By mid-2023, clients will be one step closer to knowing how much their segregated funds actually cost.
The Canadian Council of Insurance Regulators, which consulted on total cost reporting for seg funds last year, intends to release final TCR guidance “this coming spring,” said Erica Hiemstra, head of insurance conduct with Ontario’s Financial Services Regulatory Authority (FSRA), at an event held by the regulator in Toronto on Thursday.
FSRA is working with the Canadian Securities Administrators “to improve and harmonize disclosure of the total amount consumers are paying on mutual funds and segregated funds, including embedded fees,” Hiemstra said, adding that TCR would outline indirect costs — paid from assets held in funds — that would not necessarily “be visible to consumers” but can reduce the return.
At the same event, Hiemstra reiterated FSRA’s proposal to amend the Unfair or Deceptive Acts or Practices (UDAP) rule to prohibit insurers from selling new individual seg fund contracts with DSCs, as well as to “introduce some customer protections that address the use of DSCs” for all seg fund contracts, “regardless of when” the customer made the purchase.
Last year, insurance regulators across Canada signalled their intention to ban DSCs for seg funds by June 1, 2023. Quebec’s Autorité des marchés financiers, for example, released its draft regulation in December while FSRA issued a draft regulation in November. FSRA’s proposals are out for comment until Feb. 23.
FSRA also remains concerned about managing general agents (MGAs) paying life insurance agents not only for their own sales, but also for those of new people they recruit.
“MGAs are the most pervasive distribution channel in Ontario” for life insurance, said life and health insurers director Swati Agrawal during the event. She was commenting on a joint review, released Sept. 28, of three MGAs’ individual life and health businesses.
“We have some serious concerns and we will use all the measures available, whether it’s supervisory compliance, whether it’s enforcement, whether we issue policy tools whether we need to communicate more, whether we need to listen to complaints or whistleblowers,” said Huston Loke, FSRA’s executive vice-president of market conduct regulation.
FSRA also announced in September that it plans to hold consultations in 2023 on a draft proposal to expand life insurance MGA regulation.