On September 11, 2024, The Canadian Association of Financial Institutions in Insurance (CAFII) held its fourth webinar of 2024 – a Conversation with Atlantic Regulators. CAFII’s Executive Director, Keith Martin, moderated the webinar. He was joined by four insurance regulators representing the four Atlantic Canada provinces. All four have years of experience in the financial regulatory environment. They were:
- Jennifer Crummey (Director of Consumer and Financial Services of Newfoundland and Labrador);
- Rahul Deshmukh (Manager, Financial Institutions, Office of the Superintendent of Insurance (OSFI));
- Jennifer Sutherland Green (Deputy Director & Senior Legal Counsel, Pensions, Financial and Consumer Services Commission (FCNB)); and,
- Lauren Keefe-Hogan (Registry and Licensing Counsel, Government of Prince Edward Island’s Financial and Consumer Services Divisions).
Many representatives from CAFII’s 15 member companies and 10 Associates attended the webinar, as did representatives from allied industry Associations such as the Canadian Life and Health Insurance Association, or CLHIA; and the Travel and Health Insurance Association, or THIA. Many insurance and financial services regulators and policy-making authorities attended as well, including the following government organizations:
- The Insurance Council of British Columbia;
- The Government of Alberta;
- The Financial Services Regulatory of Ontario, FSRA;
- Québec’s Authorité des marchés financiers, or the AMF;
- The Financial and Consumer Services Commission of New Brunswick, or FCNB.
New Brunswick
After introducing the speakers, K. Martin began the webinar by speaking with Jennifer Sutherland Green about New Brunswick’s regulatory priorities. J. Sutherland Green explained that for the next few years, FCNB’s priorities are:
- Rule INS-001 Insurance Intermediaries Licensing and Obligations, and,
- Rule INS-002 Insurance Fees.
Both rules came into effect on February 1, 2023. They followed amendments to the Insurance Act, which gave the FCNB rule-making authority.
Rule INS-001 updates the licensing requirements for existing individual licensees, outlines supervision requirements, and strengthens market conduct standards. It also introduces new licensing categories for insurance agencies, MGAs, adjusting firms, and Restricted insurance representatives. Prior to the rule and amendments coming into effect, only individuals in the insurance industry were licensed in New Brunswick. The new restricted insurance representative license is a limited insurance license. It requires those who engage in the selling of incidental insurance to be knowledgeable and accountable, and consumers are provided sufficient information to make an informed decision. The introduction of both these rules not only increased the number of licenses in New Brunswick but also expanded regulation to companies that were not previously overseen by FCNB, such as car dealerships.
Implementing these rules required considerable time and resources. FCNB gave itself a two-year window to transfer all licensees to the new system. During the first year that the rules came into effect, education was another primary focus. Ensuring people were familiar with the new requirements was an important objective. FCNB has moved to a new phase in which they now expect everyone to be familiar with the new rules, and the required compliance measures will be enacted where necessary.
For the coming 2-3 years, FCNB’s priorities will be to continue implementing the new rule and using its compliance site visits and other reviews to ensure adherence to the new measures, including consumer protection. Compliance site visit reviews could include ensuring that the restricted insurance representatives are using the proper forms, that intermediaries are licensed properly, and that the designated representatives are using the report function properly.
As FCNB approaches the two-year mark for the rules, it has begun a systemic review to add clarity where needed and make the necessary adjustments. The FCNB wants to fully implement the feedback it has received. In addition, the FCNB is continuing some internal process improvement projects and updates to its website. It also has an ongoing project for a second phase of modernizing the Insurance Act.
Nova Scotia
Rahul Deshmukh then spoke about the priorities in Nova Scotia. He began by explaining that the Office of the Superintendent of Insurance (OSI) is focused on healthcare. From an insurance regulator side, R. Deshmukh is actively working to reduce the administrative burden on physicians through standardization. OSI has standardized the short-term disability forms it uses but is intent on standardizing more. K. Martin commented that CAFII is actively monitoring Quebec’s Bill 68, which is trying to lower the administrative burden on physicians, which sounds to be aligned with OSI objectives.
R. Deshmukh then explained that the regulator is also planning to introduce continuing education for licensed agents. The goal is to introduce continuing education forms in the next year or two. Due to OSI’s small size, this will be self-monitored and self-reported. Most insurers already have continuing education; therefore, it won’t be a big change if any rules or regulations are implemented in the next few years.
