2024 FSRA Exchange – Recordings
2024 FSRA Exchange focused on regulating in a rapidly changing environment with panel discussions from many financial services industry experts and FSRA leaders.
Video highlights
Morning sessions
8:45 a.m. – 8:55 a.m.
Welcome by host, Judy Pfeifer, Chief Public Affairs Officer (see bio)
Video Transcript - Welcome by host, Judy Pfeifer, Chief Public Affairs Officer
8:55 a.m. – 9:05 a.m.
Greetings from FSRA’s Board Chair, Joanne De Laurentiis (see bio)
Video Transcript - Greetings from FSRA’s Board Chair, Joanne De Laurentiis
9:05 a.m. – 9:15 a.m.
Greetings from The Honourable Peter Bethlenfalvy, Minister of Finance (see bio)
Video Transcript - Greetings from The Honourable Peter Bethlenfalvy, Minister of Finance
9:20 a.m. – 10:15 a.m.
Fireside Chat with Mark White, FSRA CEO (see bio)
10:35 a.m. – 11:10 a.m.
How climate change is impacting financial services, consumers and the role of the regulator
11:25 a.m. – 11:55 a.m.
The rise of AI, its application for financial services and the implications for regulators
11:55 a.m. – 12:05 p.m.
Closing Remarks Mark White, CEO, FSRA
Afternoon sessions
1:05 p.m. – 2:30 p.m.
Mortgage Brokering: What Does Driving a Positive Conduct Culture Look Like? – Scaling the Approach for Brokerages of Varying Sizes
1:05 p.m. – 2:30 p.m.
Life & Health: Keeping the Focus on Consumers: What Does Strong Conduct Culture & Effective Oversight in L&H Insurance Look Like?
Video Transcript - Session #2 Life & Health: Keeping the Focus on Consumers
1:05 p.m. – 2:30 p.m.
P&C Insurance (non-auto): Ensuring the Fair Treatment of (non-auto) P&C Consumers from home insurance claims handling and improving our policy and supervisory approach for insurer outsourcing.
1:05 p.m. – 2:30 p.m.
Financial Planner (FP)/Financial Advisor (FA): Approval of Credentialing Bodies and Their Role in Consumer Protection under the Financial Professionals Title Protection Framework
Video Transcript - Session #4 Financial Planner (FP)/Financial Advisor (FA)
1:05 p.m. – 2:30 p.m.
Credit Union: Long Term Vision and Evolution of the Credit Union Sector
1:05 p.m. – 2:30 p.m.
Pensions: Risk Management & Principles-Based Regulation (PBR) Note: there is poor audio quality for the first seven minutes of the video due to microphone issues.
Note: there is poor audio quality for the first seven minutes of the video due to microphone issues.
Video Transcript - Session #6 Pensions: Risk Management & Principles-Based Regulation (PBR)
1:05 p.m. – 2:30 p.m.
Auto: Auto Rate & Underwriting Regulation Reform: Improving Consumer Outcomes through Risk-based Supervision
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Good morning.
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On behalf of all teachers, good morning.
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Awesome.
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Thank you very much.
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Good morning, and welcome to our third annual FSRA Exchange event.
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My name is Judy Pfeifer.
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I'm the Chief Public Affairs Officer and I'm honoured to MC today.
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Before we begin, we'd like to do our land acknowledgment.
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Before we begin, it's important to acknowledge the land we are on is the traditional territory
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of many nations, including the Mississaugas of the Credit, the Anishnabeg, the Chippewa, the Haudenosaunee
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and the Wendat peoples and is now home to many diverse First Nations, Inuit and Métis peoples.
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We acknowledge that Toronto is covered by Treaty 13 with the Mississaugas of the Credit
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and the Williams Treaties signed with multiple Mississaugas and Chippewa bands.
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Before we begin
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some housekeeping, I just want to remind everybody this session is being taped.
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We have simultaneous French translation,
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and the most important part,
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we're taking all questions by the app.
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So when you got your registration confirmation, you got a login and a passcode.
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I know, another passcode.
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You can go from this QR code.
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If you take a picture of it, put your camera on it, you see a little yellow thingamajig and you press on it.
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You're going to need to know your email and your passcode, but that's how we're taking questions today.
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So just a reminder, if you've not logged in, you've got some time to do it right now.
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In terms of today's event.
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We will take questions through the website.
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If you're having difficulty logging in or your passcode does not work, if you flag a member of the FSRA team,
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they will come and take your question written down and input it into the conference app.
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So great news today.
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This continues to be our largest FSRA Exchange.
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This year we have over 1,200 people participating.
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Last year you may recall we had 300 people in house.
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Today we have over 640.
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And then we have an additional 600 people online.
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People ask us, why do you do the online feature?
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We do it for two reasons.
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One, doesn't matter where you live in the province,
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you should be able to access our event without having to come to downtown Toronto.
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Second of all, we want our staff who can't come to see the conversation to help them become better regulators.
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So over the course of the morning, we're going to explore some challenges and opportunities
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facing financial services and how we can better protect consumers.
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On the conference website, you can findthe information about all of our speakers.
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In the afternoon, we will break into sector specific workshops.
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And then please join us at 2:30 for our reception.
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This morning we're going to
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start with remarks from our Board Chair.
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Joanne has been the FSRA Board Chair since 2021.
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She comes to FSRA with an accomplished career as President and CEO of Investment
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Funds Institute of Canada, President and CEO of Central Credit Union of Canada,
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and Vice President of the Canadian Bankers Association.
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Joanne.
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Please.
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Thanks, Judy.
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God, there's so many of you here.
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Welcome.
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It is great to see such a large audience.
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And I want to welcome as well those of you who are online.
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So again, thank you for coming,
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but I want to start by
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thanking in particular those of you who are here
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who sit on our Advisory, our Sector Advisory Committees,
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and also our Advisory Panel, our Consumer Advisory Panel.
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And, Laura, I don't know where you are, but,
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I want to thank Laura Tamblyn Watts, the Chair of that Committee.
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You know, all of
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the input we get from the Advisory Committees and in particular
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the Consumer Advisory Committee really strengthens the work we do.
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And it really helps us to understand,
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both sectoral issues and what consumers need.
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So thank you for that.
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So welcome again.
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In the few minutes,
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I've got I'm going to speak with you today.
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I want to come back
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to the theme that I highlighted last year,
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FSRA was given five years ago now.
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FSRA was given the mandate to transition
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into a principles-based regulator, or PBR for short.
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You know, we love our acronyms, so keep that PBR
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principles-based regulation.
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That approach
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drives outcomes, giving consumers choice, fairness and safety
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in the products and services available to them.
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And it allows financial services companies a greater capacity to innovate.
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As Board Chair,
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I've been hearing from people in many of our sectors
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about how we are implementing the principles-based regulation.
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Most of the comments, I'm happy
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to say, have been extremely positive,
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but I also hear concerns.
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Those who are expressing concerns
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believe there's ambiguity in the approach,
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and they are somewhat uncomfortable with the fact that we are moving away
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from the known, standard checklist
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and prescriptive requirements.
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Concern centers around the fact that there isn't clarity
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about how to achieve the outcomes FSRA expects.
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There's also concern that transitioning to principles-based
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regulation is leading FSRA to collect
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more of your information and data.
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Over the next few minutes I will speak to those concerns
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and hopefully leave you with a greater understanding of what we are doing
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and the benefits that we all are going to reap from that approach.
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So while we have
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highlighted FSRA's move to principles-based model,
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a better description
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is that we are moving to a hybrid model.
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A hybrid model is one that seeks to rely mainly on principles
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such as protecting the rights and interests of consumers
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and promoting high standards of business conduct.
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The model will set clear outcomes that we expect
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our regulated sectors will eventually meet.
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But while FSRA
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seeks to, will seek to rely mainly on the principles to support
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the regulatory outcomes
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we've identified, there will always be a need for rules
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under specific circumstances.
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We use the term rules in two senses.
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There are FSRA rules which are generally structured
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in a more principles based and outcomes focused manner.
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And there are existing statutory requirements and regulations
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that contain prescriptive standards, such as the requirement to hold a license.
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Some of our
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rules are more principles-based and some are more prescriptive.
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Therefore, depending on the context and the policy objective.
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For example,
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FSRA has worked closely with regulators across the country to agree on how
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the cost of investing should be calculated
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for segregated funds and mutual funds.
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We will implement this approach in a detailed FSRA rule,
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to enable customers to compare the costs
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of their various investments based on consistent reports.
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That's an example of a prescriptive rule.
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Principles-based regulation
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is founded on a supervisory relationship,
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which is cooperative, collaborative,
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and requires mutual trust.
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As your regulator FSRA won't act unilaterally
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for those who are committed to achieving the identified outcomes.
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We will work to build consensus and understanding.
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We trust, but verify
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using information and data
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that you provide to assess the achievement of your outcomes.
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The exercise benefits both FSRA
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and the regulated entity.
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The insight
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that we get by your data sharing allows FSRA
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to focus on fulfilling its statutory mandate.
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So good regulation, of course, as I've said,
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comes from that data because it provides an understanding
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of the business and service it is regulating.
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So good regulation comes from a regulator
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understanding your business,
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because it allows us to be more proactive and then reactive,
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allowing us to identify potential issues.
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And course correct before something becomes a full blown
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crisis and impacts the stability of the sector or undermines
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the consumer, the confidence of the consumer.
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This is really what PBR is meant to achieve.
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From the regulator's perspective, the ability to focus on the problems that matter.
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Let me give you a couple of examples,
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about that, that will illustrate what I'm talking about.
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We recently completed
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two thematic reviews of the Credit Union sector,
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one on residential mortgage lending and the other on deposit
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taking. A total of 58 Credit
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Unions, pretty much the entire system,
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provided detailed data.
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For many, it required a substantial effort
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and considerable resources to fulfill,
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but it was worth it.
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With higher interest rates, inflationary pressures
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and a resulting housing crisis.
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We found that Credit Unions have not, let me repeat,
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not materially increased lending activity in high-risk mortgages.
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The bottom line, we are not seeing system wide issues
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that should be addressed with more prescriptive Guidance
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or rules.
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The ability
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to access that data in a timely manner allowed FSRA
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to reduce the regulatory burden
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by not imposing additional requirements,
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which would be a solution
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looking for a problem.
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The Credit Union
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data demonstrated that while other information was showing
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that financial institutions were making riskier loans,
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Credit Unions were acting prudently.
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The second thematic review was on Credit Union deposit
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taking. That data helped us understand
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current trends in deposit taking activities,
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and enabled FSRA to identify opportunities
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to enhance deposit taking practices, particularly as they relate to
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periodic self-assessments, internal audit
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efficiency and board oversight.
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These thematic reviews and the data that supported
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them, have allowed us to get an accurate picture of the sector, enabling us
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to develop a regulatory response that is both measured and appropriate.
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An ongoing analysis of that
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data will tell us whether
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our solutions are working, or whether we need to change course.
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By the way, the data
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of these thematic reviews is being shared with the Credit Union sector.
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So it gives the sector,
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the Senior Management and the Board of Directors of each Credit Union,
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information that allows them to better
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manage their operations.
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I'll give you one further example of
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FSRA’s collection analytics in action.
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Our market conduct unit completed a first of its kind
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review of Life and Health Insurance
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Managing General Agencies or MGAs,
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in this case, the acronym as a whole lot easier than Managing
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General Agencies.
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Using the data collected
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our unit discovered that some MGAs
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and their agents were using poor training materials
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and selling complex products
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that were not appropriate for their consumers.
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In fact, some customers were being harmed.
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The investigation resulted
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in enforcement action against two MGAs
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and follow-up with other MGA agents and insurers.
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So with these
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examples, I hope I've clarified the key benefits
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and the promise of a hybrid, principles and rules-based
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regulation model.
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I think that, you know, I think we all think certainly at FSRA
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and the Board, that providing the information
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and data support
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to support our analytics
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is a more effective way of supervision
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than having a team of supervisors
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descending on you, asking questions,
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gathering documents,
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that may or may not tell the story.
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The full story.
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It can lead to less burden for you over time.
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And our discussions will be more focused.
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And our efforts directed to where they matter most.
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In most cases, the information
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and data we're asking for should already exist.
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If it doesn't, a request will create a constructive
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internal dialog about the value of good information and data.
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We believe it's foundational and fundamental to understanding
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your business, particularly as we move into an AI driven world.
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The responsible sharing of information and data will be the cornerstone
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for societal advancement and well informed decisions.
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So in closing, let me summarize the key points I'd like you to take away.
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First,
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consumer and beneficiary
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protection are at the heart of everything we do at FSRA.
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Second,
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we're thinking differently and are fully committed to implementing
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a hybrid principle-based and prescriptive-based
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approach that will give us the right outcomes.
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Third,
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we encourage you to share information
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and data to allow us to better understand your business,
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which will result in better regulatory decisions and outcomes.
00:13:27,538 -- 00:13:29,340
And fourth, as I noted
00:13:29,340 -- 00:13:32,710
about our Advisory, Sectoral Advisory Committees,
00:13:33,244 -- 00:13:38,616
consultation is foundational to FSRA, and we support robust
00:13:38,616 -- 00:13:42,786
dialouge and collaboration across all of our sectors.
00:13:42,786 -- 00:13:45,256
So thanks for being here today
00:13:46,590 -- 00:13:49,226
and continuing that dialog and conversation.
00:00:05,271 -- 00:00:07,140
Consumer protection
00:00:07,140 -- 00:00:10,543
is also a priority of the Government of Ontario,
00:00:11,077 -- 00:00:14,414
and particularly so for the Minister of Finance.
00:00:15,582 -- 00:00:18,585
Since being elected in 2018,
00:00:18,918 -- 00:00:22,989
the Honourable Peter Bethlenfalvy has been a strong advocate
00:00:23,656 -- 00:00:27,127
of improving and strengthening our public service
00:00:28,194 -- 00:00:31,798
and ensuring people from all walks of life have access
00:00:31,798 -- 00:00:37,170
to efficient public services when and where they need them.
00:00:38,505 -- 00:00:41,107
Now, as you know, the Minister is in the height
00:00:41,107 -- 00:00:45,411
in the middle of the budget season and taking time out
00:00:46,079 -- 00:00:51,684
to be with us today, tells you how important he knows each of your sectors
00:00:51,985 -- 00:00:56,890
are to serving the financial needs of consumers, depositors,
00:00:57,190 -- 00:01:01,227
and plan member and plan sponsors and the economy of Ontario.
00:01:01,861 -- 00:01:03,963
It's now my privilege
00:01:03,963 -- 00:01:07,333
to invite the Minister to the stage to say a few words.
00:01:07,533 -- 00:01:08,034
Minister.
00:01:19,445 -- 00:01:20,146
Well, good morning.
00:01:20,146 -- 00:01:21,447
And, thank you, Joanne.
00:01:21,447 -- 00:01:24,450
That was a great, overview.
00:01:26,753 -- 00:01:28,388
Multiple things to think about.
00:01:28,388 -- 00:01:32,258
And, you know, principle-based regulation, consumer,
00:01:32,258 -- 00:01:33,726
data, collaboration.
00:01:33,726 -- 00:01:36,663
You really hit some big themes in my career.
00:01:36,663 -- 00:01:39,532
I spent 15 years in New York and,
00:01:39,532 -- 00:01:42,435
working for TD and Dominion Bond Rating Service.
00:01:42,435 -- 00:01:46,606
And, you know, I saw that overly prescriptive, rules-based
00:01:46,706 -- 00:01:50,843
regulatory system versus Canada's and OFSI's
00:01:50,843 -- 00:01:54,514
principle-based regulation system, really have different
00:01:54,514 -- 00:01:57,617
outcomes in the financial crisis of 2000 and 2009.
00:01:57,617 -- 00:02:02,855
So I really applaud the work of your board, Joanne, and your service
00:02:02,855 -- 00:02:06,859
to FSRA, to Mark White and the team, and all the Board Members
00:02:06,859 -- 00:02:08,795
that are here today.
00:02:08,795 -- 00:02:11,497
You know, folks, this is a new organization, it’s
00:02:11,497 -- 00:02:16,135
still a puppy, having been merged of two other organizations.
00:02:16,135 -- 00:02:17,904
So the amount of progress
00:02:17,904 -- 00:02:21,674
that has been made really in five years, Joanne, is really remarkable.
00:02:21,674 -- 00:02:24,877
And so, I think, a round of applause for FSRA. Would be well
00:02:24,877 -- 00:02:26,579
warranted at this point.
00:02:31,384 -- 00:02:32,118
Now, we do have
00:02:32,118 -- 00:02:35,888
a rule, Joanne, that any acronym is $5 in the jar.
00:02:35,888 -- 00:02:37,256
And I think he broke that rule twice.
00:02:37,256 -- 00:02:40,092
So you owe us ten bucks.
00:02:40,092 -- 00:02:42,862
I do want to thank everyone for being here.
00:02:42,862 -- 00:02:46,966
You represent so much of the vital economic interests,
00:02:46,966 -- 00:02:49,969
financial interests of Ontario, right here in this room.
00:02:50,169 -- 00:02:54,540
Be it, Property and Casualty, be it Life, be it Credit Unions, be
00:02:54,540 -- 00:03:00,479
it Pension, be it Title Protection, you know, a range of industries.
00:03:00,479 -- 00:03:02,481
It's so important that we collaborate.
00:03:02,481 -- 00:03:06,752
I really like that point and share data because we have a common objective
00:03:06,752 -- 00:03:10,656
to have safety and soundness in our financial system, but to move
00:03:10,656 -- 00:03:15,628
forward in a very, complex world that isn't getting any less complex.
00:03:16,562 -- 00:03:20,800
I'm going to have a few remarks here, and I'm gonna frustrate my team
00:03:20,800 -- 00:03:23,836
because I go off script so often and I think I'm about to do it again.
00:03:25,371 -- 00:03:28,207
You know, I think the rapidly changing environment is what I look
00:03:28,207 -- 00:03:30,142
toward real leadership.
00:03:30,142 -- 00:03:33,045
You know, how do we respond to a changing environment,
00:03:33,045 -- 00:03:34,547
a changing economy?
00:03:34,547 -- 00:03:36,882
We know the world is a very complex place.
00:03:36,882 -- 00:03:38,451
And boy, we're seeing complexity
00:03:38,451 -- 00:03:41,821
like we've never seen before, certainly not recently.
00:03:42,521 -- 00:03:46,492
And so the ability for an organization like the Financial Services
00:03:46,492 -- 00:03:50,730
Regulatory Authority—said that to avoid $5, by the way...
00:03:51,697 -- 00:03:53,799
is so critical
00:03:53,799 -- 00:03:56,802
and I know we're going to continue on the provincial side
00:03:57,169 -- 00:04:01,707
to support the organization, to support the work that you do
00:04:02,041 -- 00:04:05,077
and to support the many industries that are represented in this room.
00:04:06,078 -- 00:04:10,149
You know, change is a positive thing, but we have to do smart change.
00:04:10,149 -- 00:04:13,285
And I think, that is what is occurring.
00:04:14,120 -- 00:04:16,455
I can tell you that from, my
00:04:16,455 -- 00:04:19,091
perspective, I continue to work day in, day out.
00:04:19,091 -- 00:04:23,429
You're right, we have a budget that I have to table, honour, before
00:04:23,696 -- 00:04:25,064
March 31st.
00:04:25,064 -- 00:04:29,668
And I can tell you that we continue to invest in a responsible
00:04:30,369 -- 00:04:33,138
fiscal plan and a path to balance.
00:04:33,138 -- 00:04:36,408
I think that's really important that we don't lose sight.
00:04:36,408 -- 00:04:40,446
That, you know, the more debts and deficits we rack up, we're just
00:04:41,247 -- 00:04:43,582
burdening the next generation.
00:04:43,582 -- 00:04:46,619
And so intergenerational issues are really big
00:04:46,619 -- 00:04:49,655
as we think about how we manage the fiscal policy.
00:04:50,322 -- 00:04:51,724
And I can tell you that,
00:04:53,392 -- 00:04:54,126
the environment
00:04:54,126 -- 00:04:57,463
that we're in, excuse me; high inflation coming down
00:04:57,863 -- 00:05:01,367
2.9% in the last print, headline inflation
00:05:01,767 -- 00:05:04,703
2.7%, actually in Ontario,
00:05:04,703 -- 00:05:08,207
is directionally positive, is still very high and many, many people
00:05:08,741 -- 00:05:11,744
in this province feel like we're in a deep recession.
00:05:12,278 -- 00:05:14,747
You know, many of us are fortunate, many are fortunate.
00:05:14,747 -- 00:05:17,916
But many, you know, to be able to
00:05:19,084 -- 00:05:23,522
afford the food, the cost of food, the cost of rent, the cost of a mortgage
00:05:23,522 -- 00:05:24,890
that's rolling over,
00:05:24,890 -- 00:05:27,926
the cost of day-to-day life is hurting many, many people.
00:05:27,926 -- 00:05:28,527
And in government
00:05:28,527 -- 00:05:32,431
we have to be very mindful of that in the economy
00:05:32,431 -- 00:05:35,367
and the economic environment that we're in.
00:05:35,367 -- 00:05:38,370
Today, I can say that the government
00:05:38,470 -- 00:05:42,741
continues to invest prudently and responsibly
00:05:43,442 -- 00:05:45,878
to build a strong province
00:05:45,878 -- 00:05:49,915
while staying on track to balance the budget.
00:05:49,915 -- 00:05:52,017
Ontario's labour market
00:05:52,017 -- 00:05:56,855
is showing strong 2023 results overall,
00:05:56,855 -- 00:05:59,858
but it has recently shown signs of reflection.
00:06:01,226 -- 00:06:04,463
And despite ongoing challenges,
00:06:04,463 -- 00:06:09,768
such as high Bank of Canada interest rates and inflationary pressure,
00:06:09,802 -- 00:06:14,039
Ontario's economy remains resilient,
00:06:14,039 -- 00:06:19,077
and is expected to continue to grow in 2024
00:06:19,311 -- 00:06:23,649
just as it did last year.
00:06:23,649 -- 00:06:25,350
You know from day one,
00:06:25,350 -- 00:06:28,120
our government made a promise to the people and stakeholders
00:06:28,120 -- 00:06:33,392
of Ontario to give, to govern in a way that is responsible and transparent.
00:06:33,392 -- 00:06:37,229
Joanne, you talked about collaboration and sharing data,
00:06:37,229 -- 00:06:41,366
and our government feels very strongly about data and using data.
00:06:41,366 -- 00:06:44,202
And if you can't measure things, you can't manage them.
00:06:44,202 -- 00:06:45,304
And we have a lot to do.
00:06:45,304 -- 00:06:47,439
You know, we are very much
00:06:47,439 -- 00:06:50,776
Silicon Valley North here in Canada and particularly in Ontario.
00:06:51,243 -- 00:06:54,880
We have a great artificial intelligence, great data
00:06:54,880 -- 00:06:58,717
and digital capabilities right here in Ontario, right here in Toronto.
00:06:58,717 -- 00:07:02,587
Not far from here, Waterloo and Ottawa and many other parts of Ontario.
00:07:03,021 -- 00:07:06,058
So we have to use that as a competitive advantage as we move forward.
00:07:06,725 -- 00:07:08,527
And I feel strongly about that.
00:07:08,527 -- 00:07:11,863
You know, government is a very complex organization.
00:07:12,464 -- 00:07:15,967
And right across the street from government is the private sector.
00:07:16,535 -- 00:07:19,805
And right across the street to the west is academia, represented
00:07:19,805 -- 00:07:20,839
by the University of Toronto
00:07:20,839 -- 00:07:23,842
and all the great colleges and universities that we have.
00:07:24,009 -- 00:07:27,012
And in just a little while,
00:07:27,279 -- 00:07:30,282
some private benefactors donated
00:07:30,482 -- 00:07:33,885
$100 million to build the new artificial intelligence
00:07:34,720 -- 00:07:38,757
office right across from my office in Frost, up at Queen's Park.
00:07:38,757 -- 00:07:42,194
So my view now is blocked by an artificial intelligence
00:07:42,728 -- 00:07:45,297
building, and I think that's a good thing.
00:07:45,297 -- 00:07:48,033
I think that's a good thing, because Ontario
00:07:48,033 -- 00:07:51,369
and Canada have such great competitive advantages.
00:07:51,803 -- 00:07:54,606
You know, we're able to work collaboratively across
00:07:54,606 -- 00:07:58,343
government, public sector, private sector, academia to get better
00:07:58,343 -- 00:08:01,346
outcomes for the people of Ontario and for Canada.
00:08:01,580 -- 00:08:03,715
So know that we will continue in that regard.
00:08:05,183 -- 00:08:05,717
You know, I do
00:08:05,717 -- 00:08:09,187
know that, I will talk about a couple of other things right now.
00:08:09,187 -- 00:08:12,190
One is that, you know, I'm touched on how
00:08:13,158 -- 00:08:15,460
the environment is very difficult for people.
00:08:15,460 -- 00:08:18,797
And as you serve your clients, many of you serve clients in this room.
00:08:19,531 -- 00:08:22,267
You know, remember that times are tough,
00:08:22,267 -- 00:08:24,035
that we're looking at ways to put more
00:08:24,035 -- 00:08:27,906
money back in people's pockets to make life a little bit affordable.
00:08:27,906 -- 00:08:29,674
We've cut the gas tax, for example.
00:08:29,674 -- 00:08:33,011
We've indexed a number of social welfare programs to inflation.
00:08:33,011 -- 00:08:35,814
First time that's ever been done by any government.
00:08:35,814 -- 00:08:40,619
You know, we continue to find ways to reduce fees, like dropping the
00:08:40,719 -- 00:08:45,657
license plate stickers that took money out of people's pockets.
00:08:45,657 -- 00:08:47,158
And we'll continue in that regard.
00:08:48,326 -- 00:08:50,695
I can say to you today
00:08:50,695 -- 00:08:53,565
that our government understands
00:08:53,565 -- 00:08:55,533
that people already
00:08:55,533 -- 00:08:58,503
have to be very careful with how they spend
00:08:58,503 -- 00:09:00,805
their hard-earned money.
00:09:00,805 -- 00:09:03,608
And that's why I will continue that work.
00:09:03,608 -- 00:09:07,245
I do want to talk about another area that our vision
00:09:07,245 -- 00:09:10,248
for Ontario is so paramount.
00:09:11,082 -- 00:09:14,019
And that is infrastructure and housing.
00:09:14,019 -- 00:09:17,889
You know, this, this great province has attracted so many people.
00:09:17,889 -- 00:09:21,826
If you're other than indigenous, everyone came from somewhere else.
00:09:22,694 -- 00:09:25,830
My parents came from war torn Hungary, and I met,
00:09:26,197 -- 00:09:29,834
Sandor, you're in this room somewhere who came from Budapest six years ago.
00:09:29,834 -- 00:09:34,072
Now works at FSRA, works in your supervisor area for Credit Unions.
00:09:34,606 -- 00:09:37,575
You know, as I travel around the world,
00:09:37,575 -- 00:09:42,280
one thing I keep hearing over and over again is how they view Canada.
00:09:42,881 -- 00:09:47,118
And they view Canada as a sea of stability, a beacon of hope
00:09:47,118 -- 00:09:51,356
for people, a beacon of freedom and democracy in a very troubled world.
00:09:52,090 -- 00:09:55,326
And that's why I think it's so critical that our government
00:09:55,326 -- 00:10:00,598
and our policies continue to focus on putting in place
00:10:01,366 -- 00:10:04,035
the conditions to grow,
00:10:04,035 -- 00:10:07,038
whether people are here or come from somewhere else.
00:10:07,405 -- 00:10:08,306
And what does that mean?
00:10:09,307 -- 00:10:09,941
That means that we
00:10:09,941 -- 00:10:12,944
have to work on housing and we have been.
00:10:13,011 -- 00:10:15,547
You know, a whole generation is finding it
00:10:15,547 -- 00:10:18,550
impossible to own a house.
00:10:18,616 -- 00:10:20,952
You know, when my parents came
00:10:20,952 -- 00:10:24,355
and I wasn't born yet. They met here in Toronto.
00:10:25,156 -- 00:10:29,494
My first experience was living in Montreal where
00:10:30,562 -- 00:10:33,831
my grandparents lived with three of my great grandparents.
00:10:34,766 -- 00:10:36,968
Plus, my mother's brother.
00:10:36,968 -- 00:10:39,971
You know, multi-generational in one house but they had a house.
00:10:41,806 -- 00:10:45,310
You know, my granddad and my father and my mother were able to find jobs.
00:10:45,710 -- 00:10:47,745
They were able to grow a family.
00:10:47,745 -- 00:10:49,647
They felt safe in this country.
00:10:49,647 -- 00:10:52,350
So I think we have to continue collectively
00:10:52,350 -- 00:10:55,486
supporting the environment to build more infrastructure, houses,
00:10:55,953 -- 00:11:00,058
the social infrastructure, health care, home care, long-term care,
00:11:00,758 -- 00:11:03,728
hospital beds, mental health and addiction.
00:11:04,028 -- 00:11:07,665
These are all important part of our plan to build Ontario.
00:11:08,132 -- 00:11:09,934
We have to build more roads.
00:11:09,934 -- 00:11:13,471
You have to build more subways and transit, public transit.
00:11:13,471 -- 00:11:14,272
That's what we're doing.
00:11:15,373 -- 00:11:17,842
And we're doing it all simultaneously.
00:11:17,842 -- 00:11:21,879
Because if we are going to continue to be the beacon of hope
00:11:22,513 -- 00:11:25,917
in the world and one of the great, great democracies of the world
00:11:25,917 -- 00:11:29,087
that Canada is, we got to be ready for everybody coming here.
00:11:29,420 -- 00:11:32,423
And that's a challenge that all of us in this room.
00:11:32,590 -- 00:11:36,461
My ask of all of you in this room is to continue working day in and day out
00:11:36,928 -- 00:11:39,931
to support this great province in the way you do.
00:11:40,898 -- 00:11:44,402
Now, I'd like to stay longer, but apparently I have to go back
00:11:44,402 -- 00:11:48,005
to Queen's Park and take some tough questions in question period.
00:11:48,406 -- 00:11:52,310
But before I do, I'm going to hop over to the TSX
00:11:52,910 -- 00:11:55,780
and I'm going to help open up the day and ring the bell.
00:11:55,780 -- 00:11:58,216
And the reason that I'm doing that is of course
00:11:58,216 -- 00:12:01,619
the Property and Developers Association of Canada Week.
00:12:02,486 -- 00:12:03,721
And why do I say all that?
00:12:03,721 -- 00:12:06,791
Because we're also very focused on the environment.
00:12:07,658 -- 00:12:10,995
We're very focused on building electric vehicles and the whole supply
00:12:10,995 -- 00:12:13,397
chain, including the critical minerals in the north
00:12:13,397 -- 00:12:17,201
right through the battery manufacturing and the assembly of electric vehicles.
00:12:18,236 -- 00:12:18,970
And it's important
00:12:18,970 -- 00:12:22,440
that we also focus on the environment
00:12:22,873 -- 00:12:26,811
as we navigate these uncertain waters and climate change.
00:12:27,178 -- 00:12:30,381
Part of the insurance I spoke with, Paul, I don't know where you are,
00:12:30,381 -- 00:12:35,319
but you're right there, talking about, catastrophic insurance.
00:12:35,953 -- 00:12:37,688
These things all intersect.
00:12:37,688 -- 00:12:41,859
And I would ask each one of you in your role, at whether you're at FSRA,
00:12:42,393 -- 00:12:46,030
and whether you're in the Pension industry, the Credit Union industry,
00:12:46,030 -- 00:12:49,100
the Life industry, the P&C industry, all the other industries that
00:12:49,100 -- 00:12:52,103
you represent here today, you're playing a role
00:12:53,104 -- 00:12:54,338
on building Ontario.
00:12:54,338 -- 00:12:58,709
You're playing a role on making and continuing to make Ontario and Canada
00:12:58,709 -- 00:13:01,145
the greatest country on the face of the earth.
00:13:01,145 -- 00:13:02,513
Thank you and have a great conference.
00:00:05,038 -- 00:00:06,239
Now I'd like to invite
00:00:06,239 -- 00:00:09,609
Mark White, FSRA CEO, to come to the stage,
00:00:10,043 -- 00:00:13,680
and he will be taking questions from Clare O'Hara, an award winning journalist
00:00:13,913 -- 00:00:17,917
for the Globe and Mail, who covers wealth management and insurance.
00:00:18,718 -- 00:00:21,755
Mark will be touching on a range of topics,
00:00:21,755 -- 00:00:25,458
and Mark always wants to have real hard questions.
00:00:25,959 -- 00:00:28,995
And then afterwards, he'll be taking questions from the audience.
00:00:28,995 -- 00:00:34,834
Just a reminder, if you've not logged in or screenshot, please do so now.
00:00:35,235 -- 00:00:38,805
And if you're not able to raise your handsFSRA staff will come
00:00:38,805 -- 00:00:41,808
and collect it over to Mark and Clare.
00:00:42,842 -- 00:00:43,443
Good morning.
00:00:43,443 -- 00:00:44,043
Good morning, Clare.
00:00:44,043 -- 00:00:44,811
How are you today?
00:00:44,811 -- 00:00:45,278
Great.
00:00:45,278 -- 00:00:48,615
And it's great to be back in person.
00:00:48,615 -- 00:00:52,151
I think we chatted a couple of years ago for the exchange and it was online,
00:00:52,685 -- 00:00:54,954
so it's fabulous to see so many faces.
00:00:54,954 -- 00:00:57,123
And welcome to everyone online as well.
00:00:57,123 -- 00:00:58,992
Haven't forgotten about you.
00:00:58,992 -- 00:01:01,327
So as you can
00:01:01,327 -- 00:01:04,330
imagine, we have a lot of sectors to hit, a lot of questions.
00:01:04,564 -- 00:01:05,532
But I did want to start off,
00:01:05,532 -- 00:01:08,534
Mark, you know, FSRA talks a lot about protecting consumers
00:01:08,668 -- 00:01:11,571
across many different sectors in the financial services.
00:01:11,571 -- 00:01:13,773
So since last year, you know, what has FSRA done
00:01:13,773 -- 00:01:17,176
that shows its commitment to hearingand acting on consumer issues?
00:01:17,176 -- 00:01:19,612
And how do you measure that success?
00:01:19,612 -- 00:01:22,615
Well, it's always difficult to measure your success with respect to consumers,
00:01:22,615 -- 00:01:27,053
but it has been since day one an important element, as Joanne
00:01:27,053 -- 00:01:30,757
said, it really is our primary object to consumer protection.
00:01:31,190 -- 00:01:32,992
And so we've continued to build on things
00:01:32,992 -- 00:01:36,596
that work for us, our Consumer Office,the Consumer Advisory Panel.
00:01:36,829 -- 00:01:40,166
Laura Tamblyn Watts the chair is here, and some of the members of Consumer
00:01:40,166 -- 00:01:43,803
Advisory Panel that continue to give us real insights and we resource them
00:01:44,037 -- 00:01:47,173
so that they're able to provide their own analysis and submissions.
00:01:47,173 -- 00:01:50,176
And I attend their meetings because I always learn from that.
00:01:50,243 -- 00:01:52,912
We continue to do things like Financial Literacy Day,
00:01:52,912 -- 00:01:55,882
Pension Awareness Day, our second Pension Awareness Day.
00:01:55,882 -- 00:01:59,685
Was this a couple of weeks ago, big successes
00:02:00,186 -- 00:02:02,855
and we've actually been realizing that we need to dig deeper.
00:02:02,855 -- 00:02:05,858
So we've been doing research on important consumer issues
00:02:06,325 -- 00:02:10,096
and that research manifests itself in how we regulate.
00:02:10,096 -- 00:02:14,267
and so auto and financial advisors andplanners, we've done research
00:02:14,567 -- 00:02:17,570
that's changing how we're supervising those sectors.
00:02:18,004 -- 00:02:21,007
In the area of consumers generally,
00:02:21,107 -- 00:02:24,777
we've identified that vulnerable consumers are at greater risk
00:02:25,178 -- 00:02:28,648
and that their relationship with their financial services providers is
00:02:28,948 -- 00:02:31,284
not one of trust and confidence.
00:02:31,284 -- 00:02:35,521
And so we've now published a planfor consultation about how we can deal
00:02:36,022 -- 00:02:39,725
with the vulnerable consumers and support them so that they feel
00:02:39,725 -- 00:02:43,162
more at ease and comfortable in dealing with institutions.
00:02:43,729 -- 00:02:48,067
Another area we've done research, really quite cutting edge on Mortgage Brokerage
00:02:48,434 -- 00:02:52,638
and we've identified there, particularlywith respect to private mortgages,
00:02:53,005 -- 00:02:54,874
that consumers need to know
00:02:54,874 -- 00:02:58,477
what their options are and what it means when they get into a private mortgage,
00:02:58,711 -- 00:03:01,714
because it's not the same as dealing with a financial institution.
00:03:01,914 -- 00:03:05,284
We've also done things like trying to inform consumers now
00:03:05,284 -- 00:03:08,521
not only on mortgages but something like financial advisors.
00:03:08,521 -- 00:03:11,524
We've just launched the what we call credential check,
00:03:11,757 -- 00:03:14,794
and that allows someone who wantsto know whether advisor or planner
00:03:15,127 -- 00:03:17,997
is actually who they are, what are their credentials.
00:03:17,997 -- 00:03:21,600
They can go to one place and basically get that information right away,
00:03:23,369 -- 00:03:24,603
other quick things
00:03:24,603 -- 00:03:28,574
we've now have because of governmentchanges that Minister Bethlenfalvy
00:03:28,574 -- 00:03:33,879
put through, we now have a fund from the monetary penalties we levy
00:03:34,347 -- 00:03:37,650
that we can use to benefit the sectors and consumers.
00:03:38,050 -- 00:03:41,887
We recently closed our first round of submissions and we're evaluating them
00:03:42,154 -- 00:03:45,057
and that will give us other ways that we can help consumers
00:03:45,057 -- 00:03:48,027
basically furthering research and education.
00:03:48,027 -- 00:03:51,497
And finally, I'll just talk for a moment about one of our great supervisory
00:03:51,497 -- 00:03:55,868
successes, the Take All Comers, which is an auto insurance issue,
00:03:56,302 -- 00:03:59,739
where auto insurers are obligated to take
00:03:59,739 -- 00:04:02,408
every customer who comes which meets the requirements.
00:04:02,408 -- 00:04:05,010
And so that has been a tremendous success for us as well.
00:04:05,010 -- 00:04:08,013
So there's been an awful lot going on at FSRA over the last year,
00:04:08,013 -- 00:04:09,749
all with the consumers in mind.
00:04:09,749 -- 00:04:10,416
Great.
00:04:10,416 -- 00:04:12,818
And you just jumped into my next section.
00:04:12,818 -- 00:04:14,753
So I definitely want to touch upon Auto Insurance.
00:04:14,753 -- 00:04:18,124
It's a section that I've started to pay more close
00:04:18,124 -- 00:04:21,760
attention to, and that's around the rising cost of auto insurance.
00:04:21,760 -- 00:04:27,166
In Ontario, car insurance rates have jumped by about 12% in the last 18 months.
00:04:27,433 -- 00:04:32,972
So that means in Ontario right now, the average premium is about $1,744.
00:04:33,272 -- 00:04:37,142
That's up from $1,555 at the end of 2021.
00:04:37,877 -- 00:04:39,945
So what is FSRA doing to make things better?
00:04:39,945 -- 00:04:41,280
And last year at the Exchange,
00:04:41,280 -- 00:04:44,350
you mentioned things around working to refine rate settings.
00:04:44,617 -- 00:04:47,353
So maybe you can touch upon the outlook for that.
00:04:47,353 -- 00:04:48,654
The rates.
00:04:48,654 -- 00:04:51,190
Yeah, I mean, costs are going up
00:04:51,190 -- 00:04:54,560
across the board, but in auto insurance, the rate of inflation
00:04:54,593 -- 00:04:58,330
is higher than other goods and services, and that's a statistical fact.
00:04:58,864 -- 00:05:01,734
Last couple of years, part of it is increased driving,
00:05:01,734 -- 00:05:04,703
but there's also basically even interest rates
00:05:04,703 -- 00:05:08,440
also affect costs in the auto sector, even in the longer term.
00:05:08,440 -- 00:05:12,011
If you look over the last, say, five years, theft has gone up.
00:05:12,378 -- 00:05:15,914
Vehicles are more expensive. Parts and labor costs more.
00:05:16,115 -- 00:05:16,982
Even rental car
00:05:16,982 -- 00:05:20,686
costs are statistically more expensive now than they were five years ago.
00:05:21,153 -- 00:05:25,424
So you talked about Ontario being up 12%, but in other jurisdictions
00:05:25,724 -- 00:05:30,329
it's up 32.9% in Québec over the last 12 months on preliminary data,
00:05:30,329 -- 00:05:35,768
25% of the Atlantic provinces and 21% in Alberta.
00:05:35,934 -- 00:05:37,469
I'm sorry, those are the five year numbers.
00:05:37,469 -- 00:05:41,373
So 32% Québec, 25% Atlantic,
00:05:41,540 -- 00:05:44,543
21% Alberta versus Ontario
00:05:44,843 -- 00:05:47,846
being up 12% in the last
00:05:48,480 -- 00:05:52,918
2023 numbers, which is preliminary, but it's still instructive.
00:05:52,918 -- 00:05:56,021
Québec was up 12.4%, Atlantic up
00:05:56,121 -- 00:05:59,291
10%, Ontario up 8%.
00:05:59,858 -- 00:06:04,830
Alberta, which actually capped its rate increases, was up 7.6%.
00:06:05,297 -- 00:06:08,901
So when I look at that, I think Ontario is actually doing both in the last year
00:06:09,201 -- 00:06:12,271
and the five years leading up to that, actually doing remarkably
00:06:12,271 -- 00:06:16,208
well because we have even greater cost pressures in many respects.
00:06:17,276 -- 00:06:20,279
We are going through a transformation and you alluded to this,
00:06:20,579 -- 00:06:23,949
it's about our rate setting and underwriting reform.
00:06:24,416 -- 00:06:27,686
And we realize that we've been in the business of approving rates
00:06:27,920 -- 00:06:31,356
instead of in the business of managing markets and consumer interests.
00:06:31,857 -- 00:06:35,294
And so what we're looking at doing is empowering consumers
00:06:35,827 -- 00:06:39,097
through making sure that insurers understand their obligation
00:06:39,097 -- 00:06:43,268
to be treating consumers fairly as well as
00:06:44,303 -- 00:06:45,437
get feedback.
00:06:45,437 -- 00:06:49,775
We want to try this as well as can you still hear me back there?
00:06:50,242 -- 00:06:54,846
But as well as making sure that insurers are aligned
00:06:54,846 -- 00:06:57,849
so that they have their systems and processes
00:06:58,183 -- 00:07:01,353
really focused on providing the best product
00:07:01,353 -- 00:07:03,488
that they can for consumers that will make sure
00:07:03,488 -- 00:07:06,525
they treat them fairly through their rates and underwriting processes.
00:07:07,259 -- 00:07:09,995
And particularly we're looking at giving consumers
00:07:09,995 -- 00:07:14,633
transparency through technology so that they'll be able to ease
00:07:14,633 -- 00:07:16,034
the burden of rate searching
00:07:16,034 -- 00:07:19,037
and make sure that they're getting the best rates which are available to them.
00:07:19,604 -- 00:07:25,210
In the end, a healthy and dynamic, competitive but regulated and supervised
00:07:25,210 -- 00:07:28,814
by FSRA market is the best alternative to keep rates down.
00:07:30,048 -- 00:07:33,018
So I want to touch upon one more thing with auto insurers.
00:07:33,018 -- 00:07:35,120
We're going to come back to fraud if we have time.
00:07:35,120 -- 00:07:36,922
But territory ratings, you know,
00:07:36,922 -- 00:07:39,424
this is also something we've talked about in previous years,
00:07:39,424 -- 00:07:40,659
and this is when someone goes to
00:07:40,659 -- 00:07:44,396
price out their auto insurance companies, look at a lot of different factors
00:07:44,396 -- 00:07:48,300
or age, gender, driving records, but they're also looking about where you live.
00:07:48,600 -- 00:07:51,670
And this is also known as postcode discrimination.
00:07:51,670 -- 00:07:54,072
And we know that many in the industry have expressed
00:07:54,072 -- 00:07:57,042
a lot of concern over postal code discrimination.
00:07:57,042 -- 00:08:01,713
And FSRA recently opened a Test and Learn Environment, allows insurers
00:08:01,713 -- 00:08:05,183
to examine ideas and innovate around the topic of territory rating.
00:08:05,450 -- 00:08:08,753
But why not just ban territory rating altogether?
00:08:08,987 -- 00:08:10,188
Isn't it just unfair?
00:08:11,156 -- 00:08:13,859
Well, actually, it's not unfair.
00:08:13,859 -- 00:08:16,528
Location is one of the primary determinants
00:08:16,528 -- 00:08:19,531
of your risk as an insured driver,
00:08:20,332 -- 00:08:23,668
your risk of theft where you drive most frequently,
00:08:23,668 -- 00:08:26,738
the density of the traffic, how good the roads are.
00:08:26,905 -- 00:08:29,474
That is all determined by where you live.
00:08:29,474 -- 00:08:33,645
And so to take geography out would mean that we would actually increase
00:08:33,879 -- 00:08:39,317
cross subsidization and we'd have rates that are less fair for many consumers.
00:08:40,118 -- 00:08:43,955
So it is the problem is, is that territories
00:08:43,955 -- 00:08:47,158
the way they were constructed based on our predecessor
00:08:47,692 -- 00:08:50,829
many years ago, 2005, they just took postal codes.
00:08:51,329 -- 00:08:53,331
And what happened is now people move
00:08:53,331 -- 00:08:57,068
literally across the street from one postal code territory to another
00:08:57,268 -- 00:09:00,271
and they can see a significant increase in rates.
00:09:00,305 -- 00:09:02,774
The Minister asked us to look at this and we have determined
00:09:02,774 -- 00:09:05,844
that that postal code based system is outdated.
00:09:06,144 -- 00:09:08,079
It needs to be changed.
00:09:08,079 -- 00:09:10,682
The problem is not that people use territory,
00:09:10,682 -- 00:09:13,685
it's that territory is not allowed to be refined
00:09:13,852 -- 00:09:17,122
based upon how the risks actually transpire in the marketplace.
00:09:18,156 -- 00:09:18,490
So what
00:09:18,490 -- 00:09:21,760
we're doing is we're allowing, using our innovation framework
00:09:22,260 -- 00:09:25,864
initially focused on the GTA, all insurers can come in
00:09:25,864 -- 00:09:29,634
and say we want to change the territories to something else
00:09:29,634 -- 00:09:32,637
that we think is data based actuarially sound,
00:09:32,670 -- 00:09:35,807
and it could be many more territories or possible that it's fewer
00:09:35,807 -- 00:09:39,210
territories or that there's some type of flexibility between territories.
00:09:39,210 -- 00:09:42,213
So it's not all black and white that moving across the street.
00:09:42,347 -- 00:09:46,551
So we're open to any suggestions and that means that consumers can then buy
00:09:46,551 -- 00:09:51,489
shopping around ultimately fine insurers with different territory patterns.
00:09:51,856 -- 00:09:54,859
So you won't have that situation when you move across the street
00:09:55,059 -- 00:09:56,094
and your rates go way up.
00:09:56,094 -- 00:09:59,764
Maybe it will be true with your insurer, but some other insurer will say that
00:09:59,764 -- 00:10:01,232
risk hasn't changed.
00:10:01,232 -- 00:10:01,966
All those issues.
00:10:01,966 -- 00:10:05,537
I talked about theft, traffic density, quality of roads,
00:10:06,037 -- 00:10:09,040
you know, the risk of you being an insured customer will be the same for you
00:10:09,040 -- 00:10:10,909
when you're on one side of the street or the other.
00:10:10,909 -- 00:10:13,912
And so we actually think that is the way to allow the market
00:10:14,012 -- 00:10:16,981
to figure it out again in a supervised fashion.
00:10:16,981 -- 00:10:18,583
And we will be able to control this
00:10:18,583 -- 00:10:21,252
through our Test and Learn Environment in our innovation framework.
00:10:21,252 -- 00:10:23,655
So we're very pleased the Minister asked us to look at this
00:10:23,655 -- 00:10:26,057
and we think this would be a tremendous improvement
00:10:26,057 -- 00:10:29,394
and we're also it can also be available to outside the GTA
00:10:29,627 -- 00:10:31,563
through the major filing process.
00:10:31,563 -- 00:10:34,799
So if you're in the GTA and you're concerned about your auto price
00:10:34,899 -- 00:10:36,968
right now, you can maybe start to even shop around.
00:10:36,968 -- 00:10:37,468
You might see
00:10:37,468 -- 00:10:41,539
some differences in those rates or is it too early quite yet to do that?
00:10:41,572 -- 00:10:43,641
Well, there's already tremendous differences in rates,
00:10:43,641 -- 00:10:46,344
so we always urge everybody to shop around.
00:10:46,344 -- 00:10:48,980
That is your best protection as a consumer.
00:10:48,980 -- 00:10:50,715
And there is something in insurance
00:10:50,715 -- 00:10:54,519
which in other jurisdictions they've actually prohibited it.
00:10:54,819 -- 00:10:56,754
But it's essentially a loyalty penalty.
00:10:57,889 -- 00:10:59,490
Insurers recognize
00:10:59,490 -- 00:11:03,261
and they do analysis on what the propensity is to renew
00:11:03,261 -- 00:11:07,598
without shopping around, and it is actually shockingly high.
00:11:08,366 -- 00:11:12,970
And so you don't get the best rate sometimes unless you do shop around
00:11:13,004 -- 00:11:15,373
because there is a certain transitive insurer
00:11:15,373 -- 00:11:18,743
might be happy with all the customers it has in a certain area. So
00:11:18,743 -- 00:11:22,380
it's not really working hard to get more customers, let's say from Mississauga.
00:11:22,880 -- 00:11:26,784
So maybe someone else, another insurer actually really wants to get more business
00:11:26,784 -- 00:11:27,785
from Mississauga
00:11:27,785 -- 00:11:30,988
and they're willing to price to get those business that business from you.
00:11:31,989 -- 00:11:32,757
Okay, I lied.
00:11:32,757 -- 00:11:35,226
I want to squeeze one more in about auto insurance here.
00:11:35,226 -- 00:11:39,430
And so last year at the FSRA Exchange, there was a discussion about health care
00:11:39,430 -- 00:11:42,700
benefits for accident victims and what gets paid to those Health
00:11:42,700 -- 00:11:45,837
Service Providers who service victims such as physiotherapists.
00:11:46,237 -- 00:11:49,841
And currently the professional services guideline does not restrict the amount
00:11:49,841 -- 00:11:52,944
that a health professional can bill a client, but it does determine
00:11:52,944 -- 00:11:57,949
the amount that an insurance company is obligated to pay a health professional
00:11:57,949 -- 00:12:00,418
for the services they provide when someone is injured
00:12:00,418 -- 00:12:01,786
and FSRA is the one who sets
00:12:01,786 -- 00:12:05,323
the fee maximums for rehabilitation services for accident victims.
00:12:05,590 -- 00:12:08,492
And that hasn't changed since 2014.
00:12:08,492 -- 00:12:11,529
And FSRA also sets the minor injury guideline
00:12:12,029 -- 00:12:15,032
establishing maximum fees to health service providers.
00:12:15,032 -- 00:12:18,069
And that guideline hasn't changed since 2014 either.
00:12:18,369 -- 00:12:20,338
And so what we're hearing from health service providers
00:12:20,338 -- 00:12:22,240
is that they're seeing that the fees are too low
00:12:22,240 -- 00:12:25,776
and they're having difficulties actually servicing accident victims.
00:12:26,110 -- 00:12:28,579
Other service providers are saying that these low rates
00:12:28,579 -- 00:12:31,582
are contributing to their desire to leave Ontario altogether.
00:12:31,816 -- 00:12:36,420
So giving your authority to adjust these fees, you know, what are you intending?
00:12:36,621 -- 00:12:38,990
Are you intending to rectify this oversight
00:12:38,990 -- 00:12:41,993
and what have you done since last year when it was first mentioned?
00:12:42,426 -- 00:12:45,429
Well, I'm not sure I agree with your assumption that this is an oversight.
00:12:45,563 -- 00:12:48,099
So we actually monitor the market.
00:12:48,099 -- 00:12:49,433
So let's give you a little bit of breakdown.
00:12:49,433 -- 00:12:54,372
First of all, the benefits to the insured, to the accident victim are controlled
00:12:54,572 -- 00:12:58,709
by the statutory SABS we call a statutory automobile benefit schedule.
00:12:58,709 -- 00:12:59,777
I think it is.
00:12:59,777 -- 00:13:05,182
And so that actually is everybody's policy so that you whether you're driving,
00:13:05,182 -- 00:13:07,017
whether you're a passenger, whether another vehicle,
00:13:07,017 -- 00:13:09,987
whether you're a pedestrian, you have coverage,
00:13:10,955 -- 00:13:12,790
that's the most important thing.
00:13:12,790 -- 00:13:15,626
What we're talking about here with the professional services guideline
00:13:15,626 -- 00:13:20,664
and the minor injury guideline is what insurers are obligated to pay
00:13:21,899 -- 00:13:22,933
is no questions asked.
00:13:22,933 -- 00:13:24,869
They don't need to
00:13:24,869 -- 00:13:26,937
be involved in providing these health
00:13:26,937 -- 00:13:29,940
care services to the Health Service Provider.
00:13:30,241 -- 00:13:33,577
And so it sets a guaranteed amount that the Health Service Provider
00:13:33,577 -- 00:13:35,446
for an insurer can get.
00:13:35,446 -- 00:13:38,682
But it actually doesn't determine what that Health Service
00:13:38,682 -- 00:13:41,919
Provider can charge if the customer wants to pay more
00:13:42,553 -- 00:13:45,623
or they could also reach out to the insurer if that's some type of
00:13:45,623 -- 00:13:49,059
special service and say we should get more because of a special situation.
00:13:49,627 -- 00:13:52,163
So what this does is it actually controls
00:13:52,163 -- 00:13:55,165
the cost in the in the system.
00:13:55,866 -- 00:13:59,203
If we actually increase the PSG or MIG,
00:14:00,604 -- 00:14:01,772
that cost will then
00:14:01,772 -- 00:14:05,876
be a legitimate cost for insurers to come back and ask for rate increases.
00:14:06,343 -- 00:14:09,179
And so what we're doing here with the consumer
00:14:09,179 -- 00:14:12,383
interest in mind is we're balancing the competing objectives
00:14:12,583 -- 00:14:17,421
of keeping rates down by keeping costs under control, but
00:14:17,421 -- 00:14:22,159
making sure that accident victims are able to get needed and timely services.
00:14:22,826 -- 00:14:26,230
And so what we monitor and we're always glad to get more information on this,
00:14:26,397 -- 00:14:29,266
is whether there's actually a shortage of supply.
00:14:29,266 -- 00:14:33,637
If accident victims are not getting timely and necessary treatment,
00:14:34,305 -- 00:14:37,574
then so this is a supply issue then demonstrably
00:14:37,574 -- 00:14:40,577
we would be very concerned and want to increase these rates.
00:14:40,978 -- 00:14:43,981
But that is essentially the balancing that we're trying to get.
00:14:43,981 -- 00:14:46,050
And this is something that, yes, we are looking at
00:14:46,050 -- 00:14:48,218
and we will probably continue to look at in the future
00:14:48,218 -- 00:14:51,388
because inflation, of course, we are sensitive that it has eaten
00:14:51,388 -- 00:14:54,391
into the income of those Health Service Providers.
00:14:54,725 -- 00:14:55,559
Great.
00:14:55,559 -- 00:14:59,730
Now moving on from auto insurance into the P&C insurance sector.
00:14:59,730 -- 00:15:04,501
So when we look at P&C Property Casualty, that does not include auto.
00:15:04,768 -- 00:15:08,872
So what is FSRA seeing that has prompted you to prioritize, prioritize home
00:15:08,872 -- 00:15:13,610
insurance claims as well as the P&C MGA supervision in the non auto sector?
00:15:13,610 -- 00:15:17,381
And I'm going to get a lot of buckets for the acronyms today.
00:15:18,015 -- 00:15:21,251
Yeah. We should probably just put in $100. I’m going to put in like $500.
00:15:21,351 -- 00:15:24,555
So just like we observed
00:15:24,555 -- 00:15:28,659
as we started to look at the distribution channels in the Life and Health market,
00:15:29,226 -- 00:15:31,929
we realized that the predecessor regulators were very much
00:15:31,929 -- 00:15:33,697
about putting out some guidance
00:15:33,697 -- 00:15:37,201
and then trying to be responsive to complaints and doing enforcement.
00:15:37,668 -- 00:15:41,638
And we've tried to build out in that barbell of regulation is the middle.
00:15:42,339 -- 00:15:43,807
And so the first thing you have to do is
00:15:43,807 -- 00:15:45,776
you have to understand what's going on in the marketplace.
00:15:45,776 -- 00:15:47,811
So just like we did with Life and Health,
00:15:47,811 -- 00:15:50,781
we're now going to start to look at the distribution channels
00:15:50,781 -- 00:15:54,151
in the P&C business to understand, because they've changed a lot
00:15:54,151 -- 00:15:57,654
since the Insurance Act was put in place many years ago and understand
00:15:57,654 -- 00:16:01,858
what is the role of MGAs, for example, in the P&C and distribution channels?
00:16:01,858 -- 00:16:03,727
What is the role of brokers?
00:16:03,727 -- 00:16:06,863
Also, we do have enough complaint information
00:16:06,863 -- 00:16:09,866
and we also look at other jurisdictions and we know
00:16:09,933 -- 00:16:13,537
at least anecdotally in Ontario, that claims are a huge issue.
00:16:13,537 -- 00:16:16,073
Now a lot of that is because of natural disasters,
00:16:16,073 -- 00:16:19,209
basically people flooding, wind, storm damage.
00:16:19,509 -- 00:16:24,014
And so we want to be on top of that issue because it is in every jurisdiction
00:16:24,014 -- 00:16:25,082
around the world right now.
00:16:25,082 -- 00:16:29,119
A big focus are claims being adjusted fairly fast
00:16:29,653 -- 00:16:33,056
payments timely, are consumers getting the coverage that they want?
00:16:33,357 -- 00:16:36,827
Exceptions and policies tend to be coming more fine tuned
00:16:36,827 -- 00:16:39,429
because insurers are paying out more on claims.
00:16:39,429 -- 00:16:43,900
So is there knowledge in the information that people understand what their policy
00:16:43,900 -- 00:16:47,504
actually covers, like water damage, whether it's flood or sewer backups?
00:16:48,338 -- 00:16:50,307
It's a very complicated area.
00:16:50,307 -- 00:16:54,144
And so we just think looking at claims, because this is obviously going
00:16:54,144 -- 00:16:58,849
to be a landmark event in someone's life when their house is severely damaged
00:16:59,816 -- 00:17:03,086
by something that's an insurable or potentially insurable event.
00:17:03,353 -- 00:17:05,021
So we want to get on top of that.
00:17:05,021 -- 00:17:08,024
We have a workplan we've put out publicly.
00:17:08,058 -- 00:17:10,727
We're very transparent about what we're going to do in this area.
00:17:10,727 -- 00:17:15,132
We think we have good support from the insurance community.
00:17:15,132 -- 00:17:17,567
They realize that this is an area we need to look at.
00:17:17,567 -- 00:17:20,303
We'll work very closely with RIBO, which is the
00:17:20,303 -- 00:17:23,340
Registered Insurance Brokers of Ontario.
00:17:23,840 -- 00:17:25,208
I think I've got that acronym right.
00:17:25,208 -- 00:17:28,812
So I have to get my $5 back if I say what it is right after I use the acronym.
00:17:28,812 -- 00:17:29,412
Okay, good.
00:17:29,412 -- 00:17:33,416
But anyway, we work because they regulate brokers
00:17:33,617 -- 00:17:36,253
and we actually supervise RIBO in that activity.
00:17:36,253 -- 00:17:39,389
So we're looking at that unfair, deceptive acts and practices.
00:17:39,389 -- 00:17:41,024
How that all fits in.
00:17:41,024 -- 00:17:42,526
It is a big area,
00:17:42,526 -- 00:17:45,996
but it's one that we realize we have to build capabilities to look at.
00:17:46,563 -- 00:17:48,632
First of all, by understanding the business practices
00:17:48,632 -- 00:17:51,334
and the consumer issues that we think might be out there.
00:17:51,334 -- 00:17:52,102
Great.
00:17:52,102 -- 00:17:55,105
I'm going to jump over to pensions because I'm watching my clock ticked down.
00:17:55,438 -- 00:17:59,209
And just quickly on pensions, you know, why is FSRA focusing its time
00:17:59,209 -- 00:18:02,979
and energy and money on jointly sponsored pension plans?
00:18:04,014 -- 00:18:04,414
Yeah, So
00:18:04,414 -- 00:18:07,417
these are the big guys, the seven large plans,
00:18:07,450 -- 00:18:12,656
but they represent about $560 billion of assets,
00:18:12,922 -- 00:18:16,426
two thirds of the assets in the pension system in Ontario.
00:18:16,693 -- 00:18:18,361
It's massive.
00:18:18,361 -- 00:18:21,998
There's close to 2 million members and beneficiaries in these plans.
00:18:22,599 -- 00:18:25,535
And so that's why we have to look at it.
00:18:25,535 -- 00:18:29,639
We have a statutory object that says we have to protect the rights
00:18:29,639 -- 00:18:32,642
and benefits of plan members
00:18:32,642 -- 00:18:35,178
that include joint sponsored pension plans.
00:18:35,178 -- 00:18:37,681
Yes, they are government sponsored organizations.
00:18:37,681 -- 00:18:39,549
They are well-run organizations.
00:18:39,549 -- 00:18:42,719
They have complicated but important governance
00:18:42,719 -- 00:18:45,722
that provides representation from their members as well.
00:18:45,789 -- 00:18:47,390
But our job under
00:18:47,390 -- 00:18:50,727
the law is to make sure that those rights and benefits are protected.
00:18:51,361 -- 00:18:53,396
And so they're complicated organizations.
00:18:53,396 -- 00:18:56,733
When you're into that many billions of dollars, those seven large plans,
00:18:56,733 -- 00:19:00,603
$560 billion, some are larger than others, but they're all very sizable.
00:19:01,671 -- 00:19:03,773
It is complex what they do.
00:19:03,773 -- 00:19:07,043
They are doing some of the most complicated investment strategies
00:19:07,043 -- 00:19:10,814
in the world private equity infrastructure, derivatives
00:19:10,814 -- 00:19:13,950
strategies, you name it, private credit.
00:19:14,617 -- 00:19:15,618
They're in it.
00:19:15,618 -- 00:19:18,955
And we don't doubt that they know what they're doing,
00:19:18,955 -- 00:19:20,323
but we know they do different things.
00:19:20,323 -- 00:19:23,560
And we also know that also sophisticated
00:19:23,560 -- 00:19:26,563
pensions have made mistakes and gotten in trouble.
00:19:26,830 -- 00:19:30,200
And they almost come back almost always come back to breakdowns
00:19:30,700 -- 00:19:32,735
in risk management and governance.
00:19:32,735 -- 00:19:36,472
And so we're going to be focusing on is that the fiduciary is in the plan.
00:19:36,472 -- 00:19:38,808
We want to be there to support them, to make sure
00:19:38,808 -- 00:19:42,612
that we form an independent view on their risk management and governance.
00:19:42,879 -- 00:19:46,449
And we think that will be of value to those fiduciaries in the plans.
00:19:46,916 -- 00:19:50,787
I know it will be of value to the members who are relying on those plans
00:19:50,987 -- 00:19:53,990
and the government sponsors, because if losses occur,
00:19:54,691 -- 00:19:59,395
either benefits go down or the sponsors or the members contributions have to go up.
00:19:59,929 -- 00:20:03,533
And we think that we want to make sure avoidable risks are avoided.
00:20:04,100 -- 00:20:06,069
Great. And I do want to remind the audience, you are able
00:20:06,069 -- 00:20:09,372
to submit your questions this year and we will have them pop up
00:20:09,372 -- 00:20:12,375
for us to ask Mark at the end of the of the session.
00:20:12,742 -- 00:20:16,179
Jumping over to Credit Unions, you know, we started off this morning
00:20:16,179 -- 00:20:18,448
with some great comments from Joanne about Credit Union,
00:20:18,448 -- 00:20:19,849
the work that you've been doing
00:20:19,849 -- 00:20:23,219
and Credit Unions are similar to banks and have bank like risks.
00:20:23,219 -- 00:20:25,988
And we have seen the recent bank failures elsewhere.
00:20:25,988 -- 00:20:29,292
But can you talk a little bit about what worries you about our Credit Unions?
00:20:30,059 -- 00:20:30,693
Well, first of all,
00:20:30,693 -- 00:20:34,797
in the context of the issues that happened in the Silicon Valley bank
00:20:34,797 -- 00:20:38,234
and the regional banks in the US, we have looked at those carefully.
00:20:38,735 -- 00:20:41,304
They essentially had fairly unique business
00:20:41,304 -- 00:20:45,141
models focused on certain sectors, technology and Silicon Valley banks.
00:20:45,141 -- 00:20:50,613
They had large uninsured deposits that weren't actually sticky,
00:20:50,613 -- 00:20:53,616
they wouldn't they didn't have reasons to stay with the business
00:20:53,883 -- 00:20:57,086
and they had liquidity management practices that were suspect,
00:20:57,420 -- 00:21:00,523
including holding, yes, what looked like very high
00:21:00,523 -- 00:21:03,626
quality securities, but they weren't marking them to market.
00:21:04,293 -- 00:21:07,163
So then when they actually had to sell those securities to get money
00:21:07,163 -- 00:21:09,265
to pay the deposits, which were starting to run
00:21:09,265 -- 00:21:12,268
because the tech companies wanted their money, then
00:21:12,268 -- 00:21:15,271
they incurred losses and all of a sudden then they had capital problems.
00:21:15,771 -- 00:21:18,174
Silicon Valley Bank didn't even have a CIRO, I don't think,
00:21:18,174 -- 00:21:21,410
for like months and months they weren't addressing regulatory issues.
00:21:21,711 -- 00:21:24,413
So there was all kinds of things that went wrong there.
00:21:24,413 -- 00:21:28,651
And I can say with confidence those issues do not exist in our credit union system.
00:21:29,018 -- 00:21:31,821
So we can park that to one side.
00:21:31,821 -- 00:21:34,056
We have stable deposits in our Credit Unions.
00:21:34,056 -- 00:21:36,459
Their business models are tried and true.
00:21:36,459 -- 00:21:38,761
Now what does worry about them?
00:21:38,761 -- 00:21:42,031
You know, it's obviously a prudential regulator at heart.
00:21:42,098 -- 00:21:45,434
I'm a worrier, but I'll just hit four quickly.
00:21:45,534 -- 00:21:48,838
One is we'd like to see profitability increase
00:21:49,205 -- 00:21:51,240
and there has been margin compression.
00:21:51,240 -- 00:21:55,177
And normally when interest rates go up, margins should go up.
00:21:55,478 -- 00:21:58,447
That hasn't happened universally across the sector.
00:21:58,447 -- 00:22:02,652
And that's troubling sometimes because we think it is because of Treasury
00:22:02,685 -- 00:22:07,189
and asset liability matching principles, what an acronym there.
00:22:08,557 -- 00:22:10,960
We're also focused on that
00:22:10,960 -- 00:22:15,264
they need to continue to invest and that creates overhead.
00:22:15,531 -- 00:22:18,801
And that sometimes is a problem if you don't have sufficient scale.
00:22:19,335 -- 00:22:21,237
And so they are competing against the banks.
00:22:21,237 -- 00:22:23,973
And so if they're going to have products and services compete,
00:22:23,973 -- 00:22:26,208
they have to invest in that.
00:22:26,208 -- 00:22:28,177
The third thing we focus on
00:22:28,177 -- 00:22:32,581
is the adequacy of the Deposit Insurance Reserve Fund and ensuring
00:22:32,581 -- 00:22:36,485
that there's access to liquidity, particularly emergency liquidity,
00:22:37,286 -- 00:22:40,823
because that is the type of thing that you actually have to have to stop
00:22:40,823 -- 00:22:43,592
a small problem from becoming a big problem
00:22:43,592 -- 00:22:47,129
that the deposit insurance reserve fund to provide confidence to depositors
00:22:47,129 -- 00:22:48,864
that they don't have to worry
00:22:48,864 -- 00:22:49,665
and the liquidity
00:22:49,665 -- 00:22:53,502
to make sure that the credit union remains open and honours obligations,
00:22:53,869 -- 00:22:57,039
even though it has illiquid assets on one side and might have
00:22:57,773 -- 00:23:00,876
demands for the deposits which far exceeds their ability
00:23:00,876 -- 00:23:03,679
to get those assets into a liquid position.
00:23:03,679 -- 00:23:06,715
And the final thing we worry about this part based on our PACE Credit
00:23:06,715 -- 00:23:09,818
Union experience is we want to make sure we have the right resolution.
00:23:09,818 -- 00:23:13,489
Authorities, our regime right now does not have all the tools
00:23:13,489 -- 00:23:17,259
that most modern resolution regimes have, and that, frankly,
00:23:17,259 -- 00:23:20,729
was an issue and delayed our ability to act with respect to PACE.
00:23:21,630 -- 00:23:23,799
So we do have some worries.
00:23:23,799 -- 00:23:26,869
I'd call those normal course of business worries for a regulator.
00:23:27,136 -- 00:23:30,139
And we're always focused on, you know, that the things can go wrong.
00:23:30,406 -- 00:23:31,574
Joanne alluded to it, though.
00:23:31,574 -- 00:23:35,544
One of the things we're not worried about is the residential mortgage portfolios,
00:23:35,844 -- 00:23:38,647
Even though they have much more flexibility than the federally
00:23:38,647 -- 00:23:41,650
regulated banks, they seem to be using that wisely.
00:23:41,917 -- 00:23:45,955
And we're not seeing lending practices which are exposing
00:23:45,955 -- 00:23:48,958
their organizations to, you know, any out of line risk.
00:23:49,091 -- 00:23:50,993
So that's a great, great news story.
00:23:50,993 -- 00:23:53,529
With the Deposit Insurance Reserve Fund last year,
00:23:53,529 -- 00:23:57,032
you said you wanted to keep a close eye on whether the fund was at the right size.
00:23:57,700 -- 00:23:59,068
Is that something you're still monitoring?
00:23:59,068 -- 00:24:01,303
Are you happy with where that is?
00:24:01,303 -- 00:24:05,240
So there's been as Credit Unions get bigger, their deposit bases get bigger.
00:24:05,240 -- 00:24:07,643
And so there has been a historic 100
00:24:07,643 -- 00:24:11,313
basis points of deposit target for the DIRF.
00:24:11,447 -- 00:24:15,217
We've applied some very, I think, good statistical analysis
00:24:15,217 -- 00:24:17,953
to that based upon some of that data that Joanne was talking about,
00:24:17,953 -- 00:24:19,822
where we actually get into the large Credit Unions,
00:24:19,822 -- 00:24:23,325
We actually can we can stress their loan portfolios.
00:24:23,659 -- 00:24:24,727
So that's really remarkable.
00:24:24,727 -- 00:24:27,229
I think that's even better than they can do at the federal level.
00:24:27,229 -- 00:24:30,466
And so based upon that, we believe and we what we're having,
00:24:30,499 -- 00:24:32,668
we're just starting a discussion now with the sector
00:24:32,668 -- 00:24:34,703
that the DIRF it's in the interest of the sector
00:24:34,703 -- 00:24:36,605
because they are obviously co-insure each other.
00:24:36,605 -- 00:24:39,608
We believe there are a different DIRF target is appropriate.
00:24:39,908 -- 00:24:41,343
We have some external advice on that.
00:24:41,343 -- 00:24:43,612
We're sharing with the sector and we're going to work through that
00:24:43,612 -- 00:24:45,047
and hopefully come to a consensus
00:24:45,047 -- 00:24:48,050
with the sector and then go to the government together.
00:24:48,050 -- 00:24:48,717
Great.
00:24:48,717 -- 00:24:53,355
Moving on to Life and Health Insurance, as pointed out this morning as well,
00:24:53,355 -- 00:24:56,358
we have seen FSRA take some enforcement action in this sector.
00:24:56,558 -- 00:24:59,661
Now, how serious is FSRA about taking sufficient measures
00:24:59,661 -- 00:25:03,432
to prevent misselling and other consumer harms in this channel?
00:25:03,432 -- 00:25:06,535
And I do want to point out something that that was raised last year,
00:25:06,535 -- 00:25:11,139
and this is around what we call orphan Life Insurance policyholders.
00:25:11,340 -- 00:25:15,978
And this is where policyholders won't be serviced by their life agents
00:25:15,978 -- 00:25:18,814
because they've either retired or left the industry.
00:25:18,814 -- 00:25:23,151
And so they're orphaned because they're not able to track down their policies
00:25:23,151 -- 00:25:26,154
or they're not able to their families can't get a payout.
00:25:26,188 -- 00:25:27,155
So maybe you can talk a little bit
00:25:27,155 -- 00:25:30,158
about how that kind of comes into consumer harm as well.
00:25:30,659 -- 00:25:34,863
So I alluded earlier to our review of distribution channels and Life and Health,
00:25:35,297 -- 00:25:39,201
which made us realize that MGA is managing generally agents are playing
00:25:39,201 -- 00:25:44,106
a very important role and there's multiple levels of agents between the insurer
00:25:44,106 -- 00:25:47,109
and the agent who actually is the sales agent to the customer.
00:25:47,709 -- 00:25:52,214
We also identified through that that there were practices where complex
00:25:52,214 -- 00:25:56,018
products like Universal Life, which are great for a sophisticated,
00:25:56,018 -- 00:25:59,554
wealthy individual who used up their all their existing tax advantages
00:25:59,888 -- 00:26:02,958
and is doing estate planning, were being sold to people
00:26:02,958 -- 00:26:07,029
who were in lower socioeconomic situations and could not sustain that.
00:26:07,329 -- 00:26:09,631
And then when the policy lapses,
00:26:09,631 -- 00:26:12,634
all the upfront money they paid basically goes to fees.
00:26:13,235 -- 00:26:17,305
We consider that to be an unacceptable practice and I think most insurers do too.
00:26:18,039 -- 00:26:21,610
And so we realized that we need to use the tools that we have.
00:26:21,943 -- 00:26:25,046
We've put out guidance on what is suitable.
00:26:25,046 -- 00:26:29,584
If you are an agent, and that's the sales agent as well as the MGA,
00:26:29,618 -- 00:26:34,389
who is a type of agent, recognizing the insurers have an obligation.
00:26:34,489 -- 00:26:37,492
The phrase in the law is a reasonable system of compliance
00:26:37,692 -- 00:26:41,830
to make sure that they know what's happening in their channels.
00:26:42,497 -- 00:26:46,401
And our view is where an MGA takes on delegated functions
00:26:46,401 -- 00:26:50,305
such as the recruitment, the training, the oversight of agents, that they then
00:26:50,305 -- 00:26:51,640
should have the same obligation
00:26:51,640 -- 00:26:54,643
to make sure that they have a reasonable system of compliance,
00:26:54,643 -- 00:26:59,648
not that it relieves the insurer their responsibility, but a delegated function.
00:26:59,648 -- 00:27:02,050
They need to make sure that the marketplace is working
00:27:02,050 -- 00:27:04,653
and those agents are properly trained and supervised.
00:27:05,720 -- 00:27:06,288
There's also a
00:27:06,288 -- 00:27:10,125
discussion which we're happy to have comments on, is
00:27:10,358 -- 00:27:14,162
Can you be a suitable agent or suitable MGA overseeing agents?
00:27:14,362 -- 00:27:16,798
If you're selling unsuitable products?
00:27:16,798 -- 00:27:18,533
And so even though we don't have
00:27:18,533 -- 00:27:21,536
quite the suitability regime that exists in some other jurisdictions,
00:27:22,337 -- 00:27:25,240
I think there is an argument to be made that you can't be a suitable agent
00:27:25,240 -- 00:27:29,177
or a suitable MGA if you are in the business of selling unsuitable products.
00:27:29,611 -- 00:27:32,314
So that is something we're going to work on
00:27:32,314 -- 00:27:34,416
with effect to orphan policies.
00:27:34,416 -- 00:27:38,453
There's I think about $4.6 million life policies in Ontario.
00:27:39,788 -- 00:27:43,725
Most of the incentives are upfront, so the fees are paid upfront.
00:27:44,059 -- 00:27:45,560
And yes, that does lead to
00:27:45,560 -- 00:27:48,763
what they call orphan policies where someone leaves the business.
00:27:49,631 -- 00:27:52,600
Now, there is actually tremendous value in that book of business,
00:27:52,600 -- 00:27:55,603
and so we don't actually get a lot of complaints about orphan policies.
00:27:56,137 -- 00:27:58,907
And I believe that's because generally the book of business has value
00:27:58,907 -- 00:28:00,308
and gets sold to somebody.
00:28:00,308 -- 00:28:03,478
So it actually is picked up by an agent who wants to basically contact
00:28:03,478 -- 00:28:05,880
that customer and see if their needs have changed.
00:28:05,880 -- 00:28:08,883
So there's more insurance that could be purchased.
00:28:09,217 -- 00:28:13,188
And also, we think insurers do try to if there is an orphan client,
00:28:13,188 -- 00:28:15,924
they try to get an agent that will cover it. They use their own
00:28:17,225 -- 00:28:18,126
call centers to
00:28:18,126 -- 00:28:21,129
provide some basic advice on policy administration.
00:28:21,196 -- 00:28:24,732
And ultimately the insurer is in that contract with the customer.
00:28:24,933 -- 00:28:28,636
And the loss of the agent actually doesn't change the terms of the policy.
00:28:28,736 -- 00:28:30,638
So all the benefits are still there.
00:28:30,638 -- 00:28:33,441
So it is something that the market does not function well.
00:28:33,441 -- 00:28:37,412
If agents are leave and are not replaced.
00:28:37,812 -- 00:28:41,115
But the reason they don't is because then the advice is not provided.
00:28:41,115 -- 00:28:43,651
Life Insurance is complicated.
00:28:43,651 -- 00:28:46,421
That's why agents get compensation.
00:28:46,421 -- 00:28:50,592
And so, it leads to what is the right incentive commission model.
00:28:50,992 -- 00:28:54,395
And the ideal one would be one where the advisor has an incentive
00:28:54,562 -- 00:28:55,730
and this could be you
00:28:55,730 -- 00:28:58,733
pay a fee for financial advice generally to a planner
00:28:58,866 -- 00:29:00,635
where you have a continuing relationship with them.
00:29:00,635 -- 00:29:02,170
That is the Cadillac.
00:29:02,170 -- 00:29:04,839
The truth is that that model probably doesn't work
00:29:04,839 -- 00:29:08,109
for people who aren't willing to pay that type of fee upfront or don't have
00:29:08,376 -- 00:29:11,412
the size of portfolio insurance needs to justify that.
00:29:11,746 -- 00:29:14,048
So we watch that part of the market very carefully.
00:29:14,048 -- 00:29:17,051
But as they say, it's surprising we don't get that many complaints
00:29:17,051 -- 00:29:20,288
in the area because I was going to bring up the compensation of
00:29:21,422 -- 00:29:22,357
the commissions that are paid
00:29:22,357 -- 00:29:25,360
because you're right, these are sort of policies are sold,
00:29:26,461 -- 00:29:29,230
the commissions are paid out when they sell it
00:29:29,230 -- 00:29:31,099
and it's not really paid out to service.
00:29:31,099 -- 00:29:33,634
And so I have spoken to a lot of financial advisors.
00:29:33,634 -- 00:29:38,172
To your point, they service these clients as a courtesy
00:29:38,406 -- 00:29:41,743
and then they kind of hope that maybe they'll be able to cross-sell.
00:29:42,210 -- 00:29:46,047
So do you think the industry would ever take a look at the way
00:29:46,047 -- 00:29:49,117
and this is a huge thing to change the way that you're compensated
00:29:49,117 -- 00:29:50,752
on a life insurance policy.
00:29:50,752 -- 00:29:52,587
But, you know, do you think it's right that commissions are paid
00:29:52,587 -- 00:29:56,991
to the agent who sold it and the residuals continue to be sold to that person,
00:29:57,258 -- 00:30:00,428
whether they're retired unless an insurance company intervenes and
00:30:00,928 -- 00:30:01,929
can collect those.
00:30:01,929 -- 00:30:03,731
But as far as I'm concerned, it
00:30:03,731 -- 00:30:06,734
there's a lot of retired people who still collect those small residuals.
00:30:06,934 -- 00:30:10,905
Is there a way the industry could perhaps redirect those residuals?
00:30:11,839 -- 00:30:15,109
Well, I think that is an important issue.
00:30:15,109 -- 00:30:19,547
And there is incentives guidance that we're looking at with our
00:30:20,314 -- 00:30:21,616
Canadian Council of Insurance Regulators.
00:30:21,616 -- 00:30:26,721
So it is an active topic for discussion, but it is very important that we allow
00:30:26,721 -- 00:30:31,559
for a sufficient upfront incentive so that people get the advice
00:30:31,559 -- 00:30:35,863
so they can know what their insurance needs are as well as the second piece.
00:30:35,863 -- 00:30:36,697
What you're getting at
00:30:36,697 -- 00:30:40,401
is making sure that there's the incentive to provide ongoing advice.
00:30:40,535 -- 00:30:43,871
And so that is a careful balancing act when you actually want
00:30:43,871 -- 00:30:46,974
to also minimize in the consumer interests our number one objective.
00:30:47,308 -- 00:30:49,944
You want to minimize the amount of fees that they're paying.
00:30:51,078 -- 00:30:53,147
So there's some balancing there.
00:30:53,147 -- 00:30:54,415
It's a tough one.
00:30:54,415 -- 00:30:56,951
And just finally, to jump back to the MGA channel,
00:30:56,951 -- 00:31:00,187
if MGAs have increased conduct requirements
00:31:00,187 -- 00:31:03,958
such as becoming a license class, will that let insurers off the hook?
00:31:04,759 -- 00:31:07,728
Well, I don't think it ever can, because the contract is
00:31:07,728 -- 00:31:10,731
between the insurer and the end customer.
00:31:10,798 -- 00:31:14,335
It's not like a securities where it is a different a separate instrument
00:31:14,669 -- 00:31:18,739
that is basically created by an issuer or sold by a distributor.
00:31:19,006 -- 00:31:21,242
And then it actually has sort of life outside.
00:31:21,242 -- 00:31:22,977
This is an ongoing contract,
00:31:22,977 -- 00:31:25,980
a contract of utmost good faith between the insurer and the customer.
00:31:26,380 -- 00:31:31,419
And so I think insurers always have to be responsible for their contract
00:31:31,752 -- 00:31:35,690
and through for how it's distributed and how they administer it over the term.
00:31:36,457 -- 00:31:39,760
That reasonable system of compliance doesn't have any exception for that.
00:31:40,161 -- 00:31:44,665
I will say that if to the extent we get more tools over MGAs,
00:31:45,066 -- 00:31:49,336
we'll actually have another way to regulate and get to the conduct
00:31:49,336 -- 00:31:52,673
that we want to see, and then obviously we won't have to put
00:31:52,673 -- 00:31:57,478
maybe as much pressure on insurers because if the MGA is the one
00:31:57,478 -- 00:32:01,415
supervising the agent where we see issues and we can go to that MGA
00:32:01,449 -- 00:32:05,319
and we can get that remedied, that'll be probably more effective than us
00:32:05,319 -- 00:32:07,755
go to the insurer who then
00:32:07,755 -- 00:32:10,825
uses its influence on the MGA and say there could be multiple tiers of MGA.
00:32:10,825 -- 00:32:14,462
So we it's much better if we can do that directly.
00:32:14,462 -- 00:32:17,431
But no, I think it's always going to be appropriate for the insurer
00:32:17,431 -- 00:32:19,099
to have that continuing obligation
00:32:19,099 -- 00:32:22,503
for its sales channels, because if it is the one in the contract.
00:32:23,070 -- 00:32:27,174
Great. Moving over to financial planners and financial advisers,
00:32:27,441 -- 00:32:30,444
also an area that I have been keeping a close eye on,
00:32:30,711 -- 00:32:33,480
many in the investment community is watching it closely, and this is around
00:32:33,480 -- 00:32:39,220
Ontario's Financial Professionals Title Protection Act that was passed in 2019,
00:32:39,220 -- 00:32:42,223
and that requires anyone in the province that wants to use a title,
00:32:42,256 -- 00:32:46,060
financial adviser or financial planner to obtain appropriate credentials
00:32:46,293 -- 00:32:47,695
from an approved provider.
00:32:47,695 -- 00:32:49,029
And since the bill passed,
00:32:49,029 -- 00:32:52,333
you know, FSRA has approved several credentialing bodies,
00:32:52,600 -- 00:32:55,402
and most recently they approved the Canadian Investment
00:32:55,402 -- 00:32:58,672
Regulatory Organization, which I'm going to refer to as CIRO.
00:32:59,006 -- 00:33:02,409
And that's caused a lot of concern for investor advocates,
00:33:02,409 -- 00:33:04,511
particularly around mutual fund licensed advisors.
00:33:04,511 -- 00:33:09,116
So why is FSRA allowing tens of thousands of individuals who are registered by CIRO
00:33:09,116 -- 00:33:12,820
but many considered to be salespeople to use the financial advisor title?
00:33:13,821 -- 00:33:14,722
We're doing it because it
00:33:14,722 -- 00:33:17,725
is demonstrably in the consumer interest
00:33:17,825 -- 00:33:21,762
and it is completely aligned with the regime that exists in law
00:33:21,762 -- 00:33:24,998
and the one that we heavily consulted on in our rules and our guidance.
00:33:25,632 -- 00:33:26,533
So let me take you back.
00:33:26,533 -- 00:33:29,536
Before this regime existed,
00:33:29,737 -- 00:33:32,773
anyone could use the title Financial Advisor, a Planner,
00:33:33,407 -- 00:33:37,077
no education, no credentials, no complaint, no discipline.
00:33:37,878 -- 00:33:40,114
Anybody could use that.
00:33:40,114 -- 00:33:43,117
So everyone agrees that's not good.
00:33:43,150 -- 00:33:46,153
Then let me take you before we had CIRO approved,
00:33:46,420 -- 00:33:49,990
so we now had credentialing bodies and they would basically say,
00:33:50,290 -- 00:33:52,593
we have a course, we have a program we're going to supervise.
00:33:52,593 -- 00:33:55,362
We're going to give it a title credential to this person,
00:33:55,362 -- 00:33:58,365
and they can become a financial advisor or a financial planner.
00:33:58,432 -- 00:34:02,636
But CIRO also had a huge body,
00:34:02,769 -- 00:34:05,772
a larger body of financial advisors than we had.
00:34:06,206 -- 00:34:09,009
They were using sometimes using a Financial Advisor title
00:34:09,009 -- 00:34:12,179
because they were grandfathered or they had a separate credential,
00:34:12,479 -- 00:34:15,849
but in many cases they could also just use the term investment advisors.
00:34:16,350 -- 00:34:18,252
So then we'd have consumers out there going
00:34:18,252 -- 00:34:20,020
Financial Advisor, Investment Advisor.
00:34:20,020 -- 00:34:22,523
What's the difference? They go to our credential check.
00:34:22,523 -- 00:34:25,192
If CIRO is not there, they're not able to find out that
00:34:25,192 -- 00:34:28,228
this person is a mutual fund
00:34:29,396 -- 00:34:31,331
salesperson,
00:34:31,331 -- 00:34:31,732
right?
00:34:31,732 -- 00:34:34,101
And get that knowledge, just go. It's an investment, right?
00:34:34,101 -- 00:34:36,436
There's and they're regulated by CIRO.
00:34:36,436 -- 00:34:37,638
But why CIRO?
00:34:37,638 -- 00:34:38,639
Will CIRO is actually
00:34:38,639 -- 00:34:41,875
the gold standard for many of the things we want to see in credentialing bodies.
00:34:42,409 -- 00:34:46,013
They're overseen by the OSC and the Canadian Securities Administrators.
00:34:46,546 -- 00:34:50,917
They have a very highly developed conduct and discipline framework.
00:34:51,551 -- 00:34:54,421
So the people that are in the CIRO framework,
00:34:54,421 -- 00:34:57,324
yes, they are well overseen, well regulated.
00:34:57,324 -- 00:35:00,394
The issue that some of the consumer advocates have and this is kind of
00:35:00,394 -- 00:35:04,398
like when you give something somebody and they always want more, I understand it.
00:35:05,365 -- 00:35:08,368
They're concerned that some CIRO
00:35:08,802 -- 00:35:11,004
basically licensees
00:35:11,004 -- 00:35:14,007
are basically looking at mutual funds as a sole product.
00:35:14,341 -- 00:35:17,344
But by being in our regime, they have a professional
00:35:17,577 -- 00:35:21,048
code of conduct, of ethics, minimum standards of competency.
00:35:21,048 -- 00:35:24,051
They have to not only understand their product that they sell,
00:35:24,184 -- 00:35:27,421
but they have a responsibility to understand alternative products.
00:35:28,021 -- 00:35:30,624
And I actually think that this is a good sign that CIRO
00:35:30,624 -- 00:35:31,391
the fact that they're willing
00:35:31,391 -- 00:35:34,394
to come into our regime knowing that that is the case,
00:35:34,761 -- 00:35:38,398
there's an opportunity for everybody to bring up the bottom
00:35:38,398 -- 00:35:42,302
end of that competency so that maybe you are only selling mutual funds,
00:35:42,636 -- 00:35:46,139
but you are supposed to be able to say, you know, in your circumstances,
00:35:46,139 -- 00:35:48,074
maybe you need to start buying ETFs
00:35:48,074 -- 00:35:51,077
or stocks or bonds or seek other diversification.
00:35:51,144 -- 00:35:54,147
So we want to get the marketplace to that point in time.
00:35:54,447 -- 00:35:57,918
By having CIRO in, we remove the consumer confusion.
00:35:58,318 -- 00:36:00,787
We have the ability now to get the best out of CIRO
00:36:00,787 -- 00:36:04,491
and bring the other credential bodies up to their standards where they're higher.
00:36:04,891 -- 00:36:06,960
And we'll bring worked with CIRO
00:36:06,960 -- 00:36:08,395
to bring its standards up
00:36:08,395 -- 00:36:10,564
to the higher standards of the other credentialing bodies,
00:36:10,564 -- 00:36:11,665
where they're greater.
00:36:11,665 -- 00:36:14,801
So I think it's to everyone's advantage and it also
00:36:15,535 -- 00:36:18,405
dramatically reduces the startup costs that are being charged
00:36:18,405 -- 00:36:21,808
to credentialing bodies, which I also think is in the interest of those bodies.
00:36:21,975 -- 00:36:23,143
And of course, all their members,
00:36:23,143 -- 00:36:26,947
because their members are the ones who ultimately pay is their concern,
00:36:27,414 -- 00:36:32,419
because CIRO does oversee two different types of advisors is a security license
00:36:32,419 -- 00:36:35,422
and what used to be known as the IROC channel.
00:36:35,455 -- 00:36:38,792
And there's a mutual fund channel concerned that someone may think they're
00:36:38,792 -- 00:36:43,363
talking to a securities licensed adviser, which is very different type of advice.
00:36:44,130 -- 00:36:46,232
Well, that concern exists today, though.
00:36:46,232 -- 00:36:50,337
And so by being in our regime now, because we consulted on this
00:36:50,337 -- 00:36:53,340
and this was broadly supported, is that, yes,
00:36:53,406 -- 00:36:57,877
the MFDA level should be qualified for financial advisors,
00:36:58,378 -- 00:37:01,548
but whenever they're using their credential
00:37:01,981 -- 00:37:03,850
or they're using the title Financial Adviser,
00:37:03,850 -- 00:37:06,386
they also have to say what their credential is.
00:37:06,386 -- 00:37:09,389
It will be apparent through the credential check tool we give
00:37:09,589 -- 00:37:14,094
so that that a consumer can easily find out that that person is different
00:37:14,094 -- 00:37:15,695
than someone who can give a full advice on
00:37:15,695 -- 00:37:19,399
stocks and bonds and investments versus the mutual fund channel only.
00:37:19,666 -- 00:37:22,669
And so that consumer transparency is very important.
00:37:22,702 -- 00:37:26,740
I could do a whole panel on this, so I'll flip over to mortgage
00:37:26,740 -- 00:37:29,976
brokers and then we're going to see if we can get to some audience questions.
00:37:30,210 -- 00:37:33,680
Obviously, a big topic in Canada right now is with housing prices,
00:37:33,947 -- 00:37:36,783
mortgage affordability and availability is a big issue.
00:37:36,783 -- 00:37:40,386
Are you concerned that this will cause increased risks and conduct
00:37:40,386 -- 00:37:43,389
issues in residential mortgages?
00:37:43,456 -- 00:37:45,158
Yeah, well, it always does.
00:37:45,158 -- 00:37:45,492
Every time
00:37:45,492 -- 00:37:49,529
there's stress in the marketplace, there's incentive for aberrant behaviors
00:37:49,896 -- 00:37:52,265
and also part of it is like Warren Buffett said,
00:37:52,265 -- 00:37:54,834
“when the tide goes out, you see who's been swimming naked.”
00:37:54,834 -- 00:37:59,172
So there will be people who will do fraud for mortgage
00:37:59,172 -- 00:38:02,342
because that's the only way they can get their house or keep their house.
00:38:03,042 -- 00:38:06,479
And so they will shade the information to try
00:38:06,479 -- 00:38:09,482
and do what they have to do and what we're concerned.
00:38:09,549 -- 00:38:12,252
about is the mortgage brokers that we supervise.
00:38:12,252 -- 00:38:15,154
Their volumes are always going to go down and they also
00:38:15,154 -- 00:38:18,191
will want to try and help that person who's having trouble getting a mortgage.
00:38:18,625 -- 00:38:19,659
And so it may even
00:38:19,659 -- 00:38:23,463
be out of good intentions, but they may not they may cut some corners
00:38:23,463 -- 00:38:26,766
in not providing the full information package to the financial institution.
00:38:27,200 -- 00:38:29,269
So we are concerned about from that perspective.
00:38:29,269 -- 00:38:30,803
We're also concerned about it
00:38:30,803 -- 00:38:34,374
from the increasing amount we're seeing in the private mortgage market.
00:38:34,974 -- 00:38:36,576
And we've put an education on that.
00:38:36,576 -- 00:38:39,045
A private mortgage is not a long term solution.
00:38:39,045 -- 00:38:41,848
They're shorter term, they're higher cost.
00:38:41,848 -- 00:38:45,218
They are not a way that you're going to end up owning a house after 25 years.
00:38:45,885 -- 00:38:49,022
It is a if it's a bridge to somewhere to a sale,
00:38:49,355 -- 00:38:52,725
to basically establishing your income so that you can get a more
00:38:52,725 -- 00:38:55,762
routine mortgage at better rates, longer terms.
00:38:56,229 -- 00:38:59,265
It is a viable alternative and so we've put out
00:38:59,399 -- 00:39:02,535
information for that for users of private mortgages.
00:39:02,802 -- 00:39:06,939
We've created a private mortgage agent licensing tier
00:39:06,939 -- 00:39:09,942
because they should have extras skills and experience,
00:39:09,942 -- 00:39:11,644
because you have to remember they're also dealing with
00:39:11,644 -- 00:39:14,647
not a sophisticated institution that protects themselves.
00:39:14,947 -- 00:39:17,250
They're dealing then with private investors.
00:39:17,250 -- 00:39:19,419
And so those private investors are also at risk.
00:39:19,419 -- 00:39:20,887
There's been some things in the paper
00:39:20,887 -- 00:39:23,890
you can see how quickly that some of these deals can go bad.
00:39:23,990 -- 00:39:25,158
And there is a history of that.
00:39:25,158 -- 00:39:28,628
So we've worked very hard to make sure that not only are we helping
00:39:28,961 -- 00:39:33,099
borrowers get access, private mortgages as well as institutional mortgages,
00:39:33,666 -- 00:39:38,137
but investors can protect themselves if they're going to participate in that
00:39:38,137 -- 00:39:41,474
because it is a higher yield but higher risk.
00:39:42,742 -- 00:39:43,509
And we end it
00:39:43,509 -- 00:39:47,780
exactly on the zero we're going to see I'm assuming it's going to pop up here.
00:39:47,780 -- 00:39:49,682
The questions.
00:39:49,682 -- 00:39:52,685
there we go.
00:39:52,885 -- 00:39:57,924
Is FSRA are working with the Ministry of Finance to modernize the Insurance Act.
00:39:57,924 -- 00:40:01,527
And this includes regulating unlicensed insurance intermediaries
00:40:01,527 -- 00:40:04,530
and updating the fire part of the act
00:40:05,965 -- 00:40:08,968
fire part of the act.
00:40:09,368 -- 00:40:11,203
I'm not quite sure what that is.
00:40:11,203 -- 00:40:13,973
If it's about the fire mutuals.
00:40:13,973 -- 00:40:16,976
That could be what it's about.
00:40:17,076 -- 00:40:19,812
I never thought that out of the fire part of the act.
00:40:19,812 -- 00:40:22,682
So the decision on
00:40:22,682 -- 00:40:26,285
what legislation will be amended is a government decision.
00:40:26,419 -- 00:40:30,556
We provide our advice to the ministry on where we think it is appropriate
00:40:30,556 -- 00:40:32,491
that there should be action taken.
00:40:32,491 -- 00:40:36,062
I do think that the Insurance Act in Ontario, when it compared
00:40:36,062 -- 00:40:39,498
to some of our provincial peers or federal, there it is.
00:40:39,565 -- 00:40:42,068
There are sections that are in need of an update.
00:40:42,068 -- 00:40:45,037
For example, we talked about the absence of an MGA licensing class
00:40:45,037 -- 00:40:48,040
when most insurance is now distributed through MGAs.
00:40:48,307 -- 00:40:52,044
So we do think that, you know, we're on record saying that, yes,
00:40:52,044 -- 00:40:55,681
this is something we should look at, but we do have existing regulatory tools
00:40:55,681 -- 00:40:58,150
and we will use those existing regulatory tools
00:40:58,150 -- 00:41:01,754
regardless of whether the Insurance Act is updated, because we have
00:41:01,754 -- 00:41:04,156
we have to protect the consumers and make the market function.
00:41:04,156 -- 00:41:05,658
But yes, I,
00:41:05,658 -- 00:41:07,660
I certainly think the minister wouldn't
00:41:07,660 -- 00:41:12,098
be shocked if I was on record saying that the Insurance Act is a piece
00:41:12,098 -- 00:41:15,201
of legislation that could probably use a review in the near future.
00:41:16,836 -- 00:41:19,772
Our next question is can a Credit Union access
00:41:19,772 -- 00:41:24,810
emergency liquidity through the Deposit Insurance Relief Fund?
00:41:24,810 -- 00:41:26,912
I read that out. It was an acronym.
00:41:26,912 -- 00:41:31,016
If there was a very short term crisis, this person is asking for a friend.
00:41:31,584 -- 00:41:34,620
Well, let's hope
00:41:34,620 -- 00:41:37,623
that friend isn't a Credit Union.
00:41:38,357 -- 00:41:42,394
So we do actually have an incredible amount of flexibility
00:41:42,394 -- 00:41:46,498
under the Credit Union Cassie Populaire Act to use the DIRF to provide
00:41:46,498 -- 00:41:50,336
financial assistance where we think it's in the overall interest.
00:41:50,569 -- 00:41:53,572
So our objects are to minimize loss to the DIRF.
00:41:53,572 -- 00:41:55,841
So basically, if it's a little bit of money now
00:41:55,841 -- 00:41:57,776
will avoid a bigger problem later.
00:41:57,776 -- 00:42:01,747
Our objects are also good financial stability, strong, stable sector.
00:42:02,114 -- 00:42:05,718
So we will actually use the DIRF we have we're empowered to do that
00:42:05,718 -- 00:42:07,253
in a creative way.
00:42:07,253 -- 00:42:11,857
In the PACE Credit Union, for example, we actually did provide a backstop
00:42:11,857 -- 00:42:15,527
liquidity facility so that the members of PACE Credit Union,
00:42:15,527 -- 00:42:17,229
even when it was going through its turmoil,
00:42:17,229 -- 00:42:21,200
we put $500 million on the line for a, you know, less than $1,000,000,000
00:42:21,200 -- 00:42:21,700
Credit Union.
00:42:21,700 -- 00:42:23,135
So that's a lot of money.
00:42:23,135 -- 00:42:24,903
But we wanted to know that there was
00:42:26,372 -- 00:42:28,574
a big gun there if it was ever necessary,
00:42:28,574 -- 00:42:31,577
so they didn't have to worry that there was going to be a liquidity problem.
00:42:31,644 -- 00:42:34,980
So we are willing to use the DIRF we also it's a matter of public record,
00:42:35,014 -- 00:42:38,951
have a 2 billion line of credit from the provincial government
00:42:39,184 -- 00:42:42,187
that we could also use that to supplement if we needed more funds.
00:42:42,254 -- 00:42:45,324
You know, it's just one of those things you want to have the trucks
00:42:45,324 -- 00:42:49,128
in the firehouse and we are looking at getting
00:42:50,062 -- 00:42:54,500
proper access to emergency liquidity with the Bank of Canada through its
00:42:54,500 -- 00:42:59,805
lending programs, including emergency lending or liquidity assistance.
00:42:59,805 -- 00:43:01,874
And that is something that has been facilitated
00:43:01,874 -- 00:43:05,477
by the federal government by recent changes to the Payments Canada Act.
00:43:05,878 -- 00:43:09,348
So we do care very deeply about these issues and we
00:43:09,348 -- 00:43:12,351
but we do think that there is adequate liquidity and we do have the
00:43:12,851 -- 00:43:16,555
legal tools to be able to use it to provide that short term funding.
00:43:17,556 -- 00:43:18,757
And the next question is
00:43:18,757 -- 00:43:22,327
the regulatory response to AI may take some time to finalize.
00:43:22,594 -- 00:43:25,898
Many businesses will make large investments over the next short time
00:43:26,131 -- 00:43:27,799
into these types of technologies.
00:43:27,799 -- 00:43:31,403
How we're financial service businesses expected to make these investments
00:43:31,670 -- 00:43:36,308
while moderating concerns over moderating concerns that technology or features
00:43:36,308 -- 00:43:40,512
will eventually be prohibited subsequent to investment or implementation.
00:43:41,580 -- 00:43:44,650
Well, the issue of investment in technology
00:43:44,816 -- 00:43:48,086
will be prohibited it is a difficult one for us to manage
00:43:48,086 -- 00:43:51,623
because a lot of that prohibition will not be by us as a regulator.
00:43:51,623 -- 00:43:56,495
It is possible, but most of that's probably in what is a fair use of data.
00:43:56,495 -- 00:43:59,531
What types of algorithms are, let's say, discriminatory.
00:43:59,898 -- 00:44:05,537
And so it gets into things that we may not be the person prohibiting it.
00:44:06,371 -- 00:44:09,374
So it is up to the financial institutions to basically
00:44:09,608 -- 00:44:12,577
go down the AI and the data path wisely.
00:44:13,178 -- 00:44:16,281
A few years ago, I was actually responsible at
00:44:16,448 -- 00:44:18,784
one of the big banks here for overseeing all their models.
00:44:18,784 -- 00:44:20,919
So this isn't really new.
00:44:20,919 -- 00:44:24,823
I know it's in the press a lot now, but models that learned from themselves
00:44:24,823 -- 00:44:27,693
and from data and information have been around for years.
00:44:27,693 -- 00:44:31,430
And models based upon consumer information were being used
00:44:31,463 -- 00:44:35,033
and by large financial institutions in this country for many years.
00:44:35,467 -- 00:44:38,470
So these are not new issues.
00:44:38,904 -- 00:44:41,907
What is new is the breadth of the application
00:44:41,907 -- 00:44:45,577
and how in-your-face it is when you're seeing things like, you know,
00:44:45,644 -- 00:44:49,714
ChatGPT, just sort of those things that have learned from learning
00:44:49,714 -- 00:44:51,483
from huge databases.
00:44:51,483 -- 00:44:54,052
So I think these issues will continue to evolve,
00:44:54,052 -- 00:44:57,556
but I think it's mostly not the conduct and prudential regulator,
00:44:57,589 -- 00:45:00,592
although we would have concerns if we thought were privacy abuses,
00:45:00,725 -- 00:45:03,962
but we'll be the privacy regulator that the consumer data regulators,
00:45:04,262 -- 00:45:08,166
they're going to be the ones that are most creating the boundaries.
00:45:08,166 -- 00:45:12,070
And it is true there is uncertainty because people will need protection
00:45:12,070 -- 00:45:15,340
from issues which we probably haven't fully appreciated at this point.
00:45:16,208 -- 00:45:19,744
We're following the MGA thematic review, did FSRA
00:45:19,744 -- 00:45:23,582
conclude that additional reviews were required of the insurers involved?
00:45:25,016 -- 00:45:28,420
Yes. So we actually went through a couple different stages.
00:45:28,420 -- 00:45:31,423
This the first one was more just learning about the channels and MGAS.
00:45:31,690 -- 00:45:35,827
And then we did start to drill down on particular insurers and MGAs.
00:45:36,127 -- 00:45:39,130
And that's also been complemented by a great innovation
00:45:39,130 -- 00:45:41,766
which our insurance conduct team has led along.
00:45:41,766 -- 00:45:45,670
We call it cooperative supervisor reviews, where we go to major insurers
00:45:46,104 -- 00:45:47,672
involving the other provinces.
00:45:47,672 -- 00:45:48,573
We want to participate.
00:45:48,573 -- 00:45:50,976
The MF in particular is a great partner with this,
00:45:50,976 -- 00:45:52,410
and we go out and we do these reviews.
00:45:52,410 -- 00:45:58,049
So, yes, there are multiple layers to this and we are now building the conduct,
00:45:58,049 -- 00:46:02,020
supervision, resources in Life and Health that this isn't a one off.
00:46:02,520 -- 00:46:05,390
This is going to be a permanent feature of how we're going
00:46:05,390 -- 00:46:08,827
to basically supervise those insurers and manage that marketplace.
00:46:09,527 -- 00:46:12,564
I'm going to squeeze a question in about the Financial Planners
00:46:12,564 -- 00:46:15,567
Protection Act around Advocis.
