Investor advocacy group FAIR Canada says insurance regulators should be tackling many of the same issues as securities regulators — including improving their public accountability, enhancing disclosure, and ensuring clients’ interests take priority.
In a submission to the Financial Services Commission of Ontario (FSCO) on its draft statement of priorities, the Canadian Foundation for Advancement of Investor Rights recommends that the regulator take on many of the same issues that have been, or, it believes should be, addressed in the securities world.
For example, it proposes that FSCO should improve its communication with, an accountability to, consumers by strengthening its Consumer Advisory Committee so that it functions more like the Ontario Securities Commission’s independent Investor Advisory Panel, by giving the committee greater resources and compensating participants.
It also calls for improved disclosure to consumers. FAIR Canada recommends that regulators create a ‘one-stop’ national system that would enable consumers to conduct a comprehensive background check on a life agent, detailing their registration status, disciplinary history, and other non-insurance licenses. And it says that FSCO should also address the ability of an insurance agent to continue providing advice after they have been sanctioned by a regulator.
The group also suggests that changes should be made to insurance legislation to include a ‘best interest of the client’ standard and improve disclosure surrounding compensation and incentives. “FAIR Canada advocates for the adoption of a new model of consumer protection for complex financial products, including segregated funds,” it says. “This new model would place the burden on parties who sell complex financial products to consumers (meaning insurance companies, distributors and agents) to ensure that their sales force, clients and the end consumer actually understand the products being sold, the associated costs, fees and risks, and the implications of the disclosure documents provided.”
Additionally, it makes a number of recommendations concerning FSCO’s product suitability review, including, that it should involve: a substantive assessment of the adequacy of the current suitability process; setting out regulatory requirements for suitability similar to securities rules; examining the prevalence of recommended borrowing to invest, particularly in segregated funds; the adequacy of disclosure; possibly increasing proficiency standards for insurance agents; and, imposing a regulatory requirement that, in order to sell seg funds, agents should also be licensed to sell mutual funds or other lower cost products.