CAFII Webinar: Principles-Based Regulation (PBR); The Emergence of Rule-Making Authority; and How They Work Together: A Complementary, Harmonious Fit Or ‘Dynamic Tension’ For Canada’s Insurance Regulators?

CAFII Holds Webinar on “Principles-Based Regulation (PBR); The Emergence of Rule-Making Authority; and How They Work Together: A Complementary, Harmonious Fit Or “Dynamic Tension” For Canada’s Insurance Regulators.”

On 3 May, 2022 CAFII held a well-attended webinar on “Principles-Based Regulation (PBR); The Emergence of Rule-Making Authority; and How They Work Together: A Complementary, Harmonious Fit Or “Dynamic Tension” For Canada’s Insurance Regulators.”  Two leading Canadian experts participated in the panel discussion: Dr. Cristie Ford who is a full tenured Professor at the Peter A. Allard School of Law, University of British Columbia; and Stuart Carruthers who is a partner at Stikeman Elliott and a member of their Insurance & Reinsurance, Financial Products & Services, and Mergers & Acquisitions Groups, and a lawyer with whom CAFII has worked in the past.

Over 100 people registered for the webinar, including over 45 regulators and policy-makers, including 14 registrants from FSRA.  In total, the following regulators registered for the event:

• The Government of the North-West Territories;
• The British Columbia Financial Services Authority, or BCFSA;
• The British Columbia Ministry of Finance;
• The Insurance Council of BC;
• The Government of Alberta;
• The Alberta Ministry of Finance ;
• The Alberta Insurance Council;
• The Financial and Consumer Affairs Authority of Saskatchewan, or FCAA;
• The Insurance Councils of Saskatchewan ;
• The Financial Services Regulatory Authority of Ontario, or FSRA ;
• The Ontario Ministry of Finance ;
• The Autorité des marches financiers, or the AMF ;
• The New Brunswick Financial and Consumer Services Commission, or FCNB;
• The Canadian Insurance Services Regulatory Organizations, or CISRO; and
• The Office of the Superintendent of Financial Institutions, or OSFI.

Professor Ford began the webinar by stating that principles-based regulation ) (PBR) could be viewed as a “changed approach” to regulation, and she identified four characteristics of such an approach.  The first was that more of the regulatory rules would be at a higher level of generality to allow for flexibility.  An example of this would be not to say “do not drive over 50 kilometres and hour” (which is a rule) but rather to say “you should drive in a manner that is prudent and reasonable” (which is a principle).  Furthermore, when a new requirement comes about, the first approach should not be to develop a new rule, but rather to see if existing rules can cover that situation. 

Second, principles-based regulation makes sense in an environment where there is more change or complexity, and where one set of rules will not cover everything. In this sort of environment, regulators can struggle to get the rules right and to get the information they need to build rules that are effective and able to adopt to constantly changing circumstances.  In a principles-based regulatory environment, on the other hand, the regulator sets out the overall context, and industry fills in the details. 

The third feature is that principles-based regulation works most effectively where it is outcome-oriented and data-driven.  This involves ongoing consultation and dialogue with industry to ensure that the principles are understood and being met.  Fourth, cooperation is critical to the success of this model, but there has to be an enforcement capability that regulators can use if they need to.  Overall this model is more effective in many cases than developing a rule, to which industry may try to find a loophole, which the regulator then tries to close.  Principles-based regulation is more about industry and regulators working together towards a common objective.  Professor Ford said that the development of the FSRA Unfair or Deceptive Acts or Practices (UDAP) rule is an example of principles-based regulation, in that the rule is only 8-pages long and is based on broad, open concepts.

Stuart Carruthers commented on PCR and its relation to the fair treatment of customers (FTC) and said that FTC was the logical outcome of a principles-based regulatory regime.  This regime has its source in developments that begin in the United Kingdom coming out of the global financial crisis.  A critical source of insurance principles is the work done around insurance core principles (ICPs) by the IAIS (International Association of Insurance Supervisors), in particular ICP-19, which establishes core insurance market conduct principles.  This principle looks at a product across its entire life-cycle.

Christie Ford said that PBR and enforcement capability are not at odds, but rather they are complimentary.  Rules can have benefits as they can produce certainty and clarity, but they can also be restrictive and arbitrary.  The challenge for the regulator is to get the balance right.  The key here is proper implementation of the mix of tools the regulator has at its disposal. Dialogue with industry is necessary to fill in the areas of vagueness. 

