Canada: Fair Treatment Of Customers: CCIR And FSCO Release Finalized Guidelines

The Canadian Council of Insurance Regulators (CCIR) and the Financial Services Commission of Ontario (FSCO) have released finalized versions of their policies on the fair treatment of customers.

  • Fair treatment of customers is increasingly an area of focus for Canadian insurance regulators.
  • Over the past six months, CCIR/CISRO, Ontario's FSCO and British Columbia's Ministry of Finance have each released separate fair treatment proposals.
  • Recently, the CCIR/CISRO and FSCO proposals were finalized in light of the comments that were submitted on the earlier draft versions.
  • This post considers a number of significant changes that appear in the finalized versions.


"Fair treatment" proposals are part of a global shift in regulator focus toward market behaviour regulation, as solvency regulation becomes less urgent. This regulatory trend is particularly advanced in the United Kingdom, where it emerged in response to the controversy over Payment Protection Insurance (PPI). It is now spreading to other jurisdictions, including Canada, where regulators are setting out formal expectations for fair treatment of insurance customers throughout the life cycle of the product.

The CCIR/CISRO Guidance

The Canadian Council of Insurance Regulators ("CCIR") and the Canadian Insurance Services Regulatory Organizations ("CISRO") have jointly developed a fair treatment guidance entitled Conduct of Insurance Business and Fair Treatment of Customers ("the Guidance"), the final version of which was released on September 27, 2018.

Our June 28, 2018 post on the consultation draft outlines the CCIR's expectations in detail. The following are some of the changes that appear in the final document:

Intermediary-related definitions

"Agent Firm", a defined term in the original draft that is not in common use in the industry, has been dropped, along with "Distribution Firm". As a result of those changes, the definition of "Intermediary" has been clarified and broadened to include managing general agencies ("MGAs"), third party administrators and "national accounts".

Insurers' responsibilities for intermediaries

The Guidance now clearly states that, even though the insurer is ultimately responsible for the fair treatment of customers, intermediaries remain accountable for discharging their responsibilities. In addition, the Guidance has relaxed the proposed requirement that insurers "ensure" that intermediaries have adequate knowledge and authorization to conduct an insurance business and that they maintain appropriate fair treatment policies – insurers are now expected only to "assess" intermediaries with respect to these matters.

Putting customers' interests first

The Guidance includes additional language to emphasize the obligation of insurers and intermediaries to put customers' interests ahead of their own in order to avoid conflicts of interest.

Standards for advice and disclosure

The requirement in the consultation paper that all advice given be "of a high quality" has been softened to a more objective "relevant" standard. Similarly, the rather vague requirement that disclosure to customers include information on "key features of particular significance" has been amended by replacing the words "of particular significance" with the following examples: conditions, exclusions, restrictions and fees.

The FSCO Guideline

The Financial Services Commission of Ontario released the finalized version of its Treating Financial Services Consumers Fairly Guideline ("the Guideline") on September 28, 2018. As noted in our blog post on the draft version, the Guideline establishes expectations – set out under eight headings – that apply to all licensees, including those with little or no direct contact with consumers and those offering products of all levels of complexity.

Our April 17, 2018 post describes the expectations in the FSCO Guideline in detail. Changes in the finalized version, which are considerably less significant than the changes in the CCIR/CISRO Guidance, include the following:

Responsibilities with respect to third-party contractors

The finalized Guideline limits licensees' responsibility for ensuring that third-party contractors understand and comply with FSCO's expectations to contractors "whose function could reasonably be undertaken internally by the Licensee".

Flexibility of the expectations

The statement in the draft version that FSCO's expectations are not intended to be "one size fits all" is reinforced in the finalized version with a clear statement that the Guideline will be implemented in a manner "proportionate and appropriate to" the size, sophistication and characteristics of the licensee and/or the products that it offers. The draft version did not include the words "appropriate to".

Conflict of interest audits

The Guideline clarifies the nature of licensees' responsibility to conduct internal audits with respect to possible conflicts of interest. It is now clear that these audits should be focused on "the management of potential or actual conflicts of interest" within the organization or distribution channels, rather than attempting to merely identify such conflicts, as was arguably implied by the wording in the draft version.


The finalized versions of the CCIR/CISRO and FSCO fair treatment policies have addressed a number of the concerns expressed during the respective consultation processes. In our view, however, significant concerns continue to exist, particularly with respect to:

  • lack of harmonization among the proposals, which were developed independently of one another; and
  • insufficient differentiation in the proposals between different kinds of distributors, distribution channels and insurance products.

As noted in our earlier posts, organizations affected by the CCIR/CISRO or FSCO guidelines (or by the BC Finance proposals) will need to ensure that compliance plans are in place as soon as possible.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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