2024 FSRA Exchange – Questions and answers

Supporting responsible innovation in our regulated sectors is a foundational part of FSRA’s mandate as a regulator. In fact, it is one of FSRA’s statutory objects.

To enable this commitment, FSRA established an Innovation Office and Innovation Framework to facilitate innovation.

• The Innovation Office is FSRA’s dedicated champion and central driver of innovation. The Innovation Office was established to promote innovative thinking and help innovators develop and introduce new or improved products, services, and business models while maintaining consumer protection.
• The Innovation Framework guides our approach for how we support and facilitate responsible innovation in Ontario’s financial services sectors.

FSRA is a regulator that encourages experimentation and works with its regulated sectors and other market participants (non-regulated) to enable ‘responsible innovation’ while also protecting the public interest.

• One of FSRA’s key tools to support innovation is our dynamic regulatory sandbox – the Test and Learn Environment – which allows us to work collaboratively with innovators and transparently test new business ideas and ventures to understand how they might impact the marketplace, businesses and consumers to provide more accessible, affordable, and tailored products and services to Ontario's consumers. We also have other regulatory tools (e.g., statutory interpretation) to support innovation opportunities. Please refer to this presentation for more information: Test and Learn Environments (TLEs) & Other Innovation Tools.
  • To date, there have been two TLE projects announced. The Direct Access Model TLE was announced in August 2023 and the Territories TLE was announced in January 2024. While we’ve had two TLE projects recently launched, we want to continue to actively work with the various sectors on identifying and developing their innovative ideas! We are eager to hear from you so please reach out to us ([email protected]).
• The Innovation Office is continuing to broaden its engagement efforts with innovators in FSRA’s regulated sectors and other market participants (including innovation hubs, incubators, accelerators, relevant start-ups) to identify regulatory barriers as well as potential innovation opportunities and bring those to the forefront.
• The Innovation Office also continues to monitor the latest and emerging innovation, technological and regulatory trends in financial services to inform FSRA’s innovation priorities.

Our goal is to collaborate with the best and the brightest in financial services innovation to encourage experimentation and promote innovative thinking.

Brokerages and their principal brokers have obligations to ensure fair treatment outcomes for consumers. The more a brokerage can demonstrate their consumers are being treated fairly, receiving suitable mortgage products and advice based on their needs and circumstances, and understand the features and implications, the more likely FSRA will determine the brokerage and its agents and brokers are complying with the Act.

These obligations extend to brokerage management and directing bodies of entities, including Directors and Officers of corporations, and Partners of a Partnership, even if those individuals are not licensed. Please refer to MBLAA, ss. 7, 48, and 52.

Commitment to good conduct through compliance and consumer protection best practices is established at the top levels and contributes significantly to a firm's overall culture.

Question: In a market where private lenders are preparing for a potential increase in defaults and therefore foreclosure or power of sale actions, are you willing to comment on if an incorporated lender corporation with employees handling its own NSFs when it is not a licensed administrator is compliant or not compliant with the act? For instance, when a lender is compliant by dealing through a brokerage, but is not licensed as an administrator. Where is the line between the lender sending NSF notices as its own corporation, and the interpretation of enforcement in the act?

Answer: Under the MBLAA (s. 5(1)) and its regulations (O. Reg. 406/07, s. 1), administering mortgages includes taking steps on behalf of another person or entity to enforce payment by a borrower under a mortgage. A lender can take on the administration of their own mortgages without a licence, provided they are only administering their own lent funds.

FSRA takes a principles-based approach to regulation, which means that we do not prescribe specific compliance procedures for our regulated firms. As long as the approach and procedures implemented meet the outcomes of compliance and fair treatment of consumers, firms have the flexibility to tailor them based on the nature, size and complexity of their business. Generally, when compliance procedures at brokerages adhere to the Act, Regulations and Guidance, as well as common industry best business practices, and effectively promote positive consumer outcomes, it is more likely that they will align with FSRA's expectations. In the near future, FSRA will publish proposed guidance on how brokerages and their principal brokers can ensure fair treatment of consumers, including examples of effective measures that they can take to ensure compliance of their brokers and agents.

Fostering a strong conduct culture includes looking not only at technical compliance with the Act and Regulations, but also instilling a "do the right thing for your customer" approach into all aspects of the brokerage's business. Brokerages should consider the overall outcomes that should be achieved for their customers (e.g., customers are able to obtain a mortgage that is suitable for their unique needs and competent advice about mortgage products).

FSRA seeks and welcomes, through public consultations of proposed guidance, comments and inputs from the sector on how to strengthen the conduct culture in the industry.

A key part of the Principal Broker's responsibility is to take steps to ensure that each agent and broker authorized under the brokerage complies with every requirement under the Act and Regulations. Principal Brokers achieve this by ensuring the brokerage has comprehensive policies and procedures customized to its business activities combined with appropriate training and supervision practices. Principal Brokers can seek training resources from lender partners, industry associations, and other providers of financial services education.

FSRA supports innovations in the mortgage brokering sector. Mortgage brokerages and administrators can leverage innovative technologies for conducting regulated activities under the Act while being aware of potential related risks associated with using these technologies.

The use of technology tools or platforms to support mortgage transactions does not remove the obligations on licensed agents, brokers, brokerages or administrators to meet their regulatory obligations under MBLAA. In summary, these obligations cannot, in themselves, be automated or be delegated to a third-party.

