Total expense ratio (TCR) reporting for both securities and segregated funds is expected to be mandatory in client statements from 2027.
While there are no requirements for life agents in the proposed TCR regulation, “we recognize that (the proposed regulation) will likely have an impact on agents,” said Mike Winter, senior policy and technical manager, insurance policies, at the Financial Services Regulatory Authority of Ontario (FSRA). “Clients will have questions about their contracts and may want to make some changes to their contracts or investments after receiving these expanded disclosures.”
Winter made the comments during an informational webinar held on Wednesday.
The proposed FSRA regulations impose requirements on insurers regarding the information customers receive in their annual reports, including fees, commissions, performance and SEG fund guarantees.
Article 7 of the proposed regulation includes a requirement for insurers to remind customers at least annually to review their life insurance fund agreements, contract structures and related investments, and to inform their insurance agents of material changes to their life insurance policies.
Winter said such reminders “can trigger additional ‘know your client’ type information… from the agent.
As a result, insurance agents would have to act or provide advice. For example, beneficiaries may need to be updated or investments may no longer be suitable.
During the webinar, the question also arose whether the TCR rules will be the same for securities and investment funds as for private segment funds.
The short answer is no, Winter said, although the Canadian Council of Insurance Regulators and the Securities Administrators of Canada worked together on the TCR to align current reporting with investors and policyholders.
He added that the securities side has a national instrument framework, while the insurance side has guidelines: “They are different systems and will remain different systems.”
The webinar also discussed the challenges of implementing the regulations across the industry, and FSRA sought feedback on potential exceptions to the requirements in specific cases where costs and compliance are burdensome.
The consultation will last until 26 July.
