Regulators issue recommendations for avoiding conflicts

The Canadian Council of Insurance Regulators (CCIR) and the Canadian Insurance Services Regulatory Organizations (CISRO) have issued a third consultation paper that includes three recommendations for harmonizing best practices across the country so as to avoid conflict of interest situations.
The Industry Practices Review Committee (IPRC) presented the recommendations to the CCIR-CISRO in the form of a discussion paper, which is posted on the CCIR Web site. The recommendations follow more than a year of consultations on such issues as conflict of interest and contingent commissions or profit.
The IPRC is recommending the following best practices:
An intermediary must place the interests of policyholders and prospective purchasers of insurance ahead of his or her own interests.
“Wherever possible, harmonized language should be used to describe the priority of the client’s interest in regulation, [insurance] council bylaws and industry codes,” according to the IPRC.
Consumers must receive disclosure of any actual or potential conflict of interest that is associated with a transaction or a recommendation.
According to the IPRC, brokers must reveal the insurers they represent whenever “a significant volume of business is placed,” the extent of the broker’s search for a competitive price, the methods of broker compensation (including contingent profit commissions), and any other situations that might indicate a potential conflict (company ownership, for example).
Insurers “should disclose on their Web sites or make publicly available clear and concise information about their relationships with intermediaries.”
The recommended product must be suitable for the needs of the customer.
This includes being able to demonstrate fact-finding and an assessment of the client’s needs when making a recommendation, the IPRC says.
After conducting further consultations with the industry, the IPRC will make its final recommendations to CCIR and CISRO sometime during the spring of 2006. “If it determined that implementation of the recommendations should be accomplished through legislation [as opposed to best practices], then the recommendations would become a matter for consideration by governments,” the IPRC notes in its consultation paper.