The Canadian Council of Insurance Regulators (CCIR) accepted, subject to agreement from the Canadian Insurance Services Regulatory Organizations (CISRO), the recommendations made in the February 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:

1. 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.

2. 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.

3. Product suitability: The recommended product must be suitable for the needs of the consumer.

This acceptance completes this phase of the work of the Industry Practices Review Committee (IPRC) that 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 IPRC will follow-up with these organizations to work out the next steps and timeframes of implementation.

To encourage the timely implementation of these proposals, the IPRC will also be working to develop methodologies for an implementation review of insurers and intermediaries to be undertaken in six to twelve months to confirm the extent that these principles have been embraced by the industry and whether further regulatory action is required.

Risk-Based

Market

Conduct

Regulation

Committee

The CCIR approved in principle the first three fundamentals of a common approach to market conduct regulation to come out of the research conducted by the Risk-based Market Conduct Regulation Committee (RbMCR) to develop a common approach to market conduct regulation that fits Canadian market oversight and supervisory requirements:

1. Regulators recognize that there are benefits in collaborating in market conduct reviews, like the work done in connection with the relationship between insurers and sales intermediaries;

2. At a minimum, market oversight must become more progressive, transparent and should be based on the assessment of:

                     a)       Risks to the achievement of regulatory                                objectives;

                     b)       Meaningful and reliable consumer                                complaint data; and

                     c)       The effectiveness of corporate                                governance and other control systems;                                and

3. A common approach will facilitate efficient market conduct regulation in Canada.

The CCIR endorsed the continued work of the committee towards development of a more systematic and risk based approach to market conduct regulation.

The CCIR agreed, subject to agreement from the Canadian Insurance Services Regulatory Organizations (CISRO), that the reliance model put forward by the Reciprocal Licensing Committee be implemented as of July 4, 2006 in each jurisdiction where it will be possible.

Under the reliance model, a host jurisdiction will rely on most of the requirements of the agent’s home jurisdiction but can request that the agent meet some further jurisdiction-specific requirements. In conjunction with this model, the Committee has also recommended standards for continuing education and errors and omissions insurance. These are key aspects of licensing qualifications that, if harmonized, would facilitate the introduction of a reciprocal licensing system.

The Reciprocal Licensing Committee was originally established as a joint committee of CCIR and CISRO to look at initiatives proposed by industry associations to streamline or harmonize agent and broker licensing.