CLHIA-ACCAP

1 INSURANCE DISTRIBUTION IN CANADA: PROMOTING A CUSTOMER-FOCUSED SYSTEM Maintaining a strong customer focus and having processes and procedures that protect customers has long been the fundamental underpinning of insurance legislation, marketplace regulation and the life and health insurance industry in Canada. More recently, the concept has emerged as a central tenet in the Insurance Core Principles of the International Association of Insurance Supervisors. Given the global focus on managing conduct of business (market conduct) risks and fostering a customer-focused culture, the Canadian Life and Health Insurance Association (CLHIA) decided that it would be timely to review practices surrounding the distribution of individual insurance from the perspective of the consumer. How do industry practices support positive customer outcomes? Could they be improved? The objective of the exercise is to ensure a robust, world-class environment for insurance customers in Canada. As the vast majority of insurance to retail customers is provided through advice channels, our focus is on practices that support those channels. Direct channels, e.g. insurance sold through call centres or on- line, are not addressed in this paper. BACKGROUND International IAIS has adopted 26 Insurance Core Principles to provide coordinated guidance to insurance regulators around the world. With respect to the distribution of insurance, they recommend that insurance advisors be licensed, subject to proficiency standards and a code of conduct, and that both advisors and insurers incorporate the concept of "treating customers fairly" into their businesses. IAIS defines treating customers fairly as promoting positive customer outcomes such as: • Developing and marketing products in a way that pays due regard to the interests of customers • Providing customers with clear information, before, during and after the point-of-sale • Reducing the risk of sales which are not appropriate to the customers' needs • Ensuring that any advice given is of high quality • Dealing with customer complaints and disputes in a fair manner • Managing the reasonable expectations of customers Canadian environment Market conduct regulation is the responsibility of the provinces. The raison d'être of insurance market conduct regulation is customer protection. It is reflected in the mandate of provincial insurance regulators, and in legislative and regulatory provisions that, among other things:

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