Question: When I try implementing a new compliance measure, standard document or other process, my agents push back saying they're independent contractors, so I shouldn't be so controlling or monitoring. How do we bridge the gap in understanding that supervision and compliance expectations are no different - regardless of whether they are salaried or contractors?

Answer: Every agent and broker licence is subject to authorization (also referred to as "sponsorship") by a duly licensed mortgage brokerage. The authorizing brokerage is responsible for ensuring the compliance of each of its authorized/sponsored agents and brokers. Therefore, agents and brokers must be willing to conform to the conduct and compliance standards set out by their Principal Broker and their brokerage. The employee-employer or independent contractor relationship is relevant for CRA and income tax purposes; the MBLAA applies regardless of the employment status of an individual. 

In the words of many Principal Brokers / Brokerage Owners -- "my shop, my rules." If you are not confident that your agents and brokers can and will comply with your brokerage's policies and procedures, the Act and/or its regulations, it would not be appropriate to continue to sponsor their licence.

FSRA will soon be publishing draft guidance for public consultation addressing how brokerages and their principal brokers can ensure compliance and fair treatment of consumers. This guidance is intended to support principal brokers in supervising and influencing conduct of their brokers and agents.

Question: As a Financial Institution that deals with Brokers and Agents, bad actors show up on occasion. Other than internally placing these Brokers/Agents on caution what other recourse do an FIs have on reporting improper activity? What is the right course of action?

Answer: Where a party to a mortgage transaction has identified potential misconduct by a mortgage agent or broker, it is important that this matter be reported to FSRA. 

Financial institutions are regulated federally under the Bank Act, which is administered by the Office of the Superintendent of Financial Institutions (OSFI). Concerns about misconduct by financial institution representatives should be reported to the Financial Consumer Agency of Canada (FCAC), who is the conduct regulator for financial institutions.

FSRA has developed a Whistle-Blower Program. It is aimed to protect whistle-blowers from the harms associated with disclosing information related to misconduct in FSRA's regulated sectors. More information may be found on FSRA's website. In addition, a Financial Institution can also report to FSRA through the normal complaint route.

Where allegations of misconduct are evidenced through FSRA's review and investigation, and it challenges the suitability of the licensees, the licensed individual or entity may be fined, suspended or revoked. Corrective measures such as monitoring, hiring of external compliance consultants, or conditions on a licence may be contemplated.

While this will not be an exhaustive list, some characteristics a Principal broker, leadership, and/or a Principal Representative should possess are integrity, courage, accountability, and fairness. These characteristics support a strong conduct culture because it is important to ensure consumers are treated fairly and advised on the best solution based on the consumer's specific needs and circumstances.

For the Principal Broker and Principal Representative, where they are not owners of the brokerage or administrator, independence, autonomy and access to adequate resources to complete their role should be provided.

This question was answered live during the panel discussion. 

The panelists highlighted that policies and procedures manuals which outline the brokerage's specific business model, business conduct expectations, periodic training, one-on-one supervision, and include an attestation form confirming awareness and understanding of the brokerage or administrator's vision and mission are common tools used to promote a strong conduct and compliance culture.

This question pertains to the product and underwriting criteria of specific lenders. As such, we recommend that you reach out to your lender to discuss their lending policies regarding flood plains.

The anti-money laundering and anti-terrorist financing regulations that will apply to the mortgage brokering sector are governed under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and its associated regulations, which are regulated by the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC). Guidance and compliance advice on adhering with these requirements is provided by FINTRAC. 

We encourage you to review FINTRAC's website, as it contains helpful information on the requirements, such as the establishment of a compliance program, and reporting processes. For questions, please contact FINTRAC by telephone at 1-866-346-8722 (toll-free) or by email at [email protected]. To receive e-mail notifications on FINTRAC's activities and changes, please subscribe to FINTRAC mailing list.

Question: In the sale of other financial products (P&C insurance, mutual funds, securities, mortgages), sales people are required to align themselves to one intermediary. Insurance agents are permitted to be aligned to multiple firms, which makes supervsion and oversight more difficult. Do you see this changing where sales people have one intermediary?

Answer: FSRA will continue to explore distribution through intermediaries, and has Proposed Guidance for Life Agent & MGA Licensing Suitability. 

This Guidance outlines FSRA's interpretation of licensing suitability requirements under the Insurance Act, its regulations, and FSRA’s approach to assessing an applicant’s or agent’s, including a Managing General Agency’s (“MGA’s”), suitability to hold a life insurance agent licence. 

The Guidance is a reference for applicants, prospective applicants, agents, including MGAs, to understand how past and current conduct may affect their suitability to hold a life insurance agent licence. 

For insurers and MGAs, it serves as a guide for screening applicants and agents, including MGAs, for suitability. It also serves to inform insurers of what FSRA considers to be a reasonable system for the oversight of agent compliance.

Please refer to the Proposed Guidance: Life Insurance Agent & MGA Licensing Suitability.

Previous reviews conducted over the last several years have shown the prevalence of MGAs in the distribution channel, however data on the MGA landscape is still limited. 

FSRA intends to launch the Life Insurer Questionnaire on MGA Distribution and Business Practices to help us better understand the relationship between Insurers and their MGAs, such as how Insurers distribute their products through their MGAs and how they oversee them.

FSRA will review the results of the Questionnaire, identify pertinent risks and determine next steps including reporting possibilities to assist the industry.

Question: For Swati: Product suitability, particularly in the sale of certain types of UL products, has been an focus for FSRA. How does FSRA reconcile the fact that certain products may be preferred within certain communities, despite the fact that these products may not be “suitable” under most traditional measures? Has FSRA recognized this conflict, and how do you manage this, through and FTC lens?

