Update on Regulatory and Administrative Matters Affecting Ontario's Life Agents

 

Bulletin

No. LH-02/01
 
- Life and Health
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To the attention of Province of Ontario Level I and Level II agents

This bulletin provides a general update on various topics that are of interest to insurance companies and insurance agents licensed to transact the business of insurance in Ontario.

To distribute this bulletin to all Level I agents in Ontario, we will be sending an appropriate number of copies to the attention of chief executive officers/chief agents or marketing managers of life insurance companies with a written request to distribute the bulletin to their Level I agents. To reach Level II agents, we will be mailing a copy to each agent.

This information in this bulletin is organized under the following headings:

Internet Application System
Paper Application Forms
How to obtain the new form
Other Items:

      Joint Forum of Financial Market Regulators
      Financial Planners
      Life Licensing Qualification Programme
      Enforcement Statistics
          Type of Enforcement Action
          Monitoring Activities
      Update on the FSCO/OSC Merger

Internet Application System

The Financial Services Commission of Ontario (FSCO) has implemented the first phase of its Internet Application System. This on-line access will improve service to our stakeholders by enhancing the efficiency of the licensing process in Ontario.

The new service was developed in consultation with the Canadian Association of Insurance and Financial Advisors (CAIFA), the Independent Financial Brokers of Canada (IFBC), the Canadian Life and Health Insurance Association Inc. (CLHIA), and other stakeholders.

Through this initiative, life insurance agents will be able to renew their Level II agent licence, or move from a Level I to Level II over the Internet 24 hours a day, 7 days a week. This new service will provide greater convenience and a much faster turnaround. There is no paper application to fill out and licence applications can be processed in minutes.

Future plans include expanding the electronic licensing system to allow all Level I life agents, mortgage brokers, other licensees and registrants to have access to this system. For more information on this initiative visit our web site at and click on "What's New."

The renewal or move to Level II will be effective immediately upon completion of the application and the payment, by credit card, of the licensing fees, where applicable. FSCO's internal agent licensing database and agent licensing information on the FSCO web site will be updated immediately upon the completion of the electronic application process. There is no change in the fee structure nor the continuing education audit process.

Listed below are the major changes that have been made to the application requirements for both the on-line and paper versions:

  • The Affidavit section has been replaced with a Declaration which does not require the signature of a commissioner or notary public.
  • Part D of the old paper application has been removed. The examination equivalency question has been incorporated into the examination requirements section of the new application; the question concerning errors and omissions insurance has been expanded and moved to the Declaration section of the new application; and the grandfathering provision has been removed since it is no longer applicable.
  • If using the Internet Application System, Level I agents moving to Level II are not required to submit an original copy of their examination results at the time of application. The agent is, instead, asked to provide the examination details which FSCO will confirm with CAIFA. Original copies of examination results may be requested at a later date. If submitting the paper application, original copies of examination results must be attached to the application or it will be returned without processing.

The new application imposes no new regulatory requirements.

Paper Application Forms

Paper applications are still available for agents who wish to submit their application in paper format. It has been revised and redesigned to ensure that the information requested is consistent with the new electronic version. The new form is effective on May 14, 2001.

FSCO will accept the old yellow application form dated 09/98 until September 1, 2001. If agents are submitting the old version of the application it must be completed in full, all required sections, signatures, attachments, and the signature of a notary public are required. If the application is incomplete it will be returned without processing.

How to obtain the new form

To obtain a copy of the new application form, please contact the licensing coordinator at the head office of your sponsoring insurance company, or print a copy from the "Forms" section of our website at www.fsco.gov.on.ca Applications may also be obtained by contacting a FSCO licensing representative through our automated call distribution system which routes calls to the first available representative. The system also includes recorded information on commonly asked questions: please call 416-250-9209 or toll free at 1-800-263-0541, during regular business hours, 8:30 a.m. to 5:00 p.m.

Sponsoring companies are requested to provide the form to agents. Insurers' licensing departments have been sent an electronic version of the new application and a copy on white paper for photocopying to facilitate reproduction of the forms. Forms should be copied on blue paper and double sided. Please note that the content of this form may not be altered.

The paper used for the enclosed copy of the form is on a 20 lb weight 8½" x 11" light blue photocopy quality paper, manufactured by Boise Cascade. The colour has been selected for ease of identification. Use of other coloured or white paper may result in difficulties in correct identification and routing of the application within FSCO, and cause delays for agent applications.

Other Items:

Joint Forum of Financial Market Regulators

The Joint Forum of Financial Market Regulators (Joint Forum) was established in early 1999 by the Canadian Securities Administrators (CSA), the Canadian Council of Insurance Regulators (CCIR) and the Canadian Association of Pension Supervisory Authorities (CAPSA). This group of securities, insurance and pension regulators work together striving to improve consumer protection; streamline the regulation of financial services; and adapt the regulatory system to the changing marketplace.

Current projects underway focussing on regulatory harmonization include: proficiency requirements for financial planners; individual variable insurance contracts and mutual funds; investment disclosure in capital accumulation plans; and intermediary proficiency and licensing. The Joint Forum is also working on a consumer complaint management and dispute resolution system.

Details on these projects may be found in the Joint Forum's Fall 2000 Newsletter, available on the FSCO website at www.fsco.gov.on.ca.

Financial Planners

The initiative to propose a proficiency standard for financial planners was borne out of regulators' concerns that consumers currently have no way of ascertaining whether the financial services intermediaries on whom they rely for such advice have achieved a standard level of financial planning education and proficiency.