Stuart Carruthers said that the benefit of rules-based authority is to give regulators the ability to respond to developments more quickly.  Principles-based regulation should allow for a more efficient system, letting industry apply expectations in a way that makes sense for their organization, while allowing regulators to focus on a risk-based approach that emphasizes the largest regulatory issues they need to look at.  A drawback of PBR is that it can lead to more ambiguity, which in turn can lead to more work and a requirement for more resources.  For smaller firms with fewer resources in particular, rules-based approaches can be easier to deal with.

Cristie Ford said that PBR does require a mental shift in terms of the approach taken to regulation.  PBR is an ongoing, evolving regulatory approach that requires confidence and transparency.  Regulators may need to provide support for smaller firms that have fewer resources.  Christie Ford added said while PBR can produce more innovation, not all innovation is necessarily good—and the financial products that led to the financial crises is an example of that.  Stuart Carruthers felt that a PBR-regime fosters more innovation because it is more flexible and adapts better to change.

Stuart Carruthers felt that Canada does not have a PBR-regime throughout the country, with different provinces at different stages down this path, but that there is a general trend toward principles-based regulation.  On the issue of the Canadian insurance industry having 17 regulators and therefore a need for harmonization, Stuart Carruthers mentioned CCIR and CISRO as an example of an effort to coordinate activity.  But there are also siloes where different provinces are going in different directions.  More provinces are providing their regulators with rule-making authorities, and there is a tendency for regulators with rule-making authority to use it. 

Cristie Ford said that rule-making authority for regulators is better than relying on the legislature to shift rules where necessary, which is a very time-consuming process.  But that does not mean rules should be developed unless they are absolutely necessary, and unless existing rules cannot manage the outcomes the regulator is seeking. Stuart Carruthers said that some of the work that FSRA is doing is the high-water mark in Canada around principles-based regulation.

Stuart Carruthers said that a rules-based approach leads to compliance departments being like referees; PBR leads to compliance departments being more like coaches.  On the issue of how to demonstrate a FTC culture, Cristie Ford said it was difficult to measure but ongoing dialogue and transparency can help show that the regulated industry is doing the right thing.  

Stuart Carruthers said that Canada was a world leader in PBR and Canadian regulators have better relationships with their regulated entities than is the case in many other jurisdictions.  Canada does not suffer from the problems other jurisdictions have where the regulator is focused on fines for revenue-generation, and where regulatory leaders are  politically-appointed and use those positions as a stepping stone to political careers.

CAFII Holds Webinar on 7 March, 2022 on Mental Health Issues and Challenges in the Workplace, At Home, and In Society: Coping With the Persistent Pandemic’s Impact

On 7 March, 2022 CAFII held a webinar on “Mental Health Issues and Challenges in the Workplace, At Home, and in Society: Coping with the Persistent Pandemic’s Impact.” Participating in the webinar were three leading experts on these issues: Paula Allen, Global Leader and SVP, Research and Total Wellbeing, LifeWorks, the successor to the business formerly know as Morneau Sobeco; Irene Keller, Director, Group Benefits Product and Solutions, Sun Life; and Shawna Oliver, AVP, Head of Global Benefits, Manulife, working out of its Boston office.

Panelists all felt that the COVID-19 pandemic had definitely had an impact on mental health issues for Canadians.  Paula Allen said that the impact had been greater than many realized. Change, uncertainly, risk, and isolation had all been introduced into peoples’ lives in the past two years, and these are all stressors.  LifeWorks has surveyed pre-pandemic and current levels of mental health and wellness, and has found that there has been a massive decline in the mental health status of people.  This has resulted in major increases in mental health risks, including one-third of Canadians being at risk of mental health issues.  Taking another measure, risky levels of alcohol intake has moved from 2 percent of the working population to 8 percent of the working population during the pandemic. 

Irene Keller added that mental health issues were a big issue before the pandemic, and this has now been accelerated by the past few years, especially for the under-35 population.  Paula Allen noted that there are more vulnerabilities and challenges for younger people, and the pandemic has added to the already existing stress for this more vulnerable population.  This is also an age where isolation is more challenging and that has made the pandemic worse for this younger population.  Shawna Oliver said that working mothers are another vulnerable group, and that the impact of stressors over the past two years are going to manifest themselves at some point in time. 

The panelists spoke next about workplace culture, and the importance of creating a safe, supportive environment.  Many employees still associate a stigma with mental health issues, are many will not want to share any such issues with their employers.  Employers have to take this on a critical priority, and the right tone has to be set throughout the organization. 

The right tools and resources are critical, but the cultural environment is even more important. It was also noted that employees should not have to choose between physical and mental health—they are not separate issues, they are linked, and both need to be part of the equation for employees.  The panel also noted that “one size fits all” does not work for mental health issues, and employees need to offer employees options. 

