CLHIA-ACCAP

7 have processes in place to monitor both internal and external replacements and "red-flag" situations which suggest inappropriate replacements. The current system supports customer-focused practices, with appropriate checks and balances. We do not believe that changes are needed. (ii) Conference/travel incentives related to the placement of policies with insurance companies It is not uncommon for insurers to provide additional incentives for the placement of policies by allowing advisors to qualify for conferences and to pay for their expenses to attend. While these conferences have a significant educational component to them, they are often held out-of-Canada in desirable locations. It should be noted that the fact of conference incentives does not, in any way, obviate the advisor's obligation to ensure that all recommendations put the interests of the customer first. We have seen no evidence, nor are we aware of customer concerns or complaints, that these incentives give rise to a conflict of interest which negatively influences an advisor's recommendations. In fact, surveys conducted by Newlink have found that advisors put greater weight on all other factors (e.g. products, insurer service, insurer reputation, underwriting, etc.) when choosing which product to recommend. And, while such conferences may be considered a "perk", travel costs are a taxable benefit to the advisor consistent with Canada Revenue Agency (CRA) rules. However, we recognize that, in those situations where an advisor has a choice between various insurers, conference incentives could contribute to a perception of a conflict of interest. It is not the intent of insurers to create or contribute to such perceptions. We note that, in the mutual fund industry, regulators have banned travel incentives at the manufacturer level where the possibility exists that the incentive could influence a representative's recommendation, but continue to allow them at the distribution level, e.g. mutual fund dealers, where representatives can place business with a variety of manufacturers through the dealer, so no particular bias exists. If a similar approach was applied to insurance, a regime that could potentially deal with any perceived conflicts would be the following: a) Insurers that manufacture products and distribute them through independent channels be allowed to offer only trips with reasonable professional content where advisors must pay their own travel and accommodation costs. This would counter the perception that advisors are placing a product with a particular insurer in order to qualify for a trip. b) Insurers that manufacture products and distribute them through an exclusive sales force be allowed to offer trips with reasonable professional content, and have the option to pay advisors' expenses. In this scenario, there is no incentive to recommend one insurer's product over another. c) Distribution firms that operate through independent channels and have a range of insurers' products on their shelves be allowed to offer trips with reasonable professional content, and have the option to pay advisors' expenses, provided that such trips are not tied to placing business with any particular insurer, and there is no incentive to recommend one insurer's product over another.

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