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Regulatory awakening increases need for information sharing solutions

By Susan Yellin | June 25 2015 11:31AM

A “regulatory awakening” is taking place in the insurance industry, increasing the need for carriers, distributors and advisors to share information required to comply with these new rules, the Canadian Life Insurance EDI Standards (CLIEDIS) annual seminar in Toronto was told. Dennis Craig, vice president of MGA and national account relationships at RBC Insurance, said the number of new rules continues to mount in the insurance industry. At first, Craig said, much of the regulations focused on advisors themselves with issues like conflict of interest, the importance of needs analyses and continuing education. Then the federal government stepped in with policies like Anti-Money Laundering and privacy. Knocking on the door now are international regulators, who are asking all countries to think about how they are going to address issues surrounding fair treatment of clients, said Craig.

clarke_heatherThe rise in the number of regulations requires an increase in the amount of information held by insurance stakeholders. But even though they need this data to be compliant, it’s difficult to get, said Heather Clarke, vice president of I.G. Insurance Services Inc. “We just don’t have the information to fulfill all of the regulatory requirements.”

Clarke identified a number of issues for distributors, including what she called the “regulatory awakening” that is taking place in different jurisdictions.

Every province has its own set of rules and regulations and while there are those who are talking about inter-provincial harmonization, she said the recent proposal by Saskatchewan to introduce a new, separate licensing class for MGAs that do business in that province indicates harmonization may be far off.

But Clarke said CLIEDIS has already standardized data through an initiative called CITS and hopes that will expand to other areas. “CITS standardized the data. And I say, let’s standardize the regulations across the country as well. [But] there is a movement afoot that has gotten ahead of harmonization. So I don’t think this is happen as easily and as smoothly as some might think.”

Adding to the confusion is that many distributors have more than one regulator, whether it’s the Mutual Fund Dealers Association or the Investment Industry Regulatory Organization of Canada. Clarke said it would be better for the industry if there was one set of rules that can be applied to both the investment and the insurance sides of the business.

“Because if you put yourself in the role of the advisor, you don’t want to have different compliance rules to deal with,” said Clarke. “So what we try to as an organization [at I.G.] is to put one rule in that applies to all lines of business.”

The industry has been working hard to help its members improve the kinds of information they receive through electronic feeds – information that will go far in helping them achieve compliance with all the regulations. Some insurers have completed their feeds to distributors, while others are in various stages of having the work done.

Electronic applications

The biggest move has been in the area of electronic applications (e-apps), enabling advisors to submit client applications directly to carriers, said Tana Sabatino, implementation services specialist at CLIEDIS.

sabatino_tana_article “Across the board, [insurance carriers] are looking at e-app solutions now,” Sabatino said. “You can see that progress is being made at this time,” adding that a series of best practices are being compiled to help support carriers.

MGAs have stated they want to be in the loop on these e-apps to ensure all the regulatory requirements they need to follow are being fulfilled and Sabatino said this is now top on the CLIEDIS list of priorities. “It’s still complicated to build a system to do it.”

She gave the example of a carrier trying to pull information from what could be eight different legacy systems in their back-end and eight different administration systems. To the carrier, it’s a lot of time and energy to take all of that data and boil it down to what the distributors want. But, she said, they know they need to do it.

Clarke said despite the move to electronic feeds, carriers also need to keep a copy of the e-app in their files and ensure all the necessary signatures have been made and are kept.

Sabatino said once more information is fed through e-apps, advisors will be able to data mine, enabling them to identify new sales opportunities.

In the meantime, CLIEIDIS is talking to its members about helping to smooth out other potentially conflicting issues, including security.

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