May 8, 2006 by Canadian Underwriter
The Canadian Council of Insurance Regulators (CCIR) has accepted, subject to agreement from the Canadian Insurance Services Regulatory Organizations (CISRO), the recommendations made in a Feb. 13, 2006, joint CCIR and CISRO paper entitled Managing Conflicts of Interest: A Consultation Paper on Enhancing and Harmonizing Best Practices.
The CCIR endorsed the three principles or outcomes suggested in the paper to manage actual or potential conflicts of interest associated with insurance advice or transactions:
Priority of the client’s interest: An intermediary must place the interests of policyholders and prospective purchasers of insurance ahead of his or her own interests.
Disclosure of conflict or potential conflict of interest: Consumers must receive disclosure of any actual or potential conflict of interest that is associated with a transaction or recommendation.
Product suitability: The recommended product must be suitable for the needs of the consumer.
The CCIR’s approval in April completes this phase of the Industry Practices Review Committee (IPRC)’s work. IPRC was established in November 2004 to review the financial relationships between insurance companies and their sales intermediaries.
The IPRC will now focus on the implementation of these principles across Canada. “Various industry associations have suggested that the principles be implemented through voluntary guidelines,” the CCIR notes on its Web site. “The IPRC will follow-up with these organizations to work out the next steps and timeframes of implementation.”
The IPRC will be reviewing the implementation of the three principles in six to 12 months, the CCIR says. The review will “confirm the extent that these principles have been embraced by the industry and whether further regulatory action is required.”