As of January 1, 2021, Ontario’s insurance sector is subject to a new fair treatment of customers (“FTC”) approach (“Approach”) of the Financial Services Regulatory Authority of Ontario (“FSRA”). The new Approach adopts the FTC guidance (“National Guidance”) issued in 2018 by the Canadian Council of Insurance Regulators (“CCIR”) and the Canadian Insurance Services Regulatory Organization (“CISRO”). The Approach and National Guidance apply to insurers and other entities that FSRA regulates under Ontario’s Insurance Act.

The National Guidance was based on the International Association of Insurance Supervisors’ Insurance Core Principle 19, Conduct of Business (“ICP 19”).

The issuance of the Approach followed a FSRA consultation on the topic, which concluded in October, 2020.

Affected Entities

The Approach and the National Guidance incorporated by reference into the Approach apply to FSRA-licensed insurance companies as well as to insurance agents and adjusters (as individuals and in partnership or corporate form). The National Guidance does not apply to insurers carrying on only reinsurance business. The previous Ontario guideline on fair treatment of financial services consumers – Superintendent’s Guideline 03/18 – applied to the insurance sector, as did the National Guidance, resulting in duplication and possible inconsistency between the two standards. The previous Ontario guidance continues to apply to mortgage brokers, loan and trust companies, credit unions and caisse populaires.

Requirements under the National Guidance

The National Guidance includes sections on:

  • Conduct of business
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  • Fair treatment of customers
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  • Business culture
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  • Relationships between insurers and intermediaries
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  • Relationships with regulatory authorities
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  • Customer outcomes and expectations

Customer outcomes and expectations

The majority of the National Guidance deals with customer outcomes and expectations. Twelve specific expectations are listed:

  • Governance and corporate culture to have fair treatment of customers at its core;
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  • Conflicts of interest to be avoided if they could affect the fair treatment of customers;
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  • Outsourcing not to be allowed to affect the fair treatment of customers;
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  • New and modified insurance products to take the interests of the target consumer group into account;
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  • Distribution models to be tailored to the product and interests of the target consumer group while ensuring that consumers are consistently protected under all distribution models;
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  • Disclosure to be adequate to enable the consumer to make an informed decision whether to enter into an insurance contract;
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  • Promotional material to be clear and accurate and consistent with the result that the consumer can reasonably be expected to achieve;
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  • Advice required by law prior to concluding a contract to be relevant and take into account the customer’s circumstances, as disclosed;
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  • Ongoing disclosure to ensure that customers are reminded about options available to them during the lifecycle of their contract;
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  • Claims handling and settlement to be conducted fairly and diligently using a simple and accessible procedure;
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  • Complaints handling and dispute resolution to be conducted fairly and diligently using a simple and accessible procedure; and
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  • Personal information to be protected in accordance with legislation and industry best practices.

The points above are discussed in greater detail in the National Guidance. Some of them are also discussed in our posts relating to the original release of the National Guidance by CCIR and CISRO in 2018.

Application and Remedies

The Approach and National Guidance together provide a comprehensive set of standards under which FSRA examines internal policies and procedures relating to risk identification and risk management on the part of licensees.

Because the Approach and National Guidance are principles-based, licensees are able to tailor their policies and procedures in ways that are appropriate to the size and type of business in which they engage, provided that the chosen policies and procedures are designed to achieve the expected outcomes.

Where non-compliance with the Approach/National Guidance is found, FSRA can respond with a range of remedies, from education to regulatory discipline and intervention.

Going Forward

Recognizing the value of nationwide harmonization, the Approach specifies that revisions to the National Guidance adopted by CCIR and CISRO will automatically be adopted into the Approach at the same time.

The Approach took effect in Ontario on January 1, 2021 and is scheduled for a three-year review on or before January 1, 2024.