Regulators on Nov. 30 published joint guidance about incentive management under the fair treatment of customers’ guidelines. The Canadian Council of Insurance Regulators (CCIR) and the Canadian Insurance Services Regulatory Organizations (CISRO) together published the Incentive Management Guidance (IMG) to complement the Conduct of Insurance Business and the Fair Treatment of Customers guidance (FTC guidance) published in September 2018.
“Since the release of the FTC guidance in 2018, industry participants have indicated to regulators that more clarity is needed regarding the overarching expectations for how insurers and intermediaries conduct insurance business,” they write. “Specifically, section 6 of the FTC guidance with respect to the area of remuneration and conflicts of interest.”
The IMG discusses governance, design and management of incentive arrangements, controls, risks of negative outcomes to consumers and includes in-market examples.
The document applies to insurers and intermediaries which pay compensation or design incentive arrangements. It states that regulators expect insurers and intermediaries’ governance and business cultures to put FTC at the centre of decisions concerning the way incentive arrangements are designed and managed.
The regulators add that ultimately the insurer bears the responsibility for FTC throughout the product’s lifecycle, but in the document itself, they state that the insurer’s ultimate responsibility does not absolve intermediaries of their own responsibilities for which they are also accountable.
“Treating customers fairly is a shared responsibility when insurers and intermediaries are both involved. Representatives who operate under an incentive arrangement are expected to manage conflicts of interest as described in the CCIR/CISRO FTC guidance,” they add. “This guidance applies to all insurance products, types of insurance and distribution channels.”