1. Carrier Compliance Reviews
[My name is Justin Glinski, from Canada Life, and I am going to start our conversation by providing you with some background about why we are conducting these reviews.]
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[Thank you Earleen, I am going to start by giving some background about why we are doing these reviews or assessments].
Insurance companies and advisors ultimately have the same mission. Supporting client to achieve their goals. It is essential to the ethical distribution of life insurance products that advisors are complying with their regulatory obligations.
These reviews are how we can help you check that you do not have any gaps in your compliance systems. However, these reviews are a required component of our compliance system as insurance companies.
Helping you comply with Legislative and Regulatory Obligations

2. History….how did we get here?
But were did this requirement come from?
Not just in Canada, but internationally, there has been an increased focus on how advisors conduct themselves in the market place [market conduct]. In response, countries have created laws that support the ethical treatment of clients.
The result has been regulatory obligations for insurance companies to monitor an advisor’s eligibility to sell insurance products, and to monitor how insurance products are being sold to customers.
Through the CLHIA, Insurers have agreed upon a common approach to implementing these monitoring obligations.
The agreed upon structure of a monitoring system is included in the reference document “Insurer systems for monitoring statutory obligations for advisors”.

3. Market Conduct & The Customer
Global and Canadian focus on managing market conduct and fair treatment of customers:
risk-based market conduct regulation
knowledgeable and ethical advisors
advisor compliance obligations:
Advisor Disclosure
Privacy Commitment
Life Insurance Replacement Declaration
Errors and Omission Certificate
Continuing Education Credits
PCMLTFA/PIPEDA programs
Suitability of a select number of sales
customers expect ongoing policy service and information
The agree upon system is a risk based approach to verify that they are ethical in how they sell life insurance products.
This selecting a sample of advisors and reviewing their practice.
Reviews may include an assessment of:
Advisor’s Conflict of interest Disclosure
Privacy Commitment or consent documentation
Life Insurance Replacement Declaration
Errors and Omission Certificate
Continuing Education Credits
Having a privacy program
Having an Anti-money laundering, and a anti-terrorist financing program
And the Suitability of a select number of sales (including fact finds, needs analysis, risk assessment)
Each component of the assessment supports the ongoing service that advisors provide to their clients.

4. Equitable Life - Process
Randomly select 25 advisors and select a recently issued policy for each advisor
Request the following information:
Disclosure, needs analysis and meeting notes for the selected policy
Evidence of payment of E&O premium
Details of continuing education (confirmation of CE credits earned and how tracked)
Current business card (Equitable requirement for holding out)
(Note: licensing is reviewed separately)
Review the responses and provide feedback to the advisor and the MGA
Report to management on the results

5. Canada Life - Process

6. Desk Assessment Questionnaire
Canada Life will provide you with the following questionnaire. This document lists all the information you will need to share with your Canada Life Regional Compliance team.
Our review is intended to be comprehensive looking at:
Advisor Disclosure
Privacy Commitment
Life Insurance Replacement Declaration
Errors and Omission Certificate
Continuing Education Credits, PCMLTFA/PIPEDA programs.
If “no” is answered for any of the questions, the advisor needs to complete the final column with details about either why s/he does not have supporting documentation and/or what process they follow to comply.

7. Desk Assessment Questionnaire
Canada Life will require complete client files to be sent. This number will not exceed 10 per assessment. What policies that will be specifically examined will be included listed on the questionnaire.
The documentation can be submitted in either paper or electronic format. Instructions will be provided on how to encrypt this information if ing. As well, if sending in paper copies, use a secure courier, and they will be returned to you the same way.
Files will be reviewed to assess sales suitability:
Signed advisor disclosure
Privacy commitment
Fact find
Needs Analysis
Risk Assessment
An other support documentation that demonstrates needs based selling
Replacement documents

