A new regulatory paper outlines consumer-protection requirements to align with another industry
Earlier this year, the introduction of Client Relationship Model Phase 2 (CRM2) ushered in new disclosure rules for the investment industry. The rules are meant to ensure investment firms give Canadians more useful information about their accounts; that includes how much they’ve paid in fees and how much they’ve earned in returns.
To offer similar protection for segregated-fund contract holders, the Canadian Council of Insurance Regulators (CCIR) has laid out its own framework for disclosure in a new position paper.
“The new disclosure framework will ensure that consumers are informed of not only the performance of their segregated funds, but also all of the details of what it costs,” said CCIR Chair Patrick Déry.
Currently, consumers purchasing a segregated fund receive information on the key features of the insurance contract, as well as risks and past performance of funds included in the contract. They also get periodic statements informing them of the funds’ performance.
Under the enhanced disclosure framework, consumers will also receive additional details on costs linked to the contract’s insurance features, as well as distribution and administration costs of the segregated fund.
The CCIR’s position paper spells out other consumer-protection measures aside from cost disclosure. On the sellers’ side, these include a requirement that consumers be provided with copies of the rationale for sales advice they receive, with insurers being legally responsible for oversight of their intermediaries. Mandatory disclosure of incentives related to travel and accommodations was also recommended.
The paper also made several other recommendations, including:
“Insurers will be required to ensure that consumers are provided with all of the new information outlined in the CCIR's position paper,” it said. “However they will have flexibility in terms of the layout and look of their disclosure documents.”
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To offer similar protection for segregated-fund contract holders, the Canadian Council of Insurance Regulators (CCIR) has laid out its own framework for disclosure in a new position paper.
“The new disclosure framework will ensure that consumers are informed of not only the performance of their segregated funds, but also all of the details of what it costs,” said CCIR Chair Patrick Déry.
Currently, consumers purchasing a segregated fund receive information on the key features of the insurance contract, as well as risks and past performance of funds included in the contract. They also get periodic statements informing them of the funds’ performance.
Under the enhanced disclosure framework, consumers will also receive additional details on costs linked to the contract’s insurance features, as well as distribution and administration costs of the segregated fund.
The CCIR’s position paper spells out other consumer-protection measures aside from cost disclosure. On the sellers’ side, these include a requirement that consumers be provided with copies of the rationale for sales advice they receive, with insurers being legally responsible for oversight of their intermediaries. Mandatory disclosure of incentives related to travel and accommodations was also recommended.
The paper also made several other recommendations, including:
- Aligning the requirements in delivering updated Fund Facts for seg funds;
- Establishing seg-fund risk classifications following the methodology prescribed by the Canadian Securities Administrators (CSA);
- Creating a standard of care for seg-fund dealers parallel to that used for mutual-fund dealers; and
- Harmonizing or adopting Know-Your-Product requirements that are currently applied to mutual funds.
“Insurers will be required to ensure that consumers are provided with all of the new information outlined in the CCIR's position paper,” it said. “However they will have flexibility in terms of the layout and look of their disclosure documents.”
Related stories:
Retirement options amid low interest rates
Global collaboration crucial for insurance regulators: CLHIA
