Regulators examine insurers’ Fair Treatment of Customer policies

The Annual Statement insurers must complete and file for the Canadian Council of Insurance Regulators (CCIR) provides a wealth of information about insurers’ governance, practices, policies and their treatment of customers.

The information is used by regulators to assess the industry’s adoption and implementation of fair treatment of customer (FTC) principles. It also informs regulator decision making when conducting risk assessments and other monitoring. It additionally provides a reference tool for regulators and companies during on-site examinations.

The CCIR published its first public report about the Annual Statement in early December 2020, outlining its findings from 2019.

The survey found that insurers value fair treatment of customer (FTC) principles but add there are opportunities for some insurers to better demonstrate how they have incorporated FTC principles into their businesses.

When asked if companies had a standalone, documented policy that specifically addresses the fair treatment of customers, 57 per cent of life and health companies indicated that they did. Just 53 per cent of property and casualty (P&C) companies said the same.

More, the report says it was noted during examinations that some insurers did not fully implement their FTC principles into business operations. “It is expected insurers will be prepared to demonstrate how they measure their organization’s FTC performance during an examination. This was not always the case,” the CCIR warns in the 2019 Annual Statement on Market Conduct – Public Report.

The survey also examined information about the state of policies in force and policies issued during the previous reporting period, customer and insurer-initiated cancellations, complaint handling and data on direct premiums written, commissions earned and claims incurred.

Conflicts of interest and incentives

In looking at commission data, for example, the CCIR says its member regulators have noted during examinations that some insurers have inadequate supervision of their external sales forces regarding conflicts of interest or incentives.

Overall, the CCIR notes that a disproportionate number of complaints, 61 per cent originated in Ontario for the property and casualty (P&C) sector, the majority of which, 63 per cent originated in automobile insurance. For the life and health sector, a disproportionate number of complaints, 40 per cent originated in Quebec, with accident and sickness complaints making up 57 per cent of all complaints.

The CCIR says the requirement to complete and file the statement is based on the authority of each provincial and territorial insurance regulator within their respective jurisdictions. The information collected is intended to help regulators proactively identify risks and ensure that insurance customers are being treated fairly. “CCIR members (regulators) use the date collected in the Annual Statement for various purposes and the usage will vary by regulator,” they write.

In total, 231 insurers in the P&C industry were required to file the Annual Statement. Of those, 164 were actively writing personal lines business. In life and health, 82 insurers were required to file the statement, 63 of which were actively writing new business.