The session included good representation from regulators across the country, with the following regulators registered for the session:

• The Alberta Insurance Council;
• The British Columbia Financial Services Authority, or BCFSA ;
• The Financial and Consumer Services Commission of New Brunswick;
• The Government of Alberta;
• The Insurance Council of Manitoba; and
• The Insurance Councils of Saskatchewan.

The webinar included some live polls that demonstrated that 100% of attendees had faced, or knew someone who had faced, mental health challenges; but the polls also revealed that nearly a third of attendees would not want to reveal to their employer that they were dealing with a mental health issue.

Kathryn Kitchen, VP Head of HR at Manulife, posted a link to the webinar on LinkedIn:

LinkedIn Posting on CAFII Mental Health Issues Webinar

CAFII Holds Webinar on 31 January, 2022 with Insurance Experts on Incentivization Programs

On 31 January, 2022, CAFII held a webinar on “The Ins and Outs of Life Insurers’ Health and Wellness Incentivization Programs.” Three expert insurance panelists participated:

• Patti Annable, Assistant Vice-President, Marketing Communications, Lumino Health, Sun Life;
• Lisa Heath, CEO, MediResource Inc, business partner to Canada Life’s Health Connected; and
• Paul Savage, Head of Product and Pricing, including for Vitality, Manulife.

The session covered a wide range of topics and the panelists were engaged in the discussion.  Patti Annable said that Lumino Health at Sun Life is about connecting customers with their needs.  Lisa Health spoke about Health Connected, which Canada Life participates in, with the intention to contributing the well-being of employees and connecting employees to the services that they need.  Paul Savage said that Vitality is a program that tries to use incentives to promote healthy choices.

Panelists gave examples of incentives to promote healthy behaviour, like providing rewards for getting a COVID-19 vaccine.  The panelists also noted that many people who have access to these programs are not aware of them, and increasing awareness is a key objective.  On this issue, Lisa Heath stated:

Our experience is that communication actually matters the very most. It could be because our focus is the group benefit market so we’re dealing with plan sponsors, but what’s most important if you want engagement is to tell people, your employees, very specifically what you’re offering to them in terms of health and wellness.

It’s more important, from our experience, than gamification because if people just don’t even know that the tool is available, and you don’t make any effort to tell them that these benefits are available, they’re not going to use them.

On the subject of wearables, Lisa Heath said that they had potential but that there was a need for evidence that they actually can influence behaviour, it needed to be kept in mind that not everyone has access to them, and caution needed to be shown around users being comfortable with sharing the data with third parties like their insurer.  

On the latter issue, Patti Annable said that the information that was collected was often used in the aggregate, and that protection of personal privacy was essential.  Lisa Heath said that regulatory changes would occur and that industry would have to adjust to that, and in fact proper regulation should be welcomed.  Paul Savage said that trust is central to the collection of health data and that privacy is absolutely paramount.

Poll questions found that roughly half of attendees were in incentivization programs, which panel members felt sounded roughly correct.  As well, 68% of attendees said gamification (like rewards, points, games) would increase their participation in incentivization programs, although panelists said that the demographic  that found gamification most appealing was younger people. 

The session included good representation from regulators across the country, with the following policy-makers and regulators registered for the webinar:  

• Quebec’s Autorité des marchés financiers, or AMF;
• The Financial Services Regulatory Authority of Ontario, or FSRA;
• The Ontario Ministry of Finance;
• The Government of Alberta ;
• BC Financial Services Authority;
• The Insurance Council of BC;
• Consumer and Financial Services Commission of New Brunswick;
• The Insurance Councils of Saskatchewan.

Panelist Lisa Heath posted a LinkedIn thread on the Webinar:

Lisa Heath LinkedIn Posting on CAFII Webinar on Incentivization Programs

CAFII Holds Webinar with Marlena Labieniec, FSRA’s Director of Innovation, About the Authority’s Proposed Innovation Process

On November 29, 2021 CAFII held a webinar with Marlena Labieniec, FSRA’s Director of Innovation, about FSRA’s new innovation process and its Innovation Office. Prior to the discussion with Ms. Labieniec, introductory remarks were made by Glen Padassery, FSRA’s Executive Vice-President, Policy and Chief Consumer Officer, about FSRA’s vision for its role and approach in fostering innovation in Ontario’s financial services sector.  Among the topics covered by Ms. Labieniec were:

• the Innovation Office as FSRA’s “Innovation Orchestrator”; 
• facilitating both ‘inside-out’ and ‘outside-in’ points of entry; 
• FSRA’s five-step Innovation Process;
• the role of an Intake Form in standardizing starting point input to FSRA
• the importance of “Innovator Readiness”;
• FSRA’s five-step Risk Assessment Process in working with Innovators on proposed Innovations;
• the importance of strong, testable mitigation plans for any significant risks identified;
• the role of regulatory sandbox-like Test and Learn Environments (TLEs) in resolving uncertainty through experimentation and in ameliorating or clarifying identified risks sufficiently, for Innovations which initially generate a low or medium level of FSRA confidence;
• how TLEs will work; 
• the TLE fee structure;
• the “go” or “no go” decision;
• some hypothetical Use Cases/examples; and
• FSRA’s balancing of incumbents and new market entrants in fostering innovation.

The session included good representation from regulators across the country, with the following regulators registered for the session:

• Quebec’s Autorite des marches financiers, or the AMF;
• the Ministry of Finance, Government of Quebec;
• the Alberta Auto Insurance Rate Board;
• the Government of Alberta;
• the Alberta Insurance Council;
• Alberta Treasury Board and Finance, Government of Alberta;
• several of Marlena’s colleagues from the Financial Services Regulatory Authority of Ontario, or FSRA;
• the Financial and Consumers Services Commission of New Brunswick, or FCNB;
• the Insurance Councils of Saskatchewan;
• the Financial and Consumer Affairs Authority, Government of Saskatchewan, or FCAA;
• the Insurance Council of British Columbia;
• the British Columbia Financial Services Authority, or BCFSA;
• the Financial Consumer Agency of Canada, or FCAC; and
• the Office of the Superintendent of Financial Institutions, or OSFI.

The webinar included some live polls that demonstrated strong support for the efforts around innovation by FSRA. 

CAFII Holds Webinar with Provincial Regulators on Regulatory Priorities as Canada Emerges from COVID-19

On October 25, 2021 CAFII held a webinar on Provincial Insurance Policy and Regulatory Priorities and Emerging Issues As Canada Emerges From COVID-19.  The panelists were:

• Chris Carter, Vice-President, Financial Institutions and Mortgage Brokers Market Conduct, BC Financial Services Authority;
• Mark Brisson, Assistant Deputy Minister and Superintendent of Insurance, Alberta Treasury Board and Finance;
• Janette Seibel, Deputy Superintendent of Insurance, Financial and Consumer Affairs Authority of Saskatchewan.

The session covered a wide range of topics and the panelists were engaged in the discussion. The session included good representation from regulators across the country, with the following policy-makers and regulators registered for the webinar:  

• The Government of Alberta;
• The Alberta Insurance Council;
• BC Financial Services Authority;
• The Insurance Council of BC;
• The Canadian Council of Insurance Regulators, or CCIR;
• The Canadian Insurance Services Regulatory Organizations, or CISRO;
• Consumer and Financial Services Commission of New Brunswick;
• The Insurance Council of Manitoba;
• The Insurance Councils of Saskatchewan;
• The Office of the Alberta Superintendent of Insurance;
• The Office of the Superintendent of Financial Institutions, or OSFI; and
• The Government of Yukon. 

All the panelist emphasized the continuing importance of the fair treatment of customers.  Chris Carter said that in British Columbia there was a heightened interest in the emerging climate change challenges. Cyber risk was also raised by panelists as an increasingly important issue.  The issue was raised of the potential affect of COVID on the affordability of life insurance going forward.  It was also noted that there were important industry achievements around offering insurance digitally during the pandemic. 

In terms of trends, panelists felt that industry had been very flexible and innovative in responding to the pandemic. However, the panelists also felt that they needed to monitor carefully whether there were any changes in claims payout in the context of the pandemic.  It was also felt that the adoption of online insurance options would continue after the pandemic.  It was noted however that there is a digital divide in many provinces, where some consumers’ internet connections are not as good, especially for those in rural areas, and that could be important as digitization became more prevalent. 

Mark Brisson said that regulators appreciated the efforts industry had made during the pandemic including the offering of deferrals, rebates, and other measures to help consumers.  Jan Seibel said that industry had communicated emerging issues with regulators well during the pandemic, and this helped ensure a coordinated approach between industry and regulators.  She also felt that industry handled the move to an at-home requirement effectively.  Chris Carter said that industry was extraordinarily flexible and responsive during the pandemic.  The panelists also discussed fair treatment of customers and how to measure it or demonstrate it.  The CCIR, which the three panelists all sit on, was also discussed around harmonization and how it could advance this objective.