CCIR and CISRO have released a discussion paper for public consultation
By Steve Randall
Sep 09, 2022
Whether or not to ban upfront compensation paid for the sale and servicing of segregated funds and individual insurance contracts (IVICs) is now an open conversation.
The Canadian Council of Insurance Regulators (CCIR) and the Canadian Insurance Services Regulatory Organizations (CISRO) have released a discussion paper for public consultation.
The insurance regulators’ consultation has been anticipated after it set out its position on Deferred Sales Charges (DSCs) in segregated fund sales contracts in February and said it would consult on other upfront commissions in seg funds and IVICs.
They believe that the use of DSCs is not conducive to fair treatment of consumers and is high risk for poor consumer outcomes.
Earlier this year, securities regulators banned the use of DSCs in mutual funds but the ability to continue to use them in seg funds was seen by the industry as something of a loophole.
CCIR and CISCO are urging insurers to refrain from new DSC sales contracts in segregated fund contracts and to expect these sales to be banned by June 2023.
The start of the consultation sparked by the publication of the discussion paper aims to fully understand:
Compensation arrangements in segregated funds and IVICs, and what other changes to Upfront Compensation may be needed, including understanding the impacts of a complete ban of Upfront Commissions or other measures that could be taken to improve Customer outcomes;
Potential impacts for Customers, Intermediaries, and Insurers; and
What would be a reasonable period of time for the industry to adapt to any changes.
The paper is available on both of the regulators’ websites and interested parties can give their views to the CCIR Secretariat at email@example.com by November 7, 2022.
The regulators intend to move forward swiftly with a policy position and guidance on upfront commissions in sales of segregated funds once the 60-day consultation period ends.
Source: Wealth Professional Canada