00:46:15,934 -- 00:46:19,237
So what is the status of Advocis as a credentialing body in light of its
00:46:19,237 -- 00:46:23,274
financial situation and the legal troubles that have been reported in the media?
00:46:23,541 -- 00:46:26,444
You know, how does FSRA ensure the viability of credentialing bodies?
00:46:26,444 -- 00:46:28,813
And are you monitoring the legal outcome of that? Because
00:46:30,014 -- 00:46:32,751
while it is a credentialing body and so we have an obligation
00:46:32,751 -- 00:46:36,588
to watch what's going on there, they've been very forthcoming.
00:46:36,588 -- 00:46:40,792
The new management has been engaging with us whenever we've asked.
00:46:40,792 -- 00:46:44,996
They've been even proactive that they are a credentialing body in good standing.
00:46:44,996 -- 00:46:46,865
Their fees are fully paid.
00:46:46,865 -- 00:46:50,935
So there are you know, the people are using titles through them,
00:46:51,035 -- 00:46:54,038
should have confidence that that continues to exist.
00:46:54,038 -- 00:46:56,374
We have no reason to believe that they won't continue to do this.
00:46:56,374 -- 00:46:59,244
We think it is an important part of their business.
00:46:59,244 -- 00:47:04,048
They were an early adopter in wanting to be a credentialing body,
00:47:04,048 -- 00:47:06,651
they were very helpful through the process.
00:47:06,651 -- 00:47:08,286
Like all credentialing bodies
00:47:08,286 -- 00:47:10,288
I talked about, CIRO had some great strengths,
00:47:10,288 -- 00:47:12,757
but also some areas that maybe they aren't strong as other credential bodies.
00:47:12,757 -- 00:47:17,228
Advocis also has its weaknesses, and so we continue to be focused
00:47:17,228 -- 00:47:18,730
on supervising those.
00:47:18,730 -- 00:47:22,834
And of course, any organization that's going through change at the top,
00:47:23,234 -- 00:47:26,170
we're making sure that they're not cutting back on necessary resources
00:47:26,170 -- 00:47:29,173
that's still providing governance, that their eye isn't off the ball.
00:47:29,407 -- 00:47:33,611
And so we'll deal with that if we have to, through the normal supervisory tools.
00:47:34,178 -- 00:47:35,780
And we do keep an eye though, out.
00:47:35,780 -- 00:47:38,816
So, you know, we do have we work on plans
00:47:38,816 -- 00:47:41,819
that if a credential body ever does go away, what will we do?
00:47:41,819 -- 00:47:43,087
Because we will want to see that
00:47:43,087 -- 00:47:46,624
their title holders have a pathway to continued use of the title,
00:47:46,925 -- 00:47:49,360
even if the credentialing body that there are issues.
00:47:49,360 -- 00:47:52,363
But Advocis, it's all in good standing right now.
00:47:52,697 -- 00:47:57,035
Going back to an audience question is on the topic of climate change
00:47:57,035 -- 00:48:01,039
has been top of mind for other Canadian regulators, such as OSFI and the CSA,
00:48:01,506 -- 00:48:05,009
and these regulators have been requiring climate related disclosures from their
00:48:05,009 -- 00:48:08,680
regulated entities, such as disclosing information about financed emissions.
00:48:08,946 -- 00:48:11,149
Is FSRA headed in this direction as well?
00:48:13,584 -- 00:48:15,453
I don't want to disagree with the regulators,
00:48:15,453 -- 00:48:20,558
but most financial institutions that climate risk is derived risk
00:48:21,159 -- 00:48:24,228
because there are these they do have their own heating
00:48:24,228 -- 00:48:28,299
of their buildings, for example, but they're not actually producing
00:48:29,467 -- 00:48:32,170
things that generate carbon.
00:48:32,170 -- 00:48:35,173
They do provide financing, which can.
00:48:35,673 -- 00:48:37,608
So that's why I say it's a derived risk.
00:48:37,608 -- 00:48:41,579
And so their business activities have an influence on
00:48:43,614 -- 00:48:45,817
environmental issues we're dealing with.
00:48:45,817 -- 00:48:48,286
We're very concerned about it from a perspective of
00:48:48,286 -- 00:48:52,757
are they understanding climate change and environmental concerns as a risk.
00:48:53,558 -- 00:48:56,527
So if you're a Pension, for example,
00:48:56,627 -- 00:48:58,162
and you're investing some of those hundreds
00:48:58,162 -- 00:49:01,165
of billions of dollars I talked about, where are you investing them?
00:49:01,265 -- 00:49:04,335
And is there a risk that you are not diversified
00:49:04,635 -- 00:49:07,939
sufficiently and that you actually may end up with stranded assets?
00:49:08,406 -- 00:49:11,409
So that's from a good investment risk policy point of view
00:49:11,909 -- 00:49:15,947
we do leave it to others to take a perspective on climate
00:49:15,947 -- 00:49:18,950
that there should be no investment in oil and gas.
00:49:19,250 -- 00:49:23,321
We want to see the organizations being prudent in what they're doing.
00:49:23,554 -- 00:49:26,057
And so we're not against an institution that, let's say,
00:49:26,057 -- 00:49:29,060
a pension fund that says we don't want to invest in oil and gas anymore.
00:49:29,060 -- 00:49:32,697
But that's we don't see that as our role to tell them whether they should
00:49:32,697 -- 00:49:33,998
or should not do that.
00:49:33,998 -- 00:49:36,968
Our role is to make sure that they're protecting that.
00:49:36,968 -- 00:49:39,937
We're seeing that they're protecting the rights and benefits of their members.
00:49:40,171 -- 00:49:43,174
So obviously, if someone has too much exposure,
00:49:43,240 -- 00:49:47,278
unmanaged exposure and diversified exposure, that would be our primary concern.
00:49:49,413 -- 00:49:50,381
This is a great question.
00:49:50,381 -- 00:49:54,618
Does FSRA intend on modernizing PNC in Life Agent Licensing?
00:49:54,752 -- 00:49:58,689
This would include introducing CE continuing education requirements
00:49:58,689 -- 00:50:02,093
and licensing levels like mortgage brokers recently.
00:50:03,060 -- 00:50:04,528
Yeah, that is a great comment.
00:50:04,528 -- 00:50:09,300
It is something that we do look across our different regimes.
00:50:09,900 -- 00:50:12,069
I would say
00:50:12,069 -- 00:50:14,972
in the insurance area, yes, we could do more
00:50:14,972 -- 00:50:18,409
potentially at the licensing level, but I alluded to that
00:50:18,409 -- 00:50:22,113
we actually don't have true product suitability requirements.
00:50:22,546 -- 00:50:25,516
And so maybe so you have to kind of pick your battles
00:50:25,516 -- 00:50:28,519
as to where you think your biggest impact is going to be.
00:50:30,321 -- 00:50:32,790
I think we might be done.
00:50:32,790 -- 00:50:33,724
I lied.
00:50:33,724 -- 00:50:35,626
What are you doing to raise FSRA's awareness
00:50:35,626 -- 00:50:38,662
among consumers in Ontario, particularly the most vulnerable,
00:50:38,696 -- 00:50:43,400
whose first language is not English and who may not have easy online access?
00:50:44,768 -- 00:50:47,571
Yeah, FSRA awareness actually is a bit of a concern.
00:50:47,571 -- 00:50:50,407
Some of the consumer research I talked about in the first question,
00:50:50,407 -- 00:50:53,410
most people don't know who we are,
00:50:54,178 -- 00:50:56,814
which is of course, a little upsetting to me.
00:50:56,814 -- 00:50:58,916
My kids kind of know who I am, but they don't
00:50:58,916 -- 00:51:00,918
watch the videos on our website.
00:51:00,918 -- 00:51:02,152
They don't really know what I do.
00:51:02,152 -- 00:51:04,455
I think most regulators would fall into that bucket.
00:51:04,455 -- 00:51:07,458
Yes. So
00:51:07,691 -- 00:51:10,461
we think and that's why something like the public registry,
00:51:10,461 -- 00:51:13,430
we're trying to focus on credential check.
00:51:13,430 -- 00:51:17,268
And we actually have targeted strategies which don't cost a lot of money.
00:51:17,268 -- 00:51:20,271
So we don't we're not going to run ads on the Super Bowl,
00:51:20,537 -- 00:51:24,074
but we do things in media and particularly search related
00:51:24,308 -- 00:51:26,944
so that where we do have some information out there,
00:51:26,944 -- 00:51:30,247
if someone does a search on getting a private mortgage
00:51:30,247 -- 00:51:34,585
or buying a life insurance policy or finding a financial adviser,
00:51:34,918 -- 00:51:38,055
we want our information to come up quickly.
00:51:38,322 -- 00:51:38,989
Right.
00:51:38,989 -- 00:51:41,959
So whether it's top or not, I never know whether we're the ones who are going
00:51:41,959 -- 00:51:45,295
to pay enough to get to the top billing, but we want it to be on that front page
00:51:45,896 -- 00:51:48,232
and we think that that will make us more accessible.
00:51:48,232 -- 00:51:52,269
And it isn't, even though personally, I'd love people to know who FSRA is, it's
00:51:52,269 -- 00:51:52,569
not really
00:51:52,569 -- 00:51:56,140
that important to me as long as they find the information that they need.
00:51:56,840 -- 00:51:59,943
Think about the financial services that people are buying.
00:52:00,444 -- 00:52:02,279
They're often very episodic in their life.
00:52:02,279 -- 00:52:03,547
So they're event driven.
00:52:03,547 -- 00:52:05,249
You know, you're getting married.
00:52:05,249 -- 00:52:08,218
And so you're thinking about another person in your life or having a child.
00:52:08,218 -- 00:52:09,720
So you think about Life Insurance.
00:52:09,720 -- 00:52:11,321
You're buying a house for the first time.
00:52:11,321 -- 00:52:12,856
So you're thinking about a Mortgage.
00:52:12,856 -- 00:52:16,393
You're starting to think about your kids going to school or your retirement,
00:52:16,393 -- 00:52:17,795
so you're starting to save.
00:52:17,795 -- 00:52:20,197
So those are all big life changes.
00:52:20,197 -- 00:52:23,934
And so our information has to be there when you need it.
00:52:24,301 -- 00:52:27,371
I do think there's a great role for educating people,
00:52:27,371 -- 00:52:30,374
even if those are coming through school, giving them some basic grounding.
00:52:30,407 -- 00:52:34,178
But the truth is, if you don't use knowledge, it tends to atrophy.
00:52:34,444 -- 00:52:37,447
And so hopefully, though, we can give them enough
00:52:37,714 -- 00:52:40,517
basic knowledge through their education that then they at least know
00:52:40,517 -- 00:52:43,520
how to look for it when one of those life events is happening.
00:52:43,520 -- 00:52:47,558
And so our goal at FSRA is and we're doing some very simple things,
00:52:47,858 -- 00:52:50,827
it's like, if you're going to get a mortgage,
00:52:50,961 -- 00:52:53,964
here's what you need to ask about a Life Insurance policy.
00:52:53,997 -- 00:52:55,732
Here's what you need to ask.
00:52:55,732 -- 00:52:57,501
What's the value of a pension?
00:52:57,501 -- 00:53:00,971
And so that type of information where it's targeted and,
00:53:01,672 -- 00:53:04,074
you know, in a way that people can easily consume.
00:53:04,074 -- 00:53:07,477
So on a on a page basically, not something that's long and complicated.
00:53:07,744 -- 00:53:10,147
So it's very different when we're dealing with consumers,
00:53:10,147 -- 00:53:12,115
then we're dealing with the regulated sectors
00:53:12,115 -- 00:53:15,786
where the level of language, the complexity, we have to have to deal
00:53:15,786 -- 00:53:20,290
with that. So we're very optimistic that we will get our name out increasingly.
00:53:20,724 -- 00:53:23,994
We'll get our information out.
00:53:23,994 -- 00:53:26,496
And regardless of whether it's our name and our brand,
00:53:26,496 -- 00:53:29,900
even only the sectors know who we are, that's fine as long as the
00:53:29,900 -- 00:53:30,968
consumers get what they need.
00:53:31,969 -- 00:53:34,504
So I think we have enough time to end on Credit Unions.
00:53:34,504 -- 00:53:37,341
And I'm going to ask sort of a multi-pronged question here
00:53:37,341 -- 00:53:38,608
to the Credit Unions.
00:53:38,608 -- 00:53:42,379
So what's your position on Credit Unions moving to the federal regime?
00:53:42,813 -- 00:53:45,849
As well does FSRA want to continue regulating Credit Unions?
00:53:45,849 -- 00:53:48,852
And do you see any further consolidation among the Credit Unions?
00:53:49,753 -- 00:53:52,756
So credit unions, it all comes back to our objects,
00:53:53,190 -- 00:53:56,093
our objects, our basically about making sure
00:53:56,093 -- 00:53:59,930
the stability in the sector is strong, innovative, competitive,
00:54:01,231 -- 00:54:04,601
the DIRF and Credit Unions because it's a co-insurance plan and not exposed to
00:54:04,601 -- 00:54:08,338
loss members are protected, you know, from a conduct perspective.
00:54:08,772 -- 00:54:12,709
And so we look at those objects and they really drive the answer
00:54:12,709 -- 00:54:14,244
to all those questions.
00:54:14,244 -- 00:54:17,013
So if a Credit Union
00:54:17,013 -- 00:54:20,016
does want to go federal, that's a choice for its members.
00:54:20,750 -- 00:54:21,485
But we have
00:54:22,419 -- 00:54:25,422
a say in it because we have to think about the stability
00:54:25,489 -- 00:54:29,359
of the overall Credit Union sector in Ontario.
00:54:29,993 -- 00:54:32,529
And so we will have
00:54:32,529 -- 00:54:37,100
you know, an interesting debate about what does it mean if major Credit Unions
00:54:37,367 -- 00:54:40,370
do start to go federal for the stability of the sector.
00:54:40,637 -- 00:54:44,407
So I'm not precluding that discussion, but it is important for us
00:54:44,407 -- 00:54:47,811
to take our object very seriously when we're reviewing those decisions.
00:54:48,578 -- 00:54:50,814
What I think is really important, though, is we're trying
00:54:50,814 -- 00:54:53,817
to create what I call the Ontario advantage.
00:54:53,950 -- 00:54:58,321
The Ontario advantages that we believe we are developing a world class system
00:54:58,655 -- 00:55:01,658
for the regulation and supervision of Credit Unions in Ontario.
00:55:01,791 -- 00:55:05,595
It will be data based, it will be principles based, risk based supervision.
00:55:05,929 -- 00:55:08,798
It's going to make sure that we're not in there just checking loan files,
00:55:08,798 -- 00:55:12,636
that we're looking at the policies and processes within a Credit Union about
00:55:12,869 -- 00:55:14,971
they do their business, that they're members,
00:55:14,971 -- 00:55:16,740
they have codes of conduct that they're following.
00:55:16,740 -- 00:55:19,075
So the members are honored and well protected.
00:55:19,075 -- 00:55:20,710
We think that with that,
00:55:20,710 -- 00:55:22,712
some of the things I talked about with the Deposit Insurance
00:55:22,712 -- 00:55:26,282
Reserve Fund, making sure that there's good liquidity in the system, good regulatory
00:55:26,282 -- 00:55:29,719
tools that we do have to resolve a Credit Union, all that will give us
00:55:29,719 -- 00:55:34,157
a great Credit Union system and I think it will the Ontario advantage
00:55:34,591 -- 00:55:38,828
and the Credit Unions will want to stay so we're not inundated.
00:55:38,828 -- 00:55:41,798
I don't even know if we've ever received an application to go federal.
00:55:41,831 -- 00:55:46,870
Interestingly, most of the Credit Union to get to that size,
00:55:47,170 -- 00:55:49,005
they've realize that they can create a bank sub
00:55:49,005 -- 00:55:52,409
which gives them a federal charter, and so it gives them all the advantages
00:55:52,409 -- 00:55:55,779
if they need to go to provincial without actually changing
00:55:56,012 -- 00:55:57,914
their jurisdiction of incorporation.
00:55:57,914 -- 00:55:59,215
That's different than some of the B.C.
00:55:59,215 -- 00:56:01,251
Credit Unions where they have went federal.
00:56:01,251 -- 00:56:04,354
So you know, we're not against going federal,
00:56:04,354 -- 00:56:07,323
but we will always view it through our objects.
00:56:07,323 -- 00:56:10,193
What is the best for that credit union and for the system
00:56:11,327 -- 00:56:11,961
that also.
00:56:11,961 -- 00:56:13,897
So do we want to continue regulating Credit Unions?
00:56:13,897 -- 00:56:15,932
Yeah, it's our job.
00:56:15,932 -- 00:56:17,467
I mean, those are our objects.
00:56:17,467 -- 00:56:20,470
It's not a choice. You don't get a choice.
00:56:21,037 -- 00:56:22,372
You sign up to be a regulator.
00:56:22,372 -- 00:56:24,607
You look at your statute, you have objects.
00:56:24,607 -- 00:56:26,276
We do that. That's what we do for a living.
00:56:26,276 -- 00:56:29,479
So want is not it doesn't come into it.
00:56:29,913 -- 00:56:34,050
As to consolidation, sure, there's been a ton of consolidation
00:56:34,050 -- 00:56:37,053
of Credit Union sector and we do expect it's going to continue.
00:56:37,353 -- 00:56:41,090
But we don't have a view on what is the right number of Credit Unions
00:56:41,090 -- 00:56:43,159
or what is the right size of a Credit Union.
00:56:43,159 -- 00:56:46,796
We think obviously is a trend to larger because they can offer more products
00:56:46,796 -- 00:56:49,799
and services that can average down overhead costs.
00:56:49,899 -- 00:56:54,404
So there's there are advantages, but let's face it, there are many smaller
00:56:54,404 -- 00:56:57,407
and mid-sized Credit Unions that have very successful business models.
00:56:57,574 -- 00:56:59,642
They serve their communities.
00:56:59,642 -- 00:57:04,280
Credit Unions are very important source of competition to other financial
00:57:04,280 -- 00:57:07,317
institutions and understanding the needs of their members.
00:57:07,317 -- 00:57:09,018
That is probably their most unique
00:57:09,018 -- 00:57:11,287
selling proposition that I've seen over the years
00:57:11,287 -- 00:57:14,290
is that they work harder to understand their member needs
00:57:14,290 -- 00:57:15,858
and how they serve them.
00:57:15,858 -- 00:57:19,595
And so with that, yeah, we may continue with some smaller Credit Unions
00:57:19,595 -- 00:57:23,766
for forever, but yes, more consolidation.
00:57:23,933 -- 00:57:26,936
Yeah, I do think that that is probably going to happen.
00:57:27,136 -- 00:57:31,641
But we want the marketplace to essentially try and decide that sometimes we may
00:57:32,241 -- 00:57:34,544
of course we have to be involved in the decisions on mergers,
00:57:34,544 -- 00:57:37,313
but that's something that we're not out there advocating for.
00:57:37,313 -- 00:57:41,617
We're not going to try and centrally plan this like we have an industrial policy
00:57:41,617 -- 00:57:45,321
and we're going to decide that it should be 15 Credit Unions in Ontario or 50.
00:57:45,855 -- 00:57:49,892
We want to let the marketplace decide that what we supervise and we regulate it,
00:57:50,093 -- 00:57:51,994
always keeping our objects in mind.
00:57:51,994 -- 00:57:52,728
Right.
00:57:52,728 -- 00:57:55,164
And we are officially out of time.
00:57:55,164 -- 00:57:56,799
I appreciate all the comments.
00:57:56,799 -- 00:57:58,201
If you didn't get your question answered,
00:57:58,201 -- 00:58:00,002
I think we're just going to be holding on to them
00:58:00,002 -- 00:58:02,605
and we'll look to get a response and post them online.
00:58:02,605 -- 00:58:05,475
You can also reach out to me as well [email protected]
00:58:05,475 -- 00:58:08,845
Mark, thank you so much for joining me on stage today.
00:58:08,978 -- 00:58:10,112
It's been fantastic.
00:58:10,112 -- 00:58:13,483
Thank you Clara I’ve enjoyed it.
00:00:05,171 -- 00:00:05,605
All right.
00:00:05,605 -- 00:00:08,174
Welcome back everyone.
00:00:08,174 -- 00:00:09,676
As many of you know today,
00:00:09,676 -- 00:00:11,611
you can't really turn on the news
00:00:11,611 -- 00:00:15,482
without seeing the impact of climate change.
00:00:15,482 -- 00:00:19,586
And it has massive impacts across financial services.
00:00:20,320 -- 00:00:23,623
So today, facilitating our expert panel for climate
00:00:23,623 -- 00:00:26,726
discussion is the Head of Financial Institutions
00:00:26,726 -- 00:00:27,727
and Mortgage Broker
00:00:27,727 -- 00:00:31,698
Conduct and Media Superstar, Antoinette Leung.
00:00:32,298 -- 00:00:34,667
Introduce your panel.
00:00:34,667 -- 00:00:37,303
Sure. Thank you Judy.
00:00:37,303 -- 00:00:41,307
I'm very excited and delighted to moderate this panel.
00:00:41,608 -- 00:00:44,244
As a consumer protection agency,
00:00:44,244 -- 00:00:46,146
FSRA vision is financial
00:00:46,146 -- 00:00:48,648
safety, fairness and choice for consumers.
00:00:48,648 -- 00:00:51,684
And we know that climate is impacting
00:00:51,684 -- 00:00:54,287
everyone as consumers as well as business.
00:00:54,287 -- 00:00:56,789
So I'm excited that we have two experts
00:00:56,789 -- 00:00:58,358
with us today to talk about
00:00:58,358 -- 00:01:02,262
how businesses can adapt their business model,
00:01:02,262 -- 00:01:05,498
to continue to provide services for consumers.
00:01:05,498 -- 00:01:09,369
And, I'd like to introduce our two experts.
00:01:09,369 -- 00:01:09,836
Dr.
00:01:09,836 -- 00:01:10,169
Blair
00:01:10,169 -- 00:01:12,405
Feltmate is the Head of the Intact Centre
00:01:12,405 -- 00:01:15,808
on Climate Adaptation at the University of Waterloo.
00:01:15,808 -- 00:01:19,412
And Paul Kovacs is the Founder and Executive Director
00:01:19,412 -- 00:01:21,281
of the Institute for Catastrophic
00:01:21,281 -- 00:01:23,783
Loss Reduction at Western University.
00:01:23,783 -- 00:01:26,352
Their full bios is on our conference website.
00:01:26,352 -- 00:01:30,056
So I want to jump right into our discussion.
00:01:30,056 -- 00:01:31,758
So maybe before we start,
00:01:31,758 -- 00:01:33,192
I would like to ask each of
00:01:33,192 -- 00:01:35,228
you to set the stage for us,
00:01:36,362 -- 00:01:38,631
about what is physical climate risk?
00:01:38,631 -- 00:01:39,565
What are some of the things
00:01:39,565 -- 00:01:41,467
that we're currently facing?
00:01:41,467 -- 00:01:43,903
Maybe I'll start with you, Blair. Sure.
00:01:43,903 -- 00:01:44,871
Thank you very much.
00:01:44,871 -- 00:01:47,073
And I am, pleased to be here this morning
00:01:47,073 -- 00:01:49,208
to talk about, climate change.
00:01:49,208 -- 00:01:50,343
And I thought I'd start out
00:01:50,343 -- 00:01:51,711
with something that, quite frankly,
00:01:51,711 -- 00:01:52,612
I can tell you right now
00:01:52,612 -- 00:01:53,746
for the first
00:01:53,746 -- 00:01:54,747
couple of minutes is going to be
00:01:54,747 -- 00:01:56,249
a little bit depressing,
00:01:56,249 -- 00:01:58,017
and it's not going to put you in a good mood,
00:01:58,017 -- 00:01:59,685
but I just want to really profile
00:01:59,685 -- 00:02:01,320
the formidability of the challenge
00:02:01,320 -- 00:02:03,156
we're facing with climate change.
00:02:03,156 -- 00:02:04,657
Extreme weather risk,
00:02:04,657 -- 00:02:07,860
emphasizing the point that it is irreversible.
00:02:07,860 -- 00:02:10,196
Period. Climate change is here to stay.
00:02:10,196 -- 00:02:12,198
We're not going backwards on climate change.
00:02:12,198 -- 00:02:14,801
We can slow down the rate of climate change
00:02:14,801 -- 00:02:16,803
by lowering the discharge
00:02:16,803 -- 00:02:19,839
of greenhouse gas emissions into the atmosphere.
00:02:19,839 -- 00:02:21,908
But we're not going backwards.
00:02:21,908 -- 00:02:24,644
And this is not my cavalier opinion.
00:02:24,644 -- 00:02:27,146
This is an opinion expressed by
00:02:27,146 -- 00:02:29,348
a variety of authoritative agencies,
00:02:29,348 -- 00:02:33,085
both at the national level and internationally.
00:02:33,085 -- 00:02:35,021
And if you allow me, I'm just going to read 1 or 2
00:02:35,021 -- 00:02:36,489
sentences from
00:02:36,489 -- 00:02:37,390
various agencies
00:02:37,390 -- 00:02:40,059
talking about the irreversibility of climate change.
00:02:41,194 -- 00:02:43,362
For example, in
00:02:43,362 -- 00:02:45,431
2019, the
00:02:45,431 -- 00:02:46,866
federal government of Canada,
00:02:46,866 -- 00:02:49,268
through Environment and Climate Change Canada,
00:02:49,268 -- 00:02:50,770
they wrote a report called
00:02:50,770 -- 00:02:53,206
Canada's Changing Climate Report.
00:02:53,206 -- 00:02:54,340
And this was authored
00:02:54,340 -- 00:02:55,241
by, more
00:02:55,241 -- 00:02:57,176
or less about a dozen climate scientists
00:02:57,176 -- 00:02:59,378
from Environment and Climate Change Canada.
00:02:59,378 -- 00:03:00,479
So they had the
00:03:00,479 -- 00:03:02,548
proper authority to
00:03:02,548 -- 00:03:04,884
pay attention to what they're saying in this report.
00:03:04,884 -- 00:03:06,385
And in that report,
00:03:06,385 -- 00:03:08,187
they state, and I'm quoting,
00:03:08,187 -- 00:03:10,122
“Canada's climate has warmed
00:03:10,122 -- 00:03:11,324
and will warm further
00:03:11,324 -- 00:03:14,093
in the future, driven by human influence,”
00:03:14,093 -- 00:03:16,028
which is the burning of fossil fuels
00:03:16,028 -- 00:03:19,065
that puts CO2 in the atmosphere and traps energy
00:03:19,065 -- 00:03:20,833
that would otherwise escape into space.
00:03:20,833 -- 00:03:23,636
It stays in the system and causes warming,
00:03:23,636 -- 00:03:25,504
driven by human influence.
00:03:25,504 -- 00:03:28,374
This warming is effectively irreversible,
00:03:28,374 -- 00:03:30,609
and this is the first time that I'm aware of that.
00:03:30,609 -- 00:03:32,211
The federal government of Canada
00:03:32,211 -- 00:03:35,414
recognized the irreversibility of climate change.
00:03:35,414 -- 00:03:39,652
And then in 2022, from the intergovernmental Panel
00:03:39,652 -- 00:03:40,686
on Climate Change,
00:03:40,686 -- 00:03:42,488
they wrote a report called, “Climate Change
00:03:42,488 -- 00:03:46,492
2022 Impacts Adaptation and Vulnerability.”
00:03:47,059 -- 00:03:49,028
And this is a group of several
00:03:49,028 -- 00:03:50,229
hundred climate scientists
00:03:50,229 -- 00:03:51,964
that all they do seven days
00:03:51,964 -- 00:03:53,766
a week to study climate science.
00:03:53,766 -- 00:03:56,235
And they wrote, and I quote,
00:03:56,235 -- 00:03:58,838
“it is indisputable that human activities,
00:03:58,838 -- 00:04:00,639
the burning of fossil fuels
00:04:00,639 -- 00:04:01,373
are causing
00:04:01,373 -- 00:04:04,076
climate change, making extreme climate events
00:04:04,076 -- 00:04:06,278
including heatwaves, heavy rainfall
00:04:06,278 -- 00:04:09,248
and droughts more frequent and severe.”
00:04:09,248 -- 00:04:10,149
And then,
00:04:10,149 -- 00:04:11,350
just a few months back,
00:04:11,350 -- 00:04:13,886
the United Nations Environmental Program,
00:04:13,886 -- 00:04:16,055
released a report called, “Broken Report.”
00:04:16,055 -- 00:04:20,559
And they said there's no credible pathway to 1.5°C.
00:04:20,926 -- 00:04:24,663
So, point number one is we're not going backwards on
00:04:24,663 -- 00:04:25,397
climate change.
00:04:25,397 -- 00:04:26,866
It's here to stay. Extreme weather
00:04:26,866 -- 00:04:29,235
will get more extreme as a function of time.
00:04:29,235 -- 00:04:30,836
Sometimes you'll hear in the media
00:04:30,836 -- 00:04:33,305
they talk about the new normal of climate change.
00:04:33,305 -- 00:04:34,840
There is no new normal.
00:04:34,840 -- 00:04:37,142
There's just evolving risk.
00:04:37,142 -- 00:04:38,777
We can slow down the rate of change,
00:04:38,777 -- 00:04:41,213
but it's going to get more challenging over time.
00:04:41,213 -- 00:04:42,515
And I'll leave it at that
00:04:42,515 -- 00:04:45,284
and maybe turn to Paul’s thoughts. Sure, Paul.
00:04:47,319 -- 00:04:47,653
Thank you
00:04:47,653 -- 00:04:49,154
for including climate change
00:04:49,154 -- 00:04:52,191
in the conversation today.
00:04:52,191 -- 00:04:54,593
From the research that I have been doing
00:04:54,593 -- 00:04:57,696
and the research that I've been following,
00:04:57,696 -- 00:05:00,299
our climate has changed.
00:05:00,299 -- 00:05:04,303
There's significant further change coming.
00:05:04,436 -- 00:05:08,674
And this is going to profoundly change the business
00:05:08,874 -- 00:05:11,110
of all of the financial institutions
00:05:11,110 -- 00:05:14,847
being monitored by FSRA.
00:05:14,847 -- 00:05:18,851
As a consumer of financial services living in Ontario,
00:05:18,884 -- 00:05:22,888
I'm counting on regulators, supervisors
00:05:23,255 -- 00:05:24,556
to assure me
00:05:24,556 -- 00:05:26,358
that the financial institutions
00:05:26,358 -- 00:05:30,362
are properly managing these risks.
00:05:30,696 -- 00:05:33,132
The failure of policymakers to deal with
00:05:33,132 -- 00:05:35,000
climate change
00:05:35,000 -- 00:05:37,970
has resulted in two fundamental risks
00:05:37,970 -- 00:05:40,372
for financial institutions.
00:05:40,372 -- 00:05:42,341
One being transitional risk
00:05:42,341 -- 00:05:45,878
and the other being physical risk.
00:05:45,878 -- 00:05:49,782
So it's the supervision of how financial institutions
00:05:49,782 -- 00:05:53,786
across all the sectors are handling transition risk
00:05:54,219 -- 00:05:57,489
and handling physical risks. That I'm concerned about.
00:05:59,825 -- 00:06:00,225
It's my
00:06:00,225 -- 00:06:04,229
opinion that on the physical risk area,
00:06:04,296 -- 00:06:05,164
you've got,
00:06:05,164 -- 00:06:07,366
Property Insurance companies that are about ten years
00:06:07,366 -- 00:06:09,134
ahead of all the other financial companies
00:06:09,134 -- 00:06:13,405
that have been
working on this file for more than a decade
00:06:14,039 -- 00:06:18,510
and doing some very prominent things
00:06:18,510 -- 00:06:22,014
and really trying to manage these risks.
00:06:22,014 -- 00:06:23,382
But on the physical risk side,
00:06:23,382 -- 00:06:25,551
outside of the Property Insurance Industry,
00:06:25,551 -- 00:06:27,219
there's very little going on.
00:06:27,219 -- 00:06:30,022
There's a lot that needs to be done.
00:06:30,022 -- 00:06:31,757
Some headlines in Québec
00:06:31,757 -- 00:06:33,292
Desjardins made some announcements
00:06:33,292 -- 00:06:36,628
about their lending for people living in floodplains.
00:06:36,628 -- 00:06:38,997
Some common sense stuff that
00:06:38,997 -- 00:06:40,432
I think should have happened years ago.
00:06:40,432 -- 00:06:42,634
So it's
great to see some changes starting to happen
00:06:42,634 -- 00:06:45,537
outside of the insurance industry.
00:06:45,537 -- 00:06:47,639
But they're way behind.
00:06:47,639 -- 00:06:50,309
The leadership that's been in the insurance industry
00:06:51,376 -- 00:06:52,344
on the,
00:06:52,344 -- 00:06:53,712
transition risk side,
00:06:53,712 -- 00:06:56,949
as Mark touched on earlier today,
00:06:56,949 -- 00:06:59,918
knowing how financial institutions are investing,
00:06:59,918 -- 00:07:02,587
knowing how financial institutions are lending,
00:07:02,587 -- 00:07:03,121
who they lend
00:07:03,121 -- 00:07:05,123
to, it's a lot more complicated
00:07:05,123 -- 00:07:05,824
with the change
00:07:05,824 -- 00:07:06,858
that's happening in the climate
00:07:06,858 -- 00:07:10,062
about the right investments to make
00:07:10,062 -- 00:07:13,532
and OSFI’s leadership to look for disclosure
00:07:13,532 -- 00:07:16,268
about how financial institutions
00:07:16,268 -- 00:07:19,237
are thinking about these risks.
00:07:19,237 -- 00:07:20,972
And thinking about this transition
00:07:20,972 -- 00:07:23,709
that's taking place, for me is very exciting.
00:07:23,709 -- 00:07:27,212
It's great to see the change that is starting to come.
00:07:27,212 -- 00:07:28,947
Anyway, so for me, setting
00:07:28,947 -- 00:07:31,383
the context, the climate is changing.
00:07:31,383 -- 00:07:32,818
It's going to have a profound impact
00:07:32,818 -- 00:07:34,419
on the financial sector.
00:07:34,419 -- 00:07:39,224
Having leadership from FSRA and OSFI to oversee
00:07:39,224 -- 00:07:42,160
how financial institutions are thinking about
00:07:42,160 -- 00:07:43,929
imagining this is incredibly important.
00:07:44,996 -- 00:07:45,664
And I
00:07:45,664 -- 00:07:49,668
think, within the sector, the regulatory sector,
00:07:49,868 -- 00:07:53,338
terms like,
00:07:53,338 -- 00:07:55,841
transmission risk and physical risk
00:07:55,841 -- 00:07:57,776
are going to become really commonplace,
00:07:57,776 -- 00:07:59,444
like prudential risk
00:07:59,444 -- 00:08:03,181
and Market Conduct risk, has been for many years.
00:08:03,181 -- 00:08:05,050
So understanding what those terms mean
00:08:05,050 -- 00:08:06,985
and how to properly act upon that,
00:08:06,985 -- 00:08:09,488
I think will be really important going forward.
00:08:09,488 -- 00:08:10,255
That's great.
00:08:10,255 -- 00:08:11,823
So that's actually a great segue
00:08:11,823 -- 00:08:15,160
into our first question, which is what do you think?
00:08:15,160 -- 00:08:16,995
You know,
each of our regulated sector
00:08:16,995 -- 00:08:20,999
can do to better prepare for extreme weather
00:08:21,099 -- 00:08:22,200
that is to come.
00:08:22,200 -- 00:08:23,168
And I know that, you know,
00:08:23,168 -- 00:08:24,369
you've both mentioned
00:08:24,369 -- 00:08:26,004
that on the P&C side,
00:08:26,004 -- 00:08:27,372
Property and Casualty side,
00:08:27,372 -- 00:08:29,007
there has been a lot of thinking about it.
00:08:29,007 -- 00:08:31,576
What about our other regulated sectors?
00:08:31,576 -- 00:08:34,079
Blair, do you have any thoughts on those?
00:08:34,079 -- 00:08:34,946
Yeah, I think
00:08:36,748 -- 00:08:38,917
there's good news here by the way.
00:08:38,917 -- 00:08:41,152
You know, we actually know what to do
00:08:41,152 -- 00:08:42,420
before turning to the sectors.
00:08:42,420 -- 00:08:43,955
We actually know what to do
00:08:43,955 -- 00:08:45,523
if we're talking particularly about Property
00:08:45,523 -- 00:08:47,092
Casualty Insurance and Life
00:08:47,092 -- 00:08:47,892
and Health Insurance
00:08:47,892 -- 00:08:51,963
because people's houses and basement flooding,
00:08:52,197 -- 00:08:54,566
we now know quantitatively that this adds
00:08:54,566 -- 00:08:57,669
psychosocial mental health stress to people.
00:08:57,669 -- 00:08:59,671
It affects long time lost time from work
00:08:59,671 -- 00:09:01,272
when their houses are flooded.
00:09:01,272 -- 00:09:03,608
It's not just a P&C issue now.
00:09:03,608 -- 00:09:05,944
It's also a Life and Health issue.
00:09:05,944 -- 00:09:09,481
But for example, for
00:09:09,481 -- 00:09:13,251
flooding and wildfire, which are the two most costly
00:09:13,251 -- 00:09:16,087
physical climate risks realized in the country.
00:09:16,087 -- 00:09:18,156
And flooding being the number one peril.
00:09:18,156 -- 00:09:20,225
And then out of that residential being,
00:09:20,225 -- 00:09:22,127
residential basement flooding
00:09:22,127 -- 00:09:24,029
being the most costly expression
00:09:24,029 -- 00:09:26,631
of climate change in the country.
00:09:26,631 -- 00:09:28,032
That's the bad news.
00:09:28,032 -- 00:09:31,536
The good news is that, over,
00:09:31,536 -- 00:09:34,506
about maybe the last ten years or so
00:09:34,506 -- 00:09:36,040
working with organizations
00:09:36,040 -- 00:09:38,176
like the Standards Council of Canada,
00:09:38,176 -- 00:09:40,345
the National Research Council,
00:09:40,345 -- 00:09:44,682
Canadian Standards Association, I think ICLR.
00:09:44,682 -- 00:09:47,185
And I like to think the INTACT Center and others...
00:09:47,185 -- 00:09:48,319
What we've developed over
00:09:48,319 -- 00:09:50,722
the last ten years for the country
00:09:50,722 -- 00:09:52,557
is very good,
00:09:52,557 -- 00:09:55,794
practical, meaningful, cost effective Guidance
00:09:55,794 -- 00:09:58,696
as actions that can be taken or implemented
00:09:58,696 -- 00:10:01,666
to mitigate flood risk at the level of the home
00:10:01,666 -- 00:10:03,968
and at the level of the community.
00:10:03,968 -- 00:10:05,336
And the same for wildfire.
00:10:05,336 -- 00:10:07,305
We know what to do to mitigate wildfire
00:10:07,305 -- 00:10:09,307
risk for homes, businesses and communities
00:10:09,307 -- 00:10:10,975
and forested and grassland regions
00:10:10,975 -- 00:10:12,043
to make it such that
00:10:12,043 -- 00:10:13,278
when a fire comes through,
00:10:13,278 -- 00:10:14,846
it doesn't burn down every home
00:10:14,846 -- 00:10:16,848
or burn down the community.
00:10:16,848 -- 00:10:20,885
Now for Property and Casualty Insurers, for example,
00:10:20,885 -- 00:10:23,888
one of the rather deeply involved in, the
00:10:23,888 -- 00:10:26,524
one of the areas that they're pushing,
00:10:26,524 -- 00:10:27,625
very aggressively
00:10:27,625 -- 00:10:28,226
and the Insurance
00:10:28,226 -- 00:10:32,630
Bureau of Canada and others is giving direction
00:10:32,964 -- 00:10:34,232
to homeowners
00:10:34,232 -- 00:10:37,969
as to actions they can take around their property.
00:10:37,969 -- 00:10:40,204
Generally speaking, over a long weekend
00:10:40,204 -- 00:10:43,408
without special expertise for very little money
00:10:43,408 -- 00:10:44,409
in the hundreds,
00:10:44,409 -- 00:10:46,411
maybe the low thousands of dollars,
00:10:46,411 -- 00:10:48,579
that on a scale of 0 to 100, 100
00:10:48,579 -- 00:10:50,181
being the worst for basement flooding.
00:10:50,181 -- 00:10:53,284
You can take a home from an 80 down to a 20
00:10:53,284 -- 00:10:54,218
just like that,
00:10:54,218 -- 00:10:56,554
by providing the appropriate information
00:10:56,554 -- 00:10:58,556
to people to act upon to protect their homes.
00:10:58,556 -- 00:10:59,390
The reason
00:10:59,390 -- 00:11:01,459
they're not protecting their home for most homeowners
00:11:01,459 -- 00:11:02,894
is, is not that they won't do it, it's
00:11:02,894 -- 00:11:04,095
because they don't know what to do.
00:11:04,095 -- 00:11:07,298
But when you actually give them the information,
00:11:07,298 -- 00:11:11,269
simple diagrammatic infographic style information,
00:11:11,269 -- 00:11:12,170
we find that,
00:11:13,337 -- 00:11:16,174
70% of people will take two actions to
00:11:16,174 -- 00:11:17,108
protect their homes
00:11:17,108 -- 00:11:19,310
from basement flooding within a six month
00:11:19,310 -- 00:11:21,479
period that they otherwise wouldn't have done.
00:11:21,479 -- 00:11:22,513
Now, let's see,
00:11:22,513 -- 00:11:24,816
with the Credit Unions, a role that they can play.
00:11:24,816 -- 00:11:26,751
And I'll give you one tangible example.
00:11:26,751 -- 00:11:28,019
So I'm going to mention Meridian.
00:11:28,019 -- 00:11:30,354
And this is positive news for Meridian,
00:11:30,354 -- 00:11:32,290
just in case Meridian’s here are getting nervous.
00:11:32,290 -- 00:11:38,463
On Meridian's website now they list infographics.
00:11:38,463 -- 00:11:40,932
They present infographics on their website
00:11:40,932 -- 00:11:42,900
to their customers that they can,
00:11:42,900 -- 00:11:45,903
or members, I think they call them, that
00:11:45,903 -- 00:11:47,305
that give them guidance on
00:11:47,305 -- 00:11:50,107
how to protect their home from basement flooding.
00:11:50,107 -- 00:11:52,109
The Property and Casualty insurers
00:11:52,109 -- 00:11:54,278
are doing exactly the same thing,
00:11:54,278 -- 00:11:56,180
rolling this stuff out in simple language
00:11:56,180 -- 00:11:57,882
to help people help themselves.
00:11:57,882 -- 00:11:58,816
And now also,
00:11:58,816 -- 00:12:01,919
we have the Life and Health Insurers on board doing
00:12:01,919 -- 00:12:04,255
the same thing. So the
00:12:05,323 -- 00:12:07,258
formability of the challenge,
00:12:07,258 -- 00:12:08,526
it almost can't be overstated.
00:12:08,526 -- 00:12:10,795
But the good news is we know what to do
00:12:10,795 -- 00:12:13,264
to counter the negative effects.
00:12:13,264 -- 00:12:13,698
That's great.
00:12:13,698 -- 00:12:14,799
So it's helping
00:12:14,799 -- 00:12:16,000
consumers help themselves
00:12:16,000 -- 00:12:19,837
so that businesses can continue to offer services.
00:12:19,837 -- 00:12:21,572
And just so everyone knows that
00:12:21,572 -- 00:12:22,974
a lot of these resources
00:12:22,974 -- 00:12:25,076
are actually included in the conference website.
00:12:25,076 -- 00:12:27,245
You can take a look at that. Paul,
00:12:27,245 -- 00:12:28,913
what about,
00:12:28,913 -- 00:12:29,947
are there anything else
00:12:29,947 -- 00:12:33,918
that we're missing that you think the regulated sector
00:12:34,018 -- 00:12:35,319
should be thinking about
00:12:35,319 -- 00:12:39,290
as we encounter more and more extreme weather events?
00:12:41,826 -- 00:12:44,261
We know the change that's coming to the climate
00:12:44,261 -- 00:12:46,030
the next 25 years or so,
00:12:46,030 -- 00:12:48,299
there will be more large storms,
00:12:48,299 -- 00:12:51,535
the kind of storms that can cause damage.
00:12:51,535 -- 00:12:54,772
About 90% of the damage in Ontario
00:12:54,772 -- 00:12:56,173
over the last 50 years
00:12:56,173 -- 00:12:59,710
or so has been for different kinds of risks.
00:12:59,710 -- 00:13:01,078
As Blair has touched on basement
00:13:01,078 -- 00:13:03,748
flooding and flooding, wildfires,
00:13:03,748 -- 00:13:06,217
also severe wind and hail.
00:13:06,217 -- 00:13:09,887
And for each of those four climate related risks,
00:13:09,887 -- 00:13:12,556
we know how to protect our buildings
00:13:12,556 -- 00:13:13,491
and our infrastructure.
00:13:13,491 -- 00:13:16,093
All of the protective actions are known.
00:13:17,661 -- 00:13:18,329
Critical
00:13:18,329 -- 00:13:20,030
thing for the financial services
00:13:20,030 -- 00:13:22,433
sector is to encourage people
00:13:22,433 -- 00:13:26,437
to start to bring those features into effect.
00:13:26,737 -- 00:13:28,773
My home is 130 years old.
00:13:28,773 -- 00:13:30,341
Most of the modern ideas
00:13:30,341 -- 00:13:33,010
weren't put into the home when it was built.
00:13:33,010 -- 00:13:34,044
They have to be added.
00:13:34,044 -- 00:13:36,180
And so I've added it to my home.
00:13:36,180 -- 00:13:39,517
But, the data shows for most of the homes in Ontario,
00:13:39,517 -- 00:13:41,418
the most
00:13:41,418 -- 00:13:45,089
fundamental protective measures are not yet in place.
00:13:45,089 -- 00:13:45,489
And that's
00:13:45,489 -- 00:13:47,124
why the losses have been getting up
00:13:47,124 -- 00:13:49,960
to the billions of dollars a year.
00:13:49,960 -- 00:13:51,996
That's why,
00:13:51,996 -- 00:13:54,865
the financial services industry is struggling because,
00:13:54,865 -- 00:13:56,500
you have our housing sector
00:13:56,500 -- 00:13:57,801
spending billions of dollars
00:13:57,801 -- 00:13:59,003
just to fix
00:13:59,003 -- 00:13:59,603
the damage
00:13:59,603 -- 00:14:00,337
that's been occurring
00:14:00,337 -- 00:14:03,607
because of flooding, a wildfire and wind.
00:14:03,607 -- 00:14:05,609
And until we start making the investments
00:14:05,609 -- 00:14:07,411
to protect ourselves,
00:14:07,411 -- 00:14:09,346
we're going to have these problems
00:14:09,346 -- 00:14:11,315
grow with climate change.
00:14:11,315 -- 00:14:12,683
But as Blair touched on,
00:14:12,683 -- 00:14:15,319
the exciting news is that we do know what to do.
00:14:15,319 -- 00:14:18,155
We've got proven solutions that are affordable.
00:14:18,155 -- 00:14:19,023
Our research shows
00:14:19,023 -- 00:14:20,891
you spend a dollar and you save 5 to 10.
00:14:21,992 -- 00:14:24,028
So the economic case is very, very strong.
00:14:24,028 -- 00:14:25,095
We just need to get more people
00:14:25,095 -- 00:14:28,098
to act upon the known science.
00:14:28,098 -- 00:14:29,099
That's great.
00:14:29,099 -- 00:14:30,934
So we talked about Insurance.
00:14:30,934 -- 00:14:33,203
We talked about Credit Unions.
00:14:33,203 -- 00:14:34,338
What about,
00:14:34,338 -- 00:14:36,974
Pension Plans that have an obligation
00:14:36,974 -- 00:14:40,077
towards their investors or the beneficiaries?
00:14:40,077 -- 00:14:43,047
Any thoughts on that front?
00:14:43,047 -- 00:14:44,581
Yes.
00:14:44,581 -- 00:14:48,886
So the Pension Plans in the country to date
00:14:49,253 -- 00:14:51,288
in talking about climate change
00:14:51,288 -- 00:14:54,158
have almost been looking exclusively
00:14:54,158 -- 00:14:55,993
at transition risk.
00:14:55,993 -- 00:14:56,560
What does it mean
00:14:56,560 -- 00:14:58,328
to portfolios for companies
00:14:58,328 -- 00:15:01,565
they invest in to as they have to
00:15:01,565 -- 00:15:02,800
move towards net zero
00:15:02,800 -- 00:15:04,768
and lowering their carbon footprint
00:15:04,768 -- 00:15:06,036
and realizing the costs
00:15:06,036 -- 00:15:07,404
associated with a carbon price.
00:15:07,404 -- 00:15:11,708
So there's lots of good thinking around that, largely
00:15:11,708 -- 00:15:15,679
driven by SFAC, the sustainable
00:15:16,146 -- 00:15:16,947
financial...
00:15:16,947 -- 00:15:19,349
I forgot what SFAC stands for now
00:15:19,349 -- 00:15:21,118
because I'm trying to think about it. Doesn't matter.
00:15:21,118 -- 00:15:23,287
The point is, there's been a lot of work
00:15:26,290 -- 00:15:29,426
on transition risk factoring into pension funds.
00:15:29,426 -- 00:15:33,430
But what's now also happening is, is we're looking at
00:15:34,998 -- 00:15:36,266
physical climate risk
00:15:36,266 -- 00:15:37,935
and the incorporation of physical climate
00:15:37,935 -- 00:15:40,737
risk into investment decision making,
00:15:40,737 -- 00:15:42,306
such that,
00:15:42,306 -- 00:15:44,208
and across different industry
00:15:44,208 -- 00:15:46,443
sectors, mining, forestry, petroleum,
00:15:46,443 -- 00:15:47,811
utilities, hospitality,
00:15:47,811 -- 00:15:51,448
telecommunications, financial services.
00:15:51,448 -- 00:15:54,451
We are making fairly good strides
00:15:54,451 -- 00:15:55,185
forward,
00:15:55,185 -- 00:15:58,555
saying under each one of these industry sectors,
00:15:58,555 -- 00:16:00,157
what are the key perils
00:16:00,157 -- 00:16:02,793
flooding, wildfire, ice storm, snow storm,
00:16:02,793 -- 00:16:03,427
whatever it might be,
00:16:03,427 -- 00:16:04,861
that are most problematic
00:16:04,861 -- 00:16:06,830
for the continuity of business operations
00:16:06,830 -- 00:16:09,099
on all these different industry sectors?
00:16:09,099 -- 00:16:13,003
And then below each one of these,
00:16:13,003 -- 00:16:15,339
impacts, perils,
00:16:15,339 -- 00:16:17,541
what are the top 1 or 2 impacts
00:16:17,541 -- 00:16:20,310
that if you are a portfolio manager,
00:16:20,310 -- 00:16:22,179
you should be zeroing in on
00:16:22,179 -- 00:16:23,614
to see if the company
00:16:23,614 -- 00:16:25,582
you're about to invest in or hold
00:16:25,582 -- 00:16:27,250
or divest the degree
00:16:27,250 -- 00:16:29,319
to which they're actually embracing actions
00:16:29,319 -- 00:16:31,188
to respond to the risk
00:16:31,188 -- 00:16:34,591
associated with that peril hitting this impact.
00:16:34,591 -- 00:16:36,660
So right now, on an industry
00:16:36,660 -- 00:16:39,730
specific basis, we're incorporating,
00:16:39,730 -- 00:16:40,998
physical climate risk
00:16:40,998 -- 00:16:42,532
into institutional investment
00:16:42,532 -- 00:16:44,534
decision making because otherwise,
00:16:44,534 -- 00:16:48,538
and by the way, every industry sector is impacted by
00:16:48,839 -- 00:16:49,973
physical climate risk.
00:16:49,973 -- 00:16:52,209
There is no sector that's immune.
00:16:52,209 -- 00:16:53,477
I had a graduate student
00:16:53,477 -- 00:16:55,879
sit down a little while ago and I said,
00:16:55,879 -- 00:16:58,014
I just want you to go through the headlines
00:16:58,014 -- 00:17:01,184
of the major newspapers for the last 5 to 8 years
00:17:01,184 -- 00:17:03,820
and write down any headline pertaining to physical
00:17:03,820 -- 00:17:05,789
climate risk, a flood or wildfire,
00:17:05,789 -- 00:17:07,991
ice storm, whatever it might be
00:17:07,991 -- 00:17:11,795
and link to a particular industry sector.
00:17:11,795 -- 00:17:13,029
And I thought,
00:17:13,029 -- 00:17:16,099
in this case, he would come back with a few headlines.
00:17:16,099 -- 00:17:18,301
Well, we could have actually, we could wallpaper,
00:17:18,301 -- 00:17:19,870
you know, the walls of this building
00:17:19,870 -- 00:17:21,538
with all the different headlines
00:17:21,538 -- 00:17:23,340
pertaining to everything from,
00:17:23,340 -- 00:17:26,576
fisheries to ice wine making, to you name it,
00:17:26,576 -- 00:17:29,346
a sector is being hit by physical climate risk.
00:17:29,346 -- 00:17:34,050
So for portfolio managers in institutional investing,
00:17:34,217 -- 00:17:36,553
they should be really looking seriously at
00:17:38,989 -- 00:17:40,190
preparing themselves to
00:17:40,190 -- 00:17:41,324
ask the right questions
00:17:41,324 -- 00:17:43,293
pertaining to physical climate risk for companies
00:17:43,293 -- 00:17:44,327
they invest in.
00:17:44,327 -- 00:17:48,331
And the tools are largely being developed to do that.
00:17:49,132 -- 00:17:52,168
That's great. So it's helping
00:17:52,168 -- 00:17:57,073
Pension Fund Managers to look at how they're invested
00:17:57,073 -- 00:17:59,409
companies are risk managing.
00:17:59,409 -- 00:18:00,277
And then from there.
00:18:00,277 -- 00:18:02,579
By the way, it's Sustainable Finance Action Council –
00:18:02,579 -- 00:18:05,215
that's SFAC. Yeah. That's great.
00:18:05,215 -- 00:18:06,483
I'm going to change gears a little bit.
00:18:06,483 -- 00:18:10,487
Just keep being very mindful of the time here.
00:18:10,754 -- 00:18:13,757
Board of Directors, you know,
00:18:13,757 -- 00:18:15,759
anything that you think
00:18:15,759 -- 00:18:17,160
a Board of Directors can do
00:18:17,160 -- 00:18:18,395
so that they're better equipped
00:18:18,395 -- 00:18:19,596
to give
00:18:19,596 -- 00:18:21,264
oversight over their management
00:18:21,264 -- 00:18:24,868
when it comes to physical climate risk.
00:18:24,868 -- 00:18:26,469
What needs to change?
00:18:26,469 -- 00:18:29,372
What advice would you have for them?
00:18:29,372 -- 00:18:30,340
Maybe I'll start with Paul.
00:18:31,941 -- 00:18:32,375
I'm really
00:18:32,375 -- 00:18:35,345
excited by the leadership that OSFI is showing to,
00:18:35,345 -- 00:18:39,616
promote disclosure by companies about how companies
00:18:39,616 -- 00:18:42,852
in the financial sector that are supervised federally
00:18:42,852 -- 00:18:47,057
are thinking about transition risk and physical risk.
00:18:47,824 -- 00:18:50,293
And some of the disclosure involves
00:18:50,293 -- 00:18:51,895
describing the management plans
00:18:51,895 -- 00:18:53,830
to deal with these risks.
00:18:53,830 -- 00:18:56,166
As management is documenting this,
00:18:56,166 -- 00:19:00,170
this is bringing the Board into the conversation.
00:19:00,236 -- 00:19:01,471
This is a new conversation,
00:19:01,471 -- 00:19:03,440
I think, for most financial institutions,
00:19:03,440 -- 00:19:06,276
as they're engaging the Board.
00:19:06,276 -- 00:19:08,311
I do believe that there's a lot of Board Members
00:19:08,311 -- 00:19:09,913
realizing that they don't feel ready
00:19:09,913 -- 00:19:11,681
for this conversation.
00:19:11,681 -- 00:19:12,749
They don't have the background,
00:19:12,749 -- 00:19:15,952
they don't have the training.
00:19:15,952 -- 00:19:18,855
You have a lot of experts that Blair and I work
00:19:18,855 -- 00:19:21,424
with in the climate community,
00:19:21,424 -- 00:19:24,160
not great communicators.
00:19:24,160 -- 00:19:25,228
So,
00:19:25,228 -- 00:19:26,229
climate can be made
00:19:26,229 -- 00:19:28,731
into a very complicated conversation.
00:19:28,731 -- 00:19:30,633
So who are the right people to have on the Board?
00:19:30,633 -- 00:19:33,036
It's not always a climate specialist
00:19:33,036 -- 00:19:34,437
who can
00:19:34,437 -- 00:19:35,371
give that guidance
00:19:35,371 -- 00:19:38,841
about what the right practices are for industry.
00:19:38,841 -- 00:19:40,143
So it's a real art to find out
00:19:40,143 -- 00:19:41,244
who should be on the Board
00:19:41,244 -- 00:19:42,212
and what kind of training
00:19:42,212 -- 00:19:44,013
the Board Members should have.
00:19:44,013 -- 00:19:48,251
But, having the overwhelming evidence
00:19:48,718 -- 00:19:49,586
that climate change
00:19:49,586 -- 00:19:51,554
is one of the most profound impacts
00:19:51,554 -- 00:19:54,190
that's happening for all the financial sectors,
00:19:54,190 -- 00:19:55,992
having Boards think about
00:19:55,992 -- 00:19:58,227
who are the right people to have on the Board
00:19:58,227 -- 00:19:59,262
and what's the right training
00:19:59,262 -- 00:20:00,797
so that they can support management,
00:20:00,797 -- 00:20:02,699
make decisions about investments
00:20:02,699 -- 00:20:05,335
with divisions, about loans,
00:20:05,335 -- 00:20:07,103
decisions about where to ensure
00:20:08,137 -- 00:20:10,340
is a really big need.
00:20:10,340 -- 00:20:12,342
And, the push going on
00:20:12,342 -- 00:20:14,477
within the prudential side
00:20:14,477 -- 00:20:17,046
through OSFI has been really exciting.
00:20:17,046 -- 00:20:18,881
It's great. Blair anything to add?
00:20:18,881 -- 00:20:19,949
Yeah, I, I would say
00:20:19,949 -- 00:20:22,385
because we're asked to be in front of a lot of Boards
00:20:22,385 -- 00:20:23,553
talking about this stuff.
00:20:23,553 -- 00:20:25,555
And I find for Boards, by and large,
00:20:25,555 -- 00:20:28,191
you know, very competent people sitting on Boards.
00:20:28,191 -- 00:20:29,959
And I don't know if it's by luck or design
00:20:29,959 -- 00:20:31,027
or a combination of both,
00:20:31,027 -- 00:20:33,062
but I find they tend to have
00:20:33,062 -- 00:20:35,765
people on the Board who know about cybersecurity
00:20:35,765 -- 00:20:37,600
or artificial intelligence
00:20:37,600 -- 00:20:38,901
or, you know, where long term
00:20:38,901 -- 00:20:39,936
interest rates are going to head
00:20:39,936 -- 00:20:43,706
at a global or national level, whatever it might be.
00:20:43,706 -- 00:20:47,744
But by and large, there's a real paucity of expertise
00:20:47,744 -- 00:20:51,747
at the Board level in reference to climate change.
00:20:51,747 -- 00:20:52,648
And I think they need
00:20:52,648 -- 00:20:54,383
to take a more conservative effort
00:20:54,383 -- 00:20:59,288
to find people who are fluent in that discussion and,
00:20:59,288 -- 00:21:01,257
and bring their expertise to the table.
00:21:01,257 -- 00:21:04,594
It's sort of like having a pharmaceutical company
00:21:04,594 -- 00:21:06,496
that has nobody on the Board
00:21:06,496 -- 00:21:09,031
of Directors, who's a pharmacist or a medical doctor,
00:21:09,031 -- 00:21:09,899
you know,
00:21:09,899 -- 00:21:10,833
it would leap,
00:21:10,833 -- 00:21:13,536
it would stand out as a void in knowledge.
00:21:13,536 -- 00:21:15,838
But for Boards to give appropriate
00:21:15,838 -- 00:21:18,641
oversight to management on this file,
00:21:18,641 -- 00:21:20,109
I think they need someone
00:21:20,109 -- 00:21:22,745
who's taken more than a weekend course
00:21:22,745 -- 00:21:23,980
on climate change.
00:21:25,548 -- 00:21:25,982
It's great.
00:21:25,982 -- 00:21:29,418
So education and seeking expert advice,
00:21:29,418 -- 00:21:30,486
that's what it is.
00:21:30,486 -- 00:21:32,288
So let's switch a little bit.
00:21:32,288 -- 00:21:35,458
Let's talk about the role of financial regulators.
00:21:35,458 -- 00:21:38,895
What are some immediate and mid-term actions
00:21:38,895 -- 00:21:41,397
that a financial regulator like FSRA
00:21:41,397 -- 00:21:43,199
should consider to make sure
00:21:43,199 -- 00:21:44,533
that we have a healthy market
00:21:44,533 -- 00:21:48,537
and consumers are continued to be offering choices.
00:21:49,639 -- 00:21:53,476
Mark shared with us in the conversation earlier today
00:21:53,476 -- 00:21:57,480
just how broad a mandate FSRA has
00:21:57,680 -- 00:22:01,584
and how specific some of the questions are as you move
00:22:01,584 -- 00:22:03,252
from one financial sector
00:22:03,252 -- 00:22:06,288
to another, to another, to another, to another.
00:22:06,288 -- 00:22:08,658
Climate change is cutting across all of that.
00:22:08,658 -- 00:22:12,361
And and there's not many issues like climate change
00:22:12,361 -- 00:22:14,330
that are affecting
00:22:14,330 -- 00:22:17,666
all aspects of what's happening here.
00:22:17,666 -- 00:22:20,770
So that's distinct and special here.
00:22:23,105 -- 00:22:24,040
And so for me
00:22:24,040 -- 00:22:25,708
that's quite intriguing that
00:22:25,708 -- 00:22:28,477
bringing climate change into this conversation,
00:22:28,477 -- 00:22:30,746
despite some nuances about how it affects
00:22:30,746 -- 00:22:32,114
individual sectors different,
00:22:32,114 -- 00:22:34,216
it is definitely cutting across all the sectors.
00:22:34,216 -- 00:22:35,785
So it's having a very
00:22:35,785 -- 00:22:38,654
profound impact on all of the sectors.
00:22:38,654 -- 00:22:42,658
So there is an opportunity for FSRA to get involved.
00:22:43,759 -- 00:22:46,529
It will certainly include a lot of the information
00:22:46,529 -- 00:22:50,466
type role that FSRA has regularly been playing.
00:22:50,466 -- 00:22:52,501
How all of the different groups
00:22:52,501 -- 00:22:53,702
that are being supervised
00:22:53,702 -- 00:22:55,871
can be informed with common information
00:22:55,871 -- 00:22:58,440
about some things that are happening,
00:22:58,440 -- 00:23:01,043
and that can happen quickly.
00:23:01,043 -- 00:23:03,279
The fact that as Blair and I are sharing
00:23:03,279 -- 00:23:05,614
on the physical damage side, the solutions are known.
00:23:05,614 -- 00:23:06,515
Let's get on with them.
00:23:06,515 -- 00:23:09,251
I mean, some of these things can be done today.
00:23:09,251 -- 00:23:10,886
They don't need time to develop.
00:23:10,886 -- 00:23:12,254
They can be put out very quickly.
00:23:13,289 -- 00:23:15,057
There are other elements that
00:23:15,057 -- 00:23:18,027
definitely spread over the multi-year focus
00:23:18,027 -- 00:23:18,994
that you're asking about
00:23:18,994 -- 00:23:19,728
and what
00:23:19,728 -- 00:23:21,230
the supervisors need to do
00:23:21,230 -- 00:23:23,999
over a longer period of time.
00:23:23,999 -- 00:23:27,069
OSFI monitored this file for many years
00:23:27,069 -- 00:23:28,837
and it's just recently decided
00:23:28,837 -- 00:23:31,240
to become very proactive,
00:23:31,240 -- 00:23:34,343
focusing primarily on disclosure,
00:23:34,343 -- 00:23:37,413
requiring companies to disclose.
00:23:37,413 -- 00:23:40,983
That's a really powerful thought process
00:23:40,983 -- 00:23:44,820
that forces the thinking within companies
00:23:44,820 -- 00:23:47,856
and getting that out to the supervisor,
00:23:47,856 -- 00:23:49,725
but to others about how
00:23:49,725 -- 00:23:52,261
these are being managed within the companies
00:23:52,261 -- 00:23:56,332
and frankly, their commitment at OSFI to always deal
00:23:56,332 -- 00:23:57,399
with prudential matters.
00:23:57,399 -- 00:23:59,134
They're pushing some limits here.
00:23:59,134 -- 00:24:01,070
Some of the way they're approaching this issue,
00:24:01,070 -- 00:24:04,306
I find that exciting. And I think that's helpful.
00:24:04,306 -- 00:24:06,608
So how FSRA can move around
00:24:06,608 -- 00:24:09,078
some of the leadership coming from OSFI,
00:24:09,078 -- 00:24:11,313
there are many institutions
00:24:11,313 -- 00:24:12,948
that are not federally supervised.
00:24:12,948 -- 00:24:16,652
And to expect similar expectations about disclosure,
00:24:17,686 -- 00:24:19,221
to make sure that they have access
00:24:19,221 -- 00:24:21,356
to similar type of information
00:24:21,356 -- 00:24:22,391
so that the messaging
00:24:22,391 -- 00:24:24,827
coming from one regulator in Canada
00:24:24,827 -- 00:24:26,495
about how the risk is
00:24:26,495 -- 00:24:28,697
evolving is not contradictory
00:24:28,697 -- 00:24:30,599
to what would come from FSRA.
00:24:30,599 -- 00:24:33,035
So coordinating some of the messaging going out
00:24:33,035 -- 00:24:34,303
are just a couple examples
00:24:34,303 -- 00:24:38,107
of some things that FSRA can do. Great, Blair.
00:24:38,107 -- 00:24:40,476
I like it very much like FSRA's mandate
00:24:40,476 -- 00:24:42,644
to serve the interests of consumers.
00:24:42,644 -- 00:24:45,214
And just a very practical example,
00:24:45,214 -- 00:24:47,649
and I'm not quite sure where FSRA’s
00:24:47,649 -- 00:24:49,218
authority stops and starts.
00:24:49,218 -- 00:24:53,222
But for example, here's a simple action item
00:24:53,589 -- 00:24:56,492
anybody who's getting a mortgage in this country
00:24:56,492 -- 00:24:57,993
with the closing package
00:24:57,993 -- 00:25:00,596
and then twice a year as a mail out, as a reminder,
00:25:00,596 -- 00:25:01,630
it should follow.
00:25:01,630 -- 00:25:03,365
They should be receiving direction
00:25:03,365 -- 00:25:04,900
on how to protect that home
00:25:04,900 -- 00:25:06,668
from basement flooding, period.
00:25:06,668 -- 00:25:08,737
If you own a home somewhere where it rains,
00:25:08,737 -- 00:25:11,473
your house is subject to flood risk, period.
00:25:11,473 -- 00:25:13,275
And some areas more than others.
00:25:13,275 -- 00:25:15,010
But that's the way it is.
00:25:15,010 -- 00:25:17,212
So when somebody gets a mortgage
00:25:17,212 -- 00:25:18,680
in that closing package
00:25:18,680 -- 00:25:20,048
and this is now, you know,
00:25:20,048 -- 00:25:21,216
the thing that they're going to get up
00:25:21,216 -- 00:25:21,583
and work
00:25:21,583 -- 00:25:23,819
for 25 years of their life to pay for it,
00:25:23,819 -- 00:25:25,954
it's probably going to be their retirement plan.
00:25:25,954 -- 00:25:27,956
You want to protect that investment.
00:25:27,956 -- 00:25:30,659
So I would make sure that in that closing package,
00:25:30,659 -- 00:25:32,794
there are simple, straightforward information.
00:25:32,794 -- 00:25:35,230
And it exists that any organization
00:25:35,230 -- 00:25:36,531
can put their logo on
00:25:36,531 -- 00:25:36,932
that says
00:25:36,932 -- 00:25:38,767
and by the way, for you, the homeowner,
00:25:38,767 -- 00:25:41,003
and we're now a partner in this deal with you,
00:25:41,003 -- 00:25:43,639
here's how you protect this property
00:25:43,639 -- 00:25:45,040
from basement flooding.
00:25:45,040 -- 00:25:45,607
And the average
00:25:45,607 -- 00:25:46,875
cost of a flooded basement
00:25:46,875 -- 00:25:49,277
on Ontario right now is $43,000.
00:25:49,277 -- 00:25:51,380
So if you have the average flood,
00:25:51,380 -- 00:25:52,748
that's not the place you want to be.
00:25:52,748 -- 00:25:55,017
If you could avoid it, avoid it.
00:25:55,017 -- 00:25:56,918
That's great. Thank you.
00:25:56,918 -- 00:26:01,023
So we may have some time for questions from
00:26:01,023 -- 00:26:01,690
the audience.
00:26:04,226 -- 00:26:05,360
And we'll see.
00:26:05,360 -- 00:26:08,530
I think the questions will be popping up
00:26:08,530 -- 00:26:12,501
on the monitor.
00:26:15,404 -- 00:26:15,771
Right.
00:26:15,771 -- 00:26:21,910
So this is a question on how do P&C Insurers
00:26:22,344 -- 00:26:27,549
best educate, inform and incentivize policy holders
00:26:27,549 -- 00:26:28,683
to take more action
00:26:28,683 -- 00:26:32,687
to mitigate exposure to extreme weather?
00:26:33,955 -- 00:26:35,724
Okay.
00:26:35,724 -- 00:26:37,826
I'll go quickly and...
00:26:37,826 -- 00:26:41,830
Up to about maybe 4 or 5 years ago,
00:26:41,830 -- 00:26:43,365
even when you talk to the Presidents
00:26:43,365 -- 00:26:45,634
and CEOs of the major P&C companies,
00:26:45,634 -- 00:26:47,969
they said themselves that the direction
00:26:47,969 -- 00:26:49,237
they gave to policyholders
00:26:49,237 -- 00:26:51,573
on how to protect properties from flooding or wildfire
00:26:51,573 -- 00:26:54,242
and so forth or what even their coverage
00:26:54,242 -- 00:26:56,211
was very poor and confusing.
00:26:56,211 -- 00:26:57,946
So one of the things they're doing now is,
00:26:57,946 -- 00:26:59,047
first of all, just in terms
00:26:59,047 -- 00:27:00,715
of what you're covered for versus
00:27:00,715 -- 00:27:01,783
what you're not covered for
00:27:01,783 -- 00:27:04,386
for overland flooding, for sewer backup,
00:27:04,386 -- 00:27:06,988
for just conventional flood risk in a basement.
00:27:08,123 -- 00:27:09,758
They're doing a much, much better job.
00:27:09,758 -- 00:27:11,860
Most of the insurers now explaining this stuff
00:27:11,860 -- 00:27:13,261
in plain, simple language
00:27:13,261 -- 00:27:16,331
that people can read and understand. That's good.
00:27:16,331 -- 00:27:19,901
But also, the insurers are now very much
00:27:19,901 -- 00:27:22,170
on the leading edge of the curve in Canada
00:27:22,170 -- 00:27:27,042
as to supporting better understanding of the actions
00:27:27,042 -- 00:27:28,310
to be to be taken
00:27:28,310 -- 00:27:29,344
to mitigate
00:27:29,344 -- 00:27:30,979
risk in the country from flooding,
00:27:30,979 -- 00:27:33,348
wildfire, extreme heat, wind.
00:27:33,348 -- 00:27:34,883
They're supporting that research.
00:27:34,883 -- 00:27:37,018
And then
00:27:37,018 -- 00:27:39,554
helping to deploy the inculcation
00:27:39,554 -- 00:27:41,923
of that research into day to day operations
00:27:41,923 -- 00:27:44,326
to actually get risk out of the system.
00:27:44,326 -- 00:27:46,494
What we want to do is get all the risk
00:27:46,494 -- 00:27:47,162
out of the system.
00:27:47,162 -- 00:27:47,929
You can
00:27:47,929 -- 00:27:49,297
and then deal
00:27:49,297 -- 00:27:51,266
with the pricing of what's ever left over.
00:27:52,534 -- 00:27:53,134
The small part.
00:27:53,134 -- 00:27:55,403
I that is,
00:27:55,403 -- 00:27:57,572
the longer answer is I've written a book.
00:27:57,572 -- 00:28:00,375
So if you'd like to read my book, I have,
00:28:00,375 -- 00:28:02,711
laid it all out in detail.
00:28:02,711 -- 00:28:04,179
“Climate Risks Implications
00:28:04,179 -- 00:28:07,382
for the Insurance Industry in Canada.”
00:28:07,382 -- 00:28:08,683
Call our institute,
00:28:08,683 -- 00:28:11,119
we have 120 companies that support our work.
00:28:11,119 -- 00:28:13,321
And we give to them materials
00:28:13,321 -- 00:28:17,225
to give out to policyholders. We give to them...
00:28:17,225 -- 00:28:19,828
We have showcases, displays,
00:28:19,828 -- 00:28:22,096
videos, all kinds of materials.
00:28:22,096 -- 00:28:25,934
Any insurer in Ontario who would like to
00:28:25,934 -- 00:28:26,501
use members,
00:28:26,501 -- 00:28:28,403
I think 90 whatever percent
00:28:28,403 -- 00:28:29,504
are members of our institute.
00:28:29,504 -- 00:28:31,940
So we give our materials out and
00:28:31,940 -- 00:28:33,074
we're delighted to help them
00:28:33,074 -- 00:28:35,376
promote it to policyholders. Right.
00:28:35,376 -- 00:28:36,711
So we have another question.
00:28:36,711 -- 00:28:38,680
Very similar question.
00:28:38,680 -- 00:28:41,783
This is not about educating policyholders,
00:28:41,783 -- 00:28:45,019
but what insurance companies can do to prepare,
00:28:45,019 -- 00:28:46,688
since physical climate change
00:28:46,688 -- 00:28:48,056
is just going to increase.
00:28:49,123 -- 00:28:50,959
So this is where insurance companies
00:28:50,959 -- 00:28:52,927
are way ahead of the rest of the financial sector.
00:28:52,927 -- 00:28:54,762
They have models.
00:28:54,762 -- 00:28:57,165
They have actuarial data on actual losses
00:28:57,165 -- 00:28:58,766
that they've experienced.
00:28:58,766 -- 00:29:01,502
They understand which are territories,
00:29:01,502 -- 00:29:03,738
which regions have the greatest risk.
00:29:03,738 -- 00:29:05,540
They know the features of a home
00:29:05,540 -- 00:29:06,641
that we've been providing them,
00:29:06,641 -- 00:29:08,142
saying this home has higher risk.
00:29:08,142 -- 00:29:10,478
This home has lower risk.
00:29:10,478 -- 00:29:12,580
That's hard
00:29:12,580 -- 00:29:15,883
evidence that's available to all insurance companies.
00:29:15,883 -- 00:29:17,318
It's part of their practices.
00:29:17,318 -- 00:29:18,353
It's part of their pricing.
00:29:18,353 -- 00:29:21,889
It's part of their product design.
00:29:21,889 -- 00:29:22,924
Part of their choices
00:29:22,924 -- 00:29:25,059
about where insurance is available, not available.
00:29:25,059 -- 00:29:28,629
Whatever...There's just a lot of science available.
00:29:28,629 -- 00:29:30,031
Insurance companies are using it.
00:29:30,031 -- 00:29:31,699
I'm always surprised when I talk to people
00:29:31,699 -- 00:29:32,934
who are in the insurance industry
00:29:32,934 -- 00:29:34,869
why they don't use the same information
00:29:34,869 -- 00:29:36,537
to decide where to give a mortgage
00:29:36,537 -- 00:29:37,839
and where to make investments.
00:29:37,839 -- 00:29:40,808
But, insurance companies have a lot of data
00:29:40,808 -- 00:29:42,143
to do this.
00:29:42,143 -- 00:29:43,611
Maybe I can add one here. Sure.
00:29:43,611 -- 00:29:45,480
Where we spend a lot of time,
00:29:45,480 -- 00:29:47,081
now, I spend a lot more of my time with,
00:29:47,081 -- 00:29:49,117
I don't need more climate scientists
00:29:49,117 -- 00:29:51,452
tell me that the climate is, you know, things are bad.
00:29:51,452 -- 00:29:53,755
Or documenting
00:29:53,755 -- 00:29:54,756
by the way,
00:29:54,756 -- 00:29:56,457
the catastrophic loss insurable claims
00:29:56,457 -- 00:29:58,593
data in the country, it's not just going up,
00:29:58,593 -- 00:30:00,228
it's going up curvilinearly.
00:30:00,228 -- 00:30:01,929
Things are getting worse, faster.
00:30:01,929 -- 00:30:03,698
But we have known solutions.
00:30:03,698 -- 00:30:06,267
So where I spend my time now is much more with,
00:30:06,267 -- 00:30:08,903
behavioral economists, behavioral psychologists
00:30:08,903 -- 00:30:09,403
to look at
00:30:09,403 -- 00:30:10,838
how do you motivate the masses
00:30:10,838 -- 00:30:12,640
to behave in a particular way?
00:30:12,640 -- 00:30:13,674
We've got the tools
00:30:13,674 -- 00:30:15,543
but we're not utilizing the tools.
00:30:15,543 -- 00:30:17,578
So the trick is one of now
00:30:17,578 -- 00:30:19,680
if human psychology to a certain extent.
00:30:19,680 -- 00:30:21,549
So that's where we're spending
00:30:21,549 -- 00:30:22,450
more and more of our time.
00:30:23,451 -- 00:30:25,353
Thinking about how consumers
00:30:25,353 -- 00:30:26,454
use the information
00:30:26,454 -- 00:30:27,722
and then providing it to
00:30:27,722 -- 00:30:30,458
in a way that is, that resonate with them.
00:30:30,458 -- 00:30:31,726
So I think we probably have time
00:30:31,726 -- 00:30:33,661
for one more question because,
00:30:33,661 -- 00:30:37,131
because we'll have to move on to the next session.
00:30:37,131 -- 00:30:39,166
So, this one came from
00:30:39,166 -- 00:30:40,268
what do you think
00:30:40,268 -- 00:30:41,969
would be the right training for Boards
00:30:41,969 -- 00:30:43,971
regarding climate risk?
00:30:43,971 -- 00:30:47,975
And with so many regulators and bodies involved,
00:30:48,075 -- 00:30:52,079
who should the Boards be following?
00:30:53,347 -- 00:30:54,615
Blair and I spent a lot of time
00:30:54,615 -- 00:30:58,019
talking to boards in the insurance sector
00:30:58,019 -- 00:30:59,553
and so I have lots of experience.
00:30:59,553 -- 00:31:01,255
I could talk about,
00:31:01,255 -- 00:31:02,623
some of the particular questions
00:31:02,623 -- 00:31:03,691
that insurance companies
00:31:03,691 -- 00:31:07,929
give about product design pricing,
00:31:08,629 -- 00:31:12,466
use of models, avoiding solvency risk.
00:31:12,466 -- 00:31:13,267
We've had
00:31:13,267 -- 00:31:15,069
no property companies
00:31:15,069 -- 00:31:17,438
go insolvent in decades in this country
00:31:17,438 -- 00:31:19,440
because they've thought through all these things.
00:31:21,008 -- 00:31:23,744
And so getting the Board Members
00:31:23,744 -- 00:31:28,849
in insurance informed is sort of common.
00:31:31,052 -- 00:31:33,421
Occasionally, I've been invited to some Boards
00:31:33,421 -- 00:31:36,424
that are not in insurance, and
00:31:36,424 -- 00:31:38,392
I don't get good questions.
00:31:38,392 -- 00:31:41,529
I mean there was a time in insurance,
00:31:41,529 -- 00:31:43,564
I've been doing this stuff for 30 years.
00:31:43,564 -- 00:31:44,965
The insurance people didn't know what to ask.
00:31:44,965 -- 00:31:47,301
20, 30 years ago...but
00:31:47,301 -- 00:31:48,803
the conversations outside of insurance
00:31:48,803 -- 00:31:53,707
that I occasionally get invited to are very early and
00:31:55,142 -- 00:31:57,111
basic questions.
00:31:57,111 -- 00:31:59,380
Insurance companies would never give insurance
00:31:59,380 -- 00:31:59,947
to somebody
00:31:59,947 -- 00:32:02,216
who's been designated by the province of Ontario
00:32:02,216 -- 00:32:04,018
at extreme or high risk of flooding.
00:32:04,018 -- 00:32:07,555
You just can't get insurance from an insurance company,
00:32:07,555 -- 00:32:10,024
but you can get a loan.
00:32:10,024 -- 00:32:12,693
I mean.
00:32:12,693 -- 00:32:14,228
There you go.
00:32:14,228 -- 00:32:17,565
So the process, some of the knowledge that
00:32:17,565 -- 00:32:19,967
is available for Boards
00:32:21,235 -- 00:32:24,405
Management as well has to get going more on
00:32:24,405 -- 00:32:25,172
these issues.
00:32:25,172 -- 00:32:26,841
I'm more familiar with physical risk.
00:32:26,841 -- 00:32:30,177
That's what I work on. But Boards,
00:32:30,177 -- 00:32:31,579
yeah, but
00:32:31,579 -- 00:32:33,314
Management and Boards
00:32:33,314 -- 00:32:35,749
really need to get working on this.
00:32:35,749 -- 00:32:37,117
And also not, you know,
00:32:37,117 -- 00:32:38,819
Not to go back to the depressing stuff,
00:32:38,819 -- 00:32:41,488
but I don't think we've mentioned this yet,
00:32:41,488 -- 00:32:43,357
but we now have,
00:32:43,357 -- 00:32:46,560
10% of homes in Canada are no longer insurable
00:32:46,560 -- 00:32:47,595
relative to flood risk.
00:32:47,595 -- 00:32:48,362
That's 1.5
00:32:48,362 -- 00:32:50,030
million people in Canada
00:32:50,030 -- 00:32:52,933
can't get insurance coverage for their homes for
00:32:52,933 -- 00:32:54,001
basement flooding.
00:32:54,001 -- 00:32:55,970
They can still get it for theft and fire,
00:32:55,970 -- 00:32:58,205
but not for basement flooding.
00:32:58,205 -- 00:33:00,741
The good thing is,
00:33:00,741 -- 00:33:02,176
given that reality,
00:33:02,176 -- 00:33:06,013
you can still get a mortgage without flood insurance.
00:33:06,013 -- 00:33:09,350
However, we're starting to head into a direction
00:33:09,350 -- 00:33:12,252
where for wildfire risk in this country is becoming
00:33:12,252 -- 00:33:14,455
so prominent in certain regions
00:33:14,455 -- 00:33:16,724
that it's just a matter of time,
00:33:16,724 -- 00:33:18,726
as has already happened in California,
00:33:18,726 -- 00:33:20,427
with Allstate and State Farm.
00:33:20,427 -- 00:33:21,695
They're not writing new house
00:33:21,695 -- 00:33:23,797
insurance for fire risk in California.
00:33:23,797 -- 00:33:26,233
Well, Canada isn't immune to that either.
00:33:26,233 -- 00:33:28,369
So what happens if it just,
00:33:28,369 -- 00:33:30,537
you know, let's go beyond Ontario for the moment.
00:33:30,537 -- 00:33:32,139
If you're in, northern
00:33:32,139 -- 00:33:33,941
Alberta or parts of British Columbia
00:33:33,941 -- 00:33:34,908
where you can no longer
00:33:34,908 -- 00:33:36,543
get fire insurance for your home,
00:33:36,543 -- 00:33:37,811
because without fire insurance,
00:33:37,811 -- 00:33:39,346
you can't get a mortgage.
00:33:39,346 -- 00:33:41,582
I spent a lot of time with CMHC
00:33:41,582 -- 00:33:42,983
and brought this question up
00:33:42,983 -- 00:33:45,152
just a little while ago to the lenders
00:33:45,152 -- 00:33:46,553
working group of CMHC,
00:33:46,553 -- 00:33:48,222
which is basically the big banks
00:33:48,222 -- 00:33:50,290
that hold the mortgages in the country
00:33:50,290 -- 00:33:51,325
and said, you know,
00:33:51,325 -- 00:33:52,693
what is the plan
00:33:52,693 -- 00:33:55,395
if fire insurance isn't available?
00:33:55,395 -- 00:33:55,929
What is that?
00:33:55,929 -- 00:33:57,297
What are the repercussions of that?
00:33:57,297 -- 00:33:58,298
And how are we going to handle this
00:33:58,298 -- 00:34:00,400
from a mortgage perspective?
00:34:00,400 -- 00:34:02,136
And the room just goes dead quiet.
00:34:02,136 -- 00:34:03,537
You know, there was no plan.
00:34:03,537 -- 00:34:07,541
So this is the direction we're heading.
00:34:07,808 -- 00:34:11,378
And as bad as it may seem now, it's just.
00:34:11,378 -- 00:34:12,980
I'm not trying to be dramatic.
00:34:12,980 -- 00:34:14,615
Actually, I'm trying to be dramatic.
00:34:14,615 -- 00:34:17,851
We need to prepare for a more formidable future
00:34:17,851 -- 00:34:19,286
that's coming at us.
00:34:19,286 -- 00:34:22,322
And, we're starting to see these expressions
00:34:22,322 -- 00:34:23,457
with
00:34:23,457 -- 00:34:24,625
Desjardins talked about we're now
00:34:24,625 -- 00:34:26,627
not going to hold mortgages for certain communities going back.
00:34:27,594 -- 00:34:29,096
That's just the tip of the iceberg.
00:34:29,096 -- 00:34:30,998
It's going to keep coming, coming and coming.
00:34:30,998 -- 00:34:33,767
So, Canada has been sleepwalking
00:34:33,767 -- 00:34:34,902
in terms of preparedness
00:34:34,902 -- 00:34:36,536
for climate change and extreme weather risks.
00:34:36,536 -- 00:34:37,537
We need to pick up the pace.
00:34:37,537 -- 00:34:39,139
And here's a question to the audience.
00:34:40,207 -- 00:34:42,809
Canada now has...
00:34:42,809 -- 00:34:43,210
no...
00:34:43,210 -- 00:34:44,111
I'm going to ask the question
00:34:44,111 -- 00:34:45,145
and then I'll explain it.
00:34:45,145 -- 00:34:46,346
How many people here,
00:34:46,346 -- 00:34:47,514
by way of show of hands
00:34:47,514 -- 00:34:51,018
and by show of hands, I mean, like show of hands,
00:34:51,018 -- 00:34:51,718
are familiar
00:34:51,718 -- 00:34:55,722
with Canada's National Adaptation Strategy.
00:34:56,657 -- 00:34:58,525
Okay, so there's more or less
00:34:58,525 -- 00:34:59,926
600 people in this room,
00:34:59,926 -- 00:35:02,095
and there's about seven people have heard of Canada's
00:35:02,095 -- 00:35:04,131
National Adaptation Strategy.
00:35:04,131 -- 00:35:05,565
Get familiar with it.
00:35:05,565 -- 00:35:06,333
Canada now
00:35:06,333 -- 00:35:07,868
launched its national adaptation
00:35:07,868 -- 00:35:10,937
strategy of June, July of last year.
00:35:10,937 -- 00:35:13,040
The primary minister on it as Minister
00:35:13,040 -- 00:35:14,741
Guilbeault from Minister of Environment
00:35:14,741 -- 00:35:16,176
and Climate Change.
00:35:16,176 -- 00:35:17,844
In that strategy,
00:35:17,844 -- 00:35:19,579
there are 26 targets in it
00:35:19,579 -- 00:35:22,749
that Canada's to meet from an adaptation perspective.
00:35:22,749 -- 00:35:25,952
Ten of which are to be realized or success realized.
00:35:25,952 -- 00:35:29,956
And meeting those targets in 2024, 25 and 26.
00:35:30,123 -- 00:35:32,025
A multiplicity of them
00:35:32,025 -- 00:35:34,861
have applicability to financial services.
00:35:34,861 -- 00:35:36,763
So, FSRA, I would say
00:35:36,763 -- 00:35:37,898
this is an area
00:35:37,898 -- 00:35:39,900
that it should become part of your DNA
00:35:39,900 -- 00:35:43,270
almost and say for those 26 targets,
00:35:43,270 -- 00:35:45,672
are there seven of them where we can make
00:35:45,672 -- 00:35:49,409
a material contribution or something like that?
00:35:49,409 -- 00:35:49,943
That's great.
00:35:49,943 -- 00:35:52,412
We're going to go to our very last question,
00:35:52,412 -- 00:35:53,713
and then we'll have to wrap up.
00:35:54,714 -- 00:35:56,016
This is from our CEO.
00:35:56,016 -- 00:35:56,917
So is
00:35:56,917 -- 00:35:58,318
there a potential conflict
00:35:58,318 -- 00:36:00,954
between prudential regulation,
00:36:00,954 -- 00:36:04,357
which is about solvency and reducing payouts
00:36:04,357 -- 00:36:05,892
and conduct regulation
00:36:05,892 -- 00:36:09,796
that focus on consumer protection, consumer choice?
00:36:09,796 -- 00:36:13,767
Yes.
00:36:13,767 -- 00:36:15,535
Would you like to elaborate a little bit.
00:36:15,535 -- 00:36:17,470
Slightly longer answer is to move away
00:36:17,470 -- 00:36:18,872
from our climate conversation.
00:36:18,872 -- 00:36:21,541
Talk about earthquake.
00:36:21,541 -- 00:36:23,176
And on the earthquake file,
00:36:23,176 -- 00:36:25,278
there are a very large number of people in Canada
00:36:25,278 -- 00:36:26,846
who don't have earthquake protection.
00:36:26,846 -- 00:36:29,616
It's available for sale, but they don't buy it
00:36:29,616 -- 00:36:33,620
because the cost of achieving our prudential
00:36:33,787 -- 00:36:36,623
expectations are really high.
00:36:36,623 -- 00:36:40,393
And, and makes the product being offered,
00:36:40,393 -- 00:36:41,328
for anybody who has it,
00:36:41,328 -- 00:36:42,262
they're under-insured
00:36:42,262 -- 00:36:44,230
because they have enormous deductibles
00:36:44,230 -- 00:36:45,865
and other things brought in anyway.
00:36:45,865 -- 00:36:50,470
So there is absolutely contradictory objectives
00:36:51,037 -- 00:36:53,306
on some of these issues.
00:36:53,306 -- 00:36:54,674
And earthquake is the one where
00:36:54,674 -- 00:36:56,543
if you want to do any homework, you'll find it
00:36:56,543 -- 00:36:57,811
in your face fairly quickly.
00:36:59,079 -- 00:37:00,947
So it's really about working with
00:37:00,947 -- 00:37:03,450
consumers, educating them, helping them.
00:37:03,450 -- 00:37:04,718
They need to do both.
00:37:04,718 -- 00:37:07,387
Prudential is really important
00:37:07,387 -- 00:37:10,857
and Market Conduct is incredibly important.
00:37:10,857 -- 00:37:14,361
So how do you get that balance.
00:37:14,361 -- 00:37:15,495
It's a challenge.
00:37:15,495 -- 00:37:17,263
Something for us to think about.
00:37:17,263 -- 00:37:18,832
We have to wrap
00:37:18,832 -- 00:37:21,134
because, we have another session coming up,
00:37:21,134 -- 00:37:24,904
but thank you for sharing your perspective on how
00:37:24,904 -- 00:37:25,905
the financial services
00:37:25,905 -- 00:37:27,941
sector can prudently manage the risk,
00:37:27,941 -- 00:37:32,712
but also keeping consumers in mind. Before we close
00:37:33,480 -- 00:37:35,048
20 seconds each,
00:37:35,048 -- 00:37:37,050
what are your final thoughts that you want to leave
00:37:37,050 -- 00:37:37,884
with the audience
00:37:37,884 -- 00:37:39,385
about specific actions
00:37:39,385 -- 00:37:43,389
that they can take to manage this risk going forward?
00:37:43,656 -- 00:37:45,592
Start with you, Blair.
00:37:45,592 -- 00:37:46,793
Everybody in this audience,
00:37:46,793 -- 00:37:49,929
relative to their area of work, should be doing
00:37:49,929 -- 00:37:51,998
sort of a deep dive self-examination
00:37:51,998 -- 00:37:54,000
on how physical climate risk
00:37:54,000 -- 00:37:56,669
may bear relevance to their work.
00:37:56,669 -- 00:38:00,240
And then the last thought is just the
00:38:00,240 -- 00:38:01,341
biggest limitation
00:38:01,341 -- 00:38:02,742
of forward movement in Canada
00:38:02,742 -- 00:38:03,409
on preparedness
00:38:03,409 -- 00:38:04,444
for climate change
00:38:04,444 -- 00:38:06,212
is lack of sense of appreciation
00:38:06,212 -- 00:38:08,414
for the need to act with urgency.
00:38:08,414 -- 00:38:09,883
We've got to we've got to,
00:38:09,883 -- 00:38:11,284
urgency has got to come fire up
00:38:11,284 -- 00:38:12,385
higher up on the food chain.
00:38:13,453 -- 00:38:15,388
The change that's happened to the climate
00:38:15,388 -- 00:38:17,223
is very small compared to the change
00:38:17,223 -- 00:38:20,093
that's going to happen to our climate,
00:38:20,093 -- 00:38:24,697
and the implications for making good investments
00:38:24,697 -- 00:38:27,600
by financial institutions, making good loans,
00:38:27,600 -- 00:38:28,868
providing insurance
00:38:28,868 -- 00:38:31,070
are going to get much more difficult
00:38:31,070 -- 00:38:33,139
as the climate changes.
00:38:33,139 -- 00:38:34,741
And so the supervision
00:38:34,741 -- 00:38:36,909
for those of us who are consumers,
00:38:36,909 -- 00:38:39,278
counting on our supervisors,
00:38:39,278 -- 00:38:41,347
the supervision of financial institutions
00:38:41,347 -- 00:38:41,781
to make sure
00:38:41,781 -- 00:38:42,882
they're making good choices
00:38:42,882 -- 00:38:46,352
about loans and investments and
00:38:46,352 -- 00:38:49,288
insurance is just going to get more challenging.
00:38:49,288 -- 00:38:50,790
It'll become more critical
00:38:50,790 -- 00:38:52,859
for proper supervision
00:38:52,859 -- 00:38:55,428
over time as things move forward.
00:38:55,428 -- 00:38:57,530
So, think about climate change,
00:38:57,530 -- 00:38:58,898
get to understand climate change,
00:38:58,898 -- 00:39:00,366
don't have to get all the science.
00:39:00,366 -- 00:39:01,901
You just need to understand
00:39:01,901 -- 00:39:05,038
how financial institutions are making choices.
00:39:05,038 -- 00:39:06,572
And are they doing their homework?
00:39:06,572 -- 00:39:08,374
Do you see them thinking about this?
00:39:08,374 -- 00:39:09,375
Well, that's
00:39:09,375 -- 00:39:10,076
what I'm looking
00:39:10,076 -- 00:39:13,479
for, is the core message back to those in FSRA
00:39:13,479 -- 00:39:15,281
and those in the regulatory sector.
00:39:15,281 -- 00:39:15,915
That's great.
00:39:15,915 -- 00:39:16,449
Thank you.
00:39:16,449 -- 00:39:17,717
I know we had a very short time,
00:39:17,717 -- 00:39:19,352
but thank you for sharing your insights.
00:00:05,171 -- 00:00:06,172
I am Judy Pfeifer,
00:00:06,172 -- 00:00:11,177
Chief Public Affairs Officer, and I love my AI tools,
00:00:11,578 -- 00:00:13,413
and I'm sure many of you are using
00:00:13,413 -- 00:00:14,948
AI tools in your business
00:00:14,948 -- 00:00:17,717
and is rapidly changing our environment.
00:00:17,717 -- 00:00:21,488
So I am pleased to introduce my colleague Jordan Solway,
00:00:21,488 -- 00:00:23,656
EVP of Legal Enforcement,
00:00:23,656 -- 00:00:28,661
and he's going to lead this great panel on AI.
00:00:28,828 -- 00:00:31,297
Thanks, Judy. Good morning, everybody.
00:00:31,297 -- 00:00:33,466
Before I introduce the panelists,
00:00:33,466 -- 00:00:36,069
I want to just put a scenario out there.
00:00:36,069 -- 00:00:37,871
Imagine if you can
00:00:37,871 -- 00:00:40,840
a artificial general intelligence computer
00:00:40,840 -- 00:00:43,476
that can perform many, many functions, human functions,
00:00:43,476 -- 00:00:45,678
even better than most humans.
00:00:45,678 -- 00:00:47,413
It's slowly
00:00:47,413 -- 00:00:50,049
and very gradually begins to malfunction
00:00:50,049 -- 00:00:54,287
in very subtle ways through effective AI governance.
00:00:54,287 -- 00:00:56,523
I got advice from Carole.
00:00:56,523 -- 00:00:59,759
The errors are recognized by the human oversight.
00:00:59,759 -- 00:01:00,493
However,
00:01:01,728 -- 00:01:04,430
the AI computer that uses,
00:01:04,430 -- 00:01:07,600
what's called Sentient AI, it's effectively
00:01:07,600 -- 00:01:09,669
consciousness awareness
00:01:09,669 -- 00:01:10,603
has now determined
00:01:10,603 -- 00:01:12,005
that it may be shut down,
00:01:12,005 -- 00:01:17,010
and it preemptively shuts down the human oversight.
00:01:17,110 -- 00:01:19,712
Susan, from today's Globe and Mail.
00:01:19,712 -- 00:01:23,049
But it really is a scenario that existed over 50 years ago
00:01:23,049 -- 00:01:26,919
in Stanley Kubrick's classic, 2001, A Space Odyssey.
00:01:26,919 -- 00:01:29,922
If you really want to scare yourself, imagine
00:01:29,922 -- 00:01:32,925
an AI run by Air Canada Rouge.
00:01:32,925 -- 00:01:35,962
And then you'll understand what I'm talking about.
00:01:35,962 -- 00:01:38,398
Where 50 years after,
00:01:38,398 -- 00:01:42,201
Goldberg's masterpiece in AI is no longer science fiction,
00:01:42,201 -- 00:01:44,437
it's actually science fact.
00:01:44,437 -- 00:01:45,672
It's often described
00:01:45,672 -- 00:01:48,741
as, you know, is the next industrial revolution,
00:01:48,741 -- 00:01:50,109
and has even been compared
00:01:50,109 -- 00:01:52,178
to how the discovery of electricity
00:01:52,178 -- 00:01:56,215
transformed the economy and society at large.
00:01:56,215 -- 00:01:57,683
There's no question
00:01:57,683 -- 00:01:59,385
that AI will be transformative,
00:01:59,385 -- 00:02:01,754
but the extent to which is not clear,
00:02:01,754 -- 00:02:04,791
which is why I'm very pleased to have this expert panel
00:02:04,791 -- 00:02:06,192
who have agreed to share their views.
00:02:07,827 -- 00:02:10,930
Before I do that, I just quickly want to
00:02:10,930 -- 00:02:14,767
to sort of set the, set some parameters.
00:02:14,767 -- 00:02:15,435
Bill gates
00:02:15,435 -- 00:02:16,936
once famously said that we always
00:02:16,936 -- 00:02:18,237
overestimate the change
00:02:18,237 -- 00:02:19,739
that will occur in the next two years,
00:02:19,739 -- 00:02:22,809
but underestimate the change in the next ten years.
00:02:22,809 -- 00:02:24,310
If you look at what's going to happen
00:02:24,310 -- 00:02:26,579
in the next two years, it's estimated that over
00:02:26,579 -- 00:02:31,584
70% of businesses will start to use data driven AI,
00:02:32,251 -- 00:02:33,452
machine learning,
00:02:33,452 -- 00:02:34,921
or even a blockchain
00:02:34,921 -- 00:02:37,957
as critical components of their business operations.
00:02:37,957 -- 00:02:39,725
And the investment in AI
00:02:39,725 -- 00:02:44,630
by 2025 is estimated to be in the range of $200 billion.
00:02:44,630 -- 00:02:46,999
So it's pretty staggering.
00:02:46,999 -- 00:02:49,802
I'm very pleased to have a panel
00:02:49,802 -- 00:02:51,270
of really leading experts.
00:02:51,270 -- 00:02:53,806
To my immediate left is Josh Teichman.
00:02:53,806 -- 00:02:55,408
He's the Vice President of Legal
00:02:55,408 -- 00:02:57,610
and Corporate Affairs for Radical Ventures.
00:02:57,610 -- 00:03:00,213
And if you've never heard of Radical Ventures, you should.
00:03:00,213 -- 00:03:01,547
It is a leading venture capital
00:03:01,547 -- 00:03:03,349
fund right here in Toronto
00:03:03,349 -- 00:03:06,852
that's focused on businesses that use transformational AI.
00:03:07,820 -- 00:03:10,923
Radical Ventures has close to $1 billion in capital
00:03:10,923 -- 00:03:13,793
to invest in entrepreneurs who apply technology
00:03:13,793 -- 00:03:16,762
to transform massive industries.
00:03:16,762 -- 00:03:18,331
What's interesting about Radical Ventures
00:03:18,331 -- 00:03:20,399
is it's both a product of the Canadian
00:03:20,399 -- 00:03:23,069
AI ecosystem, and it's also one of its architects.
00:03:23,069 -- 00:03:25,004
So welcome, Josh.
00:03:25,004 -- 00:03:29,041
To Josh's left, parden me, is Abdi Aidid.
00:03:29,041 -- 00:03:30,376
He is an Assistant Professor
00:03:30,376 -- 00:03:32,445
at the University of Toronto Law School,
00:03:32,445 -- 00:03:34,947
and he is also the legal innovation strategist
00:03:34,947 -- 00:03:37,016
at Blue J Legal. Another company,
00:03:37,016 -- 00:03:39,218
if you haven't heard of, you're going to hear of.
00:03:39,218 -- 00:03:40,820
It's a leading AI platform
00:03:40,820 -- 00:03:42,288
that uses machine learning to predict
00:03:42,288 -- 00:03:44,757
tax law outcomes and recommendations.
00:03:44,757 -- 00:03:46,559
You can see Abdi during the break
00:03:46,559 -- 00:03:49,028
to get a tax refund from CRA.
00:03:49,028 -- 00:03:50,496
And lastly,
00:03:50,496 -- 00:03:53,265
but not least is Carole Piovesan,
00:03:53,265 -- 00:03:56,102
who is the Managing Partner of INQ Law,
00:03:56,102 -- 00:03:57,570
a leading boutique
00:03:57,570 -- 00:03:59,004
law firm and consulting business
00:03:59,004 -- 00:03:59,572
which provides
00:03:59,572 -- 00:04:02,274
legal advice to businesses in the area of privacy,
00:04:02,274 -- 00:04:04,910
data governance, cybersecurity and AI,
00:04:04,910 -- 00:04:06,412
along with multi-disciplinary
00:04:06,412 -- 00:04:08,080
services and law policy data
00:04:09,081 -- 00:04:10,116
and technology.
00:04:10,116 -- 00:04:11,717
So welcome.
00:04:11,717 -- 00:04:14,753
I'm going to start, Josh, with you.
00:04:14,753 -- 00:04:16,422
And if you don't mind,
00:04:16,422 -- 00:04:18,157
your company is essentially a king
00:04:18,157 -- 00:04:21,527
or queen maker in the AI space and assessing
00:04:21,527 -- 00:04:23,829
which AI business models
00:04:23,829 -- 00:04:26,232
you're going to back and why?
00:04:26,232 -- 00:04:28,868
Can you give us an assessment of how transformative
00:04:28,868 -- 00:04:32,438
you think I will be to financial services in Ontario?
00:04:32,438 -- 00:04:34,573
Can you guys hear me? Okay.
00:04:34,573 -- 00:04:37,576
I've got my mic. Okay.
00:04:37,576 -- 00:04:40,145
I think when Radical Ventures was formed,
00:04:40,145 -- 00:04:42,815
the first institutional fund back in 2017.
00:04:42,815 -- 00:04:45,050
We had a thesis that I was going to replace
00:04:45,050 -- 00:04:47,953
all software over a ten year replacement cycle,
00:04:47,953 -- 00:04:48,754
which actually aligns
00:04:48,754 -- 00:04:51,891
neatly with the George Bush estimate of underestimating
00:04:51,891 -- 00:04:54,126
how much transformation can happen in ten years.
00:04:54,126 -- 00:04:56,228
I think so far, we've seen that timeline play out
00:04:56,228 -- 00:04:57,563
quite accurately.
00:04:57,563 -- 00:04:59,665
And of course, everyone here is familiar with ChatGPT,
00:04:59,665 -- 00:05:01,333
and when it launched a couple years ago,
00:05:01,333 -- 00:05:03,469
it was absolutely transformative.
00:05:03,469 -- 00:05:05,804
I don't expect financial services will be any different.
00:05:05,804 -- 00:05:06,672
I think
00:05:06,672 -- 00:05:08,407
there's a few things about financial services
00:05:08,407 -- 00:05:11,977
that make it uniquely suited to AI adoption.
00:05:11,977 -- 00:05:16,115
There's many of them, but I can touch briefly on,
00:05:16,115 -- 00:05:17,950
just maybe a few.
00:05:17,950 -- 00:05:19,318
I think the first is
00:05:19,318 -- 00:05:22,287
AI is obviously a very data hungry endeavor,
00:05:22,287 -- 00:05:24,223
and you need a lot of high-quality,
00:05:24,223 -- 00:05:25,758
curated and labeled data
00:05:25,758 -- 00:05:27,960
to come up with really powerful AI models.
00:05:30,095 -- 00:05:32,331
the financial services industry has for a long time
00:05:32,331 -- 00:05:35,134
been ahead of the curve in generating,
00:05:35,134 -- 00:05:36,869
collating and aggregating
00:05:36,869 -- 00:05:37,836
high-quality data
00:05:37,836 -- 00:05:40,239
that are going to be really powerful inputs to AI models.
00:05:40,239 -- 00:05:43,008
So they're already got a leg up there.
00:05:43,008 -- 00:05:44,543
I also think financial services sits
00:05:44,543 -- 00:05:49,348
at the intersection of a few different AI core use cases.
00:05:49,348 -- 00:05:52,351
So you guys all know ChatGPT is a large language model,
00:05:52,351 -- 00:05:54,219
but there are also foundation models
00:05:54,219 -- 00:05:56,155
for other applications
00:05:56,155 -- 00:05:58,490
like, you know, pixels with ability
00:05:58,490 -- 00:06:01,427
AI and stable diffusion where you can generate images.
