Proposed New Proficiency Model for Life Agents, Proficiency Requirements for Financial Planners

 

Bulletin

No. LH-10/99
 
- Life & Health
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To the attention of Province of Ontario Level I and Level II agents

At the request of the Life Agent Education Committee of the Canadian Self-Regulatory Organization (CISRO) and the Canadian Council of Insurance Regulators (CCIR), the Financial Services Commission of Ontario (FSCO) is urging all Ontario agents to review the attached proposal for a Life Agent Proficiency Model and provide comments to CISRO by December 31, 1999.

As a member of the CCIR and CISRO, FSCO is consulting stakeholders on the proposed recommendations. These recommendations are designed to ensure greater protection for consumers by enhancing the life agent licensing process for new agents in all Canadian provinces and territories.

FSCO supports the effort to develop an appropriate national proficiency standard for life insurance agents because it will update licensing standards and equip new agents with the skills required to meet consumer expectations in a rapidly changing financial services marketplace.

It is important to note that Level II agents who are already licensed will not be affected by the proposal. It is proposed that Level I agents be given a reasonable period of time to meet the existing Level II proficiency examination, before the proposed new standard is applied.

The proposal by CISRO, an association of regulators of insurance intermediaries, includes a single step licensing process to replace the current two-step licensing process; the establishment of entry-level qualifications for new agents; and a revised qualifying examination for Level I agents to be tested at a higher standard of competence in applying their knowledge to help consumers.


Comments on the proposal on the Life Agent Proficiency Standard should be sent to Joanne Abram, Chair, Life Education Committee, Canadian Insurance Self-Regulatory Organization, c/o Alberta Insurance Council, Suite 901, T-D Tower, 10088-102 Avenue, Edmonton, Alberta, T5J 2Z1.

All comments received through this consultation in Ontario will be shared among all insurance regulators in Canada. There is no need for agents to send a copy of their comments to FSCO, as FSCO will obtain the information from CISRO.

To distribute this bulletin to all Level I agents in Ontario, we are sending an appropriate number of copies to the attention of the Chief Executive Officer/Chief Agent or Marketing Managers of life insurance companies with a request to distribute to their Level I agents. To reach Level II agents, we are mailing a copy of this bulletin to each agent at the last address they provided to FSCO. We are also posting this bulletin on FSCO’s website at www.fsco.gov.on.ca

Proficiency Requirements for Financial Planners

At the same time that the national consultation on a Life Agent Proficiency Model is being undertaken, FSCO is working closely with the Ontario Securities Commission (OSC) and other securities and insurance regulators in Canada on a proposal for Proficiency Requirements for Financial Planners.

The OSC, in conjunction with FSCO, is organizing a consultation on a plan to establish a uniform standard for all financial services intermediaries who hold themselves out as having a special expertise in financial planning. The objective is to establish a uniform standard to ensure that the financial planning advice offered by financial services intermediaries is objective, comprehensive and integrated, so it meets the needs of consumers across the financial services sector.

It is anticipated that the OSC will be issuing a call to financial services intermediaries to provide input on this proposal which will affect life insurance licencees. The proposal will be available on the OSC's website at www.osc.gov.on.ca Responses received will be shared among regulators.

Canadian Council of Insurance Regulators to release Consumer Protection Initiatives Report.

Approximately a year ago the CCIR formed a Committee to study and make recommendations on a number of consumer protection issues that had been identified. Working with key stakeholders, a working group of the committee developed recommendations on point-of-sale disclosure, policy contract wordings and errors & omission insurance that were approved at the CCIR meeting in September.

A report on the recommendations will be released during late November of 1999 for industry consultation. It will be available on FSCO's website: www.fsco.gov.on.ca

Other content in this Bulletin

  • Insurance Distribution Review
  • Enforcement Update
  • New Form for Corporate Agencies
  • Life Insurance Agent Information on FSCO's website
  • "Recommendations on Agent Licensing Process by the Life Education Committee of the Canadian Self-Regulatory Organization" - September, 1999.

Insurance Distribution Review

Many agents provided input to FSCO on the Discussion Paper on Insurance Distribution and Co-ordination of Financial Services Regulation in Ontario that was released in June, 1998. Stakeholders, including agents had provided their comments to FSCO by the October, 1998 deadline. Following this, reports -- Investment Funds in Canada and Consumer Protection - Strategies for the Millennium by Glorianne Stromberg, and A New Framework for Market Regulation in Canada by the Canadian Securities Administrators -- were released nationally on behalf of other regulators.