Answer: The suitability of the life insurance product should be based on the client's goals and financial situation. If specific products are preferred within certain communities, the agent must document how the preference affects the consumer's relevant circumstances.

Please also refer to the Proposed Guidance: Life Insurance Agent & MGA Licensing Suitability.

FSRA’s expectations apply to all licensees, whether or not they interact directly with the consumer, and whether or not they are involved in all stages of the product life cycle. This includes monitoring the sales practices of the insurance product.

Please also refer to the Proposed Guidance: Life Insurance Agent & MGA Licensing Suitability.

There will be communications from FSRA explaining the roll out of the of the questionnaire and how it works.

Question: I'd like to double-click (pun intended) and build on Kim's point from carrier perspective - does FSRA and/or CLHIA comment on any innovative technologies they've investigated to support their work on oversight? Do you have a wish list of technologies that you'd like to see to help you and your teams day-to-day?

Answer: FSRA does not have a specific technology that we wish to see implemented. However, it is one of our priorities that market participants achieve innovation within the sector. Our Innovation Framework sets clear expectations and guiding principles to help you bring innovative products to market in a sustainable, responsible and accessible way.

FSRA also has an Innovation Office to enable responsible innovation in Ontario's financial services sector.

Insurers are required to report agents to FSRA if the insurer has reasonable grounds to believe that an agent who acts on behalf of the insurer is not suitable to carry on business as an agent. In some cases, insurers may delegate screening activities to another entity, such as a managing general agent (“MGA”). MGAs are not currently required to report agents to FSRA whom the MGA has reasonable grounds to believe is unsuitable to carry on business as an agent. However, the MGA may choose to do so through a Life Agent Misconduct Report. Please refer to Report unsuitable life agents to FSRA.

Please see section 446 of the Insurance Act regarding statements made in good faith to the CEO or employees of FSRA. Alternatively, someone wishing to report an agent but who is concerned about reprisals could consider FSRA’s whistleblower program. Please refer to FSRA’s Whistle-blower Program.

This is not legal advice: FSRA is not commenting on the application of s. 446 or the whistle-blower program in particular circumstances.

Please refer to the following webpage, Licence Renewals Continuing Education.

Question: As part of FSRA's Life and Health Insurance Agent Supervision Framework, are there any plans for regulatory tools/resources/databases to support the fair treatment of consumers, for example, a centralized database/repository to allow the industry (insurers and MGAs) to conduct a fulsome, anonymized ''background check'' re: advisor misconduct (alleged and proven)?

Answer: FSRA does not share information regarding ongoing reviews of its licensees or enforcement actions against them unless it becomes public information. This ensures the integrity of our review and ensures fairness to people who may be subject to reviews that do not result in enforcement actions or sanctions. FSRA described its approach to enforcement communications through our Transparent Communication of FSRA Enforcement Action Guidance. This Guidance outlined a clear and consistent approach to how FSRA informs the public about enforcement actions.

FSRA will continue to explore distribution through intermediaries, and has Proposed Guidance for Life Agent & MGA Licensing Suitability. 

This Guidance outlines FSRA's interpretation of licensing suitability requirements under the Insurance Act, its regulations, and FSRA’s approach to assessing an applicant’s or agent’s, including a Managing General Agency’s (“MGA’s”), suitability to hold a life insurance agent licence. 

The Guidance is a reference for applicants, prospective applicants, agents, including MGAs, to understand how past and current conduct may affect their suitability to hold a life insurance agent licence. 

For insurers and MGAs, it serves as a guide for screening applicants and agents, including MGAs, for suitability. It also serves to inform insurers of what FSRA considers to be a reasonable system for the oversight of agent compliance.

Please refer to the Proposed Guidance: Life Insurance Agent & MGA Licensing Suitability.

Question: This morning we talked about the impact AI will have on our industry. How does FSRA plan on addressing the unique FTC concerns (i.e., selling with a digital advisor, digital hallucinations, etc. ), which will arise in the coming years, without hindering technological development in the industry?

Answer: FSRA has adopted the CCIR Conduct of Insurance Business and Fair Treatment Of Customers guidance (known as the "Fair Treatment of Customers" or "FTC" guidance). This guidance sets out several expectations relating to customer outcomes in different phases of an insurance product's cycle. It also acknowledges "[d]istribution strategies have evolved as well as the digital needs of Customers and CCIR and CISRO consider that this evolutionary process to continue and expect that the Customers’ needs be fulfilled regardless of the distribution model or the medium used."
 
With this mind, FSRA expects the use of technologies to continue to result in fair treatment of customers through the different phases of a product's cycle. 

FSRA has an Innovation Office to enable responsible innovation in Ontario's financial services sector.

As well as an Information Technology Risk Management Guidance.

Question: While training advisors is certainly critical as are the insurance company audits, the insurance companies only review business placed with them. Who is responsible for a wholistic review ensuring there is evidence of needs-based selling and that consumer harming practices such as churning do not occur?

Answer: FSRA will continue to explore distribution through intermediaries, and has Proposed Guidance for Life Agent & MGA Licensing Suitability. 

This Guidance outlines FSRA's interpretation of licensing suitability requirements under the Insurance Act, its regulations, and FSRA’s approach to assessing an applicant’s or agent’s, including a Managing General Agency’s (“MGA’s”), suitability to hold a life insurance agent licence. 

