Insurance advisors are facing a variety of regulatory changes that could impact their businesses substantially in the next few years, according to Grant Swanson, executive director of the licensing and market conduct division at the Financial Services Commission of Ontario (FSCO).
Speaking at the Independent Financial Brokers (IFB) fall summit in Toronto on Tuesday, Swanson said the changes are largely in response to weak economic conditions, the prolonged period of low interest rates, and the ongoing fallout from the sub-prime mortgage crisis.
“As a result of the [sub-prime] crisis, there’s been a lot more attention put on regulation, and asking, ‘how can we ensure that the problems that occurred three years ago don’t happen again?'” he said. “It affects your lives.”
Here are three regulatory developments that should be on advisors’ radar.
1. Globalization of standards
Regulatory standards for the financial services industry are increasingly being set at an international level, Swanson said. Specifically, the International Association of Insurance Supervisors (IAIS) released a new version of insurance core principles last year, which constitutes the globally accepted framework used in the evaluation of insurance regulators.
“This is really the beginning of the globalization of standards,” Swanson said.
Although it’s not necessarily mandatory for Canadian regulators to meet these new global standards, Swanson said it’s important for them to comply in order to uphold the country’s reputation.
“This is really very significant to Canada,” he said. “The quality of Canada’s reputation is affected by our ability to meet these international standards.”
The International Monetary Fund (IMF) will be conducting an audit of Canadian insurance regulators next year, to assess their compliance with the core principles.
Some aspects of the new principles, including the market conduct rules, pertain specifically to insurance advisors, Swanson said. Thus, he encourages advisors to familiarize themselves with the rules.
2. Electronic commerce
As digital technology becomes increasingly prominent, regulators are turning their attention to the supervision of business conducted electronically. The Canadian Council of Insurance Regulators (CCIR) is set to release a position paper for consultation in the coming months, setting out proposals in this area, Swanson said.
Specifically, the paper will address topics such as rate-comparison websites, and whether they should be subject to supervision; and whether consumers should have access to advice from a licensed agent when they’re using an electronic channel to purchase insurance policies.
“This can cover a wide waterfront of issues,” Swanson said.
3. National disciplinary database
In an effort to make it easier for clients to identify advisors who have engaged in misconduct, regulators are taking steps to establish a Canada-wide disciplinary action database, Swanson said.
Currently, regulators in each province post disciplinary proceedings on their respective websites. However there’s no database containing such actions on a national scale.
“It’s very, very difficult to go to one place and see if somebody has a disciplinary action in another province. And people can be licensed in different provinces,” Swanson said. “A lot of people have asked for this over the years.”
The project to launch this national database is currently underway, Swanson said.