8. Canada Life Assessment
A Canada Life Regional Compliance Manager will first contact your MGA Compliance Officer to notify them that you have been selected for a compliance assessment.
A member of the Market Conduct Regional Compliance team will contact you by in a couple of days to outline the process.
The assessment will not be completed onsite - all requested documents will be sent to Canada Life
You will receive a questionnaire from a Canada Life Regional Compliance Manager
The assessment will be completed within 5 days after it has been received by Canada Life
A Canada Life Regional Compliance Manager will first contact your MGA Compliance Officer to notify them that you have been selected for a compliance assessment. They are the first point of contact. They are being notified to allow them preparation time to provide you with any support you may require.
A member of the Market Conduct Regional Compliance team will contact you by in a couple of days to outline the process.
The assessment will be a desk assessment meaning nobody will need to visit your office however you will be required to send copies of client files and other supporting documentation to the Canada Life head office in London Ontario.
You will receive a questionnaire from a Canada Life Regional Compliance. The documents requested documentation must be submitted 1 week after it is received. A regional compliance manager will complete the assessment that will be completed in 5 days after it has been received.

9. Canada Life Assessment: Results
A Regional Compliance Manager will contact you to discuss the results by telephone.
There will be a colour coded grade given (green, yellow, red)
A timeline will be agreed upon for closing any gaps
Post-Assessment report will be sent to you, the MGA Principal, the MGA’s Chief Compliance Officer, and your Canada Life VP.
Remedial steps
A Regional Compliance Manager will contact you to discuss the results by telephone.
There will be a colour coded grade given (green, yellow, red)
A timeline will be agreed upon for correcting any gaps
Post-Assessment report will be sent you, with a copy to the MGA Principal and Compliance Officer and your Canada Life VP.
A yellow or red grade signifies that remediation steps will be required. These can include the completion of one required document, e.g advisor disclosure, up to a full re-assessment.

10. What we learn from the results so far

11. Equitable Life – Summary of Results
E&O and business cards were fine
Needs analysis and meeting notes were generally ok
Disclosure document:
in some cases, disclosure was either insufficient or missing entirely
segregated funds sales – example of disclosure only relating to Deferred Sales Charges
CE credits:
in some cases, not keeping good records of CE credits
some appeared to be fairly short on hours coming up to the end of the period

12. “The Approach” to Suitable Sales
Sending and writing a
‘reason why’ letter

13. Purpose of a Reason Why Letter
For the Client:
Check accuracy
Review that the product meets their needs
Review any gaps in coverage
Review the reason for the advisors recommendation
Contact their advisor if something is incorrect or forgotten
Documentation about why a particular product was purchased
For the Advisor:
Confirm Facts
Verify the direction received from the client
Identify needs that the product meets and needs left uninsured
Document that the sale is suitable
Substantiate the client’s understanding of the sale
The purpose of the reason why letter is to be a final check by the advisor that the sale is suitable to the clients needs. For the client it is a condensed written version of the rationale for their purchase.
For the advisor these letters will:
Confirm the facts;
Verify the direction received from the client;
Indentify the need that the product meets, and needs that are left uninsured;
Document that a suitable sale was made;
and, substantiate the client's understanding
For the client these letters are:
an opportunity to check that the transaction is what they want
review that the insurance product meets their needs
review any gaps an advisor has identified in their insurance coverage
review the advisors reason for the recommendation
it is also a reminder to contact the advisor if something is incorrect or forgotten
and lastly, this documentation serves as a reminder to the client about why a particular product was purchased

14. Content Each reason why letter should identify the:
Product being purchased
Type of insurance, the carrier, and brand name
Key facts
Needs and gaps in coverage identified
Plans to follow-up on unmet needs
Discretionary fee choices
Overall, each reason why letter is meant to be brief summary of the transaction with a focus on understandability.
The letter should:
Identify what insurance product is being purchased
The type of insurance, the carrier, and brand-name
The key facts that have lead to the advisor making their recommendation
What specific needs are being addressed, and any needs that the client has decided to not insure against...
When providing this explanation include the specific amount of coverage purchased and the value of any coverage the client still needs
A plan to follow-up on unmet needs should also be incorporated into the letter
If an IVIC was purchased the discretionary fee choices selected should be included.
Advisors that already send letters summarizing the circumstance around a transaction don’t need to change the letters if the required content is included. If a Life Insurance Replacement Disclosure (LIRD) has already been sent, an additional reason why letter is unneeded.