00:06:01,427 -- 00:06:03,262
And there are also now foundation models
00:06:03,262 -- 00:06:06,465
for numbers and math and financial spreadsheets.
00:06:06,465 -- 00:06:08,367
And if you put all three of those together,
00:06:08,367 -- 00:06:09,735
you get some really powerful tools
00:06:09,735 -- 00:06:11,904
where you can use a pixel model
00:06:11,904 -- 00:06:15,607
to extract information out of applicant submissions,
00:06:15,607 -- 00:06:17,109
use a large language model to then
00:06:17,109 -- 00:06:19,111
summarize and analyze that information,
00:06:19,111 -- 00:06:21,580
and then use a mathematical
00:06:21,580 -- 00:06:22,447
and spreadsheet model
00:06:22,447 -- 00:06:26,151
to create some risk analysis and financial planning.
00:06:26,151 -- 00:06:28,120
So you kind of put all three of those together,
00:06:28,120 -- 00:06:28,887
and you have.
00:06:28,887 -- 00:06:30,822
That's one enterprise
00:06:30,822 -- 00:06:33,325
that really can leverage a few different areas
00:06:33,325 -- 00:06:36,695
that are very powerful AI tools on the market today.
00:06:36,695 -- 00:06:38,096
Maybe the last,
00:06:38,096 -- 00:06:39,331
way in which I think financial services
00:06:39,331 -- 00:06:40,666
is uniquely positioned to use
00:06:40,666 -- 00:06:44,269
AI is the fact that it is actually a regulated industry.
00:06:44,269 -- 00:06:45,571
And a lot of people think that might be
00:06:45,571 -- 00:06:47,739
a headwind for adoption of technology.
00:06:47,739 -- 00:06:48,674
I think when it comes to AI,
00:06:48,674 -- 00:06:51,276
I actually is a bit of a tailwind,
00:06:51,276 -- 00:06:53,478
because if you think about some of the problems
00:06:53,478 -- 00:06:54,680
with AI
00:06:54,680 -- 00:06:57,249
in particular, like prone to hallucinations
00:06:57,249 -- 00:06:59,918
and making up information that may not be accurate,
00:06:59,918 -- 00:07:02,487
if you then take that AI tool and stick it in a sandbox
00:07:02,487 -- 00:07:05,324
and say you can only draw on data from this one space,
00:07:05,324 -- 00:07:07,960
and you're bound by these set of rules and constraints,
00:07:07,960 -- 00:07:10,062
it's much less likely to hallucinate.
00:07:10,062 -- 00:07:11,563
I actually think there's a good use case
00:07:11,563 -- 00:07:13,565
for AI, particularly in regulated spaces,
00:07:13,565 -- 00:07:15,801
because it can actually be more accurate
00:07:15,801 -- 00:07:16,802
and highly performant.
00:07:17,836 -- 00:07:21,540
I would say it well regulated space, but anyway.
00:07:21,540 -- 00:07:24,242
Abdi, it's been observed that,
00:07:24,242 -- 00:07:27,079
one of the main impacts of artificial intelligence will be
00:07:27,079 -- 00:07:29,214
it will really force businesses
00:07:29,214 -- 00:07:29,781
to assess
00:07:29,781 -- 00:07:32,017
how the technology impacts their business strategy,
00:07:32,017 -- 00:07:35,787
specifically as it relates to predictive modeling.
00:07:35,787 -- 00:07:36,922
This is really, as I understand
00:07:36,922 -- 00:07:39,491
it, at the core of what Blue J Legal does.
00:07:39,491 -- 00:07:40,525
Can you comment on how
00:07:40,525 -- 00:07:41,960
where sectors need to be thinking
00:07:41,960 -- 00:07:44,629
about the technology for their businesses?
00:07:44,629 -- 00:07:47,132
Sure. Thanks for having me.
00:07:47,132 -- 00:07:50,469
The way that I think about the strategic benefit of using
00:07:50,469 -- 00:07:53,839
AI is really as a professional augmentation tool.
00:07:53,839 -- 00:07:54,739
So, Blue J, we built
00:07:54,739 -- 00:07:56,708
these tools that were supposed to supercharge
00:07:56,708 -- 00:07:57,809
lawyer research.
00:07:57,809 -- 00:08:00,278
And that was really recognizing that there's
00:08:00,278 -- 00:08:01,713
an emerging division of labor
00:08:01,713 -- 00:08:05,150
between human and technology, where we understand that
00:08:05,150 -- 00:08:07,319
computers can synthesize volumes of data
00:08:07,319 -- 00:08:10,589
that I can't begin to, in a shorter period of time. So,
00:08:12,057 -- 00:08:13,225
maybe everyone up here is a lawyer.
00:08:13,225 -- 00:08:15,093
There are a lot of lawyers in the room.
00:08:15,093 -- 00:08:18,597
And let's imagine. I think there's two. There's two.
00:08:18,597 -- 00:08:22,334
Let's imagine you're not yourselves, but your, you know,
00:08:22,334 -- 00:08:24,669
a county lawyer who hangs a shingle somewhere
00:08:24,669 -- 00:08:26,438
and you have an office in a strip mall,
00:08:26,438 -- 00:08:27,806
and someone knocks on your door
00:08:27,806 -- 00:08:28,607
and says,
00:08:28,607 -- 00:08:31,076
I, you know, I've been terminated at work.
00:08:31,076 -- 00:08:33,044
It feels like it was wrong, right?
00:08:33,044 -- 00:08:35,113
The rate limiting factor in the quality of advice
00:08:35,113 -- 00:08:36,681
I can give is,
00:08:36,681 -- 00:08:38,416
you know, I can I can start by shooting from the hip.
00:08:38,416 -- 00:08:40,151
I can tell them a bit
00:08:40,151 -- 00:08:42,053
about my experience of wrongful dismissal.
00:08:42,053 -- 00:08:44,456
But at some point I'm going to have to justify my advice
00:08:44,456 -- 00:08:45,223
with some rigor
00:08:45,223 -- 00:08:47,259
and the rate limiting factor on the quality of advice
00:08:47,259 -- 00:08:49,828
I can give is how many cases can I read in a day, right?
00:08:49,828 -- 00:08:50,795
Well, if you have technology
00:08:50,795 -- 00:08:53,465
that can purport to synthesize
00:08:53,465 -- 00:08:55,133
all of the historical case law in the area,
00:08:55,133 -- 00:08:56,901
and then I can start at a higher floor,
00:08:56,901 -- 00:08:59,204
I can then reconcile that against my experience,
00:08:59,204 -- 00:09:00,105
my understanding,
00:09:00,105 -- 00:09:02,774
my sense of the judge in the local,
00:09:02,774 -- 00:09:05,977
my sense of what the appropriate arguments are.
00:09:05,977 -- 00:09:07,545
And now I have this,
00:09:08,747 -- 00:09:11,182
I've made use of an intelligent high powered assistant.
00:09:11,182 -- 00:09:11,649
And actually,
00:09:11,649 -- 00:09:12,484
when you think about things
00:09:12,484 -- 00:09:14,285
in the context of a division of labor,
00:09:14,285 -- 00:09:15,220
then some of the concerns
00:09:15,220 -- 00:09:17,122
that we have around things like inaccuracy
00:09:17,122 -- 00:09:18,490
start to fall away
00:09:18,490 -- 00:09:20,692
because they're in a familiar template, right?
00:09:20,692 -- 00:09:22,093
If ChatGPT is giving you
00:09:22,093 -- 00:09:23,461
false information,
00:09:23,461 -- 00:09:27,599
well, maybe you treat it the way you treat the,
00:09:27,599 -- 00:09:29,768
eager intern at your office, right?
00:09:29,768 -- 00:09:34,272
It's like they're very, eager to please.
00:09:34,272 -- 00:09:36,007
They can work 24 hours a day.
00:09:36,007 -- 00:09:37,475
They really want to do well by you.
00:09:37,475 -- 00:09:38,710
They have the vocabulary, right,
00:09:38,710 -- 00:09:40,111
but they don't know anything yet.
00:09:40,111 -- 00:09:43,148
So what do you do? You trust but verify, right.
00:09:43,148 -- 00:09:44,749
And so when we start to think about it in the context
00:09:44,749 -- 00:09:47,218
of professional augmentation, supercharging what we do,
00:09:47,218 -- 00:09:49,420
working alongside high powered assistants.
00:09:49,420 -- 00:09:50,221
In that way,
00:09:50,221 -- 00:09:52,190
then it becomes utterly familiar to us
00:09:52,190 -- 00:09:53,458
and we can better navigate the risks.
00:09:53,458 -- 00:09:54,759
And so
00:09:54,759 -- 00:09:57,162
the main strategic benefit for businesses
00:09:57,162 -- 00:10:00,265
right now is to think through the chance of supercharging
00:10:00,265 -- 00:10:00,999
the professional work
00:10:00,999 -- 00:10:01,866
they're already doing
00:10:01,866 -- 00:10:05,003
and recognizing that the technology is just attempting
00:10:05,003 -- 00:10:07,705
to do the thing that you're also attempting to do.
00:10:07,705 -- 00:10:08,373
And so,
00:10:08,373 -- 00:10:09,374
rather than oppose it, work
00:10:09,374 -- 00:10:11,309
harmoniously with it. As lawyers,
00:10:11,309 -- 00:10:13,578
what are we doing except trying to predict outcomes?
00:10:13,578 -- 00:10:16,848
If that person who knocked on my door, my office door,
00:10:16,848 -- 00:10:19,317
said, hey, I've been terminated from my job, what do I do?
00:10:19,317 -- 00:10:20,151
They'd be frustrated
00:10:20,151 -- 00:10:22,153
if I started reciting the multi-part test
00:10:22,153 -- 00:10:23,588
for wrongful dismissal,
00:10:23,588 -- 00:10:25,623
or gave them the contours of the doctrine.
00:10:25,623 -- 00:10:27,225
No, they want to know what's going to happen. Yep.
00:10:27,225 -- 00:10:28,426
And so tech can predict
00:10:28,426 -- 00:10:30,161
and it can work alongside us to predict.
00:10:30,161 -- 00:10:31,529
Then why would we oppose it?
00:10:33,097 -- 00:10:33,998
I guess I was going to
00:10:33,998 -- 00:10:35,066
say the only difference is the law
00:10:35,066 -- 00:10:37,669
firm gets to charge that, person with lack of knowledge.
00:10:37,669 -- 00:10:38,970
But at $500 an hour,
00:10:38,970 -- 00:10:41,139
which they're not gonna be able to do with ChatGPT.
00:10:41,139 -- 00:10:43,975
There's always ways to charge the money.
00:10:43,975 -- 00:10:44,542
Telling you,
00:10:44,542 -- 00:10:47,679
Don't worry about it. Carole.
00:10:47,679 -- 00:10:50,948
You have been, a little bit like a canary in a coal mine
00:10:50,948 -- 00:10:52,850
with AI focusing on the,
00:10:52,850 -- 00:10:56,888
business uses to be both responsible and ethical.
00:10:56,888 -- 00:10:58,389
I was joking about Air Canada Rouge,
00:10:58,389 -- 00:10:59,324
but everyone knows
00:10:59,324 -- 00:11:02,627
a few weeks ago, Air Canada got into trouble,
00:11:02,627 -- 00:11:04,696
and made the news because one of its chat bots
00:11:04,696 -- 00:11:08,099
gave inaccurate advice about its bereavement policy,
00:11:08,099 -- 00:11:09,634
which caused the financial exposure
00:11:09,634 -- 00:11:11,669
and lots of reputational risk.
00:11:11,669 -- 00:11:13,504
It's just isolated.
00:11:13,504 -- 00:11:14,639
Just Air Canada,
00:11:14,639 -- 00:11:17,108
or is this really a harbinger of things to come with AI?
00:11:18,076 -- 00:11:21,279
It's not isolated.
00:11:21,279 -- 00:11:24,048
As you heard,
00:11:24,048 -- 00:11:25,750
there are some really great use cases
00:11:25,750 -- 00:11:27,618
for artificial intelligence and ways
00:11:27,618 -- 00:11:29,454
it can augment productivity.
00:11:29,454 -- 00:11:31,389
It can identify new markets.
00:11:31,389 -- 00:11:32,623
It can help us with,
00:11:32,623 -- 00:11:35,693
you know, predictions and other really valuable uses.
00:11:35,693 -- 00:11:38,329
So there are lots of ways where artificial intelligence
00:11:38,329 -- 00:11:41,799
will be extremely valuable to our businesses.
00:11:41,799 -- 00:11:42,700
At the same time,
00:11:42,700 -- 00:11:45,269
we have to recognize that there are limitations.
00:11:45,269 -- 00:11:47,505
And you heard Josh talk about some of those.
00:11:47,505 -- 00:11:49,640
There are limitations with the technology
00:11:49,640 -- 00:11:51,909
that if you don't appreciate the limitations
00:11:51,909 -- 00:11:55,513
and put in place some reasonable mitigating factors,
00:11:55,513 -- 00:11:59,350
you are at risk of the type of reputational harm
00:11:59,350 -- 00:12:02,687
or more that Air Canada faced as an example.
00:12:02,687 -- 00:12:03,855
And they are not alone.
00:12:03,855 -- 00:12:04,956
There are professionals
00:12:04,956 -- 00:12:07,058
who have used artificial intelligence
00:12:07,058 -- 00:12:09,227
in, you know, formal briefing documents
00:12:09,227 -- 00:12:11,696
and have been slammed for the fact that the
00:12:11,696 -- 00:12:13,497
the system unearthed,
00:12:13,497 -- 00:12:15,933
you know, information that was not true.
00:12:15,933 -- 00:12:17,068
We see it happening
00:12:17,068 -- 00:12:19,637
in triaging in the sort of health sector
00:12:19,637 -- 00:12:20,905
where artificial intelligence
00:12:20,905 -- 00:12:22,607
is used in triaging services,
00:12:22,607 -- 00:12:24,242
and there's baked in discrimination
00:12:24,242 -- 00:12:25,910
that wasn't caught in advance,
00:12:25,910 -- 00:12:28,379
and that caused significant harm
00:12:28,379 -- 00:12:30,948
to individuals on the receiving end of that.
00:12:30,948 -- 00:12:31,916
And the list goes on.
00:12:31,916 -- 00:12:32,483
There's actually,
00:12:32,483 -- 00:12:33,484
if you're curious, there's
00:12:33,484 -- 00:12:35,786
actually an AI Incident Database.
00:12:35,786 -- 00:12:38,289
You just literally Google AI Incident Database
00:12:38,289 -- 00:12:40,658
and it's the first thing that will come up.
00:12:40,658 -- 00:12:41,392
And I would
00:12:41,392 -- 00:12:44,762
look at it with some, you know, a critical eye.
00:12:44,762 -- 00:12:47,231
But it's interesting to see the types of incidents
00:12:47,231 -- 00:12:48,699
that are being documented.
00:12:48,699 -- 00:12:50,167
And those incidents reflect
00:12:50,167 -- 00:12:53,104
some of the legal, reputational, ethical
00:12:53,104 -- 00:12:54,538
and other risks that come
00:12:54,538 -- 00:12:56,340
with the use of artificial intelligence.
00:12:56,340 -- 00:12:58,709
So it's by no means, a standalone.
00:12:58,709 -- 00:13:01,212
We will see lots of these examples come up.
00:13:01,212 -- 00:13:04,048
But there are things that can be done to mitigate
00:13:04,048 -- 00:13:06,584
some of those risks and put in place more governance.
00:13:06,584 -- 00:13:08,919
So you're using the technology more responsibly.
00:13:08,919 -- 00:13:11,222
You know, are you seeing businesses doing that?
00:13:11,222 -- 00:13:15,593
Absolutely, absolutely. So the first thing with ChatGPT
00:13:16,560 -- 00:13:17,862
and we in Canada, we have
00:13:17,862 -- 00:13:20,331
similar types, systems like cohere
00:13:20,331 -- 00:13:21,699
that have large language models
00:13:21,699 -- 00:13:23,400
that we can be using as well.
00:13:23,400 -- 00:13:24,769
So the first thing we saw
00:13:24,769 -- 00:13:27,438
is an acceptable use policy for AI,
00:13:27,438 -- 00:13:31,675
for generative AI in particular. That became all the rage.
00:13:31,675 -- 00:13:33,811
Since then we have seen greater investment
00:13:33,811 -- 00:13:35,312
in a data governance, or, sorry, in
00:13:35,312 -- 00:13:39,350
AI governance framework, a suite of AI related policies.
00:13:39,350 -- 00:13:41,952
If you are at all curious, which I'm sure you all are,
00:13:41,952 -- 00:13:44,054
there is an interesting ISO standard,
00:13:44,054 -- 00:13:46,257
and I know we all like reading ISO standards,
00:13:46,257 -- 00:13:48,726
but it's 4201
00:13:48,726 -- 00:13:51,262
and it gives some good guidance
00:13:51,262 -- 00:13:53,531
about what an AI responsible
00:13:53,531 -- 00:13:55,799
AI management framework could look like.
00:13:55,799 -- 00:13:57,468
So even if you don't want to read
00:13:57,468 -- 00:13:59,637
the nuts and bolts of the actual standard,
00:13:59,637 -- 00:14:01,238
look at the index. Like,
00:14:01,238 -- 00:14:02,940
just peruse the index
00:14:02,940 -- 00:14:05,576
to get some ideas about what people are doing.
00:14:05,576 -- 00:14:07,611
What different organizations are doing.
00:14:07,611 -- 00:14:08,379
You're going to see
00:14:08,379 -- 00:14:10,347
there is a suite of policies and procedures
00:14:10,347 -- 00:14:12,883
that touch on appropriate use, risk
00:14:12,883 -- 00:14:17,321
mitigation, impact assessments, incident response.
00:14:17,321 -- 00:14:20,391
Then there will be an entire risk management framework
00:14:20,391 -- 00:14:24,028
that is put in place to help mitigate some of those,
00:14:24,028 -- 00:14:26,130
potential risks of the higher use cases.
00:14:26,130 -- 00:14:28,198
And then there are governance structures in place,
00:14:28,198 -- 00:14:29,733
including various committees.
00:14:29,733 -- 00:14:30,701
I mean, you organize it
00:14:30,701 -- 00:14:32,836
according to your own internal culture,
00:14:32,836 -- 00:14:36,273
but they do help set up that appropriate oversight
00:14:36,273 -- 00:14:38,442
of the higher risk use cases,
00:14:38,442 -- 00:14:41,912
not of every single use of artificial intelligence.
00:14:41,912 -- 00:14:44,648
Thank you. Josh, can I come back to you for a second?
00:14:44,648 -- 00:14:47,084
So, there’s a famous quote by Peter Drucker
00:14:47,084 -- 00:14:49,753
who said, “the only purpose of a business
00:14:49,753 -- 00:14:51,422
just to create a customer.” I'm sure you've heard that.
00:14:52,389 -- 00:14:54,291
Your company looks, as I understand it,
00:14:54,291 -- 00:14:55,959
that the ability of AI to transform
00:14:55,959 -- 00:14:59,830
a given business, right? To improve it.
00:14:59,830 -- 00:15:03,133
How does AI enable financial services,
00:15:03,133 -- 00:15:06,437
businesses, to personalize the customer experience,
00:15:06,437 -- 00:15:08,305
offer tailored product
00:15:08,305 -- 00:15:09,640
recommendations, and generally
00:15:09,640 -- 00:15:12,676
improve customer engagement?
00:15:12,676 -- 00:15:16,213
I think there's a lot to unpack there, but AI can
00:15:16,213 -- 00:15:17,414
sort of supercharge
00:15:17,414 -- 00:15:18,715
not just the customer experience,
00:15:18,715 -- 00:15:20,751
but also the vendor experience
00:15:20,751 -- 00:15:23,320
and the agent and broker experience.
00:15:23,320 -- 00:15:25,189
If we zoom in on the customer governance in particular,
00:15:25,189 -- 00:15:26,523
I think there's use cases on
00:15:26,523 -- 00:15:28,525
almost every stage of the customer
00:15:28,525 -- 00:15:30,727
experience journey from,
00:15:30,727 -- 00:15:32,129
you know, finding out what services
00:15:32,129 -- 00:15:33,597
you even need in the first place,
00:15:33,597 -- 00:15:36,200
to connecting with a service provider,
00:15:36,200 -- 00:15:37,868
evaluating them,
00:15:37,868 -- 00:15:40,270
running through the sales process, concluding a sale
00:15:40,270 -- 00:15:42,439
and then getting support on the back end.
00:15:42,439 -- 00:15:46,176
We're already seeing AI tools in all of these spaces. Right.
00:15:46,176 -- 00:15:47,911
Some of them kind of try to go end to end,
00:15:47,911 -- 00:15:50,547
and some of them focus, focus on a specific vertical.
00:15:50,547 -- 00:15:53,750
But lots of them exist and there's lots more coming.
00:15:53,750 -- 00:15:54,551
I also think,
00:15:56,220 -- 00:15:56,687
when you think
00:15:56,687 -- 00:15:57,654
about
00:15:57,654 -- 00:15:58,855
whether an AI tool
00:15:58,855 -- 00:16:00,357
is the right tool for a particular purpose,
00:16:00,357 -- 00:16:02,326
you got to think about, does it
00:16:02,326 -- 00:16:03,026
first of all, balance
00:16:03,026 -- 00:16:04,428
the risks that we're talking about,
00:16:04,428 -- 00:16:07,064
but also actually make the customer's life easier
00:16:07,064 -- 00:16:08,966
because at the end of the day, improves outcomes,
00:16:08,966 -- 00:16:10,667
but introduces a whole lot of challenges
00:16:10,667 -- 00:16:11,935
and the customer doesn't trust it.
00:16:11,935 -- 00:16:14,371
It's not going to get widely adopted.
00:16:14,371 -- 00:16:15,706
So we think about,
00:16:15,706 -- 00:16:16,206
you know,
00:16:16,206 -- 00:16:18,809
can the customer access the tool outside of office hours
00:16:18,809 -- 00:16:19,876
that would normally be restrictive
00:16:19,876 -- 00:16:22,112
if they want to learn about their policy, for example.
00:16:22,112 -- 00:16:22,646
Right.
00:16:22,646 -- 00:16:24,915
Or can they go ask an AI chat bot about their policy
00:16:24,915 -- 00:16:26,116
and not wait until nine in the morning
00:16:26,116 -- 00:16:28,251
to talk to their broker when their office opens?
00:16:28,251 -- 00:16:30,954
There's lots of tools trying to solve that problem.
00:16:30,954 -- 00:16:32,022
There's also lots of tools.
00:16:32,022 -- 00:16:35,258
Now that I sort of put in a family of AI tools,
00:16:35,258 -- 00:16:37,861
trying to figure out a better way of,
00:16:37,861 -- 00:16:40,697
analyzing the risk profile of an applicant.
00:16:40,697 -- 00:16:43,033
And if you can get more granular in that risk profile,
00:16:43,033 -- 00:16:43,367
you can
00:16:43,367 -- 00:16:46,536
then better match them to an underwriter
00:16:46,536 -- 00:16:47,070
or provider
00:16:47,070 -- 00:16:48,972
who has appetite for that risk
00:16:48,972 -- 00:16:51,007
and then create sort of customized
00:16:51,007 -- 00:16:52,943
or tailored policies for them
00:16:52,943 -- 00:16:54,277
that previously was just not possible,
00:16:54,277 -- 00:16:56,046
because the man hours involved in creating
00:16:56,046 -- 00:16:57,914
that policy was just too high. Right.
00:16:57,914 -- 00:16:59,049
You can now create the policy
00:16:59,049 -- 00:17:01,384
and service that policy all using AI,
00:17:01,384 -- 00:17:03,420
and then support it on the back end through again,
00:17:03,420 -- 00:17:05,989
sort of uses a chat bot type functionality
00:17:05,989 -- 00:17:07,657
when customers have questions about it.
00:17:07,657 -- 00:17:09,659
And thereby improve the customer experience. Yeah.
00:17:11,094 -- 00:17:11,661
Carole, maybe
00:17:11,661 -- 00:17:12,562
back to you for a second,
00:17:12,562 -- 00:17:14,831
because we have lots of people in the room
00:17:14,831 -- 00:17:16,733
who sit on the Board of entities or businesses
00:17:16,733 -- 00:17:18,068
we regulate.
00:17:18,068 -- 00:17:20,170
How do you balance
00:17:20,170 -- 00:17:21,171
or how do you strike the right
00:17:21,171 -- 00:17:23,073
balance of an AI driven automation
00:17:23,073 -- 00:17:25,609
and all the benefits that Josh has spoken to
00:17:25,609 -- 00:17:26,576
and efficiency with,
00:17:26,576 -- 00:17:29,913
and with the need to maintain human oversight
00:17:29,913 -- 00:17:32,349
and accountability, especially in sensitive areas?
00:17:32,349 -- 00:17:33,550
For example,
00:17:33,550 -- 00:17:37,153
you know, our Credit Unions do loan underwriting.
00:17:37,153 -- 00:17:37,854
Yeah.
00:17:37,854 -- 00:17:40,924
So the first thing I would always say
00:17:40,924 -- 00:17:42,826
is figure out what your use cases
00:17:42,826 -- 00:17:45,295
are and figure out what existing
00:17:45,295 -- 00:17:48,265
sort of data security and data governance practices
00:17:48,265 -- 00:17:50,700
you have in place and figure out,
00:17:50,700 -- 00:17:52,035
as I said, what your use cases are.
00:17:52,035 -- 00:17:52,969
So where are you going?
00:17:52,969 -- 00:17:53,870
Where do you think you're going
00:17:53,870 -- 00:17:55,305
to be using this technology?
00:17:55,305 -- 00:17:56,640
Because what you will want to do
00:17:56,640 -- 00:17:59,943
is bridge the gap between where you are today
00:17:59,943 -- 00:18:01,978
and where you are going to be going in the next
00:18:01,978 -- 00:18:03,146
3 to 5 years.
00:18:03,146 -- 00:18:04,414
And I strongly encourage
00:18:04,414 -- 00:18:06,416
everyone to be a bit ambitious about it.
00:18:06,416 -- 00:18:10,153
We I there are absolutely distinct risks with AI,
00:18:10,153 -- 00:18:12,188
but they're not insurmountable risks.
00:18:12,188 -- 00:18:13,456
Or if they are, then at least
00:18:13,456 -- 00:18:15,659
you know which use cases to avoid.
00:18:15,659 -- 00:18:19,262
So bridging that gap becomes very, very important.
00:18:19,262 -- 00:18:21,064
And then you can start to put in place
00:18:21,064 -- 00:18:23,033
a reasonable, responsible
00:18:23,033 -- 00:18:26,336
AI plan that will allow you to operationalize
00:18:26,336 -- 00:18:27,937
while mitigating and lessening
00:18:27,937 -- 00:18:29,639
some of those distinct risks.
00:18:29,639 -- 00:18:30,907
So the number one thing
00:18:30,907 -- 00:18:31,341
that I
00:18:31,341 -- 00:18:33,910
caution every especially Canadian company
00:18:33,910 -- 00:18:36,846
is not to be so fearful of the technology
00:18:36,846 -- 00:18:38,982
because of all the hype around the risks,
00:18:38,982 -- 00:18:41,951
that you don't start investing in and understanding
00:18:41,951 -- 00:18:43,887
where it can actually be quite beneficial
00:18:43,887 -- 00:18:44,888
to your business.
00:18:44,888 -- 00:18:46,523
The good news in all of this
00:18:46,523 -- 00:18:48,792
is that there is a reasonable way forward,
00:18:48,792 -- 00:18:50,860
especially for the initial
00:18:50,860 -- 00:18:52,962
use cases that you're likely to take on,
00:18:52,962 -- 00:18:56,499
which are probably lower risk and higher productivity.
00:18:56,499 -- 00:18:58,501
So you can demonstrate that good ROI.
00:18:58,501 -- 00:19:00,003
And this is a lawyer speaking, right.
00:19:00,003 -- 00:19:01,538
Like I should be telling you, don't touch it
00:19:01,538 -- 00:19:03,339
with a ten foot pole and get away from it.
00:19:03,339 -- 00:19:07,210
But actually I see a distinct risk on the opposite side,
00:19:07,210 -- 00:19:09,879
which is not only the competitive
00:19:09,879 -- 00:19:11,815
disadvantage of not using it,
00:19:11,815 -- 00:19:13,516
but also overall,
00:19:13,516 -- 00:19:16,419
we can all be playing to our higher strengths,
00:19:16,419 -- 00:19:18,154
I think, if we've got some technology
00:19:18,154 -- 00:19:19,823
to augment our intelligence.
00:19:19,823 -- 00:19:21,524
And see if I can follow up,
00:19:21,524 -- 00:19:22,659
you see that discussion
00:19:22,659 -- 00:19:25,195
starting at the Board level or is it starting up?
00:19:25,195 -- 00:19:28,064
Absolutely. It is absolutely happening at the Board level.
00:19:28,064 -- 00:19:29,432
And increasingly, Boards,
00:19:29,432 -- 00:19:31,434
especially of large organizations,
00:19:31,434 -- 00:19:34,337
are bringing on that kind of expertise
00:19:34,337 -- 00:19:36,339
for Board education.
00:19:36,339 -- 00:19:37,106
Over time,
00:19:37,106 -- 00:19:38,241
we are going to see what's happening
00:19:38,241 -- 00:19:39,442
in the cybersecurity world,
00:19:39,442 -- 00:19:41,177
which is you're going to want that expertise
00:19:41,177 -- 00:19:42,545
actually sitting on your Board.
00:19:42,545 -- 00:19:44,314
We're not there yet with AI. Right.
00:19:44,314 -- 00:19:46,316
The regulators will require it, probably.
00:19:46,316 -- 00:19:49,118
Absolutely. They should. Abdi, coming back to you.
00:19:49,118 -- 00:19:50,787
So, you know, Blue J Legal, purpose
00:19:50,787 -- 00:19:53,256
driven, generative AI platform
00:19:53,256 -- 00:19:56,092
built on an authoritative tax law,
00:19:56,092 -- 00:19:58,161
database to provide predictive analysis
00:19:58,161 -- 00:20:00,630
to customers, mainly lawyers.
00:20:00,630 -- 00:20:01,731
Do you see the business
00:20:01,731 -- 00:20:03,566
model is having broader application
00:20:03,566 -- 00:20:05,969
to financial services, for example,
00:20:05,969 -- 00:20:08,271
could you use it to give advice on a Mortgage
00:20:08,271 -- 00:20:11,441
or Auto Insurance or Home Insurance?
00:20:11,441 -- 00:20:14,110
Yeah, I think, one of the points that Josh made earlier
00:20:14,110 -- 00:20:17,347
is that we're trending towards more consolidation, right?
00:20:17,347 -- 00:20:18,247
More domain expertise.
00:20:18,247 -- 00:20:19,749
So if you think about ChatGPT
00:20:19,749 -- 00:20:21,484
and one of the things that's so exciting,
00:20:21,484 -- 00:20:23,553
but also frustrating about it is that it's trained
00:20:23,553 -- 00:20:26,422
on, let's call it the sum total of the internet. Right.
00:20:26,422 -- 00:20:29,392
So that's part of why it's interesting and exciting,
00:20:29,392 -- 00:20:30,727
but also why it's unreliable.
00:20:30,727 -- 00:20:32,862
Why you won't ask it a factual question. Right.
00:20:32,862 -- 00:20:34,964
You might ask it to,
00:20:34,964 -- 00:20:37,433
you know, write your biography or obituary,
00:20:37,433 -- 00:20:39,368
but you can ask it to do,
00:20:39,368 -- 00:20:41,671
and it might give you things that sound compelling,
00:20:41,671 -- 00:20:43,406
that sound like they ought to be about you,
00:20:43,406 -- 00:20:45,341
but maybe aren't specific enough about you.
00:20:45,341 -- 00:20:46,809
Well, that's because it's a language model, right?
00:20:46,809 -- 00:20:49,312
It's at best a predictive,
00:20:49,312 -- 00:20:52,315
or, probabilistic determination of the next likely word.
00:20:52,315 -- 00:20:54,550
Or what if you took that language generation capacity
00:20:54,550 -- 00:20:56,419
and you merited it to a knowledge
00:20:56,419 -- 00:20:58,354
model, language model, knowledge model, where you said,
00:20:58,354 -- 00:21:02,158
let's only pull from vetted, scored information
00:21:02,158 -- 00:21:03,459
in a specific area.
00:21:03,459 -- 00:21:04,026
Well,
00:21:04,026 -- 00:21:05,161
in a regulated profession
00:21:05,161 -- 00:21:06,762
where you have a data rich environment
00:21:06,762 -- 00:21:09,198
and where you have people who are task compliance
00:21:09,198 -- 00:21:11,167
officers, others, who can be tasked with,
00:21:13,336 -- 00:21:15,771
sort of attesting to the veracity of that information.
00:21:15,771 -- 00:21:17,807
Then you have a chance to really say,
00:21:17,807 -- 00:21:19,809
let's use all the language generation capacity of
00:21:19,809 -- 00:21:20,409
this tool,
00:21:20,409 -- 00:21:21,577
but limit what it can pull
00:21:21,577 -- 00:21:23,112
from the information that we know.
00:21:23,112 -- 00:21:26,549
And that's actually a trend that you're seeing everywhere.
00:21:26,549 -- 00:21:28,618
So in education,
00:21:28,618 -- 00:21:30,219
I was talking to a community organization
00:21:30,219 -- 00:21:31,487
the other day, which was saying,
00:21:31,487 -- 00:21:32,955
we're going to use a large language model
00:21:32,955 -- 00:21:35,191
and train it on high school physics textbooks
00:21:35,191 -- 00:21:38,027
so that the kids can have a tutor that's available
00:21:38,027 -- 00:21:41,197
all hours of the night at any time for low cost. Right.
00:21:41,197 -- 00:21:42,331
And so the trend towards
00:21:42,331 -- 00:21:44,800
that kind of domain expertise is a wonderful thing,
00:21:44,800 -- 00:21:46,369
not only because it brings costs down,
00:21:46,369 -- 00:21:48,404
but it gets the right people into the space.
00:21:48,404 -- 00:21:50,706
One of the things that Carole was mentioning was,
00:21:50,706 -- 00:21:52,074
having human beings involved in the loop.
00:21:52,074 -- 00:21:55,044
Well, if we're trending towards more domain expertise
00:21:55,044 -- 00:21:56,445
at a technological level,
00:21:56,445 -- 00:21:57,246
then it means we're gonna need
00:21:57,246 -- 00:21:59,649
more domain experts to verify the information,
00:21:59,649 -- 00:22:01,050
participate in the development.
00:22:01,050 -- 00:22:02,685
I'll tell one very, very quick,
00:22:03,853 -- 00:22:05,121
story, which is
00:22:05,121 -- 00:22:09,091
I talk about this all the time, this lawsuit against
00:22:09,091 -- 00:22:11,193
the State of Arkansas by the Legal Aid Society.
00:22:11,193 -- 00:22:11,927
And in Arkansas,
00:22:11,927 -- 00:22:15,398
they decided to use, an algorithm to replace nurses
00:22:15,398 -- 00:22:17,166
who are determining in the past
00:22:17,166 -- 00:22:19,168
who was entitled to a person support worker
00:22:19,168 -- 00:22:20,669
so you could apply for state funding
00:22:20,669 -- 00:22:22,204
if you're someone with mobility issues.
00:22:22,204 -- 00:22:25,674
They terminated the nurses, had an algorithm,
00:22:25,674 -- 00:22:29,879
and the algorithm ask you questions like, are you,
00:22:29,879 -- 00:22:31,047
do you have foot pain, yes or no?
00:22:31,047 -- 00:22:32,314
The idea being, if you have foot pain,
00:22:32,314 -- 00:22:34,617
you're more likely to need a PSW.
00:22:34,617 -- 00:22:35,951
The following people were answering
00:22:35,951 -- 00:22:37,686
no to the question of their foot pain.
00:22:37,686 -- 00:22:39,021
People who are paraplegic.
00:22:39,021 -- 00:22:40,322
People who are quadriplegic.
00:22:40,322 -- 00:22:41,791
People who are amputees.
00:22:41,791 -- 00:22:43,125
So there's two ways to look at that one way.
00:22:43,125 -- 00:22:46,061
Say, let's never use technology in this context.
00:22:46,061 -- 00:22:47,897
The other way to look at it is, say,
00:22:47,897 -- 00:22:51,267
for determining the nurses, why not have them work on,
00:22:51,267 -- 00:22:52,268
the questionnaire design?
00:22:52,268 -- 00:22:53,202
Or better yet,
00:22:53,202 -- 00:22:53,936
use your common sense
00:22:53,936 -- 00:22:55,704
that have a not available option for the question of
00:22:55,704 -- 00:22:57,740
does someone have a foot pain instead of forcing
00:22:57,740 -- 00:22:58,741
to binary choice.
00:22:58,741 -- 00:23:01,377
So that domain expertise is totally critically necessary.
00:23:01,377 -- 00:23:04,046
The other thing, the last thing I'll say on this is
00:23:04,046 -- 00:23:06,849
when we're talking about insights for consumers,
00:23:06,849 -- 00:23:07,716
we have to recognize that
00:23:07,716 -- 00:23:10,119
we're in a very different world than we used to be.
00:23:10,119 -- 00:23:12,321
Things like targeting consumers
00:23:12,321 -- 00:23:14,056
with their data in order to market
00:23:14,056 -- 00:23:16,959
better prices to them is like, that's yesterday's.
00:23:16,959 -- 00:23:19,528
That's like Expedia or iTravel or something.
00:23:19,528 -- 00:23:23,065
We're talking about now is anticipatory marketing.
00:23:23,065 -- 00:23:23,966
We're talking about,
00:23:25,401 -- 00:23:26,535
being able to
00:23:26,535 -- 00:23:28,671
get information to people, not just based on
00:23:28,671 -- 00:23:30,005
what do we know about them, but
00:23:30,005 -- 00:23:32,241
based on what we know about the 360 degrees
00:23:32,241 -- 00:23:34,209
that surround them, their location,
00:23:34,209 -- 00:23:36,011
the people around them,
00:23:36,011 -- 00:23:37,313
not just their own buying history,
00:23:37,313 -- 00:23:39,348
but the buying history people,
00:23:39,348 -- 00:23:40,482
that they interact with.
00:23:40,482 -- 00:23:41,317
And not just that,
00:23:41,317 -- 00:23:43,585
but also synthetic models of all that information.
00:23:43,585 -- 00:23:46,088
So we can run yet more granular simulations.
00:23:46,088 -- 00:23:47,890
And so I think that,
00:23:47,890 -- 00:23:50,225
if we keep thinking about AI for, say,
00:23:50,225 -- 00:23:52,728
consumer insights or positioning things
00:23:52,728 -- 00:23:54,063
that are better price to people,
00:23:54,063 -- 00:23:55,497
we might be talking about an old model.
00:23:55,497 -- 00:23:57,099
What AI is capable of now,
00:23:57,099 -- 00:24:00,069
given that it has a basically infinite amount of,
00:24:00,069 -- 00:24:02,771
data crunching power is much more powerful than that.
00:24:02,771 -- 00:24:05,841
And the key now is starting at the governance level
00:24:05,841 -- 00:24:08,010
to think through how to mitigate those risks.
00:24:08,010 -- 00:24:08,977
So can I ask you something?
00:24:08,977 -- 00:24:10,412
Because one of the things that struck me
00:24:10,412 -- 00:24:13,816
was, you know, the promise of technology 20 years ago
00:24:13,816 -- 00:24:15,784
was that we were going to have a three day work week.
00:24:15,784 -- 00:24:18,654
We'd have more time for our families, our lifestyles.
00:24:18,654 -- 00:24:20,823
And the exact opposite has happened.
00:24:20,823 -- 00:24:24,159
Do you think AI will deliver that promise?
00:24:24,159 -- 00:24:26,762
The promise of freeing up so productive
00:24:26,762 -- 00:24:29,665
that we get more free time? Yeah. Oh, not a chance. Okay,
00:24:31,033 -- 00:24:32,868
I think, I think
00:24:32,868 -- 00:24:34,570
the evidence is plain
00:24:34,570 -- 00:24:37,573
that we're going to find yet more applications,
00:24:37,573 -- 00:24:39,374
more ways that we can do more work.
00:24:39,374 -- 00:24:40,709
Like as I mentioned,
00:24:40,709 -- 00:24:42,845
think about the example of the individual
00:24:42,845 -- 00:24:44,279
who's suddenly much more productive.
00:24:44,279 -- 00:24:46,215
If the rate limiting factor in the past was
00:24:46,215 -- 00:24:47,583
how many clients it can take on,
00:24:47,583 -- 00:24:49,451
they'll just take on more instead of going home.
00:24:49,451 -- 00:24:50,853
But I think the insight here
00:24:50,853 -- 00:24:51,920
is even more profound than that,
00:24:51,920 -- 00:24:54,456
which is we're at a stage right now.
00:24:54,456 -- 00:24:56,692
The trajectory towards
00:24:56,692 -- 00:24:58,660
artificial general intelligence is not linear.
00:24:58,660 -- 00:25:00,629
There's a messy interregnum along the way.
00:25:00,629 -- 00:25:02,464
And so right now as generating all kinds
00:25:02,464 -- 00:25:03,999
of legal problems, right.
00:25:03,999 -- 00:25:05,701
It's generating all kinds of concerns
00:25:05,701 -- 00:25:07,436
that are requiring a second look, a critical
00:25:07,436 -- 00:25:09,204
eye, policies and procedures.
00:25:09,204 -- 00:25:11,073
So in our hunt for productivity,
00:25:11,073 -- 00:25:12,574
we're also generating all this,
00:25:12,574 -- 00:25:14,977
the secondary market of labor basically.
00:25:14,977 -- 00:25:18,880
I mean, where likewise, I mean, we're all kind of here
00:25:18,880 -- 00:25:23,218
because of that, right? And so, the chances of it being,
00:25:24,286 -- 00:25:25,120
contribute to a strict
00:25:25,120 -- 00:25:27,789
decrease in the amount of work that we do
00:25:27,789 -- 00:25:30,392
just doesn't seem probable.
00:25:30,392 -- 00:25:31,927
I was this close to getting Mark
00:25:31,927 -- 00:25:34,096
to go to a three day work week for us.
00:25:34,096 -- 00:25:36,832
Now, you just you totally kiboshed it. No.
00:25:36,832 -- 00:25:38,367
There's much more likely to be a six day
00:25:38,367 -- 00:25:41,169
work week in the world of AI.
00:25:41,169 -- 00:25:43,038
So, maybe I'll just put out there
00:25:43,038 -- 00:25:44,740
and whoever wants to jump on this one.
00:25:44,740 -- 00:25:47,943
There's a lot of focus, as you know, in the media, about,
00:25:47,943 -- 00:25:50,646
AI replacing various professional jobs,
00:25:50,646 -- 00:25:52,247
lawyers, accountants,
00:25:52,247 -- 00:25:55,283
and it will change the structure of the economy.
00:25:55,283 -- 00:25:58,387
In financial services, though, I think it's fair to say
00:25:58,387 -- 00:26:00,355
that it actually will have beneficial impacts
00:26:00,355 -- 00:26:02,357
in the area of,
00:26:02,357 -- 00:26:04,026
risk management,
00:26:04,026 -- 00:26:06,294
fraud detection and regulatory compliance.
00:26:06,294 -- 00:26:08,230
Can any of you comment on that?
00:26:09,531 -- 00:26:10,165
Maybe starting with.
00:26:10,165 -- 00:26:10,732
I can go first
00:26:10,732 -- 00:26:11,900
and maybe just on the topic
00:26:11,900 -- 00:26:13,869
of replacing humans in the workforce.
00:26:13,869 -- 00:26:16,571
I mean, I generally think of AI tools in this space
00:26:16,571 -- 00:26:18,140
in one of two buckets.
00:26:18,140 -- 00:26:20,242
One is sort of fully autonomous AI,
00:26:20,242 -- 00:26:22,344
and the second is just copilots.
00:26:22,344 -- 00:26:24,579
And there's a ton of copilot on the market
00:26:24,579 -- 00:26:27,883
that augment a human worker, but don't replace them.
00:26:27,883 -- 00:26:29,050
I think the more regulated
00:26:29,050 -- 00:26:29,618
the space is,
00:26:29,618 -- 00:26:30,385
the more likely it is
00:26:30,385 -- 00:26:32,220
we're going to see more of those copilots
00:26:32,220 -- 00:26:34,589
as opposed to fully autonomous software
00:26:34,589 -- 00:26:36,258
regulators are just gonna be more comfortable with it,
00:26:36,258 -- 00:26:37,292
knowing that there's ultimately
00:26:37,292 -- 00:26:39,461
a human still involved in the decision making,
00:26:39,461 -- 00:26:41,229
still apply their professional judgment,
00:26:41,229 -- 00:26:43,265
giving advice, etc.
00:26:43,265 -- 00:26:45,467
So we can talk a lot about sort of the risk
00:26:45,467 -- 00:26:46,334
mitigation and all that.
00:26:46,334 -- 00:26:48,570
But I do think at the end of the day,
00:26:48,570 -- 00:26:49,838
the tools we're going to see hit
00:26:49,838 -- 00:26:52,073
the market are more likely to be those copilots
00:26:52,073 -- 00:26:53,508
that don't actually replace jobs,
00:26:53,508 -- 00:26:54,809
that they make you more powerful,
00:26:54,809 -- 00:26:56,077
make you more proficient, and give you that
00:26:56,077 -- 00:26:57,012
efficiency boost.
00:26:58,480 -- 00:26:59,981
Carole, you're gonna jump in.
00:26:59,981 -- 00:27:03,752
I just want to highlight the point that,
00:27:03,752 -- 00:27:05,620
there is transition right now. Right.
00:27:05,620 -- 00:27:06,388
So we are
00:27:06,388 -- 00:27:08,857
we are very much in a world where we are trying
00:27:08,857 -- 00:27:10,725
to understand the technology
00:27:10,725 -- 00:27:14,362
as it changes exponentially or it feels like it is.
00:27:14,362 -- 00:27:16,064
So that's certainly the feeling
00:27:16,064 -- 00:27:17,766
and we're trying to adapt to it.
00:27:17,766 -- 00:27:21,136
And so we're using these very sort of analog constructs
00:27:21,136 -- 00:27:23,338
to make sense of what
00:27:23,338 -- 00:27:27,075
a much more digitally integrated world looks like.
00:27:27,075 -- 00:27:29,678
And that is very, very challenging.
00:27:29,678 -- 00:27:32,881
So I think a practical tip to take away
00:27:32,881 -- 00:27:34,182
is to sit down
00:27:34,182 -- 00:27:36,418
and really think through where
00:27:36,418 -- 00:27:39,087
there are strategic uses for this technology
00:27:39,087 -- 00:27:40,388
now, and I know I've said that,
00:27:40,388 -- 00:27:41,856
but I think it's really critical
00:27:41,856 -- 00:27:44,526
because it will start to shape that idea of
00:27:44,526 -- 00:27:47,429
what are we augmenting and what are we replacing.
00:27:47,429 -- 00:27:49,330
So what does it look like to do,
00:27:49,330 -- 00:27:52,600
go through that transition, and what do we anticipate
00:27:52,600 -- 00:27:55,403
the other side of the transition looking like,
00:27:55,403 -- 00:27:57,505
so that we can be a little bit more ready
00:27:57,505 -- 00:28:00,909
and much more agile in our strategic approach?
00:28:00,909 -- 00:28:02,510
and I think that's also helpful
00:28:02,510 -- 00:28:04,212
from a change management perspective,
00:28:04,212 -- 00:28:06,848
because all of this transition is also very,
00:28:06,848 -- 00:28:09,551
very, very difficult on workers
00:28:09,551 -- 00:28:12,120
and just this feeling of insecurity that,
00:28:12,120 -- 00:28:14,722
you know, I might be replaced even within my own law firm,
00:28:14,722 -- 00:28:15,824
I have to remind people,
00:28:15,824 -- 00:28:19,327
this is about enabling you to play to your higher strengths,
00:28:19,327 -- 00:28:22,130
as opposed to doing the stuff that we really shouldn't
00:28:22,130 -- 00:28:24,365
be doing and charging for in any case.
00:28:24,365 -- 00:28:26,034
So that change management piece,
00:28:26,034 -- 00:28:28,603
which is the people part of all of this,
00:28:28,603 -- 00:28:30,638
should not be underestimated.
00:28:30,638 -- 00:28:32,707
There's a lot of transition happening right now,
00:28:32,707 -- 00:28:35,043
and we need to help individuals
00:28:35,043 -- 00:28:37,779
understand what this transition process looks like
00:28:37,779 -- 00:28:39,447
and what the ultimate vision looks like
00:28:39,447 -- 00:28:41,316
and where they fit in.
00:28:41,316 -- 00:28:42,450
So we have two minutes.
00:28:42,450 -- 00:28:43,818
I do want to take time
00:28:43,818 -- 00:28:45,520
just to make sure there's any questions in the audience
00:28:45,520 -- 00:28:47,922
because we have, you know, just an amazing panel here.
00:28:49,324 -- 00:28:53,895
I can't see the question.
00:28:53,895 -- 00:28:55,930
Do one of you see it? You’re closer.
00:28:55,930 -- 00:28:58,600
We have a question here.
00:28:58,600 -- 00:29:00,501
similar to how climate change has introduced
00:29:00,501 -- 00:29:03,238
new risk classes such as transition and physical risk.
00:29:03,238 -- 00:29:04,305
What new classes
00:29:04,305 -- 00:29:09,310
do you see AI introducing in the financial sector?
00:29:10,778 -- 00:29:12,413
Do you want to just I want to take note.
00:29:12,413 -- 00:29:15,316
I mean, I think the broad risks that AI introduce
00:29:15,316 -- 00:29:17,485
generally are still good applied in financial services.
00:29:17,485 -- 00:29:20,421
So, confidentiality is going to be a big issue.
00:29:20,421 -- 00:29:22,457
And it's a there's a bit of a tension there.
00:29:22,457 -- 00:29:24,759
Because if you want your AI to be highly performant,
00:29:24,759 -- 00:29:26,060
you want it to have more data,
00:29:26,060 -- 00:29:26,995
and you want that data to come
00:29:26,995 -- 00:29:28,262
from a broad number of sources
00:29:28,262 -- 00:29:29,797
so that it has more context.
00:29:29,797 -- 00:29:31,299
But then you start blending information
00:29:31,299 -- 00:29:31,899
for different sources,
00:29:31,899 -- 00:29:34,502
and then you get into more issues about confidentiality.
00:29:34,502 -- 00:29:35,269
So I think one area
00:29:35,269 -- 00:29:36,671
that we got to think about in financial services
00:29:36,671 -- 00:29:38,272
in particular is going to be
00:29:38,272 -- 00:29:40,742
how do we make sure we have a lot of good quality data
00:29:40,742 -- 00:29:42,610
that comes from multiple contexts
00:29:42,610 -- 00:29:44,545
and yet still preserves the confidentiality?
00:29:44,545 -- 00:29:46,547
I think that's one sort of unique risk,
00:29:46,547 -- 00:29:48,583
particularly with AI in financial services, in particular.
00:29:49,784 -- 00:29:51,386
I might just add that I
00:29:51,386 -- 00:29:54,722
think the nature of the risks faced by
00:29:54,722 -- 00:29:55,690
financial institutions
00:29:55,690 -- 00:29:57,392
is just going to become more complicated.
00:29:57,392 -- 00:29:58,159
Threat actors
00:29:58,159 -- 00:30:00,361
also have AI in their possession,
00:30:00,361 -- 00:30:03,364
and they're governed by absolutely no one but themselves.
00:30:03,364 -- 00:30:05,133
So I would just be mindful
00:30:05,133 -- 00:30:07,201
of the changing threat landscape as well,
00:30:07,201 -- 00:30:09,303
and the insecurity of some of these systems,
00:30:09,303 -- 00:30:12,840
and who has access to some of these systems.
00:30:12,840 -- 00:30:14,675
If I can. Absolutely. If I can add one thing.
00:30:14,675 -- 00:30:17,779
There has to be a cultural shift as we embrace AI,
00:30:17,779 -- 00:30:19,180
which is, I think,
00:30:19,180 -- 00:30:20,181
if I, if I may,
00:30:20,181 -- 00:30:22,517
we have to kind of increase our error tolerance
00:30:22,517 -- 00:30:23,451
when it comes to technology.
00:30:23,451 -- 00:30:26,053
So if I hit my space bar on my laptop
00:30:26,053 -- 00:30:28,322
and it doesn't move the cursor a millimeter,
00:30:28,322 -- 00:30:29,056
if it doesn’t move the cursor
00:30:29,056 -- 00:30:31,125
a millimeter on my word processor, it's
00:30:31,125 -- 00:30:33,361
my laptop is broken. I might throw it against the wall.
00:30:33,361 -- 00:30:34,695
Right. It's clearly a failure.
00:30:34,695 -- 00:30:36,864
Binary states of fail or not.
00:30:36,864 -- 00:30:38,799
But if I'm asking a
00:30:38,799 -- 00:30:39,667
AI application
00:30:39,667 -- 00:30:42,036
to do something like draft a memo,
00:30:42,036 -- 00:30:45,139
then I can think about it in these binary states of,
00:30:45,139 -- 00:30:46,974
failure or not. An error,
00:30:46,974 -- 00:30:49,176
the fact that it produces error can't
00:30:50,211 -- 00:30:51,279
condemn it in
00:30:51,279 -- 00:30:54,782
the same way that me hitting the space bar on my laptop
00:30:54,782 -- 00:30:56,617
not working will condemn my laptop.
00:30:56,617 -- 00:30:57,351
You have to again
00:30:57,351 -- 00:30:59,654
force into the familiar template of the division of labor
00:30:59,654 -- 00:31:00,788
where if
00:31:00,788 -- 00:31:02,723
someone that you work with, a junior colleague
00:31:02,723 -- 00:31:04,825
gave you a memo and it had some issues,
00:31:04,825 -- 00:31:06,193
you would find a way to work with them
00:31:06,193 -- 00:31:08,562
and engage in this dialogical iterative process.
00:31:08,562 -- 00:31:11,098
If AI is aspiring to these higher order tasks,
00:31:11,098 -- 00:31:14,335
it's going to misfire sometimes.
00:31:14,335 -- 00:31:17,104
And until we can absorb that cultural reality
00:31:17,104 -- 00:31:18,039
of needing
00:31:18,039 -- 00:31:19,540
to increase our error tolerance,
00:31:19,540 -- 00:31:20,207
we're probably going
00:31:20,207 -- 00:31:21,909
to have the same conversation over and over again
00:31:21,909 -- 00:31:23,711
where we're not going to
00:31:23,711 -- 00:31:26,847
realize all the gains that are in front of us.
00:31:26,847 -- 00:31:27,948
So I'm conscious of time,
00:31:27,948 -- 00:31:29,917
and I'm also conscious that we’re the last panel
00:31:29,917 -- 00:31:30,584
before lunch.
00:31:30,584 -- 00:31:34,689
So what I did last night was I went on to Chat GPD
00:31:34,689 -- 00:31:37,291
chit Chat GPT, pardon me, and I said, what are the best
00:31:37,291 -- 00:31:40,294
wrap up comments to ask an expert panel on AI?
00:31:41,228 -- 00:31:42,763
And what I got back was,
00:31:42,763 -- 00:31:44,231
we conclude our discussion today,
00:31:44,231 -- 00:31:46,133
it is clear that artificial intelligence
00:31:46,133 -- 00:31:49,003
is not just revolutionizing financial services,
00:31:49,003 -- 00:31:50,771
but it's redefining the very nature
00:31:50,771 -- 00:31:54,175
of how we interact with data markets and customers.
00:31:54,175 -- 00:31:57,244
From predictive analytics,
00:31:57,244 -- 00:31:58,779
to algorithmic trading,
00:31:58,779 -- 00:32:00,748
AI has become the cornerstone of innovation
00:32:00,748 -- 00:32:02,116
in the financial sector,
00:32:02,116 -- 00:32:03,651
driving efficiency,
00:32:03,651 -- 00:32:06,921
accuracy, and agility like never before.
00:32:06,921 -- 00:32:09,557
Our panel has underscored the importance of responsible
00:32:09,557 -- 00:32:10,691
AI implementation.
00:32:10,691 -- 00:32:12,893
Ensuring transparency, fairness,
00:32:12,893 -- 00:32:14,628
and ethical considerations remain
00:32:14,628 -- 00:32:19,200
at the forefront of our strategies. That's pretty good.
00:32:19,200 -- 00:32:21,936
So Mark's like thinking, okay, I can get rid of Solway
00:32:21,936 -- 00:32:24,505
and I can get ChatGPT.
00:32:24,505 -- 00:32:27,775
Please join me in thanking our panelists who, you know...
00:00:05,372 -- 00:00:06,473
That was quite a morning.
00:00:06,473 -- 00:00:09,109
I hope everybody enjoyed it.
00:00:09,109 -- 00:00:10,777
This morning made it clear to me
00:00:10,777 -- 00:00:14,514
that we are indeed regulating in a rapidly changing environment.
00:00:15,181 -- 00:00:20,053
My favorite organizational psychologist, Abraham Maslow, the Hierarchy of Needs,
00:00:20,720 -- 00:00:25,158
said that when we're faced with change, we can step forward into growth
00:00:25,692 -- 00:00:28,161
or step back into safety.
00:00:28,161 -- 00:00:31,164
At FSRA, we embrace your choice
00:00:31,197 -- 00:00:34,134
to step forward into growth.
00:00:34,134 -- 00:00:37,871
Given this choice, the magnitude and the pace of change
00:00:38,304 -- 00:00:41,307
is both an opportunity and a challenge.
00:00:41,374 -- 00:00:43,343
Minister Bethlenfalvy noted
00:00:43,343 -- 00:00:48,648
our fast changing financial services environment
00:00:49,182 -- 00:00:51,084
is both an opportunity and a challenge,
00:00:51,284 -- 00:00:54,120
but he correctly identified the collaboration
00:00:54,120 -- 00:00:57,123
between government regulators and stakeholders
00:00:57,490 -- 00:01:01,861
is the key to successfully tackle whatever challenges will come our way.
00:01:03,063 -- 00:01:05,432
Joanne, Business Chair
00:01:05,432 -- 00:01:08,468
identified that FSRA's principles-based approach
00:01:09,002 -- 00:01:12,806
gives us the flexibility to focus on outcomes as businesses change,
00:01:14,407 -- 00:01:18,211
and that with reliable information that enables us to proactively
00:01:18,211 -- 00:01:23,583
identify issues with higher accuracy and not intrusive supervision,
00:01:24,050 -- 00:01:27,053
that that will allow us to progressively regulate better.
00:01:28,288 -- 00:01:30,223
During the climate change session,
00:01:30,223 -- 00:01:34,027
one of the major takeaways for me was that what we're seeing today
00:01:34,027 -- 00:01:36,196
may be irreversible.
00:01:36,262 -- 00:01:39,866
The actions that we take as a global community can slow down
00:01:39,866 -- 00:01:43,436
the pace of climate change, but we need to be ready
00:01:43,536 -- 00:01:46,473
for a new paradigm.
00:01:46,473 -- 00:01:49,442
This will exert a profound influence
00:01:49,442 -- 00:01:52,378
on financial services,
00:01:52,378 -- 00:01:54,247
introducing new challenges,
00:01:54,247 -- 00:01:58,718
whether they be physical risks to people, property and businesses,
00:01:59,352 -- 00:02:04,190
or transition risks to the shift to a low carbon economy.
00:02:05,625 -- 00:02:09,095
To mitigate these risks, it requires a collaborative approach.
00:02:09,929 -- 00:02:13,266
The discussion on artificial intelligence provided food for thought.
00:02:14,334 -- 00:02:17,804
A.I. indeed transforming the landscape of financial services
00:02:18,271 -- 00:02:21,808
and revolutionizing the way institutions operate,
00:02:23,009 -- 00:02:25,411
the way they make decisions and interact with clients
00:02:25,411 -- 00:02:28,414
and others will be fundamentally changed.
00:02:28,448 -- 00:02:31,584
It also raises concerns about data protection,
00:02:31,784 -- 00:02:34,821
privacy and potential bias.
00:02:34,821 -- 00:02:35,488
At FSRA,
00:02:35,989 -- 00:02:38,324
we work with our sectors,
00:02:38,324 -- 00:02:41,327
the government and other regulators to better understand
00:02:41,461 -- 00:02:44,430
exactly how these issues are to be addressed.
00:02:45,265 -- 00:02:47,100
We always do so to make sure
00:02:47,100 -- 00:02:50,103
that consumer protection is prioritized.
00:02:50,370 -- 00:02:54,274
After all, consumer protection is at the heart of everything we do at FSRA.
00:02:54,607 -- 00:02:57,510
That's our North Star.
00:02:57,510 -- 00:02:59,646
Our approach to regulation, rulemaking,
00:02:59,646 -- 00:03:02,916
supervision and enforcement is developed
00:03:02,916 -- 00:03:05,919
and executed with consumer protection always at the forefront.
00:03:07,020 -- 00:03:09,088
We're now approaching our fifth year.
00:03:09,088 -- 00:03:10,623
We remain a work in progress.
00:03:10,623 -- 00:03:13,626
Or, as the Minister said, we're still a puppy.
00:03:14,093 -- 00:03:15,228
I love puppies, by the way.
00:03:15,228 -- 00:03:17,297
They're so cute.
00:03:17,297 -- 00:03:19,032
Yet with your help
00:03:19,032 -- 00:03:21,701
and your advocacy and questioning,
00:03:21,701 -- 00:03:24,971
we’ll continue to grow and improve the lives of people in Ontario.
00:03:26,005 -- 00:03:28,174
As I look back at 2023,
00:03:28,174 -- 00:03:31,010
there have been many noteworthy accomplishments.
00:03:31,010 -- 00:03:32,779
Let me highlight a few.
00:03:32,779 -- 00:03:36,916
We issued our Take All Comers report detailing systemic noncompliance
00:03:37,217 -- 00:03:40,220
by our 12 largest auto insurers.
00:03:40,220 -- 00:03:42,422
We also identified and acted on
00:03:42,422 -- 00:03:45,425
troubling practices in the life and health insurance business,
00:03:46,125 -- 00:03:48,328
and we proposed guidance to help address that,
00:03:48,328 -- 00:03:50,830
to define who is suitable to be a life agent.
00:03:51,764 -- 00:03:55,802
We're working to ensure that all life agents, including managing general agents,
00:03:56,236 -- 00:03:59,072
will treat customers fairly and respect the law.
00:04:00,807 -- 00:04:01,975
Our Credit Union
00:04:01,975 -- 00:04:05,245
and our insurance prudential groups had conferences last September.
00:04:06,246 -- 00:04:08,881
They strengthened the relationship between FSRA
00:04:08,881 -- 00:04:10,750
and the attending directors.
00:04:10,750 -- 00:04:13,620
We talked about how important risk-based supervision is
00:04:13,620 -- 00:04:16,623
and what principles-based regulation really means.
00:04:17,557 -- 00:04:20,526
In addition, we completed our most ambitious
00:04:20,526 -- 00:04:23,930
consumer education campaigns to date.
00:04:23,930 -- 00:04:25,598
To level the playing field,
00:04:25,598 -- 00:04:28,201
our consumer messages were direct.
00:04:28,201 -- 00:04:31,170
If you're getting a private mortgage, know what you're signing.
00:04:31,838 -- 00:04:35,275
If you're buying life or health insurance, ask the right questions.
00:04:36,009 -- 00:04:39,012
If you're getting auto insurance, shop around
00:04:39,345 -- 00:04:42,348
and learn the value of pensions and saving early.
00:04:43,483 -- 00:04:48,421
I'm pleased that our recent Pension Awareness Day was the most successful ever.
00:04:48,655 -- 00:04:51,691
Finally, I want to thank all of you who participated.
00:04:52,358 -- 00:04:56,829
Those who led our discussions, notably Minister Bethlenfalvy,
00:04:56,829 -- 00:04:58,831
our chair, Joanne De Laurentiis,
00:04:58,831 -- 00:05:00,333
my inquisitor, Clare O'Hare.
00:05:00,733 -- 00:05:04,771
Judy, our host for the day, and all of our panels and moderators.
00:05:05,738 -- 00:05:08,241
I'd like to thank those here in person and online
00:05:08,241 -- 00:05:11,044
for taking time out of your busy days to attend
00:05:11,044 -- 00:05:13,913
our third annual FSRA Exchange.
00:05:13,913 -- 00:05:16,983
And finally, to our many conference organizers,
00:05:16,983 -- 00:05:18,351
because it does take a village.
00:05:18,351 -- 00:05:19,552
Thank you!
00:05:19,552 -- 00:05:22,555
For without you, there would be no Exchange.
00:05:23,022 -- 00:05:27,093
We value this opportunity to connect and to exchange ideas with each other.
00:05:28,027 -- 00:05:31,030
You have the sector workshops to look forward to this afternoon,
00:05:31,331 -- 00:05:32,732
followed by our reception.
00:05:32,732 -- 00:05:35,735
But first, there's lunch. Bon appétit!
00:05:35,935 -- 00:05:36,803
And have a great day.
00:00:04,971 -- 00:00:06,473
I want to welcome you all here.
00:00:06,473 -- 00:00:07,273
Good afternoon.
00:00:07,273 -- 00:00:08,375
My name is Gina Stephens.
00:00:08,375 -- 00:00:12,078
I'm the Director of Mortgage Broker Conduct at FSRA.
00:00:12,078 -- 00:00:14,414
Thank you, folks, for joining us in person.
00:00:14,414 -- 00:00:17,317
And for those of you that are online. Welcome.
00:00:17,317 -- 00:00:18,184
Before we begin,
00:00:18,184 -- 00:00:20,553
I want to remind everyone that this is being taped.
00:00:20,553 -- 00:00:22,021
That includes our panelists.
00:00:22,021 -- 00:00:23,857
This is being taped.
00:00:23,857 -- 00:00:25,458
And there's simultaneous
00:00:25,458 -- 00:00:27,694
French translation for anyone who needs it.
00:00:27,694 -- 00:00:29,229
So if you're in the room
00:00:29,229 -- 00:00:32,665
and you would like a headset for simultaneous translation,
00:00:32,665 -- 00:00:33,433
just put up your hand.
00:00:33,433 -- 00:00:35,935
And our staff will come in and meet you there.
00:00:35,935 -- 00:00:39,472
For those of you online that are attending virtually,
00:00:39,472 -- 00:00:42,275
you can click the initials at the top right
00:00:42,275 -- 00:00:45,778
corner of your screen, and you can select Set Language
00:00:45,778 -- 00:00:48,381
to listen to this session in French.
00:00:49,449 -- 00:00:52,485
We will be taking questions at the end of the session
00:00:52,485 -- 00:00:53,720
through the conference site.
00:00:53,720 -- 00:00:56,956
So we don't have mics going around, but,
00:00:56,956 -- 00:00:58,224
we will be taking questions
00:00:58,224 -- 00:01:00,360
that are fed through the Chime app.
00:01:00,360 -- 00:01:02,395
If for some reason you're here
00:01:02,395 -- 00:01:04,731
and you're having difficulty connecting to the app,
00:01:04,731 -- 00:01:07,033
you can always flag down a FSRA staff member
00:01:07,033 -- 00:01:09,102
and give them your question directly
00:01:09,102 -- 00:01:11,170
and they'll feed it into the app.
00:01:11,170 -- 00:01:13,006
For the folks that are supporting us in the back,
00:01:13,006 -- 00:01:16,342
thank you.
00:01:16,342 -- 00:01:18,711
So now let me introduce our expert panel.
00:01:18,711 -- 00:01:20,613
I'm sure that many of these folks
00:01:20,613 -- 00:01:22,582
do not need an introduction, but nonetheless,
00:01:22,582 -- 00:01:24,484
I will give you a short introduction.
00:01:24,484 -- 00:01:26,686
I encourage you to look at their full bios
00:01:26,686 -- 00:01:28,755
that are on the FSRA event page,
00:01:28,755 -- 00:01:29,989
but to save us some time
00:01:29,989 -- 00:01:31,991
to get into some juicy conversation,
00:01:31,991 -- 00:01:33,793
we're going to do a short introduction
00:01:33,793 -- 00:01:35,595
and then launch right in.
00:01:35,595 -- 00:01:39,065
So I'm joined today by Dong Lee.
00:01:39,065 -- 00:01:41,868
He is the former Principal Broker of Mortgage Architects
00:01:41,868 -- 00:01:43,536
and also the former President
00:01:43,536 -- 00:01:46,439
and COO of DLC Group of Companies.
00:01:46,439 -- 00:01:50,143
Most recently, Dong became the CEO of Axiom Innovations.
00:01:50,143 -- 00:01:52,311
It's one of Canada's largest independent
00:01:52,311 -- 00:01:54,280
point of sale platforms.
00:01:55,481 -- 00:01:57,917
Dong is joined by Kerri Reed.
00:01:57,917 -- 00:01:59,919
She is the Principal Broker and Partner
00:01:59,919 -- 00:02:02,422
at Premiere Mortgage Centre.
00:02:02,422 -- 00:02:04,757
I'm also joined by Sadiq right beside me here,
00:02:04,757 -- 00:02:05,758
who is the Principal Broker
00:02:05,758 -- 00:02:08,327
and CEO of Approved Financial Services.
00:02:08,327 -- 00:02:09,762
And, last
00:02:09,762 -- 00:02:12,598
but not least, in terms of our industry participants,
00:02:12,598 -- 00:02:15,034
Ron Butler is here from Butler Mortgage,
00:02:15,034 -- 00:02:16,369
and you may know him
00:02:16,369 -- 00:02:20,006
also as the star of the Angry Mortgage Podcast.
00:02:20,006 -- 00:02:22,241
I am also joined by Antoinette.
00:02:22,241 -- 00:02:25,178
She's the Head of Financial Institutions
00:02:25,178 -- 00:02:27,113
and Mortgage Brokerage Conduct at FSRA.
00:02:27,113 -- 00:02:29,782
My boss. So no pressure
00:02:29,782 -- 00:02:30,950
and,
00:02:30,950 -- 00:02:33,152
we're here this afternoon to discuss
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something that is very topical.
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It couldn't be more timely in terms of some of the concerns
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that FSRA is seeing in the marketplace
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that some of the speakers earlier today mentioned.
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Interest rates are very high, housing prices are high.
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Most homeowners are seeing huge jumps
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in their mortgage payments,
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and it's getting more
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and more difficult for consumers
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to find affordable mortgage solutions
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when they're looking to buy a home.
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So it's really critical for the mortgage broker sector.
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The advice and the services that you provide to
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your clients has never been more important.
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But in this context, FSRA
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is increasingly concerned
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about, number one, protecting consumers.
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I think you've heard that through all the sessions today.
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ensuring that mortgage brokers are keeping
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their clients' interests top of mind
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and most importantly,
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making sure that consumers
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and investors are receiving mortgage
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product recommendations
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that are suitable for their specific
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needs and circumstances.
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So one of FSRA’s stated priorities
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this year,
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in keeping with this session,
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is to develop and release Guidance
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that is going to enhance principal broker effectiveness.
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We've been working really hard on this proposed Guidance,
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and once it's ready to be published,
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we're very much looking forward
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to your feedback on this topical subject
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that is going to really address
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some of the issues that we talk about
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with our guests here today.
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So without further ado,
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I'd like to launch into the discussion that we're here,
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to participate
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in creating and supporting a strong conduct
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culture in Mortgage Brokerage.
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So I want to begin with a question.
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If I can direct it, to Sadiq.
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Sadiq, how have you changed your approach
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to setting the right tone from the top,
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as we've seen
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the economic fundamentals changing
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now that we're seeing some of the issues
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that I pointed out earlier, higher interest rates, greater
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difficulty for consumers and qualifying for mortgages,
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low housing supply.
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This is the kind of,
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environment where you see people wanting to cut corners
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because their volumes are getting lower.
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You know, how do you deal with that
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in your mortgage brokerage?
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So would say on the compliance standpoint,
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not much has really changed
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because we've always had a very strong,
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focus on compliance.
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We've always, you know,
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put the emphasis on doing what's right for the client
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where things have changed in the past.
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We would be looking kind of more of the meeting
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the immediate need of the client.
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Now that the immediate need has kind of become twofold.
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We're looking at the short term, you know, 2 to 3 year
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goal of the client, the longer,
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prospects of where rates can go into five years.
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So looking at,
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you know, how do we balance clients' affordability
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with their desire for lower rates.
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So looking at,
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you know, putting them into a shorter term product
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that would,
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you know,
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still be affordable
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while giving them flexibility to exit from that product
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should rates eventually come down.
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I think that's one of the biggest concerns
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on homeowners minds right now.
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And what we've done with
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that is we've focused on assessing
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all possible options, opening up,
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you know,
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all the discussions into different types of products,
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different ways of how they can balance their finances
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and how we can help them kind of plan for those changes,
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regardless of which way the market goes,
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to give them more flexibility.
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And I think that's the key to it, is really the discussion
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and it's not us pushing a solution out to the client.
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It's more collaboration with the client
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so that they feel involved
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and they feel confident in the direction
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of how their mortgage and how their finances is heading.
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And those types of conversations
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are really how you determine suitability.
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And you make sure that you have the information
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you need to find a product
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that's suitable
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for that person in front of you
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that's going to last through this period
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of of economic change.
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Hands down, it’s suitability, reasonability.
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And depending on the type of mortgage exit strategy.
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And that's kind of the three fundamentals that we look at
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with every single client.
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That's great.
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I'm going to actually ask Kerrie to chime in if she has,
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any different approaches in your brokerage.
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I know you're brokerage is quite large, so,
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just to see if you have anything to add
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to what Sadiq has, has mentioned to us.
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I think the focus,
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along with,
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with Sadiq’s
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brokerage, the focus is about ensuring
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that the agents and brokers have confidence
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when they're talking to clients
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and the needs and wants of those clients.
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So there are some very dramatic changes, interest rates,
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you know,
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lack of housing,
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even affordability of the housing that they currently own.
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Right.
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So we've spent a significant amount of time,
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training and informing the agents and the brokers
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of what these changes
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mean in their own portfolios of business,
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right, their own book of business.
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Actually drilling it right down to
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how is this going to impact your clients?
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We've brought in and encourage and continue to train,
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bring in the experts on alternative products,
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different strategies.
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You know, I'm not going to claim
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to be the expert for everybody,
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and neither will the rest of the leadership team
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at Premiere Mortgage Centre.
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But we encourage,
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you know, that the sharing is caring model, right?
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Which is, bring in the people
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that can talk with the agents and brokers
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to give them the confidence
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to build the strategies with their clients.
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Right.
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Providing solutions
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that, you know, are actually going to,
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are actually going to bring the result
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that everyone's looking for, right?
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We're not just throwing them into something.
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There's a lot of training involved in the last
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year and year or two years.
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A lot of agents and brokers were kind of
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just walking the path every day. Right?
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It was it was it was an easy path to walk.
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And it's not today.
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So it was really important for us.
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And it remains top of top of the list
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to ensure that the information
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is available to the agents and brokers.
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They understand the information,
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they know what's available.
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We're training to it,
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and they can provide strategies that,
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that their clients are actually going to benefit from.
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So to Kerrie's point, it's
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a reminder of the story of a of a mortgage broker who,
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in the midst of all the interest rate hikes
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and something brave and courageous,
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she emailed all of her variable rate customers and said,
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if you want to have a conversation,
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please book some time with me on my account.
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She got booked for the entire month.
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And I said to her, I said, I said were you scared?
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She goes,
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I was terrified about the comments
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you get back,
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how could you dare put me into a variable mortgage?
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It's a worst decision in my life.
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She said of the 50 conversations she had,
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she said only one customer came back
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and was really angry at her.
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The rest of them were just thankful
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that she took the time to have that conversation with them.
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Because I think the problem these days is,
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is we get so nervous about the conversation
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we have to have with our customers
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when the truth is, if you just get ahead of it,
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the great things happen. I think that's to carry Sadiq’s
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point is, is
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if we are there to provide advice to the customer,
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I think there's so many people
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who are afraid to have that conversation.
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I think my financial planner,
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who didn't once called me through the entire changes
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to the interest rate environment and didn't
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once call me when my portfolio was declining.
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And so, you know what I mean?
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It's just one of those things, I think.
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I think as an industry, we're doing a better job with.
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I agree, I think,
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you know, Ron, although you would disagree with,
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mortgage brokers being order takers
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at times from clients
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who seem to believe that they know what's best for them.
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We're now in an environment
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where we're no longer taking orders,
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and or orders aren't being shouted at us from clients
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who are now providing solutions.
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So you just got to have the information, right?
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You know,
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potentially the best concept of this is 2,700 years old.
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Socrates said the first principle would be to do no harm,
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and that is potentially the most important thing that
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all of us have to address, and particularly
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a regulator has to address
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is mistakes can be made, markets can change.
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People make,
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people have bad judgment
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sometimes about what
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particular product or what particular term.
00:10:38,836 -- 00:10:41,906
But the most important element
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when dealing with a consumer,
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some of them are very sophisticated
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and some of them are very unsophisticated.
00:10:47,312 -- 00:10:50,648
So the most important element is do no harm
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come from a place
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where you want to do the best for the consumer,
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and then we have to find the people who want to do harm,
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and we have to get them out of the business.
00:11:03,795 -- 00:11:08,199
So just to follow up on that, Ron, with you, because,
00:11:08,199 -- 00:11:10,668
you know, I think as the panelists have already noted,
00:11:10,668 -- 00:11:12,470
the margin for error
00:11:12,470 -- 00:11:16,374
now, given the economic fundamentals have changed,
00:11:16,374 -- 00:11:17,942
is much narrower.
00:11:17,942 -- 00:11:22,947
So previous to this, in a in a hot market, you know,
00:11:23,114 -- 00:11:24,749
people could be putting
00:11:24,749 -- 00:11:26,617
consumers into mortgages
00:11:26,617 -- 00:11:28,820
and they had lots of room to maneuver.
00:11:28,820 -- 00:11:30,188
Interest rates were low.
00:11:30,188 -- 00:11:31,923
But now with interest rates being so high,
00:11:31,923 -- 00:11:34,425
it's very hard to qualify for a mortgage.
00:11:34,425 -- 00:11:36,627
Some people are getting into mortgages
00:11:36,627 -- 00:11:39,130
that are very unusual, like private mortgages
00:11:39,130 -- 00:11:42,934
that have unusual terms that consumers are not used to.
00:11:42,934 -- 00:11:44,969
What kind of methods do you use
00:11:44,969 -- 00:11:50,074
in your brokerage to communicate your conduct expectations,
00:11:50,508 -- 00:11:52,810
especially when it comes to new agents.
00:11:52,810 -- 00:11:55,446
So these are new agents that are just out there starting
00:11:55,446 -- 00:11:56,247
to operate.
00:11:57,281 -- 00:12:00,051
And, you know, it's much easier these days
00:12:00,051 -- 00:12:01,719
to put someone in a mortgage product
00:12:01,719 -- 00:12:03,054
that's not going to work for them
00:12:03,054 -- 00:12:05,690
if you don't collect enough information.
00:12:05,690 -- 00:12:07,458
And if you don't have those, you know,
00:12:07,458 -- 00:12:10,328
very in-depth conversations with your clients.
00:12:10,328 -- 00:12:13,631
So what kind of methods do you use with new agents
00:12:13,631 -- 00:12:14,398
when you hire them
00:12:14,398 -- 00:12:16,400
to make sure that they're living up
00:12:16,400 -- 00:12:19,503
to the expectations that you have for your brand?
00:12:19,503 -- 00:12:22,306
Well, sometimes the best thing to do is just say no.
00:12:22,306 -- 00:12:25,910
It's in all parts of life.
00:12:25,910 -- 00:12:28,446
That brings to mind,
00:12:28,446 -- 00:12:31,115
something we're seeing on social media right now
00:12:31,115 -- 00:12:36,120
where, agents, mortgage agents are promoting the idea of,
00:12:36,420 -- 00:12:42,026
$1.7 million property purchase where you only put 5% down
00:12:42,460 -- 00:12:45,997
because it's fractional ownership with other parties,
00:12:45,997 -- 00:12:47,565
which will, without doubt,
00:12:47,565 -- 00:12:49,100
have a horrible result eventually.
00:12:50,201 -- 00:12:51,669
But yet it's out there.
00:12:51,669 -- 00:12:56,407
So the most important thing you can tell people again is
00:12:56,407 -- 00:12:58,609
just don't do stupidity.
00:12:58,609 -- 00:13:00,845
You know, when Google started
00:13:00,845 -- 00:13:03,180
there, they've changed it drastically since.
00:13:03,180 -- 00:13:08,018
But when Google started, their mantra was don't do evil.
00:13:08,018 -- 00:13:11,489
Now they swapped out to, you know, destroy the world
00:13:11,489 -- 00:13:13,657
really quickly after that. But that was how it started.
00:13:13,657 -- 00:13:15,459
So don't do evil.
00:13:15,459 -- 00:13:16,660
And, you know,
00:13:16,660 -- 00:13:18,662
if you just as a
00:13:18,662 -- 00:13:19,764
as a leader in your business,
00:13:19,764 -- 00:13:23,334
if you just take the position that we don't tolerate this,
00:13:23,334 -- 00:13:25,269
we won't accept it.
00:13:25,269 -- 00:13:26,837
It's a nonstarter.
00:13:26,837 -- 00:13:30,107
And if we catch you, we get rid of you.
00:13:30,107 -- 00:13:33,410
is probably the best operating guidelines.
00:13:33,410 -- 00:13:36,280
Sadiq, do you have anything to add to what Ron said?
00:13:36,280 -- 00:13:37,581
Well, I totally agree, right?
00:13:37,581 -- 00:13:38,649
I mean, if
00:13:38,649 -- 00:13:40,050
if you're doing the wrong things,
00:13:40,050 -- 00:13:41,318
you need to be booted out, right?
00:13:41,318 -- 00:13:43,354
That's in our brokerage.
00:13:43,354 -- 00:13:46,690
Like, our protocols are very, very tight.
00:13:46,690 -- 00:13:49,493
Not a single commitment or,
00:13:49,493 -- 00:13:50,794
document goes in front of a client
00:13:50,794 -- 00:13:52,229
unless I've reviewed it myself.
00:13:53,497 -- 00:13:56,667
I, we look for, you know, of the suitability.
00:13:56,667 -- 00:13:57,701
We look for the reasonability,
00:13:57,701 -- 00:14:00,704
we look for the proper disclosures.
00:14:00,704 -- 00:14:03,040
And every agent is trained that way.
00:14:03,040 -- 00:14:04,608
And in fact,
00:14:04,608 -- 00:14:06,176
when I say tight protocols
00:14:06,176 -- 00:14:09,813
until I am fully confident that you understand
00:14:09,813 -- 00:14:11,582
every single aspect of your role
00:14:11,582 -- 00:14:13,083
as a mortgage agent or broker
00:14:13,083 -- 00:14:16,687
in how to explain to a customer
00:14:16,687 -- 00:14:20,057
the risks involved and all the steps,
00:14:20,057 -- 00:14:22,593
that they need to take for their mortgage.
00:14:22,593 -- 00:14:25,029
You cannot submit a deal without my review,
00:14:25,029 -- 00:14:27,231
so they literally don't have the access to it.
00:14:27,231 -- 00:14:30,167
And I think that's what kind of keeps, you know, agents,
00:14:30,167 -- 00:14:31,602
you know, an agent coming into a brokerage,
00:14:31,602 -- 00:14:33,003
he will hate that.
00:14:33,003 -- 00:14:33,671
Absolutely.
00:14:33,671 -- 00:14:35,739
I know why,
00:14:35,739 -- 00:14:37,041
you know, somebody restricting your ability
00:14:37,041 -- 00:14:39,510
to do business like that with the way you want to.
00:14:39,510 -- 00:14:40,411
But at the end of the day,
00:14:40,411 -- 00:14:44,948
you know, it's a brand that I and my team have built.
00:14:44,948 -- 00:14:46,550
We're not going to risk that over
00:14:46,550 -- 00:14:47,651
somebody being,
00:14:47,651 -- 00:14:48,485
you know,
00:14:48,485 -- 00:14:50,220
treating mortgages like the Wild West
00:14:50,220 -- 00:14:51,822
and doing whatever they want.
00:14:51,822 -- 00:14:53,057
Maybe not the Wild, Wild West.
00:14:53,057 -- 00:14:54,324
It's still a little bit Wild West, right?
00:14:54,324 -- 00:14:56,727
But, we want to make sure that, you know,
00:14:56,727 -- 00:14:58,796
customers are protected. And as Ron said, you know,
00:15:00,130 -- 00:15:01,832
it is that do no harm.
00:15:01,832 -- 00:15:04,034
And the best way to insure that is
00:15:04,034 -- 00:15:07,071
you have to, supervise, you have to monitor.
00:15:07,071 -- 00:15:09,039
Which brings me to the challenge
00:15:09,039 -- 00:15:11,075
of what happens in larger brokerages.
00:15:11,075 -- 00:15:13,477
And if I can maybe ask Dong to put his principal
00:15:13,477 -- 00:15:17,881
broker hat on from his previous brokerage.
00:15:17,881 -- 00:15:18,415
You know, what did,
00:15:18,415 -- 00:15:20,951
what were some of the techniques that you use
00:15:20,951 -- 00:15:23,954
to handle misconduct and discipline in an environment
00:15:23,954 -- 00:15:26,857
where you have a lot of moving parts?
00:15:26,857 -- 00:15:27,491
I always said,
00:15:27,491 -- 00:15:28,792
you know, brokers are motivated
00:15:28,792 -- 00:15:32,329
by two things either fear or greed.
00:15:32,329 -- 00:15:37,334
As a principal broker and one that holds a compliance hat,
00:15:37,501 -- 00:15:42,339
fear was oftentimes what we use as a means of trying to
00:15:42,339 -- 00:15:45,776
direct agents in a, in a path of conduct culture.
00:15:45,776 -- 00:15:47,678
So, you know,
00:15:47,678 -- 00:15:48,045
it's funny
00:15:48,045 -- 00:15:49,980
because when something bad happens, people
00:15:49,980 -- 00:15:51,515
get into this, this mode of
00:15:51,515 -- 00:15:53,617
of hiding and not sharing
00:15:53,617 -- 00:15:57,487
where we actually had the absolute opposite effect,
00:15:57,487 -- 00:15:58,922
where when something didn't go
00:15:58,922 -- 00:16:00,190
right that we were supposed to,
00:16:00,190 -- 00:16:02,259
we actually cascaded it to
00:16:02,259 -- 00:16:03,260
the entire audience,
00:16:03,260 -- 00:16:04,728
because we want everyone to know
00:16:04,728 -- 00:16:06,763
that this is a consequence for poor behavior.
00:16:06,763 -- 00:16:09,266
So a good example might be,
00:16:09,266 -- 00:16:10,601
we had an agent in Ontario
00:16:10,601 -- 00:16:14,137
do a transaction in New Brunswick where they were’nt licensed.
00:16:14,137 -- 00:16:17,708
So I got a letter from the regulator from New Brunswick
00:16:17,708 -- 00:16:18,475
letting them know that
00:16:18,475 -- 00:16:20,611
if this happens again, the fine would be
00:16:20,611 -- 00:16:22,145
I think it was a half $1 million and,
00:16:22,145 -- 00:16:23,313
you know, another ten grand
00:16:23,313 -- 00:16:25,315
for the agent that was involved.
00:16:25,315 -- 00:16:26,616
And I had no problem sharing that
00:16:26,616 -- 00:16:28,919
with all of our broker owners
00:16:28,919 -- 00:16:31,221
and agents, because to me,
00:16:31,221 -- 00:16:33,824
I get how hard it is to be a principal broker.
00:16:33,824 -- 00:16:36,460
I understand that you've got competing interests.
00:16:36,460 -- 00:16:37,060
I get that,
00:16:37,060 -- 00:16:38,528
you know, you have agents that are
00:16:38,528 -- 00:16:41,098
that are motivated and sometimes very difficult to manage
00:16:41,098 -- 00:16:44,134
because they're only focused on getting transactions done.
00:16:44,134 -- 00:16:46,303
And interprovincial transactions are one of those ones
00:16:46,303 -- 00:16:48,438
where like, what harm am I doing?
00:16:48,438 -- 00:16:50,140
And to me it's giving,
00:16:50,140 -- 00:16:51,975
you know, equipping our principal brokers
00:16:51,975 -- 00:16:55,312
with the information and case studies to be able to make
00:16:55,312 -- 00:16:56,880
it have those difficult conversations.
00:16:56,880 -- 00:16:58,348
So I had no problem,
00:16:58,348 -- 00:17:01,418
you know, someone using me as a litmus test of here's
00:17:01,418 -- 00:17:04,654
what happens, for the sake of, of doing those things.
00:17:04,654 -- 00:17:07,090
And the other thing we do is we have no problem,
00:17:08,325 -- 00:17:11,361
when we have an agent that that did something wrong to,
00:17:11,361 -- 00:17:15,765
in some cases, hang them from the, the square of the town
00:17:15,765 -- 00:17:16,766
to let everybody know
00:17:16,766 -- 00:17:19,636
this is what happens when you do wrong. Right.
00:17:19,636 -- 00:17:21,571
And having a relationship with the regulators,
00:17:21,571 -- 00:17:23,140
I think is also critically important,
00:17:23,140 -- 00:17:25,208
because I think when you become large
00:17:25,208 -- 00:17:28,778
and you have so many agents, it's
00:17:28,778 -- 00:17:30,213
like, I think it's easy to
00:17:30,213 -- 00:17:32,382
to point out the one wrong person.
00:17:32,382 -- 00:17:33,617
But the simple reality is
00:17:33,617 -- 00:17:35,285
I think we've got a lot of really great agents
00:17:35,285 -- 00:17:37,020
and a few bad apples.
00:17:37,020 -- 00:17:39,389
and the best thing we can do is, is do the best
00:17:39,389 -- 00:17:42,392
we can to weed those bad apples out,
00:17:42,392 -- 00:17:44,227
and, and work from that perspective.
00:17:44,227 -- 00:17:44,828
And I think, listen,
00:17:44,828 -- 00:17:46,696
I think as an industry,
00:17:46,696 -- 00:17:48,465
we're doing better with things like technology.
00:17:49,532 -- 00:17:50,667
And I think if
00:17:50,667 -- 00:17:51,368
somebody wants
00:17:51,368 -- 00:17:53,770
to behave poorly in this industry,
00:17:53,770 -- 00:17:54,704
then they're going to typically
00:17:54,704 -- 00:17:57,340
go to a place where there's less technology,
00:17:57,340 -- 00:17:58,508
as opposed to more technology,
00:17:58,508 -- 00:18:00,977
because if you have the document portal
00:18:00,977 -- 00:18:02,345
where you're getting documents directly
00:18:02,345 -- 00:18:03,613
from the customer into your portal,
00:18:03,613 -- 00:18:06,116
you know exactly where that document came from.
00:18:06,116 -- 00:18:07,884
There's no
00:18:07,884 -- 00:18:09,219
nefarious acts happening,
00:18:09,219 -- 00:18:11,454
which becomes a little bit more tougher to do.
00:18:11,454 -- 00:18:12,856
So I think a lot of these things
00:18:12,856 -- 00:18:15,392
are working in our favor to make us a better industry.
00:18:15,392 -- 00:18:18,428
But as an as an industry as a whole in large brokerages,
00:18:18,428 -- 00:18:20,397
I think that's what we're doing to make things better.
00:18:20,397 -- 00:18:23,633
Couldn't the people from New Brunswick fly to Ontario
00:18:23,633 -- 00:18:25,435
and then say they met you in your office?
00:18:26,569 -- 00:18:27,070
I'm kidding, I.
00:18:27,070 -- 00:18:31,975
Tried that, they didn't buy it.
00:18:31,975 -- 00:18:33,877
which brings me to ask Ron,
00:18:33,877 -- 00:18:34,911
because I think you know that
00:18:34,911 -- 00:18:38,148
Ron doesn't put up with guff from what you've heard of Ron.
00:18:38,148 -- 00:18:40,950
So I'd be interested, Ron, to hear,
00:18:40,950 -- 00:18:44,821
if your experience is similar to what Don's articulated,
00:18:44,821 -- 00:18:46,856
how did you deal with,
00:18:46,856 -- 00:18:48,491
issues of misconduct and discipline
00:18:48,491 -- 00:18:50,260
in your own brokerage?
00:18:50,260 -- 00:18:51,661
Well, in a brokerage it operates
00:18:51,661 -- 00:18:52,562
a salary model,
00:18:52,562 -- 00:18:53,563
which is not,
00:18:53,563 -- 00:18:55,999
you know, very, very prevalent in Ontario or any place else,
00:18:55,999 -- 00:18:57,967
but in a brokerage with a salary model,
00:18:57,967 -- 00:18:59,536
people just have no choice
00:18:59,536 -- 00:19:01,237
but to do exactly what they're told to do.
00:19:01,237 -- 00:19:04,240
And so you set standards and that's how it works.
00:19:04,240 -- 00:19:07,076
we use to have a few outside agents and, you know,
00:19:08,144 -- 00:19:10,380
to, to Dong and
00:19:10,380 -- 00:19:13,449
everybody else's point, you just have to,
00:19:13,449 -- 00:19:15,652
particularly when they're new,
00:19:15,652 -- 00:19:17,220
you have to analyze the hell
00:19:17,220 -- 00:19:19,289
out of the compliance documents.
00:19:19,289 -- 00:19:22,225
You have to decide whether something's going on there
00:19:22,225 -- 00:19:25,495
that doesn't seem normal, that doesn't seem
00:19:25,495 -- 00:19:27,964
common and take more steps.
00:19:27,964 -- 00:19:30,967
I mean, that's always at the end of the day.
00:19:30,967 -- 00:19:32,569
I don't know if I'm going to look at every file
00:19:32,569 -- 00:19:34,337
before it goes to the lender stick.
00:19:34,337 -- 00:19:37,440
But, just maybe a few to many.
00:19:37,440 -- 00:19:42,478
but the, but the reality is that if you look at
00:19:42,478 -- 00:19:43,813
your compliance documents
00:19:43,813 -- 00:19:45,248
from a holistic point of view,
00:19:45,248 -- 00:19:48,284
you will often find stuff that makes no sense at all.
00:19:48,284 -- 00:19:50,954
And if you're well trained,
00:19:50,954 -- 00:19:53,056
you have a solid compliance group.
00:19:53,056 -- 00:19:54,390
They will say, well, wait a minute.
00:19:54,390 -- 00:19:57,026
Why would, it looks like a normal file?
00:19:57,026 -- 00:19:59,362
Why is there a B lender? Why is it a private mortgage?
00:19:59,362 -- 00:20:01,998
I mean, let's dig in. Let's dig in deeper.
00:20:01,998 -- 00:20:04,233
And as long as you have that in your compliance group,
00:20:04,233 -- 00:20:07,270
you'll discover some things, you will.
00:20:07,270 -- 00:20:09,105
So I think that raises a good point,
00:20:09,105 -- 00:20:11,207
because I think, you know, what we run into is, is
00:20:11,207 -- 00:20:12,408
sometimes a little bit of information
00:20:12,408 -- 00:20:13,943
can be very dangerous.
00:20:13,943 -- 00:20:16,679
And, Nick and I were having a conversation over lunch
00:20:16,679 -- 00:20:19,082
and we were talking about, you know, mix,
00:20:19,082 -- 00:20:21,351
and some of them have never done a foreclosure
00:20:21,351 -- 00:20:22,785
before or understand
00:20:22,785 -- 00:20:24,887
how to take somebody through a legal proceedings.
00:20:24,887 -- 00:20:26,456
I think there's a lot of brokers out there
00:20:26,456 -- 00:20:29,058
that have never really done a private mortgage
00:20:29,058 -- 00:20:32,228
or a B transaction to really understand the problems with it.
00:20:32,228 -- 00:20:33,429
And I think that's,
00:20:33,429 -- 00:20:33,629
you know,
00:20:33,629 -- 00:20:34,597
I applaud FSRA
00:20:34,597 -- 00:20:36,032
for taking that first step forward
00:20:36,032 -- 00:20:37,934
of creating a licensing class
00:20:37,934 -- 00:20:40,236
so that you're getting a little bit more information.
00:20:40,236 -- 00:20:44,140
The challenge is, is when house prices are going up,
00:20:44,140 -- 00:20:45,274
everybody look like a hero.
00:20:45,274 -- 00:20:47,477
Everybody looked like they knew exactly what they're doing.
00:20:47,477 -- 00:20:50,179
Make wonderful underwriting decisions.
00:20:50,179 -- 00:20:52,482
And when, you know, property prices dropped
00:20:52,482 -- 00:20:54,550
and things happen all of a sudden, you know,
00:20:54,550 -- 00:20:57,220
as one presenter said, you know, when the
00:20:57,220 -- 00:20:59,856
when the tide goes out, you can see who's swimming naked.
00:20:59,856 -- 00:21:00,790
And there's a lot of people
00:21:00,790 -- 00:21:03,226
swimming naked in this, in this industry.
00:21:03,226 -- 00:21:04,527
And I think, you know,
00:21:04,527 -- 00:21:06,162
we have to work harder as an industry
00:21:06,162 -- 00:21:08,197
to just clean everything up.
00:21:08,197 -- 00:21:09,098
And I think we're getting there,
00:21:09,098 -- 00:21:12,168
but it's going to take time. That's a horrible visual.
00:21:14,036 -- 00:21:15,771
Really tough.
00:21:15,771 -- 00:21:18,307
I also I just wanted to add into that.
00:21:18,307 -- 00:21:21,878
Yes, it is a horrible visual. I closed my eyes by the way.
00:21:21,878 -- 00:21:22,678
You know.
00:21:22,678 -- 00:21:25,748
We talk a lot about educating,
00:21:25,748 -- 00:21:29,919
our agents and our brokers, training them,
00:21:29,919 -- 00:21:34,690
Premiere Mortgage Centre is a very large brokerage.
00:21:34,690 -- 00:21:35,558
More than over
00:21:35,558 -- 00:21:38,227
170 agents and brokers across five provinces.
00:21:38,227 -- 00:21:40,830
But we're just speaking to Ontario right now
00:21:40,830 -- 00:21:45,101
where there's a little over 90 agents and brokers.
00:21:45,101 -- 00:21:46,636
We've spent a lot of time
00:21:46,636 -- 00:21:49,272
not only training the agents and the brokers,
00:21:49,272 -- 00:21:52,375
but training the operational leadership as well.
00:21:52,375 -- 00:21:57,079
So when you speak about having locked in compliance
00:21:57,079 -- 00:21:59,148
procedures and policies,
00:21:59,148 -- 00:22:01,617
you know, our individual staff
00:22:01,617 -- 00:22:03,085
that work in those departments,
00:22:03,085 -- 00:22:05,154
we're training them at all times as well.
00:22:05,154 -- 00:22:06,522
And many of them,
00:22:06,522 -- 00:22:07,023
you know,
00:22:07,023 -- 00:22:09,825
one in particular came from a real estate background, but,
00:22:09,825 -- 00:22:12,428
you know, now probably knows more about mortgage brokering
00:22:12,428 -- 00:22:14,764
than she ever thought that she would have. Right.
00:22:14,764 -- 00:22:17,533
But by training them and giving them
00:22:17,533 -- 00:22:18,701
the confidence
00:22:18,701 -- 00:22:21,270
and the information that they need to do their job
00:22:21,270 -- 00:22:21,937
well, right.
00:22:21,937 -- 00:22:23,539
Because their salary drawn, right,
00:22:23,539 -- 00:22:24,407
they have no choice
00:22:24,407 -- 00:22:27,309
but to do what Kerri has told them to do.
00:22:27,309 -- 00:22:32,548
They are in fact, you know, educated enough to really find
00:22:32,548 -- 00:22:33,849
some of those,
00:22:33,849 -- 00:22:36,252
you know, little pieces that we would be looking for
00:22:36,252 -- 00:22:38,621
that would send us searching for some answers
00:22:38,621 -- 00:22:42,124
as to why certain decisions were made in those files. Yeah.
00:22:43,759 -- 00:22:45,694
So we've spent some time talking
00:22:45,694 -- 00:22:48,631
about the principal broker perspective.
00:22:48,631 -- 00:22:49,398
At this point.
00:22:49,398 -- 00:22:50,800
It would be interesting to hear
00:22:50,800 -- 00:22:52,902
from Antoinette in terms of the things
00:22:52,902 -- 00:22:56,472
that keep us the regulator up at night.
00:22:56,472 -- 00:23:00,009
What are the things that that at the present time
00:23:00,009 -- 00:23:04,547
we're most worried about? I have the answer already, but,
00:23:04,547 -- 00:23:06,882
and why is, strong conduct,
00:23:06,882 -- 00:23:09,351
culture and effective principal broker
00:23:09,351 -- 00:23:12,288
supervision so important at this particular time?
00:23:12,288 -- 00:23:13,289
Antoinette.
00:23:13,289 -- 00:23:15,624
Yeah. So there's a few things that we are worried about.
00:23:15,624 -- 00:23:16,959
And I think we talked about it.
00:23:16,959 -- 00:23:20,796
One is really about proficiency of the sector. Right.
00:23:20,796 -- 00:23:24,700
You know, in the last five years the sector has grown 20%.
00:23:24,700 -- 00:23:28,304
So we have 20% more licensed individuals.
00:23:28,304 -- 00:23:30,739
But the number of firms stay the same.
00:23:30,739 -- 00:23:32,608
So obviously, from our perspective
00:23:32,608 -- 00:23:35,377
is, many of those entering
00:23:35,377 -- 00:23:39,815
this sector, might not have experienced a market downturn.
00:23:39,815 -- 00:23:41,717
So are these individuals,
00:23:41,717 -- 00:23:43,185
proficient enough to be able
00:23:43,185 -- 00:23:45,487
to give that suitable mortgage advice?
00:23:45,487 -- 00:23:48,023
The other thing that we're also noticing
00:23:48,023 -- 00:23:51,093
is that consumer expectation has gone up.
00:23:51,093 -- 00:23:53,963
the reason why they use a mortgage broker
00:23:53,963 -- 00:23:55,664
is because they need assistance.
00:23:55,664 -- 00:23:57,633
They need help. They need that advice.
00:23:57,633 -- 00:24:02,438
And when you couple a market downturn uncertainty
00:24:02,438 -- 00:24:05,574
with higher consumer expectation,
00:24:05,574 -- 00:24:08,043
it just makes the work of the sector
00:24:08,043 -- 00:24:09,678
so much more important. Right.
00:24:09,678 -- 00:24:12,014
So you need to be more diligent.
00:24:12,014 -- 00:24:13,782
You need to be,
00:24:13,782 -- 00:24:15,217
you really need to up your game
00:24:15,217 -- 00:24:19,388
to make sure that you understand a client situation.
00:24:19,388 -- 00:24:21,790
I think a lot of us, we're all human.
00:24:21,790 -- 00:24:25,327
We like to think we're in a better situation than we are.
00:24:25,327 -- 00:24:28,363
And when you have that expectation gap,
00:24:28,363 -- 00:24:33,235
that's when you know, as a broker, your job is harder.
00:24:33,235 -- 00:24:36,305
We do think that because of this environment,
00:24:36,305 -- 00:24:39,007
the risk of unsuitable mortgage advice
00:24:39,007 -- 00:24:42,544
and the risk that a client don't quite understand
00:24:42,544 -- 00:24:45,447
what is being offered to them is going to go up.
00:24:45,447 -- 00:24:48,784
So obviously, we are going to be very focused on,
00:24:48,784 -- 00:24:50,018
you know, suitability,
00:24:50,018 -- 00:24:51,353
on what you're explaining,
00:24:51,353 -- 00:24:53,589
what is being explained to consumers.
00:24:53,589 -- 00:24:55,624
And why a brokerage
00:24:55,624 -- 00:24:57,593
and a principal broker is so important
00:24:57,593 -- 00:24:59,194
in this environment is that,
00:25:00,529 -- 00:25:02,431
you are a senior person
00:25:02,431 -- 00:25:05,033
within your organization, even if you're like
00:25:05,033 -- 00:25:08,136
sometimes you're the owner, you set the direction.
00:25:08,136 -- 00:25:10,939
And we've all heard that, you know, culture of a firm
00:25:10,939 -- 00:25:14,710
is always starts from the top.
00:25:14,710 -- 00:25:16,078
From our perspective,
00:25:16,078 -- 00:25:16,945
if you know,
00:25:16,945 -- 00:25:18,981
if a principal broker is able
00:25:18,981 -- 00:25:23,318
to set that high standard of conduct and behavior,
00:25:23,318 -- 00:25:25,020
it makes our job easier.
00:25:25,020 -- 00:25:26,622
I mean, like any regulators,
00:25:26,622 -- 00:25:28,357
we don't have unlimited resources.
00:25:28,357 -- 00:25:32,060
We got to be able to focus our limited resources
00:25:32,060 -- 00:25:33,629
on the bad actors.
00:25:33,629 -- 00:25:35,597
So to the extent that,
00:25:35,597 -- 00:25:38,100
we are seeing principal brokers,
00:25:38,100 -- 00:25:39,668
you know, doing what they can,
00:25:39,668 -- 00:25:41,903
taking reasonable steps to,
00:25:41,903 -- 00:25:43,605
set high standards of conduct
00:25:43,605 -- 00:25:45,507
and doing proper supervision,
00:25:45,507 -- 00:25:49,878
then we can divert our resources to the bad actors.
00:25:49,878 -- 00:25:52,180
We use the word conduct culture a lot.
00:25:52,180 -- 00:25:54,282
And I know this is a term that,
00:25:54,282 -- 00:25:56,952
you start hearing from a lot of regulators
00:25:56,952 -- 00:26:00,088
and if we have to summarize what it means
00:26:00,088 -- 00:26:01,056
for us, it's
00:26:01,056 -- 00:26:06,561
really about having a culture so that your organization,
00:26:06,561 -- 00:26:07,896
the people,
00:26:07,896 -- 00:26:11,032
they are always thinking about the consumer,
00:26:11,032 -- 00:26:13,101
the do no harm concept. Right.
00:26:13,101 -- 00:26:15,971
When you are dealing with consumers, you're
00:26:15,971 -- 00:26:17,539
thinking about what's best for them.
00:26:17,539 -- 00:26:18,740
How do we make sure that
00:26:19,941 -- 00:26:22,110
you are providing the right service?
00:26:22,110 -- 00:26:23,812
So be more proactive
00:26:23,812 -- 00:26:25,180
because
00:26:25,180 -- 00:26:27,382
we will never have the resources
00:26:27,382 -- 00:26:30,051
to be able to check everybody, every transaction.
