Insurance regulators team up to draft consumer protection guidance

The fair treatment of consumers is a main theme across the financial industry. Just as advisors and their firms are wondering what’s to come in the midst of regulatory scrutiny, so too are insurers and their representatives, or intermediaries.

The Canadian Council of Insurance Regulators (CCIR) and the Canadian Insurance Services Regulatory Organizations (CISRO) released, on Thursday, a joint draft guidance paper for consultation that sets out their expectations for professionals in the space. Both organizations are groups of regulating authorities.

The detailed and “overarching” paper, which deals with issues such as the design and promotion of products and how advice is given to clients, is the latest step by both “to enhance consumer protection, work collaboratively with regulatory partners and partner with industry stakeholders to increase regulatory and supervisory harmonization,” a release says.

Read: Modernize financial regs to improve productivity: C.D. Howe

While “the conduct of business in insurance is the exclusive authority of the provinces and territories,” the paper says, the members of both CCIR and CISRO wanted to set out their vision and expectations.

In April, the Financial Services Commission of Ontario (FSCO) delivered a similar proposal, which was up for comment until May 8, for firms licensed or registered by FSCO in the insurance, credit union/caisse populaire, loan and trust, and mortgage brokering sectors.

That proposal offered eight expectations for treating consumers fairly, including acting with due skill, care and diligence; promoting products and services in a clear and fair manner; recommending suitable products; and disclosing and managing conflicts.

Read: FSCO proposes guideline to treat clients fairly

For its part, the CCIR and CISRO paper breaks down how the two bodies expect companies and their representatives to address their expectations regarding fair treatment and issues including conflicts of interest.

Examples include:

Advice. Since the giving of advice is “a personalized recommendation on a product in relation to the disclosed needs of the customer,” firms and representatives must offer high-quality, clear and accurate advice that aims to minimize risk. Before giving advice, information about a customer’s financial knowledge and experience, needs, ability to afford products and risk profile is required. Rigorous documentation and processes are also required throughout the advice-giving process.

Disclosure to customers. Before a representative sells a product and at the point of sale, customers must be “appropriately informed” to help them make decisions. Since different customers will have different levels of knowledge, that must be considered. Information offered to people must be current, provided in multiple formats, focus on quality and not quantity, include key information about products, and clearly identify a customer’s right and obligations.

Protection of personal information. The “theft, loss or inappropriate use of personal information obtained from customers” results in risk, so firms and representatives must have sufficient safeguards that put clients at ease as well as “appropriate policies and procedures” that prove firms understand the risks and outcomes of failure to protect data.

The consultation period for the paper is open until June 18. Both the CCIR and CISRO ask for electronic commentary to be sent to ccir-ccrra@fsco.gov.on.ca.

Also read:

Accessing insurance policy value through a policy loan

Canada Life joins CAFII