afterwards, the Financial Services Commission of Ontario (FSCO), now the former Ontario insurance regulator, separately published its own guidelines on this issue. The guidelines set out conduct expectations for insurers and intermediaries and are based on international standards on the fair treatment of customers (FTC).
Although the FTC guidelines do not have the effect of law, since 2017 the Financial Services Regulatory Authority of Ontario (FSRA), which took over Ontario’s insurance oversight from FSCO in June 2019, has been collaborating with other regulators through CCIR to conduct FTC reviews of federally-incorporated insurance companies. The purpose of these reviews, which started with the largest life insurers, is to assess how insurance companies are implementing FTC principles throughout their organizations and the entire lifecycle of their products.
FSRA recently published its 2020/2021 Market Conduct Report on Life and Health Insurance Sector Key Areas of Assessment (Report), in which it clearly indicated that in F2020-2021, FSRA’s key areas of assessments will be 1) the implementation of FTC principles across distribution channels through the lifecycle of the insurance product and 2) a review of the relationship between insurance companies and managing general agents (MGAs) in the context of an continuously evolving distribution system.
FSRA will be reviewing insurance companies with respect to:
Similar reviews of industry performance with respect to FTC principles are being conducted in Québec and also more generally through the forum of the Canadian Council of Insurance Regulators.
Although FSRA does not currently regulate MGAs, FSRA is undertaking a review process (the MGA Relationship Review) in order to gain a deeper and more up-to-date understanding of how life insurers are distributing their products in the marketplace through the MGA distribution channel, and how MGAs interact with the public during the sales process. The objective of this review process is to determine whether the public interest is being served. These MGA Relationship Reviews aim, among other things, to assess the effectiveness of governance and risk management of MGAs, and to identify potential gaps in roles and responsibilities between the insurance companies, MGAs, and independent agents.
According to the Report, the MGA Relationship Review will focus on the following key activities and areas: