Ontario’s provincial government is moving full speed ahead with plans to modernize insurance regulation. And although its aim is to harmonize its regulations with those of other provinces, a review to be conducted this autumn will also look at the enforcement system for the sector — and whether a more streamlined system for charging financial advisors with penalties is necessary.

In Ontario’s March budget, the province’s government had called for a review of the life insurance and accident and sickness insurance sections of the Ontario Insurance Act. The goal of the review is to see how consistent the rules in the OIA are with those of other provinces and whether regulators need more enforcement tools on the table.

It’s a review that’s “long overdue,” the budget stated. The OIA has not been amended since it was instituted in 1962.

“Other provinces, such as Alberta and British Columbia, have made amendments — and Ontario needs to follow [suit],” says Susan Allemang, head of regulatory affairs with Mississauga, Ont.-based Independent Financial Brokers of Canada. “Legislation needs to reflect the current environment; as to what the details are, we will just have to wait and see.”

The Ontario Ministry of Finance will lead the review and consult with the insurance sector, as well as with its regulatory implementation arm, the Financial Services Commission of Ontario, to pinpoint what sections of the act require an update. Among the topics first being looked at is FSCO’s enforcement system — and whether the regulator requires more streamlined tools.

Under the current act, FSCO is able to enforce its rules only by way of a court tribunal, through which FSCO can seek court-imposed fines for certain offences. If the court finds an advisor guilty through the hearing process, it then imposes a fine.

Currently, the ministry is considering amending FSCO’s enforcement process to include what are known as “administrative monetary penalties.” By including AMPs in FSCO’s enforcement toolbox, the regulator can bypass the tribunal process when issuing a fine for an offence, similar to the way in which police officers issue parking tickets and the onus is on the offender to dispute the fine.

One of the ministry’s projects is to evaluate the pros and cons of AMPs and see where they could apply in the insurance sector, says Alvaro del Castillo, director of the industrial and financial policy branch at the ministry: “Other jurisdictions use an AMP approach. We need to consult with industry stakeholders to see if that is what we need in Ontario.”

The main advantage of adding AMPs to FSCO’s toolbox is that it allows it to respond to offences at a faster rate, says del Castillo: “Without a tribunal process to go through, it’s argued that AMPs are a speedier and more effective way for a regulator to act and ensure compliance.”

Currently, FSCO can charge AMPs to mortgage brokers and credit unions. Whether there is an advantage to applying AMPs across all of the sectors FSCO regulates remains to be seen, adds del Castillo: “We are going into this review without a view as to what the outcome will be; consultations will determine that.”

Meanwhile, the ministry will also concentrate on reviewing the documents advisors use to sell life, sickness and accident products.

Before Alberta and B.C. amended their insurance acts in the past few years, all common-law provinces were harmonized on the life insurance and the accident and sickness insurance rules.

However, since these western provinces have amended their legislation, Ontario and others have fallen out of sync.

For example, in Alberta, insurers are now required to disclose the limitation period of an insurance contract, the amount of time an advisor has to contest a claim decision and, in cases involving
life and disability insurance, remind the client of when that limitation period is coming due. This is not the case in Ontario.

“We want to ensure,” del Castillo says, “that clients in Ontario are being treated consistently [with those] across the country.”

The Canadian Life and Health Insurance Association Inc. also is in favour of more consistency. The CLHIA has met with Ontario ministry officials to encourage them to pursue this goal, says Frank Zinatelli, the CLHIA’s vice president and general counsel: “It’s the cumulative result of harmonization in paperwork and disclosure processes that will lead to more protection for clients.” IE