Regulators comment on industry’s adoption of Fair Treatment of Customers principles

The Canadian Council of Insurance Regulators (CCIR) has published a number of negative observations, made in recent reviews, about the industry’s adoption of Fair Treatment of Customers (FTC) principles, in the CCIR Cooperative Fair Treatment of Customers (FTC) Review – Consolidated Observations Report, published in October 2021.

“FTC principles have a broad impact on the reputation of not only individual companies, but on the reputation and confidence of the financial system as a whole,” the CCIR writes. “Adherence to FTC is an end-to-end process. The insurer must take it into consideration at each stage of the product life cycle. Strong integrated risk management in the form of monitoring and supervision must also be used.” 

The CCIR, along with the Canadian Insurance Services Regulatory Organizations (CISRO) jointly published the Conduct of Insurance Business and Fair Treatment of Customers guidance back in 2018. The consolidated observations report provides a summary of key observations from the CCIR based on FTC reviews of insurance companies conducted between 2017 and 2021, and based on the individual FTC reviews of insurance companies in each of the CCIR members’ own jurisdictions.

Key observations 

Among their key observations, the CCIR says roles and responsibilities related to FTC were not always clearly defined, policies and procedures were not fully evaluated to assess if pertinent FTC elements were incorporated, and no action plans were in place to implement and operationalize FTC elements. “There was no consolidated reporting that assesses the insurers’ overall performance with respect to FTC,” they add.

Under training and outsourcing, they add that contractual agreements between insurers and intermediaries did not outline detailed explanations regarding their roles and responsibilities, and no mechanisms were in place to provide reasonable assurance that independent agent training was being completed or that intermediaries understood and fulfilled their delegated training responsibilities. They add that FTC was not reflected in incentive or renumeration structures and they found no formal processes for ongoing or periodic reviews of marketing materials. They add that the claims process was not always explained in a complete or accessible manner. Similarly, complaints handling policies and procedures were not always simple, accessible or complete.

“The objective of these joint FTC reviews was to assess the business practices of various insurance companies to ensure FTC is being applied and followed across all distribution channels,” the CCIR writes. They add that the common observations and themes outlined can be applied to both the life and health and property and casualty sectors.

A shared responsibility 

“The insurer is responsible for FTC throughout the life cycle of the insurance product, as it is the insurer that is the ultimate risk carrier. However, it is important to note that intermediaries also play a significant role in insurance distribution,” they conclude. “FTC in respect of the relevant services is a responsibility that is shared.” 

The CCIR also concludes saying they expect the consolidated review results “will shed light onto some of the common issues the industry encounters and serve as a tool for insurers in both the life and health and property and casualty sectors to benchmark themselves against the reported recommendations in order to achieve better outcomes and protection.”