The potential overregulation of insurance products is a key concern for the insurance industry, and threatens to significantly alter the product mix that the industry is able to offer, association leaders said on Wednesday.

Speaking at the Canadian Association of Independent Life Brokerage Agencies (CAILBA) annual meeting in Toronto, Frank Swedlove, president of the Canadian Life and Health Industry Association (CLHIA) said the changing regulation is hampering the ability of insurers to offer products with long-term guarantees, in particular.

“What I think concerns us most of all,” Swedlove said, “is the concern of overregulation and over-capitalization of the products that Canada probably does best at, and that is long-term products that have guaranteed elements.”

With capital requirements continuing to move higher, Swedlove said it is becoming increasingly difficult for insurers to sell some of the key products that many Canadians will need to rely on in retirement. This trend is particularly worrisome given the decline of defined benefit pension plans and the fiscal challenges facing governments, he added.

“We think it’s really unfortunate that at a time when governments are less and less able to provide assurances and guarantees to Canadians, that we as an industry are being hampered in providing those assurances and guarantees because of regulatory and capital rules that apply,” Swedlove said.

He said the industry must do a better job of educating the government on the importance of having a regulatory framework that ensures the sustainability of the long-term guaranteed products that Canadians need to rely on in retirement. If regulations continue to become more cumbersome, he said, products could begin to disappear.

“If we don’t do a good job of explaining to regulators the real risk that does apply,” he said, “then there is a chance that we’ll be significantly changing the product mix, and that would be very unfortunate.”

However, chances are that the regulation of the insurance industry will continue to climb, according to Greg Pollock, president of Advocis. The substantial regulatory changes occurring in other parts of the financial services industry, such as the new Client Relationship Model (CRM) rules, are likely a sign of what’s in store for the insurance space, he said.

“At the end of the day, if things are happening on the fund side, you’re going to see it happen on the insurance side,” Pollock said. He suspects that the insurance industry could soon see more onerous disclosure requirements around compensation and fees, similar to the new CRM requirements.

“Eventually, we will see this regulation coming together, and everyone will be affected,” Pollock said. “I think we are going to see changes, unless we stand up, take control, and we set the direction for ourselves. And I believe we can do that.”