The Guidance is a reference for applicants, prospective applicants, agents, including MGAs, to understand how past and current conduct may affect their suitability to hold a life insurance agent licence. 

For insurers and MGAs, it serves as a guide for screening applicants and agents, including MGAs, for suitability. It also serves to inform insurers of what FSRA considers to be a reasonable system for the oversight of agent compliance.

Please refer to the Proposed Guidance: Life Insurance Agent & MGA Licensing Suitability.

FSRA will continue to explore distribution through intermediaries, and has Proposed Guidance for Life Agent & MGA Licensing Suitability. 

This Guidance outlines FSRA's interpretation of licensing suitability requirements under the Insurance Act, its regulations, and FSRA’s approach to assessing an applicant’s or agent’s, including a Managing General Agency’s (“MGA’s”), suitability to hold a life insurance agent licence. 

The Guidance is a reference for applicants, prospective applicants, agents, including MGAs, to understand how past and current conduct may affect their suitability to hold a life insurance agent licence. 

For insurers and MGAs, it serves as a guide for screening applicants and agents, including MGAs, for suitability. It also serves to inform insurers of what FSRA considers to be a reasonable system for the oversight of agent compliance.

Please refer to the Proposed Guidance: Life Insurance Agent & MGA Licensing Suitability.

FSRA continues to monitor Group Insurance for complaints and key issues, and expects insurers to remain in compliance with Insurance Act and the UDAP rule. The rule strengthens the supervision of insurance industry conduct and enhances consumer protection by clearly defining outcomes that are unfair or otherwise harmful to consumers. In the meantime, we welcome insights and feedback from consumers and industry representatives that helps FSRA better understand how to protect consumers and guide the sector.

FSRA has adopted the CCIR Conduct of Insurance Business and Fair Treatment Of Customers guidance (known as the "Fair Treatment of Customers" or "FTC" guidance). This guidance sets out several expectations relating to customer outcomes in different phases of an insurance product's cycle. It also acknowledges "[d]istribution strategies have evolved as well as the digital needs of Customers and CCIR and CISRO consider that this evolutionary process to continue and expect that the Customers’ needs be fulfilled regardless of the distribution model or the medium used."

If the agent is continuing to be the agent on record for the consumer, they should contact the insurer directly to manage their access. The challenges referenced may be a contractual matter depending on the terms of the agent agreement. 

You can also refer to the Proposed Guidance for Life Agent & MGA Licensing Suitability.

FSRA has adopted the CCIR Conduct of Insurance Business and Fair Treatment Of Customers guidance (known as the "Fair Treatment of Customers" or "FTC" guidance). This guidance sets out several expectations relating to customer outcomes in different phases of an insurance product's cycle. It also acknowledges "[d]istribution strategies have evolved as well as the digital needs of Customers and CCIR and CISRO consider that this evolutionary process to continue and expect that the Customers’ needs be fulfilled regardless of the distribution model or the medium used."
 
With this mind, FSRA expects the use of technologies to continue to result in fair treatment of customers through the different phases of a product's cycle. 

FSRA has an Innovation Office to enable responsible innovation in Ontario's financial services sector.

As well as an Information Technology Risk Management Guidance.

Regardless of the distribution channel dynamics, the sponsoring company should ensure that the agent is trained and knowledgeable. 

The Proposed Guidance for Life Agent & MGA Licensing Suitability outlines FSRA's interpretation of licensing suitability requirements under the Insurance Act, its regulations, and FSRA’s approach to assessing an applicant’s or agent’s, including a Managing General Agency’s (“MGA’s”), suitability to hold a life insurance agent licence. 

The Guidance is a reference for applicants, prospective applicants, agents, including MGAs, to understand how past and current conduct may affect their suitability to hold a life insurance agent licence. 

For insurers and MGAs, it serves as a guide for screening applicants and agents, including MGAs, for suitability. It also serves to inform insurers of what FSRA considers to be a reasonable system for the oversight of agent compliance.

Please refer to the Proposed Guidance: Life Insurance Agent & MGA Licensing Suitability.

FSRA will continue to explore distribution through intermediaries, and has Proposed Guidance for Life Agent & MGA Licensing Suitability. 

This Guidance outlines FSRA's interpretation of licensing suitability requirements under the Insurance Act, its regulations, and FSRA’s approach to assessing an applicant’s or agent’s, including a Managing General Agency’s (“MGA’s”), suitability to hold a life insurance agent licence. 

The Guidance is a reference for applicants, prospective applicants, agents, including MGAs, to understand how past and current conduct may affect their suitability to hold a life insurance agent licence. 

For insurers and MGAs, it serves as a guide for screening applicants and agents, including MGAs, for suitability. It also serves to inform insurers of what FSRA considers to be a reasonable system for the oversight of agent compliance.

Please refer to the Proposed Guidance: Life Insurance Agent & MGA Licensing Suitability.

As FSRA evolves as a PBR regulator, it intends to work with industry to ensure there is a common understanding on how principles may be interpreted to achieve desired outcomes. PBR offers regulated entities the flexibility to determine for themselves how they will meet the outcomes defined by FSRA, considering their size, complexity, risk profile, management, and resources.

A common area FSRA is coordinating with both federal and provincial regulators on are insurer business practices relating to their distribution channels. While the scope of work may differ between regulators, FSRA has published its intentions to focus on the relationships P&C insurers have with Managing General Agents (MGAs) and the business practices insurers employ to ensure customers are treated fairly throughout the life of the contract. FSRA expects insurers to make a commitment to the fair treatment of consumers throughout the life-cycle of the product, regardless of the distribution channel used by the Insurer.