00:26:30,051 -- 00:26:31,386
And we don't want to do that.
00:26:31,386 -- 00:26:33,622
So we want to be able to leverage,
00:26:33,622 -- 00:26:36,691
principal brokers and senior management of firms
00:26:36,691 -- 00:26:38,693
to be able to do that.
00:26:38,693 -- 00:26:39,995
And so as a follow up,
00:26:39,995 -- 00:26:43,098
I mean, not to try and scare people here or anything,
00:26:43,098 -- 00:26:44,633
I think people know
00:26:44,633 -- 00:26:47,369
kind of the usual basic disciplinary actions
00:26:47,369 -- 00:26:49,671
that can take place for individuals.
00:26:49,671 -- 00:26:50,238
But Antoinette,
00:26:50,238 -- 00:26:52,274
I was wondering if you could maybe
00:26:52,274 -- 00:26:54,809
articulate a bit for, for folks out there,
00:26:54,809 -- 00:26:58,113
what are some of the regulatory consequences
00:26:58,113 -- 00:27:02,284
that can happen for a principal broker and their brokerage
00:27:02,284 -- 00:27:04,319
if they're found, their agents
00:27:04,319 -- 00:27:07,489
and brokers are found to be not dealing with,
00:27:07,489 -- 00:27:09,658
consumers fairly and more importantly,
00:27:09,658 -- 00:27:11,560
breaching the legislation.
00:27:11,560 -- 00:27:14,195
So the first thing we always look at is
00:27:14,195 -- 00:27:15,697
whether the principal broker
00:27:15,697 -- 00:27:17,732
actually have a systematic process
00:27:17,732 -- 00:27:21,937
to monitor the conduct and supervise the agents.
00:27:21,937 -- 00:27:23,805
and some of these could include,
00:27:23,805 -- 00:27:26,574
you know, all the proper training for,
00:27:26,574 -- 00:27:28,910
for the brokers and agents.
00:27:28,910 -- 00:27:33,915
are there process to help you identify potential,
00:27:33,982 -- 00:27:38,019
bad behavior or, quality of service or not there.
00:27:38,019 -- 00:27:40,822
So I like to stress the quality of service
00:27:40,822 -- 00:27:45,627
we do see a lot of firms that have a compliance process,
00:27:45,627 -- 00:27:47,062
but is very checklist based.
00:27:47,062 -- 00:27:49,197
Oh, all these documentation are there,
00:27:49,197 -- 00:27:52,867
but there is little focus on the content,
00:27:52,867 -- 00:27:53,501
like,
00:27:53,501 -- 00:27:55,403
you know, do my brokers and agents
00:27:55,403 -- 00:27:58,073
actually collect the right information?
00:27:58,073 -- 00:28:00,408
Did they make that link from,
00:28:00,408 -- 00:28:00,675
you know,
00:28:00,675 -- 00:28:02,544
the know your client information
00:28:02,544 -- 00:28:06,414
all the way to the final product recommendation?
00:28:06,414 -- 00:28:07,682
So,
00:28:07,682 -- 00:28:08,183
you know,
00:28:08,183 -- 00:28:12,821
we like to emphasize the quality of those process.
00:28:12,821 -- 00:28:15,056
If you can demonstrate as a principal broker,
00:28:15,056 -- 00:28:16,458
you can demonstrate,
00:28:16,458 -- 00:28:18,460
you have that systematic approach
00:28:18,460 -- 00:28:22,263
to monitoring the activities of your brokers and agents.
00:28:22,263 -- 00:28:23,798
You are giving them training.
00:28:23,798 -- 00:28:25,366
If you're identifying issues,
00:28:25,366 -- 00:28:27,635
you are actually dealing with it.
00:28:27,635 -- 00:28:28,536
We're all human.
00:28:28,536 -- 00:28:29,871
So there will be mistake
00:28:29,871 -- 00:28:31,739
and it is okay to make mistake
00:28:31,739 -- 00:28:33,608
as long as you learn from your mistake and then
00:28:34,642 -- 00:28:37,011
you address them.
00:28:37,011 -- 00:28:40,982
So if you can demonstrate that, then that's very helpful.
00:28:40,982 -- 00:28:45,653
Now, if we notice that there is no process
00:28:45,653 -- 00:28:47,388
and your brokers and agents
00:28:47,388 -- 00:28:50,258
are found to be breaching requirements
00:28:50,258 -- 00:28:53,094
or treating consumers unfairly,
00:28:53,094 -- 00:28:56,097
then yes, a principal broker could be liable.
00:28:56,097 -- 00:28:59,734
You know, it could be as simple as
00:28:59,734 -- 00:29:03,104
you are going to see us a lot more often,
00:29:03,104 -- 00:29:07,175
To, you know, license revocation or even,
00:29:07,175 -- 00:29:08,876
you know, conditions on your licensing.
00:29:08,876 -- 00:29:10,478
And sometimes we
00:29:10,478 -- 00:29:15,450
may ban somebody from being a principal broker.
00:29:15,717 -- 00:29:18,186
Good to note.
00:29:18,186 -- 00:29:20,622
But you bring up an interesting topic, Antoinette,
00:29:20,622 -- 00:29:23,858
and I think this came up earlier in the conversation, too.
00:29:23,858 -- 00:29:26,227
FSRA has seen a really rapid growth
00:29:26,227 -- 00:29:27,996
in the number of agents and brokers
00:29:27,996 -- 00:29:32,000
and not the same jump in the number of brokerages.
00:29:32,000 -- 00:29:35,136
So that means that brokerages are getting larger
00:29:35,136 -- 00:29:37,505
and they were getting larger very quickly
00:29:37,505 -- 00:29:39,507
for a certain period of time there.
00:29:39,507 -- 00:29:40,842
So maybe I can ask Kerrie
00:29:40,842 -- 00:29:43,478
because I know you have a pretty big organization.
00:29:43,478 -- 00:29:47,782
How do you meet the challenge of being systematic,
00:29:47,782 -- 00:29:49,884
like Antoinette was talking about making sure
00:29:49,884 -- 00:29:52,453
that there's oversight over your agents and brokers,
00:29:52,453 -- 00:29:57,458
when you have so many additional bodies being onboarded?
00:29:57,525 -- 00:29:59,927
What are some of the techniques that larger
00:29:59,927 -- 00:30:02,530
growing operations can take to make sure
00:30:02,530 -- 00:30:03,998
that they've got their finger on the pulse
00:30:03,998 -- 00:30:06,834
and that they are having those kind of processes
00:30:06,834 -- 00:30:09,704
put in place, like Antoinette just outlined in her remarks.
00:30:12,673 -- 00:30:14,909
We
00:30:14,909 -- 00:30:17,879
start the process of,
00:30:17,879 -- 00:30:18,880
for lack of a better word,
00:30:18,880 -- 00:30:20,648
managing the agents and the brokers
00:30:20,648 -- 00:30:23,618
in their individual businesses from day one.
00:30:23,618 -- 00:30:26,087
So we are in five different provinces.
00:30:26,087 -- 00:30:30,925
We're specifically speaking to Ontario, today, but
00:30:30,925 -- 00:30:32,860
you're right, the growth of agents
00:30:32,860 -- 00:30:35,229
and brokers inside of the brokerage is showing,
00:30:35,229 -- 00:30:37,999
but the number of brokerages remains the same.
00:30:37,999 -- 00:30:41,102
That's interesting to me, but it but it does make sense.
00:30:41,102 -- 00:30:43,571
So how do we manage through,
00:30:43,571 -- 00:30:48,476
making sure that all of these 170 or 90 some-odd Ontario
00:30:48,476 -- 00:30:51,178
businesses are running successfully and are compliant
00:30:51,178 -- 00:30:54,448
and are abiding by the rules
00:30:54,448 -- 00:30:56,317
and regulations within the industry.
00:30:56,317 -- 00:30:57,118
Well,
00:30:57,118 -- 00:30:59,053
we train specifically from day
00:30:59,053 -- 00:31:02,723
one to our policies and procedures manual. Day one.
00:31:02,723 -- 00:31:04,392
We marry that with,
00:31:04,392 -- 00:31:07,094
I would call it our own premiere code of conduct
00:31:07,094 -- 00:31:10,197
and what we would consider,
00:31:10,197 -- 00:31:12,266
you know, what we consider
00:31:12,266 -- 00:31:14,769
to be the standard of excellence for us.
00:31:14,769 -- 00:31:16,470
And we're very well known in the industry for that.
00:31:17,705 -- 00:31:22,710
We take advantage of tools, technology,
00:31:23,844 -- 00:31:26,047
you know, different levels of expertise
00:31:26,047 -- 00:31:27,815
with, with certain agents and brokers
00:31:27,815 -- 00:31:30,284
that are within our industry that are very well known.
00:31:30,284 -- 00:31:34,221
We manage,
00:31:34,221 -- 00:31:35,289
as a principal broker
00:31:35,289 -- 00:31:37,058
and not only manage the agents and brokers,
00:31:37,058 -- 00:31:37,692
but we
00:31:37,692 -- 00:31:41,395
layer in as we grow, we layer in, we have sales leadership,
00:31:41,395 -- 00:31:43,297
we have operational leadership.
00:31:43,297 -- 00:31:46,400
You know, the more, the more hands on deck, the better.
00:31:46,400 -- 00:31:48,969
And to Ron's point, his brokerages,
00:31:48,969 -- 00:31:49,837
you know,
00:31:49,837 -- 00:31:53,007
comprised of many salaried employees,
00:31:53,007 -- 00:31:55,843
these leadership roles are also salaried employees for us.
00:31:55,843 -- 00:31:57,278
So that there's no,
00:31:57,278 -- 00:31:58,345
you know, there
00:31:58,345 -- 00:31:59,680
isn't, you know, a
00:31:59,680 -- 00:32:00,915
lack of balance in terms
00:32:00,915 -- 00:32:03,818
of what we require from them to help us
00:32:03,818 -- 00:32:06,754
make sure that these 170 or 90 some-odd
00:32:06,754 -- 00:32:09,190
Ontario businesses are running effectively
00:32:09,190 -- 00:32:10,458
and efficiently,
00:32:10,458 -- 00:32:12,493
and which then means the brokerages
00:32:12,493 -- 00:32:14,428
is running in the same capacity.
00:32:14,428 -- 00:32:18,699
So, you know, it starts with onboarding.
00:32:18,699 -- 00:32:22,436
You know, our operational staff are using,
00:32:22,436 -- 00:32:25,272
are using management systems and technology
00:32:25,272 -- 00:32:25,906
to make sure
00:32:25,906 -- 00:32:28,509
that every single step that needs to happen
00:32:28,509 -- 00:32:29,577
with an agent or a broker
00:32:29,577 -- 00:32:31,846
when they come into Premiere is happening,
00:32:31,846 -- 00:32:34,782
we make sure that the agents and the brokers know who
00:32:36,150 -- 00:32:36,750
within
00:32:36,750 -- 00:32:38,185
the brokerage
00:32:38,185 -- 00:32:41,855
they can answer to, they can ask questions to,
00:32:41,855 -- 00:32:45,693
you know, it's a collaborative approach.
00:32:45,693 -- 00:32:48,195
It's not something that I can do on my own.
00:32:48,195 -- 00:32:49,797
I'm well aware of that.
00:32:49,797 -- 00:32:51,832
And I would never say that I could. Right.
00:32:51,832 -- 00:32:53,200
It takes a village.
00:32:53,200 -- 00:32:55,869
So as we continued to grow,
00:32:55,869 -- 00:32:58,372
because Premiere Mortgage Centre did start 18 years ago,
00:32:58,372 -- 00:33:00,941
as you know, a handful of people.
00:33:00,941 -- 00:33:01,275
Right.
00:33:01,275 -- 00:33:01,775
And today
00:33:01,775 -- 00:33:07,147
we're 170 strong and 14 staff, full-time staff, right,
00:33:07,147 -- 00:33:08,382
that are helping us manage
00:33:08,382 -- 00:33:11,785
and make sure that each of the agents and the brokers
00:33:11,785 -- 00:33:13,187
and how they're conducting business,
00:33:13,187 -- 00:33:17,391
that their business is strong so that we're strong.
00:33:17,391 -- 00:33:18,292
All right.
00:33:18,292 -- 00:33:21,996
It's funny because I think I always learn from my mistakes.
00:33:21,996 -- 00:33:24,431
And so I remember a few years ago,
00:33:24,431 -- 00:33:27,401
I think I got called 2 or 3 times from FSRA
00:33:27,401 -- 00:33:31,839
about a client complaint, usually private related.
00:33:31,839 -- 00:33:34,908
And they asked me if you could pull the file for me and
00:33:34,908 -- 00:33:35,642
I couldn't find it.
00:33:36,944 -- 00:33:37,378
And it
00:33:37,378 -- 00:33:39,780
so happened that these three different agents
00:33:39,780 -- 00:33:42,850
had done transactions privately, but got paid directly
00:33:42,850 -- 00:33:44,051
and didn't report it.
00:33:44,051 -- 00:33:47,621
So I'm like, man, this is really painful.
00:33:47,621 -- 00:33:50,357
If I get another call from the regulator and they ask me,
00:33:50,357 -- 00:33:51,458
can you look up this file?
00:33:51,458 -- 00:33:53,894
And if I had to say one more time, I did not know about it
00:33:53,894 -- 00:33:57,097
at some point that excuse becomes a little bit muted.
00:33:57,097 -- 00:33:58,232
And then it's like, well,
00:33:58,232 -- 00:33:59,700
where are you actually supervising?
00:33:59,700 -- 00:34:00,567
Like what's going on there?
00:34:00,567 -- 00:34:02,369
So the one thing that we did
00:34:02,369 -- 00:34:04,204
internally is all of us
00:34:04,204 -- 00:34:05,439
as principal brokers has to file
00:34:05,439 -- 00:34:06,807
an annual information return.
00:34:06,807 -- 00:34:08,742
So I said, well, you know what,
00:34:08,742 -- 00:34:10,310
we're going to get all of our agents to file
00:34:10,310 -- 00:34:12,579
annual information returns to the brokerage.
00:34:12,579 -- 00:34:13,714
So we're going to ask questions
00:34:13,714 -- 00:34:15,215
like, were there any transactions
00:34:15,215 -- 00:34:17,351
that you did outside the brokerage where you got paid
00:34:17,351 -- 00:34:19,219
and didn't get paid through the brokerage?
00:34:19,219 -- 00:34:21,588
It's a pretty straightforward question.
00:34:21,588 -- 00:34:22,222
Are you,
00:34:22,222 -- 00:34:24,892
do you have licenses in other disciplines
00:34:24,892 -- 00:34:26,260
that may be a conflict of interest
00:34:26,260 -- 00:34:27,494
to you as a mortgage brokerage?
00:34:27,494 -- 00:34:28,462
Please name them.
00:34:28,462 -- 00:34:30,664
So if I'm an insurance agent, let me know.
00:34:30,664 -- 00:34:33,100
So now I know that I've got a conflict of interest.
00:34:33,100 -- 00:34:36,069
You know, have you seen and read the last policy?
00:34:36,069 -- 00:34:37,738
These are all questions you can ask anything.
00:34:37,738 -- 00:34:39,439
Every brokerage has their own nuances.
00:34:39,439 -- 00:34:41,241
You know, Ron, being mostly
00:34:41,241 -- 00:34:42,809
salary people might be a little bit different.
00:34:42,809 -- 00:34:45,979
But to me that became a very powerful tool
00:34:45,979 -- 00:34:48,115
because all of a sudden, now annually,
00:34:48,115 -- 00:34:49,883
I have to get every single one of my agents
00:34:49,883 -- 00:34:52,119
to be able to answer this question for me.
00:34:52,119 -- 00:34:54,054
And it's so funny because sometimes, like, oh,
00:34:54,054 -- 00:34:55,656
I didn't know that this was a case.
00:34:55,656 -- 00:34:58,925
I'm like, no, it's freaking black and white, man. Let's.
00:34:58,925 -- 00:35:00,994
And then so it draws a conversation
00:35:00,994 -- 00:35:02,763
and a lot of that problem disappears.
00:35:02,763 -- 00:35:04,631
So, you know, if that's one practical
00:35:04,631 -- 00:35:07,100
example of how you, as a principal broker,
00:35:07,100 -- 00:35:08,301
want to run your brokerage
00:35:08,301 -- 00:35:09,870
to help you with those sorts of things.
00:35:09,870 -- 00:35:11,171
I think an annual information return
00:35:11,171 -- 00:35:12,973
no different than the regulator asks of us
00:35:12,973 -- 00:35:14,341
principal brokers
00:35:14,341 -- 00:35:15,676
ask it of your agents,
00:35:15,676 -- 00:35:19,179
and you might be surprised that the response you get back.
00:35:19,179 -- 00:35:20,047
You know, Dong,
00:35:20,047 -- 00:35:22,449
11 people online just said,
00:35:22,449 -- 00:35:24,518
you mean we can get the lawyers to pay us directly?
00:35:24,518 -- 00:35:26,420
Wow, that's a great idea.
00:35:26,420 -- 00:35:27,788
So...
00:35:27,788 -- 00:35:31,525
So you can't always control the way people think.
00:35:31,525 -- 00:35:32,259
I gotta say that.
00:35:33,260 -- 00:35:34,494
Can I just add to that?
00:35:34,494 -- 00:35:36,696
Because I think that is great, right?
00:35:36,696 -- 00:35:37,264
Like from,
00:35:37,264 -- 00:35:38,632
I know a lot of
00:35:38,632 -- 00:35:43,470
we get asked a lot. What are the things that we need to do.
00:35:43,470 -- 00:35:44,971
Can you just give us a checklist.
00:35:44,971 -- 00:35:46,373
And we always said, I,
00:35:46,373 -- 00:35:47,974
we're not giving you a checklist,
00:35:47,974 -- 00:35:51,411
but definitely there's a lot of best practices out there
00:35:51,411 -- 00:35:53,780
like attestation is interesting.
00:35:53,780 -- 00:35:55,115
And then using
00:35:55,115 -- 00:35:56,383
you know, management system
00:35:56,383 -- 00:35:59,553
and technology to help is it's also, you know,
00:35:59,553 -- 00:36:00,654
very powerful.
00:36:00,654 -- 00:36:02,222
We heard this morning about AI
00:36:02,222 -- 00:36:05,625
there's definitely a lot there that we can leverage.
00:36:05,625 -- 00:36:07,460
The one thing that
00:36:07,460 -- 00:36:09,162
that we are deliberate in
00:36:09,162 -- 00:36:11,231
not setting out what to do is
00:36:11,231 -- 00:36:13,700
because every brokerage is different,
00:36:13,700 -- 00:36:15,769
that there are a couple of things that I thought
00:36:15,769 -- 00:36:16,937
I'll put it on the table
00:36:16,937 -- 00:36:17,804
because I,
00:36:17,804 -- 00:36:19,306
I know for other sectors,
00:36:19,306 -- 00:36:20,240
some firms
00:36:20,240 -- 00:36:22,642
like to use consumer reviews
00:36:22,642 -- 00:36:26,346
as a tool to identify other issues
00:36:26,346 -- 00:36:28,248
or other things that we do really good at.
00:36:28,248 -- 00:36:30,917
That's good to emphasize.
00:36:30,917 -- 00:36:32,419
Some other do analyze
00:36:32,419 -- 00:36:33,453
complaints data,
00:36:33,453 -- 00:36:33,753
you know,
00:36:33,753 -- 00:36:37,791
are there other complaints coming from a specific pocket.
00:36:37,791 -- 00:36:38,558
Is that
00:36:38,558 -- 00:36:40,794
is there a systemic issue that we need to think about.
00:36:40,794 -- 00:36:42,696
So there are different ways to do it.
00:36:42,696 -- 00:36:45,832
We recognize that it's not going to be,
00:36:45,832 -- 00:36:50,570
you know, checking every transaction all the time.
00:36:50,570 -- 00:36:52,739
Because it's probably not necessary
00:36:52,739 -- 00:36:55,041
if you have somebody who's very, you know, so
00:36:55,041 -- 00:36:56,710
who has been in the business long time
00:36:56,710 -- 00:37:00,213
and have seen the, the up and down of the sector.
00:37:00,213 -- 00:37:04,351
But for more junior agents, that's probably necessary,
00:37:05,985 -- 00:37:06,953
I think.
00:37:06,953 -- 00:37:08,922
I just wanted to add one more thing in there.
00:37:08,922 -- 00:37:12,225
One of the best practice that we use as we have,
00:37:12,225 -- 00:37:13,393
an agent questionnaire.
00:37:13,393 -- 00:37:15,195
So much like a client
00:37:15,195 -- 00:37:16,629
would,
00:37:16,629 -- 00:37:18,098
would provide information
00:37:18,098 -- 00:37:19,299
to an agent to our broker
00:37:19,299 -- 00:37:21,000
when they're doing an application.
00:37:21,000 -- 00:37:22,836
We require this of our agents
00:37:22,836 -- 00:37:25,538
every year on their licensing renewal.
00:37:25,538 -- 00:37:26,840
So we're looking for them
00:37:26,840 -- 00:37:29,409
to answer questions about themselves,
00:37:29,409 -- 00:37:32,112
their businesses, which is our business,
00:37:32,112 -- 00:37:35,248
although they consider it theirs.
00:37:35,248 -- 00:37:36,883
And the information
00:37:36,883 -- 00:37:37,851
that they provide to us
00:37:37,851 -- 00:37:39,085
is really, really helpful
00:37:39,085 -- 00:37:40,220
and understanding
00:37:40,220 -- 00:37:43,323
where they are in their business or their personal life.
00:37:43,323 -- 00:37:44,124
There are some questions
00:37:44,124 -- 00:37:46,292
that many actually wouldn't want to answer.
00:37:46,292 -- 00:37:47,827
one of them that I specifically ask
00:37:47,827 -- 00:37:49,796
is whether or not they're in good standing with CRA.
00:37:50,997 -- 00:37:54,100
This is important to me as a broker owner.
00:37:54,100 -- 00:37:58,171
Those are issues that can lead to other issues.
00:37:58,171 -- 00:37:59,138
So, you know,
00:37:59,138 -- 00:38:00,874
and if they choose not to answer that question,
00:38:00,874 -- 00:38:03,042
that's a whole other question.
00:38:03,042 -- 00:38:05,678
You know, but again,
00:38:05,678 -- 00:38:08,848
managing as many agents and brokers or supporting,
00:38:08,848 -- 00:38:10,216
let's call it, supporting
00:38:10,216 -- 00:38:14,220
as many agents and brokers in their businesses as, as I do,
00:38:14,220 -- 00:38:15,788
it's really important for me to make sure
00:38:15,788 -- 00:38:17,657
that I know exactly
00:38:17,657 -- 00:38:21,361
who these agents and brokers are as best as I can.
00:38:21,361 -- 00:38:22,595
You know, the CRA question
00:38:22,595 -- 00:38:25,465
would wipe out about five agencies.
00:38:25,465 -- 00:38:27,433
Yes, it would Ron.
00:38:27,433 -- 00:38:29,269
But we all know, we all know what it means
00:38:29,269 -- 00:38:31,671
when an agent or a broker is not in good standing. Right?
00:38:31,671 -- 00:38:33,006
Just as you would ask your client,
00:38:33,006 -- 00:38:35,408
have you paid your taxes, right? Yeah.
00:38:37,310 -- 00:38:38,945
And so improving conduct
00:38:38,945 -- 00:38:41,581
at your brokerage is it takes time. It takes effort.
00:38:41,581 -- 00:38:43,516
And this is a sales business.
00:38:43,516 -- 00:38:46,085
So it takes time away from your employees
00:38:46,085 -- 00:38:48,855
selling to be able to focus on things
00:38:48,855 -- 00:38:52,992
like making sure that they've done the KYC properly, etc.
00:38:52,992 -- 00:38:55,695
So, Sadiq,
00:38:55,695 -- 00:38:58,831
does improving conduct culture in your brokerage?
00:38:58,831 -- 00:39:01,834
Is it divisible from your bottom line,
00:39:01,834 -- 00:39:05,104
or does it support your bottom line? Does it improve
00:39:05,104 -- 00:39:07,707
you know, the reputation of your brokerage?
00:39:07,707 -- 00:39:08,674
Well, you know, strong
00:39:08,674 -- 00:39:10,910
conduct culture definitely improves your reputation.
00:39:10,910 -- 00:39:13,579
The brokerage improves your reputation with your customers
00:39:13,579 -- 00:39:14,914
and with your lenders
00:39:14,914 -- 00:39:17,350
and with your brokerage, your team itself. Right.
00:39:17,350 -- 00:39:18,684
I think, you know,
00:39:18,684 -- 00:39:20,486
people who care about their business,
00:39:20,486 -- 00:39:21,554
care about their reputation,
00:39:21,554 -- 00:39:23,790
want to work with a reputable company.
00:39:23,790 -- 00:39:24,757
Consumers want to deal
00:39:24,757 -- 00:39:26,058
with a reputable company
00:39:26,058 -- 00:39:27,360
and the lenders,
00:39:27,360 -- 00:39:30,429
they want to deal with reputable brokerages and agents.
00:39:30,429 -- 00:39:32,732
You know, I find where it does support is,
00:39:32,732 -- 00:39:35,334
you know, especially with the lender side of things is
00:39:35,334 -- 00:39:37,170
lenders are willing to back you on that deal,
00:39:37,170 -- 00:39:39,939
that they can go either way with it because they know
00:39:39,939 -- 00:39:42,408
your brokerage runs a tight ship.
00:39:42,408 -- 00:39:44,243
You got, you know, strong,
00:39:44,243 -- 00:39:46,045
good quality agents working for you.
00:39:46,045 -- 00:39:48,881
So they'll have your back on a decision to help a client
00:39:48,881 -- 00:39:50,183
where it could have gone the other way.
00:39:51,317 -- 00:39:53,486
Does it necessarily, you know, translate.
00:39:53,486 -- 00:39:55,821
Is it measurable to your bottom line?
00:39:55,821 -- 00:39:56,756
You know, you don't necessarily
00:39:56,756 -- 00:39:58,224
see increased revenue
00:39:58,224 -- 00:40:00,660
by having a stronger conduct culture because,
00:40:00,660 -- 00:40:02,028
as you mentioned,
00:40:02,028 -- 00:40:03,129
it takes away your time,
00:40:03,129 -- 00:40:05,665
as Kerrie mentioned, there’s cost of staffing
00:40:05,665 -- 00:40:06,098
and all that stuff.
00:40:06,098 -- 00:40:07,567
So there's an expense,
00:40:07,567 -- 00:40:08,834
that’s inherently there.
00:40:08,834 -- 00:40:11,971
The stronger you want to build your conduct culture.
00:40:11,971 -- 00:40:14,106
There's processes and technology and all this stuff.
00:40:14,106 -- 00:40:15,508
You have to spend money behind.
00:40:15,508 -- 00:40:18,244
But where it does translate to a stronger bottom line,
00:40:18,244 -- 00:40:19,979
and I think a lot of times we don't recognize it
00:40:19,979 -- 00:40:23,115
because we don't see a revenue coming in,
00:40:23,115 -- 00:40:26,385
is that it protects you from losing the revenue you've made
00:40:26,385 -- 00:40:27,687
because of lawsuits
00:40:27,687 -- 00:40:30,256
and things that you have to now spend money
00:40:30,256 -- 00:40:32,124
on to fix problems
00:40:32,124 -- 00:40:34,260
that you could have avoided in the first place.
00:40:34,260 -- 00:40:35,227
And I look at the way
00:40:35,227 -- 00:40:37,463
I consider a strong conduct
00:40:37,463 -- 00:40:41,033
culture is like an insurance policy on your revenue.
00:40:41,033 -- 00:40:42,668
If you have it in place,
00:40:42,668 -- 00:40:43,636
you're protecting the money
00:40:43,636 -- 00:40:45,271
you did earn as opposed to
00:40:45,271 -- 00:40:47,273
just looking at it as, could I have earned more?
00:40:48,574 -- 00:40:50,843
Does anyone have anything to add to that?
00:40:50,843 -- 00:40:51,577
I would say,
00:40:51,577 -- 00:40:53,079
you know, it's,
00:40:53,079 -- 00:40:54,013
the age old saying,
00:40:54,013 -- 00:40:57,183
if you tell the truth and you don't need a memory, right?
00:40:57,183 -- 00:40:59,852
And, you know, to,
00:40:59,852 -- 00:41:01,587
Antoinette's point,
00:41:01,587 -- 00:41:03,189
if you do what's right for the customer
00:41:03,189 -- 00:41:04,090
because I think that's really
00:41:04,090 -- 00:41:05,224
what conduct culture is, just do
00:41:05,224 -- 00:41:07,059
what's right for the customer.
00:41:07,059 -- 00:41:08,527
Funny, because I went on your website, Ron,
00:41:08,527 -- 00:41:09,528
because I was thinking, well,
00:41:09,528 -- 00:41:10,763
if Ron and I are going to sit together
00:41:10,763 -- 00:41:12,231
and he's going to beat me up about something
00:41:12,231 -- 00:41:14,533
and I'm going to come back and fight him.
00:41:14,533 -- 00:41:16,969
And your Google review ratings are spectacular.
00:41:16,969 -- 00:41:18,337
I think they're 4.8.
00:41:18,337 -- 00:41:19,839
And haven't even started beating you up. Yet.
00:41:19,839 -- 00:41:21,440
Yeah, I know.
00:41:21,440 -- 00:41:22,808
I try to,
00:41:22,808 -- 00:41:24,376
so I'm thinking like
00:41:24,376 -- 00:41:27,513
if you look at Ron's business as an example, you know,
00:41:27,513 -- 00:41:31,083
what more is an example of doing the right thing
00:41:31,083 -- 00:41:34,253
because it resonates in the reviews from your customers.
00:41:34,253 -- 00:41:35,888
Or if you do the right thing for your customers
00:41:35,888 -- 00:41:38,057
and then it finds a way back.
00:41:38,057 -- 00:41:40,159
The problem I do think that is, is
00:41:40,159 -- 00:41:43,028
as much as the people up here on stage and watching
00:41:43,028 -- 00:41:45,598
probably feel the same way that doing the right thing
00:41:45,598 -- 00:41:47,399
and having the right conduct culture
00:41:47,399 -- 00:41:48,667
is good for your business.
00:41:48,667 -- 00:41:51,670
There's also a handful or more people out there
00:41:51,670 -- 00:41:54,106
that don't actually see the correlation.
00:41:54,106 -- 00:41:57,476
That taking that shortcut is better for my bottom line
00:41:57,476 -- 00:42:00,212
than doing the right thing about asking the right questions
00:42:00,212 -- 00:42:03,449
and sometimes saying, no, and they can't say no.
00:42:03,449 -- 00:42:05,918
So, I think, I think that's a challenge.
00:42:05,918 -- 00:42:07,186
I think, you know, as Sadiq said, it's
00:42:07,186 -- 00:42:08,487
not a it's not a direct correlation.
00:42:08,487 -- 00:42:11,190
If it was and we wouldn't have a regulator in the industry
00:42:11,190 -- 00:42:12,358
be really easy to manage.
00:42:12,358 -- 00:42:14,193
But the problem is we've got people out there
00:42:14,193 -- 00:42:16,762
that just don't feel that same way.
00:42:16,762 -- 00:42:18,697
And we got to find a way to root those people out
00:42:18,697 -- 00:42:20,499
and make sure the good people stay.
00:42:20,499 -- 00:42:21,867
Yeah, I'd have to say that
00:42:22,968 -- 00:42:26,038
the key answer to that question is longevity.
00:42:26,038 -- 00:42:30,075
So, I've seen people who've run very bad shops.
00:42:30,075 -- 00:42:31,577
They can't do it forever.
00:42:31,577 -- 00:42:34,747
They have to change or they get removed.
00:42:34,747 -- 00:42:36,015
And it's just as simple as that.
00:42:36,015 -- 00:42:37,783
So if you're planning on running a business
00:42:37,783 -- 00:42:40,386
for a very short time,
00:42:40,386 -- 00:42:41,987
doing bad things is an option.
00:42:41,987 -- 00:42:45,057
But if you want to run a business for a long time,
00:42:45,057 -- 00:42:45,791
sooner or later
00:42:45,791 -- 00:42:46,658
you have to come around
00:42:46,658 -- 00:42:48,160
to doing the right thing for the consumer.
00:42:48,160 -- 00:42:50,396
And that's just the way it is.
00:42:50,396 -- 00:42:52,464
Do you think agents can bounce around
00:42:52,464 -- 00:42:54,433
and stay under the radar?
00:42:54,433 -- 00:42:58,537
Different topic. Sorry.
00:42:58,537 -- 00:42:59,905
Good question.
00:42:59,905 -- 00:43:04,109
So is the approach to this different
00:43:04,109 -- 00:43:06,612
depending on the size of your firm?
00:43:06,612 -- 00:43:08,547
So I know that there's people out there
00:43:08,547 -- 00:43:09,681
that are probably saying, well,
00:43:09,681 -- 00:43:12,084
I know if it's a small firm you've got, you know,
00:43:12,084 -- 00:43:13,418
you know, who's working for you.
00:43:13,418 -- 00:43:14,920
You're probably looking at their
00:43:14,920 -- 00:43:16,622
deals before they get sent,
00:43:17,723 -- 00:43:20,292
but is this kind of an approach scalable
00:43:20,292 -- 00:43:23,328
depending on the size of your brokerage?
00:43:23,328 -- 00:43:26,165
Ron, I'm looking at you for an answer to this.
00:43:26,165 -- 00:43:29,668
You know, the attitude of the management
00:43:29,668 -- 00:43:32,938
is prevalent even at any scale.
00:43:32,938 -- 00:43:34,006
At any scale.
00:43:34,006 -- 00:43:36,642
Now, Kerrie talks about a big operation, people
00:43:36,642 -- 00:43:39,945
all working from their homes or from offices,
00:43:39,945 -- 00:43:43,348
but not in her office, obviously.
00:43:43,348 -- 00:43:47,920
and they understand that it's consequential
00:43:47,920 -- 00:43:50,088
that bad actions are consequential.
00:43:50,088 -- 00:43:51,056
Everybody understands it.
00:43:51,056 -- 00:43:52,958
It doesn't take long.
00:43:52,958 -- 00:43:56,528
Even for newcomers, to understand it's consequential.
00:43:56,528 -- 00:44:00,432
So that's the essence of it all.
00:44:00,432 -- 00:44:05,070
If management cares and management radiates that concept
00:44:05,070 -- 00:44:06,204
that,
00:44:06,204 -- 00:44:10,175
you know, you will get clipped if you do something wrong,
00:44:10,175 -- 00:44:14,413
and we only accept proper behavior
00:44:14,413 -- 00:44:16,648
that is just known.
00:44:16,648 -- 00:44:19,017
And people will leave once they figure it out.
00:44:19,017 -- 00:44:20,786
Oh, well, I can't get away with anything here.
00:44:20,786 -- 00:44:22,387
I got to leave. I got to go.
00:44:22,387 -- 00:44:25,891
And, consequentially, you end up with a pretty good group.
00:44:27,025 -- 00:44:28,927
Does anyone have anything to add to that?
00:44:28,927 -- 00:44:29,227
Maybe
00:44:29,227 -- 00:44:33,098
Kerrie, you have different approaches at your brokerage.
00:44:33,098 -- 00:44:34,733
Ironically, no.
00:44:34,733 -- 00:44:35,867
It's the same approach.
00:44:35,867 -- 00:44:36,201
I think.
00:44:36,201 -- 00:44:38,236
No matter how large the brokerage is,
00:44:38,236 -- 00:44:41,506
you have to have your agents and brokers aligned,
00:44:41,506 -- 00:44:43,375
your leadership have to be aligned.
00:44:43,375 -- 00:44:46,478
Management, leadership, whatever title you're giving them,
00:44:46,478 -- 00:44:47,946
everyone has to be in the alignment.
00:44:47,946 -- 00:44:49,681
We all have to be in the same circle.
00:44:49,681 -- 00:44:51,750
If you want to step outside the circle,
00:44:51,750 -- 00:44:54,219
then the circle's just going to get smaller, right?
00:44:54,219 -- 00:44:57,923
You're just not going to have you as a part of that group.
00:44:57,923 -- 00:44:58,256
Right.
00:44:58,256 -- 00:45:01,626
And we're all consistently walking forward together. Right.
00:45:01,626 -- 00:45:03,195
So it shouldn't matter.
00:45:03,195 -- 00:45:04,095
I know at Premiere
00:45:04,095 -- 00:45:04,896
it shouldn't matter
00:45:04,896 -- 00:45:06,531
if you contact myself,
00:45:06,531 -- 00:45:10,469
you contact my business partner Don, or you contact,
00:45:10,469 -- 00:45:11,536
you know, Michelle Drover,
00:45:11,536 -- 00:45:13,038
who helps me run Atlantic Canada.
00:45:13,038 -- 00:45:17,108
You're going to get the same exact answer to a question.
00:45:17,108 -- 00:45:19,010
And that's really, really important.
00:45:19,010 -- 00:45:24,049
And I've never been afraid to, to communicate or
00:45:24,049 -- 00:45:25,684
to voice that, you know,
00:45:27,352 -- 00:45:27,819
if I have to
00:45:27,819 -- 00:45:29,354
ask you a question, if I'm asking you a question
00:45:29,354 -- 00:45:30,455
and you're not willing to
00:45:30,455 -- 00:45:31,489
to answer that question
00:45:31,489 -- 00:45:33,225
or you're going to become defensive,
00:45:33,225 -- 00:45:35,393
in some investigation or conversation
00:45:35,393 -- 00:45:38,730
that we need to have, right, then you're the issue, not me.
00:45:38,730 -- 00:45:39,064
Right?
00:45:39,064 -- 00:45:41,466
This again, the brokerage itself is a business
00:45:41,466 -- 00:45:42,968
and it's a strong business.
00:45:42,968 -- 00:45:44,069
And without the brokerage,
00:45:44,069 -- 00:45:46,805
the agent, the brokers don't have a business.
00:45:46,805 -- 00:45:48,306
So we all have to work together.
00:45:48,306 -- 00:45:49,341
We all have to be aligned.
00:45:49,341 -- 00:45:50,442
There's no you know,
00:45:50,442 -- 00:45:53,712
I don't think there's outside of the size of
00:45:53,712 -- 00:45:55,447
call it the staff that I would have.
00:45:55,447 -- 00:45:57,849
And yes, I don't have them here in Ontario
00:45:57,849 -- 00:45:58,950
all working together.
00:45:58,950 -- 00:46:00,752
All of our staff are in Atlantic Canada,
00:46:00,752 -- 00:46:02,020
but they're all housed together.
00:46:03,088 -- 00:46:04,089
you know, it's
00:46:04,089 -- 00:46:07,192
we're the same no matter how big or small you are.
00:46:07,192 -- 00:46:08,493
Can I, can I add something?
00:46:08,493 -- 00:46:11,496
Because one of the things that I keep hearing
00:46:11,496 -- 00:46:13,631
is that the good brokerages
00:46:13,631 -- 00:46:15,400
are trying to do the right thing,
00:46:15,400 -- 00:46:16,868
but then agents and brokers
00:46:16,868 -- 00:46:18,970
who realize that, oh, I'm under scrutiny.
00:46:18,970 -- 00:46:23,341
I'm just going to leave and find a brokerage that
00:46:23,341 -- 00:46:26,311
you maybe have easier standard.
00:46:26,311 -- 00:46:26,678
Right?
00:46:26,678 -- 00:46:31,783
So I think as a regulator, you know, our role is really to,
00:46:32,117 -- 00:46:32,717
you know,
00:46:32,717 -- 00:46:35,420
emphasize the importance and hold
00:46:35,420 -- 00:46:37,889
all principal brokers accountable.
00:46:37,889 -- 00:46:40,725
And one of the, and,
00:46:40,725 -- 00:46:41,826
you know, going forward,
00:46:41,826 -- 00:46:43,194
I think a lot of our emphasis
00:46:43,194 -- 00:46:46,464
is going to be on onboarding and retention.
00:46:46,464 -- 00:46:48,500
What are principal brokers doing
00:46:48,500 -- 00:46:52,737
when you are onboarding a new brokerage agent?
00:46:52,737 -- 00:46:55,073
Are you doing due diligence?
00:46:55,073 -- 00:46:58,810
Are you checking their compliance history?
00:46:58,810 -- 00:46:59,878
Are you,
00:46:59,878 -- 00:47:03,181
you know, maybe checking their consumer reviews online?
00:47:03,181 -- 00:47:06,184
What are you doing to get you comfortable
00:47:06,184 -- 00:47:07,819
that somebody who's joining
00:47:07,819 -- 00:47:11,356
your firm is going to be living up to your expectation?
00:47:11,356 -- 00:47:15,627
We know the sector is not mature as other financial sectors.
00:47:16,794 -- 00:47:18,763
So I do have principal
00:47:18,763 -- 00:47:20,965
brokers who have come up to me to say,
00:47:20,965 -- 00:47:22,867
hey, FSRA, you licensed that individual,
00:47:22,867 -- 00:47:24,068
why should I check?
00:47:24,068 -- 00:47:26,070
And my,
00:47:26,070 -- 00:47:28,039
yes, and my comments has always been
00:47:28,039 -- 00:47:30,942
because as your business, it's your reputation.
00:47:30,942 -- 00:47:34,112
So and then the other thing that we are also doing more
00:47:34,112 -- 00:47:35,947
and I want to kind of
00:47:35,947 -- 00:47:40,551
maybe do a little pitches is that a lot of times
00:47:40,551 -- 00:47:45,556
sectors know who are the bad actors.
00:47:45,623 -- 00:47:48,426
Regulators often don't know fast enough.
00:47:48,426 -- 00:47:52,997
And we do have a whistleblower program that,
00:47:52,997 -- 00:47:55,833
if that is allowed, you know,
00:47:55,833 -- 00:47:59,003
people in the sector to report to us,
00:47:59,003 -- 00:48:01,039
and with, with, you know,
00:48:01,039 -- 00:48:03,374
so that we can protect them from consequences.
00:48:03,374 -- 00:48:05,476
So there is, there is different tools
00:48:05,476 -- 00:48:08,379
that we're putting out there to support the sector,
00:48:08,379 -- 00:48:11,416
to let us know if there are misconduct
00:48:11,416 -- 00:48:13,351
because if you give us credible information
00:48:13,351 -- 00:48:15,820
that we can act on, we will look at it seriously.
00:48:17,655 -- 00:48:19,223
Dong, I think you had one more thing.
00:48:19,223 -- 00:48:21,559
Yeah, it was funny because, a couple of years ago,
00:48:21,559 -- 00:48:22,760
I did a survey
00:48:22,760 -- 00:48:25,063
with all the provincial regulators across the country.
00:48:25,063 -- 00:48:25,763
And one of the questions
00:48:25,763 -- 00:48:27,265
I asked, and I asked this question,
00:48:27,265 -- 00:48:29,801
I said, do most of your problems
00:48:29,801 -- 00:48:33,638
happen in small brokerages or big brokerages?
00:48:33,638 -- 00:48:37,075
And and the answer was, the truth is, it's
00:48:37,075 -- 00:48:38,176
it's even across the board
00:48:38,176 -- 00:48:40,711
because if you run a small brokerage,
00:48:40,711 -- 00:48:43,181
you have small brokerage issues, right?
00:48:43,181 -- 00:48:45,683
You've got a principal broker who's doing the payroll
00:48:45,683 -- 00:48:47,018
compliance running, you know,
00:48:47,018 -- 00:48:48,619
running their own transactions,
00:48:48,619 -- 00:48:50,221
trying to grow their business.
00:48:50,221 -- 00:48:52,023
And then you and then you have a situation
00:48:52,023 -- 00:48:53,558
where you have a large brokerage, where you have
00:48:53,558 -- 00:48:55,259
maybe shareholders and,
00:48:55,259 -- 00:49:00,064
and the political issues and undue influence and, you know,
00:49:00,064 -- 00:49:01,232
the bottom line is more important
00:49:01,232 -- 00:49:02,333
than compliance and all sorts.
00:49:02,333 -- 00:49:05,736
So I think every brokerage has its challenges and issues.
00:49:05,736 -- 00:49:06,771
And I think as a regulator,
00:49:06,771 -- 00:49:09,607
it makes it very difficult for these guys, which is
00:49:09,607 -- 00:49:11,342
how do you tailor the
00:49:11,342 -- 00:49:14,579
the regulation to make sure that that you move everybody
00:49:14,579 -- 00:49:18,883
from the continuum along so that we're all behaving well.
00:49:18,883 -- 00:49:19,784
And it's a tough thing, right?
00:49:19,784 -- 00:49:20,251
I think, you know,
00:49:20,251 -- 00:49:22,820
the struggles of a small brokerage is very different
00:49:22,820 -- 00:49:24,422
from a struggles of a large brokerage
00:49:24,422 -- 00:49:25,656
where you have 170 agents.
00:49:26,791 -- 00:49:28,125
Where you have structure in place.
00:49:28,125 -- 00:49:30,061
So it's a really tricky thing.
00:49:30,061 -- 00:49:32,730
So I think, you know, that
00:49:32,730 -- 00:49:36,133
conduct culture, the compliance,
00:49:36,133 -- 00:49:37,768
starting from the beginning becomes really,
00:49:37,768 -- 00:49:39,670
really important because, you know, as
00:49:39,670 -- 00:49:41,606
you know, these things are legacy things.
00:49:41,606 -- 00:49:43,641
And if you have a legacy that starts off
00:49:43,641 -- 00:49:45,276
as being a bit of a shady brokerage,
00:49:45,276 -- 00:49:47,678
then sometimes that's that's hard to shake.
00:49:47,678 -- 00:49:48,813
as you as you grow out,
00:49:48,813 -- 00:49:52,416
so do the right thing from the beginning.
00:49:52,416 -- 00:49:55,886
Great way to end that discussion.
00:49:55,886 -- 00:49:56,887
Thank you, panelists.
00:49:56,887 -- 00:49:58,522
That was a really robust discussion
00:49:58,522 -- 00:50:00,691
on a very important topic.
00:50:00,691 -- 00:50:01,792
At this point,
00:50:01,792 -- 00:50:05,029
we're going to get some questions from the virtual audience
00:50:05,029 -- 00:50:08,399
or even our folks here that are plugged into the app.
00:50:08,399 -- 00:50:11,235
so we will ask you some questions from the audience
00:50:11,235 -- 00:50:13,037
as soon as they pop up on my screen here.
00:50:14,238 -- 00:50:15,339
Screen is white.
00:50:15,339 -- 00:50:17,074
The screen is white.
00:50:17,074 -- 00:50:20,044
Takes a few seconds and you go
00:50:20,044 -- 00:50:22,680
anonymous. Anonymous.
00:50:22,680 -- 00:50:26,817
Here we go. Anonymous. They're scared.
00:50:26,817 -- 00:50:30,554
FSRA, what are the key leadership characteristics
00:50:30,554 -- 00:50:33,324
that a principal, broker, principal, representative
00:50:33,324 -- 00:50:36,327
and leadership should have to support
00:50:36,327 -- 00:50:38,696
a strong conduct culture?
00:50:38,696 -- 00:50:42,700
That is a great question.
00:50:42,700 -- 00:50:45,002
I would say two main things.
00:50:45,002 -- 00:50:47,204
One is integrity.
00:50:47,204 -- 00:50:50,808
I know a lot of people will say, oh, what is integrity?
00:50:50,808 -- 00:50:52,409
Integrity, you know,
00:50:52,409 -- 00:50:54,078
you can really see from
00:50:54,078 -- 00:50:59,517
is that, you know, customer centric and understanding where
00:50:59,517 -- 00:51:00,951
you, as a principal broker
00:51:00,951 -- 00:51:02,920
should be placed in a conflict situation
00:51:02,920 -- 00:51:04,522
and be able to remove yourself.
00:51:04,522 -- 00:51:06,657
So integrity is really important.
00:51:06,657 -- 00:51:11,662
Second thing that we look for is experience and competence.
00:51:12,229 -- 00:51:16,400
We, you know, sometimes the title principal broker
00:51:16,400 -- 00:51:18,602
could seem big, and some,
00:51:18,602 -- 00:51:19,270
younger folks
00:51:19,270 -- 00:51:20,938
may get attached,
00:51:20,938 -- 00:51:22,273
you know, attracted to the title
00:51:22,273 -- 00:51:24,975
and want to be a principal broker.
00:51:24,975 -- 00:51:26,910
But we from our perspective, as you know,
00:51:26,910 -- 00:51:27,645
principal brokers
00:51:27,645 -- 00:51:31,282
do need to have that experience and the competence
00:51:31,282 -- 00:51:33,217
they got to understand,
00:51:33,217 -- 00:51:35,753
the sector, they got to understand the business challenges.
00:51:35,753 -- 00:51:40,324
They got to understand the regulatory requirements.
00:51:40,324 -- 00:51:41,892
They got to understand the customer.
00:51:41,892 -- 00:51:46,797
So, you know, having that competence and having experience,
00:51:48,065 -- 00:51:51,802
will be really important and being,
00:51:51,802 -- 00:51:54,038
I would say, also not having the courage
00:51:54,038 -- 00:51:55,806
to do the right things
00:51:55,806 -- 00:51:57,307
and having the courage to acknowledge
00:51:57,307 -- 00:52:00,711
that or maybe this is a new area I need, I need more,
00:52:00,711 -- 00:52:03,414
I need more education and more information
00:52:03,414 -- 00:52:05,482
and go seek help.
00:52:05,482 -- 00:52:06,750
Do any of the panelists
00:52:06,750 -- 00:52:11,755
have any views on what brokerages need to do to support
00:52:12,089 -- 00:52:13,257
a principal broker
00:52:13,257 -- 00:52:17,394
in making the right decisions and making strong,
00:52:17,394 -- 00:52:19,763
conduct decisions in their day to day
00:52:19,763 -- 00:52:21,698
work, especially if, for example,
00:52:21,698 -- 00:52:24,034
they may not be an owner
00:52:24,034 -- 00:52:27,671
or a partner in the, in the brokerage.
00:52:27,671 -- 00:52:32,009
Well, I would suggest that one thing that no regulator
00:52:32,009 -- 00:52:34,444
and no principal broker,
00:52:34,444 -- 00:52:39,650
no compliance officer can easily manage, is bad intentions.
00:52:40,417 -- 00:52:43,687
People start from a framework of bad intentions
00:52:43,687 -- 00:52:46,690
or become reckless and crazy in their
00:52:46,690 -- 00:52:48,025
approach to the business.
00:52:49,960 -- 00:52:53,230
It only tends to come out later.
00:52:53,230 -- 00:52:54,431
That just means
00:52:54,431 -- 00:52:57,968
that the management of the brokerage has to be vigilant,
00:52:57,968 -- 00:53:01,438
has to care about what they're seeing in social media
00:53:01,438 -- 00:53:03,540
that the agent brokers putting out.
00:53:03,540 -- 00:53:06,076
They have to think about what they're seeing.
00:53:06,076 -- 00:53:08,345
But, you know,
00:53:08,345 -- 00:53:10,614
I'm a guy who actually talks to reporters
00:53:10,614 -- 00:53:11,748
from time to time.
00:53:11,748 -- 00:53:16,753
And the thing that I have to constantly remind them is that
00:53:17,087 -- 00:53:19,556
bad intentions are not something
00:53:19,556 -- 00:53:21,558
a regulator can easily control.
00:53:21,558 -- 00:53:23,994
If somebody sets out to do wrong,
00:53:23,994 -- 00:53:25,562
it's also sometimes the principal broker,
00:53:25,562 -- 00:53:26,830
hopefully it's not the principal broker
00:53:26,830 -- 00:53:31,835
is doing wrong, but, it's, it's not as easy as people think.
00:53:32,202 -- 00:53:33,236
It's hard.
00:53:33,236 -- 00:53:36,440
And it just means that vigilance
00:53:36,440 -- 00:53:38,475
has to be the watchword of what you do.
00:53:38,475 -- 00:53:41,845
Because those who set out to do wrong,
00:53:41,845 -- 00:53:43,980
they'll do some wrong before they finally get caught.
00:53:43,980 -- 00:53:45,649
And that's reality.
00:53:47,584 -- 00:53:48,518
And hopefully someone will
00:53:48,518 -- 00:53:51,455
use the whistleblower provision to report them.
00:53:51,455 -- 00:53:53,957
Just saying.
00:53:53,957 -- 00:53:57,160
Any other questions from the crowd?
00:53:57,160 -- 00:53:58,495
There we go.
00:53:58,495 -- 00:53:59,329
Anonymous.
00:53:59,329 -- 00:54:02,165
It's a question for Antoinette.
00:54:02,165 -- 00:54:03,734
As a financial institution
00:54:03,734 -- 00:54:06,036
that deals with brokers and agents.
00:54:06,036 -- 00:54:06,770
Bad actors
00:54:06,770 -- 00:54:08,505
show up on occasion
00:54:08,505 -- 00:54:10,073
other than internally placing
00:54:10,073 -- 00:54:12,242
these brokers and agents on caution.
00:54:12,242 -- 00:54:16,279
What other recourses do FI’s have on reporting
00:54:16,279 -- 00:54:21,284
improper activity and what is the right course of action?
00:54:23,019 -- 00:54:25,155
So thank you for this question.
00:54:25,155 -- 00:54:26,189
It does
00:54:26,189 -- 00:54:29,726
give me comfort that there seems to be an interest
00:54:29,726 -- 00:54:31,595
in reporting those to us.
00:54:31,595 -- 00:54:32,662
So there are,
00:54:32,662 -- 00:54:34,431
there are right now,
00:54:34,431 -- 00:54:36,099
I would say two main ways
00:54:36,099 -- 00:54:38,902
that this information can be reported to us.
00:54:38,902 -- 00:54:41,004
We just talked about the whistleblower program,
00:54:41,004 -- 00:54:42,439
where you can,
00:54:42,439 -- 00:54:45,108
you know, submit that information through there.
00:54:45,108 -- 00:54:47,210
The other channel is our regular
00:54:47,210 -- 00:54:50,280
complaints channel, where you can, you know,
00:54:50,280 -- 00:54:52,148
send in complaints.
00:54:52,148 -- 00:54:55,051
There will be a form where you can outline,
00:54:55,051 -- 00:54:56,653
you know, what are the observation?
00:54:56,653 -- 00:55:00,290
What are the information you've collected that suggest
00:55:00,290 -- 00:55:02,192
there may be misconduct?
00:55:02,192 -- 00:55:04,661
And that way we will come back to you
00:55:04,661 -- 00:55:06,596
and gather information so that we
00:55:06,596 -- 00:55:08,898
we can get to the bottom of it. Are there misconduct?
00:55:08,898 -- 00:55:09,699
Are there breaches?
00:55:09,699 -- 00:55:12,869
And then we can, we can address them accordingly.
00:55:14,170 -- 00:55:15,939
Good stuff.
00:55:15,939 -- 00:55:20,944
Any other questions?
00:55:22,078 -- 00:55:22,846
Here we go.
00:55:22,846 -- 00:55:23,780
Another anonymous.
00:55:23,780 -- 00:55:27,684
Anonymous is active in this, in this session.
00:55:27,684 -- 00:55:30,887
Have you discovered or used any best practices
00:55:30,887 -- 00:55:34,224
for automating good conduct so using tech.
00:55:34,224 -- 00:55:37,627
Are there easier ways to automate processes
00:55:37,627 -- 00:55:41,331
for your agents and brokers that lead to better outcomes
00:55:41,331 -- 00:55:44,334
and more compliant outcomes?
00:55:44,334 -- 00:55:46,736
So I'll take the first stab at this.
00:55:46,736 -- 00:55:49,372
I think,
00:55:49,372 -- 00:55:54,377
100% using some level of technology makes,
00:55:57,614 -- 00:55:59,949
makes fraud easier and sometimes harder.
00:55:59,949 -- 00:56:01,151
So it's a two pronged approach.
00:56:01,151 -- 00:56:05,422
So the way I say this is, is I mentioned earlier,
00:56:05,422 -- 00:56:07,524
with, with all this advent of technology,
00:56:07,524 -- 00:56:10,560
there are document portals, there is,
00:56:10,560 -- 00:56:11,895
tracking of documentation
00:56:11,895 -- 00:56:15,465
coming from customer directly to the broker.
00:56:15,465 -- 00:56:18,468
The form of those documents coming through are captured.
00:56:18,468 -- 00:56:20,236
You can see what happened to the documentation
00:56:20,236 -- 00:56:21,304
as it came through.
00:56:21,304 -- 00:56:24,808
So if you are interested in being a bad actor,
00:56:24,808 -- 00:56:26,609
then maybe being a part of a brokerage
00:56:26,609 -- 00:56:27,977
that has lots of technology
00:56:27,977 -- 00:56:29,579
becomes a little bit more difficult.
00:56:29,579 -- 00:56:31,147
Or you're gonna have to step up your game
00:56:31,147 -- 00:56:34,784
and play different games to, to game the game.
00:56:34,784 -- 00:56:35,718
There's all sorts of things.
00:56:35,718 -- 00:56:37,053
You know, I remember,
00:56:37,053 -- 00:56:37,687
ten years ago,
00:56:37,687 -- 00:56:40,924
we put a, a mechanism within our, our compliance department
00:56:40,924 -- 00:56:42,091
where we could actually look up,
00:56:43,059 -- 00:56:44,360
employers.
00:56:44,360 -- 00:56:45,261
So I might look
00:56:45,261 -- 00:56:50,600
up Sadiq and I might put in, PetSmart as an employer.
00:56:50,600 -- 00:56:52,769
And if Sadiq, happens to have 4
00:56:52,769 -- 00:56:56,072
or 5 customers with PetSmart as employer,
00:56:56,072 -- 00:56:58,107
that might raise a bit of a red flag to me, that
00:56:58,107 -- 00:57:01,244
maybe some of these employment letters are not legitimate.
00:57:01,244 -- 00:57:02,745
Maybe they're fraudulent.
00:57:02,745 -- 00:57:04,847
Because what is the likelihood that Sadiq’s done
00:57:04,847 -- 00:57:07,717
five transactions for employees of PetSmart?
00:57:07,717 -- 00:57:09,652
So, and then, and then you can look at them and go,
00:57:09,652 -- 00:57:13,523
the job letters are a little bit off.
00:57:13,523 -- 00:57:15,758
And I think with the advent of,
00:57:15,758 -- 00:57:16,959
open banking
00:57:16,959 -- 00:57:19,195
and with better sharing of information
00:57:19,195 -- 00:57:20,596
with CRA and things like that,
00:57:20,596 -- 00:57:21,698
I think we'll get to a place
00:57:21,698 -- 00:57:24,634
where a lot of this becomes a lot more difficult to do.
00:57:25,802 -- 00:57:27,837
But like anything, you know, technology evolve.
00:57:27,837 -- 00:57:30,039
And as much as we're leveraging
00:57:30,039 -- 00:57:32,408
good technology, the bad actors are also leveraging it
00:57:32,408 -- 00:57:33,309
to do what they need to do.
00:57:33,309 -- 00:57:36,279
So I think at the end of the game, it's just a race,
00:57:36,279 -- 00:57:37,647
but I do think the technology,
00:57:37,647 -- 00:57:39,382
it will play a bigger role
00:57:39,382 -- 00:57:41,684
in making sure that we all behave well.
00:57:41,684 -- 00:57:43,419
And if you do choose to play,
00:57:43,419 -- 00:57:45,722
nefariously then you'll go somewhere else to do it.
00:57:45,722 -- 00:57:47,523
Just, you know, they were all family members.
00:57:47,523 -- 00:57:49,425
Yes, of course I know.
00:57:49,425 -- 00:57:52,128
That's why he has his own brokerage now.
00:57:52,128 -- 00:57:53,863
I will say, though, that linkage
00:57:53,863 -- 00:57:55,031
to CRA for income
00:57:55,031 -- 00:58:00,036
verification will put a serious, serious dent
00:58:00,369 -- 00:58:03,473
in any fraudsters ability to do that stuff.
00:58:03,473 -- 00:58:05,374
So that's something we gotta have.
00:58:05,374 -- 00:58:06,442
We just keep pushing for it.
00:58:06,442 -- 00:58:08,744
We don't. We never stop. Just keep after it.
00:58:08,744 -- 00:58:09,879
Someday it'll happen.
00:58:10,880 -- 00:58:12,381
Someday.
00:58:12,381 -- 00:58:12,849
Right?
00:58:12,849 -- 00:58:15,852
So this is an idea that some have suggested.
00:58:15,852 -- 00:58:19,789
This technology can be used to analyze a lot of data.
00:58:19,789 -- 00:58:23,092
Right. You can use that to analyze all that anomaly.
00:58:23,092 -- 00:58:24,994
Why is this particular agent
00:58:24,994 -- 00:58:27,129
just seems to be doing so much more do
00:58:27,129 -- 00:58:29,732
when he or she is the youngest,
00:58:29,732 -- 00:58:34,203
like I think identifying that anomaly that is just
00:58:34,203 -- 00:58:36,405
not, seem
00:58:36,405 -- 00:58:38,841
unreasonable, is a way to help,
00:58:38,841 -- 00:58:40,977
you know, help you to target
00:58:40,977 -- 00:58:44,080
where you need to spend your time on.
00:58:44,080 -- 00:58:47,583
It's something that is not a secret.
00:58:47,583 -- 00:58:48,951
As a risk based regulator,
00:58:48,951 -- 00:58:51,254
we, we do that too, is try to look for anomaly.
00:58:51,254 -- 00:58:54,757
Look at where seems to be the highest risk area.
00:58:54,757 -- 00:58:56,626
and then it help us target our resources.
00:58:56,626 -- 00:59:00,630
So that's definitely, is what some has told me this
00:59:00,630 -- 00:59:03,165
as use of technology and automation.
00:59:05,334 -- 00:59:05,635
Okay.
00:59:05,635 -- 00:59:09,639
So I think this might be our last question. We'll see.
00:59:09,639 -- 00:59:11,674
When I try to implement
00:59:11,674 -- 00:59:13,309
a new compliance measure
00:59:13,309 -- 00:59:15,978
standard document or other process,
00:59:15,978 -- 00:59:16,645
my agents
00:59:16,645 -- 00:59:19,148
push back saying they're independent contractors,
00:59:19,148 -- 00:59:22,118
so I shouldn't be so controlling or monitoring.
00:59:22,118 -- 00:59:24,553
How do we bridge the gap in understanding
00:59:24,553 -- 00:59:26,522
that supervision and compliance
00:59:26,522 -- 00:59:29,291
expectations are no different, regardless
00:59:29,291 -- 00:59:31,861
of whether they are salaried or contractors?
00:59:31,861 -- 00:59:32,995
I'll start with that one.
00:59:32,995 -- 00:59:36,532
When I think I've heard that many times.
00:59:36,532 -- 00:59:39,301
you know, so,
00:59:39,301 -- 00:59:42,938
yes, you know, mortgage or agent broker will say, you know, yes I’m an independent contractor,
00:59:42,938 -- 00:59:45,875
but you cannot operate without being under a brokerage.
00:59:45,875 -- 00:59:50,412
So the way I approach this, my sandbox, my rules. Okay.
00:59:50,412 -- 00:59:53,115
So reality is, if you don't like it,
00:59:53,115 -- 00:59:54,850
by all means, there's the door.
00:59:54,850 -- 00:59:57,386
You just show yourself out. You're independent, you can go.
00:59:57,386 -- 01:00:00,222
But the reality, the approach that I,
01:00:00,222 -- 01:00:02,691
I take with, it's showing them is like.
01:00:02,691 -- 01:00:06,061
And I actually I love that FSRA has the enforcement page,
01:00:06,061 -- 01:00:09,565
I weekly will go on there and pull up.
01:00:09,565 -- 01:00:12,468
Where do you think that's new and send it out to my team.
01:00:12,468 -- 01:00:13,702
And here is
01:00:13,702 -- 01:00:16,639
and I'll relate it to why we have a process in place.
01:00:16,639 -- 01:00:19,375
Here's something that somebody did wrong
01:00:19,375 -- 01:00:21,744
FSRA, you know, took action. Here's the penalty.
01:00:21,744 -- 01:00:25,748
Here's $140,000 in penalty that they got hit with.
01:00:25,748 -- 01:00:28,651
And here's how our documentation or our process
01:00:28,651 -- 01:00:32,621
or our policy protects you from being on that page.
01:00:32,621 -- 01:00:34,456
And that's how I related back to them.
01:00:34,456 -- 01:00:35,858
And in the beginning
01:00:35,858 -- 01:00:38,160
it was always that kind of like, well, you know,
01:00:38,160 -- 01:00:40,329
I want to run my business how I want to run my business.
01:00:40,329 -- 01:00:40,930
No problem.
01:00:40,930 -- 01:00:42,131
By all means, go get your mortgage,
01:00:42,131 -- 01:00:43,832
your principal broker's license,
01:00:43,832 -- 01:00:46,302
go open your own brokerage and go to town on it.
01:00:46,302 -- 01:00:48,370
But if you're going to be part of my brokerage,
01:00:48,370 -- 01:00:49,471
this is how we're going to do it.
01:00:49,471 -- 01:00:51,440
And here's the reason why.
01:00:51,440 -- 01:00:53,809
I'm taking this extra step
01:00:53,809 -- 01:00:55,077
to protect you
01:00:55,077 -- 01:00:58,514
and your business, so that you are going to be, as Ron
01:00:58,514 -- 01:01:00,749
mentioned, you know, it's longevity.
01:01:00,749 -- 01:01:03,085
You're going to be in this business longer
01:01:03,085 -- 01:01:05,688
because of these processes, because of these steps,
01:01:05,688 -- 01:01:07,890
because of the standardization of documentation
01:01:07,890 -- 01:01:10,125
that make sure you don't miss something
01:01:10,125 -- 01:01:11,293
when dealing with a client.
01:01:12,394 -- 01:01:13,529
I guess my first comment would be
01:01:13,529 -- 01:01:15,564
if a principal broker is the person
01:01:15,564 -- 01:01:17,299
asking that question,
01:01:17,299 -- 01:01:21,770
like the appropriate comment is grow a spine.
01:01:21,770 -- 01:01:23,572
Nothing else
01:01:23,572 -- 01:01:25,240
relevant after that.
01:01:25,240 -- 01:01:27,943
So it's funny because you know,
01:01:27,943 -- 01:01:30,746
one thing that I used to deal with all the time was brokers
01:01:30,746 -- 01:01:32,347
and agents
01:01:32,347 -- 01:01:36,151
wanted to advertise themselves as their own entity.
01:01:36,151 -- 01:01:36,385
Right?
01:01:36,385 -- 01:01:37,820
They all have personal service corp.
01:01:37,820 -- 01:01:42,825
So, you know, it’s, it’s, Ron’s mortgages as an example.
01:01:42,991 -- 01:01:45,461
And I tell the story, I go years ago,
01:01:45,461 -- 01:01:48,831
I had an agent who wanted to go and create his own brand.
01:01:48,831 -- 01:01:49,531
And, you know,
01:01:49,531 -- 01:01:52,701
so he created a company, Ron’s Mortgages, Inc.,
01:01:52,701 -- 01:01:54,269
and he decided that he was going to put it
01:01:54,269 -- 01:01:58,307
on all his letterhead, including the brokerage letterhead.
01:01:58,307 -- 01:02:00,209
And one day they made a mistake
01:02:00,209 -- 01:02:03,445
on quoting the prepayment penalty
01:02:03,445 -- 01:02:05,514
and sure enough, a lawsuit occured
01:02:05,514 -- 01:02:09,451
So the simple reality was in this lawsuit,
01:02:09,451 -- 01:02:10,519
the brokerage was named
01:02:11,486 -- 01:02:13,689
Ron Butler was named as the agent.
01:02:13,689 -- 01:02:15,791
Butler Mortgages, Inc. was also named.
01:02:15,791 -- 01:02:17,125
But the problem was the,
01:02:17,125 -- 01:02:19,895
you know, insurance only covered the brokerage
01:02:19,895 -- 01:02:22,364
and the individual, but not this entity.
01:02:22,364 -- 01:02:25,000
So it was the most awkward situation
01:02:25,000 -- 01:02:27,736
because we had to go to court and discoveries,
01:02:27,736 -- 01:02:30,572
and the individual had to get his own lawyer
01:02:30,572 -- 01:02:33,108
to protect his corporate entity.
01:02:33,108 -- 01:02:33,809
Yet we had an,
01:02:33,809 -- 01:02:34,676
you know, person
01:02:34,676 -- 01:02:36,078
representing the individual
01:02:36,078 -- 01:02:37,212
in the brokerage
01:02:37,212 -- 01:02:39,448
of which at the end of day, we came up with a settlement
01:02:39,448 -- 01:02:41,984
of which everybody paid a certain sum.
01:02:41,984 -- 01:02:43,385
But it's a very awkward scenario.
01:02:43,385 -- 01:02:46,188
And, and I tell these stories because to me, it's like,
01:02:46,188 -- 01:02:47,456
if you want to go down this road
01:02:47,456 -- 01:02:49,391
and you want to do these sorts of things,
01:02:49,391 -- 01:02:51,159
and this is a consequence, like you can
01:02:51,159 -- 01:02:52,327
you're going to be named in this suit
01:02:52,327 -- 01:02:54,329
and you have absolutely no coverage
01:02:54,329 -- 01:02:55,430
and you're going to get screwed.
01:02:55,430 -- 01:02:57,432
So why do you want to go down this road?
01:02:57,432 -- 01:02:58,367
So, you know, it's funny
01:02:58,367 -- 01:03:01,169
but you know, to this, you know, to Ron's point
01:03:01,169 -- 01:03:02,938
to grow a spine,
01:03:02,938 -- 01:03:05,440
it is very true that I think as the principal broker,
01:03:05,440 -- 01:03:07,843
you have to have, you know,
01:03:07,843 -- 01:03:09,277
I think Antoinette said this, you know,
01:03:09,277 -- 01:03:10,345
you need to do the right thing.
01:03:10,345 -- 01:03:11,380
You need to have integrity,
01:03:11,380 -- 01:03:14,082
and you need to make sure that the things that you're doing
01:03:14,082 -- 01:03:16,151
is in the best interest of the entity
01:03:16,151 -- 01:03:17,686
in which you're serving,
01:03:17,686 -- 01:03:19,388
and not to fall into the trap
01:03:19,388 -- 01:03:21,056
of doing what your agent wants to do,
01:03:21,056 -- 01:03:23,625
because they're a big producer and they call the shots.
01:03:25,694 -- 01:03:27,562
Which...Oh, sorry, go ahead, Kerrie.
01:03:27,562 -- 01:03:28,930
Sorry, I'll add into that.
01:03:28,930 -- 01:03:30,832
Obviously, we deal with a lot of agents
01:03:30,832 -- 01:03:34,703
and brokers in different provinces as well.
01:03:34,703 -- 01:03:39,708
Courage is another key word that comes to mind for me.
01:03:40,408 -- 01:03:43,578
I'm not a very scary person, but I can be.
01:03:43,578 -- 01:03:46,848
And, you know, we approach
01:03:46,848 -- 01:03:50,085
we approach the licensing renewal
01:03:50,085 -- 01:03:55,090
as an opportunity for an agent to stay or go
01:03:55,390 -- 01:03:58,093
instead of, I really do like Sadiq's approach.
01:03:58,093 -- 01:03:59,427
And I was sending out,
01:03:59,427 -- 01:04:03,031
FSRA communications or other principal brokers
01:04:03,031 -- 01:04:04,900
who are sharing information of a situation
01:04:04,900 -- 01:04:05,867
that they've gone through.
01:04:05,867 -- 01:04:06,735
You can,
01:04:06,735 -- 01:04:07,035
you know,
01:04:07,035 -- 01:04:10,539
you can send out the communications of the did
01:04:10,539 -- 01:04:15,210
you knows that this could happen or this has happened.
01:04:15,210 -- 01:04:19,648
I tend to use the annual renewals as an opportunity
01:04:19,648 -- 01:04:23,251
for me to interview the agents all over again,
01:04:23,251 -- 01:04:26,821
making sure that they are strong and stable
01:04:26,821 -- 01:04:28,123
and who they are as a body
01:04:28,123 -- 01:04:30,458
because they're actually a business in themselves,
01:04:30,458 -- 01:04:33,395
which is, you know, a smaller part of who we are.
01:04:33,395 -- 01:04:38,533
But I also use that time to communicate what's coming,
01:04:39,234 -- 01:04:39,534
right.
01:04:39,534 -- 01:04:41,636
What changes as Premier Mortgage Centre is
01:04:41,636 -- 01:04:44,639
going to be making within the brokerage.
01:04:44,639 -- 01:04:48,143
And it opens lines of communication for feedback,
01:04:48,143 -- 01:04:50,145
although I may not welcome any of it.
01:04:51,146 -- 01:04:53,415
It does keep the line of communication open,
01:04:53,415 -- 01:04:54,549
but it also gives the agent
01:04:54,549 -- 01:04:56,918
an opportunity to say,
01:04:56,918 -- 01:05:00,188
you know, I'm not interested in having to,
01:05:00,188 -- 01:05:02,057
you know, operate in this way
01:05:02,057 -- 01:05:03,258
moving forward and,
01:05:03,258 -- 01:05:05,293
and FSRA can back me up on this one.
01:05:05,293 -- 01:05:08,363
There are licenses that we don't renew. That's okay.
01:05:08,363 -- 01:05:09,364
It's okay.
01:05:09,364 -- 01:05:12,067
Sadiq and I were speaking about this earlier today.
01:05:12,067 -- 01:05:16,604
Where if there ever comes a time where I am more concerned
01:05:16,604 -- 01:05:19,040
and focused on your business than you are,
01:05:19,040 -- 01:05:20,842
then we have an improper imbalance,
01:05:20,842 -- 01:05:23,311
and it's time for us to part ways.
01:05:23,311 -- 01:05:23,511
Yeah.
01:05:23,511 -- 01:05:27,682
And just to add to Kerrie, like, you know, every year I do,
01:05:27,682 -- 01:05:28,650
at least once a year,
01:05:28,650 -- 01:05:30,952
I'll have a mandatory compliance meeting
01:05:30,952 -- 01:05:33,221
where everybody has to attend their
01:05:33,221 -- 01:05:34,923
they're given the two months notice.
01:05:34,923 -- 01:05:37,025
So whatever else you've got going on in your life,
01:05:37,025 -- 01:05:39,494
you better sort it out and be there.
01:05:39,494 -- 01:05:41,529
Because if you're not there,
01:05:41,529 -- 01:05:43,598
your license isn't getting renewed.
01:05:43,598 -- 01:05:46,835
And that's the meeting. And so next Monday is my meeting.
01:05:46,835 -- 01:05:49,671
And I bring everybody up to date on everything
01:05:49,671 -- 01:05:52,073
that's happening in the, in the,
01:05:52,073 -- 01:05:52,841
the brokerage
01:05:52,841 -- 01:05:55,410
where the direction we're going, all that good stuff
01:05:55,410 -- 01:05:57,812
and also anything new that we're implementing
01:05:57,812 -- 01:06:00,648
because of trends in the industry
01:06:00,648 -- 01:06:01,950
or things that we're seeing
01:06:01,950 -- 01:06:06,254
and again, that I have one for sure, every single year
01:06:06,254 -- 01:06:08,389
with my mandatory one, just coming up to renewal.
01:06:08,389 -- 01:06:10,091
And then I'll also, if needed,
01:06:10,091 -- 01:06:12,160
have other mandatory ones throughout the year
01:06:12,160 -- 01:06:14,128
if things are evolving a little bit faster,
01:06:14,128 -- 01:06:15,730
if there's more changes, regulatory
01:06:15,730 -- 01:06:17,565
or anything, I have to bring them up too.
01:06:17,565 -- 01:06:21,135
But the rule is, is if you don't attend this, you're gone
01:06:21,135 -- 01:06:23,504
because mandatory is mandatory,
01:06:23,504 -- 01:06:25,239
and if you don't like it, don't show up.
01:06:25,239 -- 01:06:27,842
But you're also not going to be part of this brokerage
01:06:27,842 -- 01:06:30,845
because I don't want that liability on my shoulders.
01:06:33,581 -- 01:06:35,750
So it looks like the last question
01:06:35,750 -- 01:06:37,151
Antoinette is for FSRA.
01:06:37,151 -- 01:06:39,220
FSRA is being put on the spot.
01:06:39,220 -- 01:06:41,923
Does FSRA have specific expectations
01:06:41,923 -- 01:06:44,592
or guidelines for compliance?
01:06:44,592 -- 01:06:47,528
How do brokerages know if their compliance procedures
01:06:47,528 -- 01:06:49,997
are being handed down to their agents or brokers,
01:06:49,997 -- 01:06:52,567
are meeting FSRA’s expectations?
01:06:52,567 -- 01:06:54,435
So we're doing a few things.
01:06:54,435 -- 01:06:58,673
I think some of you have heard us talked about this before.
01:06:58,673 -- 01:07:00,908
we are going to be putting out Guidance,
01:07:00,908 -- 01:07:04,045
for principal brokers and brokerages,
01:07:04,045 -- 01:07:04,979
just to set out
01:07:04,979 -- 01:07:06,047
what are the things
01:07:06,047 -- 01:07:09,517
that we would be expecting a principal broker
01:07:09,517 -- 01:07:10,318
to do,
01:07:10,318 -- 01:07:12,954
you know, from on boarding, training all the way
01:07:12,954 -- 01:07:16,958
to addressing compliance issues. So that's coming up.
01:07:16,958 -- 01:07:20,728
Other things that we are looking at doing more is,
01:07:20,728 -- 01:07:24,365
you know, communicating best practices.
01:07:24,365 -- 01:07:28,903
We have put out semiannual newsletters, starting
01:07:28,903 -- 01:07:31,139
maybe a couple of years ago. So that's going to continue.
01:07:31,139 -- 01:07:32,607
So there's going to be information
01:07:32,607 -- 01:07:34,575
there as we notice,
01:07:34,575 -- 01:07:36,944
best practices that came out from the sector.
01:07:36,944 -- 01:07:39,247
We want to share that with all of you.
01:07:39,247 -- 01:07:41,716
So that's another useful tool.
01:07:41,716 -- 01:07:44,352
Other things that we are going to do
01:07:44,352 -- 01:07:49,290
more going forward is through either webinars or training,
01:07:49,290 -- 01:07:54,128
to identify topics that may be of interest to the sector,
01:07:54,128 -- 01:07:55,897
to principal brokers.
01:07:55,897 -- 01:07:59,000
So if there are topics that you're interested
01:07:59,000 -- 01:08:00,234
in, do let us know.
01:08:00,234 -- 01:08:02,503
We will make sure that we find ways
01:08:02,503 -- 01:08:05,172
to address some of your questions.
01:08:05,172 -- 01:08:09,777
And, and you're going to hear more from us, about upcoming,
01:08:09,777 -- 01:08:13,147
training or webinars or sessions. Great.
01:08:14,115 -- 01:08:15,349
Chris, I know
01:08:15,349 -- 01:08:18,819
we're not allowed to do this, but I'll make the exception.
01:08:18,819 -- 01:08:21,522
Question for the market.
01:08:21,522 -- 01:08:22,390
What do you feel
01:08:22,390 -- 01:08:27,395
are challenges, with respect to the in our...
01:08:28,863 -- 01:08:31,032
Do you want to repeat the question
01:08:31,032 -- 01:08:32,033
for our audience?
01:08:32,033 -- 01:08:35,369
So from the audience, someone asked if,
01:08:35,369 -- 01:08:38,005
the industry participants can share with us
01:08:38,005 -- 01:08:41,876
what are some of the greatest challenges with implementing
01:08:41,876 -- 01:08:43,878
the new anti-money
01:08:43,878 -- 01:08:46,881
laundering terrorist financing requirements
01:08:46,881 -- 01:08:49,316
that FINTRAC has put in place?
01:08:49,316 -- 01:08:53,487
Okay, so I'll take that first. One element
01:08:53,487 -- 01:08:55,956
that is ridiculous.
01:08:55,956 -- 01:08:58,058
If you're doing a mortgage with a bank,
01:08:58,058 -- 01:09:02,897
you're doing a mortgage with CMHC, a lender.
01:09:02,897 -- 01:09:04,665
They have to meet all those compliance
01:09:04,665 -- 01:09:06,967
guidelines themselves.
01:09:06,967 -- 01:09:10,971
So we're actually just duplicating our efforts
01:09:10,971 -- 01:09:14,208
on 90% of the files. It's just pure duplication.
01:09:14,208 -- 01:09:16,744
It's a pure expense on the brokerage.
01:09:16,744 -- 01:09:22,183
Now, if FINTRAC had spent even 30 seconds
01:09:22,416 -- 01:09:25,419
doing rational consultation with the industry,
01:09:25,419 -- 01:09:27,688
they would have realized that
01:09:27,688 -- 01:09:30,958
you only need to track the private mortgage money.
01:09:30,958 -- 01:09:31,392
That's it.
01:09:31,392 -- 01:09:32,793
That's the only place,
01:09:32,793 -- 01:09:37,798
if every, if every other entity is doing this work already.
01:09:38,199 -- 01:09:40,768
Why I get the belt and suspenders idea.
01:09:40,768 -- 01:09:42,803
But please, it's too much.
01:09:42,803 -- 01:09:45,506
If we're, if it's, if the, if a bank,
01:09:45,506 -- 01:09:47,641
if the Bank of Nova Scotia and TD Bank
01:09:47,641 -- 01:09:50,844
can't report properly to FINTRAC,
01:09:50,844 -- 01:09:52,846
we're probably going to do a worse job. Right?
01:09:52,846 -- 01:09:54,648
So in the end,
01:09:54,648 -- 01:09:58,319
the private money needs to be meticulously reviewed,
01:09:58,319 -- 01:10:01,355
because that's where all the evil doing goes on
01:10:01,355 -- 01:10:04,525
is in the private space in terms of AML.
01:10:04,525 -- 01:10:06,894
And I've seen it, I've observed it.
01:10:06,894 -- 01:10:09,263
I've observed what some brokerages have done,
01:10:09,263 -- 01:10:10,998
but it's creating a whole regime
01:10:10,998 -- 01:10:13,200
to have us duplicate something
01:10:13,200 -- 01:10:16,570
that banks and CMHC lenders are doing already.
01:10:16,570 -- 01:10:19,606
It just never made any sense to me. Yeah.
01:10:19,606 -- 01:10:20,774
The other part of that, too, is
01:10:20,774 -- 01:10:22,810
I've had conversations with FINTRAC over it.
01:10:22,810 -- 01:10:26,280
Is that, you, the,
01:10:26,280 -- 01:10:29,049
they have not provided any details of
01:10:29,049 -- 01:10:31,118
how to report, when to report, how often report,
01:10:31,118 -- 01:10:33,020
what method of reporting, any of that.
01:10:33,020 -- 01:10:35,789
So it's like how will we how is a brokerage especially
01:10:36,924 -- 01:10:38,325
that to Ron's point,
01:10:38,325 -- 01:10:38,625
you know,
01:10:38,625 -- 01:10:40,594
when 90% of your business is institutional
01:10:40,594 -- 01:10:41,462
and they already
01:10:41,462 -- 01:10:42,730
have those processes in place,
01:10:42,730 -- 01:10:46,467
and we're now just duplicating efforts, for that other 10%.
01:10:46,467 -- 01:10:47,701
It's a big cost.
01:10:47,701 -- 01:10:51,405
And you still haven't provided any framework for
01:10:51,405 -- 01:10:52,973
how are we supposed to implement that?
01:10:52,973 -- 01:10:53,974
It's kind of like,
01:10:53,974 -- 01:10:55,676
I might as well just be shooting in the dark here,
01:10:55,676 -- 01:10:57,578
because how do I report that to you
01:10:57,578 -- 01:10:59,113
if you haven't given me a framework
01:10:59,113 -- 01:11:02,716
and a methodology and a format in which you want to see it.
01:11:02,716 -- 01:11:03,083
Right.
01:11:03,083 -- 01:11:04,585
And I think that's kind of the problem
01:11:04,585 -- 01:11:05,953
that brokerage people face
01:11:05,953 -- 01:11:10,757
until something systematic is put in place by FINTRAC.
01:11:10,757 -- 01:11:11,959
I think like most things, it's going to
01:11:11,959 -- 01:11:13,861
take time to, to flush out,
01:11:15,429 -- 01:11:15,896
you know,
01:11:15,896 -- 01:11:20,868
what brings me the biggest fear is if you look at the, AML,
01:11:20,868 -- 01:11:22,135
penalties have been levied
01:11:22,135 -- 01:11:24,938
so far, it brings a chill to my spine.
01:11:24,938 -- 01:11:26,273
And I'm thankful
01:11:26,273 -- 01:11:27,341
that I'm not in the business anymore
01:11:27,341 -- 01:11:29,676
from that perspective, because
01:11:29,676 -- 01:11:31,144
you know, there's real estate firms
01:11:31,144 -- 01:11:32,179
that have had big fines
01:11:32,179 -- 01:11:33,680
levied against them, like this stuff isn't,
01:11:33,680 -- 01:11:34,781
you know, $5,000 fine.
01:11:34,781 -- 01:11:38,652
This is like $50,000 like, this is big money.
01:11:38,652 -- 01:11:39,519
So, you know,
01:11:39,519 -- 01:11:41,488
I think to Ron's point, we don't quite understand
01:11:41,488 -- 01:11:42,356
how it's all going to work out
01:11:42,356 -- 01:11:44,791
because I think it's, to Ron's point,
01:11:44,791 -- 01:11:47,361
the truth is, is if you do an institutional transaction,
01:11:47,361 -- 01:11:49,029
then they're going to do the work anyways
01:11:49,029 -- 01:11:50,597
and they probably will do a better job than us.
01:11:50,597 -- 01:11:53,100
But if we're doing business with MICs and private lenders
01:11:53,100 -- 01:11:54,968
then we better get our act together
01:11:54,968 -- 01:11:56,303
and make sure we're doing the right thing.
01:11:56,303 -- 01:11:57,537
And, you know, to some extent,
01:11:57,537 -- 01:12:00,007
I do think that the industry probably has
01:12:00,007 -- 01:12:02,109
turned a blind eye because the truth is, is
01:12:02,109 -- 01:12:03,176
you might have sent the deal to
01:12:03,176 -- 01:12:04,478
Home Trust or Equitable Bank
01:12:05,479 -- 01:12:08,115
and got a list of requirements that came back,
01:12:08,115 -- 01:12:09,416
said, oh, I don't need to provide this.
01:12:09,416 -- 01:12:10,817
If I go to a MIC or private lender.
01:12:10,817 -- 01:12:12,319
And off it went, and,
01:12:12,319 -- 01:12:14,388
and all those banks and lenders were doing
01:12:14,388 -- 01:12:15,756
was following AML rules.
01:12:15,756 -- 01:12:18,125
So all we've done is we leveled the plain field
01:12:18,125 -- 01:12:20,560
and we all have to do the right level of due
01:12:20,560 -- 01:12:23,230
diligence, especially on private and MIC transactions.
01:12:23,230 -- 01:12:24,765
So for principal brokers
01:12:24,765 -- 01:12:26,800
who've got agents playing in that space,
01:12:26,800 -- 01:12:30,070
I think the responsibility is growing leaps and bounds.
01:12:30,070 -- 01:12:30,937
And it's going to be it's
01:12:30,937 -- 01:12:32,005
going to take some time before
01:12:32,005 -- 01:12:33,740
people have all sort of graduated
01:12:33,740 -- 01:12:36,576
to the level of expectation because,
01:12:36,576 -- 01:12:36,777
you know,
01:12:36,777 -- 01:12:38,845
there's a lot of MICs out there that are very small,
01:12:38,845 -- 01:12:42,115
and I don't know that I trust them to do all the work.
01:12:42,115 -- 01:12:43,283
But there's some bigger ones that,
01:12:43,283 -- 01:12:44,451
that I have a better relationship with.
01:12:44,451 -- 01:12:46,319
But those are the kind of things, I think,
01:12:46,319 -- 01:12:47,287
we're just now at a point
01:12:47,287 -- 01:12:49,122
where we can't rely on somebody else.
01:12:49,122 -- 01:12:50,524
We're just gonna have to do the work ourselves,
01:12:50,524 -- 01:12:53,193
especially on MIC and private transactions.
01:12:56,163 -- 01:13:00,534
So I think we're at our final last question.
01:13:00,534 -- 01:13:03,470
It seems like everything is on the PB.
01:13:03,470 -- 01:13:05,672
What about other management or directors
01:13:05,672 -- 01:13:07,340
or officers of the corporation?
01:13:07,340 -- 01:13:11,578
What is their responsibility and liability?
01:13:11,578 -- 01:13:13,213
Can I take this one?
01:13:13,213 -- 01:13:14,981
That is a great question.
01:13:14,981 -- 01:13:20,453
And I think is a, is a misunderstanding of the sector.
01:13:20,554 -- 01:13:22,956
There are in fact liability provision
01:13:22,956 -- 01:13:26,059
within our statute that deals with
01:13:26,059 -- 01:13:27,994
all directors and officers.
01:13:27,994 -- 01:13:29,863
And one of the things that we're attempting
01:13:29,863 -- 01:13:30,297
to do
01:13:30,297 -- 01:13:34,834
with our upcoming Guidance is to outline, you know,
01:13:34,834 -- 01:13:40,106
what are our expectation on management, of the brokerage,
01:13:40,774 -- 01:13:43,510
in addition to the principal brokers,
01:13:43,510 -- 01:13:44,978
especially in cases
01:13:44,978 -- 01:13:47,080
where the principal broker is not an owner,
01:13:47,080 -- 01:13:50,250
they don't have direct control over the whole business.
01:13:50,250 -- 01:13:53,853
So that's where we want to emphasize that they play a role.
01:13:53,853 -- 01:13:57,090
They have a responsibility to make sure that
01:13:57,090 -- 01:13:58,391
whoever they appoint
01:13:58,391 -- 01:14:01,361
as the principal broker have the capability
01:14:01,361 -- 01:14:02,796
and the capacity to do it,
01:14:02,796 -- 01:14:06,700
they also have the responsibility to make sure that,
01:14:06,700 -- 01:14:09,469
they are supporting their principal broker
01:14:09,469 -- 01:14:11,471
so that they can do the job effectively.
01:14:11,471 -- 01:14:12,806
So we're going to clarify that,
01:14:12,806 -- 01:14:15,341
because that, that is an excellent question.
01:14:15,341 -- 01:14:17,177
And that was also one of the reason why
01:14:17,177 -- 01:14:19,612
it is such a difficult job for principal brokers.
01:14:21,414 -- 01:14:21,848
Great.
01:14:21,848 -- 01:14:24,918
Well, we have almost run out of time.
01:14:24,918 -- 01:14:29,055
Thank you very much, panel. This was really great
01:14:29,055 -- 01:14:31,024
content. Great discussion.
01:14:31,024 -- 01:14:32,992
I hope the folks online enjoyed it
01:14:32,992 -- 01:14:35,295
as much as the folks that are here.
01:14:35,295 -- 01:14:37,530
I do want to take a few moments
01:14:37,530 -- 01:14:39,432
because my licensing colleagues
01:14:39,432 -- 01:14:42,068
gave me a bit of a poke earlier.
01:14:42,068 -- 01:14:45,271
And they said, you know, you got to get this message out.
01:14:45,271 -- 01:14:46,239
Want to remind
01:14:46,239 -- 01:14:48,174
everyone that the deadline to renew
01:14:48,174 -- 01:14:51,511
your license is approaching really fast.
01:14:51,511 -- 01:14:53,279
So if you want to keep arranging
01:14:53,279 -- 01:14:55,281
private mortgages for your clients,
01:14:55,281 -- 01:14:57,650
you need to have completed two things.
01:14:57,650 -- 01:14:59,819
One, your private mortgage course
01:14:59,819 -- 01:15:02,589
and two, your continuing education course.
01:15:02,589 -- 01:15:03,223
So please
01:15:03,223 -- 01:15:05,458
remember that you need to do these things before
01:15:05,458 -- 01:15:08,261
renewing your license by the March 31st deadline.
01:15:09,729 -- 01:15:14,734
So thank you again for taking the time to be with us today.
01:15:14,968 -- 01:15:16,769
Thank you for the excellent discussion
01:15:16,769 -- 01:15:18,338
that the panel gave us.
01:15:18,338 -- 01:15:21,241
I hope that you found this session helpful.
01:15:21,241 -- 01:15:21,641
Please
01:15:21,641 -- 01:15:24,377
do take some time to fill in the conference
01:15:24,377 -- 01:15:26,946
survey on the conference website.
01:15:26,946 -- 01:15:29,315
It's under the heading of feedback,
01:15:29,315 -- 01:15:31,985
And it's on the lobby homepage.
01:15:31,985 -- 01:15:34,187
After this session concludes,
01:15:34,187 -- 01:15:37,790
there will be more discussion and more importantly,
01:15:37,790 -- 01:15:41,227
some light food and a cash bar out in the lobby.
01:15:41,227 -- 01:15:43,463
So hopefully we can continue the conversation
01:15:43,463 -- 01:15:45,798
out there in the interim.
01:15:45,798 -- 01:15:47,000
Thank you again, folks.
01:15:47,000 -- 01:15:48,568
This was a really great conversation.
01:15:48,568 -- 01:15:50,169
I think everyone that's here
01:15:50,169 -- 01:15:53,806
got something, different and exciting out of it. Thank you.
01:15:53,806 -- 01:15:54,440
Thank you, thank you.
00:00:05,004 -- 00:00:06,172
Welcome to
00:00:06,172 -- 00:00:07,774
our Life and Health Insurance
00:00:07,774 -- 00:00:11,678
breakout at the 2024 FSRA Exchange.
00:00:11,678 -- 00:00:13,346
My name is Erica Hiemstra.
00:00:13,346 -- 00:00:16,950
I'm the Head of Insurance Conduct for FSRA.
00:00:16,950 -- 00:00:21,287
and I'm your moderator for today's session.
00:00:21,287 -- 00:00:24,991
Thank you so much for joining us here today in the room
00:00:24,991 -- 00:00:26,826
as well as virtually.
00:00:26,826 -- 00:00:30,997
And, I will just pause, just for a nod from our
00:00:30,997 -- 00:00:32,132
tech crew at the back.
00:00:32,132 -- 00:00:35,468
Are we going, were live virtually as well?
00:00:35,468 -- 00:00:39,105
Okay, so I'm getting the thumbs up, so we'll just proceed.
00:00:39,105 -- 00:00:40,773
Before we begin,
00:00:40,773 -- 00:00:41,975
I wondered why they gave us
00:00:41,975 -- 00:00:42,876
just ten minutes
00:00:42,876 -- 00:00:44,010
to introduce the session
00:00:44,010 -- 00:00:46,012
because I thought, well, everybody already knows
00:00:46,012 -- 00:00:48,548
Eric and Swati and Kim and Robert.
00:00:48,548 -- 00:00:49,616
So what is this about?
00:00:49,616 -- 00:00:51,217
But there's a whole bunch of directions
00:00:51,217 -- 00:00:53,453
that they then gave me to read out to you.
00:00:53,453 -- 00:00:55,088
So I'm going to go through those first
00:00:55,088 -- 00:00:58,057
and then we'll get going into our discussion.
00:00:58,057 -- 00:00:58,791
So hold tight.
00:01:00,159 -- 00:01:03,630
I just wanted to go over a couple of housekeeping measures.
00:01:03,630 -- 00:01:03,963
First one, to,
00:01:03,963 -- 00:01:05,899
remind everyone
00:01:05,899 -- 00:01:07,333
that this session is being taped
00:01:07,333 -- 00:01:10,570
for future posting on FSRA's website.
00:01:10,570 -- 00:01:12,238
And also,
00:01:12,238 -- 00:01:12,906
we do have
00:01:12,906 -- 00:01:15,608
simultaneous French translation
00:01:15,608 -- 00:01:18,444
for those who wish to listen in French.
00:01:18,444 -- 00:01:20,713
So for those of you in the room,
00:01:20,713 -- 00:01:22,916
we can provide you with a headset.
00:01:22,916 -- 00:01:23,650
If you need one,
00:01:23,650 -- 00:01:24,784
just raise your hand,
00:01:24,784 -- 00:01:27,186
and a staff member will bring the headset
00:01:27,186 -- 00:01:29,689
to you here in the room.
00:01:29,689 -- 00:01:33,159
And then for those of you attending virtually,
00:01:33,159 -- 00:01:34,160
simply click
00:01:34,160 -- 00:01:37,797
on your initials in the top right corner of your screen.
00:01:37,797 -- 00:01:42,802
Select, Set Language and choose to listen in French.
00:01:43,302 -- 00:01:45,371
Just pause to see if any hands are going up.
00:01:45,371 -- 00:01:47,106
It looks like we can proceed
00:01:47,106 -- 00:01:50,410
and hopefully those online can catch up with us.
00:01:50,410 -- 00:01:54,013
We do have an exciting discussion planned for you today.
00:01:54,013 -- 00:01:55,415
I have a number of questions
00:01:55,415 -- 00:01:58,017
for the panel, and we'll also be taking your questions
00:01:58,017 -- 00:02:00,720
during the last portion of the discussion.
00:02:00,720 -- 00:02:01,387
So please
00:02:01,387 -- 00:02:04,257
submit your questions through the conference site
00:02:04,257 -- 00:02:07,160
any time during our discussion today.
00:02:07,160 -- 00:02:08,194
For those of you
00:02:08,194 -- 00:02:09,362
who are in person,
00:02:09,362 -- 00:02:10,797
if for some reason
00:02:10,797 -- 00:02:12,965
you can't make the
00:02:12,965 -- 00:02:16,569
site work or can't access the conference site,
00:02:16,569 -- 00:02:18,037
again, just put up your hand
00:02:18,037 -- 00:02:19,472
and one of our FSRA staff will come
00:02:19,472 -- 00:02:22,108
and take your question down for you.
00:02:22,108 -- 00:02:24,477
Our team at the back of the room,
00:02:24,477 -- 00:02:25,878
will send the questions to me
00:02:25,878 -- 00:02:28,214
for our Q&A portion of the session.
00:02:28,214 -- 00:02:29,549
And if there are any questions
00:02:29,549 -- 00:02:30,817
that we cannot answer
00:02:30,817 -- 00:02:33,085
today, we'll post those responses
00:02:33,085 -- 00:02:35,955
on our event website in due course.
00:02:35,955 -- 00:02:36,856
And if,
00:02:36,856 -- 00:02:39,992
questions are similar, we will group them,
00:02:39,992 -- 00:02:42,428
just to get through as many questions as possible.
00:02:44,197 -- 00:02:47,066
Now, please allow me to introduce our expert
00:02:47,066 -- 00:02:49,235
panel for today's session.
00:02:49,235 -- 00:02:49,869
I encourage you
00:02:49,869 -- 00:02:54,840
to read their full biographies on the conference site.
00:02:55,708 -- 00:03:00,713
Three Chairs down to my left, we have Kim Hayes.
00:03:01,047 -- 00:03:04,216
Kim is the Global Head of Market Conduct
00:03:04,216 -- 00:03:06,218
Compliance for Manulife.
00:03:06,218 -- 00:03:08,588
Her primary responsibility
00:03:08,588 -- 00:03:11,290
is to provide leadership, direction
00:03:11,290 -- 00:03:13,559
and support of the Market Conduct
00:03:13,559 -- 00:03:16,028
compliance departments across the globe
00:03:16,028 -- 00:03:17,196
around the execution
00:03:17,196 -- 00:03:17,830
of the company's
00:03:17,830 -- 00:03:22,435
Market Conduct Compliance and Examination programs.
00:03:22,435 -- 00:03:25,671
Immediate to my left, we have Eric Wachtel.
00:03:25,671 -- 00:03:28,507
Eric is the Chief Compliance Officer
00:03:28,507 -- 00:03:31,243
for IDC Worldsource Insurance Network.
00:03:31,243 -- 00:03:36,248
There are large national MGA with 13 offices across Canada.
00:03:36,482 -- 00:03:40,119
He's also the Compliance Co-chair for CAILBA,
00:03:40,119 -- 00:03:42,321
the Canadian Association of Insurance Life
00:03:42,321 -- 00:03:43,823
Brokerage Agencies.
00:03:43,823 -- 00:03:46,058
So I don't have to pay the five bucks,
00:03:46,058 -- 00:03:49,161
and sits on numerous industry compliance committees,
00:03:50,830 -- 00:03:53,499
including the FSRA,
00:03:53,499 -- 00:03:56,368
Life and Health Stakeholder Advisory
00:03:56,368 -- 00:03:58,971
Committee. Between Eric and Kim,
00:03:58,971 -- 00:04:02,408
I have my esteemed colleague Swati Agrawal.
00:04:02,408 -- 00:04:04,810
Swati is the Director of Life and Health Insurance
00:04:04,810 -- 00:04:08,114
Companies and National Supervision at FSRA.
00:04:08,114 -- 00:04:10,416
She directs the development, design
00:04:10,416 -- 00:04:13,319
and implementation of regulatory compliance
00:04:13,319 -- 00:04:15,454
and end to end thematic reviews
00:04:15,454 -- 00:04:18,557
for insurance companies and their distribution partners.
00:04:18,557 -- 00:04:21,527
Swati is Ontario's lead for cooperative
00:04:21,527 -- 00:04:23,195
supervisory initiatives
00:04:23,195 -- 00:04:25,131
performed through the Canadian Council
00:04:25,131 -- 00:04:27,132
of Insurance Regulators,
00:04:27,132 -- 00:04:29,768
and she is also a Canadian representative
00:04:29,768 -- 00:04:32,905
at the International Association of Insurance Supervisors
00:04:32,905 -- 00:04:35,274
Market Conduct Working Group.
00:04:35,274 -- 00:04:36,909
I have to read this one out though. It's fun.
00:04:36,909 -- 00:04:41,914
The IAISMCWG.
00:04:42,181 -- 00:04:44,350
Where,
00:04:44,350 -- 00:04:45,184
I'm not done,
00:04:45,184 -- 00:04:50,289
where she, co-leads the Diversity, Equity and Inclusion,
00:04:50,289 -- 00:04:54,493
the DEI
00:04:54,493 -- 00:04:56,996
strategic initiative to evaluate
00:04:56,996 -- 00:05:00,232
how greater consideration of DEI
00:05:00,232 -- 00:05:02,568
can lead to better consumer outcomes.
00:05:02,568 -- 00:05:06,305
And finally, at the end of the stage here,
00:05:06,305 -- 00:05:07,573
we have Robert Prior.
00:05:09,275 -- 00:05:10,509
Robert is
00:05:10,509 -- 00:05:11,944
Senior Manager of Market
00:05:11,944 -- 00:05:16,949
Conduct of Life and Health Insurance Agents at FSRA.
00:05:17,149 -- 00:05:20,052
Robert joined FSRA around the same time as me.
00:05:20,052 -- 00:05:21,487
I think he came in 30 days
00:05:21,487 -- 00:05:23,255
before I did or something like that.
00:05:23,255 -- 00:05:26,258
So we were brought in to FSRA together
00:05:26,258 -- 00:05:27,559
in late 2020
00:05:27,559 -- 00:05:30,162
to establish and lead a new and dedicated
00:05:30,162 -- 00:05:32,798
Market Conduct Life and Health Insurance Agent Unit.
00:05:32,798 -- 00:05:35,000
I know many of you have gotten to know Robert
00:05:35,000 -- 00:05:37,636
over the course of the last couple of years,
00:05:37,636 -- 00:05:39,505
and you would understand
00:05:39,505 -- 00:05:41,874
how seriously and, how well he's
00:05:41,874 -- 00:05:43,876
executing on his mandate
00:05:43,876 -- 00:05:47,246
to supervise the compliance and business practices
00:05:47,246 -- 00:05:47,913
of the over
00:05:47,913 -- 00:05:50,049
60,000 life license agents
00:05:50,049 -- 00:05:54,253
that we have in the province of Ontario. Panel,
00:05:54,253 -- 00:05:57,856
our topic today is keeping the focus on consumers.
00:05:59,091 -- 00:06:01,660
What does strong conduct, culture and effective
00:06:01,660 -- 00:06:04,263
oversight in Life in Health Insurance look like?
00:06:04,263 -- 00:06:07,332
And I was so pleased in the plenary sessions this morning
00:06:07,332 -- 00:06:09,568
to really hear that messaging
00:06:09,568 -- 00:06:13,005
about keeping our mandate focused on consumers
00:06:13,005 -- 00:06:14,873
and focused on good outcomes
00:06:14,873 -- 00:06:18,644
for consumers in every one of the plenary sessions.
00:06:18,644 -- 00:06:21,313
And I think we'll probably just be continuing that theme
00:06:21,313 -- 00:06:23,482
throughout our discussion today.
00:06:23,482 -- 00:06:25,117
I think this topic really speaks
00:06:25,117 -- 00:06:26,952
to the essence of Life and Health Insurance,
00:06:26,952 -- 00:06:29,521
which is really that promise to pay,
00:06:29,521 -- 00:06:31,590
when something terrible, like a death
00:06:31,590 -- 00:06:32,691
or an illness
00:06:32,691 -- 00:06:37,696
happens to a consumer or to a member of their family.
00:06:38,664 -- 00:06:40,966
Consumers want certainty
00:06:40,966 -- 00:06:44,069
that they are covered and that their claim will be paid
00:06:44,069 -- 00:06:46,538
should that terrible event occur.
00:06:46,538 -- 00:06:47,205
In short,
00:06:47,205 -- 00:06:50,142
they expect life agents, intermediaries
00:06:50,142 -- 00:06:52,711
and insurers to treat them fairly.
00:06:52,711 -- 00:06:54,279
And adopting a culture of fair
00:06:54,279 -- 00:06:55,380
treatment of customers
00:06:55,380 -- 00:06:57,516
not only helps the industry to comply
00:06:57,516 -- 00:06:59,685
with regulatory expectations,
00:06:59,685 -- 00:07:03,055
but also to stay focused on protecting customers
00:07:03,055 -- 00:07:04,723
in their time of greatest need,
00:07:04,723 -- 00:07:06,925
which is the ultimate purpose of insurance.
00:07:06,925 -- 00:07:07,960
And this really leads me
00:07:07,960 -- 00:07:10,329
to our first question for the panel,
00:07:10,329 -- 00:07:15,267
which is what is the role of the regulator, the insurer,
00:07:15,267 -- 00:07:17,502
the MGA, and the agent
00:07:19,071 -- 00:07:19,738
in staying
00:07:19,738 -- 00:07:24,743
focused on consumers and achieving fair outcomes?
00:07:24,743 -- 00:07:26,244
And
00:07:26,244 -- 00:07:31,249
Swati, we had, you leading us off in this question.