15. Delivery Send a “reason why” letter:
No later than the date he or she receives the policy
Via if the client consents
After each transaction
* Always Retain a copy of the letter in the client file *
* Clients should also be encouraged to keep copies of these letters for their own purposes *
The letter should be sent to the client before the client receives the policy.
These letters can be sent via , but only with the clients consent.
A reason why letter should always be sent to confirm that the advisor and the client understand each other regarding the transaction, even if the advisor was just taking an order from the client.
A draft of should be kept in the client’s file.
This extra layer of confirmation protects the client, and the advisor, by reinforcing sales suitability.

16. Structuring a Letter Suggested structure: Recommendation
Summary of facts and needs
Amount of coverage [unmet needs]
Suitability of fee structure [IVIC only]
A call to action
The length and detail of the letter will depend on the type of transaction.
The following slides provide different examples of what a reason why letter could look like.
Each letter should be less than a page in length, and follow a similar structure:
They each start with what the recommendation is
A summary of facts and needs that support the recommendation
Then describe the amount of coverage and any unmet needs
Where an IVIC is sold there is a paragraph that describes the suitability of the fee structure
And each example ends with a reminder for the client to contact the advisor if there are any inaccuracies
Letters do not necessarily need to follow this structure; however, a letter has to have content that covers each of these topics.

17. Writing the Letter
The next several slide provide practical examples outlining how to go about writing a reason why letter?
These examples are structured as a Q&A.
Each example in this presentation can be found in the appendix to “the Approach’s” available on the CLHIA website.

18. Questions?
Do I need a reason why letter if the client plans to fully implement my advice?
Do I need to restate all the facts and needs Identified?
What level of detail is required regarding the amount of coverage purchased?

19. Example 1: Recommendations Fully Implemented
Part 1: Recommendation I am recommending that you buy a ten year renewable term life insurance policy. The policy is called [name of policy] and it is offered by [name of insurer]. Part 2: Summary of Facts and Needs When we met, you indicated that you and your husband are both young and healthy, you are expecting your first child and just bought a house. You said you are the sole income earner in the family want an inexpensive option to pay off the mortgage if you die. Part 3: Amount of coverage, Needs the purchase meets, gaps in coverage This policy meets your needs by providing the coverage you want ($250,000) in the least expensive way. You could extend the coverage with a longer term but this is more expensive. A ten year renewable policy means the insurer will continue the coverage for ten years provided you pay the premium each year. Part 4: Call to action If any of this information about you or your needs is not correct, please let me know right away. If you have any questions about the policy or why I am recommending it, don't hesitate to ask me now or at any time in the future. You should also keep this letter with your personal papers as a reminder of why you have the policy.
Do I need a reason why letter if the client plans to take my advice?
The first sample is one where the advisor has decided to fully implement the recommendations of the advisor.
It follows the basic structure outlined on the previous slide: recommendation, analysis, how the needs were met, and an invitation for the client to review the transaction and contact the advisor if something is inaccurate. [READ SLIDE]
Even though there is not a need to confirm that the client is not aware of an uninsured risk it is a good best practice to summarize why a particular recommendation has been made.
Do I need to restate all the facts and needs identified?
Every piece of information on an application does not need to be restated. However, the main facts that your advice is based on should be included in the letter. These are the facts that support the advice given. As well, the needs you have identified should be stated so that this letter can help to confirm that no needs have been overlooked.
What level of detail is required about the product purchased when all identified insurance needs are met?
As a best practice it is useful to state the amount of coverage that is being purchased as a final written notification to the client. This allows further consideration of whether sufficient coverage is in place.

20. Questions?
How do I describe situations were my client is not taking my advice?
Should gaps in coverage be identified?
Is it appropriate to include plans to review unmet coverage needs at a later date?