Question: In regulatory guidance, insurance companies are clearly accountable for their distribution channel complying with legal and regulatory requirements. how does FSRA expect that this will be operationalized in a practical manner in the market? Have insurance companies pushed back on this accountability and where do you see it evolve?

Answer: A key tools insurers should be utilizing in assess their operations is Guidance: Conduct of Insurance Business and Fair Treatment of Customers, adopted jointly by the Canadian Council of Insurance Regulators (CCIR) and the Canadian Insurance Services Regulatory Organizations (CISRO) in 2018. FSRA expects licensees to assess themselves against the Guidance when setting or revising policies and procedures, and operating their business.

While FSRA expects insurers to be aligned with the Guidance, since the Guidance is principles-based, insurers will have some latitude to determine how best to achieve the expected outcomes, and reasonably demonstrate application of the principles in ways appropriate to the nature, size and complexity of their business operations, and activities.

As FSRA evolves as a Principles-based regulator, FSRA will work to ensure open communication with its regulated entities to promote a common understanding of how principles should be interpreted to achieve fair treatment outcomes for consumers.

Response from the Canadian Securities Institute (CSI): CSI’s Designated Financial Services Advisor (DFSA) adds value to financial services. The Canadian Investment Regulatory Organization (CIRO) becoming a credentialing body does not affect our standards or credentials. We continue to see demand for the DFSA.

Response from CSI: Please see CSI's disciplinary actions:

• Credential Holder Complaints
• Publication of Enforcement
• Ethical Misconduct Process
• Designations Ethics Committee

Response from FSRA: FSRA continues to engage with other Canadian jurisdictions who are at various stages of implementing title protection frameworks to discuss opportunities for harmonization to mitigate the regulatory burden for individual title users and credentialing bodies that may operate nationally.

Response from CSI: CSI does not require a university degree.

Response from the Canadian Institute of Financial Planning (CIFP): Thank you for your question.

CIFP does not intend to make a university degree a pre-requisite for our designations.

While CIFP recognizes the value of higher education and many of our credential holders do in fact hold a university degree, that, in and of itself, should not be the measure of a financial planner's capacity for analytical and critical thinking.

CIFP does not want to create a barrier to entry or to unfairly shut the door on individuals simply on the basis of not holding a university degree but who, in all respects, have the capacity to be highly professional and highly competent financial planners.

FSRA is aware of the considerations employers and their advisors have, when deciding between offering their employees a registered DC pension plan, a Group RRSP or other Capital Accumulation Plan (CAP), and why that choice might favour Group RRSPs and other CAPs. This is a prime example of the importance of adopting principles-based approaches to DC pension plan regulation. By looking at DC pensions plans through an outcomes-focused, risk-based lens, regulation can be streamlined, and burden reduced. FSRA continues to work with the Government to remove regulatory burdens for DC pension plans such as removing the requirement to file a Statement of Investment Policy and Procedures for member-directed DC plans, and audited reports for Financial Statements regardless of the total value of assets. FSRA also sat at the table in developing CAPSA’s Capital Accumulation Plans Guideline which raises the bar and levels the expectations of regulators regarding the operation of CAPs, including Group RRSPs across Canada.

Registered DC pension plans also benefit from FSRA’s guides like the DC Pensions Plans – What Employers need to know, communicating the value of your pension plan and our engagement and outreach activities to help them navigate their role as a pension plan administrator.

In 2020, FSRA published Guidance setting out its Supervisory Approach for Single Employer Defined Benefit Pension Plans that are Actively Monitored. This Guidance outlines the predictive and preventative tools and supervisory methods used by FSRA to promote good pension administration and improve outcomes for pension plan beneficiaries of DB SEPPs. It is a proactive approach that emphasizes relationship management and makes clear that FSRA will review the governance framework, funding and investment risks related to the pension plan, and sponsor / industry risks that, if realized, may hinder a sponsor’s ability to honour the plan’s pension promise. If concerns with respect to the security of pension benefits are identified, FSRA will consider whether plan sponsors and administrators have taken appropriate measures to address these risks and encourage implementation of appropriate risk management.

Following the publication of the FSRA Leading Practices for DB MEPPs in 2021 and the subsequent benchmarking of these leading practices with all MEPPs in Ontario, FSRA will be publishing for consultation draft prudential supervisory guidance for target benefit plans for DB MEPPs (refer to FSRA’s Proposed FY2024-2025 Statement of Priorities).

FSRA has begun having discussions with the large pension plans around their risk exposures and management practices. Discussions have arisen over plan-specific events and in response to changes in the macro investment environment. As an example, when Silicon Valley Bank started to collapse, we contacted all plans to assess potential exposures and liquidity. Events like Silicon Valley Bank can affect the large plans (over $560B under management) at the portfolio level and through specific investments and trades. One plan proactively contacted us at the beginning of the event to discuss their exposures and the mitigants it was putting in place. This example illustrates a new level of transparency and the changing regulatory relationship between FSRA and the large plans.

