By mid-2023, customers will be one step closer to knowing how much their segregated funds actually cost.
The Canadian Council of Insurance Regulators, which last year consulted on total cost reporting for seg funds, intends to release final guidance on TCR “in the spring,” said Erica Hiemstra, director of insurance conduct at the Financial Services Regulatory Authority (FSRA) in Ontario. at: an event hosted by the regulator in Toronto on Thursday.
The FSRA is working with Canadian securities administrators “to improve and standardize disclosure of the total amount consumers pay for mutual funds and segregated funds, including embedded fees,” Hiemstra said, adding that the TCR will determine indirect costs – paid from assets held in custody in funds – this would not necessarily be “consumer visible” but could reduce returns.
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 segmented fund contracts with DSCs, as well as “introduce certain customer protections regarding the use of DSCs” for all seg funds contracts, “regardless of when” the customer made the purchase.
Last year, insurance regulators across Canada signaled their intention to ban DSCs for seg funds by June 1, 2023. For example, Quebec’s Autorité des marchés financiers published a draft regulation in December, while the FSRA published a draft regulation in November. Comments can be made on the FSRA proposals until February 23.
The FSRA also remains concerned about the management of general agents (MGAs), who pay life insurance agents not only for their own sales, but also for the sales of new people they recruit.
“MGA is the most widespread life insurance distribution channel in Ontario,” said life and health insurance executive Swati Agrawal during the event. She was commenting on the joint review, published on September 28, of three individual life and health MGAs.
“We have serious concerns and we will pursue all available measures, whether it be regulatory compliance, whether it be enforcement, whether we issue policy tools, whether we need to communicate more, whether we need to listen to complaints or whistleblowers,” Huston said Loke, FSRA executive vice president for regulation of market conduct.
In September, the FSRA also announced that it plans to consult in 2023 on a draft proposal to expand MGA regulation in life insurance.