00:07:31,550 -- 00:07:34,619
Hi, everyone. You can hear me. Okay.
00:07:34,619 -- 00:07:37,489
So the question is what is the role of the regulator,
00:07:37,489 -- 00:07:41,393
the insurance companies, the MGAs and all of us
00:07:41,393 -- 00:07:45,030
when it comes to the consumer? Right.
00:07:45,030 -- 00:07:47,799
So I have an interesting story.
00:07:47,799 -- 00:07:48,400
Just last
00:07:48,400 -- 00:07:50,502
Christmas, Beata Morris,
00:07:50,502 -- 00:07:53,905
she's the Director of Property and Casualty
00:07:53,905 -- 00:07:55,440
Supervision,
00:07:55,440 -- 00:07:59,377
and she's in the next room moderating, similar session.
00:07:59,377 -- 00:08:04,349
She gave me a momentum, which said, I am the regulator,
00:08:04,483 -- 00:08:07,118
I have superpowers.
00:08:07,118 -- 00:08:09,488
And, you know, when you're
00:08:09,488 -- 00:08:10,755
enjoying your holidays
00:08:10,755 -- 00:08:13,158
and somebody gives you something like that, it's a feel
00:08:13,158 -- 00:08:13,959
good thing, right?
00:08:13,959 -- 00:08:15,427
You feel nice. Wow.
00:08:15,427 -- 00:08:17,996
Do I have superpowers, really?
00:08:17,996 -- 00:08:20,298
Is that what a regulator is?
00:08:20,298 -- 00:08:22,868
And then you start pondering that,
00:08:22,868 -- 00:08:26,838
what does it really mean to have a superpower?
00:08:26,838 -- 00:08:30,075
You know what really drives this kind of superpower?
00:08:30,075 -- 00:08:33,111
That we assume somewhere we have in our mind.
00:08:34,179 -- 00:08:38,750
And that takes me back to when FSRA launched.
00:08:38,750 -- 00:08:40,285
So five years back
00:08:40,285 -- 00:08:43,955
when FSRA launched, you know, it was a white canvas for us.
00:08:43,955 -- 00:08:44,956
We were just thinking,
00:08:44,956 -- 00:08:49,194
what is it that we really want to do in this sector?
00:08:49,194 -- 00:08:50,662
And at that point in time,
00:08:50,662 -- 00:08:53,098
I remember having tons of conversations
00:08:53,098 -- 00:08:54,899
with Kim, with Eric,
00:08:54,899 -- 00:08:56,935
with so many of you in the room
00:08:56,935 -- 00:09:00,639
where we said the if we really want to regulate the sector,
00:09:00,639 -- 00:09:05,243
we have to look into the entire ecosystem, right?
00:09:05,243 -- 00:09:07,112
It wasn't just good enough
00:09:07,112 -- 00:09:09,414
to only look at insurance companies.
00:09:09,414 -- 00:09:12,684
It wasn't just good enough to only look at agents.
00:09:12,684 -- 00:09:13,418
In fact, by then
00:09:13,418 -- 00:09:16,187
we didn't even have a full blown agent team,
00:09:16,187 -- 00:09:19,691
and we had to look into the entire sales process,
00:09:19,691 -- 00:09:23,194
because every component of the sales process
00:09:23,194 -- 00:09:26,865
has a cascading effect on what really happens
00:09:26,865 -- 00:09:28,767
in the end to the consumer.
00:09:30,068 -- 00:09:31,436
So that is where our journey
00:09:31,436 -- 00:09:32,470
started,
00:09:32,470 -- 00:09:36,908
and that is what we referred to as end to end distribution.
00:09:36,908 -- 00:09:39,244
And that is when we actually started
00:09:39,244 -- 00:09:40,945
doing a lot of different studies
00:09:40,945 -- 00:09:43,114
through the different layers and layers
00:09:43,114 -- 00:09:46,451
which exist in the Life Insurance industry.
00:09:46,451 -- 00:09:48,686
Now, if I reflect back, you know,
00:09:48,686 -- 00:09:50,722
have we done a lot of stakeholder
00:09:50,722 -- 00:09:53,658
consultations in the process? Yes.
00:09:53,658 -- 00:09:56,194
Have we collected a lot of data structured
00:09:56,194 -- 00:09:58,096
and unstructured? Yes.
00:09:58,096 -- 00:10:00,598
But the biggest bang for our buck
00:10:00,598 -- 00:10:01,432
actually has
00:10:01,432 -- 00:10:03,868
been going out on the field
00:10:03,868 -- 00:10:06,738
and conducting proactive supervision.
00:10:06,738 -- 00:10:08,439
Because when we go out in the field
00:10:08,439 -- 00:10:09,174
and we do this
00:10:09,174 -- 00:10:10,575
proactive supervision,
00:10:10,575 -- 00:10:14,512
that is when we collect a lot of empirical evidence
00:10:14,512 -- 00:10:16,281
and that empirical evidence
00:10:16,281 -- 00:10:19,350
validates, you know, the different types of deficiencies
00:10:19,350 -- 00:10:22,120
and gaps that we are seeing in the marketplace.
00:10:22,120 -- 00:10:24,322
So I think the superpower came
00:10:24,322 -- 00:10:26,758
from a combination of a variety of things,
00:10:26,758 -- 00:10:29,260
but actually going out on the field
00:10:29,260 -- 00:10:32,263
and learning what the different businesses were doing,
00:10:32,263 -- 00:10:34,599
what the different layers and players were doing,
00:10:34,599 -- 00:10:37,001
and how it really impacts the consumer.
00:10:38,503 -- 00:10:42,006
So fast forward, you know, five years now,
00:10:42,006 -- 00:10:44,609
we are in a position where through the studies
00:10:44,609 -- 00:10:46,411
of all the layers and players,
00:10:46,411 -- 00:10:49,447
we've been able to determine the root cause
00:10:49,447 -- 00:10:52,450
of why consumer harm happens.
00:10:52,450 -- 00:10:54,185
We've been able to determine
00:10:54,185 -- 00:10:56,054
how consumers are being harmed,
00:10:56,054 -- 00:10:58,723
how vulnerable consumers are being treated,
00:10:58,723 -- 00:11:01,326
and how a better treatment of diverse,
00:11:01,326 -- 00:11:04,028
vulnerable, racialized minority
00:11:04,028 -- 00:11:06,898
consumers is so important in what we do.
00:11:06,898 -- 00:11:09,100
Through a combination of thematic studies,
00:11:09,100 -- 00:11:12,437
which we did at the insurer level, at the MGA level,
00:11:12,437 -- 00:11:14,405
as well as at the agents level,
00:11:14,405 -- 00:11:16,607
through Robert and his team.
00:11:16,607 -- 00:11:20,645
So with that in the mindset, you know, now as a regulator,
00:11:20,645 -- 00:11:22,680
we are moving from what I call
00:11:22,680 -- 00:11:25,750
as the discovery phase to a corrective phase.
00:11:25,750 -- 00:11:27,585
We've discovered a lot of issues,
00:11:27,585 -- 00:11:30,288
but now we have to correct those issues.
00:11:30,288 -- 00:11:32,290
And I wouldn't get into the details
00:11:32,290 -- 00:11:34,625
of how that correction has to happen.
00:11:34,625 -- 00:11:38,162
But we've released a publication that explains a six point
00:11:38,162 -- 00:11:41,399
plan of how we plan to correct the deficiencies
00:11:41,399 -- 00:11:43,401
that we've seen in the marketplace.
00:11:43,401 -- 00:11:47,171
And I do believe that when those deficiencies get corrected
00:11:47,171 -- 00:11:48,439
and when those deficiencies
00:11:48,439 -- 00:11:51,275
get corrected for the consumers at large,
00:11:51,275 -- 00:11:53,444
that is when, just not a regulator,
00:11:53,444 -- 00:11:56,347
but we as an entire industry,
00:11:56,347 -- 00:12:00,017
can claim to have achieved some kind of superpower,
00:12:00,017 -- 00:12:01,619
a superpower that will come
00:12:01,619 -- 00:12:04,655
from doing the right thing by the consumer
00:12:04,655 -- 00:12:06,891
and taking care of the promises
00:12:06,891 -- 00:12:08,159
that we all have made,
00:12:08,159 -- 00:12:09,660
either as a regulator
00:12:09,660 -- 00:12:13,598
or as an industry member, insurance company, or MGA.
00:12:13,598 -- 00:12:16,867
So that is what I think is the role of a regulator,
00:12:16,867 -- 00:12:19,170
an aspiration to be a superpower
00:12:19,170 -- 00:12:20,805
by collaborating with all of you.
00:12:22,540 -- 00:12:23,474
Thanks, Swati.
00:12:23,474 -- 00:12:24,742
Kim, you were going to jump in
00:12:24,742 -- 00:12:28,112
and talk about your superpower as a company.
00:12:28,112 -- 00:12:30,081
Don't have superpower written on my sheet here,
00:12:30,081 -- 00:12:32,850
but I do like the analogy.
00:12:32,850 -- 00:12:34,118
I'm going to look for that memento.
00:12:34,118 -- 00:12:36,420
I think the only one that I've received from a compliance
00:12:36,420 -- 00:12:38,255
perspective is a mug that says,
00:12:38,255 -- 00:12:41,859
don't make me use my compliance voice.
00:12:41,859 -- 00:12:45,696
Which my daughter would attribute to as my mom voice.
00:12:45,696 -- 00:12:46,597
So anyway,
00:12:46,597 -- 00:12:48,399
thank you for the opportunity
00:12:48,399 -- 00:12:51,369
to be here and speak with you today.
00:12:51,369 -- 00:12:54,005
And really enjoy, presenting.
00:12:54,005 -- 00:12:56,907
And it's great to be here with my colleagues.
00:12:56,907 -- 00:12:58,943
So from an insurance company perspective,
00:12:58,943 -- 00:13:03,114
obviously we are one component of that distribution.
00:13:03,114 -- 00:13:05,549
And, you know, what are we supposed to have?
00:13:05,549 -- 00:13:06,517
We heard it this morning,
00:13:06,517 -- 00:13:09,920
a reasonably designed compliance program.
00:13:09,920 -- 00:13:11,889
Well, what does that mean?
00:13:11,889 -- 00:13:13,124
How does that operate?
00:13:13,124 -- 00:13:15,459
How do we take the fair treatment of customers
00:13:15,459 -- 00:13:17,695
into consideration, as we're looking at that?
00:13:19,397 -- 00:13:20,998
We've talked about it,
00:13:20,998 -- 00:13:22,133
like my programs,
00:13:22,133 -- 00:13:24,034
Manulife are designed around screening,
00:13:24,034 -- 00:13:27,371
monitoring and reporting advisors.
00:13:27,371 -- 00:13:31,609
Part of that is educating them,
00:13:31,609 -- 00:13:33,310
talking to them.
00:13:33,310 -- 00:13:34,111
Unfortunately,
00:13:34,111 -- 00:13:36,280
a lot of it is about examining
00:13:36,280 -- 00:13:39,583
issues and challenges that present to us.
00:13:39,583 -- 00:13:41,619
But I would say specifically in relation
00:13:41,619 -- 00:13:46,590
to FTC expectations and yes, I owe $5.
00:13:46,891 -- 00:13:49,293
it's a lot of it's been education
00:13:49,293 -- 00:13:51,729
because I don't think that they saw that
00:13:51,729 -- 00:13:53,631
as something new for them.
00:13:53,631 -- 00:13:54,732
That's what they were doing.
00:13:54,732 -- 00:13:57,568
That's what they do when they sit in front of customers,
00:13:57,568 -- 00:13:59,770
is they believe that they treat them fairly.
00:13:59,770 -- 00:14:01,872
So it was about embedding that language
00:14:01,872 -- 00:14:03,440
in our code of conduct
00:14:03,440 -- 00:14:07,578
in the business reviews that we do with advisors.
00:14:07,578 -- 00:14:10,881
And then internally at Manulife,
00:14:10,881 -- 00:14:13,450
a lot of it was about education
00:14:13,450 -- 00:14:16,987
from start to finish, that entire customer journey.
00:14:16,987 -- 00:14:20,357
So from product design and understanding
00:14:20,357 -- 00:14:22,493
who the best person is for our customer, or,
00:14:22,493 -- 00:14:24,295
for that particular product,
00:14:24,295 -- 00:14:27,731
through to, the marketing materials,
00:14:27,731 -- 00:14:33,304
to training on that product, to claims, to then,
00:14:34,071 -- 00:14:37,207
you know, complaints and issues along those lines.
00:14:37,207 -- 00:14:39,677
So it's really been an integration,
00:14:39,677 -- 00:14:42,346
of a lot of factors over the last number of years
00:14:42,346 -- 00:14:43,847
to ensure that they're all there.
00:14:45,849 -- 00:14:48,585
And during audits and reviews, it's validating,
00:14:48,585 -- 00:14:50,821
you know, that our advisors are understanding it.
00:14:50,821 -- 00:14:53,424
It's helping our MGAs understand it.
00:14:53,424 -- 00:14:55,259
I think that when the language first came out,
00:14:55,259 -- 00:14:58,262
it wasn't necessarily well understood.
00:14:58,262 -- 00:15:00,064
But we've had lots of opportunity
00:15:00,064 -- 00:15:01,498
for discussion and dialogue.
00:15:01,498 -- 00:15:06,103
So we're flexing our superpowers, our wings.
00:15:06,103 -- 00:15:09,473
Is that a good one? Okay.
00:15:09,473 -- 00:15:10,374
Thanks, Kim.
00:15:10,374 -- 00:15:12,943
Eric, do you want to jump in from the MGA
00:15:12,943 -- 00:15:14,211
and agent perspective?
00:15:14,211 -- 00:15:16,046
Yeah, and it's great,
00:15:16,046 -- 00:15:18,615
just to echo, it's great to be on this
00:15:18,615 -- 00:15:21,718
end to end distribution panel here,
00:15:21,718 -- 00:15:23,220
for this important discussion.
00:15:23,220 -- 00:15:25,656
So, you know, for the most part,
00:15:25,656 -- 00:15:27,591
MGAs are not client facing.
00:15:27,591 -- 00:15:28,025
You know,
00:15:28,025 -- 00:15:29,526
we heard Mark White this morning
00:15:29,526 -- 00:15:32,796
talk about how not many consumers know what FSRA is yet.
00:15:32,796 -- 00:15:34,965
And I think even less consumers know
00:15:34,965 -- 00:15:37,534
what a Managing General Agency is.
00:15:37,534 -- 00:15:40,337
So but in terms of the role of MGAs
00:15:40,337 -- 00:15:43,373
in promoting positive FTC outcomes,
00:15:43,373 -- 00:15:45,943
three simple words, right? Knowing our advisor,
00:15:47,544 -- 00:15:49,513
we recognize that the carrier,
00:15:49,513 -- 00:15:51,548
you know, Manulife or whoever
00:15:51,548 -- 00:15:53,483
it is, has a powerful lens
00:15:53,483 -- 00:15:55,052
into the type of cases
00:15:55,052 -- 00:15:57,487
that an advisor is writing with them,
00:15:57,487 -- 00:15:59,623
but with MGAs, to the extent
00:15:59,623 -- 00:16:00,924
that we have advisors
00:16:00,924 -- 00:16:05,329
who have multiple carrier contracts with us, you know,
00:16:05,329 -- 00:16:07,464
certainly we have a wider lens
00:16:07,464 -- 00:16:11,234
into the business practices of that advisor, their trends,
00:16:11,234 -- 00:16:13,904
their knowledge of FTC
00:16:13,904 -- 00:16:17,107
and the unique challenges they may be,
00:16:17,107 -- 00:16:18,809
facing.
00:16:18,809 -- 00:16:20,077
Excuse me.
00:16:20,077 -- 00:16:22,713
So, you know, what are we doing to promote FTC?
00:16:22,713 -- 00:16:24,581
Well, like, one word Kim used
00:16:24,581 -- 00:16:27,184
there was training and education.
00:16:27,184 -- 00:16:29,686
So this is on the proactive side, right?
00:16:29,686 -- 00:16:32,823
As MGAs, we offer training and education.
00:16:32,823 -- 00:16:35,258
Which advisors are attending those?
00:16:35,258 -- 00:16:37,427
And certainly it's, it's also a boon
00:16:37,427 -- 00:16:39,930
if you have online training in education.
00:16:39,930 -- 00:16:44,000
So you can easily draw up reports of who's attending,
00:16:44,000 -- 00:16:46,336
how long they're taking on each course.
00:16:46,336 -- 00:16:50,073
Did they finish the compliance course and earn the CE credit
00:16:50,073 -- 00:16:51,007
at the end of that?
00:16:51,007 -- 00:16:52,642
But it's a good indicator
00:16:52,642 -- 00:16:55,946
to us to see, you know, who is attending these courses,
00:16:55,946 -- 00:16:57,080
who's taking an interest,
00:16:57,080 -- 00:16:58,648
who's engaged in them and who's not.
00:17:00,283 -- 00:17:00,650
Similarly,
00:17:00,650 -- 00:17:01,718
who's, who's
00:17:01,718 -- 00:17:05,822
utilizing the MGAs, the tools, the compliance tools
00:17:05,822 -- 00:17:09,526
and resources that we offer as an MGA and,
00:17:09,526 -- 00:17:10,961
you know, the, the
00:17:10,961 -- 00:17:11,661
the tools
00:17:11,661 -- 00:17:14,097
that promote frequent client contact,
00:17:14,097 -- 00:17:17,300
like client electronic newsletters,
00:17:17,300 -- 00:17:21,404
client relationship management software,
00:17:21,404 -- 00:17:24,174
and all the different cybersecurity tools
00:17:24,174 -- 00:17:27,010
that advisors can adopt in their practice.
00:17:27,010 -- 00:17:31,348
So is the advisor or are the advisors aligned with our MGA?
00:17:31,348 -- 00:17:34,184
You know, are they largely absent from engaging on these?
00:17:34,184 -- 00:17:35,952
And, and that's not automatically
00:17:35,952 -- 00:17:37,521
an indicator that there's a problem.
00:17:37,521 -- 00:17:40,824
But, you know, some advisors are an island unto themselves.
00:17:40,824 -- 00:17:44,227
And some of the most professional advisors are like that.
00:17:44,227 -- 00:17:46,863
But it's still something for us to,
00:17:46,863 -- 00:17:47,163
you know,
00:17:47,163 -- 00:17:48,498
keep an eye on
00:17:48,498 -- 00:17:53,003
and, and, and celebrate the advisors who are participating.
00:17:53,003 -- 00:17:58,008
And one positive thing I can say through the MGA lens
00:17:58,041 -- 00:18:04,114
is increasingly we have advisors or advisor groups or AGAs,
00:18:05,148 -- 00:18:06,216
who will
00:18:06,216 -- 00:18:07,083
ask us to come and
00:18:07,083 -- 00:18:09,786
present to them, you know, can we do a luncheon learn?
00:18:09,786 -- 00:18:12,922
That didn't used to happen even 3 to 5 years ago. Rarely
00:18:12,922 -- 00:18:14,557
it happened. Now...
00:18:14,557 -- 00:18:17,594
So it's, it's just an example of, like Kim said,
00:18:17,594 -- 00:18:20,697
FTC like advisors thought they knew what it was,
00:18:20,697 -- 00:18:24,367
but they're getting a better picture of what it is now.
00:18:24,367 -- 00:18:26,036
And they're engaged.
00:18:26,036 -- 00:18:30,340
So another thing MGAs can do in our role to promote FTC
00:18:30,340 -- 00:18:32,442
on the proactive side is
00:18:32,442 -- 00:18:34,044
the advisor practice reviews
00:18:34,044 -- 00:18:36,379
that insurance companies are doing on advisors.
00:18:36,379 -- 00:18:40,550
You know, at our MGA, we've had almost 300 advisors
00:18:40,550 -- 00:18:41,317
and mainstream
00:18:41,317 -- 00:18:42,952
advisors who are producing, who,
00:18:42,952 -- 00:18:46,790
who have been subject to an advisor practice review.
00:18:46,790 -- 00:18:48,158
And again,
00:18:48,158 -- 00:18:48,458
you know,
00:18:48,458 -- 00:18:50,760
we celebrate the successes, the advisors
00:18:50,760 -- 00:18:53,063
that pass those reviews with flying colors,
00:18:53,063 -- 00:18:55,465
you know, all green, all greens on their report.
00:18:56,499 -- 00:18:59,002
But, you know, we want to look at that and see is
00:18:59,002 -- 00:19:01,204
are there any gaps, did the advisor fail
00:19:01,204 -- 00:19:03,740
certain sections of that APR?
00:19:03,740 -- 00:19:06,576
Do they need to utilize some of our tools and templates
00:19:06,576 -- 00:19:09,446
and adopt them in the practice?
00:19:09,446 -- 00:19:12,048
And, you know, we view this as an opportunity
00:19:12,048 -- 00:19:13,349
to get in front of the advisor
00:19:13,349 -- 00:19:15,785
with our business development executives
00:19:15,785 -- 00:19:19,289
and, underline with them the importance of these APRs
00:19:19,289 -- 00:19:20,423
and passing them.
00:19:20,423 -- 00:19:23,359
And just anecdotally, another thing, positive thing
00:19:23,359 -- 00:19:25,495
that's come out of those is,
00:19:25,495 -- 00:19:26,129
you know, we
00:19:26,129 -- 00:19:27,197
I heard this morning
00:19:27,197 -- 00:19:29,732
succession planning and advisors who are aging
00:19:29,732 -- 00:19:32,168
and occasionally a, you know, an advisor,
00:19:32,168 -- 00:19:34,504
perhaps an older advisor goes through
00:19:34,504 -- 00:19:37,307
an advisor practice review and does not pass.
00:19:37,307 -- 00:19:39,275
And when we engage with that advisor,
00:19:39,275 -- 00:19:42,645
we realize it was almost a silent cry for help.
00:19:42,645 -- 00:19:44,881
Like they, they want to retire.
00:19:44,881 -- 00:19:46,783
They're just very loyal to their clients.
00:19:46,783 -- 00:19:49,385
They're not really keeping up with their knowledge.
00:19:49,385 -- 00:19:52,956
And they need our help with succession planning
00:19:52,956 -- 00:19:56,025
or what we a more positive spin we put on it is,
00:19:56,025 -- 00:19:57,860
business continuity
00:19:57,860 -- 00:19:58,328
planning,
00:19:58,328 -- 00:20:00,296
because that way the older advisor feels like
00:20:00,296 -- 00:20:03,700
I can stay involved in continuing,
00:20:03,700 -- 00:20:06,169
this service for my clients, but perhaps align them.
00:20:06,169 -- 00:20:09,105
And it's great when, when, MGAs
00:20:09,105 -- 00:20:11,074
we can start thinking about that
00:20:11,074 -- 00:20:13,409
and introducing older advisors
00:20:13,409 -- 00:20:15,445
to younger advisors and various programs.
00:20:15,445 -- 00:20:17,814
So a couple other things I can state,
00:20:17,814 -- 00:20:20,950
but I want to give Robert a chance to talk. So.
00:20:25,388 -- 00:20:29,692
Thank you very much.
00:20:29,692 -- 00:20:32,662
I promised Erica I wouldn't wrapper saying so.
00:20:32,662 -- 00:20:34,997
I’ll hold that because she's giving me the eyeball right now.
00:20:34,997 -- 00:20:38,935
Like, don't you dare.
00:20:38,935 -- 00:20:40,503
The beauty of going,
00:20:40,503 -- 00:20:42,672
last when you have such brilliant colleagues,
00:20:42,672 -- 00:20:44,607
presenting ahead is I could basically just say ditto
00:20:44,607 -- 00:20:48,344
like that. You know, that's. I agree with all of you.
00:20:48,344 -- 00:20:49,579
From an agent perspective
00:20:49,579 -- 00:20:51,214
that was mentioned earlier, as you know,
00:20:51,214 -- 00:20:54,984
there are 66,000 agents in the Ontario space right now.
00:20:54,984 -- 00:20:59,322
And I have a wonderful, strong team of ten.
00:20:59,322 -- 00:21:02,558
So what we have to look at and what the focus has been
00:21:02,558 -- 00:21:02,925
and what
00:21:02,925 -- 00:21:05,361
we're looking at end to end distribution is
00:21:05,361 -- 00:21:08,397
we have to look at who's at the front line at 66,000.
00:21:08,397 -- 00:21:11,200
So we need to make sure that suitability
00:21:11,200 -- 00:21:13,569
of an agent to be licensed is a priority.
00:21:13,569 -- 00:21:16,005
Suitability of the sale has to be a priority.
00:21:16,005 -- 00:21:18,140
And how do we demonstrate
00:21:18,140 -- 00:21:21,210
what is working and what's not working? And that's to be,
00:21:22,712 -- 00:21:25,615
you know, evidence informed and risk based.
00:21:25,615 -- 00:21:28,584
So we focus our resources to where the risk is greatest.
00:21:28,584 -- 00:21:32,388
We have clear and concise evidence that gets reported
00:21:32,388 -- 00:21:36,425
transparently and is shared amongst everybody in this room.
00:21:36,425 -- 00:21:37,660
So we can all compare notes
00:21:37,660 -- 00:21:39,996
and say we're seeing that to where we're not seeing that,
00:21:39,996 -- 00:21:41,864
or even the perhaps this is the anomaly.
00:21:41,864 -- 00:21:43,966
So I think that's one of the major changes we're seeing
00:21:43,966 -- 00:21:47,303
is that incredibly collaborative approach to being,
00:21:47,303 -- 00:21:48,904
you know, a very evidence focused,
00:21:48,904 -- 00:21:53,909
focused, compliance industry, not just regulator.
00:21:54,176 -- 00:21:55,111
Thanks, Robert.
00:21:55,111 -- 00:21:58,714
And, you know, the evil I worked as I was,
00:21:58,714 -- 00:21:59,081
it's,
00:21:59,081 -- 00:21:59,949
my superpower
00:21:59,949 -- 00:22:03,152
today is supposed to be keeping this panel on time.
00:22:03,152 -- 00:22:05,221
And, so far, so good.
00:22:05,221 -- 00:22:06,722
So,
00:22:06,722 -- 00:22:09,659
thanks, everyone, for your comments on that question.
00:22:09,659 -- 00:22:12,762
And, why don't we move it along?
00:22:12,762 -- 00:22:16,265
This kind of builds on this concept of,
00:22:16,265 -- 00:22:20,803
end to end oversight and fair treatment of consumers.
00:22:20,803 -- 00:22:23,305
When we look at Life and Health Insurance,
00:22:23,305 -- 00:22:24,807
really, you know, one of the key
00:22:24,807 -- 00:22:27,610
defining aspects of the products
00:22:27,610 -- 00:22:29,545
are that they're very long term
00:22:29,545 -- 00:22:31,747
in nature, generally speaking.
00:22:31,747 -- 00:22:33,015
And it's vital
00:22:33,015 -- 00:22:36,519
then that consumers are able to access advice
00:22:36,519 -- 00:22:38,521
to ensure that the products
00:22:38,521 -- 00:22:39,288
that they purchase
00:22:39,288 -- 00:22:40,956
today are suitable
00:22:40,956 -- 00:22:44,894
and will be there to protect their, future financial needs.
00:22:44,894 -- 00:22:46,562
So if we think about that role,
00:22:46,562 -- 00:22:47,096
that key
00:22:47,096 -- 00:22:48,230
role that Life and Health
00:22:48,230 -- 00:22:51,400
Insurance has in ensuring the financial security
00:22:51,400 -- 00:22:53,369
of so many Ontarians,
00:22:53,369 -- 00:22:54,804
how has your approach
00:22:54,804 -- 00:22:58,207
to ensuring that customers are treated fairly evolved
00:22:58,207 -- 00:23:03,179
since the CCIR and FSRA Guidances were adopted?
00:23:03,279 -- 00:23:06,148
Eric, I think you were going to kick us off here.
00:23:06,148 -- 00:23:06,916
Yeah, sure.
00:23:06,916 -- 00:23:10,753
So, you know, we I talked about the training and education.
00:23:10,753 -- 00:23:12,154
Well, that's only increasing.
00:23:12,154 -- 00:23:13,722
I know at many MGAs
00:23:13,722 -- 00:23:16,625
and in conjunction with our carrier partners,
00:23:16,625 -- 00:23:17,393
holding events,
00:23:18,427 -- 00:23:19,929
and then taking a great interest
00:23:19,929 -- 00:23:21,931
in advisor APRs,
00:23:21,931 -- 00:23:25,467
which the frequency of which are only going to increase.
00:23:25,467 -- 00:23:29,939
So two other things is, is the staff training
00:23:29,939 -- 00:23:31,307
at the MGA level.
00:23:31,307 -- 00:23:35,210
So all MGAs, you know, we have new business staff
00:23:35,210 -- 00:23:40,215
and, you know, just having more and more frequent,
00:23:41,317 -- 00:23:42,851
training sessions with our staff
00:23:42,851 -- 00:23:46,422
so that they start to adopt that compliance lens
00:23:46,422 -- 00:23:48,657
when they're, when they're ingesting business
00:23:48,657 -- 00:23:50,092
into our systems.
00:23:50,092 -- 00:23:51,660
So teaching them how to do that,
00:23:51,660 -- 00:23:53,362
and certainly many of the MGAs
00:23:53,362 -- 00:23:55,431
that I'm involved with at CAILBA,
00:23:55,431 -- 00:23:58,400
will use a model where each Case Coordinator
00:23:58,400 -- 00:23:59,802
or Case Specialist
00:23:59,802 -- 00:24:01,403
who ingests business,
00:24:01,403 -- 00:24:02,738
you know, receives it
00:24:02,738 -- 00:24:04,006
and puts it into our own system
00:24:04,006 -- 00:24:06,308
and forwards it on to the carriers,
00:24:06,308 -- 00:24:08,744
that they deal with their own group of advisors.
00:24:08,744 -- 00:24:10,245
So whether it's 100 advisors
00:24:10,245 -- 00:24:11,613
or 150 advisors,
00:24:11,613 -- 00:24:13,749
so they start to know their advisors
00:24:13,749 -- 00:24:15,984
trends, their ups, their downs.
00:24:15,984 -- 00:24:18,087
And, and that's a good model to adapt.
00:24:18,087 -- 00:24:20,055
But getting back, I'm
00:24:20,055 -- 00:24:21,790
not going to get into a whole checklist of,
00:24:21,790 -- 00:24:23,025
you know, what,
00:24:23,025 -- 00:24:24,727
a Case Coordinator will do
00:24:24,727 -- 00:24:26,895
when they receive a piece of business.
00:24:26,895 -- 00:24:28,464
But just teaching them things
00:24:28,464 -- 00:24:30,332
about like, little warning flags
00:24:30,332 -- 00:24:34,036
that may require them to flag that up to compliance
00:24:34,036 -- 00:24:35,904
or to the business
00:24:35,904 -- 00:24:38,941
Development Executive who works with that advisor.
00:24:38,941 -- 00:24:39,675
So things like,
00:24:40,642 -- 00:24:43,245
client income to premium ratio,
00:24:43,245 -- 00:24:45,914
you know, is it, is it looking very, very high.
00:24:45,914 -- 00:24:47,616
So the premium for this case is
00:24:47,616 -- 00:24:49,685
is it a very large percent of that client's
00:24:49,685 -- 00:24:51,386
gross income.
00:24:51,386 -- 00:24:54,990
High rates of return quoted on universal life,
00:24:54,990 -- 00:24:56,358
especially if it's YRT
00:24:56,358 -- 00:24:57,826
and if there's a guaranteed early
00:24:57,826 -- 00:25:01,497
or if there's an illustrated early off set of payment.
00:25:01,497 -- 00:25:03,098
You know, the, or even something
00:25:03,098 -- 00:25:06,068
as mundane as, are all the health questions always answered?
00:25:06,068 -- 00:25:07,536
No.
00:25:07,536 -- 00:25:10,405
You know, is the advisor maybe getting lazy,
00:25:10,405 -- 00:25:12,908
looking at these and just kind of rushing to the end.
00:25:12,908 -- 00:25:15,577
So we view these as opportunities,
00:25:15,577 -- 00:25:16,612
you know, to,
00:25:16,612 -- 00:25:18,146
to get in front of advisors,
00:25:18,146 -- 00:25:19,481
especially with, again,
00:25:19,481 -- 00:25:21,350
from the business development executive
00:25:21,350 -- 00:25:22,985
just to do a temperature check.
00:25:22,985 -- 00:25:25,687
Hey, we noticed this and we noticed that. And guess what?
00:25:25,687 -- 00:25:27,189
If we're noticing it,
00:25:27,189 -- 00:25:29,191
probably Kim's team is noticing
00:25:29,191 -- 00:25:30,859
it too at the carrier level.
00:25:30,859 -- 00:25:33,295
So you know, you're going down a path here
00:25:33,295 -- 00:25:36,031
that you may be engaging in self harm.
00:25:36,031 -- 00:25:38,533
And this might not have good outcomes for the client too.
00:25:38,533 -- 00:25:40,068
So maybe we need a reset here.
00:25:40,068 -- 00:25:42,337
So, it's a, it's a great opportunity
00:25:42,337 -- 00:25:46,008
for us to increase the frequency of those contacts.
00:25:46,008 -- 00:25:48,744
And with our advisors get in front of them
00:25:48,744 -- 00:25:51,346
sometimes help them with some corrective actions,
00:25:51,346 -- 00:25:54,383
point them to a course they can take to get up to speed.
00:25:55,450 -- 00:25:56,618
And by the way, I,
00:25:56,618 -- 00:25:56,885
you know,
00:25:56,885 -- 00:25:58,220
I feel like,
00:25:58,220 -- 00:25:59,888
at the insurance company level two
00:25:59,888 -- 00:26:02,124
at their business ingestion departments.
00:26:02,124 -- 00:26:05,160
That's not a bad thing at that level as well for,
00:26:05,160 -- 00:26:07,529
you know, new business people to understand that,
00:26:07,529 -- 00:26:08,663
yes, administratively,
00:26:08,663 -- 00:26:10,132
you know, you're doing this function,
00:26:10,132 -- 00:26:13,068
but there are key flags you can,
00:26:13,068 -- 00:26:16,338
you can raise with your manager as well.
00:26:16,338 -- 00:26:17,973
You know, these reasonability tests.
00:26:17,973 -- 00:26:22,477
So, so that can help improve, FTC outcomes.
00:26:22,477 -- 00:26:26,047
And then the second thing I talked about reactively
00:26:26,047 -- 00:26:30,786
is careful and organized complaint tracking.
00:26:30,786 -- 00:26:31,186
Okay.
00:26:31,186 -- 00:26:32,320
So, you know,
00:26:32,320 -- 00:26:35,924
looking for advisor trends, AGA trends
00:26:35,924 -- 00:26:38,026
or even just market trends.
00:26:38,026 -- 00:26:38,393
You know,
00:26:38,393 -- 00:26:39,127
is there
00:26:39,127 -- 00:26:41,696
a certain advisor that's had a complaint
00:26:41,696 -- 00:26:44,266
from two different insurance companies?
00:26:44,266 -- 00:26:45,834
Is there an AGA
00:26:45,834 -- 00:26:47,435
where they
00:26:47,435 -- 00:26:49,271
there's some complaints coming in
00:26:49,271 -- 00:26:52,374
pertinent to advisors with that AGA?
00:26:52,374 -- 00:26:53,875
Or is there just a certain product,
00:26:53,875 -- 00:26:55,277
like the new chargeback series,
00:26:55,277 -- 00:26:57,546
or are we noticing complaints with that?
00:26:57,546 -- 00:26:58,547
So, you know,
00:26:58,547 -- 00:27:00,515
we try to, at RGA,
00:27:00,515 -- 00:27:01,583
we try to follow,
00:27:01,583 -- 00:27:03,285
you know, categorize complaints similar
00:27:03,285 -- 00:27:05,720
to what Robert's team would do.
00:27:05,720 -- 00:27:08,557
So you know, our, our categories, our business practice.
00:27:08,557 -- 00:27:10,158
So is this a business practice complaint?
00:27:10,158 -- 00:27:14,829
Something to do with privacy, EML, or, or something like that.
00:27:14,829 -- 00:27:17,365
Is it a financial stability complaint?
00:27:17,365 -- 00:27:18,566
You know, is, is a carrier
00:27:19,801 -- 00:27:21,102
emailing us saying
00:27:21,102 -- 00:27:24,639
so-and-so advisors credit score has fallen below 600?
00:27:24,639 -- 00:27:28,476
Can you please talk to the advisor, see what's happening?
00:27:28,476 -- 00:27:30,312
Is it a license and E&O complaint?
00:27:30,312 -- 00:27:33,448
You know, did a carrier, did, did an advisor write a case
00:27:33,448 -- 00:27:36,084
out of their province of license?
00:27:36,084 -- 00:27:38,486
Or was there a lapse in, you know, something like that?
00:27:38,486 -- 00:27:40,955
And then, is it a market conduct complaint?
00:27:40,955 -- 00:27:43,591
You know, just the overall conduct to the advisor?
00:27:43,591 -- 00:27:48,029
Or a sales practice, specific to a sale?
00:27:48,029 -- 00:27:50,098
So, you know, by looking at these things
00:27:50,098 -- 00:27:51,666
and I just have to say, a
00:27:51,666 -- 00:27:53,601
complaint may be too strong a word.
00:27:53,601 -- 00:27:54,903
Maybe it's not the best word
00:27:54,903 -- 00:27:59,708
because there's low, medium, high level complaints.
00:27:59,708 -- 00:28:02,977
You know, generally traditionally a complaint is a client
00:28:02,977 -- 00:28:05,280
is unhappy with the performance of a product.
00:28:05,280 -- 00:28:08,049
Maybe it's a Manulife product. They call Manulife.
00:28:08,049 -- 00:28:10,185
Kim's team calls our team.
00:28:10,185 -- 00:28:12,854
We go get the advisor file. Okay.
00:28:12,854 -- 00:28:14,055
Not a single you out.
00:28:14,055 -- 00:28:15,890
I'm saying that never happens.
00:28:15,890 -- 00:28:17,859
It happens. No, not at all.
00:28:17,859 -- 00:28:20,562
But, you know, they can be advisor concerns.
00:28:20,562 -- 00:28:21,729
But my point
00:28:21,729 -- 00:28:23,798
is, you know, it's very important
00:28:23,798 -- 00:28:28,503
for us to track these and understand where the patterns are
00:28:28,503 -- 00:28:31,506
so that we can, again, have those corrective discussions
00:28:31,506 -- 00:28:34,142
or design some compliance programs
00:28:34,142 -- 00:28:36,344
to fill a gap that might be out there.
00:28:36,344 -- 00:28:39,848
So yeah, I think I'll leave it at that.
00:28:39,848 -- 00:28:42,283
Kim, do you want to jump in and sort of build
00:28:42,283 -- 00:28:45,753
on Eric's comments on MGAs with insurer initiatives?
00:28:45,753 -- 00:28:47,388
Sure, absolutely. Thanks, Erica.
00:28:47,388 -- 00:28:51,993
So since 2018 and I first met Swati, well,
00:28:51,993 -- 00:28:53,228
one of the first times,
00:28:53,228 -- 00:28:54,729
coming into the Manulife office
00:28:54,729 -- 00:28:56,798
to do a fair treatment of customers audit,
00:28:58,266 -- 00:28:59,634
lots of things have changed.
00:28:59,634 -- 00:29:03,404
We have a fair treatment of customers policy,
00:29:03,404 -- 00:29:07,542
that promotes the importance of that process from,
00:29:07,542 -- 00:29:09,277
as I said, through that customer journey.
00:29:09,277 -- 00:29:11,379
So the beginning of the product design
00:29:11,379 -- 00:29:16,384
right through to the complaints, and, and claims process.
00:29:17,118 -- 00:29:21,456
We've embedded language, as I mentioned earlier
00:29:21,456 -- 00:29:23,725
in our code of conduct, in our business practice
00:29:23,725 -- 00:29:26,494
reviews or advisor practice reviews.
00:29:26,494 -- 00:29:28,663
Same thing, different title,
00:29:28,663 -- 00:29:30,465
different acronym in this industry.
00:29:30,465 -- 00:29:34,936
But in into that work that we do with our advisors.
00:29:34,936 -- 00:29:36,437
We do have some courses,
00:29:36,437 -- 00:29:39,607
so we have a fair treatment of customers.
00:29:39,607 -- 00:29:44,579
CE Learning Center, one hour continuing education credit,
00:29:44,979 -- 00:29:48,816
on our website that,
00:29:48,816 -- 00:29:50,918
surprisingly gets like four
00:29:50,918 -- 00:29:53,287
and 500 views a year,
00:29:53,287 -- 00:29:56,424
which I think is absolutely fantastic.
00:29:56,424 -- 00:29:59,127
But some of the things that we've done internally,
00:29:59,127 -- 00:30:01,429
are, you know, things that you were chatting about,
00:30:01,429 -- 00:30:02,029
Eric, it's
00:30:02,029 -- 00:30:05,733
ensuring that the escalations from our complaints team
00:30:05,733 -- 00:30:08,536
or our underwriting teams or our sales
00:30:08,536 -- 00:30:12,173
teams are coming into the compliance area for
00:30:12,173 -- 00:30:13,741
evaluation and review.
00:30:15,076 -- 00:30:17,378
We have created an entire
00:30:17,378 -- 00:30:22,917
risk based methodology tool, that we are do...
00:30:22,917 -- 00:30:26,420
that we are using data from all sorts of areas in our business
00:30:26,420 -- 00:30:28,689
to then select the advisors
00:30:28,689 -- 00:30:31,659
that we might want to come out and visit.
00:30:31,659 -- 00:30:34,328
And we're proactively reaching out to our MGA partners.
00:30:34,328 -- 00:30:35,429
So to yourself, Eric,
00:30:35,429 -- 00:30:36,364
and to some of the others
00:30:36,364 -- 00:30:37,398
that are in the room
00:30:37,398 -- 00:30:38,099
to say
00:30:38,099 -- 00:30:40,134
we're going to go and do a business practice
00:30:40,134 -- 00:30:42,036
review with this particular advisor.
00:30:42,036 -- 00:30:43,938
Did you want to come in, hang out with us
00:30:43,938 -- 00:30:47,074
and go through this process with us?
00:30:47,074 -- 00:30:49,644
Most cases we're getting a positive yes.
00:30:49,644 -- 00:30:51,579
Which I think is, is an advantage
00:30:51,579 -- 00:30:53,314
because it's helping
00:30:53,314 -- 00:30:57,518
the MGAs understand the expectations that the insurers have.
00:30:57,518 -- 00:30:59,453
But as you point out, Eric, it's
00:30:59,453 -- 00:31:01,656
also giving the advisors that opportunity
00:31:01,656 -- 00:31:03,658
to put their hands up and say,
00:31:03,658 -- 00:31:05,593
we might need some more help, right?
00:31:05,593 -- 00:31:07,962
Or, we might need to be able to,
00:31:07,962 -- 00:31:09,096
you know, put some additional,
00:31:10,331 -- 00:31:15,336
templates in their office and things like that.
00:31:15,670 -- 00:31:17,905
Board reporting. It's Board
00:31:17,905 -- 00:31:20,107
reporting time, friends.
00:31:20,107 -- 00:31:23,477
It's like, everything I'm doing these days,
00:31:23,477 -- 00:31:26,614
we speak to fair treatment of customers.
00:31:26,614 -- 00:31:30,251
We have a new sales conduct risk metric
00:31:30,251 -- 00:31:31,752
that is going in our Board
00:31:31,752 -- 00:31:33,688
reporting for the very first time,
00:31:33,688 -- 00:31:36,023
this quarter, in 2024.
00:31:36,023 -- 00:31:40,327
This is a request both from OSFI and our Board.
00:31:40,327 -- 00:31:42,063
So we are taking information
00:31:42,063 -- 00:31:47,068
that is being collected globally about conduct,
00:31:47,334 -- 00:31:51,605
and putting risk statement in our Board report.
00:31:51,605 -- 00:31:55,843
I'll let you know what it says after we figured it out.
00:31:55,843 -- 00:31:57,278
because we're still in the process
00:31:57,278 -- 00:31:58,813
of gathering all of that data,
00:31:58,813 -- 00:32:01,816
but things that are included in that,
00:32:01,816 -- 00:32:03,651
which is really interesting,
00:32:03,651 -- 00:32:05,486
is complaints
00:32:05,486 -- 00:32:06,787
that we've kind of talked about here
00:32:06,787 -- 00:32:10,391
conduct issues, which, of course, we can all appreciate
00:32:10,391 -- 00:32:13,327
regulatory findings that are related to sales
00:32:13,327 -- 00:32:16,130
conduct and internal audit
00:32:16,130 -- 00:32:18,699
findings that are related to sales conduct.
00:32:18,699 -- 00:32:20,434
So all of these are newer things
00:32:20,434 -- 00:32:21,869
that we are putting into place.
00:32:23,671 -- 00:32:26,106
And the last thing that I would probably speak to
00:32:26,106 -- 00:32:28,642
is we have a new incentive committee.
00:32:28,642 -- 00:32:30,244
This is specifically
00:32:30,244 -- 00:32:32,980
come out of the various pieces of guidance
00:32:32,980 -- 00:32:35,749
that we've had around, fair treatment of customers.
00:32:35,749 -- 00:32:38,252
So Manulife has stood up and incentives committee.
00:32:38,252 -- 00:32:43,958
So, any new incentive programs, campaigns, time limited...
00:32:44,758 -- 00:32:48,662
Bonuses have to go through a committee approval.
00:32:48,662 -- 00:32:50,497
And then there is a tracking process
00:32:50,497 -- 00:32:52,433
because very selfishly,
00:32:52,433 -- 00:32:54,768
the Market Conduct team wants to ingest that.
00:32:54,768 -- 00:32:56,337
I would like to know when we are doing
00:32:56,337 -- 00:32:58,739
an investigation on the advisor, an advisor,
00:32:58,739 -- 00:33:01,809
whether or not they have received compensation
00:33:01,809 -- 00:33:04,678
that's above and beyond the regular grid.
00:33:04,678 -- 00:33:07,047
Did that inform their sales practices
00:33:07,047 -- 00:33:08,048
in a different fashion?
00:33:08,048 -- 00:33:09,984
So we're looking at those things,
00:33:09,984 -- 00:33:12,086
in a bit of a different way,
00:33:12,086 -- 00:33:15,689
using some technologies and some advancements to,
00:33:15,689 -- 00:33:18,125
to analyze all of that work.
00:33:18,125 -- 00:33:21,228
So, we're bored. Thanks Kim.
00:33:21,228 -- 00:33:23,364
So I think we've heard a lot of,
00:33:23,364 -- 00:33:24,598
from Kim and Eric
00:33:24,598 -- 00:33:25,366
about
00:33:25,366 -- 00:33:28,235
how their organizations have evolved
00:33:28,235 -- 00:33:28,702
in terms
00:33:28,702 -- 00:33:31,171
of some of the oversight practices and monitoring,
00:33:31,171 -- 00:33:34,708
but sometimes, sometimes
00:33:34,708 -- 00:33:36,877
practices get reported to the regulator.
00:33:36,877 -- 00:33:38,746
Robert, do you want to jump in
00:33:38,746 -- 00:33:40,814
and talk about the evolution of the LAMR?
00:33:42,649 -- 00:33:43,484
My favorite topic.
00:33:43,484 -- 00:33:45,219
And I could talk all afternoon and you know that.
00:33:45,219 -- 00:33:48,489
So please shut me down.
00:33:48,489 -- 00:33:52,593
So the LAMR or the Life Agent Misconduct report
00:33:52,593 -- 00:33:54,628
Some of you may recall something called a LARF,
00:33:54,628 -- 00:33:56,196
A Life Agent Reporting Form
00:33:56,196 -- 00:33:58,499
that's, document, an excellent document
00:33:58,499 -- 00:33:59,500
developed by the CLHIA.
00:33:59,500 -- 00:34:01,568
It's been in use for 20 plus years.
00:34:01,568 -- 00:34:03,637
The industry knows it well.
00:34:03,637 -- 00:34:06,507
The LARF is 24 data points.
00:34:06,507 -- 00:34:10,110
In the, in the main hall,
00:34:10,110 -- 00:34:12,846
we were hearing, you know, the obligations of the insurers,
00:34:12,846 -- 00:34:15,649
you know, to have a reasonable system of compliance,
00:34:15,649 -- 00:34:18,252
reasonable system of oversight of agents.
00:34:18,252 -- 00:34:19,887
And there's also a piece of the act that says
00:34:19,887 -- 00:34:22,756
that there is an obligation for insurance companies
00:34:22,756 -- 00:34:25,325
to report unsuitable agents to the regulator.
00:34:25,325 -- 00:34:27,327
And that's traditionally been done through the LARF
00:34:27,327 -- 00:34:29,596
as a convenient methodology.
00:34:29,596 -- 00:34:31,531
So the LAMR has been developed
00:34:31,531 -- 00:34:34,968
with a little bit more of a, of a FTC lens.
00:34:34,968 -- 00:34:38,472
So there's 141 data points in the LAMR.
00:34:38,472 -- 00:34:41,341
It's online, it’s convenient uploading all that sort of stuff.
00:34:41,341 -- 00:34:42,976
That's just a burden reduction thing.
00:34:42,976 -- 00:34:44,244
But I think what matters most
00:34:44,244 -- 00:34:48,982
is that there's 141 data points, to allow reporting.
00:34:48,982 -- 00:34:51,785
And we have done a lot of stakeholder
00:34:51,785 -- 00:34:53,787
engagement in the development of the LAMR
00:34:53,787 -- 00:34:55,188
as well as since we've launched it
00:34:55,188 -- 00:34:57,958
in terms of understanding what, what it means and what,
00:34:57,958 -- 00:35:00,227
and what the industries expectations of it are.
00:35:01,928 -- 00:35:03,797
So basically the question is, is like,
00:35:03,797 -- 00:35:05,332
do you want us to report this?
00:35:05,332 -- 00:35:06,433
Do you want to report to that?
00:35:06,433 -- 00:35:07,901
Do you want this every time?
00:35:07,901 -- 00:35:09,870
You know, I believe I've even heard.
00:35:09,870 -- 00:35:13,540
Be careful what you wish for. In terms of, like, what type?
00:35:13,540 -- 00:35:14,975
What's going to be reported?
00:35:14,975 -- 00:35:15,742
That might’ve been me.
00:35:15,742 -- 00:35:17,044
I, I'm pretty sure it was you.
00:35:17,044 -- 00:35:18,045
And I think that's why I said it
00:35:18,045 -- 00:35:20,981
while you're sitting right beside me. So,
00:35:20,981 -- 00:35:22,482
but basically
00:35:22,482 -- 00:35:23,050
a response
00:35:23,050 -- 00:35:25,685
that I've been given, I've been giving is
00:35:25,685 -- 00:35:26,853
you have an obligation
00:35:26,853 -- 00:35:28,522
for a reasonable system of compliance.
00:35:28,522 -- 00:35:31,224
You have an obligation to report an unsuitable agent.
00:35:31,224 -- 00:35:33,460
If you find an agent so unsuitable
00:35:33,460 -- 00:35:36,029
that you terminate their contract,
00:35:36,029 -- 00:35:37,798
we may want to hear about it.
00:35:37,798 -- 00:35:40,867
But what's also important is, is that the act only contains
00:35:40,867 -- 00:35:43,870
so many actionable items for us as well.
00:35:43,870 -- 00:35:45,305
So you could report something
00:35:45,305 -- 00:35:47,974
that may not meet that threshold of us
00:35:47,974 -- 00:35:50,377
being able to revoke a license, let's say.
00:35:50,377 -- 00:35:52,979
But it's still, a risk identifier.
00:35:52,979 -- 00:35:55,582
It still gives us pause to red flag
00:35:55,582 -- 00:35:57,717
to conduct an examination.
00:35:57,717 -- 00:35:58,451
but more importantly,
00:35:58,451 -- 00:36:00,587
it builds data on that particular topic.
00:36:01,855 -- 00:36:04,357
Those, that data that we build is
00:36:04,357 -- 00:36:05,892
something that will inform
00:36:05,892 -- 00:36:07,727
our proactive supervision programs,
00:36:07,727 -- 00:36:09,930
that will inform policy initiatives.
00:36:09,930 -- 00:36:13,266
But like I said previously to, it's all shared.
00:36:13,266 -- 00:36:14,768
We're publishing on all of this
00:36:14,768 -- 00:36:17,837
to say what we're finding to say. This isn't anecdotal.
00:36:17,837 -- 00:36:20,740
This isn't just, you know, the industry is seeing this.
00:36:20,740 -- 00:36:22,042
It's not just the regulator saying
00:36:22,042 -- 00:36:23,910
this is what the industry is reporting.
00:36:23,910 -- 00:36:25,345
So that's that collaborative approach
00:36:25,345 -- 00:36:27,113
that we're really, really seeing the change there.
00:36:27,113 -- 00:36:28,582
And so that the idea that,
00:36:28,582 -- 00:36:31,384
you know, this is FTC driven and it's principles-based
00:36:31,384 -- 00:36:32,619
regulation driven,
00:36:32,619 -- 00:36:36,856
I'm not asking you to fill out a prescriptive form.
00:36:36,856 -- 00:36:37,624
And here is that
00:36:37,624 -- 00:36:40,794
although there are checkboxes but it's not a checkbox,
00:36:40,794 -- 00:36:41,795
you know, a task.
00:36:41,795 -- 00:36:43,630
It is like, you know, report what works for you.
00:36:43,630 -- 00:36:45,131
So if you're reporting things, for example,
00:36:45,131 -- 00:36:47,067
like borrowing money from a client,
00:36:47,067 -- 00:36:49,202
strictly speaking, that's not a contravention of the act.
00:36:49,202 -- 00:36:51,504
But boy, it's a risk concern isn't it?
00:36:51,504 -- 00:36:52,739
And we want to hear about it.
00:36:52,739 -- 00:36:55,041
And I'm sure I know that most,
00:36:55,041 -- 00:36:56,943
if not all insurer contracts,
00:36:56,943 -- 00:36:58,211
sales contracts with their agents.
00:36:58,211 -- 00:36:59,145
You're says right there
00:36:59,145 -- 00:37:00,847
you're not allowed to borrow money from a client, right.
00:37:00,847 -- 00:37:02,749
That, one of many examples.
00:37:02,749 -- 00:37:05,018
So with that data now coming in through the LAMR, it's
00:37:05,018 -- 00:37:06,319
something we can report back.
00:37:06,319 -- 00:37:08,655
And again, sort of implementing those changes.
00:37:08,655 -- 00:37:09,322
That requires
00:37:09,322 -- 00:37:11,858
a 100% collaboration between the industry
00:37:11,858 -- 00:37:13,126
and a willingness to do that,
00:37:13,126 -- 00:37:15,428
because the industry could very easily to say,
00:37:15,428 -- 00:37:17,931
why would I report something you can't do anything about,
00:37:18,898 -- 00:37:20,233
which is fair comment.
00:37:20,233 -- 00:37:21,201
So we're just saying
00:37:21,201 -- 00:37:23,737
if we are FTC based as an industry,
00:37:23,737 -- 00:37:27,207
if we are principles-based as an industry,
00:37:27,207 -- 00:37:30,009
then we need to share this data
00:37:30,009 -- 00:37:32,378
to, to, to implement these changes that everybody
00:37:32,378 -- 00:37:34,681
wants to see, to protect consumers in the end.
00:37:34,681 -- 00:37:38,151
And the response has been amazing,
00:37:38,151 -- 00:37:38,618
to the point
00:37:38,618 -- 00:37:42,455
that, I mean, our, our landers have more than doubled
00:37:42,455 -- 00:37:45,492
since FSRA's inception and it's trending upwards as well.
00:37:45,492 -- 00:37:48,428
So thank you for,
00:37:48,428 -- 00:37:52,532
for sharing in the vision and participating in the vision.
00:37:52,532 -- 00:37:56,135
I just want a, a quick shout out for that, Robert.
00:37:56,135 -- 00:37:57,937
And I don't know how many in the audience
00:37:57,937 -- 00:37:59,472
from the MGA community
00:37:59,472 -- 00:38:02,275
or carrier community have filed a LAMR,
00:38:02,275 -- 00:38:06,412
but it's really not, egregious at all in terms of workload.
00:38:06,412 -- 00:38:09,215
So compliments to Robert's team
00:38:09,215 -- 00:38:12,852
who, who designed it and the responsiveness as well.
00:38:14,120 -- 00:38:15,655
We recently had to file a
00:38:15,655 -- 00:38:20,660
LAMR and heard back from Debbie Scott within 36 hours.
00:38:21,094 -- 00:38:25,031
So you know, the message there is, it's very easy to do.
00:38:25,031 -- 00:38:27,300
You don't have to psych yourself up, and,
00:38:27,300 -- 00:38:32,305
and FSRA is definitely responding to these, so kudos.
00:38:33,072 -- 00:38:33,906
Thanks, Eric.
00:38:33,906 -- 00:38:38,177
Now, our number of resources Robert will double to 20.
00:38:38,177 -- 00:38:41,948
Eric has put in a plug here for additional resources.
00:38:41,948 -- 00:38:43,082
So very effective.
00:38:43,082 -- 00:38:44,283
We'll get a lot more LAMRs,
00:38:44,283 -- 00:38:48,788
Eric, that's the bottom line, right?
00:38:48,788 -- 00:38:49,288
Thanks. Yeah.
00:38:49,288 -- 00:38:51,557
Just one last little thing as well is, you know,
00:38:51,557 -- 00:38:54,627
the regulation says insurers must report.
00:38:54,627 -- 00:38:56,829
It doesn't say MGAs, must report.
00:38:56,829 -- 00:38:58,831
And yet the MGAs are reporting,
00:38:58,831 -- 00:38:59,298
you know,
00:38:59,298 -- 00:39:01,267
they don't necessarily have safe harbour,
00:39:01,267 -- 00:39:02,468
but that it shows
00:39:02,468 -- 00:39:03,503
the level
00:39:03,503 -- 00:39:04,971
of commitment in the end
00:39:04,971 -- 00:39:06,406
distribution level to,
00:39:06,406 -- 00:39:08,508
you know, to support consumer protection,
00:39:08,508 -- 00:39:10,209
that I'm getting MGAs filing
00:39:10,209 -- 00:39:11,711
LAMRs. That's very rewarding.
00:39:11,711 -- 00:39:14,814
And it says a lot about, about the industry.
00:39:14,814 -- 00:39:16,516
Great. Thanks.
00:39:16,516 -- 00:39:17,683
And you know, Robert
00:39:17,683 -- 00:39:20,019
has some key members of his team here today
00:39:20,019 -- 00:39:22,522
who've been instrumental in developing the LAMR.
00:39:22,522 -- 00:39:26,559
So it's great to hear the feedback, through the panel.
00:39:26,559 -- 00:39:28,895
And, thanks to MGAs
00:39:28,895 -- 00:39:31,297
and insurers for continuing to file those with us.
00:39:31,297 -- 00:39:32,498
But we've got Sam,
00:39:32,498 -- 00:39:35,935
who's really been leading on developing the LAMR
00:39:35,935 -- 00:39:37,837
and Andy and Debbie in the room.
00:39:37,837 -- 00:39:39,405
So if you've got,
00:39:39,405 -- 00:39:44,410
more comments and questions about the LAMR as a tool,
00:39:44,410 -- 00:39:45,878
or how we're using it,
00:39:45,878 -- 00:39:47,947
you know, you've got great people to,
00:39:47,947 -- 00:39:50,049
consult with here today in the room.
00:39:51,083 -- 00:39:53,252
And I think the LAMR,
00:39:53,252 -- 00:39:54,220
Eric and Kim,
00:39:54,220 -- 00:39:56,289
your comments about how your programs
00:39:56,289 -- 00:39:56,889
have evolved,
00:39:56,889 -- 00:39:59,358
that really speaks to first,
00:39:59,358 -- 00:40:00,660
we heard it in the plenary,
00:40:00,660 -- 00:40:02,395
that role of data
00:40:02,395 -- 00:40:06,699
in terms of helping us to get an expert view
00:40:06,699 -- 00:40:08,367
of what's happening in the Life
00:40:08,367 -- 00:40:10,436
and Health Insurance sector,
00:40:10,436 -- 00:40:11,470
as a regulator,
00:40:11,470 -- 00:40:13,706
but also as insurers and MGAs
00:40:13,706 -- 00:40:16,042
and really assisting with both our proactive
00:40:16,042 -- 00:40:17,977
and reactive supervision.
00:40:17,977 -- 00:40:20,613
And it also, I think, speaks to,
00:40:20,613 -- 00:40:22,381
the evolution or kind of the journey
00:40:22,381 -- 00:40:25,718
that we're on with FTC and trying to get,
00:40:25,718 -- 00:40:28,854
fair outcomes for consumers.
00:40:28,854 -- 00:40:30,356
And I think that's so important
00:40:30,356 -- 00:40:32,325
because fair treatment of customers
00:40:32,325 -- 00:40:34,627
as a principal, as our North Star,
00:40:34,627 -- 00:40:35,227
we often say at FSRA,
00:40:35,227 -- 00:40:39,699
it really helps us to remember that behind every policy,
00:40:39,699 -- 00:40:40,566
there's a person
00:40:40,566 -- 00:40:42,101
and often a family
00:40:42,101 -- 00:40:45,971
and their own story and reason for needing insurance.
00:40:45,971 -- 00:40:48,874
And, so we've talked about kind of how we've evolved.
00:40:48,874 -- 00:40:51,077
Let's talk about, today's initiative.
00:40:51,077 -- 00:40:53,379
So what are your current priorities
00:40:53,379 -- 00:40:56,649
in relation to treating consumers fairly?
00:40:56,649 -- 00:40:59,285
And I think, Kim, you were going to jump off on this one.
00:40:59,285 -- 00:41:02,121
I was thanks, Erica. Yeah, absolutely.
00:41:02,121 -- 00:41:03,456
So, and we heard a lot about it
00:41:03,456 -- 00:41:05,257
this morning in the digital advancements
00:41:05,257 -- 00:41:08,627
and the use of AI and all of these tools.
00:41:08,627 -- 00:41:10,329
About three and a half years ago,
00:41:10,329 -- 00:41:12,631
I was really fortunate and hired,
00:41:12,631 -- 00:41:15,568
a gentleman on my team who is a data analyst.
00:41:15,568 -- 00:41:17,336
He's actually now a data scientist.
00:41:18,437 -- 00:41:20,906
And his role was to
00:41:20,906 -- 00:41:25,911
transform the way my department was doing work.
00:41:26,812 -- 00:41:30,649
We were very papers-based, paper-based.
00:41:30,649 -- 00:41:34,987
And we've moved to be very digital.
00:41:34,987 -- 00:41:39,892
Because as much as you have 66,000, I believe you said
00:41:39,892 -- 00:41:43,329
Manulife has over 100,000 just in Canada.
00:41:43,329 -- 00:41:46,065
That's a lot of advisors to have eyes on.
00:41:46,065 -- 00:41:48,200
So what better way to
00:41:48,200 -- 00:41:50,603
to do this in a more efficient manner,
00:41:50,603 -- 00:41:52,371
but to use technology.
00:41:52,371 -- 00:41:54,940
So we have a variety of graph
00:41:54,940 -- 00:41:57,009
analytics tools that we use
00:41:57,009 -- 00:42:00,312
that look to conflicts of interest.
00:42:00,312 -- 00:42:03,983
So if an advisor is the beneficiary on one policy,
00:42:03,983 -- 00:42:08,287
chances are they're likely the beneficiary on a few others.
00:42:08,287 -- 00:42:13,225
We can easily see that now. We use graph analytics to see
00:42:13,225 -- 00:42:18,397
is the advisor using their own IP address to DocuSign
00:42:19,598 -- 00:42:22,368
paperwork? Because electronic signatures
00:42:22,368 -- 00:42:25,237
have become the way we operate.
00:42:25,237 -- 00:42:26,605
You can buy a house
00:42:26,605 -- 00:42:28,641
with your electronic signature on a phone.
00:42:28,641 -- 00:42:30,809
That blows my mind, right?
00:42:30,809 -- 00:42:32,945
There's an importance behind your signature.
00:42:32,945 -- 00:42:34,480
We need to make sure that advisors
00:42:34,480 -- 00:42:37,049
and clients continue to understand that.
00:42:37,049 -- 00:42:41,820
So we've looked to use those advancements,
00:42:41,820 -- 00:42:44,490
for our monitoring and our oversight.
00:42:44,490 -- 00:42:46,258
We also look at it to see
00:42:46,258 -- 00:42:47,226
is this advisor
00:42:47,226 -- 00:42:48,260
just doing something
00:42:48,260 -- 00:42:51,029
that's really anomalous to the rest of the,
00:42:51,029 -- 00:42:52,664
to the community?
00:42:52,664 -- 00:42:54,967
And perhaps once we go and get the story,
00:42:54,967 -- 00:42:57,236
we go, great, thanks.
00:42:57,236 -- 00:42:58,804
You've got all the documentation.
00:42:58,804 -- 00:43:02,508
It really is an appropriate,
00:43:02,508 -- 00:43:04,710
based...needs-based sale.
00:43:04,710 -- 00:43:06,945
It works for that particular client
00:43:06,945 -- 00:43:08,280
or that particular community.
00:43:08,280 -- 00:43:09,882
And now we have no issues,
00:43:09,882 -- 00:43:13,085
but we've been proactively able to address that,
00:43:13,085 -- 00:43:16,388
with the advisor and the MGA in advance.
00:43:16,388 -- 00:43:19,958
So those are some pretty unique, ways
00:43:19,958 -- 00:43:23,028
that we've started to alter the way
00:43:23,028 -- 00:43:25,297
that we do our monitoring and our,
00:43:25,297 -- 00:43:28,066
our oversight of our advisors.
00:43:28,066 -- 00:43:30,602
I would tell you on my wish list for 2024
00:43:30,602 -- 00:43:33,805
is to advance our business practice review program
00:43:33,805 -- 00:43:35,741
or our internal audit program,
00:43:35,741 -- 00:43:37,709
the fact that we are in 2024
00:43:37,709 -- 00:43:41,046
and using an Excel spreadsheet just drives me crazy.
00:43:41,980 -- 00:43:43,749
So, you know, I've, I've
00:43:43,749 -- 00:43:44,349
got the team
00:43:44,349 -- 00:43:46,919
turning their mind to something along those lines
00:43:46,919 -- 00:43:48,353
that can be a little bit
00:43:48,353 -- 00:43:49,688
more interactive,
00:43:49,688 -- 00:43:52,991
that can use some of these lovely technologies
00:43:52,991 -- 00:43:53,959
to say, oh, well,
00:43:53,959 -- 00:43:55,594
we found the advisor
00:43:55,594 -- 00:43:57,296
doesn't know what we mean when we say,
00:43:57,296 -- 00:43:59,865
do you use your advisor disclosure
00:43:59,865 -- 00:44:02,134
and it automatically populates the findings
00:44:02,134 -- 00:44:03,502
so that the team isn't cutting
00:44:03,502 -- 00:44:05,437
and pasting for word documents.
00:44:05,437 -- 00:44:08,674
So, ask me a year from now how far we got
00:44:08,674 -- 00:44:09,708
and really hopeful
00:44:09,708 -- 00:44:11,476
that we're going to have some time
00:44:11,476 -- 00:44:15,213
this year to, to make some changes there.
00:44:15,213 -- 00:44:17,849
So I think that's maybe where I'll stop, Erica.
00:44:17,849 -- 00:44:18,684
Thanks, Kim.
00:44:18,684 -- 00:44:19,117
Swati,
00:44:19,117 -- 00:44:21,920
can you tie this into the work that we're doing at FSRA
00:44:21,920 -- 00:44:25,190
on the international stage, as well as our current MGA
00:44:25,190 -- 00:44:26,391
supervision priorities?
00:44:27,893 -- 00:44:28,760
Thanks, Erica.
00:44:28,760 -- 00:44:31,596
A lot of things, Kim, that you mentioned,
00:44:31,596 -- 00:44:34,933
I've heard it from Robert.
00:44:34,933 -- 00:44:38,170
It was like a déjà vu because it freaks him out
00:44:38,170 -- 00:44:40,172
to have Excel spreadsheets.
00:44:40,172 -- 00:44:43,041
When you said Excel, I got the shivers.
00:44:43,041 -- 00:44:44,810
And I know Sam and Debbie.
00:44:44,810 -- 00:44:46,378
They've been working very hard
00:44:46,378 -- 00:44:48,847
exactly to the mechanism that you mentioned.
00:44:48,847 -- 00:44:52,484
So we mentioned about LAMR as an evolution.
00:44:52,484 -- 00:44:54,686
I still think it's a continuing,
00:44:54,686 -- 00:44:55,821
you know, priority,
00:44:55,821 -- 00:44:58,356
which will take many different shapes and forms as
00:44:58,356 -- 00:45:02,027
and when we receive more from the industry.
00:45:02,027 -- 00:45:04,696
when we talk about the institutional side,
00:45:04,696 -- 00:45:07,332
there are two things that I would like to highlight.
00:45:07,332 -- 00:45:09,601
The first thing is, you know,
00:45:09,601 -- 00:45:13,505
I said that in the last five years we've been zooming in.
00:45:13,505 -- 00:45:15,307
So we look into insurance companies,
00:45:15,307 -- 00:45:16,508
we look into MGAs,
00:45:16,508 -- 00:45:18,477
we look into specific business models,
00:45:18,477 -- 00:45:21,046
we look into specific business practices.
00:45:21,046 -- 00:45:22,981
We've been reporting on that.
00:45:22,981 -- 00:45:25,817
So we keep like peeling the layers of an onion.
00:45:25,817 -- 00:45:28,186
You know, we are like zooming in, in, in.
00:45:28,186 -- 00:45:33,191
But now after five years, it's time that we also zoom out.
00:45:33,325 -- 00:45:34,326
And what I mean by
00:45:34,326 -- 00:45:39,497
zooming out is in Ontario, MGAs is not a specific
00:45:39,664 -- 00:45:41,499
licensing class.
00:45:41,499 -- 00:45:43,568
So we as regulators,
00:45:43,568 -- 00:45:44,469
you know, this morning
00:45:44,469 -- 00:45:46,638
we heard that we should be able to measure
00:45:46,638 -- 00:45:49,040
what we are about to monitor.
00:45:49,040 -- 00:45:51,409
We don't know who all the MGAs are.
00:45:51,409 -- 00:45:53,278
We don't know what their different business
00:45:53,278 -- 00:45:56,214
models are or what their product composition are.
00:45:56,214 -- 00:45:58,750
We don't know exactly which insurance companies
00:45:58,750 -- 00:46:00,986
are contracted with which MGAs.
00:46:00,986 -- 00:46:02,520
So I think as a regulator,
00:46:02,520 -- 00:46:05,824
it's very important for us to know what I call
00:46:05,824 -- 00:46:07,826
as our backyard, right?
00:46:07,826 -- 00:46:10,328
Because until we don't know what our backyard is,
00:46:10,328 -- 00:46:11,529
until we don't know what our
00:46:11,529 -- 00:46:12,330
universe is,
00:46:12,330 -- 00:46:14,799
until we don't know how we can measure
00:46:14,799 -- 00:46:18,803
what we are about to monitor, how are we going to proceed?
00:46:18,803 -- 00:46:19,471
Right.
00:46:19,471 -- 00:46:21,539
So that's one area
00:46:21,539 -- 00:46:24,342
that we are placing a lot of emphasis on.
00:46:24,342 -- 00:46:26,478
We are recently going to, you know,
00:46:26,478 -- 00:46:29,280
we just finished the design of a questionnaire,
00:46:29,280 -- 00:46:31,483
but we are going to launch this questionnaire
00:46:31,483 -- 00:46:32,984
and all the insurance companies
00:46:32,984 -- 00:46:34,853
here are going to receive it.
00:46:34,853 -- 00:46:37,255
Lynn, don't worry. Consultations are remaining.
00:46:37,255 -- 00:46:39,190
So we haven't disclosed that to you yet.
00:46:40,458 -- 00:46:41,126
But you all.
00:46:41,126 -- 00:46:43,461
Been busy this month. These not this month.
00:46:43,461 -- 00:46:43,828
Okay.
00:46:43,828 -- 00:46:45,630
We work with your schedule,
00:46:45,630 -- 00:46:49,167
But we will be working with a lot of you in this room
00:46:49,167 -- 00:46:50,835
to actually,
00:46:50,835 -- 00:46:52,704
you know, consult on that questionnaire,
00:46:52,704 -- 00:46:55,240
which is actually going to give us intelligence
00:46:55,240 -- 00:46:57,609
about what's happening in the field
00:46:57,609 -- 00:46:58,810
and what will we do
00:46:58,810 -- 00:47:01,479
with all the intelligence that we are gathering?
00:47:01,479 -- 00:47:05,717
That intelligence will help us identify the pockets of risk
00:47:05,717 -- 00:47:07,352
that exist in the marketplace,
00:47:07,352 -- 00:47:09,521
the pockets of risk that we are not aware about.
00:47:09,521 -- 00:47:12,423
There could be additional issues. It could be higher risk MGAs.
00:47:12,423 -- 00:47:13,258
It could be higher risk
00:47:13,258 -- 00:47:16,361
insurance companies, we just don't know what we don't know.
00:47:16,361 -- 00:47:18,129
So that's the intelligence program
00:47:18,129 -- 00:47:19,364
that we are going to launch.
00:47:19,364 -- 00:47:21,933
And if you have additional questions about it,
00:47:21,933 -- 00:47:23,535
we've got Kevin, Dinesh
00:47:23,535 -- 00:47:25,069
and Glenn in the room who can help
00:47:25,069 -- 00:47:26,170
you answer those questions.
00:47:26,170 -- 00:47:28,072
And I'm free of answering those questions. Then,
00:47:29,207 -- 00:47:30,942
the second piece,
00:47:30,942 -- 00:47:31,776
you know, that,
00:47:31,776 -- 00:47:36,180
Erica mentioned was on the international front,
00:47:36,180 -- 00:47:38,816
you know, I'm not from Canada.
00:47:38,816 -- 00:47:40,685
I've come to Canada a few years ago
00:47:40,685 -- 00:47:42,520
and never thought that I would be intertwined
00:47:42,520 -- 00:47:45,290
in the Canadian regulatory system,
00:47:45,290 -- 00:47:48,092
but when I was working on, you know, these Canadian
00:47:48,092 -- 00:47:51,129
consumer issues on the Market Conduct side,
00:47:51,129 -- 00:47:53,898
I started to realize that what we see in
00:47:53,898 -- 00:47:57,468
Canada is not unique to Canada alone.
00:47:57,468 -- 00:47:58,636
A lot of things,
00:47:58,636 -- 00:48:00,738
a lot of issues, a lot of deficiencies,
00:48:00,738 -- 00:48:03,875
a lot of problems that we are trying to solve in Canada,
00:48:03,875 -- 00:48:06,010
they exist across the globe.
00:48:06,010 -- 00:48:08,846
They exist in so many different countries.
00:48:08,846 -- 00:48:10,848
And we are very lucky that,
00:48:10,848 -- 00:48:11,115
you know,
00:48:11,115 -- 00:48:12,950
our CEO, Mike White, he's
00:48:12,950 -- 00:48:15,853
been selected to be the Chair of the
00:48:15,853 -- 00:48:18,990
Market Conduct Working Group, MCWG,
00:48:18,990 -- 00:48:19,390
at the
00:48:19,390 -- 00:48:21,926
IAIS, which is the International Association
00:48:21,926 -- 00:48:24,429
of Insurance Supervisors.
00:48:24,429 -- 00:48:26,264
So in that space, you know,
00:48:26,264 -- 00:48:28,232
Mark had a very good thought
00:48:28,232 -- 00:48:30,068
leadership to this whole approach
00:48:30,068 -- 00:48:33,971
where he said that when we talk about DEI,
00:48:33,971 -- 00:48:36,574
why are we only talking about DEI
00:48:36,574 -- 00:48:39,010
from an institutional perspective?
00:48:39,010 -- 00:48:41,179
Why are we only talking about gender?
00:48:41,179 -- 00:48:43,514
Why are we only talking about what happens
00:48:43,514 -- 00:48:45,650
from a governance perspective?
00:48:45,650 -- 00:48:49,020
Why can't we tweak our understanding to see
00:48:49,020 -- 00:48:54,025
how can we as an industry treat diverse consumers better?
00:48:55,226 -- 00:48:59,831
How can we treat diverse, vulnerable, minority,
00:48:59,831 -- 00:49:02,500
racialized consumers better?
00:49:02,500 -- 00:49:05,503
So we started a very interesting exercise.
00:49:05,503 -- 00:49:05,770
You know,
00:49:05,770 -- 00:49:08,539
there are 200 regulators on the Market
00:49:08,539 -- 00:49:10,474
Conduct working group internationally,
00:49:10,474 -- 00:49:12,577
and it's the crème de la crème of
00:49:12,577 -- 00:49:15,580
you know, all the top notch regulators being there.
00:49:15,580 -- 00:49:18,482
We asked each one of them to give us examples
00:49:18,482 -- 00:49:20,618
of how vulnerable consumers
00:49:20,618 -- 00:49:23,120
have been harmed in their country.
00:49:23,120 -- 00:49:25,690
So we got a huge repository of examples.
00:49:25,690 -- 00:49:26,924
And thank you to Deepa,
00:49:26,924 -- 00:49:29,827
Nathan, who led that exercise from my team.
00:49:29,827 -- 00:49:32,964
And when we gathered all those examples, we saw
00:49:32,964 -- 00:49:35,099
there are so many distinct,
00:49:35,099 -- 00:49:37,501
you know, parallels that we could draw
00:49:37,501 -- 00:49:39,337
in terms of what was happening
00:49:39,337 -- 00:49:42,273
across the different countries, but commonalities.
00:49:42,273 -- 00:49:45,643
And so now we've embarked on an exercise
00:49:45,643 -- 00:49:47,845
where we are understanding what are the common trends
00:49:47,845 -- 00:49:49,480
that are happening globally,
00:49:49,480 -- 00:49:52,450
how consumers are intentionally being targeted,
00:49:52,450 -- 00:49:54,118
or, you know, things are not comprehensive
00:49:54,118 -- 00:49:56,320
enough for vulnerable consumers.
00:49:56,320 -- 00:49:58,990
And we are developing an application paper,
00:49:58,990 -- 00:50:00,224
an application paper
00:50:00,224 -- 00:50:02,093
that's going to give all of you
00:50:02,093 -- 00:50:04,595
insurance companies and intermediaries
00:50:04,595 -- 00:50:06,997
some very practical recommendations
00:50:06,997 -- 00:50:09,166
on how diverse and vulnerable
00:50:09,166 -- 00:50:11,302
consumers can be better treated.
00:50:11,302 -- 00:50:12,436
So again,
00:50:12,436 -- 00:50:15,005
we look forward to having a lot of consultations
00:50:15,005 -- 00:50:15,740
with many of you
00:50:15,740 -- 00:50:16,540
in the room
00:50:16,540 -- 00:50:19,243
on both the exercise, on the Ontario
00:50:19,243 -- 00:50:21,278
related intelligence program,
00:50:21,278 -- 00:50:23,614
as well as the international application paper,
00:50:23,614 -- 00:50:25,983
which is going to be a great toolkit
00:50:25,983 -- 00:50:27,118
for all of us in the room.
00:50:28,419 -- 00:50:29,153
Thanks, Swati.
00:50:29,153 -- 00:50:31,388
So can I just comment on that? Yes, of course.
00:50:31,388 -- 00:50:36,393
So since my role moved to be global, late last year,
00:50:37,428 -- 00:50:38,796
it was very intriguing,
00:50:38,796 -- 00:50:40,698
and you're speaking exactly to what
00:50:40,698 -- 00:50:43,033
I have been learning over the last number of months.
00:50:43,033 -- 00:50:45,669
Everybody thinks that it's always very different
00:50:45,669 -- 00:50:47,838
in their country.
00:50:47,838 -- 00:50:51,008
and very quickly I came to the same understanding
00:50:51,008 -- 00:50:54,111
that it's all really quite the same
00:50:54,111 -- 00:50:56,347
with just some general nuances.
00:50:56,347 -- 00:50:58,048
So I'm going to be very intrigued
00:50:58,048 -- 00:51:01,418
to see where this application paper comes in.
00:51:01,418 -- 00:51:03,320
See, I said I had superpowers,
00:51:03,320 -- 00:51:06,123
I could intuitively understand what Kim was,
00:51:06,123 -- 00:51:09,460
you know, working on despite of not knowing it.
00:51:09,460 -- 00:51:12,730
Perfect. Is interesting how it all ties together. Right?
00:51:12,730 -- 00:51:17,735
So we've got international trends and consumer issues,
00:51:18,068 -- 00:51:21,138
and seeing them perhaps played out,
00:51:21,138 -- 00:51:22,206
perhaps differently,
00:51:22,206 -- 00:51:24,608
perhaps not, depending on the country
00:51:24,608 -- 00:51:27,444
and the market and the product.
00:51:27,444 -- 00:51:32,016
And we continue to see that role of gathering data
00:51:32,016 -- 00:51:36,020
in order to inform our supervisory priorities.
00:51:36,020 -- 00:51:39,823
And, then you've got to bring it back down to that
00:51:39,823 -- 00:51:40,924
agent on the ground.
00:51:40,924 -- 00:51:41,792
At the end of the day,
00:51:41,792 -- 00:51:43,694
if you're thinking about Individual Life
00:51:43,694 -- 00:51:46,864
and Health Insurance, it's typically an agent,
00:51:46,864 -- 00:51:48,966
that a consumer's interfacing with.
00:51:48,966 -- 00:51:50,634
And, Robert, your team's done
00:51:50,634 -- 00:51:52,136
a lot of work to really drive
00:51:52,136 -- 00:51:54,938
kind of intelligence informed agent supervision.
00:51:54,938 -- 00:51:56,774
Do you want to spend a couple of minutes
00:51:56,774 -- 00:51:58,409
talking about that? Sure.
00:51:58,409 -- 00:52:01,145
So the, we discussed the LAMR.
00:52:01,145 -- 00:52:01,945
So that would be, you know,
00:52:01,945 -- 00:52:04,214
industry's obligation to report on suitable
00:52:04,214 -- 00:52:07,418
agents to the regulator and the data that, you know, helps
00:52:07,418 -- 00:52:11,221
what we're driving there from a data analytics perspective.
00:52:11,221 -- 00:52:12,489
Our bread and butter,
00:52:12,489 -- 00:52:14,124
if you will, is agent examinations
00:52:14,124 -- 00:52:15,826
or audits or whatever title you want to
00:52:15,826 -- 00:52:16,560
you want to give it.
00:52:18,328 -- 00:52:21,698
So we had developed a examination program.
00:52:21,698 -- 00:52:23,200
I always get the numbers wrong.
00:52:23,200 -- 00:52:25,436
There are
00:52:25,436 -- 00:52:29,673
710 point examination with 2,282
00:52:29,673 -- 00:52:30,741
data points,
00:52:30,741 -- 00:52:34,711
including a 48 point questionnaire with attestation.
00:52:34,711 -- 00:52:37,347
And, that's all electronic,
00:52:37,347 -- 00:52:41,685
because if I saw another Excel spreadsheet, I was going to
00:52:41,685 -- 00:52:44,988
die.
00:52:44,988 -- 00:52:47,291
So we've moved that to electronic,
00:52:47,291 -- 00:52:48,959
and that's what's been launched now.
00:52:48,959 -- 00:52:50,627
So I mean, there's the typical side of it,
00:52:50,627 -- 00:52:50,928
which is,
00:52:50,928 -- 00:52:53,197
you know, reduces burden, increases accuracy,
00:52:53,197 -- 00:52:55,132
make sure you're asking the same questions
00:52:55,132 -- 00:52:58,101
that at any person who's, who's operating that particular.
00:52:58,101 -- 00:53:01,505
It's on something called OSP on Online Service Portal.
00:53:01,505 -- 00:53:03,273
So you know, if anybody is operating
00:53:03,273 -- 00:53:04,775
that OSP platform is going to be done
00:53:04,775 -- 00:53:06,443
the same ways. We could good clean data
00:53:06,443 -- 00:53:09,680
that we can report back to the industry, publish on.
00:53:09,680 -- 00:53:12,082
And then we have those collaborations compare data.
00:53:12,082 -- 00:53:14,518
Because my colleagues here are doing the same thing,
00:53:14,518 -- 00:53:17,487
just from a different side, different lens.
00:53:17,487 -- 00:53:19,990
And let's see if we're all noticing the same things.
00:53:19,990 -- 00:53:21,491
But I think
00:53:21,491 -- 00:53:23,293
and this is all good, it's good information to have,
00:53:23,293 -- 00:53:25,762
and it's something we can collate and collaborate on.
00:53:25,762 -- 00:53:28,832
But we started to do is also look at
00:53:28,832 -- 00:53:30,467
from an FTC side of things.
00:53:30,467 -- 00:53:32,703
It's not just about your strict compliance
00:53:32,703 -- 00:53:35,739
with the act and the regs and even the guidance.
00:53:35,739 -- 00:53:37,107
What we're looking for is
00:53:38,508 -- 00:53:40,477
like,
00:53:40,477 -- 00:53:43,013
are you a suitable agent and are you making suitable sales?
00:53:43,013 -- 00:53:44,881
Are you doing what's in the best interest of the consumer?
00:53:44,881 -- 00:53:47,050
And one of the easiest ways to demonstrate,
00:53:47,050 -- 00:53:48,352
or at least help demonstrate you're doing
00:53:48,352 -- 00:53:51,488
that is to follow best practices, like it's very simple.
00:53:51,488 -- 00:53:53,523
Here's your baseline of expectation.
00:53:53,523 -- 00:53:55,192
Are you taking notes?
00:53:55,192 -- 00:53:56,660
Are you doing needs analysis?
00:53:56,660 -- 00:53:58,662
Are you doing financial analysis.
00:53:58,662 -- 00:54:01,098
You know, are we following the best practice.
00:54:01,098 -- 00:54:02,332
And if we follow the best practices,
00:54:02,332 -- 00:54:04,167
then you are in a better position to demonstrate
00:54:04,167 -- 00:54:05,469
that the sale was suitable,
00:54:05,469 -- 00:54:08,105
that you had a comprehensive conversation with the client
00:54:08,105 -- 00:54:09,806
and that the client understood what you were,
00:54:09,806 -- 00:54:12,075
what you were selling them. Like,
00:54:12,075 -- 00:54:14,945
that's the driving factor of it.
00:54:14,945 -- 00:54:16,646
So that's something we've captured heavily
00:54:16,646 -- 00:54:18,448
within our examination program.
00:54:18,448 -- 00:54:20,217
It's something that we have
00:54:20,217 -- 00:54:23,320
tipped our hat to at least, in the LAMR program as well.
00:54:23,320 -- 00:54:25,355
So these are the types of things you can report even
00:54:25,355 -- 00:54:26,990
if we can't necessarily do something about it.
00:54:26,990 -- 00:54:29,326
Let's keep collecting that data to show
00:54:29,326 -- 00:54:31,261
this is where we're seeing a gap in the industry.
00:54:31,261 -- 00:54:35,232
You know, this is where we’re looking at, policy change,
00:54:35,232 -- 00:54:37,367
legislative change, whatever the case may be.
00:54:37,367 -- 00:54:40,070
And so it allows us to support that. And,
00:54:41,738 -- 00:54:42,639
yeah, I think that that
00:54:42,639 -- 00:54:44,574
testing the best practices is something that, again,
00:54:44,574 -- 00:54:45,942
the industry is very on board with
00:54:45,942 -- 00:54:47,944
because I see the importance of it.
00:54:47,944 -- 00:54:49,546
So the next sort of stage of
00:54:49,546 -- 00:54:51,147
that is not...there's our examinations,
00:54:51,147 -- 00:54:53,350
which tend to be reactive,
00:54:53,350 -- 00:54:55,118
something that we'll do if we receive a LAMR
00:54:55,118 -- 00:54:56,486
or we'll go to an examination.
00:54:56,486 -- 00:54:57,420
There's proactive,
00:54:57,420 -- 00:54:59,289
which is where we're doing something thematic
00:54:59,289 -- 00:55:01,725
like the MGA reviews is very specific.
00:55:01,725 -- 00:55:02,525
There are,
00:55:02,525 -- 00:55:04,427
intelligence focused examinations,
00:55:04,427 -- 00:55:07,664
which is another form of, you know, risk identification and
00:55:07,664 -- 00:55:09,466
and thematic review.
00:55:09,466 -- 00:55:10,800
But we're also,
00:55:10,800 -- 00:55:13,570
soon going to be sending out something called,
00:55:13,570 -- 00:55:14,771
because you need another acronym.
00:55:14,771 -- 00:55:18,074
This one's, BPAC, and it’s a...
00:55:18,074 -- 00:55:21,678
We're wrapping like. Gee, I told you.
00:55:21,678 -- 00:55:24,547
Such a set up, I had to wrap. And Erica said, no.
00:55:25,849 -- 00:55:28,852
Anyway, so the BPAC is the Business Practice
00:55:28,852 -- 00:55:29,886
and Compliance questionnaire,
00:55:29,886 -- 00:55:32,956
and this is going to be distributed as a,
00:55:32,956 -- 00:55:34,257
so I think it's not risk identified.
00:55:34,257 -- 00:55:37,027
This is something a little truly more randomized
00:55:37,027 -- 00:55:38,361
because I think it's important to,
00:55:38,361 -- 00:55:41,097
you know, to demonstrate to the industry as well as,
00:55:41,097 -- 00:55:43,733
we're not out just to catch bad acts.
00:55:43,733 -- 00:55:45,769
Like, we also want to catch people doing the right thing.
00:55:45,769 -- 00:55:46,469
That's important.
00:55:46,469 -- 00:55:48,304
With 66,000 agents in the space,
00:55:48,304 -- 00:55:49,773
I am highly confident
00:55:49,773 -- 00:55:52,175
there are some really good agents out there
00:55:52,175 -- 00:55:54,177
and they need to be highlighted as well.
00:55:54,177 -- 00:55:59,182
So sending us something that's a bit more of a,
00:55:59,783 -- 00:56:02,152
a randomize,
00:56:02,152 -- 00:56:04,254
not risk based approach...things create,
00:56:04,254 -- 00:56:07,690
sort of creates that, what's the word I'm looking for here?
00:56:08,858 -- 00:56:09,392
Baseline.
00:56:09,392 -- 00:56:10,360
Baseline. Thank you.
00:56:10,360 -- 00:56:11,661
That's the word that would not go into
00:56:11,661 -- 00:56:13,897
Robert’s head. A baseline survey.
00:56:13,897 -- 00:56:14,531
You know,
00:56:14,531 -- 00:56:15,932
and part of that baseline
00:56:15,932 -- 00:56:18,501
we're going to be asking is about business practices
00:56:18,501 -- 00:56:20,570
and how the BPAC is going to be signed
00:56:20,570 -- 00:56:21,471
by attestations.
00:56:21,471 -- 00:56:23,706
So I'm hoping everyone tells the truth on it.
00:56:23,706 -- 00:56:26,509
We have actually had such circumstances where agents had
00:56:26,509 -- 00:56:29,679
we have given them a,
00:56:29,679 -- 00:56:31,347
an administrative monetary penalty,
00:56:31,347 -- 00:56:33,249
and they've actually thanked us, say,
00:56:33,249 -- 00:56:34,984
I didn't know that I had to do that,
00:56:34,984 -- 00:56:37,053
and I'm going to change my practice as a result of that.
00:56:37,053 -- 00:56:39,656
So the idea is, that it is an educational component.
00:56:39,656 -- 00:56:41,691
It's not about catching bad guys all the time.
00:56:41,691 -- 00:56:43,960
It's not about pointing out what people have done wrong.
00:56:43,960 -- 00:56:45,595
It's pointing to what people done right.
00:56:45,595 -- 00:56:47,797
You know, using it as a learning opportunity
00:56:47,797 -- 00:56:50,567
to, to, to improve, overall business practices.
00:56:50,567 -- 00:56:51,834
And that runs end to end.
00:56:51,834 -- 00:56:54,270
And then we support each other in that, in that quest.
00:56:55,738 -- 00:56:56,372
Thanks, Robert.
00:56:56,372 -- 00:56:56,739
I have to
00:56:56,739 -- 00:56:57,340
say, first
00:56:57,340 -- 00:56:58,441
he said he wanted to wrap
00:56:58,441 -- 00:57:00,310
and then I thought I misheard him
00:57:00,310 -- 00:57:02,378
when he said bad act,
00:57:02,378 -- 00:57:06,282
and I was getting a little bit nervous as a moderator.
00:57:06,282 -- 00:57:10,320
Or you might tip up the mic like this. That’s when you have to worry.
00:57:10,320 -- 00:57:12,422
Let's, let's keep going here.
00:57:12,422 -- 00:57:15,391
We sort of looked at the past. We've looked at the present.
00:57:15,391 -- 00:57:17,560
We're going to get into the crystal ball,
00:57:17,560 -- 00:57:20,096
part of the session here.
00:57:20,096 -- 00:57:23,933
FSRA is going to turn five this spring.
00:57:23,933 -- 00:57:27,036
And as Swati said earlier in Life and Health Insurance,
00:57:27,036 -- 00:57:31,140
we are really continuing on our multi year sector strategy
00:57:31,140 -- 00:57:34,010
to really establish and operationalize
00:57:34,010 -- 00:57:34,877
FSRA's approach
00:57:34,877 -- 00:57:37,613
to supervising the end to end distribution of Life
00:57:37,613 -- 00:57:39,749
and Health Insurance products
00:57:39,749 -- 00:57:41,050
and the outcomes
00:57:41,050 -- 00:57:42,919
we're driving for here,
00:57:42,919 -- 00:57:44,020
the consumer outcomes
00:57:44,020 -- 00:57:47,023
we're trying to achieve in all of this work.
00:57:47,023 -- 00:57:50,493
First of, of course, is suitability, of
00:57:50,493 -- 00:57:52,462
the market participants in the sector.
00:57:52,462 -- 00:57:54,297
And we've talked a lot about that already,
00:57:54,297 -- 00:57:56,933
I think on on the panel today,
00:57:56,933 -- 00:58:00,203
and then more so in the last question,
00:58:00,203 -- 00:58:02,738
we were talking about business practices. Right.
00:58:02,738 -- 00:58:04,407
So the outcome you're looking for here
00:58:04,407 -- 00:58:05,975
is business practices
00:58:05,975 -- 00:58:08,811
that support fair outcomes for consumers.
00:58:08,811 -- 00:58:13,683
And of course, we do have to mitigate specific risks
00:58:13,683 -- 00:58:14,784
where we find them.
00:58:14,784 -- 00:58:16,786
If there are specific risks
00:58:16,786 -- 00:58:19,689
due to business practices or products out there
00:58:19,689 -- 00:58:21,791
when it comes to consumer protection,
00:58:21,791 -- 00:58:24,594
of course we need to seek to mitigate those risks.
00:58:24,594 -- 00:58:27,396
And so if we look ahead to the next five years,
00:58:28,364 -- 00:58:31,801
once, you know, when we're all here together,
00:58:31,801 -- 00:58:36,806
when FSRA turns ten, what does the future look like?
00:58:37,073 -- 00:58:38,941
How will it affect consumers
00:58:38,941 -- 00:58:40,843
and how are you preparing for it?
00:58:40,843 -- 00:58:43,713
Eric, I think you were going to lead us on this answer.
00:58:43,713 -- 00:58:44,747
Sure.
00:58:44,747 -- 00:58:49,885
I mean, we heard this morning during the AI discussion,
00:58:49,919 -- 00:58:50,319
you know,
00:58:50,319 -- 00:58:52,989
this great technological marvel
00:58:52,989 -- 00:58:55,825
and, you know, in this technological miracle of an age
00:58:55,825 -- 00:59:00,830
we're living in, it's interesting on the first point that,
00:59:01,430 -- 00:59:04,900
our experience is that consumers are relying on their agent
00:59:04,900 -- 00:59:06,369
more than ever before.
00:59:06,369 -- 00:59:10,206
Yes, they have electronic means to research and
00:59:10,206 -- 00:59:12,008
and get information.
00:59:12,008 -- 00:59:14,243
But this technological marvel
00:59:14,243 -- 00:59:17,046
is also leading to a certain degree of laziness.
00:59:17,046 -- 00:59:17,413
Right.
00:59:17,413 -- 00:59:18,781
And one thing I always say is
00:59:18,781 -- 00:59:20,750
people don't open their mail anymore.
00:59:20,750 -- 00:59:24,053
How many people have their credit card on auto pay?
00:59:24,053 -- 00:59:26,022
Do they really look at their statement every month?
00:59:27,189 -- 00:59:30,092
And, you know, a simple complaint like someone getting in,
00:59:30,092 -- 00:59:32,561
a ten year renewal, never opened it.
00:59:32,561 -- 00:59:34,563
Three months later, they look at their bank account
00:59:34,563 -- 00:59:36,732
and see they're being charged quadruple the premium.
00:59:36,732 -- 00:59:39,101
So, to a certain extent,
00:59:39,101 -- 00:59:40,569
you know, we take it seriously
00:59:40,569 -- 00:59:42,138
and we impress upon advisors
00:59:42,138 -- 00:59:42,638
that, you know,
00:59:42,638 -- 00:59:46,342
when a client says you're my guy or you're my girl,
00:59:46,342 -- 00:59:47,910
they really mean it.
00:59:47,910 -- 00:59:51,614
And, you know, to Robert's point, they're, just about,
00:59:51,614 -- 00:59:53,916
you know, something as simple as the approach
00:59:53,916 -- 00:59:56,452
following the approach as a best practice
00:59:56,452 -- 00:59:59,221
and having those seven key
00:59:59,221 -- 01:00:01,590
compliance aspects in your client file,
01:00:01,590 -- 01:00:04,193
it's amazing how hard it is to get in trouble
01:00:04,193 -- 01:00:06,729
if you're following the approach.
01:00:06,729 -- 01:00:08,631
Even from a self-inquiry standpoint,
01:00:08,631 -- 01:00:10,466
if the advisor's doing an engagement
01:00:10,466 -- 01:00:12,434
letter with the client,
01:00:12,434 -- 01:00:14,236
if the advisor's doing good reason
01:00:14,236 -- 01:00:17,206
why letters, it requires some self-reflection,
01:00:17,206 -- 01:00:20,209
and the advisor can often self, correct themselves.
01:00:20,209 -- 01:00:23,379
So, you know what? I have to relook at this case here.
01:00:23,379 -- 01:00:25,414
But going back to the question,
01:00:25,414 -- 01:00:27,283
so how do I expected to evolve
01:00:27,283 -- 01:00:30,152
in terms of suitability of market participants?
01:00:30,152 -- 01:00:30,819
Well, you know,
01:00:30,819 -- 01:00:32,788
we're already seeing that FSRA’s
01:00:32,788 -- 01:00:36,158
licensing team is looking more closely at renewals,
01:00:36,158 -- 01:00:38,661
at license renewals than ever before.
01:00:38,661 -- 01:00:40,562
And we have to explain to advisors, yes,
01:00:40,562 -- 01:00:43,332
you need to upload your CE credit certificates.
01:00:43,332 -- 01:00:45,668
It's not just an attestation anymore.
01:00:45,668 -- 01:00:46,568
So, you know,
01:00:46,568 -- 01:00:48,270
I think we can expect this
01:00:48,270 -- 01:00:50,940
to increase and more and more scrutiny
01:00:50,940 -- 01:00:53,876
given on this valuable thing called a Life License.
01:00:54,843 -- 01:00:55,477
And, you
01:00:55,477 -- 01:00:57,413
know, are we going to see
01:00:57,413 -- 01:01:00,516
more advisors who perhaps exit the industry?
01:01:00,516 -- 01:01:01,984
Because, you know,
01:01:01,984 -- 01:01:04,620
we have to say that some MGAs we're seeing
01:01:04,620 -- 01:01:07,389
are looking at their advisor population saying, well,
01:01:07,389 -- 01:01:08,991
this bottom third isn't doing anything.
01:01:08,991 -- 01:01:12,127
They're just hanging around. And before that was okay.
01:01:12,127 -- 01:01:14,096
But now with all the industry scrutiny,
01:01:14,096 -- 01:01:15,831
that's becoming a risk to us.
01:01:15,831 -- 01:01:19,268
So I think there's going to be some attrition there.
01:01:19,268 -- 01:01:21,070
In terms of business practices
01:01:21,070 -- 01:01:24,173
that support fair outcomes for consumers.
01:01:24,173 -- 01:01:27,076
You know, Kim talked about it, Swati talked about it,
01:01:27,076 -- 01:01:28,544
Robert talked about it.
01:01:28,544 -- 01:01:29,378
Just, you know,
01:01:29,378 -- 01:01:31,613
knocking on the advisor's door
01:01:31,613 -- 01:01:34,650
asking them, you know, what are you doing in your practice?
01:01:34,650 -- 01:01:39,655
And we've seen some insurers do some little creative,
01:01:39,822 -- 01:01:41,657
maneuvers like one insurer
01:01:41,657 -- 01:01:44,993
now instead of a standard advisor practice review,
01:01:44,993 -- 01:01:46,628
they're doing desk audits.
01:01:46,628 -- 01:01:48,063
Oh, you just submitted a case for us.
01:01:48,063 -- 01:01:50,999
Can you please provide us with the best practice
01:01:50,999 -- 01:01:52,434
documentation behind this case?
01:01:52,434 -- 01:01:56,505
Kind of a...a snappier, real time audit.
01:01:56,505 -- 01:01:59,441
Which is catching some advisors off guard,
01:01:59,441 -- 01:02:01,977
which is a good thing, right? It's ruffling some feathers.
01:02:01,977 -- 01:02:04,913
Wow. Yeah. This is real. This is, this is coming home now,
01:02:06,281 -- 01:02:07,716
And even things like,
01:02:07,716 -- 01:02:10,619
like audits, you know, that's, that's a great initiative.
01:02:10,619 -- 01:02:13,455
Robert, you spoke about.
01:02:13,455 -- 01:02:14,756
We had a little story.
01:02:14,756 -- 01:02:16,859
We had an advisor who was audited by FSRA,
01:02:16,859 -- 01:02:20,696
a dual license advisor for Mutual Funds and Life Insurance.
01:02:20,696 -- 01:02:23,298
Has great practice, has a great staff.
01:02:23,298 -- 01:02:25,601
He commented...And he passed with flying colors.
01:02:25,601 -- 01:02:26,668
But he commented
01:02:26,668 -- 01:02:29,137
because, he had just gone through an FDA audit,
01:02:29,137 -- 01:02:33,642
and he commented on how impressive the audit process was.
01:02:33,642 -- 01:02:34,509
And he said, you know what?
01:02:34,509 -- 01:02:37,145
This auditor asked me at one point?
01:02:37,145 -- 01:02:37,980
She said,
01:02:37,980 -- 01:02:40,315
how do you decide which insurance company
01:02:40,315 -- 01:02:42,851
you put a client with?
01:02:42,851 -- 01:02:44,786
What a great question!
01:02:44,786 -- 01:02:46,388
And he was impressed
01:02:46,388 -- 01:02:49,324
that the auditor knew enough to even ask that question.
01:02:49,324 -- 01:02:50,726
And he was able to pull out
01:02:50,726 -- 01:02:52,861
several client files and say, well,
01:02:52,861 -- 01:02:54,930
once we decide on a
01:02:54,930 -- 01:02:56,031
a level of insurance
01:02:56,031 -- 01:02:58,734
they need and a product structure they want,
01:02:58,734 -- 01:03:02,004
we do a life guide spread. And here's how it starts.
01:03:02,004 -- 01:03:03,872
And we don't always go to the cheapest company.
01:03:03,872 -- 01:03:05,507
We talk about features and benefits,
01:03:05,507 -- 01:03:07,442
my relationships with underwriters,
01:03:07,442 -- 01:03:08,977
customer service, things like that.
01:03:08,977 -- 01:03:11,246
But he just said, wow, that's a great question.
01:03:11,246 -- 01:03:14,149
So catching advisors doing stuff right
01:03:14,149 -- 01:03:18,019
is, is something that we can expect, more to happen.
01:03:18,019 -- 01:03:19,988
And then number three, in terms of mitigating
01:03:19,988 -- 01:03:23,525
specific consumer risks by targeting practices
01:03:23,525 -- 01:03:25,360
and products being recommended
01:03:26,361 -- 01:03:28,764
that create higher risk for consumer harm.
01:03:28,764 -- 01:03:31,266
I think we're, we're going to see in the next,
01:03:31,266 -- 01:03:33,702
you know, 0 to 5 years
01:03:33,702 -- 01:03:35,403
is collectively,
01:03:35,403 -- 01:03:38,140
we are going to have to look at strategies,
01:03:38,140 -- 01:03:41,109
right, that are being touted out there.
01:03:41,109 -- 01:03:43,078
I'll pick on,
01:03:43,078 -- 01:03:46,414
a simple generic one, leverage...leverage investments,
01:03:46,414 -- 01:03:49,050
which for whatever reason, anecdotally from my lens,
01:03:49,050 -- 01:03:50,952
were not seen as frenzied
01:03:50,952 -- 01:03:54,723
a rush for consumers or advisors recommending leverage.
01:03:54,723 -- 01:03:58,693
But I can recall, in, in my career
01:03:58,693 -- 01:04:03,698
almost having to do battle with a bank wholesaler
01:04:04,599 -- 01:04:06,568
in terms of why I was disallowing
01:04:06,568 -- 01:04:09,404
this particular leverage investment case
01:04:09,404 -- 01:04:11,106
with the bank
01:04:11,106 -- 01:04:12,140
wholesaler saying, look,
01:04:12,140 -- 01:04:14,976
the client qualifies for this million dollars
01:04:14,976 -- 01:04:16,011
and trying to explain.
01:04:16,011 -- 01:04:18,914
Yes, but that doesn't mean it's reasonable for the client,
01:04:18,914 -- 01:04:21,917
given their parameters, their age,
01:04:21,917 -- 01:04:23,051
their risk tolerance,
01:04:23,051 -- 01:04:26,988
their overall income, their wealth...profile.
01:04:26,988 -- 01:04:29,557
That doesn't mean it's a reasonable case for them.
01:04:29,557 -- 01:04:31,326
So at a certain point,
01:04:31,326 -- 01:04:33,428
you know, we have to recognize like, like here
01:04:33,428 -- 01:04:36,298
I am the MGA trying to control that
01:04:36,298 -- 01:04:38,700
the, the banker, just like our,
01:04:38,700 -- 01:04:41,936
our climate expert there on the stage said,
01:04:41,936 -- 01:04:44,673
wow, you can't insure a house in a floodplain,
01:04:44,673 -- 01:04:45,907
but you can get a loan to buy one.