Over the course of 2023, OSI held consultations with industry and stakeholders on auto review. No decision has been made regarding potential changes. As a division, OSI also takes consumer inquiries, including complaint forms, from the public if they have any claims issues or insurance in general. Many inquiries revolve around resolving complaints; OSI receives 20-25 complaints per week (20% of all inquiries). Consumers also complain about surcharges.
OSI is actively involved with CCIR and CISRO, working on various committees/subcommittees (GILQR, LLQP, Cybersecurity).
Pre-COVID, OSI used to conduct LLQP exams in person, but now they are completely online. One issue that has arisen from this move has been an increase in cheating. Not all cheating accusations are valid, but confirmed instances have increased since the online shift. OSI is exploring options to reduce or manage this issue.
OSI is a part of the Federal Committee for Disaster Insurance, which is another area of interest for the regulator.
Prince Edward Island
Next, Lauren Keefe-Hogan explained Prince Edward Island’s priorities. She began by explaining that her office, the Office of the Superintendent of Insurance for PEI, is a part of the Financial and Consumer Division within the Justice and Public Safety Department. As well as the responsibility for regulating insurance, her office regulates several other industries, including securities, real estate, debt collection, payday lending, trust and fiduciary companies, consumer and credit reporting, direct selling, and charitable lotteries. They are also responsible for administering several registries. Therefore, to adequately manage many different mandates, one of the regulator’s key priorities is efficient resource management to ensure effective regulatory oversight and consumer protection.
Part of implementing this priority is modernization and technology renewal. The current plan is to leverage technology to enhance regulatory processes and reduce the administrative burden on stakeholders. Currently, L. Keefe-Hogan’s office is engaged in three multi-year technology projects, which are in various stages of development and implementation. The most recent project is focused on replacing the old legacy licensing system. The current system is paper-based and, therefore, manual, which causes delays. L. Keefe-Hogan and her team are in the requirements-gathering stages of this project, but they are very excited about the prospect of providing PEI’s licensees with more efficient service, more timely communications, and greater access to licensing data.
As part of the goal of technology renewal, her office is trying to accept electronic payments for insurance premium taxes. This also includes updating the website’s content across her office’s many mandates, including insurance.
Newfoundland and Labrador
Finally, Jennifer Crummey detailed Newfoundland and Labrador’s priorities. Like PEI, J. Crummey’s office is small with a wide-ranging and diverse mandate. This includes regulatory and registrar work across many different areas, including payday lenders, high-cost lenders, mortgage brokers, and real estate. One consistent priority is balancing the mandate between working as an insurance regulator while being responsible for consumer protection.
An important daily function of J. Crummey’s office is the collection and assessment of consumer inquiries and complaints.
Another priority is maintaining reasonable service standards for licensing and application processes. Her office currently has an online process in place and is cognizant of the importance of timely and clear responses.
J. Crummey’s office is mindful of legislation and regulations. It keeps an eye on regulatory happenings across Canada, both provincially and federally, which is why her office participates in various federal and provincial groups, including CCIR and CISRO. They are continuously looking at opportunities for harmonization or establishing some sort of commonality within broader applicable contexts.
Another area of interest is climate change. Temporary licensure is top of mind in relation to this issue.
In June 2024, Newfoundland and Labrador announced that it would implement diagnostic treatment protocol regulations, which would provide early access to treatment for sprains and strains resulting from auto accidents. These regulations are very similar to those already in place in Nova Scotia and Alberta. J. Crummey explained that her office is working with stakeholders to implement the regulations by December 2024.
K. Martin introduced the second part of the webinar, in which each regulator discussed one key issue impacting the insurance industry.
L. Keefe-Hogan spoke about the challenges within the insurance regulatory environment. She explained that one key challenge merging within PEI and across Canada is climate change. PEI is a small but densely populated island; therefore, it is uniquely affected by climate change. This includes extreme weather, rising sea levels, coastal erosion, and saltwater intrusion. PEI has already experienced substantial damage due to abnormally high hurricane occurrences. As an insurance regulator, there is much concern about how climate change will impact the industry provincially, particularly the increasing frequency and severity of claims. Many are wondering how this will affect the financial stability of the market.
Other concerns, not limited to climate change, are changing risk profiles, the availability of coverage for consumers, the worry that high-risk areas may receive limited coverage or see insurer withdrawal from coverage markets, ensuring the fair treatment of consumers, and providing timely and fair claims handling assessments. Another area, one of which is particularly relevant, is keeping up with technology. As a regulator, modernization is important. Currently, L. Keefe-Hogan’s office is undertaking a modernization project. Data migration and data security issues are at the top of mind when it comes to modernization and digitalization.
