Summary of Responses on the Consultation Paper on Relationships between Insurers and Sales Intermediaries – Achieving Best Practices: CCIR and CISRO

November 4, 2005 — The Canadian Council of Insurance Regulators (CCIR) and the Canadian Insurance Services Regulatory Organizations (CISRO) are pleased to release the Summary of Responses on the Consultation Paper on Relationships between Insurers and Sales Intermediaries – Achieving Best Practices.

The Industry Practices Review Committee (IPRC) has been collecting data about existing practices in the insurance industry through the questionnaires sent to insurance companies in the fall of 2004, the questionnaires that Autorit� des march�s financiers (AMF) and Registered Insurance Brokers of Ontario (RIBO) sent to agents and brokers, and the consultation paper published on June 3, 2005. The IPRC review was broad and focused on best practices in managing potential conflicts of interest. This paper was prepared by the IPRC to provide a summary of the responses received to the earlier consultation paper.

The IPRC has not made any recommendations to date and will now consider if recommendations should be made to the issues highlighted in the paper. In the event that stakeholders wish to make further comment, the IPRC will take these into account in considering whether any recommendations should be made to achieve best practices in managing potential conflicts of interest. Any comments should be sent to:

Industry Practices Review Committee
CCIR Secretariat
5160 Yonge Street, Box 85
17th Floor
Toronto, Ontario M2N 6L9
E-mail: ccir-ccrra@FSCO.GOV.ON.CA

Executive summary

The IPRC was formed to review the insurer/intermediary relationship in the Canadian insurance marketplace, in response to events which took place in the insurance industry in the United States in the fall of 2004. The IPRC commenced its review by sending questionnaires to insurance companies and analyzing the responses received from insurers. The IPRC also utilized the results of the questionnaires that Autorit� des march�s financiers (AMF) and Registered Insurance Brokers of Ontario (RIBO) sent to agents and brokers in its review.

The IPRC review went beyond the illegal activities that were identified in the United States and encompassed all relationships between insurers, brokers, agents and their clients. While the CCIR/CISRO review did not identify any evidence of illegal insurance related activities of the kind seen in the United States, the questionnaire results did disclose the existence of a number of relationships and business practices that have the potential to create conflicts of interest unless they are well managed. The issue is how to ensure these potential conflicts of interests continue to be managed in a standard appropriate for today�s marketplace. Since the review was initiated, CCIR and CISRO have been pleased with the efforts made by the industry in Canada to introduce additional voluntary measures.

Following the initial fact gathering CCIR and CISRO released a consultation paper entitled Relationships between Insurers and Sales Intermediaries on June 3, 2005. A total of 69 responses were received. The key themes identified during the consultative process include the definition of �independence�, priority of the client�s interest, whether performance linked benefits and other financial links result in potential conflicts of interest and whether the current level of disclosure to consumers is adequate and consistent across jurisdictions. The IPRC wishes to thank all respondents for their comments. We have prepared this paper to summarize the results of our consultation. As always, we welcome any additional comments that industry and the public wish to make. The IPRC intends to take responses received, industry initiatives and existing codes and legislation into account in making any recommendations on the issues highlighted in this paper.

Summary of Responses

CCIR is an inter-jurisdictional association of regulators of insurance. Its mandate is to facilitate and promote an effective regulatory system in Canada to serve the public interest. http://www.ccir-ccrra.org