Life and health insurance industry reinforces customer information and confidence

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TORONTO, Dec. 21, 2004 — Canada’s life and health insurance industry today announced a package of initiatives to reinforce customer information and confidence.

“Customer trust and confidence has always been of central importance to Canada’s life and health insurance industry,” says Greg Traversy, President of the Canadian Life and Health Insurance Association. “Not only in North America but around the world, developments in the financial services industry make it clear that customer information and transparency are fundamental to that trust and confidence. Canada’s life and health insurers are moving proactively today to reinforce transparency and customer information with initiatives that build on the strong foundations put in place over past decades.”

The package announced today includes five initiatives:

  • Increased Consumer Awareness: Company websites will make accessible the Consumer Assistance Centre, the industry’s consumer publications and a Consumer Code of Ethics, to which all member companies are committed.

  • Product Disclosure: Consumers considering life and health insurance products will receive a product profile conforming to new standards and covering key features relevant to making informed and confident decisions.

  • Compensation Review: Life and health insurers will regularly review and assess their sales-related compensation practices and structures including from the perspective of their customers’ interests.

  • Travel Incentives: Companies offering such incentives will make disclosure by the intermediary a condition of eligibility.

  • Intermediary Disclosure: Companies will work cooperatively with intermediaries distributing life and health insurance products so that customers receive a brief, clear intermediary disclosure document.

(See Backgrounders A and B, below, for more details.)

“In combination with the many current consumer protection measures, these new initiatives will ensure that Canada’s life and health insurance customers continue to have the information they need to make the best choices for themselves and their families,” further noted Traversy.

Established in 1894, the CLHIA represents companies that together account for 99 per cent of Canada’s life and health insurance business. The industry protects 23 million Canadians through products such as life insurance, annuities, RRSPs, disability insurance and supplementary health plans, pays benefits of about $45 billion a year, and administers about two-thirds of Canada’s pension plans.

BACKGROUNDER A

CANADA’S LIFE AND HEALTH INSURANCE INDUSTRY: REINFORCING CUSTOMER INFORMATION AND CONFIDENCE

OVERVIEW

This document outlines five voluntary initiatives by Canada’s life and health insurance industry to ensure that customers continue to have the information they need to make the best choices for themselves and their families.

MEETING OUR CUSTOMERS’ NEEDS AND EXPECTATIONS

The Canadian life and health insurance industry has a long-standing commitment to providing customers with the information they need and to ensuring that those information resources keep pace with changes in the marketplace and in customer expectations. That information includes:

  • i) information about the product or products being considered;

  • ii) information about the insurer or insurers whose products are under consideration;

  • iii) information regarding the intermediary’s relationships with insurers to permit the customer to assess the objectivity of any advice or recommendations.

CURRENT INDUSTRY APPROACH

A number of the building blocks that provide customer information and confidence have been in place for some years. At the industry level, these include:

  • i) Consumer Assistance Centre (CAC): For over 30 years, the CAC has provided zero cost information on life and health insurance companies and products on a 1-800 basis in English and French from anywhere in Canada. More than 1.1 million consumers have been assisted to date.

  • ii) Consumer Publications: The industry, through its Association, makes available practical consumer guides focussed on the industry’s main products, namely, life insurance, health insurance, disability insurance and segregated funds.

  • iii) Consumer Code of Ethics: Since 1990, all CLHIA member companies have committed, as a condition of membership, to conduct their business in accordance with the 8-point code.

Individual life and health insurance companies, of course, supplement these by providing their customers with extensive additional information on their own products and services. As noted above, companies adhere to the Consumer Code of Ethics and many have individual company codes as well. Canada’s life and health insurance intermediaries also provide extensive information to their customers. They are licensed professionals who consistently demonstrate their strong commitment to their clients. They must successfully meet rigorous pre-licensing training requirements as well as ongoing continuing education requirements. Their own Codes of Ethics require that the interests of their customers must come first.

NEW INITIATIVES

The industry has decided that these existing building blocks must be made more visible and accessible and that the time has come to put additional building blocks in place. With that objective, Canada’s life and health insurance industry is taking the following five initiatives:

  • Increased Consumer Awareness: Company websites will make accessible the Consumer Assistance Centre, the industry’s consumer publications and a Consumer Code of Ethics, to which all member companies are committed.

  • Product Disclosure: Consumers considering life and health insurance products will receive a product profile conforming to new standards and covering key features relevant to making an informed and confident decision.

  • Compensation Review: Life and health insurers will regularly review and assess their sales-related compensation practices and structures including from the perspective of their customers’ interests.

  • Travel Incentives: Companies offering such incentives will make disclosure by the intermediary a condition of eligibility.

  • Intermediary Disclosure: Companies will work cooperatively with intermediaries distributing life and health insurance products so that customers receive a brief, clear intermediary disclosure document.

More details on all of the above initiatives are available in Backgrounder B.

LOOKING AHEAD

Building on the strong foundations put in place over many decades, these five initiatives by Canada’s life and health insurance industry will further reinforce customer information and confidence. Consistent with its long-standing tradition of constructive cooperation with its regulators, the industry stands ready to work with them on any aspect of these initiatives.

