The Financial Services Regulatory Authority of Ontario, following two consultation periods, has amended the Unfair or Deceptive Acts or Practices (UDAP) rule to address the use of deferred sales charges (DSC) in segregated fund contracts.
Insurers accepting deposits to individual variable insurance contracts, subject to the new rule’s approval, will be required to remove the DSC option from existing contracts for future deposits, if possible. The UDAP amendment also stipulates different ways of handling sales charge changes.
In cases where the insurer is unable to remove the DSC charge option, the company must provide the contract owner with information to help the client understand and decide if it is suitable to continue making deposits that will be subject to such charges. “If insurers remove the deferred sales charge option from a contract, but the contract owner had previously arranged to make future payments that would be subject to deferred sales charges, insurers must explain the contract owner’s options for future deposits,” FSRA states in an announcement about the amendments.
The amendments take effect either 15 days after being approved by Ontario’s Minister of Finance or on March 23, 2024.