Another challenge PEI experienced was implementing the IRS-17 regulation and the new OSFI forms. The transition to both these new regulations significantly changed PEI’s accounting policies and processes, which could impact key financial metrics important in prudential regulation. PEI is working to ensure proper employee training on the new regulations and forms.
Balancing the need for thorough oversight without burdening industry is something PEI is monitoring. Regulators need to ensure that compliance requirements are manageable while effectively addressing the risk and ensuring consumer protection.
K. Martin asked L. Keefe-Hogan how her small team successfully manages such a large scope of issues. He mentioned that CAFII, like her team, is small, and is, therefore, curious if she has any advice. L. Keefe-Hogan responded that while it is a challenge, she has a core team of senior regulators that speak regularly about their many mandates. Lines of communication are open and active. She added that she relies heavily on collaboration with other jurisdictions, including the other regulators sharing information. Harmonization is important as a result.
K. Martin then asked R. Deshmukh to speak about technology issues in the industry, including the development of AI. R. Deshmukh explained that the insurance sector is going through many digital changes. While there are many positives to digitalization, there are also negatives.
AI is at the forefront of industry conversations, especially because it is changing so quickly. It has become an integral part of customer service and streamlined claims processing and underwriting. AI is also used in fraud detection and customer personalization.
Quantum computing is another growing technology trend. It has the potential to solve large, complex problems quickly. R. Deshmukh believes that it will revolutionize the insurance industry in the coming years. For example, it will optimize investment portfolios and team processing. It could also be used in fraud detection. However, there are some threats and issues with quantum computing, including cyber security and data breaches.
Another technology trend is insurtech innovations, such as blockchain, IoT (Internet of Things), and cloud platforms, all of which improve operational efficiency. Insurtech could address and streamline underwriting, claims, and risk management. Personalization through digitalization, like custom apps and portals, can enhance customer interactions and satisfaction.
Some of the industry’s current issues with technology involve data privacy and security. Regulators are asking how data will be protected with increasing digitalization. Fairness and bias in AI are concerns, as is regulatory compliance in AI framework development and implementation. Regulators are asking what the ethical uses of AI and automation are. AI is costly; many insurers are struggling with the financial burden of AI implementation and maintenance.
Many regulatory challenges weigh on regulators’ minds. These include AI governance, addressing emerging and changing tech, climate risk and disclosure, consumer protection and FTC, third-party risks, and innovation versus compliance. Balancing new technologies with regulatory standards without stifling innovation or breaking laws can be tricky.
Next, J. Crummey spoke about important trends in the insurance industry. She noted that technology and the use of AI are increasingly pervasive across industry, something regulators are grappling with. There has been a shift towards consumer-centric modelling, particularly for L&H providers who have heard an increasing desire for personalized healthcare considerations. Another trend is clients’ interest in self-service options. On-demand features, like Amazon, are something clients want and expect. Individualization seems to be a growing expectation among consumers.
With a rapidly evolving regulatory environment, regulators must be increasingly adaptable. Climate change, AI and tech, and more have forced and will continue to force regulators to be flexible. Environment, Social and Governance issues (ESG) and Diversity, Equity and Inclusion (DEI) are being embedded in reporting requirements and business codes of conduct. Transparency and accountability have grown in importance as well. This ties into consumers’ evolving expectations.
Embedded insurance is appearing increasingly across industry. The labour market will factor into the industry’s evolution. Positions will change as technology does, and talent recruitment will be important to replace an aging population.
J. Sutherland-Green spoke next, explaining important changes with CCIR and CISRO. CISRO has completed significant cooperative national products, including the development of ongoing modernization of the LLQP, in conjunction with CCIR. Both have or recently had committees dedicated to FTC, climate change, consumer awareness, cooperative supervision, fintech, and more.
One recent and notable publication by CCIR is the report on the fair treatment of customers by Canadian insurers, which was released in June 2024. This report provides insight into governance and business culture in relation to the fair treatment of customer reviews. In April 2023, CCIR released the climate change, national catastrophes, and consumer awareness position paper, which focuses on actions insurers can take to ensure consumers receive and understand the information, advice, and incentives necessary to make informed decisions. In May 2023, CCIR and CISRO released a position paper on the upfront compensation of segregated funds, which followed a discussion paper on the same topic in 2022. Both organizations work closely on a wide range of topics.
J. Sutherland-Greene believes that CCIR and CISRO benefit from input from both smaller and larger regulators. Many of the Atlantic province regulators have small teams, so personnel often participate in multiple committees and files. This is a boon because these employees have a wide range of in-depth knowledge.
K. Martin concluded the webinar by thanking the four panelists.