Although a number of financial services associations currently offer a variety of financial planning courses and designations, they vary in content, emphasis and quality. Moreover, the pursuit of a designation in this area continues to be voluntary.

To address the lack of standardization, the Canadian Securities Administrators (CSA) established a Financial Planning Committee whose representation included insurance regulators and councils. In developing the Multilateral Instrument (MI), the CSA Financial Planning Committee undertook extensive consultation with industry groups and stakeholders from both the insurance and securities sectors.

In December 1999, on behalf of the CSA Financial Planning Committee, the OSC released for comment a draft version of the MI. At that time, the Financial Services Commission of Ontario (FSCO) invited comment on the draft MI encouraging stakeholders to respond on the impact of an analogous document applied to insurance licensees. Individual insurance agents, companies, life insurance associations, as well as other stakeholder groups were solicited. Consultation by FSCO continued throughout the drafting and technical review stages of the regulation.

On April 6, 2001, the Minister of Finance returned to the Ontario Securities Commission (OSC) Rule 33-107, Proficiency Requirements for Registrants Holding Themselves Out as Providing Financial Planning and Similar Advice (Rule). The Rule was returned for further consideration of the balance struck between compliance costs and investor protection. However, the Minister expressed support for the Commission's work towards creating a highly uniform proficiency standard for financial planning advice to better protect consumers and investors.

The return of the Rule by the Minister of Finance has also prompted a review of the proposed regulatory amendment under the Insurance Act, similar in substance to the Rule, that would be brought forward by FSCO in parallel with the Rule.

In response to concerns outlined by the Minister, the OSC and FSCO are proposing to consult jointly with interested parties. The OSC and FSCO expect to share the results of the consultation and publish a revised version of the Rule for comment in June, 2001. The anticipated effective date of the Rule and regulatory amendment under the Insurance Act remains February 15, 2002.

For more detailed information please visit our website at www.fsco.gov.on.ca under "What's New."

Life Licensing Qualification Program

In FSCO's Bulletin of January, 2001, a status report was provided on the work that had been undertaken by the Canadian Insurance Services Regulatory Organizations (CISRO) to update the licensing qualification system for new life agents.

The curriculum design document, "Life Agent Pre-Licence Training Program", has now been finalized and is available on the FSCO website at www.fsco.gov.on.ca This standard has been endorsed by CISRO and the Canadian Council of Insurance Regulators (CCIR), both of whom are working together towards its implementation.

Regulators across Canada are coordinating efforts to implement this upgraded licensing model. The proposed model has the following elements:

  • Single step licence. The Level II licence will no longer be required. This change does not affect existing sponsorship rules.
  • Mandatory pre-licensing training course, offered commercially in a flexible variety of formats by course providers. The courses must meet a common standard set out in the curriculum design document.
  • Upgraded entry level examination.
  • Minimum of high school education or equivalency.

To be effective, regulation changes are necessary and these will require government approval. Regulators have been working with industry groups to address program design issues and implementation questions, including timing of implementation.

FSCO will continue to provide status updates on this project. Please remember that these standards will only apply to people entering the industry.

Information, questions and answers are posted regularly to both the FSCO website at www.fsco.gov.on.ca and the Alberta Insurance Council website at www.abcouncil.ab.ca

Enforcement Statistics

12 Month Enforcement Action and Monitoring Activities Summary

Over the past 12 months (Apr 1/00 - Mar 31/01), FSCO has taken 182 enforcement actions. This represents a significant amount of enforcement activity. The chart below details the type of activity taken.

Type of Enforcement Action
Number of Cases
Letters of censure
73
Licence conditions via Minutes of Settlement
11
Provincial Offences Court convictions and fines
26
Cease and Desist orders
4
Revocation of sponsorship
13
Licence surrenders
6
Licence suspensions
16
Licence revocations
33
Total:
182

In addition to enforcement actions, FSCO conducts ongoing enforcement monitoring throughout the year. Over the past 12 months, there have been 6,208 instances of enforcement monitoring. The chart below details the types of monitoring that were undertaken.

Monitoring Activities
Number of Occurrences
Continuing education audits
1,105
Police criminal record checks of life agents/applicants
4,940
Complaint reviews
163
Total:
6,208

Update on the FSCO/OSC Merger

On Friday, April 6, 2001 the Honourable James Flaherty, Minister of Finance, announced that the Government would hold a second consultation on the proposed merger of the Ontario Securities Commission (OSC) and the Financial Services Commission of Ontario (FSCO) into a single services regulator. On Thursday, April 12, 2001 the Minister released the draft legislation.

The draft legislation would establish a new commission to be known as the Ontario Financial Services Commission. It would have a Chair, a Commission with 18 members, be self-funded, and have rule-making authority.

The draft legislation incorporates the comments received on the discussion paper, "Improving Ontario's Financial Services Regulation: Establishing A Single Financial Services Regulator" that was released for public comment last fall. While the majority of stakeholders endorsed the plan to merge OSC and FSCO, many expressed a desire to see further details.

A two-month consultation is being led by John O'Toole, Parliamentary Assistant to the Minister of Finance. The deadline for submission on the draft legislation is June 29, 2001. A copy of the draft legislation as well as additional information on the consultation process is available on FSCO's web site at www.fsco.gov.on.ca under "What's New." Your views are important to us, we urge you to participate in the consultation process.

Yours truly,


Dina Palozzi
Chief Executive Officer and
Superintendent of Financial Services