FSRA is at an early stage in its prudential supervisory activities of these plans. A key focus of FSRA’s activity is to understand how plans identify and manage risk. This focus enables FSRA to identify baseline practices in which it has confidence and whether there are opportunities for improvement or enhancement through further supervisory activity. Success over the long-term can take a variety of forms, from identifying specific issues for consideration by plans to more efficient and effective deployment of supervisory resources and programs. By putting a spotlight on risk management, FSRA supports the work of internal plan functions in evolving their risk management and related governance practices. FSRA’s on-going plan engagements provide an information gathering and feedback mechanism to assist plans in understanding and meeting their standard of care. Through engagements like the ones over Silicon Valley Bank and through formal and informal discussions with other regulatory entities in Canada and internationally, FSRA is also able to contribute to a more informed and responsive understanding of financial supervision more generally.

On the Brewers case, FSRA took the position that a plan cannot contract out of the minimum standards prescribed in the legislation. This position aligns directly with our object to protect and safeguard pension benefits under FSRA’s principles-based mandate. In FSRA’s view the proposed class settlement was less than members were entitled to under the Pension Benefits Act (PBA). We also believe that, as set out in the PBA, the Financial Services Tribunal (FST) is the appropriate body for disputes over the legality of amendments and whether an amendment safeguards members’ rights and benefits consistent with the law.

While the Court of Appeal ultimately did not agree with FSRA, the facts in this case are unique. The Court of Appeal confirmed that FSRA has jurisdiction over the registration of plan amendments, subject to review by the FST. FSRA will continue to refuse to register amendments that do not comply with the PBA.

Question: When will you allow Tesla to enter the auto insurance market in Ontario? They have an innovative product and a vertically integrated approach that could potentially lower the cost of insurance to Ontarian's currently driving Teslas. It would also open the door, in the future, for Tesla to provide auto insurance to other car makers who adopt their software thus significantly lower the cost of insurance across many Ontario drivers.

Answer: Tesla is already offering insurance in Ontario. They have partnered with a Canadian insurance company and distribute insurance under the Tesla brand. If Tesla would like to offer their own insurance, they would need to obtain a license in Ontario, which is required for all insurance companies.

No. Each private auto insurance jurisdiction in Canada has its own regulatory body, rules and requirements. There are also differences between auto insurance products and coverages by province. For these reasons, the testing required for licensing is unique to each jurisdiction.

Yes. If a company is unsuccessful in obtaining accreditation, FSRA will provide a comprehensive explanation of where the gaps are and what would be required to meet the standard for accreditation. Insurers will need to demonstrate that they have made significant effort to address the gaps before applying again. At this time, we have not determined whether there will be a minimum waiting period.

No. We believe that the accreditation system will make it easier for companies to bring new products and offerings to the market and increase speed to market for rate and underwriting changes. We anticipate that the new supervisory model will create a healthier, more dynamic marketplace, and potentially make Ontario more attractive for new entrants.

The process for an automobile insurance policy in Ontario for non-payment is set out in section 1.7 of the Ontario Automobile Policy (OAP1) Owner’s Policy. After a certain number of non-payments, the insured can receive a registered letter from the insurer notifying them that the policy will be cancelled within a specified number of days. The insured then has the opportunity to bring their account up to date or allow the policy to lapse per the cancellation notice. Repeated non-payment allows the insurer to terminate a policy without providing this notice. The insured can cancel the policy at any time for any reason by complying with s. 1.7.1 of the policy.

Credit scores are not permitted in the rating or underwriting of auto insurance policies in Ontario. However, if an insured has a history of repetitive non-payments resulting in cancellation, that in combination with other driving infractions and at-fault claims, could result in a denial of coverage with some insurers. If a consumer has had insurance cancelled for non-payment in the past, that will appear on the consumer’s Auto Plus report which all insurers use to rate and underwrite insurance premiums.

There are some ‘aggregator’ web sites and broker web sites that will provide comparable quotes from multiple auto insurance carriers; however, none of them offer price comparisons to all insurance companies. In the Summer of 2024, FSRA will be launching its own price comparison tool to allow consumers to check a range of prices in the market for their individual profile so they can make more informed buying decisions.

Principles-based regulation does not mean that there will be no rules or measurable outcomes. Principles-based regulation focuses on consumer outcomes rather than building an ever-expanding and complex web of rules. A purely rules-based regulatory model can no longer keep up with the pace of change with new business models, advanced technologies and consumer needs.

The existing rules for UDAP (Unfair or Deceptive Acts or Practices) and TAC (Take All Comers), for example, will remain in place with the new supervisory model. Planned Supervision Guidance will also set for the FSRA’s interpretation of statutory requirements under the Insurance Act. In addition, FSRA will be developing tools and measures to evaluate insurers against each of our key consumer outcomes, as well as the strength and rigour of their rate and underwriting operations, governance and controls.

FSRA has not yet determined whether accreditation status will be published. That will be decided through the development of the supervisory guidance and communicated when finalized.

The new supervisory guidance will be finalized in the Spring of 2025 and is planned to take effect in late 2025. Companies that wish to pursue accreditation are welcome to express their interest now but will not be assessed until the new guidance is in effect. However, there will be an opportunity for a limited number of companies to participate in a pilot in mid 2025. The details of the pilot have not yet been determined. If insurers would like to express their interest in joining the pilot, please contact your auto insurance relationship manager.

Yes. Accredited companies will have more flexibility to implement certain changes in products, rates and underwriting without prior approval. This is one of many key advantages to obtaining accreditation. Filings will still be required and will be reviewed by FSRA; however, some will not be required before implementation. The objective is to increase speed to market for insurers while maintaining strong regulatory oversight on consumer outcomes.

For proposals of novel products and business models, these can either be addressed through a major filing or submission through FSRA’s Innovation Office. The Innovation Office considers new proposals for unique products or business ideas that are best suited for a test-and-learn environment.

