Compliance update Living benefits symposium, 2016 Ask – did anyone attend the Fall meeting? Do you recall what I spoke about? … I’m repeating myself… Earleen Moulton VP Compliance, BridgeForce Financial Group

Agenda Audits of advisor practices FSCO enforcement of E&O insurance

Audits for suitability Advisor suitability or lack of suitability is a risk that we all share in, not just MGAs or Carriers. Unsuitable advisors hurt us all – they tarnish the reputation of the industry and that impacts you. The industry has been focusing on ways to better deal with suitability and ensure advisors are suitable in the industry.

Monitoring /oversight Significant controls, manages risk Screening – at a point in time -assessing suitability to be contracted & risk (to MGA and Carrier) Monitoring – for ongoing suitability -identify patterns to detect and prevent harm to consumers

New CLHIA Reference Document “Insurer Systems for Monitoring Statutory Compliance of Advisors” Describes procedures for monitoring compliance with statutory licensing requirements ON Reg. 347, s.12 New reference doc related to CLHIA G8 – Advisor Suitability (… to be licensed/contracted initially, and on-going… ) Insurers - required to have a compliance system that is reasonably designed to ensure that each agent complies with the Act, the regs, and the agent’s licence.” Not much information from carriers on how this will be rolled out (or down – to MGAs). Most were just finding out about it! Empire supervision bulletin

What’s in scope? 1. valid licence 2. advisor disclosure (managing conflicts of interest) 3. CE 4. E&O 5. Needs bases sales process 6. Privacy & AML compliance programs Valid – at contract, expiry, during period Might ask for copy initially when contracted; f/up or verify annually for copy (25 min) CE - f/up or verify annually for copy (25 min), FSCO says ‘at least’ – and they’re checking! E&O - at contract, expiry, during period (25 min) NBS – insurers to ask for description at contracting, during period for specific. To focus on stat require and/or The Approach (and IVIC equivilant), and replacement requirements. Privacy compliance program includes privacy consent!

Will you be audited? Some chosen based on risk, some random Would you be considered a ‘risky’ broker? Time to get your compliance ‘house’ in order; then BAU Risky ? Newly contracted Complaints/investigations Lots of leveraging Non-registered investments Volume of business * Refer to the CL playbook

Who else is asking? Sun life has a new process Brokers with outside business activities will ask asked to provide most of these compliance elements Carriers who sponsor agent licences will be held accountable So will carriers you do business with

FSCO and E&O CAILBA met with FSCO a few weeks ago Discussed their intentioned measures to improve agent compliance with requirements to maintain adequate E&O. Compliance hovers around 90% - should be 100%!

Watch for email this fall Agents will see consequences of non-compliance ratchet up, including administrative monetary penalties (AMP) -Carriers will also be held accountable (Reg. 347) Agents will be required to tell FSCO which carriers they do business with -FSCO not proceeding with designating ‘primary insurer’

E&O a concern in other jurisdictions SK, July 27, 2016: Effective September 1, 2016, those who allow their mandatory E&O policies to lapse will be subject to a minimum base fine of $1,000 for each lapse. BC, Notice from June 2015: Use of single blanket E&O policy by multiple agencies E&O policy limits must be specific to insurance Licensed agents holding administrative assistant’s coverage FSCO following the lead of both SK and BC, similar concerns from other regulators.

Results of FSCO agent exams Common findings: inadequate needs analysis documentation no letter of engagement/not documented adequately failure to disclose all carriers an agent does business with lack of written documentation of conflicts of interest. 214 completed between April 2015 & March 2016

Questions? Expert panel reviews: Regulation of MGAs CCIR - Framework for Cooperative Supervision in Canada Insurance and securities regulators sign MOU Expert panel reviews: Proposed regulation of financial planning FSCO mandate -Non-sponsored life insurance agents must indicate a primary insurance company -Updates to ON Insurance Act – directly impacts insurers, effective July, 2016