The proposals in the discussion paper deal with regulatory structure, insurance distribution regulation, and co-ordination of financial services regulation. A common topic in FSCO's discussion paper and the national reports deal with the appropriate structure for regulating market conduct and prudential regulation.

As discussion of the topics contained in the discussion paper and national reports is ongoing, FSCO decided to not proceed at this time with its proposal to introduce a new regulatory body, the Insurance Distribution Regulatory Board (IDRB), which would have changed the regulatory structure for insurance distribution. However, FSCO is giving priority to developing the details on the substantive proposals on changes to the regulatory rules.

Stakeholder participation in insurance distribution review

In March 1999, FSCO informed industry and consumer representatives about the intended directions regarding the substantive proposals in the discussion paper. These stakeholders were invited to provide input on individual initiatives which FSCO proposed to proceed with.

FSCO has now categorized all of the individual topics relating to the proposals, and has grouped them so that related issues can be reviewed together. Topics which are being grouped together include specialized licence categories; referrals and commission splitting; indemnity fund; group contract distribution; accountability; supervision; ownership requirements for corporate distributors; part-time employment; and registration.

FSCO has formed a technical advisory group of stakeholders to help refine the related proposal. These working groups began their work in October 1999. FSCO is continuing to review the priority to be given each topic so that the working groups can consider the topics in a priority sequence.

Enforcement Update

FSCO has a fair and progressive enforcement policy in place. For example, agents committing lesser offences typically receive a written warning or censure. If the offender does not heed the warning, he

or she can expect a more severe penalty. More serious offences are dealt with at the next level of enforcement, typically a prosecution resulting in a fine. The most serious offences result in licence suspensions or revocations.

Over the past 12 months, FSCO has taken 192 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
40
Licence Conditions Imposed Through
Minutes of Settlement

59
Provincial Offences Act
Convictions and Fines

30
Licence Suspension through
Revocation of Sponsorship

29
Licence Suspensions
23
Licence Revocations
11
 
192

In addition to enforcement actions, FSCO conducts ongoing enforcement monitoring throughout the year. Over the past 12 months, there have been 7,119 instances of enforcement monitoring. The chart below details the type of monitoring that were undertaken.

Monitoring Activities
Number of Occurrences
Continuing Education Audits
1,013
Police Criminal Record checks
5,897
Complaint Reviews
209
 
7,119

Full details concerning FSCO's enforcement actions can be found in FSCO’s quarterly monitoring and enforcement bulletin. The bulletins are available on the FSCO website at www.fsco.gov.on.ca

New Application Form for Corporate Agencies

FSCO has streamlined the application process for agents. We have created one new application form for corporate agencies by distilling the questions from 12 former application forms. Please find a sample of the new form attached to this bulletin.

Before we released the new application form, we tested it extensively in the field during the summer of 1999. The results confirmed that the form serves the purpose for which it is designed.

The official name of the form is entitled "Application for insurance incorporation / partnership; insurance adjuster corporation/partnership; agent's (other than life) corporation/partnership." If an agent wishes to obtain a form at any time, it can be downloaded from FSCO's website at www.fsco.gov.on.ca

For your information, the new form can be used for applying for:

  • a Life Insurance Agent's Corporation Licence
  • a Life Insurance Agent's Partnership Licence
  • an Agent's Corporation Licence (Other Than Life)
  • an Agent's Partnership Licence (Other Than Life)
  • an Insurance Adjuster's Corporation Licence
  • an Insurance Adjuster's Partnership Licence
  • a Renewal of Life Insurance Agent's Corporation Licence
  • a Renewal of Life Insurance Agent's Partnership Licence
  • a Renewal of Insurance Agent's Corporation Licence (Other Than Life)
  • a Renewal of Insurance Agent's Partnership Licence (Other Than Life)
  • a Renewal of Insurance Adjuster's Corporation Licence
  • a Renewal of Insurance Adjuster's Partnership Licence

Website information

Agents should be aware that FSCO's website contains a comprehensive range of information about licensing.

While the website contains a large amount of information relevant to the many kinds of financial services FSCO regulates, agents will likely be especially interested in the following sections of the licensing portion of our website dealing with:

  • A full list of agents licensed in Ontario
  • Listing of agents who have been disciplined -- see "Enforcement Action"
  • Listing of all corporate agencies
  • Rules of Practice and Procedure for hearings before an Advisory Board
  • Licensing referencing guide
  • Consumer Advisory - Ontario Court decision on Armada Assurance
  • Licensed insurance companies in Ontario

If agents wish to obtain copies of any forms for the licensing process, they can visit FSCO's website and download as many as are needed.

 

Dina Palozzi
Chief Executive Officer and
Superintendent of Financial Services

November 19, 1999

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