FSRA is reviewing this as part of the development of the supervisory guidance. At this time, our intention is for insurers who obtain accreditation to remain accredited until such time that there is evidence that accreditation standards have not been maintained. Once accredited, FSRA will continue to supervise insurers with requirements for ongoing data exchange, reporting and any required filings.

FSRA’s accreditation system is for insurers of all sizes. When assessing an organization for accreditation, FSRA will consider the size, complexity, and resources available, and apply proportionality principle in the accreditation evaluation.

No. FSRA does not expect insurers to create a new/distinct ORM system for auto. More than two thirds of insurers have some or many of the ORM practices already in place in their organizations. It is possible that some existing practices will need strengthening to satisfy the requirements for accreditation.

FSRA defines fairness across several dimensions including, but not limited to, unfair bias, discrimination, proxy discrimination, pricing accuracy, and consumer transparency.

Insurers need to determine how to embed the principles of fairness into their own modelling and decision-making and build tools and processes to monitor and evaluate their own effectiveness. This is especially important as companies use big data and more and more advanced modelling techniques. FSRA will evaluate insurers based on whether they have sufficient ‘systems’ in place to satisfy the fairness principle and test against them.

There are no changes planned to the Unfair or Deceptive Acts or Practices (UDAP) Rule and the Take-All-Comers (TAC) requirements as a result of the introduction of the new supervisory model.

FSRA has six principles listed in the Standard Filing Guidance. Those include consumer focus (which includes fairness), sustainability, transparency, simplicity, responsiveness, and innovation. Fairness is called out in the new supervisory guidance as an area that needs more focus, particularly around unfair bias and discrimination. Insurers should be actively exploring fairness issues within their own organizations and reviewing practices to see how they can identify, assess and mitigate unfair bias and discrimination in rating and underwriting.

The new supervisory guidance will be released for consultation in Fall of 2024, finalized in March 2025 and will be in effect before the end of December 2025.

Innovation can mean new products or distribution channels, or enhanced customer experiences. For the consumer, that means a healthier, more competitive marketplace with more choice. Innovation can also help reduce costs which helps stabilize premiums for consumers.

Principles-based regulation will only work if the regulator and regulated companies are able to demonstrate that consumer outcomes are aligned to the key principles. FSRA will be developing tools to monitor and evaluate consumer outcomes in line with the principles set out in the new supervisory guidance.

In the new supervisory guidance, there will be a chapter on fairness and the key principles to address fairness in rating and underwriting. These include mitigation of unfair bias, discrimination, and proxy discrimination, as well as principles related to transparency.

• There are many areas where unfair bias may arise, either intentionally or unintentionally. Extensive data and sophisticated models may indirectly capture the effect of protected grounds. Insurers need to actively assess proxy discrimination and potential unfair discrimination in auto insurance models, even without direct use of protected grounds.

Numerous biases are prevalent across various domains:

• A prominent instance being datasets containing protected attributes or seemingly neutral proxy variables closely associated with these protected attributes.
• Similarly, specific strategies for pricing and claims optimization, such as those aimed at maximizing consumer "willingness to pay" and "willingness to accept," require careful examination from the perspectives of fairness and non-discrimination.
• Furthermore, consumers' decision-making processes is often prone to human biases because consumers do not always make rational choices. AI systems grounded in assessments of behavioral economics should refrain from capitalizing on these biases but rather aid consumers in overcoming them.

AI systems demonstrate exceptional proficiency in detecting patterns within data. Their power lies in their ability to discern and categorize classes within training data, subsequently leveraging these insights to generate predictions for new, unseen data. Unless they are mitigated or removed from the data, any biases present in the training data will inevitably be reflected in the output produced by the AI system.

Question: With so many direct insurers marketing to only select drivers, if a driver does not qualify, why are they turned away instead of being offered a Facility quote? Makes this very difficult for consumers who have to make numerous inquires to source an insurer.

Answer: Consumers with multiple convictions or accidents, or serious convictions may not be eligible for insurance with a standard carrier. In that case, the direct insurer may not be able to offer a quote. Brokers, however, have access to multiple insurance carriers including those that specialize in higher risk driver profiles. If a consumer is not eligible for a quote with a direct insurer, they should contact a broker for a quote.

Question: In the context of auto insurance ratemaking, the principle of 'garbage in, garbage out' becomes particularly relevant when considering a system that ostensibly aims to price risk for bad behavior, yet paradoxically includes rewards and payouts that defy common sense. For example, the provision of cash settlements to at-fault drunk drivers who cause fatalities, and the universal access to cash settlements from insurers regardless of fault, fundamentally undermines the logic of risk-based pricing. Given these incongruities, how can we expect to accurately price such a system, especially with the incorporation of artificial intelligence in pricing models? These technological advancements, while sophisticated, may only serve to amplify pricing inaccuracies if they're based on flawed policy fundamentals. Where does FSRA stand on evaluating and potentially reforming the system holistically, rather than merely enforcing existing pricing rules that perpetuate these nonsensical outcomes?

Answer: The model of insurance is such that consumers share the cost in a risk pool but those who pose a higher risk pay more and those considered lower risk pay less. All consumers have some risk of getting into an accident, but some consumers, based on their driving patterns, are statistically more likely to do so.