01:04:47,008 -- 01:04:48,009
That's not consistent.
01:04:48,009 -- 01:04:50,178
Right. That's an inconsistent message.
01:04:50,178 -- 01:04:55,250
So here, if I'm trying to mitigate a leverage case,
01:04:55,250 -- 01:04:56,851
that may be egregious.
01:04:56,851 -- 01:05:00,155
Well, the bank wholesaler wants to sell debt.
01:05:00,155 -- 01:05:01,756
He wants to get the maximum debt out there.
01:05:01,756 -- 01:05:04,826
The insurance company wants to sell units of SEG funds,
01:05:04,826 -- 01:05:06,094
that's out there.
01:05:06,094 -- 01:05:07,729
So I think it will help.
01:05:07,729 -- 01:05:08,897
You know, it's a fantasy
01:05:08,897 -- 01:05:10,498
to think that I, as the MGA
01:05:10,498 -- 01:05:14,269
compliance officer, can stop that by myself.
01:05:14,269 -- 01:05:17,138
If the industry itself, at the carrier level,
01:05:17,138 -- 01:05:19,407
at the regulator level,
01:05:19,407 -- 01:05:22,744
doesn't kind of at least put forth an opinion to say,
01:05:22,744 -- 01:05:24,813
you know what, these are the nine dots.
01:05:24,813 -- 01:05:25,346
You know,
01:05:25,346 -- 01:05:26,614
you can look at the MFDA,
01:05:26,614 -- 01:05:27,916
which has a
01:05:27,916 -- 01:05:31,119
pretty reasonable way to calculate
01:05:31,119 -- 01:05:33,488
what a reasonable amount of leverage would be
01:05:33,488 -- 01:05:36,124
and what might be over, off side.
01:05:36,124 -- 01:05:37,525
So looking at the client's
01:05:37,525 -- 01:05:40,428
risk, their debt service ratio, things like that.
01:05:40,428 -- 01:05:42,630
But it can't just be one entity
01:05:42,630 -- 01:05:45,700
in the distribution chain that's trying to control that.
01:05:45,700 -- 01:05:48,403
Everybody needs to kind of put that line in the sand.
01:05:49,971 -- 01:05:51,906
So yeah.
01:05:51,906 -- 01:05:54,042
We got some SEG funds Guidance coming.
01:05:54,042 -- 01:05:57,245
You're going to get excited about Eric, when it comes to leveraging.
01:05:57,245 -- 01:05:57,946
Robert,
01:05:57,946 -- 01:05:59,080
do you want to jump in
01:05:59,080 -- 01:06:02,717
and talk about the future of agent supervision?
01:06:02,717 -- 01:06:03,017
Sure.
01:06:03,017 -- 01:06:05,119
So I already touched on some of it in terms of,
01:06:05,119 -- 01:06:05,453
you know, the
01:06:05,453 -- 01:06:10,959
we have shifted, our entire supervision process to OSP.
01:06:10,959 -- 01:06:12,794
So we're we're all we're 100% digital
01:06:12,794 -- 01:06:15,897
now for LAMR receptions, examinations.
01:06:15,897 -- 01:06:17,899
The BPAC going out.
01:06:17,899 -- 01:06:19,300
Where that's expanding out
01:06:19,300 -- 01:06:20,501
is something we mentioned earlier,
01:06:20,501 -- 01:06:22,470
is there 66,000 agents in the space.
01:06:22,470 -- 01:06:25,006
And I have a small but mighty team.
01:06:25,006 -- 01:06:30,011
We need to leverage technology heavily.
01:06:31,145 -- 01:06:32,280
By leveraging technology,
01:06:32,280 -- 01:06:33,715
not only are we looking at process
01:06:33,715 -- 01:06:35,516
efficiencies and burden reduction,
01:06:35,516 -- 01:06:36,384
and that's on both sides.
01:06:36,384 -- 01:06:38,152
It's not just the Senior Compliance Officers
01:06:38,152 -- 01:06:40,121
who are processing these.
01:06:40,121 -- 01:06:42,156
You know, these reviews and investigations,
01:06:42,156 -- 01:06:43,758
but also on the industry side,
01:06:43,758 -- 01:06:45,293
encouraging the industry to report
01:06:45,293 -- 01:06:46,627
because we make it easy for them.
01:06:46,627 -- 01:06:49,330
That's the idea, right? To reduce that burden.
01:06:49,330 -- 01:06:50,498
But at the end of the day,
01:06:50,498 -- 01:06:52,166
that all needs to be boiled down to something.
01:06:52,166 -- 01:06:54,736
So 66,000 agents, limited resources.
01:06:54,736 -- 01:06:57,171
How is it we determine what we do next?
01:06:57,171 -- 01:06:59,140
So by taking
01:06:59,140 -- 01:07:02,677
maximizing data, big data analytics and being able to,
01:07:02,677 -- 01:07:02,977
you know,
01:07:02,977 -- 01:07:05,813
distill that down and identify risk
01:07:05,813 -- 01:07:08,349
and direct resources where that risk is greatest.
01:07:08,349 -- 01:07:10,718
That is the future, and the future is now.
01:07:10,718 -- 01:07:12,487
We're doing that now,
01:07:12,487 -- 01:07:13,221
what it is
01:07:13,221 -- 01:07:14,355
now is growing
01:07:14,355 -- 01:07:15,990
the capacity to,
01:07:15,990 -- 01:07:17,191
you know, maximize
01:07:17,191 -- 01:07:19,694
those as well and also to share that data back out again.
01:07:21,028 -- 01:07:23,431
So
01:07:23,431 -- 01:07:25,266
in the meantime, we have to be realistic
01:07:25,266 -- 01:07:27,735
that we're not going to hit 66,000 agents every year.
01:07:27,735 -- 01:07:28,903
It's not going to happen.
01:07:28,903 -- 01:07:30,271
So we have to take sort of a trust
01:07:30,271 -- 01:07:32,607
and confirm approach to things as well.
01:07:32,607 -- 01:07:34,809
So yes, we have self-reported data
01:07:34,809 -- 01:07:36,878
that self-reported data through questionnaires
01:07:36,878 -- 01:07:37,812
such as the BPAC.
01:07:37,812 -- 01:07:39,313
There's a questionnaire that also goes along
01:07:39,313 -- 01:07:40,781
with the examination program.
01:07:40,781 -- 01:07:42,416
There's an attestation at the end of that.
01:07:42,416 -- 01:07:44,385
You're swearing to its content.
01:07:44,385 -- 01:07:46,320
So you may be part of an exam
01:07:46,320 -- 01:07:48,489
where we are going to confirm the content.
01:07:48,489 -- 01:07:49,757
You might be part of a BPAC,
01:07:49,757 -- 01:07:51,893
which is a broad reaching questionnaire
01:07:51,893 -- 01:07:54,128
and may or may not have a follow up examination.
01:07:54,128 -- 01:07:56,230
But that attestation means something.
01:07:56,230 -- 01:07:57,565
So it will be a test and confirm
01:07:57,565 -- 01:07:59,333
approach to it, or a trust and confirm
01:07:59,333 -- 01:08:01,002
approach to it as well,
01:08:01,002 -- 01:08:02,770
that we have to broadly believe that
01:08:02,770 -- 01:08:05,172
there are good agents who are going to report accurately,
01:08:05,172 -- 01:08:07,008
and then we'll be, will be, you know,
01:08:07,008 -- 01:08:10,611
confirming those who aren't then reporting that back again.
01:08:10,611 -- 01:08:12,146
And that's a surrealistic approach
01:08:12,146 -- 01:08:14,315
when we're looking at a large number.
01:08:14,315 -- 01:08:16,384
But in terms of the future, I mean, we're looking
01:08:16,384 -- 01:08:19,720
we've already implemented AI into, to our programs,
01:08:21,689 -- 01:08:23,824
mostly for burden reduction purposes.
01:08:23,824 -- 01:08:26,927
We're seeing the industry has shifted heavily to,
01:08:26,927 -- 01:08:29,196
electronic applications.
01:08:29,196 -- 01:08:30,431
We're looking with agents
01:08:30,431 -- 01:08:32,366
when we're doing examinations of their files,
01:08:32,366 -- 01:08:34,568
are stored electronically.
01:08:34,568 -- 01:08:36,070
That's now ballooned into,
01:08:36,070 -- 01:08:39,040
so what cloud are your, are your files served on?
01:08:39,040 -- 01:08:41,409
Are they within Canadian borders or not?
01:08:41,409 -- 01:08:42,843
Is that a concern to the industry?
01:08:42,843 -- 01:08:44,712
Is that a concern to the regulator, these sort of things?
01:08:44,712 -- 01:08:46,080
These are the conversations that are happening
01:08:46,080 -- 01:08:48,549
that expands out onto CISRO. CCIR levels
01:08:48,549 -- 01:08:51,452
having those conversations as well.
01:08:51,452 -- 01:08:53,988
So it's growing rapidly.
01:08:53,988 -- 01:08:56,490
Where I see it as a very positive,
01:08:56,490 -- 01:08:59,126
is that data is knowledge,
01:08:59,126 -- 01:09:00,761
and that knowledge gives you the ability
01:09:00,761 -- 01:09:02,296
to make good decisions.
01:09:02,296 -- 01:09:03,898
And if, if everyone's now
01:09:03,898 -- 01:09:05,833
moved from what you said earlier, like
01:09:05,833 -- 01:09:07,201
everything was paper driven, right?
01:09:07,201 -- 01:09:07,868
And everything's now
01:09:07,868 -- 01:09:10,237
shifted, that it's now easier to process
01:09:10,237 -- 01:09:11,539
and analyze that data
01:09:11,539 -- 01:09:16,544
to identify harm or identify agents doing great work.
01:09:16,877 -- 01:09:19,647
Then, then that's something that we can leverage and have,
01:09:20,948 -- 01:09:23,150
you know, to, to, to...raise the industry up entirely.
01:09:23,150 -- 01:09:27,788
So I think, an adage I like to use a lot is like,
01:09:27,788 -- 01:09:30,257
how do you eat an elephant?
01:09:30,257 -- 01:09:31,458
One bite at a time.
01:09:31,458 -- 01:09:34,361
Exactly.
01:09:34,361 -- 01:09:36,230
When I jump in with the company perspective.
01:09:36,230 -- 01:09:40,701
Not from the elephant perspective, no.
01:09:40,701 -- 01:09:41,936
I've touched on a lot of it.
01:09:41,936 -- 01:09:44,438
You've, you've spoken to a lot of it as well, Robert,
01:09:44,438 -- 01:09:47,441
about how we are changing the way that we are monitoring
01:09:47,441 -- 01:09:49,643
how we're using data.
01:09:49,643 -- 01:09:51,979
Just a couple of, kind of, follow up
01:09:51,979 -- 01:09:55,149
points to some of the things that have already said,
01:09:55,149 -- 01:09:59,386
while we may be using this data for our advisors,
01:09:59,386 -- 01:10:00,187
please understand
01:10:00,187 -- 01:10:01,455
we're also going to be rolling it up
01:10:01,455 -- 01:10:05,526
to see what firm are they with, what MGA are they with, what AGA
01:10:05,526 -- 01:10:06,126
are they with.
01:10:06,126 -- 01:10:08,228
Because that might then influence
01:10:08,228 -- 01:10:10,731
the conversations that we're going to be having.
01:10:10,731 -- 01:10:12,967
Or you know, the interactions
01:10:12,967 -- 01:10:14,902
that we might want to have with those firms.
01:10:16,337 -- 01:10:20,708
I think our advisors practices have shifted,
01:10:20,708 -- 01:10:25,779
but will shift monumentally with the use of technology.
01:10:26,213 -- 01:10:29,883
You talked about notes and things along those lines.
01:10:29,883 -- 01:10:30,784
I don't understand
01:10:30,784 -- 01:10:33,187
why advisors aren't taping some of their phone
01:10:33,187 -- 01:10:34,488
or their meetings
01:10:34,488 -- 01:10:36,790
and using those as their sources of,
01:10:36,790 -- 01:10:40,127
of meeting notes and things along those lines.
01:10:40,127 -- 01:10:42,796
But then how do we make sure that it's secure?
01:10:42,796 -- 01:10:45,833
How do we make sure the advisor understands? Yes.
01:10:45,833 -- 01:10:47,768
Where is that data cloud?
01:10:47,768 -- 01:10:52,106
Do you know how to have access or restrict access?
01:10:52,106 -- 01:10:54,975
Does your assistant that you just fired yesterday
01:10:54,975 -- 01:10:57,778
still have access to all of your systems?
01:10:57,778 -- 01:11:01,648
Have you made sure to take care of all of those things?
01:11:01,648 -- 01:11:04,751
Cybersecurity is probably one of, well,
01:11:04,751 -- 01:11:06,420
it is, the number one,
01:11:06,420 -- 01:11:08,122
behind licensing
01:11:08,122 -- 01:11:11,658
issue that my, my compliance team is dealing with.
01:11:11,658 -- 01:11:13,527
So advisors who have had
01:11:13,527 -- 01:11:15,629
their emails compromised
01:11:15,629 -- 01:11:18,632
or their clients have had their emails compromised,
01:11:18,632 -- 01:11:20,734
this is only going to continue.
01:11:20,734 -- 01:11:22,469
So there's a whole education
01:11:22,469 -- 01:11:24,404
that I believe needs to occur
01:11:24,404 -- 01:11:25,639
for advisors
01:11:25,639 -- 01:11:28,375
and for clients about data and protection
01:11:28,375 -- 01:11:31,245
and the use of these technologies
01:11:31,245 -- 01:11:35,148
that are very quickly becoming commonplace for all of us.
01:11:36,683 -- 01:11:40,087
I was a part of a very large,
01:11:40,087 -- 01:11:43,790
ATO, account takeover situation
01:11:43,790 -- 01:11:45,826
going back about two years now.
01:11:45,826 -- 01:11:46,960
And we were talking with the,
01:11:46,960 -- 01:11:48,528
you know, carrier in the,
01:11:48,528 -- 01:11:48,895
you know,
01:11:48,895 -- 01:11:52,599
carrier had just completed a survey of their advisors
01:11:52,599 -- 01:11:55,068
who purchased their insurance product.
01:11:55,068 -- 01:11:59,439
And the number one password was still password 1234.
01:11:59,439 -- 01:12:02,442
No, really. Right.
01:12:02,442 -- 01:12:03,443
Not password?
01:12:03,443 -- 01:12:04,778
That was number two, I believe.
01:12:04,778 -- 01:12:06,647
But, you know, it,
01:12:06,647 -- 01:12:07,014
you know,
01:12:07,014 -- 01:12:07,681
how do we
01:12:07,681 -- 01:12:09,549
how do we advance all of these things
01:12:09,549 -- 01:12:12,853
that are to the betterment of all of us, from the MGA
01:12:12,853 -- 01:12:15,055
to the insurer to the regulator?
01:12:15,055 -- 01:12:19,593
But then also keep the customers fair and protected?
01:12:19,593 -- 01:12:22,229
So those would be my closing.
01:12:22,229 -- 01:12:23,597
Thanks, Kim.
01:12:23,597 -- 01:12:24,798
I, in the interest of time,
01:12:24,798 -- 01:12:26,666
I think we're just going to jump ahead,
01:12:26,666 -- 01:12:28,769
and, do our last questions.
01:12:28,769 -- 01:12:30,937
We've got a bit of time for Q&A.
01:12:30,937 -- 01:12:32,005
If you've got a question
01:12:32,005 -- 01:12:33,907
and you haven't submitted it, I'd encourage you
01:12:33,907 -- 01:12:36,743
to figure out the site and submit it now
01:12:36,743 -- 01:12:39,379
so we can take it in a couple of minutes.
01:12:39,379 -- 01:12:41,248
I'm hearing a lot on the need
01:12:41,248 -- 01:12:44,451
for education, on the need for security,
01:12:44,451 -- 01:12:46,887
on the need for data protection.
01:12:46,887 -- 01:12:47,888
Another theme that I think
01:12:47,888 -- 01:12:49,156
is coming out of every single
01:12:49,156 -- 01:12:51,258
one of the questions we've discussed
01:12:51,258 -- 01:12:53,226
today is collaboration.
01:12:53,226 -- 01:12:55,762
And that collaboration is key, that we're stronger,
01:12:56,830 -- 01:12:59,366
we're stronger together when it comes to achieving fair
01:12:59,366 -- 01:13:01,201
outcomes for consumers.
01:13:01,201 -- 01:13:03,870
And it's really important then to learn from each other.
01:13:03,870 -- 01:13:04,738
It's important
01:13:04,738 -- 01:13:07,641
for regulators to learn from industry and vice versa,
01:13:07,641 -- 01:13:10,210
and to really appreciate each other's perspective.
01:13:10,210 -- 01:13:15,215
So a challenge to my panel is, for our insurer and MGA
01:13:16,883 -- 01:13:18,051
reps,
01:13:18,051 -- 01:13:19,586
if you could put yourself
01:13:19,586 -- 01:13:22,322
into the Market Conduct regulator shoes,
01:13:22,322 -- 01:13:23,890
what learnings would you share?
01:13:23,890 -- 01:13:25,959
And then for my FSRA colleagues
01:13:25,959 -- 01:13:28,028
try on Kim and Eric shoes for size.
01:13:28,028 -- 01:13:29,396
And what learnings would you share.
01:13:29,396 -- 01:13:32,666
And we'll hear more some doozies today.
01:13:32,666 -- 01:13:33,800
And I'm also going to give you
01:13:33,800 -- 01:13:37,537
an additional challenge of trying to do, your response
01:13:37,537 -- 01:13:38,672
and maybe one minute each.
01:13:38,672 -- 01:13:40,740
So we still have time for Q&A.
01:13:40,740 -- 01:13:42,075
Kim, do you want to kick it off?
01:13:42,075 -- 01:13:43,009
Okay.
01:13:43,009 -- 01:13:45,979
In one minute or less, I was actually going to say,
01:13:45,979 -- 01:13:47,681
and Swati kind of stole this, through
01:13:47,681 -- 01:13:50,150
her comments about an industry level
01:13:50,150 -- 01:13:53,019
is learning from the examples
01:13:53,019 -- 01:13:55,255
and the experiences that are occurring
01:13:55,255 -- 01:13:55,855
all around
01:13:55,855 -- 01:13:59,192
us, and using that to inform the shape
01:13:59,192 -- 01:14:01,328
and the way that our industry moves forward.
01:14:03,163 -- 01:14:05,665
Robert.
01:14:05,665 -- 01:14:07,767
For those of you who don't know, I come from industry,
01:14:07,767 -- 01:14:12,272
so I've seen sort of both sides of it. And I think,
01:14:12,272 -- 01:14:14,841
I think it's important to recognize that,
01:14:14,841 -- 01:14:16,810
people in the compliance world are genuine.
01:14:16,810 -- 01:14:19,079
They genuinely care about consumer protection,
01:14:19,079 -- 01:14:20,080
about doing the right thing.
01:14:20,080 -- 01:14:22,849
And I think it's easy to get lost in this idea
01:14:22,849 -- 01:14:24,951
that, you know,
01:14:24,951 -- 01:14:26,786
the insurers are just out to make money.
01:14:26,786 -- 01:14:27,787
It's just commission driven.
01:14:27,787 -- 01:14:30,790
And sales driven, is like, well, yes, it's a business.
01:14:30,790 -- 01:14:32,959
But the compliance side of it can still be genuine.
01:14:32,959 -- 01:14:37,497
And on the regulator's side of it, it's not the big bad
01:14:37,497 -- 01:14:40,467
regulator coming in and, you know, not connecting as well.
01:14:40,467 -- 01:14:42,335
Like this is all about collaboration.
01:14:42,335 -- 01:14:44,637
Like this has to be done together.
01:14:44,637 -- 01:14:45,872
We have to see that, you know,
01:14:45,872 -- 01:14:47,040
there's, there's a reality
01:14:47,040 -- 01:14:51,044
that tens of thousands of transactions occur every day,
01:14:51,044 -- 01:14:51,911
within an insurer.
01:14:51,911 -- 01:14:53,513
So the regulator can't look back and say, well,
01:14:53,513 -- 01:14:54,848
how did you miss that?
01:14:54,848 -- 01:14:56,816
The regulator should say, how did you miss that?
01:14:56,816 -- 01:14:57,417
You know, like, let's, let's,
01:14:57,417 -- 01:14:59,919
let's learn about this together. What can we do to help?
01:14:59,919 -- 01:15:03,690
And so I think it's really understanding each other.
01:15:03,690 -- 01:15:05,325
Well, point of your question, like,
01:15:05,325 -- 01:15:06,793
you are seeing it from both sides of it.
01:15:06,793 -- 01:15:08,094
And I think,
01:15:08,094 -- 01:15:10,063
sharing that information, sharing the mistakes
01:15:10,063 -- 01:15:12,732
as well as the victories, is very important
01:15:12,732 -- 01:15:14,567
because I've said this at other
01:15:14,567 -- 01:15:16,336
stakeholder engagement,
01:15:16,336 -- 01:15:18,104
events, you know, a rising
01:15:18,104 -- 01:15:20,106
tide of compliance raises all ships.
01:15:24,944 -- 01:15:27,947
From the MGA perspective,
01:15:27,947 -- 01:15:30,149
you know, what we would like you to know
01:15:30,149 -- 01:15:33,119
is, is how important we think the work is
01:15:33,119 -- 01:15:34,954
that you're doing with LAMRs
01:15:34,954 -- 01:15:37,624
and, and hopefully that you can triage those
01:15:37,624 -- 01:15:40,593
because at the ground level, as an MGA,
01:15:40,593 -- 01:15:43,630
if we see, a real bad actor
01:15:43,630 -- 01:15:45,164
and we have to quickly reassign
01:15:45,164 -- 01:15:47,700
those clients to new advisor,
01:15:47,700 -- 01:15:50,236
and meanwhile that advisor is still running around
01:15:50,236 -- 01:15:51,371
speaking of those clients,
01:15:51,371 -- 01:15:53,139
because nothing's yet done,
01:15:53,139 -- 01:15:54,907
it places us in a hard position,
01:15:54,907 -- 01:15:57,310
but obviously we recognize you have to cover yourselves.
01:15:57,310 -- 01:15:59,278
There's certain legal things you have to do,
01:15:59,278 -- 01:16:01,748
but we just respect that work and,
01:16:01,748 -- 01:16:03,383
want to give you that insight.
01:16:03,383 -- 01:16:05,051
And then the second thing is,
01:16:05,051 -- 01:16:08,855
maybe this is more for CLHIA, but the industry in general
01:16:08,855 -- 01:16:10,990
is the electronic applications.
01:16:10,990 -- 01:16:15,328
There's so much potential to add FTC into them.
01:16:15,328 -- 01:16:17,230
Something as simple as, there's
01:16:17,230 -- 01:16:19,532
a small insurance company out there,
01:16:19,532 -- 01:16:20,833
I won't name its name, but they
01:16:20,833 -- 01:16:24,070
they have a, a dedicated sales force.
01:16:24,070 -- 01:16:24,837
And it was interesting.
01:16:24,837 -- 01:16:26,472
I know someone who's in that company.
01:16:26,472 -- 01:16:28,074
And the application,
01:16:28,074 -- 01:16:30,009
if the advisor tries to submit a case
01:16:30,009 -- 01:16:32,512
where the premium is more than 12% of the client's
01:16:32,512 -- 01:16:36,249
gross income, it freezes it. There's a red flag on it.
01:16:36,249 -- 01:16:38,184
Not to mean that there might not be a reason for that,
01:16:38,184 -- 01:16:40,953
but it has to be approved at a higher level.
01:16:40,953 -- 01:16:43,222
So things like electronic applications
01:16:43,222 -- 01:16:44,824
that can stop something.
01:16:44,824 -- 01:16:46,325
If an advisor is writing a case
01:16:46,325 -- 01:16:48,661
on a client who lives in Alberta,
01:16:48,661 -- 01:16:50,296
and the client goes to sign it
01:16:50,296 -- 01:16:51,497
and says signed where
01:16:51,497 -- 01:16:54,300
Alberta and the advisors license is Ontario,
01:16:54,300 -- 01:16:56,869
that application should freeze that case.
01:16:56,869 -- 01:16:58,538
It shouldn't allow it to go through.
01:16:58,538 -- 01:16:59,672
And now the insurance carrier
01:16:59,672 -- 01:17:00,940
has to report to the regulator
01:17:00,940 -- 01:17:03,509
that this was an extra jurisdictional case.
01:17:03,509 -- 01:17:05,478
So, a couple of, a couple of points there.
01:17:08,147 -- 01:17:08,881
You know, our
01:17:08,881 -- 01:17:09,882
last FSRA
01:17:09,882 -- 01:17:12,518
change, the last question was
01:17:12,518 -- 01:17:15,221
what makes you successful as a regulator?
01:17:15,221 -- 01:17:18,758
And I had mentioned about five C’s that I think,
01:17:18,758 -- 01:17:21,127
you know, make us successful as a regulator.
01:17:21,127 -- 01:17:23,396
If I were to put myself in Kim
01:17:23,396 -- 01:17:27,566
and Eric's shoes, big shoes to fill and fancy ones to,
01:17:27,566 -- 01:17:29,535
but if I were to put myself in their shoes
01:17:29,535 -- 01:17:31,270
and I would apply the same
01:17:31,270 -- 01:17:33,239
five C’s to them
01:17:33,239 -- 01:17:37,109
and then see what learning can we have for the industry.
01:17:37,109 -- 01:17:39,412
So the first C is Courage.
01:17:39,412 -- 01:17:43,082
I think both Kim and Eric, representing insurance companies
01:17:43,082 -- 01:17:45,651
and the MGAs have had a lot of courage
01:17:45,651 -- 01:17:48,788
to accept the problems that we've identified.
01:17:48,788 -- 01:17:50,289
They always say to solve a problem,
01:17:50,289 -- 01:17:52,224
you first need to identify and accept
01:17:52,224 -- 01:17:53,492
that there is a problem.
01:17:53,492 -- 01:17:54,827
All automatic studies,
01:17:54,827 -- 01:17:56,996
all our reviews, all the problems and deficiencies
01:17:56,996 -- 01:17:58,664
that we've identified, them
01:17:58,664 -- 01:18:00,733
being installed, wha’ts in the industry for many,
01:18:00,733 -- 01:18:04,403
many years, still had the courage to accept it.
01:18:04,403 -- 01:18:07,073
The second thing, Competency,
01:18:07,073 -- 01:18:08,541
both on the insurer side
01:18:08,541 -- 01:18:10,910
and on the MGA side. I see Kim
01:18:10,910 -- 01:18:11,477
and Eric
01:18:11,477 -- 01:18:13,079
continuously striving
01:18:13,079 -- 01:18:14,980
to improve the competency
01:18:14,980 -- 01:18:17,383
of the people that they are working with,
01:18:17,383 -- 01:18:20,453
to ensure that we are meeting the regulatory requirements,
01:18:20,453 -- 01:18:21,320
just not, you know,
01:18:21,320 -- 01:18:22,922
the hard coded rules,
01:18:22,922 -- 01:18:24,323
but also the guidance,
01:18:24,323 -- 01:18:26,692
the spirit of law to serve the consumer better.
01:18:26,692 -- 01:18:29,161
And I'm sure, just like Eric and Kim,
01:18:29,161 -- 01:18:31,864
all of you are doing that in the room as well.
01:18:31,864 -- 01:18:34,867
The third thing, the third C, Communication.
01:18:34,867 -- 01:18:36,368
We are constantly talking.
01:18:36,368 -- 01:18:38,604
You can even see through the banter that we have here.
01:18:38,604 -- 01:18:40,105
We are interacting
01:18:40,105 -- 01:18:41,373
and insurance
01:18:41,373 -- 01:18:44,210
companies and MGAs are just not interacting with regulators,
01:18:44,210 -- 01:18:46,812
but they are also talking amongst themselves
01:18:46,812 -- 01:18:49,682
to understand how best to serve the consumer.
01:18:49,682 -- 01:18:52,117
The fourth thing, Consistent approach.
01:18:52,117 -- 01:18:54,620
I know that insurance companies and MGAs
01:18:54,620 -- 01:18:55,888
and both Kim and Eric,
01:18:55,888 -- 01:18:57,423
they are on our stakeholder advisory
01:18:57,423 -- 01:18:59,191
committee, technical advisory committee,
01:18:59,191 -- 01:19:01,126
so many members in this room,
01:19:01,126 -- 01:19:03,229
you are constantly striving to understand
01:19:03,229 -- 01:19:04,964
how best we divvy up the roles
01:19:04,964 -- 01:19:06,465
and responsibilities
01:19:06,465 -- 01:19:08,467
to make sure that the right effect
01:19:08,467 -- 01:19:10,469
gets passed on to the consumer.
01:19:10,469 -- 01:19:12,705
And the last thing is the moral Compass.
01:19:12,705 -- 01:19:13,539
The North Star
01:19:13,539 -- 01:19:15,674
that Mark mentioned as well this morning.
01:19:15,674 -- 01:19:16,475
All of this,
01:19:16,475 -- 01:19:19,144
I mean, we understand that we are in the industry.
01:19:19,144 -- 01:19:20,512
Bottom lines are important.
01:19:20,512 -- 01:19:23,215
Profitability is important. Growth is important.
01:19:23,215 -- 01:19:26,151
But doing it the right way is also very important.
01:19:26,151 -- 01:19:29,521
And if I were to place myself in Kim and Eric's shoes,
01:19:29,521 -- 01:19:29,755
you know,
01:19:29,755 -- 01:19:31,757
ever since I've started in Canada
01:19:31,757 -- 01:19:33,759
in the Life and Health Insurance industry,
01:19:33,759 -- 01:19:36,729
I've seen them both follow through that North Star.
01:19:36,729 -- 01:19:39,698
So I would just summarize that the combination of,
01:19:39,698 -- 01:19:42,668
you know, having that Courage, Competency,
01:19:42,668 -- 01:19:45,070
Communication, Consistency
01:19:45,070 -- 01:19:49,541
and Compass is what we can learn from Kim and Eric.
01:19:49,541 -- 01:19:51,243
And if we all in the industry
01:19:51,243 -- 01:19:54,913
implement that, we definitely will be a super
01:19:54,913 -- 01:19:56,615
powerful industry together.
01:19:57,583 -- 01:19:58,984
Thanks, Swati.
01:19:58,984 -- 01:20:01,987
I'm just going to do a check with, at the back of the room.
01:20:01,987 -- 01:20:05,791
I think we have about five minutes for Q&A.
01:20:05,791 -- 01:20:09,661
Okay. And, and we've got one up here.
01:20:09,661 -- 01:20:10,662
I'll read it out,
01:20:10,662 -- 01:20:12,898
and then I'll, let the panel decide
01:20:12,898 -- 01:20:15,067
who wants to jump in on it first.
01:20:15,067 -- 01:20:16,502
What is the role of life
01:20:16,502 -- 01:20:18,771
insurers to ensure that their products
01:20:18,771 -- 01:20:22,241
are designed appropriately for their target market,
01:20:22,241 -- 01:20:24,309
with increasingly complex products
01:20:24,309 -- 01:20:26,945
being sold to mass market households,
01:20:26,945 -- 01:20:28,747
who is really responsible
01:20:28,747 -- 01:20:31,250
for the suitability of the products?
01:20:31,250 -- 01:20:32,050
Or we could say,
01:20:32,050 -- 01:20:35,187
perhaps a suitability of the advice?
01:20:35,187 -- 01:20:38,157
Who wants to jump in on that?
01:20:38,157 -- 01:20:40,058
Well, I can start.
01:20:40,058 -- 01:20:45,030
So as I mentioned, in some of my earlier remarks,
01:20:45,030 -- 01:20:46,632
at Manulife,
01:20:46,632 -- 01:20:48,734
our product design does
01:20:48,734 -- 01:20:51,336
include the fair treatment of customers as a
01:20:52,838 -- 01:20:54,239
creation component.
01:20:54,239 -- 01:20:59,278
So we are, you know, doing market studies to determine who
01:20:59,278 -- 01:21:04,283
these clients should be or in some cases, shouldn't be.
01:21:04,750 -- 01:21:09,755
The complexity of the products being sold.
01:21:09,855 -- 01:21:13,358
To me, very honestly, it's a joint responsibility.
01:21:13,358 -- 01:21:16,428
The advisor has the responsibility to complete,
01:21:16,428 -- 01:21:20,299
a needs based sale that is right for their client.
01:21:20,299 -- 01:21:24,569
They need to understand the product that they are selling.
01:21:24,569 -- 01:21:26,805
They need to be able to explain it,
01:21:26,805 -- 01:21:30,175
in a variety of ways to their client.
01:21:30,175 -- 01:21:32,277
And then they need to complete,
01:21:32,277 -- 01:21:35,814
in my opinion, a really great reason
01:21:35,814 -- 01:21:39,785
why letter so that the client can remember years later
01:21:39,785 -- 01:21:43,255
why it was that they purchased what they purchased.
01:21:43,255 -- 01:21:45,490
That's the adviser's responsibility.
01:21:45,490 -- 01:21:49,094
I see the MGA having a responsibility for ensuring that,
01:21:49,094 -- 01:21:52,998
you know, it's not everything the advisor is selling.
01:21:52,998 -- 01:21:54,966
Because, again, as an insurance company,
01:21:54,966 -- 01:21:57,035
I can only see Manulife product.
01:21:57,035 -- 01:22:00,705
I can't see Sun Equitable or any of my other colleagues.
01:22:00,705 -- 01:22:02,908
I can't see what's happening there.
01:22:02,908 -- 01:22:03,975
And then from the insurance
01:22:03,975 -- 01:22:07,045
company, again, using our tools,
01:22:07,045 -- 01:22:10,315
we should be going to those advisors to say,
01:22:10,315 -- 01:22:11,950
why are you selling this?
01:22:11,950 -- 01:22:12,951
This doesn't appear
01:22:12,951 -- 01:22:17,956
to fit inside the, the client base that we were expecting.
01:22:18,190 -- 01:22:22,060
What is your rationalization for that? Help us understand.
01:22:22,060 -- 01:22:25,497
And folks, in some cases their answer is appropriate.
01:22:25,497 -- 01:22:30,168
In other cases, the answer is, that's probably not great.
01:22:30,168 -- 01:22:31,636
How can we remediate this?
01:22:31,636 -- 01:22:33,638
What should we be doing for the clients
01:22:33,638 -- 01:22:34,806
that have already got the product?
01:22:34,806 -- 01:22:37,676
And what should we be doing with you? Go forward.
01:22:37,676 -- 01:22:39,978
So I just want to quickly add to that,
01:22:39,978 -- 01:22:41,580
that a product is a thing.
01:22:41,580 -- 01:22:42,347
Right?
01:22:42,347 -- 01:22:46,518
It's, it's like a car with no governor.
01:22:48,520 -- 01:22:49,988
For those who aren't from car
01:22:49,988 -- 01:22:52,123
culture, like a governor will dictate,
01:22:52,123 -- 01:22:53,858
it can only go up to a certain speed.
01:22:53,858 -- 01:22:57,596
So I think, as I mentioned before, collectively
01:22:57,596 -- 01:22:59,864
we have to look at these products like, say, whole life.
01:22:59,864 -- 01:23:01,099
It's, it's a thing.
01:23:01,099 -- 01:23:02,767
It's designed for a marketplace,
01:23:02,767 -- 01:23:04,869
but it can be used in so many different ways.
01:23:04,869 -- 01:23:06,571
And so collectively
01:23:06,571 -- 01:23:07,906
we have to decide, like
01:23:07,906 -- 01:23:11,910
if someone's putting 40% of their income into one product,
01:23:11,910 -- 01:23:12,944
we as an industry
01:23:12,944 -- 01:23:14,279
have to start to look at that
01:23:14,279 -- 01:23:15,714
and say, okay, is that strategy?
01:23:15,714 -- 01:23:18,383
Is that going to lead to good long term success?
01:23:18,383 -- 01:23:20,986
It could or could not.
01:23:20,986 -- 01:23:23,088
But we, you know, I personally believe
01:23:23,088 -- 01:23:25,090
we can't just leave it to MGAs
01:23:25,090 -- 01:23:27,659
to put that governor on those products
01:23:27,659 -- 01:23:29,294
because it can be very dangerous
01:23:29,294 -- 01:23:30,995
if they're used the wrong way.
01:23:30,995 -- 01:23:34,032
So in this game of Whac-A-Mole, where one MGA will say,
01:23:34,032 -- 01:23:35,633
well, I'm not comfortable with that
01:23:35,633 -- 01:23:37,535
advisor moves to another MGA.
01:23:37,535 -- 01:23:39,371
That game of whac-a-mole has to stop.
01:23:39,371 -- 01:23:40,839
So I think as an industry,
01:23:40,839 -- 01:23:43,208
if we can look at the strategies
01:23:43,208 -- 01:23:46,010
and come up with certain parameters for that,
01:23:46,010 -- 01:23:47,545
that would be helpful.
01:23:47,545 -- 01:23:50,849
And I think one thing to remember that, you know,
01:23:50,849 -- 01:23:51,483
one of our,
01:23:52,517 -- 01:23:53,485
principles, which
01:23:53,485 -- 01:23:55,120
has been a very important principle
01:23:55,120 -- 01:23:56,521
and you know, our Bible,
01:23:56,521 -- 01:23:58,556
when doing market conduct regulation,
01:23:58,556 -- 01:24:01,860
are the ICPs, Insurance Core Principles,
01:24:01,860 -- 01:24:03,128
which have been established
01:24:03,128 -- 01:24:05,897
at the IAIS and Insurance Core
01:24:05,897 -- 01:24:09,334
Principle 19 is the Bible for Market Conduct.
01:24:09,334 -- 01:24:13,404
And 19.5 specifically talks about,
01:24:13,404 -- 01:24:15,840
you know, how insurance companies,
01:24:15,840 -- 01:24:17,442
when they design a product,
01:24:17,442 -- 01:24:18,643
they need to think about
01:24:18,643 -- 01:24:21,279
who their target market is for their product
01:24:21,279 -- 01:24:23,681
appropriate as well as inappropriate.
01:24:23,681 -- 01:24:25,517
Kim mentioned that there is some kind of,
01:24:25,517 -- 01:24:27,318
you know, baseline target market.
01:24:27,318 -- 01:24:30,455
Not all insurance companies that we've seen it have it.
01:24:30,455 -- 01:24:33,157
So it's important to establish it, to set it.
01:24:33,157 -- 01:24:35,293
That can be exceptions to the norm.
01:24:35,293 -- 01:24:38,463
But you know, the exception can not become the norm.
01:24:38,463 -- 01:24:41,499
And then ICP 19.5...read through it.
01:24:41,499 -- 01:24:42,500
It also delves
01:24:42,500 -- 01:24:44,569
deeper into how insurance companies
01:24:44,569 -- 01:24:48,006
should communicate that target market to the MGAs,
01:24:48,006 -- 01:24:50,441
and how the MGAs, based on their work
01:24:50,441 -- 01:24:51,843
with the advisors, are required
01:24:51,843 -- 01:24:54,479
to report it back to the insurance companies,
01:24:54,479 -- 01:24:57,415
such that you have the right checks and balances in place.
01:24:57,415 -- 01:25:01,686
So we have a lot of good guidance and principles around it.
01:25:01,686 -- 01:25:04,989
It's time now that we operationalize it.
01:25:04,989 -- 01:25:05,990
Thanks, Swati.
01:25:05,990 -- 01:25:07,225
We're almost out of time,
01:25:07,225 -- 01:25:09,661
but we've got a great, question on the Board
01:25:09,661 -- 01:25:12,797
here, about compliance from the advisors perspective.
01:25:12,797 -- 01:25:14,565
So I'll read it out and then,
01:25:14,565 -- 01:25:15,733
Robert, we'll start with you
01:25:15,733 -- 01:25:18,970
and just send it down 30 seconds each, maybe.
01:25:18,970 -- 01:25:20,338
So from the advisors
01:25:20,338 -- 01:25:23,074
perspective, are the compliance functions
01:25:23,074 -- 01:25:25,877
seen as an impediment to doing business?
01:25:25,877 -- 01:25:27,578
How can MGAs or
01:25:27,578 -- 01:25:29,047
and insurers
01:25:29,047 -- 01:25:33,551
ensure that advisors are incented to do the right thing?
01:25:33,551 -- 01:25:34,018
Robert.
01:25:35,853 -- 01:25:37,088
I have heard the comment that
01:25:37,088 -- 01:25:39,891
I don't make any money doing compliance.
01:25:39,891 -- 01:25:42,427
You know, from when I was in the private sector as well as,
01:25:42,427 -- 01:25:44,595
in the public sector now.
01:25:44,595 -- 01:25:46,030
You know, I was like, I'm here for sales.
01:25:46,030 -- 01:25:47,765
I don't make money when I'm filling out reason
01:25:47,765 -- 01:25:49,600
why letters and all this sort of stuff.
01:25:49,600 -- 01:25:51,736
And, I'm sorry, you're a licensed professional.
01:25:51,736 -- 01:25:53,771
You have obligations, and,
01:25:53,771 -- 01:25:54,939
you, you need to,
01:25:54,939 -- 01:25:58,042
you know, complete your, your best practice steps.
01:25:58,042 -- 01:25:59,977
But what I always put back to people
01:25:59,977 -- 01:26:04,315
now is if you're going to sell your book a business
01:26:04,315 -- 01:26:06,818
and get good money, top dollar for it, don't
01:26:06,818 -- 01:26:07,718
you want to make sure
01:26:07,718 -- 01:26:10,388
that it is completely compliant, that you have followed...
01:26:10,388 -- 01:26:13,057
You can demonstrate with every single sale
01:26:13,057 -- 01:26:14,659
that it was a suitable sale because you followed
01:26:14,659 -- 01:26:16,194
best practices within it?
01:26:16,194 -- 01:26:17,662
That's how you maintain book value.
01:26:17,662 -- 01:26:19,897
That ought to be one of many incentives,
01:26:19,897 -- 01:26:21,299
but that is definitely one of your incentives.
01:26:21,299 -- 01:26:22,800
Like that's your retirement plan there.
01:26:22,800 -- 01:26:23,668
When you sell that book.
01:26:27,772 -- 01:26:31,676
No.
01:26:31,676 -- 01:26:32,910
Sorry.
01:26:32,910 -- 01:26:33,978
Yeah. Elaborate.
01:26:33,978 -- 01:26:38,983
How can how can we, well, we can ensure by making...
01:26:39,083 -- 01:26:40,651
I think that we can help advisors
01:26:40,651 -- 01:26:42,520
by making sure that they understand
01:26:42,520 -- 01:26:42,954
what the best
01:26:42,954 -- 01:26:44,288
practices are
01:26:44,288 -- 01:26:46,257
that we are expecting them to adhere
01:26:46,257 -- 01:26:49,260
to, helping them very quickly, perhaps
01:26:49,260 -- 01:26:51,629
very early on in their careers.
01:26:51,629 -- 01:26:52,863
Course correct.
01:26:52,863 -- 01:26:56,634
Make, make adjustments where required.
01:26:56,634 -- 01:27:00,338
So that, they are insulated.
01:27:00,338 -- 01:27:01,605
I always say to advisors, it's
01:27:01,605 -- 01:27:04,508
not if you get a complaint, it's when.
01:27:04,508 -- 01:27:07,178
And I have seen complaints go away
01:27:07,178 -- 01:27:10,881
because they have amazing notes and reason why letters.
01:27:10,881 -- 01:27:14,018
So if we can help them understand that,
01:27:14,018 -- 01:27:17,355
and I think we've done a good job.
01:27:17,355 -- 01:27:20,191
I think in the short run, maybe.
01:27:20,191 -- 01:27:22,927
But we are not here for the short run, right?
01:27:22,927 -- 01:27:24,361
I mean, a life insurance
01:27:24,361 -- 01:27:27,098
policy is a very long term policy that we are buying.
01:27:27,098 -- 01:27:29,200
And if you serve your consumers right,
01:27:29,200 -- 01:27:30,501
I think it's only going to prosper
01:27:30,501 -- 01:27:32,203
your business in the long run.
01:27:32,203 -- 01:27:35,739
So I would keep that, again, you know, as my North Star.
01:27:36,841 -- 01:27:37,208
Yeah.
01:27:37,208 -- 01:27:39,610
And at the MGA level,
01:27:39,610 -- 01:27:41,278
for advisors,
01:27:41,278 -- 01:27:42,413
doing business
01:27:42,413 -- 01:27:43,481
who want to do the right thing,
01:27:43,481 -- 01:27:44,648
they've reported to us
01:27:44,648 -- 01:27:47,118
that these actually help them do more business.
01:27:47,118 -- 01:27:49,086
So following the approach
01:27:49,086 -- 01:27:52,089
wins them cases and it gets them more referrals.
01:27:52,089 -- 01:27:54,291
So what we try to do is enhance
01:27:54,291 -- 01:27:55,426
those success stories
01:27:55,426 -- 01:27:57,094
and spread the magic
01:27:57,094 -- 01:27:58,762
and let advisors know that this
01:27:58,762 -- 01:28:00,965
this isn't some cryptic form.
01:28:00,965 -- 01:28:02,666
You have to apologize to a client
01:28:02,666 -- 01:28:05,436
that you're shoving it in front of them to sign.
01:28:05,436 -- 01:28:05,736
You know,
01:28:05,736 -- 01:28:08,405
this is something that can enhance their understanding
01:28:08,405 -- 01:28:11,275
and make sure that, God forbid, if they're in a coma,
01:28:11,275 -- 01:28:13,844
their family will understand what you've done here today.
01:28:13,844 -- 01:28:17,548
So it's all it should be a positive thing.
01:28:17,548 -- 01:28:20,751
So, we are out of time, and,
01:28:20,751 -- 01:28:22,820
we've actually gone a couple of minutes over time,
01:28:22,820 -- 01:28:24,788
and you're clearly a compliance crowd
01:28:24,788 -- 01:28:26,023
because you're all stuck around.
01:28:26,023 -- 01:28:28,559
So thank you so much for being here.
01:28:28,559 -- 01:28:30,394
We hope you found value,
01:28:30,394 -- 01:28:33,063
in the session today, both being here in person.
01:28:33,063 -- 01:28:35,499
And for those of you who are attending virtually,
01:28:36,500 -- 01:28:37,568
We would ask,
01:28:37,568 -- 01:28:38,369
from FSRA
01:28:38,369 -- 01:28:39,036
that you please
01:28:39,036 -- 01:28:40,938
take a few minutes to complete the conference
01:28:40,938 -- 01:28:44,575
survey on the conference site under the heading Feedback.
01:28:44,575 -- 01:28:45,909
That's really helpful to us.
01:28:45,909 -- 01:28:47,211
It helps us to plan
01:28:47,211 -- 01:28:48,379
next year's Exchange,
01:28:48,379 -- 01:28:49,680
make it hopefully even better
01:28:49,680 -- 01:28:52,549
and more successful than today.
01:28:52,549 -- 01:28:57,021
Also, please join us in the main area, for,
01:28:57,021 -- 01:28:57,821
short reception.
01:28:57,821 -- 01:28:59,957
That's just where you came down the escalators.
01:28:59,957 -- 01:29:01,425
We'll have a short reception.
01:29:01,425 -- 01:29:04,128
There's a cash bar and light food.
01:29:04,128 -- 01:29:04,995
It's really our chance
01:29:04,995 -- 01:29:06,730
to continue today's discussions
01:29:06,730 -- 01:29:10,267
and do a little more networking before we head home.
01:29:10,267 -- 01:29:12,703
But before you head out of this room,
01:29:12,703 -- 01:29:15,205
please join me in thanking our panel
01:29:15,205 -- 01:29:17,608
for such an informative and engaging discussion.
00:00:04:27 - 00:00:05:17
Good afternoon.
00:00:05:17 - 00:00:08:04
Thank you for joining us. My name is Beata Morris.
00:00:08:04 - 00:00:12:19
I'm the director of Property and Casualty Insurance Conduct at FSRA.
00:00:13:15 - 00:00:17:04
Joining me today is a panel of knowledgeable experts
00:00:17:26 - 00:00:20:28
who have worked with me over the last year, year and a half or so
00:00:20:28 - 00:00:22:17
on some of the work that we're going to talk about.
00:00:22:17 - 00:00:25:17
So I wanted to thank the panel for joining me today.
00:00:26:07 - 00:00:29:10
I wanted to acknowledge the audience that is joining us virtually.
00:00:30:10 - 00:00:32:29
I will say when we were preparing for the session,
00:00:32:29 - 00:00:33:26
I had asked my team
00:00:33:26 - 00:00:38:02
to look up a couple of insurance jokes or regulator jokes to make it a bit funny.
00:00:38:20 - 00:00:41:29
They’re way back over there you have Nick, Corey and John.
00:00:42:07 - 00:00:44:07
Spoiler alert, they didn't write any jokes.
00:00:44:07 - 00:00:47:07
They told me regulators aren't funny and insurance is not funny,
00:00:47:21 - 00:00:50:21
which in itself, probably is the joke so there will be no jokes
00:00:51:14 - 00:00:53:00
but we'll go through the session.
00:00:53:00 - 00:00:57:18
I do want to flag that this session is being simultaneously translated in French.
00:00:58:15 - 00:01:01:02
So if you would like to listen French, you want to put your hand up,
00:01:01:02 - 00:01:04:25
somebody from our staff will come over and give you a microphone or,
00:01:04:25 - 00:01:07:24
I don't know, a little thing that goes in your ear, I guess.
00:01:07:24 - 00:01:11:03
And for those of you online, there's a button there as well
00:01:11:03 - 00:01:13:16
where you can click on the French translation.
00:01:13:28 - 00:01:16:27
I do not speak a word of French, so this will all be in English
00:01:16:27 - 00:01:19:12
unless you have one of those devices or one of those methods.
00:01:20:02 - 00:01:23:26
I will remind everyone we will take questions at the end of the session.
00:01:24:18 - 00:01:27:15
If you log into your app, it works the same way as it did this morning.
00:01:27:15 - 00:01:30:14
You log in to the app with your username and password
00:01:30:14 - 00:01:32:09
and the questions will go to the back of the room.
00:01:32:09 - 00:01:35:26
And once we're ready, John and team will send them to me to the front.
00:01:38:07 - 00:01:38:29
One more thing.
00:01:38:29 - 00:01:43:06
The session is being taped and will be posted on our website
00:01:43:29 - 00:01:46:02
in the coming weeks, so give it a couple of weeks before
00:01:46:02 - 00:01:50:00
it is posted, but it will be available for viewing on our website afterwards.
00:01:50:28 - 00:01:53:27
Maybe with that, I will turn it over to my panel
00:01:53:27 - 00:01:56:04
and ask them to introduce themselves.
00:01:56:04 - 00:01:57:08
Liam, since you are on my right?
00:01:57:08 - 00:01:58:12
Yeah, of course.
00:01:58:12 - 00:01:59:21
Hi everyone, my name is Liam McGuinty.
00:01:59:21 - 00:02:02:23
I'm the VP, Strategy at the Insurance Bureau of Canada.
00:02:03:17 - 00:02:05:08
Beata, do you want me to say a little bit about IBC?
00:02:05:08 - 00:02:05:28
Sure!
00:02:05:28 - 00:02:09:14
So, we're the P&C industry association
00:02:09:22 - 00:02:13:26
we represent insurers that write home, car and business insurance.
00:02:14:24 - 00:02:18:00
We represent approximately 90% of the P&C industry.
00:02:18:00 - 00:02:18:28
It’s good to be here.
00:02:20:04 - 00:02:21:05
My name is Huston Loke.
00:02:21:05 - 00:02:24:05
I'm Executive Vice President of Market Conduct at FSRA
00:02:24:13 - 00:02:28:18
and we oversee conduct for all sectors that FSRA regulates.
00:02:30:11 - 00:02:33:15
And I'm Ryan Stein with Definity Insurance,
00:02:33:15 - 00:02:38:14
and I'm the AVP responsible for Regulatory and Industry Affairs.
00:02:38:28 - 00:02:42:26
A little bit about Definity, Ontario-based insurance company
00:02:42:26 - 00:02:44:21
and some of the brands you might have heard of
00:02:45:13 - 00:02:47:10
are Economical,
00:02:47:10 - 00:02:49:25
Sonnet and Pet Line.
00:02:49:25 - 00:02:54:08
And you know, combined, it's a good mix of auto, home,
00:02:54:22 - 00:02:57:22
commercial and pet insurance.
00:02:58:00 - 00:03:00:10
So the one thing I would add before we get started
00:03:00:10 - 00:03:03:20
is this is the non-auto P&C supervision session.
00:03:03:20 - 00:03:06:28
If you're looking for the auto jokes, they are next door, head's up.
00:03:07:29 - 00:03:11:22
So my panel members have also agreed to put some trust in me
00:03:12:13 - 00:03:14:01
and in the interests of getting to know them,
00:03:14:01 - 00:03:16:23
I'm going to ask them some rapid fire questions.
00:03:16:23 - 00:03:20:15
They may regret this later because they did not get these questions ahead of time.
00:03:20:27 - 00:03:23:27
So I have no particular order as to who I'm going to ask what.
00:03:23:27 - 00:03:26:27
So I'm just going to kind of look at you and hope you find the answer
00:03:27:02 - 00:03:28:09
and we'll see what we end up with.
00:03:29:08 - 00:03:32:08
Liam, what's your favourite food?
00:03:34:13 - 00:03:35:04
I could go on.
00:03:35:04 - 00:03:36:04
I don't know.
00:03:36:04 - 00:03:39:04
Right now it is
00:03:39:09 - 00:03:40:02
Thai food.
00:03:40:02 - 00:03:42:18
No, I'm going to change my answer.
00:03:42:18 - 00:03:45:15
Dan Dan Mian noodles, which is a Chinese dish,
00:03:45:15 - 00:03:48:11
which I've come to know recently. I love it.
00:03:48:11 - 00:03:49:07
New find.
00:03:49:07 - 00:03:51:04
I like that.
00:03:51:04 - 00:03:54:04
Huston, what was your favourite subject in school?
00:03:54:21 - 00:03:55:14
That one’s easy.
00:03:55:14 - 00:03:58:14
I love math. So math
00:03:58:23 - 00:04:00:29
Almost everything can be condensed into a math problem.
00:04:00:29 - 00:04:01:27
So I love that.
00:04:01:27 - 00:04:03:26
I think with most folks on the stage,
00:04:03:26 - 00:04:07:02
no, I'm mathematically challenged, so I'll send my kid over to you for tutoring.
00:04:07:23 - 00:04:10:23
Ryan, what's your favourite movie genre?
00:04:13:18 - 00:04:14:06
I like.
00:04:14:06 - 00:04:16:29
You can tell I did not share the questions with them.
00:04:16:29 - 00:04:19:23
I like.
00:04:19:23 - 00:04:20:18
Yeah, I guess. I don't know.
00:04:20:18 - 00:04:22:19
It depends on my mood.
00:04:22:19 - 00:04:25:19
I think after this I'll see a good comedy, but in general it'll be.
00:04:26:07 - 00:04:27:16
It'll be a drama.
00:04:27:16 - 00:04:28:26
Drama? Okay.
00:04:29:15 - 00:04:33:22
Liam, What is your favourite thing to do in the summertime?
00:04:36:28 - 00:04:37:19
I don't know.
00:04:37:19 - 00:04:39:28
This is not the tricky part of this.
00:04:39:28 - 00:04:41:14
It's not on the briefing note.
00:04:42:24 - 00:04:45:03
I love going to cottages.
00:04:45:03 - 00:04:48:03
I love exploring Ontario.
00:04:48:03 - 00:04:49:28
Huston, and I think I know this one.
00:04:49:28 - 00:04:51:24
What is your hidden talent?
00:04:51:24 - 00:04:53:11
I'm not sure of it’s hidden talent.
00:04:53:11 - 00:04:55:04
I do like athletic endeavors.
00:04:55:04 - 00:04:59:09
So last year I did an Iron Man and just ran a marathon in February.
00:04:59:13 - 00:05:01:19
So the lessons out of that is
00:05:01:19 - 00:05:04:09
sometimes pain is good and sometimes pain is necessary,
00:05:04:09 - 00:05:07:09
and I don't give up too easily.
00:05:07:26 - 00:05:11:24
Ryan, on a scale of 1 to 10, how good of a driver are you?
00:05:11:28 - 00:05:14:05
Oh, wait, I do have an auto question. Never mind.
00:05:16:22 - 00:05:19:03
According to a telematics app that I had once,
00:05:19:03 - 00:05:22:00
probably between a 7 and a 10.
00:05:22:00 - 00:05:23:11
A 7 and an 8, sorry, out of 10.
00:05:23:11 - 00:05:26:11
So did you say you had the app and then you got rid of it?
00:05:26:25 - 00:05:29:24
Well, there was a switch involved.
00:05:30:14 - 00:05:32:05
I think I understand why.
00:05:32:05 - 00:05:33:04
Okay.
00:05:33:04 - 00:05:37:22
What is your favourite rainy day activity, Liam?
00:05:41:23 - 00:05:42:21
Maybe a guilty pleasure,
00:05:42:21 - 00:05:44:09
we have a Nintendo Switch.
00:05:44:09 - 00:05:45:23
You know, the most recent system.
00:05:45:23 - 00:05:49:16
I really like playing video games, even though I'm almost 40.
00:05:51:00 - 00:05:52:20
Okay.
00:05:52:20 - 00:05:56:27
What superpower would you want if you could have one, Huston?
00:05:56:27 - 00:05:58:06
Probably flying
00:05:58:06 - 00:06:00:23
and that might in fact affect insurance rates.
00:06:00:23 - 00:06:02:29
But being in the air, flying.
00:06:02:29 - 00:06:05:28
Alright, and then I have one question, one last question for all three of you.
00:06:05:28 - 00:06:07:09
Name one of the seven dwarfs.
00:06:08:12 - 00:06:10:17
Dopey.
00:06:10:17 - 00:06:13:17
Dopey.
00:06:15:07 - 00:06:18:07
I think he's describing the rest of us.
00:06:19:21 - 00:06:20:17
Sneezy.
00:06:20:17 - 00:06:22:20
Sneezy.
00:06:22:20 - 00:06:24:01
Sleepy!
00:06:24:01 - 00:06:25:12
There! Sleepy.
00:06:25:12 - 00:06:28:12
I was going to say Lousy, but Sleepy.
00:06:29:15 - 00:06:32:15
Well, let's hope the questions get easier for the rest of the session.
00:06:32:15 - 00:06:34:26
I think I might have scared the panelists here.
00:06:34:26 - 00:06:37:15
Okay. Huston, the first one is for you.
00:06:37:15 - 00:06:41:03
Why is FSRA looking into non-auto P&C insurance sector now?
00:06:42:10 - 00:06:44:29
You know, insurance is a promise.
00:06:44:29 - 00:06:48:06
Someone makes better decisions because that person has
00:06:48:14 - 00:06:50:07
the coverage that they need
00:06:50:07 - 00:06:55:02
and when there's a problem, then there is an ability to to pay for the cost.
00:06:55:28 - 00:06:58:26
So traditionally, the regulator
00:06:58:26 - 00:07:02:15
has usually focused on auto because auto is such a big piece of the market.
00:07:02:15 - 00:07:05:16
But when we look at the experience of clients and what clients need,
00:07:06:09 - 00:07:09:22
what they need is for, you know, other critical aspects of their life,
00:07:09:22 - 00:07:14:01
such as, you know, homeowner's policies to to be there when they need them.
00:07:14:09 - 00:07:17:09
And for the most part, they are.
00:07:17:14 - 00:07:20:22
But we've started to look into areas such as claims handling
00:07:21:04 - 00:07:24:04
and complaint handling, because we think that's part of the insurance promise
00:07:24:23 - 00:07:27:22
and the preliminary results that we've seen indicate that
00:07:28:04 - 00:07:31:01
there are certainly, you know, lots of instances
00:07:31:01 - 00:07:34:27
where things are handled well, where things are handled capably,
00:07:35:06 - 00:07:38:21
the customer benefits from the promise being kept.
00:07:39:16 - 00:07:41:23
And there are other cases where I think, you know,
00:07:41:23 - 00:07:44:23
we can all learn from some of the experiences.
00:07:44:23 - 00:07:48:11
Sometimes it's just the case that,
00:07:48:13 - 00:07:52:28
someone is not happy with the decision from the insurer.
00:07:53:08 - 00:07:55:14
Sometimes it's something to do with supply chain.
00:07:55:14 - 00:07:57:27
Sometimes it's something to do with an adjuster.
00:07:57:27 - 00:08:01:09
Sometimes it's got something to do with the customer not understanding
00:08:01:26 - 00:08:04:05
what was included or not included.
00:08:04:05 - 00:08:08:09
Those are all important takeaways for us to have as well as for industry
00:08:08:09 - 00:08:09:17
and for customers.
00:08:09:17 - 00:08:12:15
And so we want to actually address
00:08:12:15 - 00:08:15:15
each of those contributors
00:08:15:27 - 00:08:19:17
to make sure that that promise is available and is kept.
00:08:19:17 - 00:08:21:28
And where that's not the case,
00:08:21:28 - 00:08:25:24
then the regulator, you know, can be part of shining some light on to that.
00:08:27:06 - 00:08:28:27
Okay, I'm going to move on to,
00:08:28:27 - 00:08:31:18
and I'm going to try and not use acronyms like this morning.
00:08:31:18 - 00:08:33:03
I don't know how well that's going to go,
00:08:33:03 - 00:08:36:03
but I'm going to talk about the fair treatment of consumers,
00:08:36:10 - 00:08:41:03
which sets out the regulatory expectations for conduct of insurance businesses,
00:08:41:19 - 00:08:44:06
insurance companies when treating consumers.
00:08:44:06 - 00:08:45:04
And Fair-
00:08:45:04 - 00:08:46:01
I was going to say FTC.
00:08:46:01 - 00:08:48:20
Fair Treatment of Consumers Guidance
00:08:48:20 - 00:08:51:08
is a key tool that FSRA and regulators use
00:08:51:08 - 00:08:54:10
when it comes to assessing market conduct and compliance.
00:08:55:13 - 00:08:57:21
That is, you would have seen that in the work that we've done
00:08:57:21 - 00:08:59:01
in our home insurance review.
00:08:59:01 - 00:09:02:16
You will see that in the supervision plan that we've recently published
00:09:02:16 - 00:09:07:21
with respect to the overview of outsourcing of insurer functions to P&C MGA’s.
00:09:08:13 - 00:09:11:25
That tends to be the core of our work and what we focus on.
00:09:12:07 - 00:09:14:15
So I'm going to turn over, I guess I'll start with Ryan.
00:09:15:14 - 00:09:18:16
FTC has been around since quite a while.
00:09:18:17 - 00:09:21:08
Insurers have been slowly implementing it.
00:09:21:08 - 00:09:24:26
How is the industry implementing FTC Guidance since its release
00:09:24:26 - 00:09:27:26
and what initiatives can insurers take to promote
00:09:27:29 - 00:09:30:29
fair treatment of consumers in their organizations?
00:09:31:08 - 00:09:34:08
Well, you know, I'll start out by saying
00:09:34:08 - 00:09:37:20
insurance companies want to promote fair outcomes for their customers.
00:09:37:20 - 00:09:41:22
So I think, you know the expectations that regulators have
00:09:41:22 - 00:09:45:02
kind of aligns with the expectations that companies have for themselves.
00:09:45:02 - 00:09:48:02
In fact, companies might hold themselves to a higher standard.
00:09:48:06 - 00:09:51:07
So, yeah, I'm going to throw out an acronym here again. But,
00:09:52:10 - 00:09:56:00
you know, I'll spell it out so I don't have to give a $5.
00:09:57:10 - 00:10:01:19
FSRA adopted the Canadian Council of Insurance Regulators’ (CCIR)
00:10:01:19 - 00:10:03:13
Fair Treatment of Consumers Guidance
00:10:03:13 - 00:10:05:29
and we think that's important.
00:10:05:29 - 00:10:10:24
You know, customers across the country, they rightfully expect to be treated well
00:10:10:24 - 00:10:13:07
by their product and their service providers.
00:10:13:11 - 00:10:16:27
And so having a kind of a national standard that, you know,
00:10:17:00 - 00:10:21:12
most companies are in the space, national, have operations
00:10:21:12 - 00:10:24:15
across the country, you know, can implement
00:10:24:15 - 00:10:27:26
throughout their organizations and deploy down to their customer experiences
00:10:27:26 - 00:10:31:10
and it's just really having that national standard is really
00:10:31:10 - 00:10:35:02
a more efficient kind of approach to regulation.
00:10:35:13 - 00:10:40:26
And the way that the CCIR Guidance is drafted is in a principle-based way,
00:10:40:26 - 00:10:43:09
setting expectations for companies.
00:10:44:02 - 00:10:47:05
So now to, you know, kind of bring it down to the Definity level
00:10:47:14 - 00:10:52:06
and how we have implemented it, I'll talk from two perspectives.
00:10:52:06 - 00:10:53:08
One is going to be more
00:10:53:08 - 00:10:55:03
like the higher level, the organization level,
00:10:55:03 - 00:10:59:12
and then we'll drill down to the ground level about, you know, how this translates
00:11:00:03 - 00:11:03:11
into interactions and experiences for customers.
00:11:03:11 - 00:11:07:09
So at the sort of organizational level, we have a
00:11:07:11 - 00:11:11:16
and I'm sure you know, we're no different than many other companies, have a
00:11:12:05 - 00:11:16:06
you know, a company-wide policy, a policy framework for fair treatment of customers.
00:11:16:06 - 00:11:19:01
And this is really designed to have a kind of,
00:11:19:01 - 00:11:22:04
to sort of build a customer-centric culture
00:11:22:15 - 00:11:26:29
within the the organization and let that kind of permeate,
00:11:27:12 - 00:11:30:21
you know, through all the employees and all the different functions
00:11:30:21 - 00:11:34:25
so that ultimately we can deliver a superior service when we engage
00:11:34:25 - 00:11:37:27
with customers during multiple different touchpoints, everything from,
00:11:38:07 - 00:11:41:20
you know, giving advice to to ultimately
00:11:41:20 - 00:11:45:16
selling the policy to interacting if there is a claim and then also handling
00:11:46:19 - 00:11:51:06
any complaints and to support that companywide policy, we have,
00:11:51:06 - 00:11:54:11
you know, companywide training and then also team-specific training
00:11:54:28 - 00:11:57:22
for the various unique functions
00:11:57:22 - 00:12:02:17
and the folks that engage with the customers on the front line
00:12:03:06 - 00:12:07:01
and then also track performance metrics so that if there is a problem
00:12:07:01 - 00:12:10:12
that we identify, we're in a position to to rectify it quickly.
00:12:11:29 - 00:12:13:24
Now going down more to the ground level.
00:12:13:24 - 00:12:14:13
And again, if you know,
00:12:14:13 - 00:12:18:08
if you look at the CCIR Guidance, I think it covers about a dozen different
00:12:19:03 - 00:12:22:08
you know, kind of categories of expectations, everything from,
00:12:22:20 - 00:12:26:09
you know, governance to culture to product promotion.
00:12:26:18 - 00:12:29:15
I'm not going to go through them all, but there's
00:12:29:15 - 00:12:33:17
there's a lot and I'm just going to touch on kind of one specific instance
00:12:33:17 - 00:12:37:25
or a couple, which is really when it comes to giving advice.
00:12:37:25 - 00:12:42:00
And then, you know, ultimately selling insurance policies
00:12:42:28 - 00:12:44:22
and I'll use Sonnet as an example.
00:12:44:22 - 00:12:48:03
So for those that don't know, Sonnet is a direct digital
00:12:49:12 - 00:12:52:12
insurer, and its primary platform for
00:12:53:10 - 00:12:55:26
selling insurance is online.
00:12:55:26 - 00:12:59:29
And and the reason I want to mention, use it as the example is because it has
00:13:00:03 - 00:13:04:01
many unique risks and and, or I should say challenges
00:13:04:01 - 00:13:06:09
and opportunities associated
00:13:06:20 - 00:13:09:11
with it when engaging customers
00:13:09:11 - 00:13:13:05
and the kind of the approach that we take when we're giving advice and, you know,
00:13:13:05 - 00:13:17:23
selling insurance, it would be home and auto in this case
00:13:18:12 - 00:13:21:22
to customers, is we want to empower customers.
00:13:21:22 - 00:13:23:23
We want them to feel empowered when they're using the site.
00:13:25:00 - 00:13:27:05
So now, I'll break that down a little bit
00:13:27:26 - 00:13:29:28
before you can be kind of an empowered customer.
00:13:29:28 - 00:13:32:19
You know, we kind of think you have to be an informed customer
00:13:32:19 - 00:13:38:06
and an informed customer is someone who has the information that they need
00:13:38:08 - 00:13:41:06
to be confident in the decision that they're about to make.
00:13:41:06 - 00:13:44:11
And then an empowered customer is a customer who's informed,
00:13:44:11 - 00:13:48:06
but then is also able to act on that decision.
00:13:48:09 - 00:13:51:26
So to inform customers, you know, through the site
00:13:52:22 - 00:13:55:22
we'll use plain language text that was talked about
00:13:55:27 - 00:13:57:21
earlier today, the importance of that.
00:13:57:21 - 00:14:00:13
And then we'll also use accompanying illustrations
00:14:00:13 - 00:14:03:14
so that the customer will know what options are,
00:14:04:06 - 00:14:07:08
what are the various options that are available to them and sort of the,
00:14:08:13 - 00:14:11:12
you know, the various implications of each one.
00:14:11:12 - 00:14:13:14
And then, you know, they'll also have access
00:14:13:14 - 00:14:18:16
to other information, whether it's FAQ’s or blog posts and stuff like that
00:14:18:16 - 00:14:21:15
to just make sure that they're more informed.
00:14:22:12 - 00:14:25:12
To empower the customer,
00:14:25:16 - 00:14:29:14
we want to make sure that the application process is as simple as possible.
00:14:29:14 - 00:14:31:24
Ask only really the questions that are needed
00:14:31:24 - 00:14:34:01
that the customer knows the answers for,
00:14:34:01 - 00:14:37:25
and that the company can use for rating and underwriting.
00:14:37:25 - 00:14:39:20
And if you go through just the site,
00:14:39:20 - 00:14:42:00
you can go through that process, you know, in a few minutes
00:14:42:00 - 00:14:44:28
but we also recognize that that's not for every customer.
00:14:44:28 - 00:14:47:12
It's also not for every customer who goes to the site
00:14:47:12 - 00:14:50:04
thinking that this is the process that they want to go through.
00:14:50:04 - 00:14:53:12
They might need more advice, they might want to go a more traditional route.
00:14:53:22 - 00:14:57:01
They might have questions, and we want to provide that to them
00:14:57:01 - 00:14:58:25
so that at the end they feel
00:14:58:25 - 00:15:01:05
that they're making the right decision and they can act on it.
00:15:01:05 - 00:15:04:05
So there's other communication channels that we'll have available.
00:15:05:04 - 00:15:07:13
You know, you can send an email, you can go through the chat bot
00:15:07:13 - 00:15:10:13
or you can call and speak to a live agent and ask questions.
00:15:10:13 - 00:15:15:26
So that's just sort of, again, one form of interaction, one example,
00:15:15:26 - 00:15:19:18
but how we try to, you know, take the expectations for how customers
00:15:19:18 - 00:15:22:20
should be treated and try to create optimal outcomes for them
00:15:22:20 - 00:15:25:07
through the Sonnet platform.
00:15:25:07 - 00:15:26:24
And with the focus on the consumer.
00:15:26:28 - 00:15:30:09
Liam, maybe I'll turn it over to you for a quick industry perspective.
00:15:31:04 - 00:15:32:11
Emphasis on quick.
00:15:32:11 - 00:15:33:01
Was that subtle?
00:15:33:01 - 00:15:34:04
No problem.
00:15:34:11 - 00:15:37:11
You know, Ryan gave a really good on the ground perspective,
00:15:37:15 - 00:15:40:15
maybe from a 10,000 foot view.
00:15:41:13 - 00:15:44:23
I think the ways that insurers are implementing FTC.
00:15:44:23 - 00:15:46:19
I'm sorry, I'm going to use acronyms.
00:15:46:19 - 00:15:49:23
Let’s all agree to use FTC and CCIR.
00:15:49:29 - 00:15:50:28
We're all good.
00:15:50:28 - 00:15:52:17
You'll find that there's a difference
00:15:52:17 - 00:15:54:02
in terms of how insurers are applying them
00:15:54:02 - 00:15:55:07
but in terms of adherence
00:15:55:07 - 00:15:59:13
to the principles of FTC, that's commonplace within the industry.
00:15:59:17 - 00:16:01:13
But a few points to make, just briefly
00:16:02:20 - 00:16:03:26
on FTC
00:16:03:26 - 00:16:06:26
that I think make it and FSRA's approach
00:16:07:00 - 00:16:11:08
to implementing FTC resonate with our members.
00:16:12:01 - 00:16:15:14
The first is it's grounded in the IAS’s core insurance principles,
00:16:16:09 - 00:16:17:14
and the second, as Ryan mentioned,
00:16:17:14 - 00:16:20:18
it's a national approach by CCIR and CISRO.
00:16:21:00 - 00:16:24:19
So that means it is grounded in international best practice.
00:16:25:24 - 00:16:28:24
It's a pan-Canadian approach that focuses on harmonization.
00:16:29:03 - 00:16:34:18
And ideally, it should avoid the kinds of regulatory duplication or worse,
00:16:34:22 - 00:16:38:14
you know, divergence of regulatory obligations across the country.
00:16:38:28 - 00:16:41:21
And then the second part of FTC that I think resonates with our members
00:16:41:21 - 00:16:45:02
is it is non-prescriptive in it’s approach
00:16:45:02 - 00:16:48:02
and certainly the way that the non-auto unit has approached FTC
00:16:48:16 - 00:16:53:00
is not prescriptive, you know, specific to non-auto supervision by FSRA.
00:16:53:11 - 00:16:56:01
I think from what I've seen so far, I've been involved in it
00:16:56:01 - 00:16:57:26
for about a year now.
00:16:57:26 - 00:17:01:24
There's a much stronger emphasis on consumer outcomes
00:17:02:06 - 00:17:05:15
than insurer outputs, which I think is encouraging.
00:17:06:06 - 00:17:09:25
And I think from an FTC perspective, it really lends itself to
00:17:09:25 - 00:17:12:27
a principle-based approach than outcomes that are focused on consumers.
00:17:14:04 - 00:17:16:19
Speaking of ongoing initiatives, I'm going to quote,
00:17:16:19 - 00:17:19:24
I guess, your boss in her executive outlook
00:17:19:24 - 00:17:22:00
that was published by Canadian Underwriter,
00:17:22:00 - 00:17:23:01
Celyeste Power said
00:17:23:10 - 00:17:28:22
“Over the last decade, insured losses from natural disasters average $2.2 billion a year,
00:17:28:22 - 00:17:32:21
far exceeding the average in the previous decade of $632 million
00:17:33:00 - 00:17:36:03
and in the last two years, this year included, we've surpassed
00:17:36:03 - 00:17:39:12
$3 billion in insured losses of natural catastrophes.”
00:17:39:24 - 00:17:42:12
So I’ll start with you, Liam, what are insurers doing
00:17:42:12 - 00:17:45:12
and what is the industry doing to address the new normal?
00:17:47:04 - 00:17:49:24
Maybe some additional context as well.
00:17:49:24 - 00:17:55:00
So, the last four years are all within the worst
00:17:55:00 - 00:17:58:12
ten years in terms of insured losses from natural catastrophes.
00:17:58:12 - 00:18:01:12
In fact, they're all in the top seven.
00:18:01:25 - 00:18:05:08
And given what we've seen this winter in terms of conditions, I would expect
00:18:05:28 - 00:18:08:28
a difficult CAT season upcoming.
00:18:09:08 - 00:18:12:08
And when I think of how
00:18:12:11 - 00:18:15:16
our insurers, our members have adjusted to
00:18:15:25 - 00:18:20:15
what we call the new normal, I think of claims, Huston touched on that,
00:18:20:15 - 00:18:22:13
I think of coverage, but I also think of increasing
00:18:23:15 - 00:18:25:18
public policy thought leadership.
00:18:25:18 - 00:18:31:11
So maybe starting with claims briefly, that $3 billion figure is representative
00:18:31:11 - 00:18:36:06
of a surge in the number of individual claims stemming from CATs
00:18:36:25 - 00:18:41:13
and between 2021 and 2022, you saw a doubling of
00:18:41:13 - 00:18:45:16
CAT-related claims in Canada and a tripling in Ontario.
00:18:45:16 - 00:18:49:28
In 2023 that number has somewhat subsided from 2022, but it's still in Ontario,
00:18:49:28 - 00:18:53:00
nearly double the number of claims from 2021.
00:18:53:11 - 00:18:56:22
You've got that surge in claims matched with and you've heard us
00:18:56:22 - 00:18:58:09
say this many, many times
00:18:58:09 - 00:19:01:20
with a number of external factors, including supply chain shortages,
00:19:02:05 - 00:19:05:05
skill, trade shortages and our own challenges with with talent.
00:19:05:22 - 00:19:09:03
And you've got a perfect storm of sorts that creates pressure
00:19:09:03 - 00:19:11:19
and tests insurer claims capacity.
00:19:12:11 - 00:19:15:04
And I think that's why you've seen
00:19:15:04 - 00:19:17:24
such a renewed focus
00:19:17:24 - 00:19:21:11
by insurers on claims processes and building claims capacity.
00:19:21:11 - 00:19:24:05
And maybe just to cite a few examples of what we've heard
00:19:24:05 - 00:19:26:03
our insurer members are doing to adjust.
00:19:27:16 - 00:19:30:16
One, increasing the level of communication
00:19:30:21 - 00:19:33:13
between themselves and the claimant so the claimant is better
00:19:33:13 - 00:19:36:13
aware of where they're at in every stage of the claims process.
00:19:37:07 - 00:19:39:10
Two,
00:19:39:10 - 00:19:43:20
significant recruitment and retention efforts for relevant staff,
00:19:43:20 - 00:19:46:20
whether that's in-house adjusting capacity or claims staff.
00:19:47:06 - 00:19:52:06
And then three, the creation of specialized field teams to help manage
00:19:52:06 - 00:19:55:07
complex losses, especially those resulting from natural catastrophes.
00:19:55:18 - 00:19:58:03
And I think we'll see how this plays out on claims.
00:19:58:03 - 00:20:01:27
And you know, we can have a discussion about it, but I am encouraged by the fact
00:20:01:27 - 00:20:05:29
that the most recent numbers produced by the General Insurance OmbudService
00:20:06:23 - 00:20:09:04
point to a decline in the number
00:20:09:04 - 00:20:12:11
of claims-related inquiries made in the most recent year.
00:20:12:11 - 00:20:14:02
I think that's encouraging.
00:20:15:09 - 00:20:18:12
Maybe just briefly on coverage, we're still conducting internal research
00:20:18:12 - 00:20:23:01
on how the personal property product has evolved over the last couple of decades.
00:20:23:08 - 00:20:26:29
You know, I think the biggest development,
00:20:26:29 - 00:20:29:29
of course, is the emergence of overland flood protection
00:20:30:11 - 00:20:32:29
but you're also seeing incentives
00:20:32:29 - 00:20:35:29
increasingly be put in place by insurers
00:20:36:11 - 00:20:40:29
to incentivize risk mitigating behaviors, installation of some pumps,
00:20:41:21 - 00:20:46:22
weather-resistant hail and wind-resistant shingles and roofing and the like.
00:20:46:22 - 00:20:50:17
And I suspect you're going to see more of those kinds of incentives going forward.
00:20:50:17 - 00:20:54:13
And then maybe briefly and finally and Brian may want to touch on this as well.
00:20:54:13 - 00:20:57:13
He's been a big part of it.
00:20:57:15 - 00:20:58:25
I think the industry
00:20:58:25 - 00:21:01:25
has really put its money where its mouth is in terms of
00:21:02:25 - 00:21:05:08
thought leadership on public policy development,
00:21:05:08 - 00:21:07:23
specific to adaptation, resilience.
00:21:08:00 - 00:21:11:09
I can't think of another industry that has funded or supported
00:21:11:22 - 00:21:15:15
more third parties that are either primarily or solely dedicated
00:21:16:05 - 00:21:19:24
to advancing public policy recommendations
00:21:19:24 - 00:21:20:23
focused on resilience.
00:21:20:23 - 00:21:24:07
There’s the ICLR, Intact Center for Climate Adaptation,
00:21:25:07 - 00:21:26:04
Climate Proof Canada.
00:21:26:04 - 00:21:29:11
Then, of course, there's IBC and a number of other P&C associations
00:21:29:11 - 00:21:33:13
and and broker associations for which resilience is a primary focus.
00:21:34:24 - 00:21:38:03
So I think in that sense that the industry has been pushing
00:21:38:03 - 00:21:41:13
for what we call a whole of society approach that recognizes our role
00:21:42:10 - 00:21:43:14
in adapting to this new normal,
00:21:43:14 - 00:21:46:14
but also the role of policymakers in adapting to the new normal.
00:21:47:18 - 00:21:50:18
Ryan, I’ll handed over to you for the Definity perspective.
00:21:50:27 - 00:21:52:20
Yeah, it's a Definity perspective,
00:21:52:20 - 00:21:54:08
it's also an industry perspective.
00:21:54:08 - 00:21:56:20
I mean, there's
00:21:56:20 - 00:21:59:21
As Liam kind of, sort of insinuated where,
00:22:01:05 - 00:22:05:07
insurers are all kind of pushing in the same direction in many ways here.
00:22:05:07 - 00:22:09:17
So, you know,
00:22:10:06 - 00:22:13:14
we heard that the new normal is, there is no new normal.
00:22:13:14 - 00:22:14:09
We heard that this morning.
00:22:14:09 - 00:22:19:15
It's constantly changing and insurers are constantly adapting and,
00:22:19:26 - 00:22:21:12
you know, trying to put their customers
00:22:21:12 - 00:22:25:12
in the best position as possible to manage the risks out there.
00:22:25:12 - 00:22:28:09
They're reaching out to insurers to help them,
00:22:28:09 - 00:22:29:09
to help them manage.
00:22:29:09 - 00:22:31:17
And what I like about
00:22:31:17 - 00:22:34:16
what insurers are doing here is so much of the talk about insurance
00:22:34:16 - 00:22:36:19
is always about price what's happening with price
00:22:36:19 - 00:22:39:15
and you know why isn't it cheaper and it should be lower.
00:22:39:15 - 00:22:43:20
But here, you know, those stats you showed showed the
00:22:43:20 - 00:22:47:23
or, that you mentioned show that the scope and the scale that
00:22:49:00 - 00:22:51:07
that climate risk is increasing
00:22:51:07 - 00:22:54:23
and more severe natural catastrophes happening more frequently.
00:22:55:24 - 00:22:58:24
And insurers are responding by
00:22:59:09 - 00:23:02:22
increasing the value that they're offering.
00:23:02:22 - 00:23:05:22
And I think, you know, there's a lot of good,
00:23:05:29 - 00:23:08:29
good initiatives that are helping to make
00:23:09:07 - 00:23:12:00
home insurance, property insurance in this case
00:23:12:00 - 00:23:16:02
more valuable to customers.
00:23:16:02 - 00:23:20:17
So I've identified five ways, some of them Liam has touched on.
00:23:20:23 - 00:23:25:11
So the first one is P&C insurers are responding with more coverage.
00:23:25:26 - 00:23:28:07
So Liam talked about
00:23:28:07 - 00:23:29:20
residential flood insurance.
00:23:29:20 - 00:23:31:24
You know, 12 years ago, I believe it didn't exist
00:23:31:24 - 00:23:35:21
and at that point it was, this is uninsurable, it can't exist.
00:23:36:02 - 00:23:38:29
And then slowly, one company at a time.
00:23:38:29 - 00:23:42:18
Now, you know, pretty much 90% of the market,
00:23:42:18 - 00:23:47:07
those in the low in the medium risk zones, are able to obtain coverage
00:23:47:07 - 00:23:52:06
and I think it's one of the industry's greatest achievements in recent memory.
00:23:53:18 - 00:23:55:26
Insurers are also responding with ways to help customers.
00:23:55:26 - 00:23:57:04
There's a greater emphasis
00:23:57:04 - 00:23:59:27
on helping their customers mitigate the threat of loss.
00:23:59:27 - 00:24:03:01
So whether it could be offering discounts for
00:24:03:18 - 00:24:06:11
people who install backwater valves or some pumps on their property
00:24:06:11 - 00:24:09:28
or other resiliency measures to reduce the likelihood of
00:24:10:11 - 00:24:13:15
damage from the sewer backing up or
00:24:13:15 - 00:24:16:23
it could be other perils as well.
00:24:18:06 - 00:24:22:04
You know, in the case of a Definity, we have one of those types of discounts.
00:24:22:04 - 00:24:26:02
We also, you know, for commercial property insurance
00:24:26:02 - 00:24:30:26
for businesses that reach certain environmental criteria, we’ll offer
00:24:30:29 - 00:24:35:02
they'll be able to purchase higher coverage limits for their property.
00:24:35:27 - 00:24:38:03
And then we also have what we call a green endorsement
00:24:38:03 - 00:24:41:19
and different companies have different forms of this where after a loss,
00:24:43:00 - 00:24:45:21
you know, the insurance company will cover
00:24:45:21 - 00:24:50:22
higher than the, more than the limits to install eco-friendly
00:24:50:22 - 00:24:55:05
and resiliency enhancing solutions within the rebuilt process.
00:24:55:26 - 00:24:58:18
The third one and this is the one I think, the one that I'm
00:24:58:18 - 00:24:59:19
at least the most proud of
00:24:59:19 - 00:25:02:24
and what I think is such great value is
00:25:03:04 - 00:25:06:08
insurers are responding by helping people rebuild and recover.
00:25:06:08 - 00:25:10:12
And many companies have, you know, natural catastrophe response teams.
00:25:10:12 - 00:25:12:27
We call ours a national catastrophe response team.
00:25:12:27 - 00:25:14:21
We have
00:25:14:21 - 00:25:17:19
dedicated
00:25:17:19 - 00:25:21:05
and highly skilled and experienced adjusters
00:25:21:05 - 00:25:24:10
and appraisers located, in our case, on the East and the West Coast.
00:25:24:10 - 00:25:25:24
And really what their job is
00:25:25:24 - 00:25:28:28
when there is a catastrophe that hits somewhere around the country,
00:25:28:28 - 00:25:31:17
they drop what they're doing, they go to the location
00:25:31:17 - 00:25:34:14
and then they're on the ground meeting face to face with the customer
00:25:34:14 - 00:25:37:02
and starting the claims process and helping them
00:25:37:02 - 00:25:40:11
rebuild and recover from really what is a you know, was discussed earlier,
00:25:40:11 - 00:25:41:13
kind of like a life-altering,
00:25:43:03 - 00:25:45:15
life altering event.
00:25:46:29 - 00:25:48:23
We also-
00:25:48:23 - 00:25:51:02
Another way that we're responding is we need to make sure
00:25:51:02 - 00:25:54:06
that the businesses continue to be viable in adapting to these risks.
00:25:54:06 - 00:25:57:18
So making sure that you know, we're managing our concentration
00:25:57:18 - 00:25:59:07
and risk exposure,
00:25:59:07 - 00:26:00:24
you know, that's probably more of a boring topic,
00:26:00:24 - 00:26:02:24
but it's really important because it's important
00:26:02:24 - 00:26:07:07
that we're able to, you know, meet the obligations in the insurance policies
00:26:07:07 - 00:26:09:08
and help our customers when there's a claim.
00:26:09:08 - 00:26:12:23
And then the last one just sort of building, Liam, on what you mentioned
00:26:12:23 - 00:26:16:11
is the fifth one, which is engaging policymakers and really,
00:26:16:23 - 00:26:19:25
you know, pushing forward and being a supportive voice and helping
00:26:19:25 - 00:26:23:12
bring positive public policy change because ultimately it's,
00:26:23:12 - 00:26:26:13
you know, one company and one industry can't do it on its own.
00:26:26:13 - 00:26:29:05
It's got to be a public-private partnership in a lot of ways
00:26:29:05 - 00:26:33:04
and it's great to see the P&C insurance industry leading the way there.
00:26:35:01 - 00:26:38:13
So FSRA, as you- I think most of you know, completed
00:26:38:24 - 00:26:41:24
or started a review of home insurance claims last year.
00:26:41:25 - 00:26:44:10
So, Huston, I'm going to throw it over to you.
00:26:44:10 - 00:26:46:26
Why was home insurance an area of focus?
00:26:46:26 - 00:26:48:04
What did FSRA find?
00:26:48:04 - 00:26:51:26
And can you share a little bit of a sneak peek of what our publication will say?
00:26:52:12 - 00:26:52:22
Sure.
00:26:52:22 - 00:26:56:15
Well, this goes back to earlier comments that I made about this is the promise, right?
00:26:56:15 - 00:26:59:12
When there is a claim, when there is a complaint,
00:26:59:12 - 00:27:02:12
that's part of the deal from a consumer perspective.
00:27:02:14 - 00:27:03:09
I want to build on
00:27:03:09 - 00:27:06:22
what my colleagues up here have talked about in terms of frequency
00:27:07:23 - 00:27:11:11
as well as, you know, a preoccupation on the cost side.
00:27:11:21 - 00:27:15:11
Those are all very important consideration because this is
00:27:15:11 - 00:27:17:11
not a market or a situation
00:27:18:12 - 00:27:21:07
that is just static and doesn't change.
00:27:21:07 - 00:27:25:01
In fact, quite the opposite because of climate change issues,
00:27:25:01 - 00:27:29:11
because of density, because of different expectations and costs,
00:27:29:23 - 00:27:32:28
I think it's fair to say that many consumers don't know exactly
00:27:33:14 - 00:27:36:14
you know, what's going on in terms of their policy and coverage and so on,
00:27:36:20 - 00:27:39:15
and what is the best way to glean insight into that?
00:27:39:15 - 00:27:42:22
Well, we decided that we would do work with insurers to determine
00:27:43:00 - 00:27:46:27
what the complaint handling processes and the claims handling processes yielded.
00:27:47:10 - 00:27:51:06
And we know that from time to time there are issues in terms of, you know,
00:27:51:07 - 00:27:52:19
getting adjusters on site
00:27:52:19 - 00:27:56:08
because that's part of what happens when there's a, you know, Nat CAT event.
00:27:56:26 - 00:28:01:16
We know that there are situations where customers aren't happy at the end,
00:28:01:25 - 00:28:04:21
and that's where the complaint handling piece comes in.
00:28:04:21 - 00:28:07:21
What's more challenging is to figure out, okay,
00:28:07:28 - 00:28:10:14
what can be done to help with this?
00:28:10:14 - 00:28:12:28
And so we think the additional transparency
00:28:12:28 - 00:28:16:05
that we will be able to provide when we publish our report
00:28:16:05 - 00:28:19:11
will help in terms of identifying contributing factors.
00:28:19:27 - 00:28:21:15
We think it is important
00:28:21:15 - 00:28:25:07
to state that the timeliness with which a claim is handled
00:28:25:07 - 00:28:29:23
and the ability to have feedback and information to a customer,
00:28:29:28 - 00:28:31:15
you know, those are important factors.
00:28:31:15 - 00:28:34:07
That is part of fair treatment.
00:28:34:28 - 00:28:37:28
And we also think that
00:28:38:04 - 00:28:41:23
there's a role also for us and there's some things that we can take away as well.
00:28:42:14 - 00:28:46:23
Things like, you know, adjuster capacity when the system is stressed.
00:28:47:11 - 00:28:50:01
At FSRA, we have come up with a few mechanisms
00:28:50:01 - 00:28:53:12
that will assist in adjuster capacity and we're working with our partners
00:28:53:12 - 00:28:56:08
across the country and learning more about how they do the same.
00:28:56:08 - 00:29:01:03
So that is one area and I think that as time goes on,
00:29:01:11 - 00:29:06:06
this is an area where the average homeowner has to also adapt,
00:29:06:15 - 00:29:10:25
which will mean we need to work with industry,
00:29:10:25 - 00:29:15:06
we need to work with homeowners themselves to bring them up to speed in terms of
00:29:15:14 - 00:29:18:26
here is the disclosure that you might need in order to make the best decision
00:29:18:26 - 00:29:21:26
for your family, for your house, for your partner.
00:29:22:13 - 00:29:25:00
And all of that work is being done
00:29:25:00 - 00:29:28:00
and that work is being done as part of a CCIR initiative.
00:29:28:11 - 00:29:29:18
But stay tuned. More to come.
00:29:30:21 - 00:29:32:02
On the CCIR initiative.
00:29:32:02 - 00:29:33:12
And I think I see a theme
00:29:33:12 - 00:29:37:27
from all three of you in terms of consumer education and consumers understanding
00:29:37:27 - 00:29:40:27
what it is that they're purchasing and what needs they have,
00:29:40:27 - 00:29:44:03
which goes along with the work that CCIR is doing.
00:29:44:03 - 00:29:47:06
And I know, Liam, you're now part of the Working Group committee
00:29:47:26 - 00:29:50:01
with respect to the Consumer Education piece.
00:29:50:01 - 00:29:52:11
As a result of the paper that was published.
00:29:52:11 - 00:29:55:29
I'm just curious, for those of you in the room, all insurance professionals,
00:29:55:29 - 00:29:59:05
how many of you have earthquake insurance on your policies
00:29:59:05 - 00:30:02:05
right now?
00:30:02:09 - 00:30:05:09
How many of you don't know?
00:30:06:10 - 00:30:08:01
I think we've got our work cut out for us.
00:30:08:01 - 00:30:09:28
These are the insurance people in the room.
00:30:09:28 - 00:30:13:15
And I think that's very symptomatic of what is in society
00:30:13:15 - 00:30:16:06
where simply people don't know what the coverages are.
00:30:16:06 - 00:30:18:07
There's so many pages and so many endorsements
00:30:18:07 - 00:30:19:17
and there's a lack of understanding.
00:30:19:17 - 00:30:22:23
So I think the work that CCIR is doing together with industry
00:30:23:14 - 00:30:25:05
is very helpful in terms of that.
00:30:25:05 - 00:30:27:10
And I know, Liam, I'll give you a shameless plug.
00:30:27:10 - 00:30:31:10
IBC has done some work on home insurance and helping consumers.
00:30:31:10 - 00:30:32:15
We do.
00:30:33:18 - 00:30:35:10
We have resources on our website.
00:30:35:10 - 00:30:40:07
We also have a consumer information center that maybe isn't as widely known
00:30:40:07 - 00:30:43:28
as we wish, but that's a service offered through IBC by the industry.
00:30:43:28 - 00:30:46:28
We have mostly retired insurance professionals
00:30:47:13 - 00:30:51:09
taking phone calls and offering an impartial perspective.
00:30:51:20 - 00:30:54:20
We get thousands of emails and phone calls
00:30:54:25 - 00:30:57:14
every year through our consumer information officers.
00:30:57:14 - 00:31:01:29
We also have, you know, as you mentioned, home insurance resources on our website.
00:31:01:29 - 00:31:05:06
How to file a home insurance claim, risk mitigation tips, etc.
00:31:05:12 - 00:31:08:07
My favorite is we have a glossary of terms
00:31:08:07 - 00:31:10:28
which I think is very much needed
00:31:10:28 - 00:31:12:09
and it explains abbreviations.
00:31:12:09 - 00:31:15:14
Well, I should say since I started in the industry eight years ago,
00:31:15:15 - 00:31:18:28
I've noticed a real shift to more plain language
00:31:19:26 - 00:31:24:01
by the industry in terms of how it communicates with insureds.
00:31:24:13 - 00:31:27:13
So putting the lawyers out of business, are we?
00:31:27:29 - 00:31:28:08
Okay.
00:31:28:08 - 00:31:30:01
I'm going to keep picking on Liam.
00:31:30:01 - 00:31:35:05
Liam, last year at the National Insurance Conference, you hosted a panel called
00:31:35:13 - 00:31:41:04
‘How the industry can get out of the government's crosshairs for good.’
00:31:41:04 - 00:31:42:26
And here you are on stage with me.
00:31:42:26 - 00:31:44:20
Maybe that didn't work out so well.
00:31:44:20 - 00:31:48:04
Some of the advice from the panel was to give regulators data early
00:31:48:04 - 00:31:51:12
and address potential concerns before they are in the headlines.
00:31:51:21 - 00:31:53:08
And I think I've had you on speed dial.
00:31:53:08 - 00:31:56:25
So I think I get that from both of you on stage and many other in the room.
00:31:57:23 - 00:32:02:03
In your opinion, what has FSRA done well and what can we do better to work
00:32:02:03 - 00:32:05:14
together with industry towards common cause of better protecting consumers?
00:32:08:04 - 00:32:10:18
When my wife wants to
00:32:10:18 - 00:32:13:18
change my behavior, she delivers a compliment sandwich.
00:32:14:28 - 00:32:17:28
So I'm going to employ that technique.
00:32:18:26 - 00:32:21:26
Well, I think the first thing is through the,
00:32:22:09 - 00:32:25:08
you know, sticking to non-auto, through the Technical Advisory Committee
00:32:25:08 - 00:32:28:19
you've set up, that to me, from my observations,
00:32:28:19 - 00:32:31:18
and I think our members would say the same is a meaningful
00:32:31:27 - 00:32:34:26
and thoughtful approach to early consultation.
00:32:34:26 - 00:32:37:28
There are lots of examples I can point to from the home insurance
00:32:37:28 - 00:32:42:09
review that you did where you took insurer feedback into account,
00:32:44:03 - 00:32:46:18
worked with us in terms of,
00:32:46:18 - 00:32:49:08
you know, the scope of the questionnaire in particular,
00:32:49:08 - 00:32:51:23
and demonstrated some flexibility
00:32:51:23 - 00:32:54:14
in recognition of some of the concerns that I think insurers had raised.
00:32:54:14 - 00:32:57:07
So I think your approach to engagement is
00:32:58:18 - 00:33:00:12
is helpful in some sense, and in some cases
00:33:00:12 - 00:33:03:12
it could be a model for other regulators.
00:33:03:12 - 00:33:04:25
Now comes the bad news.
00:33:04:25 - 00:33:07:25
The meaty part of the compliment sandwich is,
00:33:08:06 - 00:33:11:06
and it's not even so much about FSRA.
00:33:12:06 - 00:33:15:24
Huston, you mentioned earlier adjuster licensing.
00:33:16:09 - 00:33:19:09
I cannot
00:33:19:25 - 00:33:20:29
subscribe
00:33:20:29 - 00:33:26:07
to the rationale that we need ten plus different accreditation regimes
00:33:26:24 - 00:33:29:24
for adjusters in Canada.
00:33:30:07 - 00:33:32:13
And if we're focused
00:33:32:13 - 00:33:35:13
on consumer outcomes in the event of a CAT,
00:33:35:22 - 00:33:40:28
we need to eliminate artificial barriers that exist between provinces.
00:33:41:06 - 00:33:44:16
I don't believe that the claims landscape
00:33:44:16 - 00:33:48:07
and the adjuster landscape is sufficiently different in New Brunswick,
00:33:48:16 - 00:33:53:11
in Ontario and Alberta that warrants this kind of bureaucracy that we have.
00:33:53:28 - 00:33:58:17
And so, you know, our request, not necessarily of FSRA, because I think
00:33:58:17 - 00:34:03:22
the undertaking that FSRA has, you know, adopted post Derecho and 2021 is a model.
00:34:04:04 - 00:34:08:22
But as we move towards ideally reciprocity of adjuster licensing in the country,
00:34:09:07 - 00:34:11:25
it would be helpful if FSRA played a leadership role
00:34:11:25 - 00:34:16:06
nationally with CISRO and the CCIR in getting us to that end state because
00:34:16:06 - 00:34:20:16
I do think these are artificial barriers that prevent optimal consumer outcomes.
00:34:22:20 - 00:34:26:03
One more part of the meat and then back to the sandwich.
00:34:26:26 - 00:34:29:07
I think just a general comment again,
00:34:29:07 - 00:34:32:15
you know, our request of FSRA would be to take into account
00:34:32:29 - 00:34:36:26
the cumulative regulatory burden on Canadian insurers.
00:34:37:09 - 00:34:39:07
We have
00:34:39:07 - 00:34:42:00
sophisticated
00:34:42:00 - 00:34:46:08
regulators in Canada with ambitious scope and pace of work
00:34:46:24 - 00:34:51:04
and our request would be that you adopt a complementarity approach
00:34:51:15 - 00:34:54:07
in your approach to regulation.
00:34:54:07 - 00:34:54:23
You know,
00:34:54:23 - 00:34:55:11
for example,
00:34:55:11 - 00:34:57:03
I'll raise it as a question, not a comment,
00:34:57:03 - 00:34:59:10
and maybe Huston will want to talk about it
00:34:59:10 - 00:35:03:15
but, in terms of the insurer MGA outsourcing arrangement review,
00:35:03:28 - 00:35:06:28
whatever comes out of that process, we would want to make sure
00:35:07:24 - 00:35:10:01
intersects neatly with
00:35:10:01 - 00:35:13:08
B10, the OSFI third-party arrangements guideline
00:35:13:08 - 00:35:15:20
and I'm sure there'll be something to say but that'll be a question
00:35:15:20 - 00:35:18:15
I'm sure that you get, Beata, through this process.
00:35:20:08 - 00:35:23:08
Can I close with one when we're positive?
00:35:23:17 - 00:35:26:15
I think,
00:35:26:15 - 00:35:27:16
I'm looking through my notes.
00:35:27:16 - 00:35:30:16
I definitely have more positives to say.
00:35:31:02 - 00:35:33:16
So maybe it might make sense for me to talk about
00:35:33:16 - 00:35:36:19
the B10 and the overlap issue because it's a real,
00:35:37:26 - 00:35:40:26
it’s an item that I think it's fair for us to try to address.
00:35:41:12 - 00:35:44:12
Of course, OSFI from a prudential perspective
00:35:44:12 - 00:35:47:17
is going to make sure that things like custody
00:35:47:17 - 00:35:51:03
of funds and securities and so on for financial institutions
00:35:51:22 - 00:35:55:15
is taken care of by whomever a financial institution outsources to
00:35:55:27 - 00:35:56:17
and similarly
00:35:56:17 - 00:35:59:25
for insurers, they'll want to know that certain outsourcing arrangements,
00:36:00:16 - 00:36:04:10
you know, I'm thinking the easier ones or, you know, Treasury functions
00:36:04:10 - 00:36:05:28
and of course they've got asset management
00:36:06:28 - 00:36:09:10
subsidiaries and so on.
00:36:09:10 - 00:36:13:16
From our perspective, first of all, why are we looking at that?
00:36:13:16 - 00:36:17:17
It's because when in our consulting and in our discussions with,
00:36:18:02 - 00:36:21:17
you know, certain commercial brokers, with those representing customers,
00:36:22:28 - 00:36:27:14
they've indicated to us that there are some aspects of functions
00:36:27:14 - 00:36:31:01
that, you know, traditionally might have been the domain of the insurer
00:36:31:11 - 00:36:34:01
and appear to be performed by others
00:36:34:01 - 00:36:36:16
and so we need to learn more about that.
00:36:36:16 - 00:36:39:24
And we will have, you know, whatever measures
00:36:40:20 - 00:36:45:22
come out of that or whatever observations we make will be guided by that evidence.
00:36:46:01 - 00:36:47:08
It really is
00:36:47:08 - 00:36:50:10
a bit of an ‘apples and oranges’ because we're not looking at it
00:36:50:10 - 00:36:52:13
from a prudential safety and soundness perspective.
00:36:52:13 - 00:36:54:27
That is the role for the prudential regulator.
00:36:54:27 - 00:36:56:29
But we know that when there is
00:36:58:17 - 00:37:01:07
let's say that there is not disclosure in terms of,
00:37:01:07 - 00:37:04:07
you know, for example, who's providing the coverage,
00:37:04:07 - 00:37:07:07
then that is something where the consumer can actually
00:37:07:19 - 00:37:09:10
it's reasonable for consumer to want to know that.
00:37:09:10 - 00:37:13:03
So I think that our intention is to work with you and your members to make sure
00:37:13:10 - 00:37:16:03
that we identify and observe issues
00:37:16:03 - 00:37:19:10
that, you know, are understood and socialized with you.
00:37:20:05 - 00:37:23:05
And of course, when we
00:37:23:09 - 00:37:25:29
when we actually publish the findings from that,
00:37:25:29 - 00:37:27:29
we will want to hear more in terms of, you know,
00:37:27:29 - 00:37:30:00
are there other ways to address the issues?
00:37:30:00 - 00:37:30:27
Because ultimately,
00:37:30:27 - 00:37:33:27
it's about the consumer, it's about being fair for the consumer
00:37:34:05 - 00:37:37:18
and not everything requires, you know, a new rule.
00:37:37:18 - 00:37:41:11
Sometimes it could be a practice that's established or a solution
00:37:41:11 - 00:37:42:08
that's derived elsewhere.
00:37:44:10 - 00:37:47:12
So maybe I'll turn this one over to you, Ryan.
00:37:47:12 - 00:37:51:16
How has industry and IBC collaborated with FSRA recently,
00:37:51:16 - 00:37:55:01
and what are some of the initiatives that both IBC and industry
00:37:55:01 - 00:37:58:09
and I'll leave the IBC part to you, Liam.
00:37:58:18 - 00:38:01:07
What plans do you have to engage with regulators in the future
00:38:01:07 - 00:38:04:16
outside of the Technical Advisory Committee that Liam mentioned?
00:38:05:24 - 00:38:06:02
Yeah.
00:38:06:02 - 00:38:10:01
So, I'll sort of just mention and this picks up a little bit
00:38:10:01 - 00:38:13:26
on what Liam said that, you know, FSRA’s approach to transparency
00:38:13:26 - 00:38:18:25
and stakeholder dialogue is quite unique.
00:38:19:23 - 00:38:23:19
You know, everything from the
00:38:23:27 - 00:38:26:11
webinars to launch regulatory initiatives,
00:38:27:00 - 00:38:29:13
willingness to have bilateral meetings with stakeholders
00:38:29:13 - 00:38:32:22
and then obviously the stakeholder and Technical Advisory committees.
00:38:32:22 - 00:38:38:10
These are all great forums for collaboration and, you know,
00:38:38:10 - 00:38:42:18
discussing issues and hopefully arriving at the optimal solution.
