FSCO under fire for ‘serious flaws’ in life insurance regulation

Ontario’s regulatory financial services commission has been taken to task by an investor advocacy group who says consumer input, compliance measures needed

An investor advocacy group has provided some scathing feedback in response to the Financial Services Commission of Ontario’s (FSCO) draft statement of 2016 priorities. FAIR Canada has called for an in-depth overhaul of the Commission, pointing to what they call “serious flaws” in existing life insurance regulations.

One of FAIR’s concerns is FSCO’s lack of consumer input when drafting reforms. In a letter to the Commission, they state that discussions between regulators and industry groups aren’t sufficient, and that "robust consultation with and input from consumers and consumer groups" is key.

Neil Gross, executive director at FAIR Canada, says the advocacy group has recommended FSCO implement a permanent independent advisory panel, pointing to the Investor Advisory Panel run by the Ontario Securities Commission as an example. The panel should consist of representatives of consumer organizations as well as individuals with expertise on consumer interests and needs in the areas that FSCO regulates, he says.

“FSCO should actively seek out consumer views through consultations and requests for input at an early stage in the policy-making process,” he stated in an interview with Life Health Professional. “We also recommend that FSCO’s board of directors/commissioners should include consumer representation.”

FAIR also calls into question FSCO’s ability to govern compliance in the financial services industry, saying, “self regulation through industry guidance has proved to be inadequate and insufficient.”

“… The policy-making process is unduly influenced by industry and industry associations such as CLHIA and Advocis without any adequate informed consumer voice being heard,” Gross states. 
He adds that FAIR’s recommendations support similar suggestions from a 2014 Auditor Gneeral Report and a 2014 IMF Report, which indicated that FSCO is not adequately fulfilling its mandate. Among their complaints is a lack of enforcement on FSCO’s behalf against agents who have been disciplined by another regulator, as well as insufficient consumer complaint handling.

Additional recommendations include:
  • A review of FSCO’s supervisory resources
  • Review of whether FSCO should be subject to hiring controls set by the Ontario Public Service
  • Empower FSCO to require insurers and intermediaries to conduct needs analysis before providing advice and to meet policy servicing obligations
  • Review the adequacy of supervisory resources of FSCO for regulatory policy formulation and for carrying out proactive conduct of business supervision. 

Related Links:
FSCO report: Should advisors be concerned?
Upfront commissions hit with reforms