The Canadian Council of Insurance Regulators (CCIR) and the Canadian Insurance Services Regulatory Organizations (CISRO) on Nov. 19 published final and long-awaited segregated fund guidance, setting out expectations for insurers and intermediaries regarding the design, sale and servicing of individual variable insurance contracts (IVICs, or segregated funds).
“CCIR and CISRO expect that insurance regulators in each Canadian jurisdiction will implement the guidance in a manner consistent with their legal framework and culture,” the guidance states.
Patrick Déry, chair of the CCIR and superintendent of financial institutions at the Autorité des marchés financiers (AMF) says the document demonstrates regulators’ commitment to protecting consumers and ensuring they are treated fairly. “It builds on our past work, reinforcing and expanding on the principles and expectations set out (in) our Fair Treatment of Customers Guidance and Incentive Management Guidance, and sends a clear message that Canadians’ best interests are being protected across all jurisdictions.”
The groups add that the guidance closes gaps in existing conduct standards, saying the document is intended to provide similar consumer protection regimes for IVICs and mutual funds “given their similarity as investment vehicles, taking into account the differences.”
The document examines and discusses IVIC design and documentation, intermediary training, compensation, advertising, advice and disclosures, statements, governance and oversight.
Oversight expectations
In matters of oversight, for example, the document reiterates that regulators expect insurers to oversee the activities of any person the insurance has authorized to act on their behalf. Insurers, they state, are expected to have and maintain policies, procedures, and controls reasonably designed to ensure the insurers monitor activities or circumstances which could suggest sales practices are contravening applicable laws. Insurers and intermediaries are both also required to have policies, procedures and controls that identify when a customer is borrowing to invest in a segregated fund.
The document also contemplates patterns which may suggest a need for increased monitoring, along with specific monitoring expectations.
The guidance does not apply to group variable insurance products or to any other non-IVIC insurance products. It includes an appendix of all industry guidelines and reference documents considered in the development of the guidance.
“Canada now has consistent national expectations for insurers and intermediaries,” says Louise Gauthier, CISRO chair and director, distribution policies at the AMF. “These expectations will be endorsed from coast to coast.”