In its submission to FSCO on its Draft Statement of Priorities and Strategic Directions, FAIR Canada recommends that FSCO adopt a number of reforms to benefit financial consumers. FSCO’s initiatives include conducting life insurance product suitability reviews, working with the Ministry of Finance to review major parts of the Insurance Act and examining CCIR’s recommendations to reflect changes in distribution channels. FAIR Canada recommends that FSCO add as initiatives:
- improving communication with an accountability to consumers by strengthening FSCO’s Consumer Advisory Committee in a manner similar to the Ontario Securities Commission’s Investor Advisory Panel; and
- create a “one-stop” national system for so that consumers can conduct a comprehensive background check on a life agent which would show his or her registration status, and disciplinary history and would identify non-insurance licenses for individuals licensed under other regimes such as securities.
FAIR Canada makes a number of recommendations in respect of FSCO’s product suitability review. FAIR Canada believes such a review should include: (a) a substantive assessment of the adequacy of the current suitability process; (b) setting out regulatory requirements for suitability in a fashion similar to IIROC Dealer Member Rules 1300 and 2500 and MFDA Rule 2.2.1 and Policy No. 2.; (c) examination of the prevalence of recommending borrowing to invest, with a particular focus on segregated funds; (d) the steps taken to address the asymmetry of information between well-resourced, sophisticated insurance companies and their insurance agents and their unsophisticated consumers so that consumers understand the product, how it works and its key features including fees and costs; (e) consultation with stakeholders on increasing proficiency standards for insurance agents; and (f) imposing a regulatory requirement that, in order to sell segregated funds, the agent should also be licensed to sell mutual funds or other lower cost products. FAIR Canada has a number of suggested legislative changes to the Insurance Act and related legislation, including a “best interest of the client” standard and disclosure to consumers of the amount of compensation and incentives.