21. Scenario 2: Recommendations Partially Implemented
STEP 1: Recommendation I am recommending that you buy a universal life policy and critical illness insurance. The universal life policy is called [name of policy] and it is offered by [name of insurer]. STEP 2: Summary of Facts and Needs The critical illness policy is called [name of policy] and it is offered by [name of insurer]. When you met, you indicated that you are primarily concerned about building up an inheritance for your children in a tax efficient manner. You also indicated you are healthy but would like some additional financial security if you become sick and can't work. STEP 3: Amount of coverage, Needs Met, Gaps in Coverage We have discussed various ways you can use the universal life policy. For now, the most effective way of meeting your needs is for you to simply pay the premiums. You also indicated that the critical illness insurance is not an immediate priority so you will think about it some more. About this time next year, we will discuss the critical illness issue. STEP 4: Call to action If any of this information about you or your needs is not correct, please let me know right away. If you have any questions about the policy or why I am recommending it, don't hesitate to ask me now or at any time in the future. You should also keep this letter with your personal papers as a reminder of why you have the policy.
How do I describe situations were my client is not taking my advice? Should I identify gaps in coverage?
[READ SLIDE]
Scenario 2 is an example of a client that has partially implemented the recommendation of their advisor. It is important to identify the direction that you have received from the client, your advice, and any differences. This way the letter helps to substantiate that the client is aware that they have an uninsured risk.
Even if there is a gap, an advisor should still identify what needs the purchase is meeting, what needs are being met, and the main facts one which the advisor bases their assessment.
In the second paragraph the advisor identifies that the client has a need for a life insurance product to build up an inheritance for his children, and an additional need for critical illness insurance. The Third paragraph identifies what needs the client’s purchase meets, and where there is a gap in coverage. The client has decided not to purchase the critical illness product.
Is it appropriate to include plans to review unmet coverage needs at a later date?
If the advisor plans to discuss unmet needs that have been identified it is a good practice to include this in the letter. It can serve as a reminder to both the advisor and the client that there is a uninsured risk that should be reviewed.
In the example a plan is made to discuss this gap in coverage next year.

22. Questions?
Can I use a standard reason why letter for each transaction?
Do I still need to summarize my fact find, needs analysis, and recommendation when I sell segregated funds?
What should I say about the choice of fee options (IVICs)?
Can I use a standard reason why letter for each transaction?
Each transaction will be different – for example when selling IVIC products.
Do I still need to summarize my fact find, needs analysis, and recommendation when I sell segregated funds? What should I say about the choice of fee options (IVICs)?
This kind of letter would read like this [read slide].

23. Scenario 3: Wealth Product with Fee Options
As we discussed, I have sent in the application for an individual variable insurance contract. The policy is called [name of policy] and it is offered by [name of insurer]. When we met, you indicated that you wanted to invest in the equity market but did not feel comfortable with the risk that goes with investing in mutual funds. Instead, you said, you wanted put your money in a segregated fund. The IVIC you bought has the basic death and maturity guarantees. This means the most you can lose is 25% of your investment. This guarantee applies if you keep your money invested in the contract until it matures or you die. As we discussed, if you need to withdraw money before then and the market value is down, the value of your investment is will be down by the same amount. You put your money in a Canadian equity fund. You can invest additional amounts in this fund at any time. You can also switch your investment to another fund in the contract or invest additional amounts in a different fund. This contract has different fee options. You selected the no-load option because you wanted all your money invested up front and you thought you might want to withdraw some of your money while DSCs still applied. If any of this information about you or your needs is not correct, please let me know right away. If you have any questions about the policy or your investments, don't hesitate to ask me now or at any time in the future. You should also keep this letter with your personal papers as a reminder of why you have the policy.
Can I use a standard reason why letter for each transaction?
Reason why letters will appear to be similarly structured. However, the rationales that will be included will depend on the product purchased. As well, the facts and needs that the advice is based on will be different with each client.
What should I say about the choice of fee options (IVICs)?
The third scenario is an example of where a client has purchased a IVIC product with different fee options. A reason why letter should summarize all advice given, and decisions made by the client. The fifth paragraph summarizes why a particular fee option was chosen.
This paragraph reads: “This contract has different fee options. You selected the no-load option because you wanted all your money invested up front, and you thought you might want two withdraw some of your money while DSCs still applied.”
Do I still need to summarize my fact find, needs analysis, and recommendations when I sell segregated funds?
In addition to summarizing fee options, the decisions of the client, advice, needs and facts should all be need to be summarized.