00:38:44:00 - 00:38:45:05
You know,
00:38:45:05 - 00:38:48:22
it's hard to separate, you know, and I go deeper into this one,
00:38:49:01 - 00:38:52:01
the auto from the non-auto because at the end
00:38:52:13 - 00:38:55:13
we’re P&C insurance companies, there's people here that are
00:38:56:01 - 00:38:57:06
you know, here because they want to learn
00:38:57:06 - 00:38:58:22
about what's happening in the non-auto space
00:38:58:22 - 00:39:03:04
but they’re pretty much all employed by companies who also work in the auto space.
00:39:03:04 - 00:39:06:28
So it's hard to separate, you know,
00:39:07:09 - 00:39:11:03
the the overall assessment of the interaction with FSRA
00:39:11:07 - 00:39:14:23
and then, you know, what are going to be the next
00:39:15:06 - 00:39:17:09
engagements.
00:39:17:20 - 00:39:20:19
I would say that,
00:39:20:24 - 00:39:24:13
you know, we see generally a move to,
00:39:24:17 - 00:39:28:08
you know, a greater focus on principles-based regulation
00:39:28:08 - 00:39:31:07
and we see it kind of upon ourselves.
00:39:31:07 - 00:39:35:15
We want to be at all the tables that we can because, you know, you're opening your doors,
00:39:35:15 - 00:39:40:16
you want to hear from us and, you know, you meet with us early.
00:39:40:16 - 00:39:44:09
Like sometimes it's not like, you know, we're about to launch this in a week,
00:39:44:09 - 00:39:48:14
let's talk. It's here's a draft survey, we're not sure if you know,
00:39:48:17 - 00:39:51:15
it makes sense to be able to share the information in this format.
00:39:51:15 - 00:39:53:18
Let's talk what this survey's going to look like.
00:39:55:05 - 00:39:58:10
So we want to be at all the tables to sort of
00:39:58:16 - 00:40:02:12
come to a common understanding about what the issue is and then be a position
00:40:02:12 - 00:40:06:05
to work with you on the eventual
00:40:07:17 - 00:40:08:29
solution.
00:40:08:29 - 00:40:11:09
I'll bring up an auto example
00:40:11:09 - 00:40:14:23
of where kind of we see a lot of really great work happening
00:40:14:23 - 00:40:17:23
and that's in the the space of,
00:40:18:21 - 00:40:23:10
you know, the reform strategy for auto rate and underwriting regulation
00:40:23:10 - 00:40:25:25
where FSRA’s been working on this
00:40:25:25 - 00:40:30:21
for a couple of years, it has a, you know, a goal by the end of 2025
00:40:30:21 - 00:40:33:23
to have replaced the traditionally rules-based approach with a more
00:40:34:17 - 00:40:35:26
principles-based one.
00:40:35:26 - 00:40:38:19
And, you know, there's still a lot to be written in this story.
00:40:38:19 - 00:40:42:06
There's probably, you know, a few more consultations to go
00:40:42:29 - 00:40:45:19
but there's a lot of great momentum.
00:40:45:19 - 00:40:50:20
And I think if, you know, FSRA and the industry has to be there
00:40:50:20 - 00:40:56:03
to be ready to engage and collaborate, sort of the momentum we're seeing
00:40:56:03 - 00:40:59:08
in that auto space, I could see translating over into the non-auto space.
00:41:00:14 - 00:41:01:28
Liam, anything to add?
00:41:01:28 - 00:41:04:28
Maybe just briefly, because you had mentioned the
00:41:05:09 - 00:41:08:04
the CCIR and CISRO
00:41:08:04 - 00:41:10:21
project looking at climate risk
00:41:10:21 - 00:41:12:29
and consumer awareness gaps and there's a
00:41:12:29 - 00:41:16:29
fairly significant project being undertaken.
00:41:16:29 - 00:41:20:25
I'm looking at Colin Simpson, who's a large part in it, and
00:41:21:26 - 00:41:25:19
I think that that will be a priority for IBC
00:41:26:21 - 00:41:29:12
over the coming year plus
00:41:29:12 - 00:41:32:12
and, you know, one of the initial observations that
00:41:32:16 - 00:41:35:24
I've made since joining the project, since we're focused on
00:41:36:07 - 00:41:39:14
individual property risks of the homeowner,
00:41:40:23 - 00:41:43:04
is the importance of ensuring
00:41:43:04 - 00:41:46:04
publicly accessible risk mapping.
00:41:46:23 - 00:41:50:15
There was a commitment to that from from the federal government as well
00:41:50:15 - 00:41:54:11
as a commitment to a national flood insurance program in the 2023 budget.
00:41:54:25 - 00:41:57:22
And so while it's not specific to FSRA
00:41:58:19 - 00:42:00:00
over the coming weeks and months
00:42:00:00 - 00:42:01:24
in the lead up to the federal budget, I suspect
00:42:01:24 - 00:42:04:24
you'll hear much from IBC as we try to secure funding
00:42:04:24 - 00:42:08:10
for a national flood insurance program and then continue to work collaboratively
00:42:09:11 - 00:42:12:16
with the federal government on designing the parameters of that program.
00:42:13:15 - 00:42:17:29
I'm going to move subjects and completely move topics to something
00:42:17:29 - 00:42:19:25
I suspect some of you might be interested in
00:42:19:25 - 00:42:23:00
and kind of the review and the supervision plan that we recently published
00:42:23:20 - 00:42:26:06
with respect to P&C MGA’s.
00:42:26:06 - 00:42:29:06
So I'm going to go with another quote because I seem to like these today.
00:42:29:22 - 00:42:32:22
Greg Williams, the Director at AM Best recently said
00:42:32:23 - 00:42:35:21
“With an estimated 80 plus MGA’s in Canada,
00:42:35:21 - 00:42:39:06
they are now the fastest growing segment of Canadian insurance market.
00:42:39:15 - 00:42:42:10
From a commercial lines perspective, estimates are anywhere between
00:42:42:10 - 00:42:45:27
three and a half to 4 billion in premium flowing through MGA’s,
00:42:45:27 - 00:42:49:06
which accounts for approximately 10% of gross written premium.”
00:42:49:22 - 00:42:50:18
So for those of you
00:42:50:18 - 00:42:54:08
that have read our report, we have done some preliminary market intelligence work.
00:42:54:08 - 00:42:57:08
We have done some discussions with industry stakeholders,
00:42:57:26 - 00:43:01:23
spoken to many of you in the room at a peripheral level
00:43:01:23 - 00:43:03:10
and a high level.
00:43:03:10 - 00:43:06:16
We've identified some potential areas of consumer harm
00:43:06:26 - 00:43:09:26
as a result of those outsourcing relationships,
00:43:09:27 - 00:43:13:01
a potential for non-disclosure of conflict of interests
00:43:13:01 - 00:43:17:03
in terms of ownership and who the MGA is owned by.
00:43:17:24 - 00:43:22:02
We had some concerns with respect to non-disclosure of the insurer underwriting the risk.
00:43:22:19 - 00:43:27:05
That is predominantly in subscription policies where the front-end consumer
00:43:27:05 - 00:43:29:23
may not actually know who the insurer on that policy is.
00:43:30:18 - 00:43:34:21
Some potential delays and poor claims management and a lack of understanding
00:43:34:21 - 00:43:37:22
from consumers as to who they complain to
00:43:37:22 - 00:43:40:22
and who do they deal with with respect to a claims if it comes up.
00:43:41:14 - 00:43:43:21
Potential mismanagement of policy funds.
00:43:43:21 - 00:43:47:17
So intermingling of funds, I'm going to say improper management
00:43:47:17 - 00:43:50:23
of a trust account, potentially inefficient
00:43:50:23 - 00:43:53:27
or inadequate E&O insurance or fidelity insurance.
00:43:54:21 - 00:43:58:02
And another one that we heard is insufficient or late
00:43:58:03 - 00:44:01:14
notice of cancellation on a policy, or non-renewal on a policy.
00:44:02:11 - 00:44:04:18
So with respect those preliminary findings,
00:44:06:09 - 00:44:07:14
we're continuing our work.
00:44:07:14 - 00:44:10:22
And I know, Liam, you've mentioned that we're proceeding with our survey,
00:44:11:04 - 00:44:14:03
that we actually have the consultation meetings booked for this week
00:44:14:13 - 00:44:18:02
where our Technical Advisory Committee has been asked to provide us feedback
00:44:18:02 - 00:44:18:27
on that survey
00:44:18:27 - 00:44:22:17
as we iron out kind of the details and the information we’ll be seeking.
00:44:23:06 - 00:44:26:06
We've also asked the Technical Advisory Committee to bring any members
00:44:26:06 - 00:44:29:06
from their organizations to provide us that feedback.
00:44:29:16 - 00:44:32:26
As Liam had said, the more the merrier and the more information we can have
00:44:32:26 - 00:44:37:01
from stakeholders and generally from folks that understand that market
00:44:37:21 - 00:44:40:25
is beneficial for us to look at it from a consumer perspective.
00:44:41:19 - 00:44:44:01
So Huston, I'm going to ask you, why is this work
00:44:44:01 - 00:44:47:01
a priority for FSRA and what are our next steps?
00:44:47:05 - 00:44:51:00
So what's happened is we are the regulator for insurers
00:44:51:04 - 00:44:55:10
and you know, we have stakeholder meetings on a regular basis.
00:44:55:10 - 00:44:58:11
There is a Stakeholder Advisory Committee
00:44:58:11 - 00:45:02:13
that we convene for the benefit of our board and our CEO attends.
00:45:02:13 - 00:45:04:15
We have Technical Advisory Committee meetings
00:45:04:15 - 00:45:08:05
and we have ad hoc meetings with other stakeholders representing
00:45:08:19 - 00:45:11:10
industry as well as consumers.
00:45:11:10 - 00:45:15:20
And at these meetings we use the input to develop our priorities.
00:45:15:20 - 00:45:18:26
We use the input to identify what are potential issues.
00:45:19:06 - 00:45:21:14
Let's say someone comes in and mentions
00:45:21:14 - 00:45:26:01
that they might have concerns about, you know, knowing who's actually on risk
00:45:26:01 - 00:45:29:17
or they might come in and say, you know what, I'm concerned about the,
00:45:29:29 - 00:45:32:29
about the way the trust account might be being managed
00:45:33:06 - 00:45:37:14
or I've got concerns about who I go to in the event of a claim.
00:45:37:29 - 00:45:40:03
At that point, it is,
00:45:40:03 - 00:45:41:20
okay, it's one piece of input.
00:45:41:20 - 00:45:47:05
And what we need to do next is to identify what is the prevalence of this.
00:45:47:05 - 00:45:49:21
Is this a large issue, small issue?
00:45:49:21 - 00:45:52:21
Are there other measures to manage it?
00:45:53:02 - 00:45:55:21
Is it something where we just need more information
00:45:56:19 - 00:45:59:28
or is it a situation where maybe some insurers handle it
00:45:59:28 - 00:46:03:01
a certain way and other insurers handle it a different way?
00:46:03:21 - 00:46:08:08
So the best way to gather that is to actually ask insurers.
00:46:08:08 - 00:46:11:11
So as the regulator, from a conduct perspective for insurers,
00:46:11:22 - 00:46:14:23
we, you know, we published our supervision plan recently
00:46:15:03 - 00:46:17:29
and we intend to gather that evidence
00:46:17:29 - 00:46:20:29
and then subsequently do the analysis to determine
00:46:21:01 - 00:46:25:12
how do we prioritize the, you know, the observations coming out of that.
00:46:25:26 - 00:46:28:03
Well, in some cases, we're going to come and look at this and say,
00:46:28:03 - 00:46:30:06
you know what, This is quite idiosyncratic.
00:46:30:06 - 00:46:32:28
And in some of the cases, we may say, you know what, this is an area,
00:46:32:28 - 00:46:33:23
you know, for example,
00:46:33:23 - 00:46:36:23
when it comes to claims management, there's been public litigation,
00:46:37:09 - 00:46:40:02
you know, from a customer saying, listen, I didn't know who I was dealing with,
00:46:40:02 - 00:46:42:18
I was dealing with this entity, and then it was this entity
00:46:42:18 - 00:46:44:12
and then just, they filed public litigation.
00:46:44:12 - 00:46:47:14
Well, that's a situation where as a regulator, we observe that
00:46:47:14 - 00:46:50:06
and we say to ourselves, if this is just going to happen,
00:46:50:06 - 00:46:52:06
very rarely, then that's one situation.
00:46:52:06 - 00:46:55:13
If it's a risk to consumers, then is it something
00:46:55:13 - 00:46:58:27
where additional measures need to be contemplated?
00:46:59:07 - 00:47:02:11
And so as we gather that information,
00:47:03:12 - 00:47:04:19
that's the next step
00:47:04:19 - 00:47:07:17
and then we will synthesize some views.
00:47:07:17 - 00:47:09:20
We'll share our observations.
00:47:09:20 - 00:47:13:14
And I think it's safe to say that it's obviously very early days.
00:47:13:14 - 00:47:16:29
We just published the supervision plan, but of course, we would,
00:47:17:13 - 00:47:20:21
you know, continue to engage with you and insurers
00:47:20:21 - 00:47:23:23
and those who are in the industry to make sure
00:47:24:10 - 00:47:27:10
that we're prioritizing and identifying the correct matters.
00:47:28:24 - 00:47:31:21
So kind of along those lines, I know we've mentioned we're consulting
00:47:31:21 - 00:47:35:16
with our Technical Advisory Committee, but I'll ask Ryan and Liam specifically,
00:47:36:11 - 00:47:38:23
what can FSRA do to ensure that we're
00:47:38:23 - 00:47:41:19
clearly understanding this market and focusing on the right things?
00:47:41:19 - 00:47:45:18
What advice would you give us when we undertake this process?
00:47:49:18 - 00:47:49:26
Okay.
00:47:49:26 - 00:47:51:06
I'll start off.
00:47:51:06 - 00:47:53:26
I think it's to look at the whole picture.
00:47:55:03 - 00:47:57:26
You know, there were opening remarks about that today
00:47:57:26 - 00:48:00:27
and Huston's talked a little bit about it, too.
00:48:00:27 - 00:48:05:01
So, I mean, you know, who are MGA’s and what's their role in the market?
00:48:05:01 - 00:48:07:10
Well, it's pretty important.
00:48:07:10 - 00:48:11:03
There is often, you know, people or companies that can't
00:48:11:10 - 00:48:14:10
get insurance for just the nature of their risk
00:48:15:00 - 00:48:19:09
from standard insurers and MGA’s are there to fill that gap.
00:48:19:09 - 00:48:22:09
That's important for those customers.
00:48:23:20 - 00:48:24:21
Mainly on the business side,
00:48:24:21 - 00:48:26:18
there are,
00:48:26:21 - 00:48:29:28
business operations that have unique specialty type risks
00:48:29:28 - 00:48:32:15
and, you know, they need coverage
00:48:32:15 - 00:48:36:26
and to provide that coverage, you need an entity that has, you know,
00:48:37:22 - 00:48:39:23
certain like really,
00:48:40:27 - 00:48:41:06
you know,
00:48:41:06 - 00:48:44:06
narrow expertise in underwriting that business
00:48:44:06 - 00:48:47:02
and MGA’s
00:48:47:02 - 00:48:49:15
provide that service.
00:48:49:15 - 00:48:52:15
You know, MGA’s come in various
00:48:52:28 - 00:48:57:11
you know, forms and sizes. They are no different than any other entity
00:48:57:11 - 00:49:01:08
or intermediary that you would see in the P&C insurance space.
00:49:01:08 - 00:49:03:14
Some of them are, you know, pretty big corporations.
00:49:03:14 - 00:49:05:08
They've been around a long time.
00:49:05:08 - 00:49:08:17
They have sophisticated governance frameworks that guide their operations.
00:49:08:17 - 00:49:10:28
There are others that are newer and smaller
00:49:10:28 - 00:49:13:28
and they're not in a position to invest as much,
00:49:14:14 - 00:49:16:09
invest as much there.
00:49:16:09 - 00:49:19:14
From the insurer perspective, you know,
00:49:19:15 - 00:49:23:02
sort of like we've talked about when it comes to other intermediaries.
00:49:24:25 - 00:49:27:01
You know, insurers, we know we're responsible
00:49:27:01 - 00:49:30:25
for the customer experience throughout the product lifecycle
00:49:30:25 - 00:49:34:01
and it's our responsibility to work with,
00:49:35:02 - 00:49:35:19
you know,
00:49:35:19 - 00:49:39:08
whether it's an MGA or whether it's another intermediary or whoever,
00:49:39:09 - 00:49:41:04
to make sure that the outcome
00:49:41:04 - 00:49:46:24
at the end for the customer is optimal and in line with
00:49:47:11 - 00:49:50:11
you know, the regulators expectations.
00:49:51:08 - 00:49:52:06
You know at Definity, and I’m sure
00:49:52:06 - 00:49:56:13
it’s no different at many other companies like when we engage with MGA’s.
00:49:56:13 - 00:49:59:22
You know, MGA is not a huge part of our operations but we do work with them.
00:50:00:22 - 00:50:04:03
We have a due diligence process before we're going to partner with them
00:50:04:03 - 00:50:07:03
and, you know, we conduct audits
00:50:07:03 - 00:50:10:03
to make sure that, you know, the contractual obligations
00:50:10:24 - 00:50:15:15
are achieved. So,
00:50:15:24 - 00:50:19:24
I think, from the regulatory perspective kind of
00:50:20:02 - 00:50:23:29
FSRA will collect the information and see what the,
00:50:24:12 - 00:50:25:26
you know, the nature of any issues.
00:50:25:26 - 00:50:26:25
But, you know
00:50:26:25 - 00:50:30:10
there is multiple you know, you have multiple parties at the table.
00:50:30:12 - 00:50:31:07
Everyone’s...,
00:50:31:16 - 00:50:33:10
MGA’s are serving a very important purpose.
00:50:33:10 - 00:50:37:05
Everyone wants the customer outcome to be a good one
00:50:37:05 - 00:50:40:05
so if there are gaps,
00:50:40:10 - 00:50:41:22
then, you know,
00:50:41:22 - 00:50:45:07
then those will need to be filled in the regulatory space like they're
00:50:45:07 - 00:50:49:09
usually supposed to be filled, which is efficient,
00:50:50:12 - 00:50:54:29
you know, proportionate and risk-based regulation
00:50:54:29 - 00:50:58:01
that all entities can abide by
00:50:58:01 - 00:51:00:05
and sort of move on.
00:51:00:05 - 00:51:01:01
Liam?
00:51:02:21 - 00:51:04:02
Only a few things to add.
00:51:04:02 - 00:51:05:21
I think the first thing I'll say is
00:51:06:07 - 00:51:09:18
we have members that use MGA’s, we have members that don't use MGA’s.
00:51:10:13 - 00:51:12:10
We know, broadly speaking, their prevalence
00:51:12:10 - 00:51:15:09
in the commercial market in Canada is increasing.
00:51:15:22 - 00:51:17:09
Anecdotally, I've heard that their presence
00:51:17:09 - 00:51:20:16
in comparable jurisdictions is even more significant.
00:51:22:06 - 00:51:23:01
I think maybe
00:51:23:01 - 00:51:26:03
just said otherwise, but, Ryan had said it well.
00:51:26:25 - 00:51:29:15
You know, the insurers that I've spoken to,
00:51:29:15 - 00:51:33:14
they understand that they're responsible for their customers regardless of
00:51:33:14 - 00:51:35:03
where the claim is underwritten or
00:51:35:03 - 00:51:38:05
where the claim is handled and the product is underwritten.
00:51:38:27 - 00:51:41:27
I think one of the things you will
00:51:42:29 - 00:51:46:01
uncover from this exploration of
00:51:47:12 - 00:51:50:01
insurer outsourcing relationships with MGA’s
00:51:50:01 - 00:51:54:24
is the incentives in place between insurers and MGA’s.
00:51:54:24 - 00:51:56:13
Put simply,
00:51:56:13 - 00:52:00:01
it's carrier’s money, it's carrier’s capital that is being used by MGA’s.
00:52:00:01 - 00:52:04:27
There's incentives in place to have a rigorous relationship there.
00:52:04:27 - 00:52:07:20
You know, Ryan had mentioned, there's underwriting audits,
00:52:07:20 - 00:52:09:20
there's financial audits
00:52:09:20 - 00:52:12:00
and, you know, from what we've heard from our members,
00:52:12:00 - 00:52:16:09
they establish clear processes that outline their expectations of MGA’s.
00:52:17:08 - 00:52:18:22
And we're looking forward to being part of the
00:52:18:22 - 00:52:21:01
exploratory conversation with FSRA.
00:52:21:03 - 00:52:24:03
Good thing those are some of the questions in the questionnaire.
00:52:25:28 - 00:52:28:15
I know we've talked a lot about kind of some of the future work
00:52:28:15 - 00:52:32:07
that we're looking into and collaboration, but I thought it might be worthwhile
00:52:32:15 - 00:52:35:22
to actually go back and I'll ask you, Ryan, first
00:52:36:04 - 00:52:38:14
some examples of the work that we have done together
00:52:38:14 - 00:52:41:13
or you have done together with FSRA in terms of collaboration
00:52:42:01 - 00:52:45:00
and kind of the focus on consumers.
00:52:45:04 - 00:52:45:17
Yeah.
00:52:45:17 - 00:52:48:23
So in the non-auto space, obviously it's a little bit.
00:52:48:23 - 00:52:49:12
Auto is next door.
00:52:49:13 - 00:52:50:00
Yeah, I know.
00:52:50:00 - 00:52:53:01
It's a little bit, it's a little bit newer,
00:52:53:12 - 00:52:54:23
but we're off to a good start.
00:52:54:23 - 00:52:57:25
You know, there's been a lot of opportunities for information sharing
00:52:57:25 - 00:53:01:16
and, you know, when I look at FSRA’s website, the consumer section of it,
00:53:01:16 - 00:53:03:25
FSRA is an authoritative figure here
00:53:04:12 - 00:53:07:12
so the information that it posts is really important.
00:53:07:19 - 00:53:12:19
There's lots of great information for home and business customers
00:53:13:08 - 00:53:16:06
about, you know, what goes into making up their premium
00:53:16:06 - 00:53:17:14
ways they can lower their premium
00:53:17:14 - 00:53:21:16
and what their rights and responsibilities are as customers.
00:53:21:16 - 00:53:24:29
So just, you know, sharing that information, I think is great.
00:53:25:22 - 00:53:27:19
You know, this isn't an auto example,
00:53:27:19 - 00:53:30:28
but I'll use just a broader FSRA example, you know, the work that
00:53:32:07 - 00:53:33:16
that's underway about,
00:53:33:16 - 00:53:36:17
you know, making sure that vulnerable customers
00:53:37:01 - 00:53:42:10
have good experiences throughout the financial services sector.
00:53:42:10 - 00:53:43:17
This isn't just P&C Insurance,
00:53:43:17 - 00:53:45:22
It's all FSRA, you know, regulated entities
00:53:45:22 - 00:53:49:23
and it's just a great example of, you know, FSRA identified an issue
00:53:50:20 - 00:53:53:01
and is really pulling, you know, all stakeholders
00:53:53:01 - 00:53:55:17
together really early, like not trying to, you know,
00:53:55:17 - 00:53:58:20
figure out the answers on its own, but to really collaborate
00:53:59:10 - 00:54:03:13
with customers in this case and then also with the regulated entities
00:54:04:04 - 00:54:09:19
to talk about it, learn what companies’ internal processes are
00:54:09:19 - 00:54:12:15
to accommodate customers who might need a little bit more help
00:54:12:15 - 00:54:14:29
in their journey, whether it's to purchase insurance
00:54:14:29 - 00:54:17:29
or to go through the claims process.
00:54:18:16 - 00:54:20:22
So to me,
00:54:20:22 - 00:54:25:04
that’s just a really good example of, you know, it still has to play out
00:54:25:04 - 00:54:26:09
and I hear it's multiyear.
00:54:26:09 - 00:54:29:17
So, you know, this this story will end maybe in 2026, 2027,
00:54:30:13 - 00:54:33:18
but it's again, you know, all parties in the industry
00:54:33:18 - 00:54:36:28
who care about the same person, in this case, the customer
00:54:37:09 - 00:54:39:23
working together to see if there's an issue
00:54:39:23 - 00:54:41:10
and if there is work together on a solution.
00:54:42:18 - 00:54:43:19
Liam?
00:54:43:19 - 00:54:45:14
Just briefly on the auto side of things
00:54:45:14 - 00:54:47:11
that just came to mind through Ryan's comments.
00:54:47:25 - 00:54:50:05
But FSRA’s
00:54:50:05 - 00:54:53:10
reaction post-pandemic in terms of providing insurers
00:54:53:10 - 00:54:57:10
with the tools they needed to offer relief, whether through deferral
00:54:57:15 - 00:55:00:28
or reductions to consumers, I think was welcome and
00:55:01:14 - 00:55:06:03
I don't know if it's appreciated how much the P&C industry did not just on auto
00:55:06:03 - 00:55:09:06
but on all lines of insurance during the pandemic.
00:55:09:06 - 00:55:12:05
I think the total figure was $3.6 billion in relief.
00:55:12:05 - 00:55:16:00
I don't know if there's another sector, certainly not in the financial services
00:55:16:12 - 00:55:19:13
that did as much as P&C did, but FSRA was a part of that.
00:55:19:23 - 00:55:21:17
Same with the recent auto theft crisis.
00:55:21:17 - 00:55:25:05
There's surcharging happening in Ontario and elsewhere.
00:55:26:06 - 00:55:28:27
And FSRA has been, by all accounts, very understanding of
00:55:29:27 - 00:55:32:27
the importance of addressing
00:55:33:05 - 00:55:36:05
the surge we've seen in thefts in the GTA in particular,
00:55:36:28 - 00:55:39:25
and the price signals that are that are being sent.
00:55:39:25 - 00:55:42:25
I think maybe just briefly on non-auto, sorry,
00:55:43:24 - 00:55:47:22
We did great work together during the peak of the hard commercial market,
00:55:47:22 - 00:55:51:25
which was exacerbated by the pandemic on business supports
00:55:52:03 - 00:55:53:00
and the core of that.
00:55:53:00 - 00:55:55:28
You know, Ryan will remember because if he doesn't mind me saying this,
00:55:55:28 - 00:56:01:27
he was an IBC staffer at the time, but we launched through the through IBC
00:56:01:27 - 00:56:04:20
but the members drove this was the Business Insurance Action Team,
00:56:04:20 - 00:56:09:11
which is essentially a facility for SMEs in the hospitality sector in Ontario.
00:56:09:11 - 00:56:11:22
It wrote dozens of policies.
00:56:11:22 - 00:56:14:18
You know, it was meant to be a short term, an interim measure
00:56:15:24 - 00:56:17:25
that helped businesses
00:56:17:25 - 00:56:20:28
who were hardest hit by the pandemic get by.
00:56:21:21 - 00:56:24:26
And the latest figures I've seen actually show that 95% of
00:56:24:26 - 00:56:28:03
the businesses that went through the BIAT, as we called it, are still in operation
00:56:28:25 - 00:56:31:10
today and have found coverage in the regular market.
00:56:31:10 - 00:56:35:28
We also offered free risk management services to businesses across Canada.
00:56:35:28 - 00:56:38:01
Hundreds of businesses took us up on that.
00:56:38:01 - 00:56:40:19
And FSRA, I wasn't as close to at the time, but
00:56:40:19 - 00:56:43:19
I know it was with us
00:56:43:23 - 00:56:45:17
every step of the way,
00:56:45:17 - 00:56:48:28
asking the right questions, encouraging the right kinds of responses,
00:56:49:13 - 00:56:53:11
and fostering sort of three way dialogue, government, regulator, industry.
00:56:53:11 - 00:56:56:12
So I think we can share mutual credit for that initiative.
00:56:56:22 - 00:56:57:25
Let me just jump in.
00:56:57:25 - 00:57:01:06
I mean, right now it's March of ‘24, right?
00:57:01:06 - 00:57:04:08
Anyone remember what you're doing four years ago, March of 2020?
00:57:04:19 - 00:57:09:11
I think, especially towards the back half of March of 2020,
00:57:09:11 - 00:57:13:13
everyone was sort of if you were out of town, you were rushing back home.
00:57:13:21 - 00:57:16:21
Offices were figuring out how to work remotely.
00:57:16:23 - 00:57:18:17
And you know what? We were doing.
00:57:18:17 - 00:57:22:29
FSRA was having calls with industry daily.
00:57:23:14 - 00:57:26:14
There was a standing daily call
00:57:26:18 - 00:57:29:11
because we were talking about three things relief,
00:57:31:03 - 00:57:33:02
access
00:57:33:02 - 00:57:35:06
and claims handling.
00:57:35:06 - 00:57:39:05
The relief piece, thankfully, is, you know, the pandemic aspect
00:57:39:05 - 00:57:42:25
and the health aspect that appears to have subsided.
00:57:43:07 - 00:57:46:15
The other two parts access and claims handling.
00:57:47:10 - 00:57:50:29
Those persist in different verticals in different areas.
00:57:51:15 - 00:57:54:15
But it just does speak to the level of communication
00:57:54:15 - 00:57:58:00
that I think is necessary from time to time and that everyone
00:57:58:00 - 00:58:01:06
was very willing to be part of during the depths of the pandemic.
00:58:01:06 - 00:58:04:02
I just want to share that because, you know, I missed those daily calls.
00:58:04:02 - 00:58:07:12
And what I found incredible about that period of time is
00:58:07:12 - 00:58:10:05
something would come across our desk and there would be a concern
00:58:10:05 - 00:58:13:08
and I would call whether it was IBC or call in
00:58:13:08 - 00:58:16:24
or one of the member, or one of the insurers with a question.
00:58:17:00 - 00:58:20:16
And 99% of the time it was, yes, we know about it.
00:58:20:16 - 00:58:21:25
We've already solved the solution
00:58:21:25 - 00:58:24:04
or we're working on a solution or here's what we're going to do
00:58:24:04 - 00:58:27:05
or here's how we can help or here's a link to a solution.
00:58:27:05 - 00:58:31:08
It was an incredible time where industry genuinely came together.
00:58:32:03 - 00:58:35:15
And I think that's what started really that relationship of collaboration
00:58:35:15 - 00:58:38:15
and that ongoing dialogue and that communication.
00:58:38:16 - 00:58:41:22
And I think that we hope to build on that relationship
00:58:41:22 - 00:58:43:23
as we go forward, because I think it started
00:58:43:23 - 00:58:47:08
with that trust and transparency that we can continue forward with.
00:58:47:28 - 00:58:49:16
I'm going to
00:58:49:16 - 00:58:51:19
land on the last question with Huston.
00:58:51:19 - 00:58:56:24
One of our key deliverables in our annual business plan is
00:58:56:24 - 00:59:01:00
the building and the drafting of a non-auto P&C supervision framework.
00:59:01:10 - 00:59:04:18
Can you give us some insights into what that framework will involve?
00:59:04:24 - 00:59:07:23
I'll caveat this with we will consult on the framework,
00:59:07:23 - 00:59:08:28
the TAC will hear about it.
00:59:08:28 - 00:59:10:15
We're open to any feedback,
00:59:10:15 - 00:59:13:26
but just some, I would say, high level preliminary ideas of where we're looking.
00:59:14:13 - 00:59:17:15
I think that it's fair to say we're always going to address areas
00:59:17:15 - 00:59:22:04
that are meaningful and of importance to consumers, what matters most.
00:59:22:04 - 00:59:26:10
So I mentioned things like access, things like, you know, claims handling,
00:59:26:27 - 00:59:29:13
fundamental fairness when it comes to having information
00:59:29:13 - 00:59:32:13
needed for consumer to make their decisions is very important.
00:59:32:26 - 00:59:35:13
We will do we will do our work
00:59:35:13 - 00:59:38:21
based on evidence and observations that we have.
00:59:38:22 - 00:59:40:17
That's why we have the survey out there.
00:59:40:17 - 00:59:42:27
That's why we have stakeholder
00:59:42:27 - 00:59:46:07
events and meetings and stakeholder committees for that very reason.
00:59:46:26 - 00:59:49:11
Where does that lead to supervision
00:59:49:11 - 00:59:53:19
as well as the ability to use a risk-based assessment
00:59:54:25 - 00:59:57:01
to build on some of the comments from this morning's
00:59:57:01 - 01:00:02:12
plenary session, we need data sometimes in order to actively increase
01:00:02:12 - 01:00:06:11
the intensity of supervision for certain aspects or certain areas of a business
01:00:07:02 - 01:00:09:11
and in some cases, you know, dial down
01:00:09:11 - 01:00:13:00
the supervisory intensity for other aspects or other businesses.
01:00:13:07 - 01:00:16:24
But to do that, we need to use tools such as surveys and data.
01:00:17:10 - 01:00:20:26
So being a risk-based regulator, a principal-based regulator,
01:00:20:26 - 01:00:22:17
I think will ultimately help.
01:00:22:17 - 01:00:27:24
There is certainly an awareness about the overall burden of regulation,
01:00:27:24 - 01:00:30:24
and we believe that using a risk based approach will help with that.
01:00:31:19 - 01:00:33:16
And the last thing I would add is transparency.
01:00:33:16 - 01:00:37:26
We're transparent with what our plans are, with what our supervisory plans are.
01:00:38:01 - 01:00:42:14
We will be transparent with our findings, both in terms of the habitation overview
01:00:42:14 - 01:00:44:25
as well as the insurer outsourcing arrangements.
01:00:45:07 - 01:00:48:05
And in addition to that, we will also identify, you know,
01:00:48:05 - 01:00:52:22
here are some of the tools as appropriate, as necessary,
01:00:53:11 - 01:00:56:22
and in a measured way based on what those observations are.
01:00:57:01 - 01:01:00:01
So you've got some of that data gathering,
01:01:00:22 - 01:01:03:22
you've got the commitment to transparency, but it starts
01:01:03:22 - 01:01:06:27
with what is important to consumers, we’ll always be focused on that.
01:01:08:19 - 01:01:10:23
I think we're actually managing to stay on time.
01:01:10:23 - 01:01:12:23
So thank you for the robust conversation.
01:01:12:23 - 01:01:15:23
I guess we now turn it over to the Q&A portion.
01:01:16:06 - 01:01:19:25
Just a reminder, the team in the back is accepting any questions through the app.
01:01:20:17 - 01:01:21:24
If we don't get to any,
01:01:21:24 - 01:01:25:04
to some of the questions they will be posted on our website after the fact,
01:01:25:28 - 01:01:28:28
and then I think you can start sending them through.
01:01:33:13 - 01:01:36:12
I may have to go back to naming dwarfs.
01:01:37:20 - 01:01:41:00
I still have some rapid fire questions if I need to kill time, gentlemen.
01:01:41:00 - 01:01:43:08
No more rapid fire questions.
01:01:45:29 - 01:01:48:20
Sorry, we have someone that can write that down for you.
01:01:53:15 - 01:01:55:15
They’re not showing up.
01:02:00:08 - 01:02:02:08
Here we go.
01:02:02:08 - 01:02:03:04
Okay.
01:02:03:04 - 01:02:07:22
Following the P&C Insurers Managing General Agent Supervision Plan publication,
01:02:07:22 - 01:02:11:12
is FSRA considering licensing P&C MGAs?
01:02:11:12 - 01:02:13:01
Huston, I’m going to turn that one over to you.
01:02:13:01 - 01:02:14:12
Well, I guess that one’s for me.
01:02:14:19 - 01:02:18:27
I think at this point, what we're doing is we've identified some areas
01:02:18:27 - 01:02:23:25
where it's come to our attention that there is an outsourcing by insurers.
01:02:24:08 - 01:02:26:19
We want to see what looks like. We want to see
01:02:27:18 - 01:02:33:22
how, you know, the incidents, how is it real, what is, what are concerns,
01:02:34:02 - 01:02:37:23
you know, to the extent there are concerns, you know, what
01:02:37:23 - 01:02:42:06
are the measures then would be appropriate to address those concerns.
01:02:42:06 - 01:02:45:12
And there are a myriad of ways to address issues,
01:02:46:06 - 01:02:48:14
you know, outside of licensing.
01:02:48:14 - 01:02:52:11
So I think right now the the focus is on identifying,
01:02:52:22 - 01:02:56:17
you know, what stakeholders have brought to us and identified as potential issues,
01:02:56:28 - 01:02:59:26
things that Beata mentioned, you know, who's handling the claim?
01:02:59:26 - 01:03:02:25
Who am I doing business with? Disclosure,
01:03:03:19 - 01:03:07:21
being able to be certain that things like, you know,
01:03:07:22 - 01:03:10:22
trust accounts are handled appropriately, things like that.
01:03:10:24 - 01:03:13:05
And I think that the measures that we take
01:03:13:05 - 01:03:17:26
will depend on what we find and also in additional consultation.
01:03:17:26 - 01:03:21:12
So I think that, you know, this is not something we're looking at right now.
01:03:21:12 - 01:03:23:13
Right now we're looking at just saying
01:03:23:13 - 01:03:26:00
what is the landscape out there, What's going on?
01:03:26:00 - 01:03:28:13
And based on what we find, then we'll take appropriate measures.
01:03:31:11 - 01:03:34:10
Next one.
01:03:38:20 - 01:03:41:20
Soon. We have some technical difficulties.
01:03:45:13 - 01:03:48:13
Here we go.
01:03:50:10 - 01:03:53:19
In regulatory guidance, insurance companies are clearly accountable
01:03:53:19 - 01:03:57:12
for their distribution channel complying with legal and regulatory requirements.
01:03:57:24 - 01:04:00:17
How does FSRA expect that this will be operationalized
01:04:00:17 - 01:04:02:15
in a practical manner in the market?
01:04:02:15 - 01:04:05:14
Have insurance companies pushed back on this accountability?
01:04:05:14 - 01:04:07:09
And where do you see it evolving?
01:04:07:09 - 01:04:09:05
Kind of along the same lines as the previous question.
01:04:09:05 - 01:04:12:05
So I'll send it to Huston.
01:04:12:21 - 01:04:16:09
I think that this is an important matter, right?
01:04:16:11 - 01:04:22:08
I think that this is where data and evidence and the results of our survey
01:04:22:08 - 01:04:27:02
will really help because it is important if there is going to be fairness,
01:04:27:21 - 01:04:31:27
if it is going to be operationalized, people expect and
01:04:31:27 - 01:04:34:14
it's only fair that it actually applies to everyone.
01:04:34:14 - 01:04:36:03
It's a level playing field.
01:04:36:03 - 01:04:38:07
It can't just be okay just here
01:04:38:07 - 01:04:40:29
but over here, something else really bad is happening.
01:04:40:29 - 01:04:43:01
So that is the power of being transparent.
01:04:43:01 - 01:04:45:27
That is the power of actually gathering data from the insurers.
01:04:45:27 - 01:04:49:27
I think it would be a combination of
01:04:50:29 - 01:04:52:23
what the solution
01:04:52:23 - 01:04:55:23
I think will lie based on the incidents
01:04:55:24 - 01:04:59:10
and then, you know, who is best situated to deal with that.
01:04:59:10 - 01:05:03:22
So, for example, we've had situations in the past where we pick up the phone
01:05:03:22 - 01:05:08:05
and we say to insurers, this is the issue we'd like to work with you on this.
01:05:08:21 - 01:05:11:11
Is there clarity we can put on this topic?
01:05:11:11 - 01:05:14:22
And in some cases, FSRA then has subsequently published Guidance
01:05:15:04 - 01:05:18:00
to clarify that this is the interpretation.
01:05:18:00 - 01:05:20:16
And we think that in many cases,
01:05:20:16 - 01:05:23:04
that's actually led to the change that's required.
01:05:23:04 - 01:05:25:12
In other cases, it's a little more complicated.
01:05:25:12 - 01:05:29:08
But in yet and still other cases, sometimes it's consumer education,
01:05:29:15 - 01:05:32:16
sometimes it's just making sure that people understand the landscape.
01:05:33:15 - 01:05:36:13
We will be around afterwards for follow up as well.
01:05:36:13 - 01:05:40:14
But I think that what we want is a level playing field, a fair playing field,
01:05:41:01 - 01:05:43:29
and where we identify something that needs to be corrected,
01:05:43:29 - 01:05:47:12
we obviously, we absolutely will work with industry and with consumers
01:05:47:22 - 01:05:50:22
to make sure that it's executed fairly.
01:05:51:10 - 01:05:53:07
The next one is up.
01:05:53:07 - 01:05:57:08
Given FSRA delegation of broker regulation to RIBO, a self-regulatory
01:05:57:08 - 01:06:01:20
organization, how do they intend to work with RIBO to agree on and work towards
01:06:01:20 - 01:06:05:12
common priorities, approaches and goals when it comes to the P&C industry?
01:06:06:12 - 01:06:09:07
So RIBO, as you all know, is
01:06:09:07 - 01:06:12:07
the regulator of insurance brokers.
01:06:12:09 - 01:06:14:06
You know, they're represented here.
01:06:14:06 - 01:06:18:02
We work with them on a regular basis.
01:06:19:11 - 01:06:22:29
I think that there are issues that are, of course,
01:06:23:09 - 01:06:27:26
broker issues and you know, we always take those to RIBO,
01:06:27:26 - 01:06:30:26
as the regulator for that area.
01:06:31:14 - 01:06:34:14
Where there are insurer issues,
01:06:35:02 - 01:06:39:11
you know, FSRA is the regulator from a conduct perspective of insurers
01:06:39:22 - 01:06:43:12
and we will take concerns we have related to insurers,
01:06:43:19 - 01:06:49:18
whether they be insurer conduct, insurer outsourcing, whatever the case may be.
01:06:49:18 - 01:06:51:26
We'll take those very seriously.
01:06:51:26 - 01:06:54:25
Where there are areas for intercept
01:06:55:04 - 01:06:58:20
when, you know, you may be dealing with a common situation
01:06:58:28 - 01:07:01:25
that is experienced by both brokers
01:07:01:25 - 01:07:05:02
as well as insurers, then of course we will collaborate.
01:07:05:02 - 01:07:08:02
So a good example of that was the Take All Comers review.
01:07:08:09 - 01:07:10:24
We worked very closely with RIBO
01:07:10:24 - 01:07:15:21
because there are, you know, brokers were helpful sources of information
01:07:15:21 - 01:07:18:21
and they were also letting us know about some of their concerns.
01:07:18:26 - 01:07:21:11
And of course, there were insurers on the other side.
01:07:21:11 - 01:07:24:04
So I like to be an optimist about this.
01:07:24:04 - 01:07:27:04
I think this is something that needs to happen and it can happen.
01:07:27:14 - 01:07:29:26
And we should definitely work together.
01:07:29:26 - 01:07:32:06
And I'll just add to that, I think the one thing
01:07:32:06 - 01:07:35:06
one of the things we've learned over the last couple of years is
01:07:35:16 - 01:07:39:16
the important role that brokers play in the lives of consumers
01:07:40:05 - 01:07:42:21
and the information that brokers hold.
01:07:42:21 - 01:07:46:18
Brokers generally are the front line access for consumers.
01:07:46:18 - 01:07:48:10
They have the information.
01:07:48:10 - 01:07:51:06
Often it's the brokers that can identify a potential issue
01:07:51:06 - 01:07:54:24
or a potential trend that's coming up before anybody else is aware of it.
01:07:54:24 - 01:07:57:24
So I think ongoing collaboration with brokers,
01:07:57:25 - 01:08:00:25
we actually have brokers on our Technical Advisory Committee
01:08:01:11 - 01:08:04:01
because we believe they're part of that whole ecosystem.
01:08:04:01 - 01:08:07:07
So in order for us to do supervision, we need to have
01:08:07:07 - 01:08:10:07
that holistic approach and brokers are definitely a part of that.
01:08:11:00 - 01:08:12:01
See, I can't help myself.
01:08:12:01 - 01:08:14:21
I was supposed to moderate, not answer questions.
01:08:14:21 - 01:08:15:17
Okay.
01:08:15:17 - 01:08:16:02
Next one.
01:08:16:02 - 01:08:19:00
On the topic of consumer education related to Nat CAT,
01:08:19:09 - 01:08:22:19
how would you characterize the role of various regulatory bodies,
01:08:22:19 - 01:08:27:10
provincial and federal, including FCAC and marketplace stakeholders should be?
01:08:27:10 - 01:08:28:19
In a perfect world,
01:08:28:19 - 01:08:31:07
what would you recommend to ensure coordination?
01:08:31:07 - 01:08:33:04
I don't know who wants to take this one.
01:08:33:04 - 01:08:34:28
I can start.
01:08:34:28 - 01:08:40:10
I touched on this concept of harmonization when we were talking
01:08:40:10 - 01:08:44:27
about fair treatment of customers and the CCIR guidance.
01:08:45:25 - 01:08:49:07
When I think of, you know, consumer education related to Nat CAT, I think of,
01:08:50:04 - 01:08:54:06
you know, this is a market conduct issue that largely
01:08:55:24 - 01:08:56:27
resides with
01:08:56:27 - 01:09:00:23
the provincial insurance regulators.
01:09:00:23 - 01:09:04:01
So I like the idea of using the Canadian Council of Insurance Regulators
01:09:04:01 - 01:09:06:14
to be the the group that engages
01:09:06:14 - 01:09:09:14
with various industry stakeholders to talk about it.
01:09:10:17 - 01:09:12:02
This is also a multiyear project.
01:09:12:02 - 01:09:16:17
I don't know what the outcome is going to be, but presumably a harmonized,
01:09:17:22 - 01:09:19:21
a harmonized approach, whatever that is.
01:09:19:21 - 01:09:22:22
Some guidance or whatever it comes out to be
01:09:22:23 - 01:09:25:29
is better than a fragmented approach
01:09:25:29 - 01:09:31:06
and CCIR already has various, you know, stakeholder forums for
01:09:32:02 - 01:09:35:02
stakeholders, you know, insurers, brokers to contribute.
01:09:35:04 - 01:09:37:08
I see the FCAC is there.
01:09:37:08 - 01:09:41:15
I'm, you know, I can't really speak specific to the FCAC's role,
01:09:41:15 - 01:09:43:25
but if there is a role for that organization,
01:09:43:25 - 01:09:45:15
I think that that should be coordinated through
01:09:46:17 - 01:09:48:16
the CCIR
01:09:48:16 - 01:09:50:17
to best determine versus having,
01:09:50:17 - 01:09:53:18
you know, one organization kind of go in and try to do its own thing
01:09:53:19 - 01:09:57:11
that doesn't feel part of this other initiative.
01:09:57:11 - 01:10:00:10
It'd be best if all parties are working together
01:10:00:10 - 01:10:02:00
in a perfect world.
01:10:02:00 - 01:10:03:14
I agree with everything Ryan said.
01:10:03:14 - 01:10:04:26
I would only add that I know,
01:10:04:26 - 01:10:09:27
and the reference to FCAC may be because there was a recent consultation
01:10:10:04 - 01:10:13:04
launched by the FCAC that specific to
01:10:14:08 - 01:10:17:27
claims and in keeping with, Ryan said, our view
01:10:17:28 - 01:10:22:16
is that sort of accountability lies with provincial market conduct regulators
01:10:22:16 - 01:10:25:16
and I think our our position as an industry to the FCAC
01:10:25:22 - 01:10:28:21
has been just that.
01:10:28:26 - 01:10:29:22
Huston, anything?
01:10:31:04 - 01:10:33:21
Is that it for questions?
01:10:36:11 - 01:10:37:01
Okay.
01:10:37:01 - 01:10:38:11
Next one.
01:10:38:11 - 01:10:41:14
The insurance industry receives a number of consumer complaints.
01:10:42:18 - 01:10:44:18
Do the panel believe we should be more open
01:10:44:18 - 01:10:48:00
about celebrating our successes while resolving our challenges?
01:10:48:00 - 01:10:49:11
And if so,
01:10:49:11 - 01:10:52:11
what should we do and what should we do differently?
01:10:52:14 - 01:10:54:25
I have a feeling you guys have a lot to say about this.
01:10:54:25 - 01:10:57:09
The answer is yes
01:10:57:09 - 01:10:59:29
and I don't know if anyone knows how to do it.
01:10:59:29 - 01:11:01:21
That's the tough part.
01:11:01:21 - 01:11:04:26
You know, to the discussion we had on natural catastrophes.
01:11:04:26 - 01:11:06:19
I mean, there's, you know, I tried to list off
01:11:06:19 - 01:11:09:19
kind of a lot of good things that insurers
01:11:09:25 - 01:11:13:16
and intermediaries are doing in trying to create more value for the customer.
01:11:13:16 - 01:11:15:28
But yeah, it just doesn't get out and the focus continues
01:11:15:28 - 01:11:20:13
to be on complaints, on price but there's really so much there.
01:11:20:13 - 01:11:23:17
So if there are any marketers, advertisers
01:11:23:17 - 01:11:27:05
in the room, I mean this is a multi, multi-million dollar
01:11:28:04 - 01:11:31:04
initiative to try to solve.
01:11:32:21 - 01:11:34:01
Well said and
01:11:34:01 - 01:11:39:05
it’s a, I think, a perennial issue that we at IBC talk about and struggle with
01:11:39:05 - 01:11:42:28
but it's funny, the you know,
01:11:43:15 - 01:11:47:19
the overwhelming majority of claims go smoothly without incident.
01:11:48:04 - 01:11:51:16
The overwhelming majority of consumer’s interactions
01:11:51:16 - 01:11:55:12
with their broker or agent or direct insurer go very smoothly
01:11:55:12 - 01:11:59:21
but we do tend to hear most about the friction points.
01:12:00:08 - 01:12:01:28
And if there's more we can do
01:12:01:28 - 01:12:05:04
and I think we have something in store at IBC this year in terms of
01:12:05:04 - 01:12:09:10
pointing to the value of the industry and then we should do so.
01:12:09:10 - 01:12:11:22
So stay tuned for more from us.
01:12:12:25 - 01:12:15:01
We're dealing with something that is essential
01:12:15:07 - 01:12:18:13
for most homeowners, right, when it comes to,
01:12:19:01 - 01:12:22:00
you know, their experience, let’s say, on the habitation overview.
01:12:22:00 - 01:12:27:06
I think our publication will also shed some light in terms of what's happening.
01:12:27:06 - 01:12:30:01
And, you know, to your points, it is the case
01:12:30:01 - 01:12:34:17
in the majority of the circumstances, people get the coverage that they need.
01:12:35:16 - 01:12:38:11
And I think what we will do is track through,
01:12:38:11 - 01:12:41:26
you know, some of the timeliness issues that may be there,
01:12:42:01 - 01:12:43:16
but that will also identify that,
01:12:43:16 - 01:12:46:15
you know, in many, many cases, people do get their claim resolved
01:12:46:16 - 01:12:47:25
and they do get what they need.
01:12:47:25 - 01:12:52:15
They get the support that they desperately require just at the right time.
01:12:52:15 - 01:12:55:11
So I think that this is something we can continue to work on together
01:12:55:11 - 01:12:58:26
and we will be able to share data related to that quite soon.
01:12:59:26 - 01:13:02:11
So that brings us to the conclusion of our session.
01:13:02:11 - 01:13:05:18
We hope you received some helpful information and we hope
01:13:05:18 - 01:13:08:23
that you took away the message that we have.
01:13:08:23 - 01:13:12:06
We look forward to continuing to collaborate with you.
01:13:12:11 - 01:13:14:19
Our doors are always open, whether it's through kind of
01:13:14:19 - 01:13:18:02
the formal engagement with our Technical or Stakeholder Advisory Committees
01:13:18:18 - 01:13:21:08
or through one-on-one interactions or through me bugging
01:13:21:08 - 01:13:24:11
some of you in the audience or on the stage here for information.
01:13:25:20 - 01:13:28:21
If you're in the app, there is a feedback section.
01:13:28:21 - 01:13:30:20
It's called the feedback section,
01:13:30:20 - 01:13:33:00
a little loop on our app.
01:13:33:00 - 01:13:36:22
We are looking for feedback to improve conferences for the future
01:13:37:09 - 01:13:40:08
and I invite you all to join us to continue the discussion.
01:13:40:08 - 01:13:41:10
I believe there will be some.
01:13:41:10 - 01:13:45:01
There’s a short reception outside with some refreshments and a cash bar.
01:13:46:02 - 01:13:46:14
Thank you.
00:00:04:28 - 00:00:06:06
I want to introduce myself.
00:00:06:06 - 00:00:07:15
My name is Wendy Horrobin,
00:00:07:15 - 00:00:11:02
I'm the Head of Licensing and Risk Assessment for FSRA.
00:00:11:15 - 00:00:16:07
So in addition to licensing and some market conduct enforcement,
00:00:16:17 - 00:00:20:19
I oversee the unit who has been responsible
00:00:20:19 - 00:00:24:05
for operationalizing the title protection framework.
00:00:24:05 - 00:00:27:19
So for those of you who may be part of a CB,
00:00:27:19 - 00:00:32:16
they're the people that did their recent supervision examination.
00:00:34:07 - 00:00:37:16
We have a few housekeeping items
00:00:37:24 - 00:00:41:20
to remind everybody of, whether you're in person here
00:00:41:20 - 00:00:46:04
or virtually, which welcome as well, those who are on virtually.
00:00:46:20 - 00:00:50:04
I want to remind everyone that this session is being taped
00:00:50:13 - 00:00:54:10
and we have simultaneous French translation available
00:00:54:10 - 00:00:56:16
for those who wish to do so.
00:00:56:16 - 00:00:58:08
If so, you can just raise your hand.
00:00:58:08 - 00:00:59:24
We'll provide you with a headset.
00:01:01:13 - 00:01:05:03
And if you're at home, you can click on the top-right
00:01:05:03 - 00:01:08:25
of the screen and change your language to French.
00:01:09:27 - 00:01:12:08
So we will be taking
00:01:12:08 - 00:01:15:11
some questions at the end of the session.
00:01:15:11 - 00:01:17:14
And as we saw this morning,
00:01:17:14 - 00:01:20:14
all of the questions are being run through the app.
00:01:21:07 - 00:01:24:16
If for whatever reason, you couldn't get on the app, just raise your hand
00:01:24:16 - 00:01:29:00
and one of our team members at the back will come and write down your question
00:01:29:00 - 00:01:32:01
and pose it to us up at the front.
00:01:35:03 - 00:01:39:00
And that brings us to our panel.
00:01:39:22 - 00:01:42:11
So let me introduce you very briefly to the panel.
00:01:42:11 - 00:01:46:25
I won't go through the whole bio because it's available to you on the website.
00:01:46:25 - 00:01:50:11
But in order to my left, we have Marie Muldowney.
00:01:50:23 - 00:01:56:07
She is the Managing Director of the Canadian Securities Institute, CSI
00:01:57:18 - 00:01:58:28
(it's a division of Moody's)
00:01:58:28 - 00:02:01:28
and she has been so since 2010.
00:02:03:11 - 00:02:05:07
For the purposes of title protection.
00:02:05:07 - 00:02:10:03
Just to remind everybody, CSI has two approved designations.
00:02:10:03 - 00:02:14:09
One is for financial planners, which is the Personal Financial Planner PFP
00:02:14:20 - 00:02:20:05
and one for financial advisors, the Designated Financial Services Advisor.
00:02:20:26 - 00:02:24:03
And to Marie's left is Tashia Batstone.
00:02:24:03 - 00:02:27:03
She's the president and CEO of FP Canada.
00:02:27:15 - 00:02:31:13
And FP Canada has the Certified Financial Planner
00:02:31:13 - 00:02:34:16
and Qualified Associate Financial Planner.
00:02:35:04 - 00:02:37:13
And finally, Anthony Williams.
00:02:37:13 - 00:02:42:05
He's the VP of the Canadian Institute of Financial Planning, CIFP,
00:02:42:17 - 00:02:45:20
and they currently have three approved credentials,
00:02:45:20 - 00:02:49:04
the Registered Retirement Consultant for FP
00:02:49:04 - 00:02:51:10
and then two FA credentials,
00:02:55:01 - 00:02:57:12
Registered Financial and Retirement Advisor
00:02:57:12 - 00:03:01:16
and Registered Retirement Analyst.
00:03:01:16 - 00:03:03:14
Welcome
00:03:03:14 - 00:03:04:16
to our panel
00:03:05:16 - 00:03:06:06
today.
00:03:07:12 - 00:03:09:14
Just as an FYI,
00:03:09:23 - 00:03:14:21
unfortunately we didn't have a representative from Advocis available
00:03:14:21 - 00:03:16:10
for today's session
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and as well for CIRO.
00:03:19:15 - 00:03:22:26
Their approval happened post Exchange planning
00:03:22:26 - 00:03:25:11
so they won't be on the panel either today.
00:03:25:11 - 00:03:28:15
That said, if you have questions for them,
00:03:29:07 - 00:03:32:25
you can still submit them and all of the questions that are submitted.
00:03:32:25 - 00:03:35:02
Obviously, we won't be handling all today.
00:03:35:02 - 00:03:38:03
They'll be taken back though, and we will eventually answer
00:03:38:04 - 00:03:41:12
all of the questions and they'll be available on our website
00:03:41:19 - 00:03:44:19
probably within a couple of weeks.
00:03:45:14 - 00:03:48:14
So with that,
00:03:48:24 - 00:03:49:24
we can get started.
00:03:49:24 - 00:03:52:24
And I know that to date
00:03:52:25 - 00:03:55:26
probably most of the public information
00:03:55:26 - 00:03:58:27
that has been available regarding title protection
00:03:59:08 - 00:04:01:27
has been mostly from the regulator.
00:04:01:27 - 00:04:07:16
So you've heard all of the talking points about the fact that credential holders
00:04:07:16 - 00:04:11:03
are now supervised, they're subject to a complaints process.
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They need to adhere to a code of conduct that puts
00:04:16:20 - 00:04:20:02
clients interests first and sign an attestation, all of those things.
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But today is a chance to hear from the credentialing bodies
00:04:24:24 - 00:04:27:11
themselves, which I'm very excited with.
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And I thought, Tashia, we would kick it off with you.
00:04:31:26 - 00:04:33:12
So question number one,
00:04:33:12 - 00:04:35:24
it's actually a two-parter.
00:04:36:04 - 00:04:39:29
What do you see as the CB's role in supporting FSRA's mandate,
00:04:39:29 - 00:04:44:08
particularly protecting the rights and interests of consumers?
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And then the second part of this question is
00:04:46:12 - 00:04:48:06
how does your organization support
00:04:48:12 - 00:04:52:02
consumer and investor protection through its credentialing program?
00:04:53:23 - 00:04:54:17
That's a lot.
00:04:54:17 - 00:04:57:15
I think I could take the full hour and just talk about that.
00:04:57:15 - 00:04:58:20
But.
00:04:59:12 - 00:05:02:07
So FP Canada is a public interest entity.
00:05:02:07 - 00:05:06:01
We are not for profit and our focus 100% in everything
00:05:06:01 - 00:05:09:18
that we do is around consumer protection and protection of the public.
00:05:10:14 - 00:05:14:15
And so for us, what really made a difference in this framework
00:05:14:21 - 00:05:19:11
was the fact that there are now standards that
00:05:20:20 - 00:05:23:12
credential holders have to adhere to in order to be able to provide
00:05:23:12 - 00:05:26:11
services to the public. And we think that's very, very important.
00:05:27:13 - 00:05:30:06
You know, we've worked closely with FSRA through this process.
00:05:30:06 - 00:05:33:02
You know, for example, one of the things that we advocated for
00:05:33:02 - 00:05:36:18
very strongly with FSRA was the best interest standard
00:05:36:18 - 00:05:40:17
to be included into the legislation and into the rules.
00:05:40:28 - 00:05:44:15
So from that perspective, we think it's really important
00:05:44:15 - 00:05:47:20
the work that's been happening and we're happy to have participated.
00:05:48:04 - 00:05:52:01
I think, you know, how we can continue to support the framework,
00:05:52:13 - 00:05:56:02
you have to remember that the credentialing bodies are probably closest
00:05:56:12 - 00:05:57:26
to the credential holders
00:05:57:26 - 00:06:01:16
and to the customers that they serve and the Canadian public.
00:06:02:00 - 00:06:05:10
And so when it comes down to that, I think we have a role
00:06:05:10 - 00:06:09:00
to help FSRA, to understand what's changing in the industry,
00:06:09:00 - 00:06:13:05
what's changing with the consumer, what you know, what's happening out there
00:06:13:05 - 00:06:18:05
so that the framework can continue to evolve and continue to stay relevant
00:06:18:15 - 00:06:21:16
and continue to uphold that very important
00:06:21:16 - 00:06:24:16
focus on the consumer and consumer protection.
00:06:24:24 - 00:06:26:28
So that's sort of the -
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I think that’s a really important role for the credentialing bodies to hold.
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With respect to,
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you know, our role and how we protect the consumer.
00:06:38:01 - 00:06:41:07
I think it sort of sits upon three, you know, I always call it
00:06:41:07 - 00:06:42:24
a three-legged stool.
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We have to have very high certification standards.
00:06:45:17 - 00:06:48:10
So our certification standards, for example,
00:06:48:10 - 00:06:51:10
are reviewed annually.
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They have to be we have to look at them as terms of
00:06:54:11 - 00:06:58:13
we have to meet global standards because we are part of a global organization.
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And so we have that all built into our processes.
00:07:02:14 - 00:07:04:08
You know, we're constantly evolving them.
00:07:04:08 - 00:07:07:26
You know, just recently we've released standards related to technology
00:07:07:26 - 00:07:11:29
because we know how important technology is in terms of the changes
00:07:11:29 - 00:07:15:27
that are going to be impacting the financial planning industry.
00:07:16:27 - 00:07:21:03
The second leg in that stool has to do with professional standards, whether,
00:07:21:06 - 00:07:25:01
you know, code of ethics, practice standards, standards of responsibility,
00:07:25:16 - 00:07:27:04
professional responsibility
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that all of our certificants are required to adhere to.
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And those standards have to be very robust.
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They have to be developed.
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You have to be very transparent with the standards.
00:07:37:26 - 00:07:39:23
And, you know, that becomes really important.
00:07:39:23 - 00:07:43:10
And we invest a lot of time and effort in setting standards both here in Canada
00:07:43:20 - 00:07:47:03
and we also contribute to the setting of those standards on a global basis.
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And the third stool or the third leg in the stool
00:07:50:21 - 00:07:54:13
comes down to making sure that you have the appropriate enforcement
00:07:54:18 - 00:07:58:24
against those standards and that enforcement has to be transparent.
00:07:59:02 - 00:08:00:21
You have to have accountability.
00:08:00:21 - 00:08:03:21
It has to be impartial and it has to be robust.
00:08:03:22 - 00:08:08:21
You know, a lot of the work that we do, whether it's responding to a complaint
00:08:08:21 - 00:08:13:23
that comes in from a member of the public or actually going out and proactively
00:08:14:00 - 00:08:17:20
looking to see whether there are instances out there,
00:08:17:22 - 00:08:22:28
we would initiate a concern or a complaint against one of our credential holders.
00:08:23:17 - 00:08:24:29
It's a very robust process.
00:08:24:29 - 00:08:27:25
We do that and then making sure, for example,
00:08:27:25 - 00:08:31:25
that you have public representation on your panels, making sure
00:08:31:25 - 00:08:35:15
that your decisions are made public, that the transparency is there.
00:08:35:24 - 00:08:38:16
Those are all of the important things that a credentialing body
00:08:38:16 - 00:08:41:02
needs to do to ensure that consumer protection.
00:08:43:07 - 00:08:46:07
I'm curious about your discipline.
00:08:47:22 - 00:08:50:15
Do you run a program that is sort of progressive
00:08:50:15 - 00:08:54:04
so you attempt to sort of rehab people where maybe it's
00:08:54:04 - 00:08:58:18
a lower end infraction or is there a different way of doing it?
00:08:59:00 - 00:08:59:22
Absolutely.
00:08:59:22 - 00:09:02:22
We have different sanctions available to the panel.
00:09:03:04 - 00:09:07:12
Sometimes it's guidance just, you know, talking to the individual.
00:09:07:12 - 00:09:08:07
Here’s what you did wrong,
00:09:08:07 - 00:09:09:29
here's what you need to do better.
00:09:09:29 - 00:09:13:18
Sometimes, depending on the severity of the issue.
00:09:13:24 - 00:09:16:24
It can be mandated professional development.
00:09:17:23 - 00:09:21:20
Our panels have the ability and actually our standards council
00:09:21:20 - 00:09:26:14
has the ability to suspend somebody if the incident
00:09:26:14 - 00:09:30:12
is sufficiently egregious that we think that there is harm to the public
00:09:30:15 - 00:09:34:03
if this person stays out providing services.
00:09:34:14 - 00:09:37:07
And then finally, of course, we do have the ability to take somebody's
00:09:37:07 - 00:09:38:05
credential away.
00:09:38:05 - 00:09:43:05
If, again, the incident is sufficiently severe.
00:09:44:09 - 00:09:45:14
That's great. Thank you.
00:09:45:14 - 00:09:47:06
I'm going to move to question two.
00:09:47:06 - 00:09:50:16
And this question is for the entirety of the panel.
00:09:50:17 - 00:09:53:06
I'm going to start with you, Marie.
00:09:53:06 - 00:09:56:07
What changes did you have to make, if any, to ensure
00:09:56:07 - 00:09:59:26
that your organization had in place the appropriate governance structure
00:09:59:26 - 00:10:04:13
and administrative policies and procedures to serve the public interest?
00:10:05:20 - 00:10:09:03
I'd say we didn't have that many changes to make.
00:10:09:17 - 00:10:12:28
We've been a credentialing body since,
00:10:12:28 - 00:10:14:11
well, over 50 years.
00:10:15:00 - 00:10:18:09
We were also part of the IDA back in the day.
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So regulation kind of rubs off on you when you're part of that kind
00:10:21:25 - 00:10:24:25
of an organization for so long.
00:10:24:25 - 00:10:31:12
We already had accreditation in place for all of our programs.
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We had a strict code of ethics for our designation holders.
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We already did
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sanctions for people who did not
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abide by their rules
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and their designation could be removed.
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And we've always seen ourselves as a group
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that is offering the possibility for all Canadians
00:10:56:20 - 00:11:00:18
to have some kind of financial advice, whether you're going into
00:11:01:02 - 00:11:04:02
a simple financial advice or something very complex.
00:11:04:02 - 00:11:08:10
And so we have financial planning that goes from branch-level people
00:11:08:17 - 00:11:11:19
up to mid-market people
00:11:11:26 - 00:11:14:04
right into the very wealthy.
00:11:14:14 - 00:11:17:11
And so being able to address the needs
00:11:17:11 - 00:11:21:00
of those markets all the way along has been really important.
00:11:21:00 - 00:11:24:18
And so we're not looking just at the consumer of our
00:11:26:02 - 00:11:29:29
our programs, which is the advisor or the financial planner or the
00:11:29:29 - 00:11:34:10
investment advisor or whoever we're giving an exam to, but we're also
00:11:34:10 - 00:11:36:05
looking at the public beyond that.
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What is the public going to need to know?
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What are they going to need to have as proper advice?
00:11:40:24 - 00:11:43:17
And be able to protect them as we go forward.
00:11:43:17 - 00:11:47:05
And so I think being able to take people who come into our industry
00:11:47:19 - 00:11:51:14
at the very, even at the very bottom level and take them through their careers
00:11:51:28 - 00:11:56:18
and be able to give them possibilities of increasing financial advisory services
00:11:56:25 - 00:12:00:07
all the way up to the very wealth management level.
00:12:00:07 - 00:12:01:20
So
00:12:01:20 - 00:12:04:20
we've really put an emphasis on
00:12:05:08 - 00:12:06:24
on making sure that
00:12:06:24 - 00:12:10:02
when we give somebody a designation, they are competent.
00:12:10:18 - 00:12:13:18
And I think competence leads to confidence.
00:12:13:20 - 00:12:16:23
And so we have people who are confident in their abilities
00:12:16:23 - 00:12:19:21
because they have gotten the kind of education,
00:12:19:21 - 00:12:22:20
deep education and the kind of rigorous exams
00:12:22:25 - 00:12:26:05
that we can attest to their level of competence.
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Talk to me about maybe
00:12:29:28 - 00:12:34:06
the complaints process that you would have had to put in place.
00:12:34:07 - 00:12:40:05
I could see formerly maybe you would receive a complaint from someone
00:12:40:05 - 00:12:43:25
who took a course, a credential, and they weren't happy about something.
00:12:43:25 - 00:12:46:13
But this is a little bit different now.
00:12:46:13 - 00:12:49:12
Any changes that you had to make in that area?
00:12:49:17 - 00:12:52:06
Well, we've always had
00:12:52:06 - 00:12:55:20
a process in place for people to complain.
00:12:55:27 - 00:12:58:12
So a consumer could complain to us.
00:12:58:12 - 00:13:02:05
We do an investigation or we look at what CIRO was doing,
00:13:02:05 - 00:13:05:10
because very often in our industry, we have CIRO,
00:13:05:10 - 00:13:09:13
who is taking someone to task for the kinds of things they're doing.
00:13:09:18 - 00:13:12:06
And if they are giving them a sanction,
00:13:12:06 - 00:13:13:25
then we're looking at what do we do
00:13:13:25 - 00:13:17:08
as a sanction against a holder who is holding a designation.
00:13:17:18 - 00:13:20:04
And so we've kept that process.
00:13:20:04 - 00:13:24:25
We've also bolstered our process by looking at
00:13:25:04 - 00:13:30:12
what are the common practices out there for people who are being taken to task.
00:13:30:15 - 00:13:32:13
And we have an ethics committee, we have
00:13:33:12 - 00:13:36:27
an appeals committee with all the levels that you need
00:13:36:27 - 00:13:40:29
in order to ensure that you can take someone to task,
00:13:41:03 - 00:13:44:03
hear them fairly, but also sanction those required.
00:13:44:23 - 00:13:46:09
That's great. Thank you.
00:13:46:09 - 00:13:48:11
Anthony, over to you.
00:13:48:11 - 00:13:52:10
Any changes in your governance structure and your organization
00:13:52:10 - 00:13:56:03
in light of now being a regulated entity under title protection?
00:13:56:10 - 00:13:59:10
Thank you, Wendy.
00:13:59:21 - 00:14:01:27
To sort of echo
00:14:01:27 - 00:14:05:03
what Marie had said, you know,
00:14:05:03 - 00:14:11:01
our organization has been around for 50 years, or, approaching that period of time
00:14:11:01 - 00:14:14:01
and during that time,
00:14:14:15 - 00:14:17:05
you know, we've been an accredited education provider,
00:14:17:05 - 00:14:19:25
an accredited continuing education provider.
00:14:20:09 - 00:14:22:19
We've managed all credentials over that period of time.
00:14:22:19 - 00:14:25:29
So I'd like to think that we had some very robust
00:14:25:29 - 00:14:29:20
processes and policies and procedures already in place.
00:14:29:20 - 00:14:33:05
Good governance structure, risk management, resource management.
00:14:33:29 - 00:14:37:07
That being said, though, we also recognize that
00:14:37:07 - 00:14:41:02
we're not perfect as as an organization and there is always room for improvement.
00:14:41:02 - 00:14:42:00
And I think
00:14:42:00 - 00:14:45:08
one of the benefits that we had, I call it a benefit now when I
00:14:45:08 - 00:14:47:16
was actually going through the process, I'm not sure it was a benefit,
00:14:47:16 - 00:14:53:26
but one of the benefits of going through this credentialing, credentialing body application
00:14:53:26 - 00:14:58:20
was it gave our organization an opportunity for some introspection.
00:15:00:04 - 00:15:04:06
Taking a look at the policies and procedures we have in place and have had in place.
00:15:04:26 - 00:15:08:27
Trying to identify some of our bad habits that have crept into the organization
00:15:09:10 - 00:15:12:21
and then really try to tighten up everything to make sure that, you know,
00:15:12:23 - 00:15:14:11
we're number one, more efficient.
00:15:14:11 - 00:15:17:11
Number two, we are truly addressing the
00:15:18:03 - 00:15:21:03
consumer protection mandate
00:15:21:05 - 00:15:23:24
and just tightening up the procedures
00:15:23:24 - 00:15:28:01
and making sure that we've got sort of the best practices in place.
00:15:28:11 - 00:15:30:03
So I think we went through that.
00:15:30:03 - 00:15:33:10
And in particular, I think one of the things,
00:15:33:10 - 00:15:36:09
two areas that we really
00:15:36:09 - 00:15:39:25
I think it did some changes to in amendments were in the area
00:15:39:25 - 00:15:44:04
of consumer protection as well as in professional ethics.
00:15:44:16 - 00:15:47:16
I think, you know, that's reflected in our course material,
00:15:48:25 - 00:15:52:00
Our organization, we've got many fronts
00:15:52:00 - 00:15:53:12
on which we operate in terms of
00:15:54:26 - 00:15:55:17
it's not just
00:15:55:17 - 00:15:58:23
about providing courses, but we also do a lot of live,
00:15:58:23 - 00:16:02:13
in-person activities, conferences, workshops, that kind of stuff.
00:16:02:24 - 00:16:06:18
And it's really reflected, I think, in our conferences and workshops
00:16:06:18 - 00:16:10:08
where we have the consumer protection and professional ethics come to the fore.
00:16:10:19 - 00:16:13:19
So I think it was a good opportunity in terms of,
00:16:14:05 - 00:16:15:23
you know, sort of
00:16:15:23 - 00:16:20:29
taking stock of where we are as an organization and where we want to be
00:16:21:00 - 00:16:24:09
going forward, and in particular further addressing
00:16:24:09 - 00:16:27:09
the consumer protection and
00:16:27:13 - 00:16:30:00
public protection mandate.
00:16:30:00 - 00:16:30:26
That’s great. Thank you.
00:16:30:26 - 00:16:33:11
Tashia,
00:16:34:10 - 00:16:37:10
I think I'm going to echo what my colleagues up here have said.
00:16:37:16 - 00:16:41:10
You know, FP Canada has always had a public interest mandate.
00:16:41:24 - 00:16:44:27
It's the core and the ethos of what we do.
00:16:44:28 - 00:16:48:24
So for us, there wasn't any significant change
00:16:48:24 - 00:16:51:25
having come under the auspices of the framework.
00:16:52:07 - 00:16:55:22
We just continued to do business the way that we've always done business.
00:16:55:22 - 00:16:59:28
And really, you know, with that heavy focus on the consumer
00:16:59:28 - 00:17:03:27
and making sure that our certificants are acting in their best interest.
00:17:05:09 - 00:17:05:26
Well, that's great.
00:17:05:26 - 00:17:08:10
And of course, we have the luxury of having, you know,
00:17:08:10 - 00:17:12:15
three organizations who have been around in each case for decades.
00:17:13:15 - 00:17:16:15
So I would have thought nothing else.
00:17:17:05 - 00:17:18:05
Okay.
00:17:18:05 - 00:17:21:05
This question is for Marie.
00:17:24:06 - 00:17:25:21
Just as you pointed out,
00:17:25:21 - 00:17:28:28
CSI has a long history of providing education
00:17:28:28 - 00:17:32:08
for financial services, both nationally and internationally.
00:17:33:02 - 00:17:37:04
How has your organization's culture shifted as a result of
00:17:37:06 - 00:17:40:06
becoming an approved CB?
00:17:41:26 - 00:17:44:05
I think that
00:17:44:05 - 00:17:46:14
we've probably
00:17:46:14 - 00:17:48:22
probably put more emphasis
00:17:48:22 - 00:17:51:29
in our discourse around putting the client first.
00:17:53:02 - 00:17:56:03
I would say it's always been there, right?
00:17:56:04 - 00:17:59:04
We have a code of ethics that talks about putting the client first.
00:17:59:06 - 00:18:02:22
We communicate that in our material.
00:18:04:11 - 00:18:06:19
We very much look to the customer.
00:18:06:19 - 00:18:11:16
And in fact, some of the the ways in which we have developed
00:18:11:16 - 00:18:16:04
our material has been to say, what will the customer ask for?
00:18:16:20 - 00:18:20:19
So your material, what you're going to give to the advisor
00:18:20:19 - 00:18:22:02
or the financial planner
00:18:22:02 - 00:18:25:15
has to reflect what the customer is going to need coming in.
00:18:25:23 - 00:18:28:11
So very much that discovery process with the client.
00:18:31:03 - 00:18:34:15
I think we didn't say it enough, right.
00:18:34:16 - 00:18:35:25
It was kind of there.
00:18:35:25 - 00:18:39:05
And so I think in the last year, we've certainly put a lot more emphasis.
00:18:39:05 - 00:18:43:02
We did a number of webinars where we put it out there and we
00:18:43:05 - 00:18:47:10
we put emphasis on it and we made sure that people were thinking about that,
00:18:47:25 - 00:18:51:24
putting the client's interest first and not just being a financial planner
00:18:51:24 - 00:18:53:21
and doing everything they're doing well,
00:18:53:21 - 00:18:56:08
but really, really thinking about that client.
00:18:56:08 - 00:18:59:08
So I would say that culturally that probably
00:18:59:19 - 00:19:02:10
it was there, but it wasn't apparent enough
00:19:02:10 - 00:19:05:10
and I think we've made it more apparent.
00:19:05:14 - 00:19:08:00
And the feedback from that webinar
00:19:08:00 - 00:19:10:12
you did, I think it was last November?
00:19:10:28 - 00:19:11:23
Very positive.
00:19:11:23 - 00:19:15:22
I mean, I think people understand that
00:19:17:06 - 00:19:20:18
being able to do something that is a greater good.
00:19:20:19 - 00:19:22:03
So if you're an advisor,
00:19:22:03 - 00:19:25:17
I think many people enjoy the job of advisor, a financial planner,
00:19:26:04 - 00:19:27:13
not so much because they're smart
00:19:27:13 - 00:19:30:13
or because they've got the competency or they've done all kinds of things,
00:19:30:17 - 00:19:35:19
but rather they have that opportunity to help people with their finances.
00:19:36:08 - 00:19:39:08
And it's kind of a noble, purposeful
00:19:41:02 - 00:19:42:01
job to have.
00:19:42:01 - 00:19:46:12
You're not just doing a job and making money for the company.
00:19:46:17 - 00:19:49:13
You are making a difference in people's lives.
00:19:49:13 - 00:19:54:05
And I think people see that you this “put your customer first” kind of thing.
00:19:54:09 - 00:19:58:20
So the kinds of reactions we get to the webinars are really positive
00:19:58:20 - 00:20:01:18
because people feel like if they're joining this industry,
00:20:01:18 - 00:20:04:05
they're joining something that is bigger than themselves
00:20:04:05 - 00:20:05:22
and that they can make a contribution.
00:20:07:07 - 00:20:07:22
That's great.
00:20:07:22 - 00:20:09:21
Thank you.
00:20:09:21 - 00:20:11:11
This next question is for you,
00:20:11:11 - 00:20:16:23
Anthony, and I'm going to preface this by saying to the benefit of everyone
00:20:16:23 - 00:20:22:09
in the room and also online listening in that this past Friday, March 1st,
00:20:22:09 - 00:20:27:08
FSRA launched their public registry for credential holders.
00:20:27:08 - 00:20:32:24
It's called the Check Credentials Tool, or CCT, if you will.
00:20:32:24 - 00:20:37:01
That's the new acronym for the day that you never knew that you needed.
00:20:38:04 - 00:20:39:22
Kind of rolls off the tongue, though.
00:20:40:23 - 00:20:42:22
That's worth $5, I'd say.
00:20:45:06 - 00:20:49:13
So, Anthony, how do you think the registry
00:20:49:13 - 00:20:53:19
is going to contribute to consumer awareness and protection?
00:20:55:06 - 00:20:57:13
I think in a very meaningful way.
00:20:57:13 - 00:21:00:12
So the public registry is
00:21:00:16 - 00:21:02:14
a very easy
00:21:02:14 - 00:21:08:19
one-stop tool that consumers can go to or consumers can use to check
00:21:08:19 - 00:21:13:02
on the financial planner or the financial advisor they're currently working with
00:21:13:02 - 00:21:16:13
or they’re considering working with at some point down the road.
00:21:17:02 - 00:21:21:17
And by using this tool, they can check to see if this financial planner,
00:21:21:17 - 00:21:25:01
financial advisor is in good standing, or in other words,
00:21:25:20 - 00:21:29:09
they've met and continue to meet the requirements of their credential.
00:21:29:16 - 00:21:33:11
And one very important aspect of that credential requirement
00:21:33:24 - 00:21:36:16
is adhering to a code of conduct.
00:21:36:16 - 00:21:41:13
So from that perspective, I think it's a very important consumer protection tool.
00:21:42:16 - 00:21:44:11
It also offers
00:21:44:11 - 00:21:48:05
a degree of comfort and a degree of peace of mind,
00:21:48:05 - 00:21:51:06
I think, to the consumer in having access to this tool and seeing
00:21:51:06 - 00:21:54:06
what the status is of their advisor or planner.
00:21:54:22 - 00:21:57:25
Now, one of the nice things I think about the registry
00:21:58:22 - 00:22:03:03
is it consolidates the information from the various
00:22:03:03 - 00:22:06:13
credentialing bodies and centralizes it on the FSRA website.
00:22:06:26 - 00:22:10:16
And and this makes it obviously very, very convenient, very simple
00:22:10:16 - 00:22:11:13
for the consumer to use.
00:22:11:13 - 00:22:14:13
So I think simplicity is the key here.
00:22:16:05 - 00:22:17:09
They want to be, you know,
00:22:17:09 - 00:22:20:15
if they want to get important and pertinent information
00:22:20:22 - 00:22:23:20
about the individual that they're working with,
00:22:23:20 - 00:22:26:20
they can use this tool in a very easy and simplistic way.
00:22:26:29 - 00:22:29:08
And it takes away a lot of the sleuthing,
00:22:30:09 - 00:22:33:09
the background work that an individual might have to do on their own
00:22:33:20 - 00:22:35:12
by having it this way.
00:22:35:12 - 00:22:40:03
So we often think about the public registry
00:22:40:04 - 00:22:43:28
from the consumer's perspective and obviously it is very important
00:22:43:28 - 00:22:44:18
from that perspective.
00:22:44:18 - 00:22:48:24
But I think it's worth also mentioning that the public registry has importance
00:22:48:24 - 00:22:51:00
for the advisor and the planner themselves.
00:22:51:00 - 00:22:52:19
Okay.
00:22:52:19 - 00:22:58:01
Keep in mind, if you hold an approved credential, then your name will appear
00:22:58:06 - 00:23:02:10
on this public registry and that will be in full view of the public.
00:23:02:10 - 00:23:05:10
It will be in full view of your clients, your firm, etc..
00:23:05:14 - 00:23:09:28
So having your name on the registry and then right beside it,
00:23:09:28 - 00:23:12:28
hopefully you've got a little tag that says in good standing.
00:23:13:04 - 00:23:15:13
I think that builds instant credibility.
00:23:15:13 - 00:23:15:20
Right?
00:23:15:20 - 00:23:19:20
So that's a very positive thing for the advisor and the planner themselves.
00:23:20:01 - 00:23:21:04
Now, on the flip side,
00:23:23:05 - 00:23:24:26
I think the public registry
00:23:24:26 - 00:23:27:21
and the fact that it is in full public view
00:23:28:11 - 00:23:32:29
also means that it will give the advisor and the planner,
00:23:34:02 - 00:23:35:29
I think, a greater incentive to make sure
00:23:35:29 - 00:23:38:29
that they've got their stuff in order
00:23:40:23 - 00:23:43:23
because you want to make sure that you're in good standing.
00:23:44:01 - 00:23:47:25
And any other status besides your name obviously is not going to reflect in there
00:23:47:25 - 00:23:50:25
in the most positive light. So, for example,
00:23:51:13 - 00:23:53:24
let's say you've got an individual
00:23:53:24 - 00:23:56:21
who's who's neglected or forgotten
00:23:56:21 - 00:24:00:26
or is late in renewing their annual dues or perhaps they're late
00:24:01:00 - 00:24:04:18
or haven't completed their continuing education requirements.
00:24:04:26 - 00:24:08:20
Now in the grand scheme of things, it may not be the biggest breaches
00:24:08:20 - 00:24:10:11
necessarily, but nonetheless
00:24:10:11 - 00:24:14:13
it will impact the status that shows beside their name on the registry.
00:24:14:29 - 00:24:18:26
So I think it's a very important thing in terms of getting planners and advisors
00:24:19:03 - 00:24:21:23
to sort of make sure that they're sort of on top of their affairs.
00:24:22:23 - 00:24:24:12
So in a sense then
00:24:24:12 - 00:24:27:09
I think the the public registry
00:24:27:18 - 00:24:30:27
is a very effective consumer protection tool that FSRA’s put in place
00:24:31:15 - 00:24:34:22
and I think it'll
00:24:35:25 - 00:24:37:16
do a lot of good in that regard.
00:24:37:16 - 00:24:40:14
Certainly different from what we've had
00:24:40:14 - 00:24:43:14
in the previous regimes where I think the consumer was sort of
00:24:43:26 - 00:24:47:21
in a position where if they had an issue, they didn't really know
00:24:48:02 - 00:24:51:15
where to go, where to start and how to proceed
00:24:51:20 - 00:24:52:29
and I think now this tool is there.
00:24:52:29 - 00:24:57:04
So the key from our perspective, I think, is about awareness, right?
00:24:57:04 - 00:25:00:20
Now as Wendy pointed out, this has just literally come out.
00:25:00:20 - 00:25:03:20
It's just been launched in the last couple of days.
00:25:03:28 - 00:25:06:07
But I think once
00:25:06:07 - 00:25:08:23
in an ideal world, if you get to the point where,
00:25:09:15 - 00:25:10:17
let's say a consumer does
00:25:10:17 - 00:25:13:17
have a concern about a financial advisor or financial planner,
00:25:13:24 - 00:25:17:02
and they can, you know, the first connection that they make
00:25:17:13 - 00:25:20:12
is to this public registry tool.
00:25:20:12 - 00:25:23:05
They go to the FSRA website, they gather some basic information.
00:25:23:05 - 00:25:26:00
Then they can sort of figure out what they want to do in the next steps.
00:25:26:00 - 00:25:27:25
If you can arrive at that stage.
00:25:27:25 - 00:25:30:25
I think that would be a big win in terms of the use of the tool.
00:25:31:13 - 00:25:32:02
Yeah, you know what?
00:25:32:02 - 00:25:34:22
I'm going to go to the rest of the panel on this question as well.
00:25:34:22 - 00:25:39:10
But I will tell you that in preparation for today,
00:25:39:10 - 00:25:44:04
I was playing with the CCT over the weekend, and I can tell you
00:25:44:04 - 00:25:48:25
that it is a powerful little tool and I can see the benefits
00:25:49:14 - 00:25:53:09
both for the consumer as well as any financial planner
00:25:53:09 - 00:25:58:12
or financial advisor out there or someone within the new categories of CIRO
00:25:58:16 - 00:25:59:16
that are now approved.
00:26:00:19 - 00:26:04:08
You can very plainly see that
00:26:04:13 - 00:26:07:23
there are people with multiple credentials.
00:26:08:03 - 00:26:13:06
It certainly gives you an idea of what they do holistically.
00:26:14:09 - 00:26:18:14
It's super easy to use and in fact, FSRA
00:26:18:14 - 00:26:22:26
we’re going through digital transformation across our whole organization.
00:26:22:26 - 00:26:25:02
We have registries for all of our sectors.
00:26:25:02 - 00:26:28:12
But this one I think by far is
00:26:28:13 - 00:26:31:29
honestly superior to our other ones.
00:26:31:29 - 00:26:32:26
And, you know,
00:26:32:26 - 00:26:38:04
we somehow did it in record time with the cooperation of all of the CB’s,
00:26:38:04 - 00:26:42:13
which really I would say above and beyond all of the other things
00:26:42:13 - 00:26:47:10
that we've had to do together to operationalize this regime.
00:26:47:23 - 00:26:50:20
This was such a great collaborative effort.
00:26:50:20 - 00:26:54:14
But Tashia, tell me what you think about the new registry.
00:26:55:20 - 00:26:58:16
Well, I mean, I would echo what Anthony said.
00:26:58:16 - 00:27:01:00
I think it's a really good product for consumers.
00:27:01:00 - 00:27:03:08
I think it's going to give them a lot of clarity.
00:27:03:08 - 00:27:06:22
You know, it's very easy for them to go in and make sure that the individual
00:27:06:22 - 00:27:09:02
with whom they're working, who's providing them with that advice,
00:27:09:02 - 00:27:11:21
as Marie was saying, that really important advice
00:27:11:21 - 00:27:14:16
does have the skills and competencies required under the framework.
00:27:14:16 - 00:27:17:12
So all of those things are great to see.
00:27:17:12 - 00:27:20:10
And as you said, it's early days, right?
00:27:20:10 - 00:27:24:25
So it's going to be really important to see how FSRA now proceeds
00:27:24:25 - 00:27:27:13
with helping the consumer understand
00:27:27:24 - 00:27:31:12
that the registry is there and they can find it easily
00:27:31:12 - 00:27:36:05
and they can work through it, which I know is part of the plan going forward.
00:27:36:17 - 00:27:40:16
And I would say that, you know, the other part of this
00:27:40:16 - 00:27:43:00
is that we have to think about is what happens
00:27:43:10 - 00:27:48:07
if someone doesn't find their advisor or their planner
00:27:49:07 - 00:27:50:15
in the registry.
00:27:50:15 - 00:27:50:22
Right.
00:27:50:22 - 00:27:51:22
What are the steps?
00:27:51:22 - 00:27:55:05
Helping the consumer know what the steps are in that circumstance.
00:27:55:15 - 00:27:59:03
Because that would mean that somebody is inappropriately using the titles.
00:27:59:03 - 00:28:03:11
And that's, I think, the next evolution of what we have to start to think about.
00:28:03:22 - 00:28:06:22
Yeah, it's a great point. Marie?
00:28:06:29 - 00:28:09:10
I think it's information, right?
00:28:09:10 - 00:28:13:11
I think if somebody needs to find out what their financial planner is about
00:28:13:11 - 00:28:16:16
and do they have the qualifications, they can look it up.
00:28:17:03 - 00:28:21:11
I think the challenge right now is to let consumers know that they can look it up.
00:28:21:11 - 00:28:23:03
Right?
00:28:23:03 - 00:28:26:03
A lot of consumers just don't know a lot of things.
00:28:27:00 - 00:28:31:22
How many in this room get a prospectus from their mutual fund company?
00:28:32:06 - 00:28:33:27
How many of you read it?
00:28:33:27 - 00:28:38:24
How many of you take it from the mail box to the blue box?
00:28:40:04 - 00:28:43:11
It's not something we like to think about.
00:28:43:23 - 00:28:47:17
And so we kind of trust people and can we trust people?
00:28:47:17 - 00:28:50:08
So I think it's really around
00:28:50:08 - 00:28:52:02
it's part of consumer education.
00:28:52:02 - 00:28:53:26
I think it's going to be a really important part
00:28:53:26 - 00:28:56:15
of what we have to do in the future is to bring consumers
00:28:56:15 - 00:28:59:05
to be much more comfortable with their finances
00:28:59:05 - 00:29:02:05
and be able to know in whom they can have confidence.
00:29:02:15 - 00:29:03:08
And that's great.
00:29:03:08 - 00:29:07:01
And just so everyone knows, this is phase one,
00:29:07:17 - 00:29:10:22
It isn't without a few little glitches.
00:29:11:15 - 00:29:14:14
I mean, not everyone uses the same terminology
00:29:14:14 - 00:29:16:21
for things like
00:29:16:21 - 00:29:20:10
‘in good standing’ versus ‘active.’
00:29:20:29 - 00:29:23:16
And we of course, would love to get to a point
00:29:23:16 - 00:29:27:02
where there is symmetry amongst all of the CB’s
00:29:27:29 - 00:29:33:18
and there are other refinements that can be made in future phases
00:29:34:27 - 00:29:37:08
but it is a great start.
00:29:37:08 - 00:29:37:16
Okay.
00:29:37:16 - 00:29:41:12
I've another question that will be for all of the panel,
00:29:41:12 - 00:29:44:01
and I'm going to go back to you, Tashia.
00:29:44:01 - 00:29:48:19
FP Canada has advanced professional financial planning for decades,
00:29:48:22 - 00:29:51:23
both nationally and internationally.
00:29:52:22 - 00:29:56:18
Please give us some insight into why your organization
00:29:56:18 - 00:30:00:00
decided to participate in the title protection framework,
00:30:00:22 - 00:30:04:00
and how has your participation been valuable
00:30:04:00 - 00:30:06:29
to your credential holders?
00:30:10:13 - 00:30:11:26
That's a great question, Wendy.
00:30:11:26 - 00:30:14:03
I mean, we,
00:30:14:03 - 00:30:17:11
I think, lobbied pretty actively for many, many years
00:30:17:16 - 00:30:20:16
for this, for the title protection framework.
00:30:20:26 - 00:30:25:16
You know, I always found it interesting that anybody could provide
00:30:25:16 - 00:30:29:02
financial advice or financial planning services.
00:30:29:15 - 00:30:31:02
And that's concerning
00:30:31:02 - 00:30:34:02
when you think about the world that we find ourselves in today
00:30:34:03 - 00:30:38:08
and how vulnerable people can be to advice that's not in their best interest.
00:30:38:22 - 00:30:41:21
And so for us, it was very important
00:30:41:21 - 00:30:45:26
that the individuals out there providing financial advice, financial planning
00:30:46:08 - 00:30:48:21
did have the appropriate skills and competencies
00:30:48:21 - 00:30:50:09
to make sure that they could protect
00:30:51:10 - 00:30:53:09
the consumers with whom they're working.
00:30:53:09 - 00:30:56:04
And so it's a no brainer, in effect, right?
00:30:56:04 - 00:30:59:00
I mean, it really is
00:30:59:00 - 00:31:03:01
so critical that consumers are aware.
00:31:03:01 - 00:31:04:00
And, you know,
00:31:04:00 - 00:31:07:19
the reality of it is, is the consumer may not even know what they don't know.
00:31:08:13 - 00:31:10:09
So, for example,
00:31:10:09 - 00:31:13:23
as we’ve been going through our discussions with various provinces,
00:31:14:19 - 00:31:17:20
with various individuals in some of those provinces,
00:31:17:29 - 00:31:19:23
a lot of them didn't even realize.
00:31:19:23 - 00:31:23:09
I remember having a conversation with the Minister of Finance who said to me,
00:31:23:28 - 00:31:27:00
I didn't even realize this wasn't already regulated.
00:31:27:14 - 00:31:30:13
And I think a lot of consumers feel the same way.
00:31:30:25 - 00:31:32:23
You know, we are a profession
00:31:32:23 - 00:31:34:26
and, you know,
00:31:34:26 - 00:31:38:13
whether it's a lawyers, accountants, doctors, they are all regulated.
00:31:38:24 - 00:31:40:02
So to see
00:31:41:06 - 00:31:43:14
to see Ontario step in and
00:31:43:14 - 00:31:46:26
establish this framework, I think is a really, really important precedent.
00:31:47:09 - 00:31:50:03
And it was very important for us to be part of that.
00:31:50:03 - 00:31:52:27
And I think what I hear from our certificants
00:31:52:27 - 00:31:56:08
is they like that fact that they are now
00:31:56:09 - 00:32:00:00
part of a profession that has standards that are recognized.
00:32:00:08 - 00:32:03:22
And, you know, just to be clear, our certificants always were subject
00:32:03:22 - 00:32:05:00
to a professional regime.
00:32:05:00 - 00:32:08:00
They always had to adhere to professional standards.
00:32:08:02 - 00:32:12:19
But what it does now is, you know, it standardize it.
00:32:12:19 - 00:32:14:20
It brings it across the industry.
00:32:14:20 - 00:32:16:01
And I think that really matters.
00:32:16:01 - 00:32:20:10
So that's what we're seeing, is people are generally pleased to be able
00:32:20:10 - 00:32:24:01
to see that they are part of a framework where the consumers
00:32:24:09 - 00:32:27:22
best interest is put forward, where the credentialing bodies
00:32:27:22 - 00:32:32:11
are expected to have certain standards, certain requirements
00:32:32:11 - 00:32:36:20
around certification, standard codes, professional ethics, etc..
00:32:36:20 - 00:32:40:10
It just raises the expectations for the whole profession.
00:32:42:04 - 00:32:43:24
Yes, I take your point.
00:32:43:24 - 00:32:47:14
I feel like in future we may have to be monitoring
00:32:47:20 - 00:32:50:20
TikTok and things because,
00:32:51:08 - 00:32:54:08
you know, everybody is an expert.
00:32:54:12 - 00:32:57:12
Same question to you, Anthony.
00:33:00:12 - 00:33:03:08
I think
00:33:03:08 - 00:33:09:24
I think in terms of why we participate in the framework, it's pretty basic.
00:33:10:01 - 00:33:11:25
It's a very fundamental reason, actually,
00:33:11:25 - 00:33:15:27
is that we believe very strongly in the mandate as an organization.
00:33:15:27 - 00:33:17:02
We always have.
00:33:17:02 - 00:33:20:01
So where would there be an objection?
00:33:21:00 - 00:33:24:00
I mean, if we think about the financial services industry
00:33:24:09 - 00:33:29:01
and really the founding principles are trust and confidence.
00:33:29:15 - 00:33:32:10
So why would we have an objection
00:33:32:10 - 00:33:35:28
to a framework where the overriding tenet is basically about consumer protection?
00:33:35:28 - 00:33:38:28
So I think it was very easy to use, you know, Tashia's
00:33:38:28 - 00:33:41:28
phrase, it was a no brainer for my organization as well.
00:33:42:06 - 00:33:46:12
I should add, you know, from a more practical level,
00:33:47:26 - 00:33:49:10
I think when we
00:33:49:10 - 00:33:53:22
as an organization, we're surveying the landscape
00:33:54:08 - 00:33:58:12
and this is, you know, several years prior to the implementation
00:33:58:12 - 00:34:02:05
of the actual title protection legislation, in Ontario anyway,
00:34:02:09 - 00:34:05:29
but when we were surveying the landscape, when we were talking to
00:34:05:29 - 00:34:07:12
our corporate partners,
00:34:07:12 - 00:34:10:18
when we were talking to our academic partners, the colleges and universities
00:34:10:18 - 00:34:13:18
across the country, and we did our own analysis,
00:34:14:09 - 00:34:17:09
I think we very quickly came to the understanding that
00:34:17:16 - 00:34:20:15
if title protection legislation was going to be a reality,
00:34:20:15 - 00:34:25:02
and particularly if it started to roll out outside of just Ontario's borders
00:34:25:02 - 00:34:28:02
and rolled out across the country, as we imagine it will,
00:34:30:04 - 00:34:31:24
then I think it became very clear
00:34:31:24 - 00:34:35:07
from our standpoint as an education provider
00:34:35:18 - 00:34:39:16
and as a credentialing body, that if we were to remain relevant
00:34:39:16 - 00:34:43:24
in this new regime, then we had to participate in the framework.
00:34:43:24 - 00:34:46:23
So there's a practical side as well, you know, a business side as well
00:34:46:23 - 00:34:48:11
that comes into play.
00:34:48:17 - 00:34:50:02
I think for our credential holders,
00:34:50:02 - 00:34:51:25
I think the other part of the question was, you know,
00:34:51:25 - 00:34:55:11
the value to credential holders in terms of our participation,
00:34:56:03 - 00:34:57:05
again, very valuable.
00:34:57:05 - 00:34:59:15
It's instant credibility.
00:34:59:15 - 00:35:01:09
Our credential holders,
00:35:01:09 - 00:35:04:00
if they are holding one of our designations,
00:35:04:00 - 00:35:07:14
can have the confidence that they're holding a credential
00:35:07:26 - 00:35:10:25
that has been vetted against various metrics
00:35:10:27 - 00:35:14:21
and at the end of the day has been approved by FSRA, the oversight body.
00:35:15:21 - 00:35:16:18
And that has
00:35:16:18 - 00:35:20:12
sort of a, you know, a secondary benefit or a derivative benefit,
00:35:20:12 - 00:35:25:05
if you like, because that then gives the credential holder the confidence
00:35:26:06 - 00:35:28:24
when they're speaking to their clients,
00:35:28:24 - 00:35:33:14
it gives the clients confidence and trust, which is what we've been, you know,
00:35:33:14 - 00:35:38:00
sort of talking about as being sort of of paramount interest to everyone here.
00:35:39:10 - 00:35:42:22
But I also think from the planner and the advisors perspective,
00:35:44:02 - 00:35:47:04
it's not just the fact that they hold an approved credential,
00:35:47:04 - 00:35:51:18
it's the derivative of that is it gives them the ability to now
00:35:51:26 - 00:35:55:13
call themselves a financial planner or a financial advisor,
00:35:55:17 - 00:35:57:12
at least in the province of Ontario.
00:35:57:12 - 00:36:00:22
And what that means then is in terms of them
00:36:00:22 - 00:36:05:22
building their practice, again, that's a very valuable platform
00:36:05:22 - 00:36:10:24
from which to build their career and their longevity in the field.
00:36:11:04 - 00:36:12:18
So multiple benefits, I think.
00:36:13:24 - 00:36:14:21
That's great.
00:36:14:21 - 00:36:15:23
Marie.
00:36:16:04 - 00:36:19:15
So we've been offering financial planning since 1996.
00:36:20:23 - 00:36:23:02
We started it because we could see
00:36:23:02 - 00:36:29:12
that consumers were going to need advice on how to place their finances
00:36:29:12 - 00:36:31:05
and how to manage their money.
00:36:31:23 - 00:36:34:23
And so we set up a number of designations that were
00:36:35:07 - 00:36:38:27
in keeping with the kind of career path, I've mentioned this earlier,
00:36:38:27 - 00:36:40:28
the kind of career path that people would have.
00:36:40:28 - 00:36:42:18
If you're coming into a bank, you're starting
00:36:42:18 - 00:36:45:15
with a mutual funds license, what are you going to do next?
00:36:45:15 - 00:36:48:15
And the banks, we worked very closely with the banks
00:36:48:18 - 00:36:51:16
to really align
00:36:51:16 - 00:36:55:14
our program with the moves that some would make in the industry.
00:36:55:24 - 00:36:57:07
What do you do at the bottom level?
00:36:57:07 - 00:36:58:25
When you’re promoted
00:36:58:27 - 00:37:00:15
you do something else and so on.
00:37:00:15 - 00:37:04:13
Our courses were added into people's career paths
00:37:05:23 - 00:37:07:17
right up to financial planning.
00:37:07:17 - 00:37:12:00
On the security side, again, you had licensing that you were required to do.
00:37:12:09 - 00:37:14:28
We had added things like wealth management essentials.
00:37:14:28 - 00:37:17:28
It was a natural to add financial planning to that,
00:37:18:09 - 00:37:20:27
but we had to have ISO accreditation
00:37:20:27 - 00:37:26:10
in order to be credible as a provider of credentials in the space.
00:37:26:20 - 00:37:28:14
And so
00:37:28:14 - 00:37:32:02
for us it was a natural next step, here is a regulator coming in,
00:37:32:02 - 00:37:35:06
we had already aligned with the Quebec requirements.
00:37:35:11 - 00:37:40:04
We already had a program of ten courses to meet the 450 hours in English
00:37:40:04 - 00:37:44:20
and French to be able to allow people to become a financial planner in Quebec.
00:37:45:00 - 00:37:48:00
Here, Ontario was now bringing in legislation
00:37:49:00 - 00:37:53:15
natural for us to go in and say, okay, we can have,
00:37:53:20 - 00:37:57:07
we can now put out our credentials aligned with the financial planner
00:37:57:14 - 00:37:59:16
and the financial advisor title.
00:37:59:16 - 00:38:01:28
So it was for us a next step.
00:38:01:28 - 00:38:03:24
That was a normal one, I think, Anthony said.
00:38:03:24 - 00:38:05:10
It's kind of a no brainer.
00:38:05:10 - 00:38:07:26
So it was very much
00:38:07:26 - 00:38:10:25
if there's going to be regulation and people are going to be required.
00:38:10:25 - 00:38:13:12
We wanted to make sure that our designations were right there.
00:38:14:18 - 00:38:17:17
And that ISO accreditation,
00:38:17:17 - 00:38:22:24
is that sort of just a look at competencies or what does that do for you?
00:38:23:04 - 00:38:27:23
It really looks at the the way that you manage the entire organization,
00:38:28:03 - 00:38:32:14
for example, to separate exams from the building of material
00:38:32:21 - 00:38:36:11
to make sure that you have a code of ethics in place, that you have
00:38:37:23 - 00:38:40:15
processes and procedures in place, that you,
00:38:40:15 - 00:38:43:22
you come up with competencies and you can say how you got to them.
00:38:43:22 - 00:38:45:07
And it's all documented.
00:38:45:07 - 00:38:48:23
It's, Natasha, you can attest to this.
00:38:48:28 - 00:38:51:06
It is tremendously
00:38:51:06 - 00:38:54:06
time consuming and, very, very,
00:38:55:04 - 00:38:58:08
very, very onerous to be able to be ISO accredited.
00:38:58:17 - 00:39:02:26
And so now being accredited by FSRA doesn't mean you're not going to come in
00:39:03:02 - 00:39:04:03
and check us out.
00:39:04:03 - 00:39:09:10
But it's sort of a different layer from the ISO layer, right?
00:39:09:12 - 00:39:13:12
Well, hopefully we add a little bit of value with those examinations as well.
00:39:16:12 - 00:39:17:18
Okay.
00:39:17:18 - 00:39:23:02
We have another question that is for the whole panel.
00:39:23:02 - 00:39:28:12
And I'm going to ask you to tap into your crystal ball
00:39:28:12 - 00:39:31:12
a little bit
00:39:31:22 - 00:39:34:22
by looking at the future.
00:39:34:26 - 00:39:38:07
So how do you see the framework evolving
00:39:38:11 - 00:39:42:10
in the next couple of years, particularly the role of CB’s and supporting
00:39:42:10 - 00:39:47:23
credential holders to continue to adhere to the client's interest first principle?
00:39:47:23 - 00:39:50:23
We're going to start with you, Anthony.
00:39:53:01 - 00:39:55:24
I think the biggest
00:39:55:24 - 00:40:00:22
trend or factor that's sort of looming out there
00:40:00:22 - 00:40:04:20
is the roll out of title protection legislation across the country
00:40:06:02 - 00:40:08:20
to jurisdictions outside of Ontario.
00:40:08:20 - 00:40:11:10
So I think that's inevitable.
00:40:11:10 - 00:40:14:10
We know that there are the jurisdictions that already got the ball rolling,
00:40:14:19 - 00:40:18:06
so it would be very interesting to see how that all emerges and how that all plays out.
00:40:19:13 - 00:40:20:18
Obviously, that's a good thing.