In combination with the many current consumer protection measures, these new initiatives will ensure that, in today’s context of rapidly changing products and rising consumer expectations, Canadian life and health insurance customers can continue to have the information they need to make the best choices for themselves and their families.

BACKGROUNDER B

INITIATIVE 1: INCREASED CONSUMER AWARENESS

Three actions will increase awareness of existing consumer resources. First, information about accessing the Consumer Assistance Centre will be made available on company websites. Second, the industry’s consumer publications will be made similarly accessible. Finally, the Consumer Code of Ethics, to which all member companies are committed, will be made accessible on company websites.

Consumer Assistance Centre:

  • About 1,100,000 Canadians have turned to the life and health insurance industry’s Consumer Assistance Centre (CAC) for information and assistance since it was established in 1973.

  • The CAC is staffed by counsellors with extensive experience and knowledge.

  • In 2003, CAC responded to 54,000 calls on more than 59,000 different topics.

  • The CAC provides general information about life and health insurance products.

  • The CAC provides information about life and health insurance companies operating in Canada.

  • It also provides a range of additional services including providing consumer publications (see below) and relocating lost policies.

Consumer Publications:

The Canadian Life and Health Insurance Association has long made available to Canadian consumers practical consumer guides on a wide range of life and health insurance products. These are available on the Association’s website at www.clhia.ca. These publications contain useful information and advice on products, what kind of coverage is available, and how to select and deal with an intermediary, as well as many other practical tips and advice.

CONSUMER PUBLICATIONS

  • A Guide to Life Insurance

  • A Guide to Supplementary Health Insurance

  • Health Insurance for Travellers: What you should know before leaving Canada.

  • Disability Insurance: Where Will the Money Come From if You’re Disabled?

  • A Guide to Segregated Fund Contracts

Consumer Code of Ethics:

Since 1990, all CLHIA participants have undertaken to adhere to the Consumer Code of Ethics as a condition of membership.

The Code will now be accessible on company websites.

CLHIA CONSUMER CODE OF ETHICS

As a condition of membership, all CLHIA members have committed themselves
>to conduct their business in accordance with the following principles:

  • To engage in keen, fair competition so that the public can obtain the products and services it needs at reasonable prices.

  • To advertise products and services clearly and straightforwardly, and to avoid practices that might mislead or deceive.

  • To ensure that illustrations of prices, values and benefits are clear and fair, and contain appropriate disclosure of amounts that are not guaranteed.

  • To write all contracts in clear, direct language without unreasonable restrictions.

  • To use underwriting techniques that are sound and fair.

  • To pay all valid claims fairly and promptly and without unreasonable requirements.

  • To ensure competent and courteous sales and service.

  • To respect the privacy of individuals by using personal information only for the purposes authorized and not revealing it to any unauthorized person.

INITIATIVE 2: PRODUCT DISCLOSURE

Consumers considering life and health insurance products will receive a product profile conforming to new standards and covering key features relevant to making an informed and confident decision.

  • Life and health insurers and their intermediaries already provide extensive information to their customers at the point of sale about the products they are considering. New standards which have been developed over the past two years will build on existing practices to help ensure that key features are covered.

  • The new standards will apply regardless of the way in which consumers choose to purchase those products i.e., through an agent, telephone contact, etc.

  • The standards will include disclosure of:

    • the main benefit offered by the product and its principal features and benefits;

    • which features and benefits are guaranteed and which are not;

    • the nature, frequency and structure of payments required;

    • any exclusions, reductions or limitations that may apply.

INITIATIVE 3: COMPENSATION REVIEW

Life and health insurers will regularly review and assess their sales-related compensation practices and structures including from the perspective of their customers’ interests.

  • Consumers will be able to have the confidence that, as compensation practices change over time, the life and health insurance companies they are dealing with are regularly reviewing their own compensation practices and structures including from their customers’ perspectives.

  • OSFI’s Standards of Sound Business and Financial Practices already require reviews of structures relative to compensation of employees. Over the period ahead, the industry will be taking action to extend such reviews to cover the entire range of sales-related compensation practices and to require that customer interests be considered in the course of those reviews.

INITIATIVE 4: TRAVEL INCENTIVES

Companies offering such incentives will make disclosure by the intermediary a condition of eligibility.

  • Travel incentives can be an appropriate form of non-monetary compensation for performance.

  • At the same time, customers should be made aware of the possibility of such compensation. The industry is moving forward on two fronts to help ensure this.

  • First, as noted above, companies will make intermediary disclosure an eligibility condition.

  • Second, as noted below, companies will work with their intermediaries to include appropriate references to such incentives in the intermediary disclosure document.

INITIATIVE 5: INTERMEDIARY DISCLOSURE

Companies will work cooperatively with intermediaries distributing life and health insurance products so that customers receive a brief, clear intermediary disclosure document.

The intermediary disclosure document will cover:

  • relationships to life and health insurers;

  • how they are compensated, including possible eligibility for non-monetary incentives; and

  • any conflicts of interest.

  • The intermediary disclosure document will also indicate that the customer has the right to ask for more information.