24. Questions?
Is a reason why letter necessary if the client knows what they want and is essentially placing an order?
Do I still summarize facts and needs if the client states that they do not require advice?
The short answer to both is yes; however, the reason why letter can be shorter.
The sale is still based on facts and needs. The letter would read like this …. [READ NEXT SLIDE]

25. Scenario 4: Order Execution
On your request, I have submitted an application for [name of policy] with [name of insurer]. This 20-year term policy for $500,000 corresponds to the term and amount of your mortgage. As your bank requires, the policy is collaterally assigned to [name of bank]. If you die and the death benefit is greater than the amount owing on your mortgage, the difference will go to the beneficiary you named. If any of this information about you or your needs is not correct, please let me know right away. If you have any questions about the policy, don't hesitate to ask me now or at any time in the future. You should also keep this letter with your personal papers as a reminder of why you have the policy.
Is a reason why letter necessary if the client knows what they want and is essentially placing an order?
The last example is a scenario where the client is making a specific request of the advisor. The advisor is essentially acting as an order taker. This letter will be much shorter. However, it will be structurally similar to other examples provided in terms of the topics covered [direction from the clients, advice given, facts found and needs identified].
Do I still summarize facts and needs if the client states that they do not require advice?
You can see that it clearly identifies in the first paragraph that the advisor is acting only on the instructions of the client, and it then goes on to identify why the client is in need of this type of coverage.

26. Conclusion A properly constructed reason why letters:
Confirm and document that a suitable sale has been made
Remind the client about which of their needs they have insured and where they may still need insurance
Summarize the facts and details surround a transaction in a manner that is easy for a client to understand
In conclusion the use of a reason-why letter supports efforts to engage in needs based selling.
Sending a reason why letter helps to:
Confirm and document that a suitable sale has been made
Remind the client about which of their needs they have insured, and where they may still need insurance
And summarize the facts and details that surround a transaction in a manner that is easy for a client to understand
In closing, it completes the process of completing a suitable sale.

27. More Information
Canadian Life and Health Association Website: Find the CLHIA Reference Document: “THE APPROACH: SERVING THE CLIENT THROUGH NEEDS- BASED SALES PRACTICES” at: file/The_Approach.pdf

28. RepNET [ONLINE TOOLS FOR ADVISORS]
Canada Life - New Tools
RepNET [ONLINE TOOLS FOR ADVISORS]

29. RepNet
The main place where you can find different tools to use in on RepNet.
If you click on the “Advisor Support” tab on the top of the page, the first item to click on is entitled “compliance”.

30. Privacy Template
One of the tools available is the template for privacy that you can choose to use when building the program.
The new template has been updated so that it more closely aligns to the legislative requirements, and is structured in away that matches the legislation.
The required elements are:
a privacy officer (similar to having an AML compliance officer)
privacy policies and procedures - which are written rules and requirements that outline what you and your employees need to do: (a) handling inquiries and requests for information (b) getting valid, informed consent from a client (c) collection use and disclosure of personal information (d) safeguards
periodic program monitoring - keeping your program up to date
You need policies for how that is completed – this is in section for of the template entitled “self-review”
Training - informing your employees about their roles in protecting your clients’ privacy
Who needs to be trained, and when they need to be trained
There are a variety of different resources that you can use to build your privacy program. CLHIA, privacy commissioners website has tools for small business, and there are tools that are provided by the other carriers.
This template could be used by you as the written component of your program. The clauses in the template become the policies and procedures that describe what your program is.
It is important that if you use this template to develop your program, and create your policies and procedures that you actively read through this document and customized it so that it accurately reflects what you doing at your practice - especially if you ever find yourself on the receiving end of litigation.

