Major changes are taking place throughout the life and health insurance industry, including new guidelines aimed at helping clients, especially the most vulnerable, get the fair treatment they rightfully deserve, speakers told the recent Advocis Symposium.
“Fairness comes down to the ability to consent and the ability to address a problem afterwards in a way that is not too hard and not too expensive,” said Laura Tamblyn Watts, president and CEO of CanAge. “As an advisor you can’t settle…unless the person can understand the information and appreciate the consequences. And if things go wrong, you have to be able to fix it.”
The Canadian Council of Insurance Regulators (CCIR) and the Canadian Insurance Services Regulatory Organizations (CISRO) have released proposed guidance on their expectations for insurers and intermediaries that pay compensation arrangements.
Its purpose is to try to accomplish fair treatment through a needs analysis plus treating customers with respect and dignity, especially when they are at their most vulnerable. And while advisors are paid for the services they provide, the guidance helps ensure that the risks that arise from compensation are properly managed.
Huston Loke, Executive Vice-President, Market Conduct Regulation at the Financial Services Regulatory Authority of Ontario (FSRA), said the purpose of insurance is to keep promises, whether it’s meant for individuals and/or business. To accomplish this, said Loke, there must be training on the part of both the advisor and sales support.
But it’s not just advisors who have a role to play in ensuring fairness among clients: so do businesses.
Changes implemented by Canada Life
Ali Ghiassi, Vice-President of Industry Affairs and Government Relations at Canada Life, noted that customers should not be prejudiced by any specific channel they use to complete their purchases.
To that end, Canada Life renegotiated and redrafted contracts with its advisors in 2020, developing principles and practices such as hiring and training advisors, ongoing monitoring as well as complaint handling and contract terminations, Ghiassi said.
As well, Canada Life now has a compensation review committee that ensures the incentives and compensation is a critical path for both employees and clients, he said.
A pathway for change
The CCIR guidelines represent “a pathway for change, so I’m optimistic,” said Tamblyn Watts. She said consumers are now getting interested in finding information quickly and less willing to hear pretentious, bureaucratic jargon.
“It’s a more complex environment now. And that means that we as insurance advisors have a vital role.”
As some products become more complex, clients need to get much clearer communications, she said. While there are those who can go online to find the information they need, the industry in general needs to be much sharper in its communications to clients.
Tamblyn Watts suggested companies and advisors also need to standardize terms and provide clear definitions with necessary information on total cost reporting and then limiting this information to a single page plus educational materials. “Disclosure means more understanding, not more words,” she said.
Ghiassi said the critical phrase in the guidance is for insurers to implement appropriate controls. “We feel fairly confident that the controls we have in place reduce risk and provide a level of transparency in the client-advisor relationship. [But] I’m not sure all companies are at the same place as we are.”
Ghiassi said Canada Life already has an advisor assessment program aimed at avoiding unfair outcomes to customers as well as other courses for MGAs.
Of increasing importance is the growing number of seniors in Canada. According to Statistics Canada, the population aged 85 and older is one of the fastest-growing age groups in the country, with a 12 per cent increase from 2016. Currently, 2.3 per cent of the population is aged 85 and older.
At the same time, the number of aging advisors is rising, pointing to the need for good succession planning in the industry, said Tamblyn Watts. In the future, she said she believes there will be more of a teams-based approach to serving clients.
The industry is interested in looking after high-risk populations, particularly when it comes to aging and dementia and Loke said he expects to see a lot of concerns in the near future. “My hope is that we’re back on this issue at a later date.”
Loke said the objective of the CCIR guidelines is not to divide, but to align incentives and the value of the product to the consumer. Compensation should be tied to the service of the product, but more importantly, must suit the needs of the consumer.
The Symposium also looked at the importance and growth of technology and innovation in the insurance and technology sector.
Glen Padassery, Executive Vice-President, Policy and Chief Consumer Officer with FSRA, said the regulator has traditionally been known to say no to innovation, but it’s trying to move away from that negative thinking.
Still, Padassery said it might take some time to change that attitude, noting that innovation is a process, not the destination.
Failing and growing
“We as the regulator, and you as the sectors who we work with are probably going to fail: we’re going to try, we’re going to fail, we’re going to learn, we’re going to grow. Innovation requires collaboration so this is a great opportunity for us to talk to you and start the dialogue on how we can work together to support innovation.”
When FSRA took over from its predecessor, the Financial Services Commission of Ontario (FSCO), its goals included supporting innovation and a healthy marketplace. Padassery said his office has to make sure innovative business opportunities are supported and legislative frameworks don’t inhibit innovation. To that end, it formed an innovation framework in 2021, launching its first test-and-learn project. “We’re trying to be flexible in our approach.”
A preference for human interaction
While a number of small businesses want to get into the fintech industry, Padassery noted that consumer research conducted by his office saw some 4,000 Ontario residents say they preferred human interaction over purely digital means.
But he also said his office is not in the business of defining what fintech is. “If you create something, it should be brought to the market. We will work with you to try to make this a reality.”