Artificial intelligence and machine learning is helping to increase the accuracy and objectivity of these predictions overall, but with this increased complexity, comes some risk of errors or unintended consequences. The rigour that we are introducing through the new principles-based supervisory framework will help to reduce the risk of such modelling challenges, and more quickly identify any fairness issues that need to be addressed.

Insurers will be required to demonstrate that they have strong model risk management in place and are operating according to FSRA’s principles to qualify for, and maintain, accreditation.

Question: Has anyone at FSRA ever put on their car insurance Consumer hat and approached, especially the major direct insurance companies, with other than a perfect driving record for a quote. Try calling feigning that you have a drinking & driving conviction, cancellations, or in 3-4 minor tickets in the past 3 years. It would be a real eye-opener, and strongly suggested.

Answer: Consumers with multiple convictions or accidents, or serious convictions such as drinking under the influence, may not be eligible for insurance with a standard direct insurance carrier. In that case, the direct insurer may not be able to offer a quote. Brokers, however, have access to multiple insurance carriers including those that specialize in higher risk driver profiles. If a consumer is not eligible for a quote with a direct insurer, they should contact a broker for a quote with high-risk carrier.

Question: Why are (some?) direct insurers and their agents permitted to advertise excessively to attract only a select type of driver/vehicle and then also avoid the Take All Comers regulations? This by filing rates which exclude an estimated 25% of the auto insurance market and refusing to provide FA/Facility rates when asked thereby forcing consumers to seek insurers or brokers who are more accommodating? This applies to all drivers who fall outside of their very strict admission/qualifications and virtually all classes of non-fleet business/commercial vehicles including such as delivery vehicles, driving schools, couriers, contractors vehicles, buses, public vehicles, dump trucks, long-haul, etc. Rates are available for all of these vehicles through the Facility Assn yet they refused to provide FA quotes?

Answer: Under the Insurance Act, insurers’ marketing needs to comply with the Insurance Act, and the regulations and FSRA rules under the Insurance Act. "Under s. 238 of the Insurance Act, an insurer cannot decline to issue a quote to all eligible consumers who request one except pursuant to a rule filed with FSRA. Many insurers have filed with which allows insurers to decline to issue a policy if a consumer has multiple convictions or accidents, or serious convictions. In these situations, the consumer may not be eligible for insurance with a standard carrier. In that case, the consumer needs to contact a broker to receive a quote from a carrier that specialize in high-risk insurance.

Question: Why are Facility Association fees/commissions capped at rates that are so low and out of touch with reality? They have not changed in years. Has a FSRA member ever tried to calculate the FA premium on a typical private passenger auto that does not qualify for a ''preferred market'' or worse, a long-haul truck, bus, tax or other commercial vehicle? It is exhaustive and full of costly issues for what is not enough compensation to even cover the cost to quote/administer. When there is no incentive assist a consumer in arranging what is often complex coverage where providers are also held accountable, the frequent option is to avoid it.

Answer: The rates are set by FA. Please refer to FA's plan of operation for more information on this matter.

FSRA’s new supervisory framework applies to all categories of vehicles. This means the scope of our new supervisory framework will not only apply to Private Passenger Vehicles, but also Commercial Vehicles and Recreational Vehicles.

FSRA is aware that approaches to rate regulation differ between jurisdictions. For example, the UK is an outcomes-focused regulator and does not require pre-approval for either rates or underwriting rules. Prohibited factors for rating stems from wider legislation around factors such as discrimination; however, some carve-outs exist. Our research found that their auto insurance market is very competitive, and drivers are usually able to obtain coverage easily.

In Ontario, the law requires that all insurers have their rates and underwriting rules filed with and approved by FSRA. FSRA is developing Auto Insurance Rating and Underwriting Supervision Guidance. Insurers will still be required to file their rates and underwriting rules with FSRA; however, the Supervision Guidance will allow insurers to apply for accreditation status, enabling them access to a fast-tracked “use-and-file” process. In order to be accredited, insurers will have to demonstrate that they meet identified fairness outcomes (including transparency); robust risk management in operations, governance and controls; and strong model risk management. All insurers, including accredited insurers, will be subject to ongoing monitoring and proactive supervision.

Question: How does FSRA’s 2024-2025 Auto market conduct supervision plan, released in December 2023 - fit into the timeline for drafting and releasing supervisory guidance and accreditation process? The 2024-2025 plan mentions on site examinations focused on areas of higher market conduct risk like sales and distribution and underwriting.

Answer: FSRA’s 2023-2025 Automobile Insurance Supervision Plan was released by the Market Conduct division and is distinct from the supervisory guidance and accreditation process led by the Auto Insurance Product division. Although both Market Conduct and Auto Insurance Product divisions collaborate and support each other’s work, they are separate areas with different functions and roles within FSRA. The Market Conduct division has oversight on insurers’ behaviour (conduct), while the Auto Insurance Product division is responsible for the review and approval of auto insurance rules and rates, along with setting and implementing risk classification systems.

FSRA is committed to supporting the government on reforming the auto insurance sector, including developing Health Service Provider supervisory reforms. These priorities are described in 4.2 of our 2024-2027 Annual Business Plan.

Since FSRA Exchange, the government has requested that FSRA conduct a review of the HSP Framework and the HCAI system to find administrative and cost efficiencies to contribute to having a more modern and efficient system. The recent budget also asks that FSRA review the Professional Services Guideline and the Attendant Care Hourly Rate Guideline and consider updating these guidelines based on the findings. FSRA is currently working with the government to address these items. FSRA intends to obtain input from stakeholders about how to best serve Ontario’s consumers and injured claimants.