31. Privacy Q&A and Brainshark
As an additional tool, Canada Life has put together a Q&A document to answer to some of the common questions that have been received by distribution compliance.
[read some of the questions]
Another tool, is a “brainshark”. This is an interactive video that will walk you through how to go about modifying the template so that it reflects your business, and what your legislative requirements are.

32. Advisor Disclosure
On RepNet is a template of a written advisor disclosure document.
Disclosure refers to when advisors provide their clients with written descriptions of their credentials and any relationships that could be considered a conflict of interest, or that could give the perception of bias.
Provincial legislation and regulation require that advisors disclose to their clients specific information prior to a sale.
This written communication mitigates risks from potential conflicts of interest because it enables clients to evaluate the objectivity and accuracy of the advice they rely when purchasing a product.
It also creates a record of the transfer of information between an advisor and the client.

33. Privacy Commitment
The privacy commitment and your client file document can also be found on repnet.
Consent is not valid unless it is informed. If you don’t have proper consent to use, access, or disclose client information you could be attracting liability.
To be sure consent is valid, your clients need to be aware of what information is being gathered about them, when you are recording information, where this information is kept, and how they can access and modify the information they have provided.
But awareness does not mean anything unless your client understands:
Why information is being collected
How their personal information will be used
Who their personal information will be disclosed to
and What steps you are taking to protect client information
You have to explain each of these points and have your client sign a “Privacy Commitment and your Client File” form so that you can prove that you have provided explanation.

34. Anti-Money Laundering/ Anti-Terrorist Financing Template
The make-up of a Compliance Program:
Policies and Procedures
Compliance Officer
Risk-Basked Approach
Training
Program updating and review [every two year]
The first element is having a designated compliance officer to be responsible for your program. Normally, this is someone who is senior that knows and understands a practice’s client base.
The second element is a training program or plan for employees to help them identify what suspicious activities look like; what is considered high risk; and what steps they need to take when they encounter a high risk factor.
The third element is a process for evaluating and updating your program. This evaluation needs to be completed every two years at a minimum. Your policies should outline what will be examined and all updates must be recorded to demonstrate how your program has evolved in response to any new risks.
The fourth component is having written policies and procedures that document your program. This means written processes and rules for:
Completing your business-based and client-based risk assessments, and the steps you have in place to mitigate and monitor risk
Ascertaining the identity of a client
How you will selected a compliance officer, train your staff, and evaluate and update your program

35. Anti-Money Laundering/ Anti-Terrorist Financing Template
The new template outlines sample clauses that you can use at your firm to implement each of the required components of a program.
There are a variety of different sources that can be used – Not Canada Life specific – Information from FINTRAC, information from other carriers, and information will be coming from the CLHIA
But what has changed?
There is an increased focus on how to go about taking a risk based approach or clients with an increased ability to lauder money.
The new an improved sections – pertain to risk assessing your business, and categorizing your clients according to risk.

36. With the old template where a business based risk assessment needed to be included was not clearly marked.
So now it is.
I believe as part of this workshop Earleen is going to do an activity with you that will help you with this portion of taking a risk based approach.
The business risk assessment looks at a variety of factors.
Why do I have the clients that I do?
How could someone use my business to launder money?
The main responses will require you to consider location, the products you sell, how products are delivered to the client. There are option you can select in a grid. Again, if you use the template it is important that you engage which each section to make sure that they accurately reflect your business.

37. The client risk assessment or relationship based assessment outlines some policies that you can use to risk assess your clients.
The template gives a sample document about how to grouping your clients by risk.
Reminder that a client that is high risk – isn’t a client that you are automatically submitting an STR about. Risk relates more to a clients ability to engage in money laundering.

38. To help answer some of your questions – a Q&A is going to be published on RepNet.
For example – read slide

39. AML/ATF Brain Shark
Like with privacy – a brainshark, or a video has been developed.
This will allow give you instructions about how to go about filling in your AML template.

40. For example, the first section talks about who can be a compliance officer, and how you can modify the template to have the correct underlying policies and proceduers.