00:40:20:18 - 00:40:23:18
I mean, if we're talking about title protection in Ontario
00:40:23:27 - 00:40:26:25
in the positive light that that we have been, then clearly
00:40:26:25 - 00:40:30:04
that's going to be very positive if we have it on a national level as well.
00:40:31:15 - 00:40:34:04
I think the concern
00:40:34:04 - 00:40:36:16
that we have as an organization
00:40:36:16 - 00:40:39:16
is ensuring that
00:40:40:07 - 00:40:43:03
as the model rolls out,
00:40:43:03 - 00:40:45:12
that there is uniformity,
00:40:45:12 - 00:40:48:12
that there's harmonization across the country.
00:40:49:23 - 00:40:53:10
And, you know, we would certainly hope and encourage FSRA
00:40:53:10 - 00:40:54:26
in their conversations
00:40:54:26 - 00:40:57:26
with these other bodies in the other jurisdictions,
00:40:58:06 - 00:41:01:02
that they really emphasize this point and they really promote
00:41:01:02 - 00:41:04:02
the benefits of harmonization and uniformity.
00:41:04:18 - 00:41:08:05
The last thing we want is a national framework
00:41:08:05 - 00:41:11:07
that is splintered or fractured or where
00:41:11:07 - 00:41:14:12
we have too many of the jurisdictions sort of doing their own thing.
00:41:15:05 - 00:41:17:19
Now we understand that there's going to be some sort
00:41:17:19 - 00:41:21:08
of idiosyncratic differences in the jurisdictions.
00:41:21:08 - 00:41:25:06
That's just normal because it would reflect sort of their population base.
00:41:25:18 - 00:41:28:15
But in the main, I think it has to be
00:41:28:15 - 00:41:31:25
a harmonized approach, and I think that's really critical for the long term
00:41:32:04 - 00:41:34:29
sustainability and viability of any title protection.
00:41:34:29 - 00:41:39:14
So really hope, you know, FSRA promotes this and encourages this,
00:41:39:14 - 00:41:42:14
which I'm sure they have been doing in their conversations.
00:41:43:07 - 00:41:44:09
I think the other
00:41:45:24 - 00:41:48:16
evolving trend is,
00:41:48:16 - 00:41:51:18
perhaps not evolving, it’s already evolved,
00:41:51:18 - 00:41:53:01
is the role of technology.
00:41:53:21 - 00:41:56:21
We know it's an ever increasing role.
00:41:57:29 - 00:42:00:08
You know, I was just thinking today about AI
00:42:00:08 - 00:42:01:29
in this whole AI conversation.
00:42:03:12 - 00:42:04:28
It's moved so rapidly.
00:42:04:28 - 00:42:07:28
I mean, if we think about a year ago or two years ago,
00:42:08:07 - 00:42:10:07
it almost seemed like a bit of science fiction.
00:42:10:07 - 00:42:13:07
We knew it was there and we knew it was coming,
00:42:13:13 - 00:42:16:04
but it was always the conversation was always, it's five years down the road,
00:42:16:04 - 00:42:17:15
it's ten years down the road.
00:42:17:15 - 00:42:21:04
Fast forward in just like the short span of a year.
00:42:21:04 - 00:42:22:20
And it's already here.
00:42:22:20 - 00:42:25:25
It's already, you know, it's today's technology.
00:42:26:08 - 00:42:29:04
So I think the evolving role of technology
00:42:29:04 - 00:42:32:24
in the financial services industry, it's very clearly there.
00:42:32:24 - 00:42:35:12
We can't put the lid back on it, even if you want to do that.
00:42:35:12 - 00:42:38:05
Not that you do, but I'm just saying you can't put the lid on it.
00:42:38:05 - 00:42:42:05
So how do we embrace it and how do we manage it
00:42:42:14 - 00:42:44:27
and regulate it
00:42:44:27 - 00:42:50:01
in the positive use of that word, not an overbearing use of the word,
00:42:50:09 - 00:42:56:09
but regulate it, particularly from the standpoint of the use of technology
00:42:56:09 - 00:43:00:28
and the ethical use of technology from the client’s perspective.
00:43:01:13 - 00:43:04:16
So I think, you know, for FSRA, for example,
00:43:04:29 - 00:43:09:01
when we're reviewing the proficiencies for financial planners,
00:43:09:01 - 00:43:12:19
financial standards, should there be proficiencies that talk about
00:43:14:11 - 00:43:16:22
being adept in technology and understanding
00:43:16:22 - 00:43:19:22
the role of technology, particularly the ethical use of technology.
00:43:20:15 - 00:43:24:01
In fact, if you think about it, I mean, an argument could be made
00:43:24:06 - 00:43:27:15
if there's so much emphasis on technical knowledge,
00:43:28:16 - 00:43:31:04
but perhaps the shift
00:43:31:04 - 00:43:34:10
should be on understanding the use of technology more so doing
00:43:34:10 - 00:43:37:10
just on being able to sort of
00:43:37:16 - 00:43:40:16
regurgitate facts about, you know,
00:43:40:20 - 00:43:43:01
the Canada pension plan or the tax code or whatever it is.
00:43:43:01 - 00:43:43:08
Right.
00:43:43:08 - 00:43:44:11
So I think
00:43:44:11 - 00:43:47:11
the role of technology, I think obviously would be a very important trend.
00:43:48:17 - 00:43:50:19
So you see, I guess
00:43:50:19 - 00:43:54:19
maybe adding to the proficiency where, you know,
00:43:54:19 - 00:43:59:07
applicable uses of AI in financial planning and financial advice.
00:43:59:19 - 00:44:00:08
Absolutely.
00:44:00:08 - 00:44:04:07
And I think, you know, look, we all know there are so many benefits
00:44:04:26 - 00:44:09:02
that come from technology, but we have to be, particularly with AI
00:44:09:19 - 00:44:13:24
because we're in the early stages of it, various iterations.
00:44:13:24 - 00:44:17:18
So I think we really have to be cognizant of the ethical use of it and
00:44:17:18 - 00:44:18:19
being very mindful of
00:44:19:21 - 00:44:22:13
not misleading clients
00:44:22:13 - 00:44:25:18
and even for advisors and planners
00:44:25:18 - 00:44:28:20
themselves to understand exactly what goes into the technology.
00:44:30:18 - 00:44:32:17
You know, it's so easy
00:44:32:17 - 00:44:35:18
to print out a report, but do they understand
00:44:36:23 - 00:44:41:02
what the numbers represent in that report and can they explain it to the client?
00:44:41:15 - 00:44:44:15
It's a challenge even for many advisors and many planners.
00:44:44:21 - 00:44:46:14
Absolutely.
00:44:46:14 - 00:44:49:07
Marie, over to you.
00:44:49:07 - 00:44:52:00
I think that
00:44:52:00 - 00:44:53:29
over time
00:44:53:29 - 00:44:57:24
we have seen a real push on education
00:44:58:10 - 00:45:01:10
in the financial services industry.
00:45:02:09 - 00:45:05:09
Over time,
00:45:05:13 - 00:45:08:10
our financial institutions, when we got into this,
00:45:08:10 - 00:45:13:00
were already developing their people in terms of their competencies.
00:45:13:15 - 00:45:16:14
So in a way they were kind of ahead of the game.
00:45:17:16 - 00:45:20:21
So I'm confident that even if we have differences
00:45:20:28 - 00:45:23:29
and we will have differences, we have differences right now.
00:45:23:29 - 00:45:27:10
Quebec has a very different regime from Ontario.
00:45:28:26 - 00:45:30:13
Saskatchewan is talking about
00:45:30:13 - 00:45:33:22
a different regime and New Brunswick is talking about something else.
00:45:33:22 - 00:45:36:18
And then we've got eight other provinces,
00:45:36:18 - 00:45:40:03
seven other provinces haven't declared anything yet.
00:45:40:14 - 00:45:41:29
What I'm what I'm seeing
00:45:41:29 - 00:45:44:29
and this is what I think financial institutions will look to,
00:45:45:04 - 00:45:49:16
is if we can't have harmonization, then what is the standard out there?
00:45:49:25 - 00:45:52:20
And they will probably go to the highest standard
00:45:52:20 - 00:45:55:20
because they want to have a national standard.
00:45:55:28 - 00:45:59:23
And so, for example, when we got into financial planning,
00:45:59:23 - 00:46:01:27
or at least the financial advisory service,
00:46:01:27 - 00:46:03:25
financial planning was much more obvious.
00:46:03:25 - 00:46:06:25
Financial advisory was a bit different, right?
00:46:06:25 - 00:46:08:20
What is a financial advisor?
00:46:08:20 - 00:46:13:22
But we already had our financial institutions taking courses to be able to
00:46:14:26 - 00:46:17:13
develop the competencies of their individuals
00:46:17:13 - 00:46:20:18
such that they could call themselves a financial advisor
00:46:21:23 - 00:46:23:25
credibly and so
00:46:23:25 - 00:46:25:17
I'm heartened, especially when I visit
00:46:25:17 - 00:46:29:14
other places around the world, where the education coming from financial
00:46:29:14 - 00:46:33:17
institutions is not such a strong culture as what we have here in Canada.
00:46:33:26 - 00:46:37:18
I think between the regulation that will give us maybe variations
00:46:37:18 - 00:46:41:04
on a theme, but we will probably come out to something over time.
00:46:41:04 - 00:46:44:02
We're at the beginning of this process, right?
00:46:44:02 - 00:46:44:22
Over time,
00:46:44:22 - 00:46:48:15
I think things will sort themselves out and we'll come to a single standard.
00:46:48:28 - 00:46:51:28
But, well, in Canada that might not be impossible.
00:46:52:10 - 00:46:54:06
Because this is Canada.
00:46:54:06 - 00:46:58:14
But that said, I'm confident that will come to some kind of a stage.
00:46:58:20 - 00:47:02:05
It'll just take a little bit of time as each of the provinces sorts out
00:47:02:16 - 00:47:05:21
what level they should be at and how to set those standards.
00:47:06:16 - 00:47:08:12
So I'm more confident than not.
00:47:09:25 - 00:47:12:01
So I have a question about
00:47:12:01 - 00:47:17:02
your your comment about, you know, increasing the education
00:47:17:02 - 00:47:20:09
standards for financial advisors and financial planners.
00:47:20:09 - 00:47:25:01
But at the same time, we have a population where every study
00:47:25:01 - 00:47:29:22
that I read indicates that financial literacy is is quite low.
00:47:31:01 - 00:47:36:25
You know, is there a risk of these two things having vastly divergent paths?
00:47:36:25 - 00:47:41:04
It seems to me that even though you're very educated, you still have to connect
00:47:41:22 - 00:47:42:27
with your client.
00:47:42:27 - 00:47:45:23
And so if you can comment on that.
00:47:45:23 - 00:47:50:06
Yeah, I think it's very important, the ability to be able to understand
00:47:50:09 - 00:47:53:16
the clients needs and not talk at them about products or services,
00:47:53:23 - 00:47:56:23
not talk at them about your expertise, but rather listen.
00:47:57:09 - 00:48:00:09
So I think one of the developments and again,
00:48:00:19 - 00:48:03:02
Anthony was talking about the future of technology.
00:48:03:02 - 00:48:06:02
I think there's also a development in terms of soft skills,
00:48:06:10 - 00:48:09:29
in terms of being able to talk to the client, being able to listen
00:48:10:19 - 00:48:13:12
not talk about what you've got to offer
00:48:13:12 - 00:48:15:28
but rather understand really well the client.
00:48:15:28 - 00:48:20:28
Part of that ‘putting your client first’ is really around what have you heard?
00:48:21:09 - 00:48:23:11
Where do you think your client is going?
00:48:23:11 - 00:48:27:09
What are they going to need and how can you accommodate those needs
00:48:27:14 - 00:48:31:00
and show them how they can manage their finances
00:48:31:11 - 00:48:34:27
and maybe explain to them that thing they get in the mail, right?
00:48:35:06 - 00:48:38:03
Tell them to read page ten and twelve
00:48:38:03 - 00:48:41:03
and here's the essence of what you need to know.
00:48:41:10 - 00:48:44:01
I think it's incumbent on us to really educate the client
00:48:44:01 - 00:48:47:16
from the individual level into the government level
00:48:47:24 - 00:48:52:24
and then set a standard that I think people can be confident of on.
00:48:54:15 - 00:48:56:10
Yes. Thank you.
00:48:56:10 - 00:48:59:11
Tashia, we're going to end this one with you.
00:48:59:11 - 00:49:03:29
So the future of the regime and also I'd be interested
00:49:03:29 - 00:49:08:07
in your thoughts on this, hopefully not diverge in path
00:49:08:07 - 00:49:09:13
with
00:49:10:19 - 00:49:11:24
professionals, sort of
00:49:11:24 - 00:49:15:06
not being in line with the needs of their client.
00:49:16:19 - 00:49:18:17
Yeah, I was going to comment on the last question
00:49:18:17 - 00:49:21:06
and this sort of relates to it in terms of the future of the regime.
00:49:21:06 - 00:49:25:11
I think, I've been involved in professional regulation for 25 years
00:49:25:22 - 00:49:29:08
and I would say, you know, in some very mature industries
00:49:29:23 - 00:49:32:18
and I would say that the lesson learned
00:49:32:18 - 00:49:35:18
is that regulation is dynamic.
00:49:35:19 - 00:49:38:13
It's not that you put a framework out and then you say, well,
00:49:38:13 - 00:49:42:16
thank you very much, I'm done and we'll just move on to the next thing.
00:49:42:27 - 00:49:45:05
You have to actually spend the time
00:49:45:05 - 00:49:49:00
sort of evolving the framework, looking at the best practices.
00:49:49:08 - 00:49:51:19
You know, you're probably not going to get it perfect
00:49:51:19 - 00:49:52:25
the first time out of the gate.
00:49:52:25 - 00:49:55:20
And I think we've seen that, you know,
00:49:55:20 - 00:49:58:20
I think FSRA has already started to recognize, you know, that there's
00:49:58:20 - 00:50:01:28
probably some refinement needed to the framework
00:50:02:22 - 00:50:05:22
with respect to harmonization across the country.
00:50:05:22 - 00:50:10:12
I think there are some interesting points being raised by other provinces
00:50:10:22 - 00:50:14:13
that probably, you know, FSRA and the CB’s
00:50:14:21 - 00:50:18:17
need to reflect back on and say, does that make sense in Ontario?
00:50:19:13 - 00:50:22:14
So I would say that, you know, I'm very much
00:50:22:14 - 00:50:26:09
looking forward to the commitment that FSRA has made to do a bit
00:50:26:09 - 00:50:28:00
of a review of the framework.
00:50:28:00 - 00:50:31:22
You know, Anthony, I go back to your discussion around technology.
00:50:32:01 - 00:50:36:04
There is a perfect example of not only where the framework
00:50:36:04 - 00:50:39:04
may need to adapt in terms of proficiencies,
00:50:39:11 - 00:50:43:08
but also may need to adapt in terms of standards
00:50:43:14 - 00:50:46:02
that are in place to protect consumers
00:50:46:02 - 00:50:48:08
and also with respect to how you discipline
00:50:48:08 - 00:50:50:08
or how you enforce against those standards.
00:50:50:08 - 00:50:56:14
So it's very much a dynamic process that we need to be evaluating on
00:50:56:14 - 00:51:02:00
a regular basis and sort of seeing where that best practice moves the industry.
00:51:02:07 - 00:51:03:14
Because at the end of the day,
00:51:03:14 - 00:51:07:08
that is the way that we're going to make sure that not only is the consumer
00:51:07:15 - 00:51:11:13
protected in the environment in which they find themselves today,
00:51:11:22 - 00:51:13:21
but they're also protected in the environment
00:51:13:21 - 00:51:17:02
in which they find themselves getting advice into the future.
00:51:19:06 - 00:51:21:12
And I'm trying to go back to the second part of your question.
00:51:21:28 - 00:51:22:24
Maybe you could repeat it?
00:51:22:24 - 00:51:25:05
It’s just about financial literacy
00:51:25:27 - 00:51:28:06
and the fact that advisors
00:51:28:06 - 00:51:33:16
and planners keep knowing more, but there's a whole subset of people
00:51:33:16 - 00:51:38:23
that they don't really keep up with financial literacy.
00:51:38:23 - 00:51:42:24
And so it's just how they would keep that connection with their client.
00:51:43:20 - 00:51:47:05
I think it comes down to providing their clients with information.
00:51:47:10 - 00:51:48:28
Taking the time.
00:51:48:28 - 00:51:51:13
Marie, you spoke about sort of those human skills
00:51:51:22 - 00:51:56:14
and taking the time through that process to explain what their options are.
00:51:56:23 - 00:52:00:13
You know, planning is such a goals-based approach.
00:52:00:23 - 00:52:05:25
So the job of the planner is really to understand the client,
00:52:05:26 - 00:52:08:26
what's important to them, what do they need,
00:52:08:29 - 00:52:10:16
and then helping them understand
00:52:10:16 - 00:52:13:16
the options that they have available to them to get there.
00:52:13:25 - 00:52:17:13
And that means taking the time to explain
00:52:18:09 - 00:52:21:10
what their options are, explain what their choices are,
00:52:21:21 - 00:52:25:10
and and to give them that very clear coaching of how to get there.
00:52:25:13 - 00:52:28:03
It's not just about the plan or the advice.
00:52:28:03 - 00:52:31:00
It's also about taking them along on the journey
00:52:31:00 - 00:52:34:03
and helping them achieve their goals at the end of the day.
00:52:34:14 - 00:52:38:05
And I think that is where really when you look at financial planning,
00:52:38:10 - 00:52:41:19
it's all about goals and achieving those goals
00:52:41:22 - 00:52:44:24
and being that coach and that partner
00:52:44:24 - 00:52:48:17
to your client to help them achieve what's really important to them.
00:52:48:17 - 00:52:50:03
So it's a very personal
00:52:51:06 - 00:52:52:13
relationship.
00:52:52:13 - 00:52:53:21
It's really important.
00:52:53:21 - 00:52:56:26
You know, Marie, you spoke about trust and confidence.
00:52:57:03 - 00:53:00:25
You can't build that relationship without trust and confidence,
00:53:01:06 - 00:53:02:18
and then they trust you
00:53:02:18 - 00:53:05:26
to take the advice that you're providing and trying to implement it
00:53:06:07 - 00:53:09:21
and helping them understand what it all means
00:53:09:21 - 00:53:12:24
and what not necessarily just the technical,
00:53:13:02 - 00:53:17:10
but what it means to them and why is it important to them.
00:53:17:20 - 00:53:20:19
There's lots of financial literacy programs out there
00:53:20:21 - 00:53:24:26
and honestly, a lot of you know, the unfortunate thing is we've got
00:53:25:00 - 00:53:28:19
people have lots of opportunities to learn financial literacy,
00:53:28:19 - 00:53:33:16
but it's not making a difference in terms of what we're seeing in the average client.
00:53:34:15 - 00:53:37:28
And I think what gets lost sometimes is if somebody
00:53:37:28 - 00:53:41:13
is going to learn something, it has to be because it matters to them.
00:53:42:02 - 00:53:45:10
And that's the role of the planner, I think, is to really make sure
00:53:45:18 - 00:53:49:05
that the advice that you're giving is relevant to the individual and it's
00:53:49:05 - 00:53:50:06
in their best interest.
00:53:51:16 - 00:53:52:16
Well, that's great.
00:53:52:16 - 00:53:53:22
Thank you.
00:53:53:22 - 00:53:57:07
Well, that is actually the end of our questions for the panel.
00:53:57:07 - 00:54:00:22
I want to thank our expert panel here today.
00:54:00:22 - 00:54:01:20
That was amazing.
00:54:01:20 - 00:54:05:18
And we should have lots of time for questions. So,
00:54:07:00 - 00:54:10:00
Karabell, if you have any questions, we're ready.
00:54:10:01 - 00:54:11:25
All right.
00:54:11:25 - 00:54:14:10
This question is, can each speaker
00:54:14:10 - 00:54:18:12
describe their respective organizations complaint handling process?
00:54:18:17 - 00:54:21:16
How about we start on the end there with you, Anthony?
00:54:22:12 - 00:54:24:02
Sure.
00:54:24:02 - 00:54:27:26
So I think we have a very robust
00:54:28:13 - 00:54:31:13
complaint handling process.
00:54:31:15 - 00:54:34:25
And I guess from our perspective we can have complaints
00:54:35:15 - 00:54:38:10
that can sort of be initiated in two ways.
00:54:38:10 - 00:54:41:19
One could be a complaint that's initiated by the public
00:54:42:12 - 00:54:46:15
and then another
00:54:47:27 - 00:54:50:27
way would be something that we sort of identify
00:54:51:25 - 00:54:55:14
either through a disciplinary hearing from another organization or another entity
00:54:56:12 - 00:54:59:09
and that sort of kickstarts a separate process.
00:54:59:09 - 00:55:02:08
But essentially what happens is if we're talking about
00:55:02:08 - 00:55:05:16
a complaint from the public against one of our credential holders,
00:55:06:24 - 00:55:10:15
clearly the first thing we have to do is gather the information from
00:55:12:04 - 00:55:14:10
from the complainant
00:55:14:10 - 00:55:18:05
and verify first and foremost that it is in fact,
00:55:19:10 - 00:55:21:11
it does in fact, have merit.
00:55:21:11 - 00:55:24:20
Just a case in point, just probably last week
00:55:24:20 - 00:55:28:26
we had a complaint come in and it was about
00:55:29:24 - 00:55:32:11
investment returns
00:55:32:11 - 00:55:36:16
and sort of not keeping up with the market.
00:55:36:19 - 00:55:39:19
Clearly, that has nothing to do with
00:55:40:03 - 00:55:43:03
all of the factors considered in the case, had nothing to do
00:55:43:06 - 00:55:46:15
with anything that the advisor had done incorrectly.
00:55:46:15 - 00:55:50:06
So it's first of all, establishing whether there is merit to this complaint.
00:55:51:13 - 00:55:54:13
Once that's established, then obviously we open a file,
00:55:54:28 - 00:55:58:06
then we have to speak to the advisor or to speak to the planner
00:55:58:08 - 00:56:00:03
to get their side of the story.
00:56:00:03 - 00:56:02:16
And we share this information with the complainant.
00:56:02:16 - 00:56:06:12
And then it's really then about the investigative process
00:56:06:12 - 00:56:08:22
that that sort of kicks in at that point.
00:56:08:22 - 00:56:12:28
and our initial conduct committee
00:56:12:28 - 00:56:15:06
will look at it and if they can rule on it,
00:56:15:06 - 00:56:18:17
there are various sanctions that they can implement.
00:56:18:28 - 00:56:22:24
Typically what we find in most instances is
00:56:23:25 - 00:56:26:14
education is really the key.
00:56:26:14 - 00:56:29:14
So we would like to take an approach where
00:56:29:21 - 00:56:32:21
we can educate the advisor if they are in fact
00:56:33:01 - 00:56:36:01
guilty of some sort of breach with the code of conduct
00:56:37:18 - 00:56:38:23
rather than,
00:56:38:23 - 00:56:41:23
because oftentimes what we do find is that
00:56:42:13 - 00:56:43:20
the breach is because
00:56:43:20 - 00:56:48:22
of a misunderstanding or an oversight or something along those lines.
00:56:48:22 - 00:56:52:12
Nothing that was sort of malicious intent.
00:56:52:25 - 00:56:55:25
And if that is the case, then we often find that education
00:56:56:10 - 00:56:58:04
can be a very, very valuable tool.
00:56:58:04 - 00:57:03:13
And obviously we're mindful of them not repeating that breach.
00:57:03:22 - 00:57:06:00
But usually that works.
00:57:06:00 - 00:57:08:21
If it's something of a more serious nature than obviously we'd
00:57:08:21 - 00:57:10:08
have to look at other sanctions.
00:57:10:08 - 00:57:12:14
It could be
00:57:12:14 - 00:57:15:22
it could be to the extreme, I guess, revoking the credential
00:57:15:22 - 00:57:17:07
from that individual.
00:57:17:07 - 00:57:19:04
Now, in the more serious cases,
00:57:20:04 - 00:57:20:25
the case would be
00:57:20:25 - 00:57:24:02
then transferred over to the hearing panel from the conduct committee.
00:57:24:07 - 00:57:27:19
And then the hearing panel would be a panel where we would have the
00:57:27:26 - 00:57:30:23
advisor or the planner, we would speak to them directly,
00:57:30:23 - 00:57:34:28
virtually or directly gather the facts, make a ruling.
00:57:34:28 - 00:57:37:29
And again, a variety of sanctions could take place from there,
00:57:38:28 - 00:57:43:28
including, I guess, worst case scenario, an outright revocation of the credential
00:57:44:02 - 00:57:47:13
and a future ban from ever getting the credential again.
00:57:47:25 - 00:57:50:25
So I skipped a lot of steps just in the interest of time.
00:57:50:26 - 00:57:54:17
But that's sort of the synopsis of our complaint handling process.
00:57:54:21 - 00:57:56:10
Thank you. Tashia.
00:57:56:10 - 00:57:59:02
Okay, I'm going to say this, and I've got four three staff
00:57:59:02 - 00:58:03:02
from my standards council in the room.
00:58:03:02 - 00:58:05:17
So I'm going to try to make sure I get this right.
00:58:05:17 - 00:58:09:15
So the first thing is how do we manage a complaint when it comes in?
00:58:09:15 - 00:58:13:10
So we would take two approaches, very similar to what Anthony said.
00:58:14:07 - 00:58:19:19
Obviously, we have mechanisms whereby we make consumers aware
00:58:19:27 - 00:58:24:14
on both our website and our consumer site where they can make a complaint
00:58:24:26 - 00:58:27:27
or we also are very proactive in reaching out.
00:58:27:27 - 00:58:28:15
We have
00:58:29:24 - 00:58:31:02
mutual
00:58:31:02 - 00:58:34:00
sort of memorandums of understanding with other regulators
00:58:34:00 - 00:58:38:24
Whereby we will share information around complaints and we are actively
00:58:39:02 - 00:58:44:16
seeking out the work that happens across the regulatory community to make that
00:58:44:16 - 00:58:47:16
there are not other complaints that we're just not aware of.
00:58:47:25 - 00:58:51:17
Once a complaint comes in, we have a team of investigators
00:58:51:17 - 00:58:55:19
and the team of investigators will then look into the complaint,
00:58:55:29 - 00:58:58:26
make sure, first of all, it relates to our professional standards.
00:58:58:26 - 00:59:01:09
So we have a code of ethics.
00:59:01:09 - 00:59:03:23
We have standards of professional responsibility,
00:59:03:23 - 00:59:05:02
we have practice standards.
00:59:05:02 - 00:59:07:11
Then we have what we call a fitness standard.
00:59:07:11 - 00:59:11:12
So they're first looking to see how does that complaint apply
00:59:11:12 - 00:59:14:28
against these standards and where is the
00:59:15:14 - 00:59:18:14
where are the actions that we need to look at enforcement activity?
00:59:19:03 - 00:59:22:03
Once that investigation is complete
00:59:22:11 - 00:59:25:05
it then gets handled by our
00:59:26:20 - 00:59:28:20
conduct panel.
00:59:28:20 - 00:59:31:11
And our conduct panel
00:59:31:11 - 00:59:34:11
will sit back and they will say, okay,
00:59:34:12 - 00:59:36:04
is this something that's egregious?
00:59:36:04 - 00:59:37:15
Is this something that needs to go on
00:59:37:15 - 00:59:41:06
to a disciplinary panel or is this something that we feel
00:59:41:26 - 00:59:43:25
needs to be handled through an advisement?
00:59:43:25 - 00:59:45:09
Or possibly they could say,
00:59:45:09 - 00:59:48:11
you know what, this is not anything that we need to be concerned about.
00:59:48:18 - 00:59:51:11
You know, to your point, it could be something that
00:59:51:11 - 00:59:54:11
where the planner hadn’t done anything wrong.
00:59:54:13 - 00:59:57:13
And so those are the three actions there.
00:59:57:26 - 01:00:00:24
If something is deemed to be sufficiently egregious,
01:00:00:24 - 01:00:03:12
then it will go on to our hearing panel.
01:00:03:12 - 01:00:05:03
Our hearing panel is a roster.
01:00:05:03 - 01:00:09:07
And so we will generally pick three people from that roster.
01:00:09:16 - 01:00:12:16
Typically, they are all members of the public
01:00:12:18 - 01:00:17:25
and they will hear and often they’re lawyers who will volunteer and work with us
01:00:18:06 - 01:00:21:13
and they will then hear the matter and make a decision.
01:00:21:13 - 01:00:22:14
And as I said before,
01:00:22:14 - 01:00:25:28
there are various sanctions that they can apply based on that decision.
01:00:26:13 - 01:00:29:08
I would say that the other part of our process
01:00:29:08 - 01:00:33:21
is our conduct review panel is actually got public representation on it as well.
01:00:33:21 - 01:00:37:22
So we try to make sure that we have public representation throughout the process
01:00:38:07 - 01:00:40:16
and then all of our decisions are public.
01:00:40:16 - 01:00:44:23
So everything that happens through the process becomes public.
01:00:45:00 - 01:00:50:07
When there's a hearing, it's public. When there is a decision, it's public.
01:00:50:13 - 01:00:53:13
And so somebody can go on our website and see
01:00:53:19 - 01:00:56:19
it's very transparent in terms of the entire process.
01:00:57:05 - 01:01:00:06
And the other thing I wanted to add is what the team does a very, very good
01:01:00:06 - 01:01:06:00
job of is they have sort of standards around how long it should take
01:01:06:00 - 01:01:09:03
to give back to a complainant and various parts of the process.
01:01:09:11 - 01:01:12:10
One of the worst things that can happen, I think, is somebody makes a complaint
01:01:12:10 - 01:01:15:15
and it's three years later before they actually find out
01:01:16:05 - 01:01:18:21
what happened as a result of their complaint.
01:01:18:21 - 01:01:21:21
So we have timelines that we try to adhere to
01:01:22:02 - 01:01:26:09
and we also report annually, we put out a Standards Council report
01:01:26:09 - 01:01:30:06
annually that sort of highlights all the work that we've been doing
01:01:30:06 - 01:01:32:26
around the enforcement of the standard setting process.
01:01:32:26 - 01:01:37:11
So it's very transparent, very open and very much designed
01:01:37:11 - 01:01:40:06
so as the public can see the work that we're doing.
01:01:40:06 - 01:01:40:22
That's great.
01:01:40:22 - 01:01:41:08
Thank you.
01:01:41:08 - 01:01:44:02
And lots of call outs for the team today, guys.
01:01:44:02 - 01:01:45:13
Way to go!
01:01:45:13 - 01:01:46:18
Marie?
01:01:46:18 - 01:01:49:00
Yeah, without sounding like an echo,
01:01:50:11 - 01:01:51:26
we have similar processes.
01:01:51:26 - 01:01:55:19
I think the most important starting point is what is the complaint
01:01:56:04 - 01:01:58:20
and how should it be handled
01:01:58:20 - 01:02:01:19
and is it something that we can handle right?
01:02:02:07 - 01:02:06:17
Is it something where we can eventually take the person's title away?
01:02:06:28 - 01:02:10:01
And so we will look at each each complaint
01:02:10:08 - 01:02:13:08
and then determine how it should be handled.
01:02:13:08 - 01:02:16:23
We have a complaints process, a complaints board.
01:02:17:10 - 01:02:19:23
We have someone who's external who oversees it.
01:02:19:23 - 01:02:21:00
So it's not us.
01:02:21:00 - 01:02:24:11
It's a sort of third party, someone who knows the area very well
01:02:24:18 - 01:02:28:12
and who can make a judgment on the way we should process.
01:02:28:20 - 01:02:31:25
And then we go through the processes similar to the
01:02:32:17 - 01:02:35:24
the functions described by Tashia and Anthony
01:02:36:18 - 01:02:39:25
to be able to say, okay, what are we going to do with this person?
01:02:40:01 - 01:02:42:28
And ultimately, do we take the designation away?
01:02:42:28 - 01:02:46:03
We also look at what are the other bodies doing.
01:02:46:03 - 01:02:49:15
So is this person also under investigation by somebody else?
01:02:49:15 - 01:02:52:24
Has this person complained to the FSRA?
01:02:52:24 - 01:02:54:00
Have they complained to CIRO?
01:02:54:00 - 01:02:57:12
Have they complained to FP Canada or to Anthony's group?
01:02:58:00 - 01:03:01:05
Because we kind of have to work in concert, if we have someone
01:03:01:12 - 01:03:05:21
who's not acting properly, but they also have another designation,
01:03:05:27 - 01:03:08:27
we need to make sure that we're acting kind of in concert.
01:03:08:29 - 01:03:12:08
And so we try to make sure that we're at least working together
01:03:12:08 - 01:03:14:15
so that we aren't working at cross-purposes.
01:03:14:15 - 01:03:16:04
Or two of us are investigating this thing
01:03:16:04 - 01:03:18:09
because a client has gone from one to the other
01:03:18:09 - 01:03:20:16
and we're all working on something that we should be working on it
01:03:20:16 - 01:03:24:06
together to make sure that we have a proper process in place.
01:03:24:24 - 01:03:26:18
That's really good to hear, because I think it's
01:03:26:18 - 01:03:30:28
one of the things we worry about, is that a bad actor out there
01:03:30:28 - 01:03:35:02
just, you know, jumping ship from one CB to another?
01:03:35:02 - 01:03:38:02
So I'm really glad to hear that that's going on.
01:03:38:07 - 01:03:38:14
Okay.
01:03:38:14 - 01:03:42:24
We have another question, and this one is, what steps can we take to improve
01:03:42:24 - 01:03:47:18
financial literacy through secondary and tertiary education levels?
01:03:47:26 - 01:03:49:07
Marie, do you want to start with that one?
01:03:50:21 - 01:03:52:16
Yeah, there's a lot to do.
01:03:52:16 - 01:03:55:24
It probably starts when children are very young and they need
01:03:55:24 - 01:03:59:01
to understand the basics of finances, which is something we didn't do
01:04:00:02 - 01:04:00:24
back in the day.
01:04:00:24 - 01:04:03:09
Certainly I didn't have anything like that.
01:04:03:09 - 01:04:06:13
I think it starts in high school or even in primary school,
01:04:07:04 - 01:04:11:20
and it's developing a comfort with your financial situation,
01:04:11:20 - 01:04:16:00
even if it's a very simple one and then bringing that culture to them.
01:04:16:00 - 01:04:19:05
So it's part of what they think about and not something that's like,
01:04:19:23 - 01:04:22:14
you know, don't don't think about that or don't understand budgeting
01:04:22:14 - 01:04:24:23
or don't understand I've got a part time job.
01:04:24:23 - 01:04:27:22
What can I do? How should I manage my money?
01:04:27:22 - 01:04:31:07
And so bring that mentality of managing money
01:04:31:20 - 01:04:34:28
into people very young and then develop that over time.
01:04:35:16 - 01:04:39:21
I think also there are lots of sort of consumer or type
01:04:41:14 - 01:04:42:22
programs that are out there
01:04:42:22 - 01:04:47:02
for financial literacy that we need to encourage people to take.
01:04:47:02 - 01:04:48:15
But it's really hard
01:04:48:15 - 01:04:51:06
because if you don't have a culture of looking at your finances
01:04:51:06 - 01:04:55:05
or you sort of take that prospectus and move it to the blue box
01:04:55:18 - 01:04:59:09
you haven't really developed any kind of knowledge of your financials,
01:04:59:18 - 01:05:02:21
your financials or what your financial products are doing for you.
01:05:03:04 - 01:05:04:29
So it's a huge job.
01:05:04:29 - 01:05:08:01
I think even having a consumer understand the difference
01:05:08:01 - 01:05:11:01
between a financial advisor and a financial planner,
01:05:11:15 - 01:05:14:15
I'm sure lots of people have no idea what the difference is.
01:05:14:19 - 01:05:17:12
And so the education piece is going to be really important.
01:05:17:12 - 01:05:19:14
The fact that the FSRA is stepping in
01:05:19:14 - 01:05:21:28
to do education, I think will be really important.
01:05:22:22 - 01:05:23:26
I'll leave it at that. So we Tashia,
01:05:23:26 - 01:05:25:07
Absolutely. Tashia?
01:05:26:27 - 01:05:27:26
I think, you know,
01:05:27:26 - 01:05:31:02
to improve financial literacy, you really have to look at two things.
01:05:31:02 - 01:05:33:21
You have to look at the modality about how you deliver it,
01:05:33:21 - 01:05:37:18
because that delivery is not the same to every group that you're working with.
01:05:37:18 - 01:05:40:09
If you're trying to provide financial literacy
01:05:40:09 - 01:05:43:09
for a high school student or for somebody in primary,
01:05:43:23 - 01:05:49:04
going in and talking about money is not going to be of interest to them.
01:05:49:04 - 01:05:50:08
So you've got to employ a little,
01:05:50:08 - 01:05:54:07
you got to be a little bit more creative in how you involve gamification.
01:05:54:07 - 01:05:57:13
You've got to get them engaged, you've got to get them involved in that manner.
01:05:57:25 - 01:06:00:16
And I think that becomes really important.
01:06:00:16 - 01:06:03:22
And then the second thing I think you have to realize is
01:06:03:29 - 01:06:07:20
not all financial literacy is equal, that there are different groups
01:06:07:20 - 01:06:10:27
that are facing different challenges, and you've got to address
01:06:10:27 - 01:06:14:12
that diversity in the types of programing that you're providing.
01:06:14:26 - 01:06:18:24
So although I'm not, we're talking about secondary and tertiary education levels.
01:06:18:24 - 01:06:22:13
I would say, you know, one of the things that we're doing is
01:06:22:28 - 01:06:25:19
we have financial literacy education that we're starting
01:06:25:19 - 01:06:28:28
to deliver through our Canadian Foundation for Financial Planning.
01:06:29:27 - 01:06:33:06
One of the first courses that we're offering is for new Canadians.
01:06:33:12 - 01:06:37:11
And one of the things that we're doing in those courses is, for example,
01:06:37:11 - 01:06:40:15
providing offerings in Farsi and in Hindi
01:06:40:21 - 01:06:43:21
and then the languages that the new Canadians are speaking
01:06:43:23 - 01:06:46:24
so as they can actually benefit
01:06:47:18 - 01:06:50:06
from the knowledge that they're gaining.
01:06:50:06 - 01:06:53:23
And I think having that lens of who are you speaking to
01:06:54:01 - 01:06:56:27
and how are you going to resonate with those individuals?
01:06:56:27 - 01:06:59:24
Because there's a lot of financial literacy training out there.
01:06:59:24 - 01:07:02:24
Every financial institution is doing financial literacy.
01:07:02:28 - 01:07:05:29
There are a number of not-for-profits, doing financial literacy.
01:07:06:08 - 01:07:09:11
But I think the key is, is to try to get that approach
01:07:09:18 - 01:07:12:19
whereby people are actually going to be able to understand it
01:07:12:24 - 01:07:16:03
and it's going to be meaningful to their particular circumstances.
01:07:17:18 - 01:07:18:03
That's great.
01:07:18:03 - 01:07:18:26
Thank you.
01:07:18:26 - 01:07:22:02
Now, Anthony, I know a lot of all of your designations
01:07:22:02 - 01:07:25:09
really have a retirement sort of bent to them.
01:07:26:12 - 01:07:30:02
And everything I read about people thinking about retiring
01:07:30:02 - 01:07:33:09
is usually in the negative that they're not ready,
01:07:33:09 - 01:07:35:04
they don't have enough money.
01:07:35:04 - 01:07:37:17
So talk to us, you know, specifically
01:07:37:17 - 01:07:40:17
about education in that realm.
01:07:41:16 - 01:07:45:12
Well, I think the focus of our curriculum
01:07:45:12 - 01:07:49:16
and some of our designation on retirement is simply because so much
01:07:49:16 - 01:07:52:16
of the financial planning conversation
01:07:52:28 - 01:07:55:28
that individuals have,
01:07:56:13 - 01:07:59:07
what's what's top of mind is am I going to be able to retire?
01:07:59:07 - 01:08:00:29
And if so, what level of,
01:08:00:29 - 01:08:03:14
you know, lifestyle can I can I maintain my current lifestyle?
01:08:03:14 - 01:08:08:24
It's such a dominating theme in all conversations with financial planning.
01:08:10:01 - 01:08:12:23
So I think that's sort of the angle that we looked at it.
01:08:12:23 - 01:08:16:21
But, you know, we want to make sure that when we're talking about retirement,
01:08:18:18 - 01:08:21:17
sort of to Tashia's point
01:08:21:17 - 01:08:24:17
in terms of the mode that it's delivered in
01:08:24:19 - 01:08:27:19
and it's an appropriate discussion
01:08:28:02 - 01:08:30:18
for the recipient of this information.
01:08:30:18 - 01:08:30:23
Okay.
01:08:30:23 - 01:08:33:22
So, for example,
01:08:34:27 - 01:08:37:27
back in the day with with your designation, Tashia,
01:08:37:27 - 01:08:41:11
with the CFP designation, when you used to have the capstone course requirement.
01:08:42:24 - 01:08:44:06
We used to have,
01:08:44:06 - 01:08:46:22
there used to be a requirement where
01:08:46:22 - 01:08:52:05
students would submit a financial plan based on a mock case study.
01:08:52:22 - 01:08:55:15
And oftentimes it had to deal with retirement,
01:08:55:15 - 01:08:57:04
not always, but sometimes.
01:08:57:04 - 01:09:00:04
So we would get advisors and planners and, you know,
01:09:00:14 - 01:09:03:26
bless them for the time and the effort that they put into this,
01:09:04:07 - 01:09:08:17
they would sometimes come in and produce a 100 page document, 120 page document
01:09:09:07 - 01:09:13:15
with all kinds of calculations and projections
01:09:14:25 - 01:09:15:27
for a
01:09:15:27 - 01:09:20:03
for an individual that's 25 years old, that's just finished university
01:09:20:03 - 01:09:23:10
and just entering into the workforce.
01:09:23:20 - 01:09:27:04
And could you imagine, I would often say to the student,
01:09:27:04 - 01:09:30:14
when I'm reviewing their plan, I would say, could you imagine
01:09:30:14 - 01:09:33:17
if you dropped this tome in front of this
01:09:33:17 - 01:09:36:17
individual with 125 pages,
01:09:37:00 - 01:09:40:21
are they likely to be overwhelmed and push that document away?
01:09:41:08 - 01:09:44:02
Or do you think that they're going to embrace that document?
01:09:44:02 - 01:09:44:29
In other words,
01:09:44:29 - 01:09:47:29
the whole idea of a financial plan is it should be something that
01:09:48:06 - 01:09:49:12
a client embraces.
01:09:49:12 - 01:09:53:28
So when you've left their house and they're still sitting at the kitchen table
01:09:53:28 - 01:09:56:05
you know, are they pushing that document away
01:09:56:05 - 01:09:59:07
because it's too intimidating or too overwhelming, or
01:09:59:07 - 01:10:02:07
are they going to pull it in and, you know, continue reading?
01:10:02:12 - 01:10:04:29
So I think it's having an understanding.
01:10:04:29 - 01:10:07:29
I think that's one of the, you know, areas where I think
01:10:08:03 - 01:10:11:17
advisors, prospective advisors and planners can can really learn
01:10:11:17 - 01:10:16:04
a lot is understanding their audience and what is appropriate.
01:10:17:04 - 01:10:18:09
What is appropriate language?
01:10:18:09 - 01:10:20:03
That's another thing as well.
01:10:20:03 - 01:10:23:21
You see so many planners throw jargon, technical terms around
01:10:23:28 - 01:10:25:02
and it's dizzying, right?
01:10:25:02 - 01:10:26:23
I mean, the amount of acronyms that are out there,
01:10:26:23 - 01:10:29:17
it's really dizzying and it's overwhelming.
01:10:29:17 - 01:10:34:01
In some cases, it may be appropriate, but in other cases less so.
01:10:34:01 - 01:10:37:20
And I think a really important skill for planners and advisors,
01:10:37:20 - 01:10:40:28
that’s where the role of education comes in, is
01:10:41:23 - 01:10:44:04
teaching them what is or being able
01:10:44:04 - 01:10:47:04
to recognize what is the appropriate level to speak to a client at.
01:10:47:09 - 01:10:51:14
Because if you want to get that client to buy into what you're saying,
01:10:51:20 - 01:10:54:20
you're going to have to connect with them right?
01:10:57:11 - 01:10:57:27
Well, that's great.
01:10:57:27 - 01:10:58:09
Thank you.
01:10:58:09 - 01:11:01:01
Yes, I think I would be rather daunted by
01:11:02:05 - 01:11:05:05
a 120 page document.
01:11:05:18 - 01:11:06:12
But it's true.
01:11:06:12 - 01:11:10:07
I mean, we're all entrenched in this work.
01:11:10:07 - 01:11:12:20
And sometimes you forget that
01:11:12:20 - 01:11:16:01
those who you're speaking to are not so we all struggle with that.
01:11:16:10 - 01:11:18:04
That is for sure.
01:11:18:04 - 01:11:22:21
We have a question that is actually for myself.
01:11:22:21 - 01:11:26:21
How does FSRA supervise the principle of putting clients interests first?
01:11:28:27 - 01:11:30:26
Well, I can tell you that
01:11:30:26 - 01:11:35:14
in the title protection rule and actually I'll read it to you,
01:11:36:09 - 01:11:41:18
it requires people using approved credentials to deal with clients
01:11:41:18 - 01:11:45:10
competently, professionally, fairly, honestly, and in good faith.
01:11:46:28 - 01:11:48:20
So we believe, of course,
01:11:48:20 - 01:11:54:14
that part of meeting that standard is to put the client's interest first
01:11:54:14 - 01:11:58:07
when preparing a financial plan or providing financial advice.
01:11:58:24 - 01:12:02:14
It is our expectation that all approved CB’s,
01:12:02:18 - 01:12:07:28
including of course, those on this panel, would put this principle
01:12:07:28 - 01:12:13:06
at the core of what they do when providing a financial planner advice.
01:12:14:18 - 01:12:16:25
So some of the key metrics
01:12:16:25 - 01:12:21:26
that we would use and we did this most recently with the examination,
01:12:22:08 - 01:12:26:28
the first examination that took place of our approved CB’s
01:12:27:15 - 01:12:33:09
was, we would ensure that the CBs hold their credential holders accountable
01:12:33:09 - 01:12:37:12
for a code of conduct that includes putting the client's interests first.
01:12:37:23 - 01:12:41:01
And not only that, they would have to attest
01:12:41:11 - 01:12:44:11
yearly to the fact that they're doing so,
01:12:44:11 - 01:12:47:16
and not only would they attest, but they would have a metric
01:12:47:16 - 01:12:51:03
that they run to ensure that everybody's actually doing it.
01:12:51:03 - 01:12:54:18
So they're there fleshing out those that maybe forgot
01:12:54:18 - 01:12:57:18
to check the box and finding out why.
01:12:58:13 - 01:13:00:13
We would also ensure
01:13:00:13 - 01:13:04:28
we talked about CSI’s webinar that they are
01:13:04:28 - 01:13:09:07
actively communicating this principle to their credential holders.
01:13:09:19 - 01:13:12:23
So whether it is having seminars,
01:13:12:23 - 01:13:18:09
webinars, it's in your CE programs, but it is at the forefront
01:13:18:22 - 01:13:22:11
of just continuous learning for credential holders.
01:13:24:02 - 01:13:26:29
And then finally,
01:13:26:29 - 01:13:30:05
you know, you're verifying through consumers
01:13:30:05 - 01:13:34:04
that they feel satisfied with the work that has been done.
01:13:35:22 - 01:13:39:12
So I think this will remain
01:13:39:13 - 01:13:43:09
a principle of title protection.
01:13:43:09 - 01:13:45:19
It's at the core of consumer protection.
01:13:45:19 - 01:13:49:15
And I think really at the root of it, it is
01:13:50:16 - 01:13:52:23
that, you know,
01:13:52:23 - 01:13:56:15
sometimes and this has been, I think the criticism of late
01:13:56:15 - 01:13:59:15
that there's just a sales process going on here,
01:14:00:12 - 01:14:02:24
not with planning but with advice.
01:14:02:24 - 01:14:06:23
And that is obviously what we don't want to see.
01:14:07:08 - 01:14:10:27
So it will remain a principle of title protection.
01:14:11:08 - 01:14:14:08
It does look like maybe we have time for one more question.
01:14:16:23 - 01:14:21:14
Is FSRA going to increase the minimum standard for financial advisor
01:14:21:14 - 01:14:24:23
title use, similar to what Saskatchewan is proposing?
01:14:25:15 - 01:14:29:25
So we talked a little bit about harmonization today.
01:14:30:29 - 01:14:35:08
I can tell you that one of the things we are doing and I'm quite
01:14:35:08 - 01:14:39:02
proud of just two years into this regime
01:14:39:02 - 01:14:41:10
is we're reviewing the framework already.
01:14:43:01 - 01:14:45:06
And I think that is important to do.
01:14:45:06 - 01:14:48:18
Our most recent sector was health service providers.
01:14:48:18 - 01:14:55:19
That happened in 2014 and we didn't review it on this type of pace.
01:14:56:01 - 01:15:00:09
So I'm proud that we're doing so so that we can apply
01:15:00:09 - 01:15:03:09
lessons learned very early on.
01:15:03:14 - 01:15:07:04
So one of the obviously
01:15:07:13 - 01:15:10:13
Saskatchewan came out with their paper
01:15:10:22 - 01:15:13:14
that not only had a higher
01:15:13:14 - 01:15:18:07
standard for financial advisors, but also had additional
01:15:19:00 - 01:15:22:00
disciplinary powers that we don't have.
01:15:22:12 - 01:15:27:17
So as we gather evidence in the evaluation of the framework,
01:15:27:17 - 01:15:31:29
we will look at what Saskatchewan is proposing.
01:15:32:08 - 01:15:35:00
There is, over time
01:15:35:00 - 01:15:38:03
looking at the future phases of title protection,
01:15:38:03 - 01:15:42:03
a sort of continuous improvement principle,
01:15:44:01 - 01:15:46:18
but it will be based on evidence.
01:15:46:18 - 01:15:49:18
So we're gathering evidence right now
01:15:50:19 - 01:15:54:02
and if we believe that that is the right thing to do,
01:15:54:02 - 01:15:57:02
then we will certainly look at that.
01:15:57:09 - 01:16:00:11
I can tell you that New Brunswick, which is the other
01:16:00:11 - 01:16:03:11
province, who I mean, our policy
01:16:04:01 - 01:16:07:26
folks are in touch with both Saskatchewan and New Brunswick all of the time.
01:16:08:16 - 01:16:11:28
They put out their paper, I think, just this past January,
01:16:11:28 - 01:16:16:07
and they did not propose an increase to those standards.
01:16:17:23 - 01:16:20:23
So there is yet to be uniformity.
01:16:21:14 - 01:16:24:19
But as we go forward, evaluating the framework,
01:16:24:19 - 01:16:27:19
that will certainly be under consideration.
01:16:29:00 - 01:16:31:13
And I think with that we are at time.
01:16:31:13 - 01:16:33:19
So I want to again thank the panel.
01:16:33:19 - 01:16:39:10
I know I learned a lot and it was almost like another little mini consultation
01:16:39:10 - 01:16:41:29
for us as we do evaluate this framework.
01:16:41:29 - 01:16:45:19
So I appreciate that and thank you again.
01:16:45:19 - 01:16:49:07
I hope that both those of you listening in
01:16:49:07 - 01:16:52:14
and here in the room, that you enjoyed it as well and got something out of it.
01:16:52:27 - 01:16:55:26
So thank you all very much. We have actually
01:16:56:27 - 01:16:57:22
a reception
01:16:57:22 - 01:17:03:08
happening I think it is 2:30 till 3:30, probably out in the main area.
01:17:03:22 - 01:17:05:04
So please join us.
01:17:05:04 - 01:17:07:29
And I think there's a cash bar, maybe
01:17:07:29 - 01:17:11:22
and a chance for you all to network.
01:17:11:28 - 01:17:13:00
So thanks again.
00:00:05,138 -- 00:00:06,740
Thank you very much for,
00:00:06,740 -- 00:00:09,209
coming to the Credit Union breakout session.
00:00:09,209 -- 00:00:11,311
We got the big room because we got the biggest turnout.
00:00:11,311 -- 00:00:12,345
You look around, you like
00:00:12,345 -- 00:00:14,814
it doesn't look like a big turnout, but it actually is.
00:00:14,814 -- 00:00:17,083
It's just a huge room, so we're not feeling it.
00:00:17,083 -- 00:00:19,319
If you feel like coming up to the front of the room,
00:00:19,319 -- 00:00:22,889
there are tons of spaces, so please come up if you wish.
00:00:22,889 -- 00:00:25,091
And this isn't your only chance at any point
00:00:25,091 -- 00:00:27,160
in this session. You want to come up? Please move up.
00:00:27,160 -- 00:00:31,731
No problem. Oh, Chandra is already coming.
00:00:31,731 -- 00:00:34,934
So this session is called Long Term
00:00:34,934 -- 00:00:37,270
Vision and Evolution of the Credit Union System.
00:00:37,270 -- 00:00:39,139
You may have seen
00:00:39,139 -- 00:00:41,007
instead of the word evolution, transformation
00:00:41,007 -- 00:00:45,211
somewhere. At some point in discussing this with,
00:00:45,211 -- 00:00:47,614
some of FSRA colleagues and the panel,
00:00:47,614 -- 00:00:49,649
we decided it would be more fitting and more accurate
00:00:49,649 -- 00:00:51,618
to call it evolution as opposed to transformation.
00:00:52,685 -- 00:00:55,788
So if you see that word change, that's why.
00:00:55,788 -- 00:00:58,825
We have a fantastic turnout in person.
00:00:58,825 -- 00:01:02,228
I'm not sure how many people we have online, but
00:01:02,228 -- 00:01:03,463
thank you very much for all of you,
00:01:03,463 -- 00:01:08,468
all of you that are joining online as well.
00:01:09,369 -- 00:01:13,339
Is this advancing?
00:01:13,339 -- 00:01:14,874
I swear I'm pushing the button.
00:01:14,874 -- 00:01:17,710
There you go. You got it. Good.
00:01:17,710 -- 00:01:18,244
Wait.
00:01:18,244 -- 00:01:21,481
What did I do differently the third time?
00:01:21,481 -- 00:01:23,916
All right, so, this is the agenda.
00:01:23,916 -- 00:01:28,121
We have 75 minutes. Let me take a look.
00:01:28,121 -- 00:01:30,189
Yeah, we got 75 minutes.
00:01:30,189 -- 00:01:32,592
A couple of minutes more, maybe.
00:01:32,592 -- 00:01:34,527
I will first introduce our panelists.
00:01:34,527 -- 00:01:35,194
And I think
00:01:35,194 -- 00:01:38,731
probably many of, you know, most of our panelists already.
00:01:38,731 -- 00:01:39,699
Then I will talk about
00:01:39,699 -- 00:01:42,101
why this topic is important for FSRA
00:01:42,101 -- 00:01:43,536
and why we're doing this.
00:01:43,536 -- 00:01:46,205
That will probably take about ten minutes.
00:01:46,205 -- 00:01:48,608
Then we'll go into the panel discussion
00:01:48,608 -- 00:01:50,109
and I'm just facilitating
00:01:50,109 -- 00:01:51,277
the attention should be on
00:01:51,277 -- 00:01:53,379
these four fantastic people here, not on me.
00:01:54,480 -- 00:01:56,349
And then we're going to save some time
00:01:56,349 -- 00:01:57,950
for questions at the end.
00:01:57,950 -- 00:01:59,852
So we got a little monitor here.
00:01:59,852 -- 00:02:01,654
And your questions do appear on the monitor.
00:02:01,654 -- 00:02:03,289
So we all see it.
00:02:03,289 -- 00:02:06,759
And we'll go through some of those.
00:02:06,759 -- 00:02:09,762
If you have a question
00:02:09,762 -- 00:02:14,100
while we're going through the session, please send it in.
00:02:14,100 -- 00:02:16,669
Oh. Thank you. If this doesn't work, use this.
00:02:16,669 -- 00:02:19,505
All right. Cool.
00:02:19,505 -- 00:02:22,542
I'm just going to go straight to that one.
00:02:22,542 -- 00:02:22,809
Yeah.
00:02:22,809 -- 00:02:23,976
Don't, don't wait to remember
00:02:23,976 -- 00:02:26,212
what your question is to the end. Send it.
00:02:26,212 -- 00:02:28,548
You can also do anonymous on your Chime app.
00:02:28,548 -- 00:02:29,749
I think that's what it's called.
00:02:29,749 -- 00:02:30,283
Send it.
00:02:30,283 -- 00:02:31,184
It'll go into the queue
00:02:31,184 -- 00:02:35,054
and then we'll address it at the end of the session.
00:02:35,054 -- 00:02:36,455
All right.
00:02:36,455 -- 00:02:38,291
So,
00:02:38,291 -- 00:02:41,294
you have the Bios for everybody that's on panel.
00:02:41,294 -- 00:02:42,995
So I'm not going to give you a long description
00:02:42,995 -- 00:02:46,165
because we have a fantastic panel.
00:02:46,165 -- 00:02:48,901
But I will give you a very short description and introduce
00:02:48,901 -- 00:02:50,236
our four panel members.
00:02:50,236 -- 00:02:55,007
We'll do it by alphabetical order, by last name.
00:02:55,007 -- 00:02:56,809
So Jacquie Davison first.
00:02:57,910 -- 00:03:01,514
She is the Board of Libro Credit Union.
00:03:01,514 -- 00:03:04,183
And, she's held a number of senior public,
00:03:04,183 -- 00:03:07,420
sector positions and has been leading Libro’s evolution
00:03:07,420 -- 00:03:09,388
for, the past four years,
00:03:09,388 -- 00:03:12,658
since 2020, when she took a Chair role.
00:03:12,658 -- 00:03:13,893
Chris Dobrzanski,
00:03:13,893 -- 00:03:18,064
who is sitting to the right of Jacquie.
00:03:18,064 -- 00:03:20,633
He flew in, I think, this weekend.
00:03:20,633 -- 00:03:21,867
You flew in from Vancouver.
00:03:21,867 -- 00:03:24,203
So Chris lives in Vancouver,
00:03:24,203 -- 00:03:26,739
but our panel members could not.
00:03:26,739 -- 00:03:28,808
We were told that we could not do this remotely.
00:03:28,808 -- 00:03:30,643
People can join in remotely to listen,
00:03:30,643 -- 00:03:32,445
but we couldn't have panel members remotely.
00:03:32,445 -- 00:03:34,947
So Chris was kind enough to join us
00:03:34,947 -- 00:03:37,516
and fly here specifically for this panel.
00:03:37,516 -- 00:03:40,353
So thank you very much, Chris.
00:03:40,353 -- 00:03:43,723
Chris is the retired CEO of Citizens Bank of Canada,
00:03:43,723 -- 00:03:47,760
now known as the Vancity Community Investment Bank.
00:03:47,760 -- 00:03:50,363
Chris served for many decades.
00:03:50,363 -- 00:03:51,664
Chris, I won't say how many decades
00:03:51,664 -- 00:03:52,765
because nobody will believe it.
00:03:53,866 -- 00:03:55,401
On the,
00:03:55,401 -- 00:03:57,670
serving the Credit Unions in British Columbia,
00:03:57,670 -- 00:04:02,308
but also the Canadian, Canadian system, across the country.
00:04:02,308 -- 00:04:06,979
So, Chris has been a very devoted leader
00:04:06,979 -- 00:04:07,713
in the credit system.
00:04:07,713 -- 00:04:08,647
I've known him for many years.
00:04:08,647 -- 00:04:10,549
And I can attest to that, that,
00:04:10,549 -- 00:04:13,452
that he is incredibly devoted to Credit Unions.
00:04:13,452 -- 00:04:15,821
Michael Hatch.
00:04:15,821 -- 00:04:19,992
Jeff Guthrie initially was on our panel. Last minute,
00:04:19,992 -- 00:04:21,160
he throws this at Michael.
00:04:21,160 -- 00:04:23,262
He's like, Michael, you go
00:04:23,262 -- 00:04:25,731
because he had some travel plans that turned sideways.
00:04:25,731 -- 00:04:28,000
So Jeff wanted to be here, but he can't.
00:04:28,000 -- 00:04:29,935
Michael, thank you very much for last minute.
00:04:29,935 -- 00:04:33,405
It was literally last week when Jeff and I told you that,
00:04:33,405 -- 00:04:36,141
if you could please step in for Jeff.
00:04:36,141 -- 00:04:38,143
So, you should get a big bonus.
00:04:38,143 -- 00:04:39,712
It was my decision. I'd give it to you.
00:04:39,712 -- 00:04:41,547
So you got to talk to Jeff. Maybe I'll talk to Jeff.
00:04:41,547 -- 00:04:42,815
This session being recorded?
00:04:44,717 -- 00:04:49,722
So, Michael Hatch is the CCUA’s Vice President of Government...
00:04:49,755 -- 00:04:52,024
Government, Government Relations.
00:04:52,024 -- 00:04:55,227
And, thank you very much, Michael, for stepping in.
00:04:55,227 -- 00:04:58,230
And Lloyd Smith, I think most of you know Lloyd Smith.
00:04:58,230 -- 00:05:01,033
He is the CEO of FirstOntario Credit Union.
00:05:01,033 -- 00:05:03,569
He has been the CEO since 2019,
00:05:03,569 -- 00:05:05,471
but he has served as a leader
00:05:05,471 -- 00:05:07,873
in the credit system in Ontario for,
00:05:07,873 -- 00:05:09,375
hard to believe what 30 years.
00:05:09,375 -- 00:05:10,876
So, you look really good.
00:05:10,876 -- 00:05:12,578
So, thank you very much
00:05:12,578 -- 00:05:15,014
for all the panel members for joining us.
00:05:15,014 -- 00:05:19,852
And, so what we'll do, this session is not about FSRA
00:05:19,852 -- 00:05:22,554
or me presenting, but we want to put things in context
00:05:22,554 -- 00:05:25,224
and give you an understanding of why we have this session.
00:05:25,224 -- 00:05:26,225
But ultimately,
00:05:26,225 -- 00:05:27,660
I will stop talking at some point
00:05:27,660 -- 00:05:28,761
and we'll turn it over to our panel.
00:05:30,129 -- 00:05:33,699
So the financial services sector is always evolving
00:05:33,699 -- 00:05:35,701
and always has been evolving,
00:05:35,701 -- 00:05:38,237
which means that financial institutions must adapt
00:05:38,237 -- 00:05:41,673
and serve their members to remain competitive.
00:05:41,673 -- 00:05:45,711
The pace of change has and is expected to pick up
00:05:45,711 -- 00:05:47,746
over the next few years.
00:05:47,746 -- 00:05:49,915
And some of these change drivers,
00:05:49,915 -- 00:05:50,983
and we put five of them there.
00:05:50,983 -- 00:05:52,718
Now, this is not an exhaustive list,
00:05:52,718 -- 00:05:55,921
but there are some very important ones that are up there.
00:05:55,921 -- 00:05:59,925
These change drivers were discussed in this morning session.
00:05:59,925 -- 00:06:01,360
I know a few of these have already come up.
00:06:01,360 -- 00:06:02,428
Not all of them necessarily,
00:06:02,428 -- 00:06:04,096
but a few of them have come up this morning.
00:06:04,096 -- 00:06:06,165
So I'll just go through them pretty quickly.
00:06:06,165 -- 00:06:09,268
Big banks are becoming more efficient and effective at,
00:06:09,268 -- 00:06:11,570
member services,
00:06:11,570 -- 00:06:12,437
and Fintech’s
00:06:12,437 -- 00:06:13,839
and other entrants seek to take
00:06:13,839 -- 00:06:15,741
market share away from established players
00:06:15,741 -- 00:06:16,809
like Credit Unions.
00:06:17,843 -- 00:06:20,112
New technologies are redefining back
00:06:20,112 -- 00:06:23,348
into customer facing service delivery.
00:06:23,348 -- 00:06:27,219
Ontario's demographics is changing and evolving
00:06:27,219 -- 00:06:31,990
as we welcome immigrants and become increasingly urbanized.
00:06:31,990 -- 00:06:33,125
The manner in which Credit Unions
00:06:33,125 -- 00:06:37,062
collaborate on shared services is under pressure.
00:06:37,062 -- 00:06:39,998
And it is going to increase costs and complexity,
00:06:39,998 -- 00:06:41,900
which is a very important point.
00:06:41,900 -- 00:06:43,368
And we'll talk about scale
00:06:43,368 -- 00:06:45,971
and how Credit Unions can achieve that needed skill.
00:06:45,971 -- 00:06:48,674
And we'll take this to panel in a few minutes.
00:06:48,674 -- 00:06:52,344
And lastly, in the bottom-right corner there,
00:06:52,344 -- 00:06:55,013
consumer expectations regarding service
00:06:55,013 -- 00:06:59,351
levels and usability are, rapidly increasing.
00:06:59,351 -- 00:07:01,420
And so, these are some of the things
00:07:01,420 -- 00:07:06,425
that, that we'll be discussing as we go forward.
00:07:08,894 -- 00:07:12,597
So why has FSRA chosen this topic
00:07:12,597 -- 00:07:15,500
for today's breakout session?
00:07:15,500 -- 00:07:18,670
I'll start by assuring everybody, especially those that
00:07:18,670 -- 00:07:20,539
are either a member of management,
00:07:20,539 -- 00:07:23,241
at a Credit Union or Board Members.
00:07:23,241 -- 00:07:25,010
This is not a precursor
00:07:25,010 -- 00:07:27,045
to us issuing further Guidance
00:07:27,045 -- 00:07:30,248
or issuing a new rule or new regulations.
00:07:30,248 -- 00:07:32,417
That's not what is for.
00:07:32,417 -- 00:07:33,585
Strategic planning,
00:07:33,585 -- 00:07:35,454
which really is a big part
00:07:35,454 -- 00:07:36,822
of what we're going to talk about today
00:07:36,822 -- 00:07:38,490
is already a part of,
00:07:38,490 -- 00:07:39,825
and covered under the Sound Business
00:07:39,825 -- 00:07:41,293
and Financial Practices Rule,
00:07:41,293 -- 00:07:43,428
which has been in effect for a couple of years now.
00:07:43,428 -- 00:07:44,162
And all
00:07:44,162 -- 00:07:46,398
Credit Unions, regardless of size and complexity,
00:07:46,398 -- 00:07:47,499
are meeting the requirements
00:07:47,499 -- 00:07:48,100
of the Sound Business
00:07:48,100 -- 00:07:49,468
Financial Practices Rule.
00:07:49,468 -- 00:07:51,069
And the expectations and the requirements
00:07:51,069 -- 00:07:52,737
for strategic planning,
00:07:52,737 -- 00:07:54,306
including the involvement of the Boards
00:07:54,306 -- 00:07:55,841
and the accountability of the Boards,
00:07:55,841 -- 00:07:57,542
is already covered under the Sound
00:07:57,542 -- 00:07:59,111
Business and Financial Practices Rule.
00:08:00,345 -- 00:08:02,981
So some of the questions we ask are, what opportunities...
00:08:02,981 -- 00:08:06,918
what opportunities, do you see looking forward?
00:08:06,918 -- 00:08:07,853
How will your business model
00:08:07,853 -- 00:08:11,389
need to adapt in response to these external changes,
00:08:11,389 -- 00:08:14,092
some of which we talked about in the last slide?
00:08:14,092 -- 00:08:15,794
How will you mitigate,
00:08:15,794 -- 00:08:20,198
the related risks and some of the new and emerging risks?
00:08:20,198 -- 00:08:23,101
FSRA wants to emphasize the critical role
00:08:23,101 -- 00:08:27,005
that Boards play in strategic planning process.
00:08:27,005 -- 00:08:30,375
And Board members are ultimately like, I said, accountable
00:08:30,375 -- 00:08:33,545
for setting the Credit Union’s strategy and setting the direction.
00:08:33,545 -- 00:08:34,779
Now, of course, Senior Management
00:08:34,779 -- 00:08:36,248
have a very important role,
00:08:36,248 -- 00:08:38,250
but really, the accountability sets where the Boards
00:08:38,250 -- 00:08:39,351
and the direction that they give to
00:08:39,351 -- 00:08:41,319
Senior Management comes from the Boards.
00:08:41,319 -- 00:08:43,688
And so Board Members must be actively involved
00:08:43,688 -- 00:08:45,790
in providing guidance and direction to Management
00:08:45,790 -- 00:08:47,993
on your Credit Unions long term
00:08:47,993 -- 00:08:50,862
objectives and strategic direction.
00:08:50,862 -- 00:08:53,898
So what does this look like in practice?
00:08:57,168 -- 00:08:57,969
The following that
00:08:57,969 -- 00:09:00,672
we'll be discussing is just an example
00:09:00,672 -- 00:09:03,041
that we're going to use on these,
00:09:03,041 -- 00:09:04,376
external change factors
00:09:04,376 -- 00:09:06,277
that one of those five that we discussed
00:09:06,277 -- 00:09:09,714
in a couple of slides ago.
00:09:09,714 -- 00:09:13,385
So, this example that we're going to use is not necessarily
00:09:13,385 -- 00:09:15,086
the most important one,
00:09:15,086 -- 00:09:18,156
but it is certainly one of the important
00:09:18,156 -- 00:09:18,957
change factors
00:09:18,957 -- 00:09:22,527
that are driving these, changes and considerations.
00:09:22,527 -- 00:09:25,630
So, let's look at a representative,
00:09:25,630 -- 00:09:29,134
external force and its impact on the Credit Union sector.
00:09:29,134 -- 00:09:30,835
As a critical leader,
00:09:30,835 -- 00:09:32,070
how will you and your organization
00:09:32,070 -- 00:09:35,673
respond to long term changes in Ontario's demographics?
00:09:35,673 -- 00:09:36,374
And that's what
00:09:36,374 -- 00:09:38,943
we'll be discussing in the next couple of slides.
00:09:38,943 -- 00:09:40,178
This provides challenges
00:09:40,178 -- 00:09:43,047
and opportunities for Credit Unions.
00:09:43,047 -- 00:09:46,618
Depending on how you prepare for Ontario, that is quickly,
00:09:46,618 -- 00:09:47,986
changing and evolving.
00:09:51,222 -- 00:09:54,759
Okay, so the next three slides are about demographics.
00:09:54,759 -- 00:09:57,128
And again, just keep this in mind. This is an example.
00:09:57,128 -- 00:09:59,030
We're not using this because we're saying
00:09:59,030 -- 00:10:01,199
this is the thing that FSRA is focusing on.
00:10:01,199 -- 00:10:03,635
This is the thing that FSRA finds most important.
00:10:03,635 -- 00:10:07,172
It's just an example, context setting.
00:10:07,172 -- 00:10:08,973
Ontario is Canada's most populated
00:10:08,973 -- 00:10:12,944
province with over 15 million inhabitants,
00:10:12,944 -- 00:10:17,549
and by 2046, this number is going to surpass 21 million.
00:10:17,549 -- 00:10:19,417
Over 85% of this growth
00:10:19,417 -- 00:10:22,987
is expected to come from net migration.
00:10:22,987 -- 00:10:25,990
Each year, around a quarter million people,
00:10:25,990 -- 00:10:30,528
international immigrants will settle in Ontario.
00:10:30,528 -- 00:10:32,196
New Ontarians,
00:10:32,196 -- 00:10:33,998
generally come from,
00:10:33,998 -- 00:10:36,567
India, China, Philippines and the Middle East.
00:10:36,567 -- 00:10:38,236
You can see the kind of big bars
00:10:38,236 -- 00:10:42,407
in the upper right hand side. So the question to ask is,
00:10:43,641 -- 00:10:47,078
if you primarily serve an Ontario,
00:10:47,078 -- 00:10:49,247
ethno religious community,
00:10:49,247 -- 00:10:52,383
will you continue to have access to new immigrants
00:10:52,383 -- 00:10:54,452
and these new immigrant members?
00:10:54,452 -- 00:10:57,088
If you serve the general population,
00:10:57,088 -- 00:10:58,122
are you positioned to capture
00:10:58,122 -- 00:11:02,226
a share of these new Canadians that, that are coming in
00:11:02,226 -- 00:11:03,027
and these numbers
00:11:03,027 -- 00:11:08,032
are steadily increasing us as we go forward?
00:11:08,332 -- 00:11:12,870
Immigration also impacts geographic strategy,
00:11:12,870 -- 00:11:14,539
especially with the placement of branches
00:11:14,539 -- 00:11:16,774
for Credit Unions. For example.
00:11:16,774 -- 00:11:19,877
two thirds of new immigrants settled in the Greater Toronto
00:11:19,877 -- 00:11:21,779
Area, the GTA,
00:11:21,779 -- 00:11:26,484
but also Ottawa, Hamilton and the Kitchener, London, corridor
00:11:26,484 -- 00:11:28,686
are very popular areas as well.
00:11:28,686 -- 00:11:33,658
So by 2048, almost half of Ontarians will live in the GTA.
00:11:34,959 -- 00:11:36,994
and rural regions will not experience
00:11:36,994 -- 00:11:41,999
the same population growth that these areas will.
00:11:44,569 -- 00:11:45,436
As well,
00:11:45,436 -- 00:11:49,540
Ontario's population is going to continue to age
00:11:49,540 -- 00:11:50,541
over the next few years.
00:11:51,576 -- 00:11:54,812
a combination of longer life expectancy
00:11:54,812 -- 00:11:58,316
and lower birth rates means that the number of seniors
00:11:58,316 -- 00:11:58,983
in the province
00:11:58,983 -- 00:12:03,988
will continue to rise in both relative and real terms.
00:12:04,021 -- 00:12:06,557
The share of seniors in rural
00:12:06,557 -- 00:12:08,259
areas will become even more pronounced
00:12:08,259 -- 00:12:11,095
because there will be less immigration
00:12:11,095 -- 00:12:12,930
to boost the working age population.
00:12:12,930 -- 00:12:15,499
So that's another consideration.
00:12:15,499 -- 00:12:16,000
For Credit
00:12:16,000 -- 00:12:17,969
Unions, these trends are even more accelerated
00:12:17,969 -- 00:12:19,070
and more pronounced
00:12:19,070 -- 00:12:21,439
because the average age of a Credit Union member
00:12:21,439 -- 00:12:23,908
is somewhere in the 50s,
00:12:23,908 -- 00:12:26,877
whereas the average age of an Ontarian is about 40.
00:12:26,877 -- 00:12:30,548
So a big difference of more than a decade.
00:12:30,548 -- 00:12:31,415
As we noted earlier,
00:12:31,415 -- 00:12:34,952
demographics is just one external force.
00:12:34,952 -- 00:12:38,289
Competition is also evolving very rapidly.
00:12:38,289 -- 00:12:40,191
Consumer expectations are rising.
00:12:40,191 -- 00:12:43,594
Technology is changing everything.
00:12:43,594 -- 00:12:47,331
So as a resilient financial institution, a Credit Union,
00:12:49,266 -- 00:12:50,534
actively planning for these
00:12:50,534 -- 00:12:51,402
changes,
00:12:51,402 -- 00:12:53,537
seeking opportunities and mitigating
00:12:53,537 -- 00:12:56,107
related risks are very important.
00:12:56,107 -- 00:12:56,707
A resilient
00:12:56,707 -- 00:13:00,611
financial institution also anticipates change, and changes
00:13:00,611 -- 00:13:02,646
and positions itself
00:13:02,646 -- 00:13:06,450
to be very ready for these changes.
00:13:06,450 -- 00:13:08,185
Many of these changes are too large
00:13:08,185 -- 00:13:11,489
and out of the control of us and Credit Unions,
00:13:11,489 -- 00:13:13,257
and it would be very difficult,
00:13:13,257 -- 00:13:14,625
if not impossible for Credit Unions
00:13:14,625 -- 00:13:15,760
to manage this on their own.
00:13:15,760 -- 00:13:17,895
So they have to do this as a sector.
00:13:17,895 -- 00:13:20,998
And that's a big part of what we'll be talking about today.
00:13:20,998 -- 00:13:23,400
Sector solutions are required.
00:13:23,400 -- 00:13:26,370
Sector leadership is required.
00:13:26,370 -- 00:13:28,839
And that is why we have our panelists here today.
00:13:28,839 -- 00:13:31,809
And that's what they're going to be talking about.
00:13:31,809 -- 00:13:33,878
So this is my last slide.
00:13:33,878 -- 00:13:38,249
And then we'll go into the panel. So just to reiterate,
00:13:39,717 -- 00:13:43,921
why is long term planning and strategy a priority for FSRA?
00:13:43,921 -- 00:13:47,324
Mark, early on today talking about the FSRA objects
00:13:47,324 -- 00:13:49,126
of protecting consumers,
00:13:49,126 -- 00:13:51,295
of maintaining financial stability,
00:13:51,295 -- 00:13:54,331
but also one of our priorities is,
00:13:54,331 -- 00:13:56,467
to promote sustainable, competitive
00:13:56,467 -- 00:13:58,469
and innovative financial sectors.
00:13:58,469 -- 00:14:00,938
That's actually listed as one of our objects.
00:14:00,938 -- 00:14:01,539
And you can see that
00:14:01,539 -- 00:14:04,375
in our annual business planning, document
00:14:04,375 -- 00:14:07,645
and in our FSRA strategy.
00:14:07,645 -- 00:14:09,079
FSRA’s interest is in the long
00:14:09,079 -- 00:14:11,448
term viability of the Credit Union sector.
00:14:11,448 -- 00:14:14,351
And this interest is rooted in our objects.
00:14:14,351 -- 00:14:17,788
You know, as Mark alluded to earlier on today.
00:14:17,788 -- 00:14:20,824
FSRA believes that a strong,
00:14:20,824 -- 00:14:22,059
that strong sector leadership
00:14:22,059 -- 00:14:25,162
is required to address these challenges.
00:14:25,162 -- 00:14:29,233
and that's why we're here today, to hear from, our panelists
00:14:29,233 -- 00:14:30,968
and not from FSRA.
00:14:30,968 -- 00:14:35,172
So our panelists are very deeply rooted, very passionate,
00:14:35,172 -- 00:14:37,808
very involved in the Credit Union sector.
00:14:37,808 -- 00:14:42,780
And with that, we'll go to the panel discussion.
00:14:43,480 -- 00:14:47,918
And will...we leave the slides on or should we take it off?
00:14:47,918 -- 00:14:50,287
I'll leave it to whoever's managing this.
00:14:50,287 -- 00:14:51,488
All right. So I'm going to stay up here.
00:14:51,488 -- 00:14:53,390
And at this point I'm just going to ask some questions.
00:14:54,358 -- 00:14:55,492
We'll take this to panel.
00:14:55,492 -- 00:14:57,361
So,
00:14:57,361 -- 00:14:59,163
this question is
00:14:59,163 -- 00:15:01,198
directed at all of you and Lloyd,
00:15:01,198 -- 00:15:03,700
if we could start with you first, please.
00:15:03,700 -- 00:15:06,403
What do you see as big challenges and opportunities
00:15:06,403 -- 00:15:07,738
facing the Credit Unions
00:15:07,738 -- 00:15:09,940
and the Credit Union sector in the next 3 to 5 years?
00:15:09,940 -- 00:15:14,578
Thank you Mehrdad. Everybody hear me okay? Perfect.
00:15:14,578 -- 00:15:16,914
There's obviously a lot of challenges and opportunities
00:15:16,914 -- 00:15:19,550
that we've been facing for decades.
00:15:19,550 -- 00:15:23,020
I'll comment on, I think, you know, four common
00:15:23,020 -- 00:15:26,123
challenges and maybe 2 or 3 opportunities.
00:15:26,123 -- 00:15:27,424
The first one that I think we're
00:15:27,424 -- 00:15:30,727
all facing is rising operating costs,
00:15:30,727 -- 00:15:34,531
mainly in people and technology. In the people side,
00:15:34,531 -- 00:15:35,399
I would,
00:15:35,399 -- 00:15:36,099
look to,
00:15:36,099 -- 00:15:39,203
you know, what it takes to attract and retain talent.
00:15:39,203 -- 00:15:42,139
Talent is required to run the Credit Union.
00:15:42,139 -- 00:15:46,844
In technology, again, it's your core systems, infrastructure,
00:15:46,844 -- 00:15:48,512
supportive systems.
00:15:48,512 -- 00:15:49,580
Think cyber security.
00:15:49,580 -- 00:15:51,949
I think we all have to invest pretty heavily into
00:15:51,949 -- 00:15:53,016
cyber to support.
00:15:54,151 -- 00:15:57,888
The second one for me would be, compressed margins.
00:15:57,888 -- 00:16:00,891
And again, Mehrdad’s comments talk about the Fintech’s,
00:16:00,891 -- 00:16:03,727
the new entrants that are coming into our sector.
00:16:03,727 -- 00:16:05,262
They have lower cost structures.
00:16:05,262 -- 00:16:07,197
They don't have legacy systems.
00:16:07,197 -- 00:16:10,300
As a result, they can sort of operate on lower margins.
00:16:10,300 -- 00:16:11,935
And then just technology in general,
00:16:11,935 -- 00:16:14,738
I think, has suppressed margins.
00:16:14,738 -- 00:16:16,707
back 34 years ago,
00:16:16,707 -- 00:16:21,178
our margins were a lot larger than they are today.
00:16:21,178 -- 00:16:25,916
Third, for me would be growth and relevancy.
00:16:25,916 -- 00:16:29,453
Again, as a member or new members coming into our sector,
00:16:29,453 -- 00:16:32,356
they have lots of choices, Mehrdad’s comments,
00:16:32,356 -- 00:16:35,892
again, the average age of our members is aging
00:16:35,892 -- 00:16:37,794
well into the 50s.
00:16:37,794 -- 00:16:40,630
How are we being relevant to a younger demographic?
00:16:40,630 -- 00:16:44,668
How are we going to attract the younger demographic?
00:16:44,668 -- 00:16:47,838
I see that as a, you know, a pretty, pretty big change.
00:16:47,838 -- 00:16:49,072
Or a big challenge, rather.
00:16:49,072 -- 00:16:52,175
And then the banks, here in Ontario, the banks
00:16:52,175 -- 00:16:54,211
dominate the marketplace.
00:16:54,211 -- 00:16:57,981
93% plus or minus have a market share,
00:16:57,981 -- 00:16:59,683
dictated by the banks.
00:16:59,683 -- 00:17:00,617
And as a result,
00:17:00,617 -- 00:17:02,085
they have more resources
00:17:02,085 -- 00:17:03,987
and more access to capital
00:17:03,987 -- 00:17:05,622
to build systems and processes
00:17:05,622 -- 00:17:07,457
and procedures to serve their customers.
00:17:08,558 -- 00:17:10,660
Again, a good example of the
00:17:10,660 -- 00:17:13,497
slides was immigration here in Ontario
00:17:13,497 -- 00:17:16,032
and Canada, for that matter.
00:17:16,032 -- 00:17:18,068
The banks have done a good job
00:17:18,068 -- 00:17:18,802
at building out
00:17:18,802 -- 00:17:20,303
those onboarding processes
00:17:20,303 -- 00:17:24,674
for welcoming new Canadians to our country and to Ontario.
00:17:24,674 -- 00:17:26,710
So it's a challenge, but I do feel
00:17:26,710 -- 00:17:31,715
it's also an opportunity for us. On the opportunities side,
00:17:32,048 -- 00:17:33,149
I said there about three,
00:17:33,149 -- 00:17:36,720
but there's lots of opportunities for us to,
00:17:36,720 -- 00:17:39,890
embrace the Credit Union system in Ontario.
00:17:39,890 -- 00:17:43,360
First for me is expanding the revenue sources.
00:17:43,360 -- 00:17:46,997
For the longest time, 30, 40, 50 years ago,
00:17:46,997 -- 00:17:47,597
the Credit Unions
00:17:47,597 -- 00:17:50,200
operated on what I would call a margin model.
00:17:50,200 -- 00:17:51,234
And the banks today,
00:17:51,234 -- 00:17:54,137
about 50% of their revenue is in margin
00:17:54,137 -- 00:17:57,807
and 50% is in non-margin income sources.
00:17:57,807 -- 00:18:01,278
So compare that to Credit Unions.
00:18:01,278 -- 00:18:05,782
It's around 75 to 85% of our revenue is margin.
00:18:05,782 -- 00:18:07,150
I do think that we need to look
00:18:07,150 -- 00:18:09,486
for other sources of revenue
00:18:09,486 -- 00:18:13,590
to diversify and to continue to thrive in Ontario.
00:18:13,590 -- 00:18:16,059
Again, a couple examples of obviously
00:18:16,059 -- 00:18:18,061
most I think would have wealth,
00:18:18,061 -- 00:18:20,830
I think we need to expand the wealth offerings,
00:18:20,830 -- 00:18:23,733
foreign exchange, again, I think there's,
00:18:23,733 -- 00:18:25,535
you know, good income opportunities for,
00:18:26,536 -- 00:18:28,738
to our Credit Unions. And,
00:18:28,738 -- 00:18:31,808
alternative investments is something that,
00:18:31,808 -- 00:18:32,475
I would throw it
00:18:32,475 -- 00:18:34,511
there as a way to diversify
00:18:34,511 -- 00:18:38,415
our revenue away from non margin income.
00:18:38,415 -- 00:18:39,816
Another opportunity
00:18:39,816 -- 00:18:43,420
I think, that really exists for all of us is in the area,
00:18:43,420 -- 00:18:45,722
what I would call operational excellence.
00:18:45,722 -- 00:18:48,058
It's the how we do business.
00:18:48,058 -- 00:18:49,125
Remember to,
00:18:49,125 -- 00:18:50,493
employee to members
00:18:50,493 -- 00:18:52,262
and even front office to back office,
00:18:52,262 -- 00:18:54,130
employees to employees.
00:18:54,130 -- 00:18:56,800
We need to figure out how to make things easier
00:18:56,800 -- 00:18:59,169
for members to want to do business.
00:18:59,169 -- 00:19:00,603
So operational excellence for me
00:19:00,603 -- 00:19:04,240
means a consistent, error free and fast experience.
00:19:04,240 -- 00:19:06,443
What else would you want as a consumer?
00:19:06,443 -- 00:19:07,977
So again, if you can make it
00:19:07,977 -- 00:19:09,579
consistent, error free and fast,
00:19:09,579 -- 00:19:11,514
make it easier to do business with,
00:19:11,514 -- 00:19:15,985
I think, that's going to be a real opportunity for us to,
00:19:15,985 -- 00:19:18,354
gain market share in Ontario.
00:19:18,354 -- 00:19:18,955
And again,
00:19:18,955 -- 00:19:22,625
some of the technologies that we heard this morning around,
00:19:22,625 -- 00:19:24,194
machine learning and AI,
00:19:26,095 -- 00:19:27,096
again, robotics,
00:19:27,096 -- 00:19:27,997
process automation,
00:19:27,997 -- 00:19:28,898
using technology
00:19:28,898 -- 00:19:32,235
for automating processes, continuous improvement.
00:19:32,235 -- 00:19:36,172
All of that will basically make a much stronger,
00:19:36,172 -- 00:19:37,574
what I call operating engine
00:19:37,574 -- 00:19:39,809
for your Credit Union going forward.
00:19:39,809 -- 00:19:41,311
And then on the other side of the
00:19:41,311 -- 00:19:43,646
AI that we heard this morning,
00:19:43,646 -- 00:19:45,081
using those advanced technologies
00:19:45,081 -- 00:19:47,684
for enhancing your customer experience.
00:19:47,684 -- 00:19:48,818
So I'll stop there.
00:19:48,818 -- 00:19:50,853
But, you know, certainly there's a lot of challenges,
00:19:50,853 -- 00:19:52,522
but I also feel
00:19:52,522 -- 00:19:55,658
there's tremendous opportunities for Ontario Credit Unions
00:19:55,658 -- 00:19:58,027
in the years to come.
00:19:58,027 -- 00:19:58,595
Thank you, Lloyd.
00:19:58,595 -- 00:20:01,798
Jacquie, please.
00:20:01,798 -- 00:20:04,334
So I,
00:20:04,334 -- 00:20:06,202
I think I'm going to focus a little bit on
00:20:06,202 -- 00:20:09,639
what is going to become table stakes.
00:20:09,639 -- 00:20:13,676
And I think that's where our new owners
00:20:13,676 -- 00:20:18,181
have a very low tolerance for technological drag.
00:20:18,181 -- 00:20:22,318
Or for process drag and they've got choices as, as Lloyd said.
00:20:22,318 -- 00:20:25,688
So they're going to move to wherever they can get
00:20:25,688 -- 00:20:28,958
they, what they need earlier and quicker.
00:20:28,958 -- 00:20:32,528
And so that's going to become the
00:20:32,528 -- 00:20:35,698
the means for, for it's going to become table stakes.
00:20:35,698 -- 00:20:38,234
That's really in order to play the game.
00:20:38,234 -- 00:20:40,369
That's what you're going to need to do.
00:20:40,369 -- 00:20:41,738
And that's where AI and
00:20:41,738 -- 00:20:44,807
all those technologies produce
00:20:44,807 -- 00:20:47,310
a little bit of a hesitation.
00:20:47,310 -- 00:20:48,644
But the positive side
00:20:48,644 -- 00:20:52,748
is that we can really differentiate ourselves
00:20:52,748 -- 00:20:54,917
by what makes us different.
00:20:54,917 -- 00:20:59,922
So instead of trying to, say we're bank light,
00:20:59,922 -- 00:21:00,823
we're different,
00:21:00,823 -- 00:21:03,693
we can do all your financial services
00:21:03,693 -- 00:21:07,797
and we can offer some kind of addition.
00:21:07,797 -- 00:21:11,567
So whether that addition is like, Vancity’s had
00:21:11,567 -- 00:21:13,970
putting a stake in the environmental,
00:21:13,970 -- 00:21:18,975
well, world, which is incredibly attractive to people.
00:21:18,975 -- 00:21:23,980
Whether it's having a community of ethnic, that you,
00:21:24,280 -- 00:21:29,285
support, whatever it is, I think that's where the value is.
00:21:29,585 -- 00:21:33,756
It's not ‘value add’ is in a capital world, but ‘values add.’
00:21:33,756 -- 00:21:37,360
What are the values that we're adding to the AI?
00:21:37,360 -- 00:21:40,696
If AI is going to be able to do your transactions,
00:21:40,696 -- 00:21:42,098
then we're going to differentiate
00:21:42,098 -- 00:21:43,432
by being
00:21:43,432 -- 00:21:45,167
something more than that
00:21:45,167 -- 00:21:48,337
and bringing the soul back to our banking.
00:21:50,706 -- 00:21:51,274
Thank you, Jacquie.
00:21:51,274 -- 00:21:52,675
Chris.
00:21:52,675 -- 00:21:55,478
So my three are more short term.
00:21:55,478 -- 00:21:59,649
I'm not denying the need for a longer term vision,
00:21:59,649 -- 00:22:00,850
but I'd like to see that vision
00:22:00,850 -- 00:22:03,052
built on a very strong foundation.
00:22:03,052 -- 00:22:04,987
And so the first one is,
00:22:04,987 -- 00:22:08,491
some Credit Unions are going to have low earnings.
00:22:08,491 -- 00:22:10,826
Some may even publish losses.
00:22:10,826 -- 00:22:11,927
And I think it's really important
00:22:11,927 -- 00:22:12,628
to think
00:22:12,628 -- 00:22:14,196
how the system collectively
00:22:14,196 -- 00:22:17,533
will maintain depositor confidence
00:22:17,533 -- 00:22:22,505
as, media or individuals, pick up that story.
00:22:22,505 -- 00:22:24,106
The second one,
00:22:24,106 -- 00:22:26,409
which has been my experience, had been at Vancity
00:22:26,409 -- 00:22:29,512
and Vancity Community Investment Bank.
00:22:29,512 -- 00:22:34,316
Maintain your capital adequacy and a cushion.
00:22:34,316 -- 00:22:37,920
Without capital adequacy compliance,
00:22:37,920 -- 00:22:39,555
you might be thrown off your strategy.
00:22:39,555 -- 00:22:42,958
You might be thrown off your investment requirements.
00:22:42,958 -- 00:22:45,394
So that's my second one.
00:22:45,394 -- 00:22:48,531
And then,
00:22:48,531 -- 00:22:51,300
before some of you were born, I started a Credit Union
00:22:51,300 -- 00:22:53,068
at the University of British Columbia.
00:22:53,068 -- 00:22:57,540
It was the third time we tried it, it merged with teachers.
00:22:57,540 -- 00:22:59,975
That then merged with Vancity. And it's operating today.
00:23:01,210 -- 00:23:06,182
I strongly believe that Credit Unions in the history
00:23:06,749 -- 00:23:08,284
of our Credit Union movement,
00:23:08,284 -- 00:23:09,985
especially shown in the prairies
00:23:09,985 -- 00:23:11,954
during the Great Depression,
00:23:11,954 -- 00:23:13,756
that we have a unique opportunity
00:23:13,756 -- 00:23:16,258
to offer selected forbearance
00:23:16,258 -- 00:23:19,228
rather than quick foreclosure.
00:23:19,228 -- 00:23:21,697
And I think that's a huge opportunity
00:23:21,697 -- 00:23:24,066
and a huge responsibility.
00:23:24,066 -- 00:23:25,401
During COVID,
00:23:25,401 -- 00:23:28,270
the regulatory environment and Credit Unions
00:23:28,270 -- 00:23:30,739
provided all kinds of deferrals
00:23:30,739 -- 00:23:32,641
to enable physical health
00:23:32,641 -- 00:23:36,478
and let the community get to the other side.
00:23:36,478 -- 00:23:40,816
My own practice has been to let, through stagflation,
00:23:40,816 -- 00:23:42,518
get the members to the other side
00:23:42,518 -- 00:23:45,854
so the communities can get back on their feet.
00:23:45,854 -- 00:23:49,124
It's selected, but I think it's a huge opportunity
00:23:49,124 -- 00:23:51,193
and it's a great differentiator.
00:23:51,193 -- 00:23:53,896
And I'll talk about that a bit more.
00:23:53,896 -- 00:23:56,298
Chris, you said forbearance instead of foreclosure.
00:23:56,298 -- 00:23:59,768
Can you just provide a bit more detail on that, please?
00:23:59,768 -- 00:24:01,670
What do you mean by that? Well,
00:24:02,871 -- 00:24:04,973
I'll give you a specific case.
00:24:04,973 -- 00:24:05,708
During the great
00:24:05,708 -- 00:24:09,878
financial crisis, a family couldn't afford their home.
00:24:09,878 -- 00:24:11,780
So what's the point of throwing them out on the street
00:24:11,780 -- 00:24:13,082
and putting another house
00:24:13,082 -- 00:24:17,653
for sale on distress to lower the housing prices?
00:24:17,653 -- 00:24:19,521
What we did is, on our own account,
00:24:19,521 -- 00:24:24,526
wrote down the mortgage to the income of the family at 30%.
00:24:24,793 -- 00:24:26,562
You know what happened?
00:24:26,562 -- 00:24:30,032
The loyalty of that family is forever.
00:24:30,032 -- 00:24:33,502
The staff were engaged because of...
00:24:33,502 -- 00:24:36,972
we sent, not the sheriff, but a solution.
00:24:36,972 -- 00:24:40,609
And on average, the costs of providing forbearance
00:24:40,609 -- 00:24:42,277
relative to a lawyer,
00:24:42,277 -- 00:24:44,780
taking people through the courts for six months
00:24:44,780 -- 00:24:46,448
came out on top.
00:24:46,448 -- 00:24:49,384
It's not a blanket opportunity,
00:24:49,384 -- 00:24:53,121
but it's selected and it has huge impact.
00:24:53,121 -- 00:24:54,490
That's what I mean.
00:24:54,490 -- 00:24:55,958
Thank you, Chris. Michael. And,
00:24:55,958 -- 00:24:56,825
as I said,
00:24:56,825 -- 00:24:59,094
we offered that a few years ago
00:24:59,094 -- 00:25:01,964
with regulatory approval during COVID.
00:25:01,964 -- 00:25:03,532
So I'm not making stuff up.
00:25:05,934 -- 00:25:07,269
Yeah, that's a remarkable story, Chris.
00:25:07,269 -- 00:25:09,471
And, you know, that's a really good example of,
00:25:09,471 -- 00:25:10,739
you know, what can differentiate us
00:25:10,739 -- 00:25:14,910
from some of our larger federally regulated, competitors.
00:25:14,910 -- 00:25:15,911
I'm going to focus on
00:25:15,911 -- 00:25:20,916
more of the members/consumer angle, I guess.
00:25:21,650 -- 00:25:23,318
From where I sit in Ottawa.
00:25:23,318 -- 00:25:25,087
You know, we can call it open banking,
00:25:25,087 -- 00:25:28,056
call it consumer direct finance, call it whatever you want.
00:25:28,056 -- 00:25:29,858
But to me, it's,
00:25:29,858 -- 00:25:34,396
both, a threat and an opportunity at the same time.
00:25:34,396 -- 00:25:36,798
Just the growing consumer
00:25:36,798 -- 00:25:41,136
awareness of the simple reality of, you know, guess what?
00:25:41,136 -- 00:25:43,271
You can shop around for your financial services.
00:25:43,271 -- 00:25:44,840
You know, people shop around for their cars.
00:25:44,840 -- 00:25:46,174
They shop around for their cell phones.
00:25:46,174 -- 00:25:48,410
They shop around for their groceries.
00:25:48,410 -- 00:25:51,546
But there's been a history in Canada of just inertia
00:25:51,546 -- 00:25:55,684
or a humongous amounts of friction,
00:25:55,684 -- 00:25:58,687
at the idea of shifting financial institutions.
00:25:58,687 -- 00:25:59,621
And I personally am
00:25:59,621 -- 00:26:01,289
an example of the same old story
00:26:01,289 -- 00:26:03,058
we've heard a thousand times of,
00:26:04,059 -- 00:26:04,359
you know, when
00:26:04,359 -- 00:26:04,726
I started
00:26:04,726 -- 00:26:05,727
my professional career,
00:26:05,727 -- 00:26:06,928
I still had the same bank account
00:26:06,928 -- 00:26:09,364
that I opened when I was ten years old.
00:26:09,364 -- 00:26:12,200
And there's no real reason that, that should be the case,
00:26:12,200 -- 00:26:13,769
except for all of the,
00:26:13,769 -- 00:26:14,503
you know, the friction
00:26:14,503 -- 00:26:16,004
that people think exists
00:26:16,004 -- 00:26:18,373
when it comes to the notion of switching
00:26:18,373 -- 00:26:20,108
financial institutions.
00:26:20,108 -- 00:26:21,476
Because I think there used to be a lot of friction,
00:26:21,476 -- 00:26:22,577
but now it's so much easier.
00:26:22,577 -- 00:26:24,746
You can get an app, you can do it on your phone
00:26:24,746 -- 00:26:28,884
with a few clicks, putting your info.
00:26:28,884 -- 00:26:32,954
And quickly and easily and cheaply or without any cost
00:26:32,954 -- 00:26:34,956
at all. Switch financial institutions.
00:26:34,956 -- 00:26:37,559
So I think there's a growing consumer awareness of that.
00:26:37,559 -- 00:26:40,295
Again, you can call it open banking or whatever the
00:26:40,295 -- 00:26:41,763
the term you want to use.
00:26:43,165 -- 00:26:43,498
but that's
00:26:43,498 -- 00:26:45,100
obviously a threat and an opportunity
00:26:45,100 -- 00:26:49,137
because on the downside, it means that it's easier for,
00:26:49,137 -- 00:26:50,438
for us perhaps to lose members.
00:26:50,438 -- 00:26:51,139
But the upside is
00:26:51,139 -- 00:26:52,741
that it becomes easier for us
00:26:52,741 -- 00:26:56,411
to show our value proposition and, and to gain membership.
00:26:56,411 -- 00:26:58,480
So, you know, that trend is,
00:26:58,480 -- 00:27:00,949
I would say, in it's not quite in its infancy.
00:27:00,949 -- 00:27:03,051
It's probably in the puppy stage still, too,
00:27:03,051 -- 00:27:06,221
to use a metaphor, that was used this morning,
00:27:06,221 -- 00:27:09,758
referring to, to FSRA.
00:27:09,758 -- 00:27:11,059
But it's, it's going to,
00:27:11,059 -- 00:27:12,961
you know, it's going to continue more and more.
00:27:12,961 -- 00:27:14,429
And the more people,
00:27:14,429 -- 00:27:14,663
you know,
00:27:14,663 -- 00:27:15,797
realize that
00:27:15,797 -- 00:27:18,099
it is, in fact, seamless and easy
00:27:18,099 -- 00:27:20,869
to move around and shop around for financial services.
00:27:20,869 -- 00:27:24,205
It'll, it'll gather like a snowball going down a hill.
00:27:24,205 -- 00:27:24,973
The other,
00:27:26,074 -- 00:27:28,076
challenge again, from where I sit in my role
00:27:28,076 -- 00:27:30,312
running the lobbying and the and the government relations
00:27:30,312 -- 00:27:33,848
for the sector, both in Ottawa at the federal level and,
00:27:33,848 -- 00:27:36,685
across the country, at the provincial level.
00:27:36,685 -- 00:27:38,053
Is that,
00:27:38,053 -- 00:27:38,687
you know, there
00:27:38,687 -- 00:27:42,057
there are some divisions that exist in, in the sector
00:27:42,057 -- 00:27:44,526
largely, you know, between big and small,
00:27:44,526 -- 00:27:46,761
I would say, although that's,
00:27:46,761 -- 00:27:48,663
you know, a broad generalization
00:27:48,663 -- 00:27:51,966
just in terms of what the future state of the sector
00:27:51,966 -- 00:27:53,668
should look like.
00:27:53,668 -- 00:27:54,069
and, you know,
00:27:54,069 -- 00:27:56,538
I know that the regulator here and elsewhere,
00:27:56,538 -- 00:27:59,107
are neutral or agnostic or whatever
00:27:59,107 -- 00:28:03,511
the word is on consolidation and that's, as it should be.
00:28:03,511 -- 00:28:05,613
And, and we're the same way. Though,
00:28:05,613 -- 00:28:07,449
part of my organization's,
00:28:07,449 -- 00:28:10,485
objectives is to work with regulators and governments
00:28:10,485 -- 00:28:12,987
to make mergers and consolidation,
00:28:13,955 -- 00:28:15,490
easier and to bring down some of the,
00:28:15,490 -- 00:28:17,826
some of the obstacles that exist in those processes
00:28:17,826 -- 00:28:19,461
at both levels of government.
00:28:19,461 -- 00:28:21,729
But there is a divide
00:28:21,729 -- 00:28:24,199
amongst Credit Unions across Canada about,
00:28:24,199 -- 00:28:26,768
you know, perhaps what the future state of the sector
00:28:26,768 -- 00:28:31,039
should look like. And in my role and my team's role,
00:28:31,039 -- 00:28:32,640
when we're lobbying or talking
00:28:32,640 -- 00:28:34,209
to governments about an issue,
00:28:34,209 -- 00:28:35,577
we really do our best
00:28:35,577 -- 00:28:36,711
because there's no shortage of issues,
00:28:36,711 -- 00:28:38,279
there's no shortage of policy challenges
00:28:38,279 -- 00:28:40,181
no shortage of things that we could go
00:28:40,181 -- 00:28:41,049
and advocate
00:28:41,049 -- 00:28:43,017
on, either in Ottawa or Queen's
00:28:43,017 -- 00:28:46,387
Park or Victoria or Saint John's or wherever.
00:28:46,387 -- 00:28:48,356
but we really try to focus on those issues
00:28:48,356 -- 00:28:49,657
that bring everybody together.
00:28:49,657 -- 00:28:49,958
You know,
00:28:49,958 -- 00:28:51,292
when the feds step in and say, well,
00:28:51,292 -- 00:28:53,628
you can't use the word bank or banking in your
00:28:53,628 -- 00:28:55,330
in your marketing terminology,
00:28:55,330 -- 00:28:57,398
it's obvious that everybody is going to be
00:28:57,398 -- 00:28:59,467
on the same side of that in the sector.
00:28:59,467 -- 00:29:00,868
It's going to create consensus.
00:29:00,868 -- 00:29:02,971
Everybody's going to be rowing in the same position.
00:29:02,971 -- 00:29:05,607
So for us, in a way that, that was a crisis moment
00:29:05,607 -- 00:29:06,908
and there's been others since then.
00:29:08,376 -- 00:29:09,244
Um, it's obvious
00:29:09,244 -- 00:29:10,111
what the direction is
00:29:10,111 -- 00:29:12,080
and that there's consensus in the sector,
00:29:12,080 -- 00:29:14,616
but that's really the exception.
00:29:14,616 -- 00:29:17,018
On a lot of issues that are of importance to the sector,
00:29:17,018 -- 00:29:20,989
there's, you know, an emerging sort of division,
00:29:20,989 -- 00:29:22,657
not along regional lines necessarily,
00:29:22,657 -- 00:29:26,194
but more along sort of big, big vs. small, I would say.
00:29:26,194 -- 00:29:28,296
I guess I'll stop there and hand it back to Mehrdad.
00:29:28,296 -- 00:29:29,897
So, Michael, you talked about open
00:29:29,897 -- 00:29:32,033
banking and digital solutions.
00:29:32,033 -- 00:29:34,969
And in an earlier conversation, I think it was last week.
00:29:34,969 -- 00:29:36,437
And I've written this down as a note,
00:29:36,437 -- 00:29:37,572
you said, “younger
00:29:37,572 -- 00:29:40,274
people are aligned with Credit Union ethos,” which I agree.
00:29:40,274 -- 00:29:42,677
I have three daughters in her 20s. They are.
00:29:42,677 -- 00:29:45,680
And yet none of them do their banking with Credit Unions.
00:29:45,680 -- 00:29:46,547
So you said, “younger people
00:29:46,547 -- 00:29:47,915
who are aligned with Credit Union ethos,
00:29:47,915 -- 00:29:48,783
but they're turned off
00:29:48,783 -- 00:29:51,219
by the state of the digital solution.”
00:29:51,219 -- 00:29:52,019
What did you mean by that?
00:29:53,488 -- 00:29:56,557
Well, I mean, I feel that's, that's fairly self-explanatory.
00:29:56,557 -- 00:29:57,692
Like, the
00:29:57,692 -- 00:29:59,260
everybody knows in every conference
00:29:59,260 -- 00:30:01,229
that I've ever attended,
00:30:01,229 -- 00:30:03,197
in the sector has spoken about the challenging
00:30:03,197 -- 00:30:04,866
demographics of the industry.
00:30:04,866 -- 00:30:06,067
And I think you said it was,
00:30:06,067 -- 00:30:07,535
you know, 57 or whatever
00:30:07,535 -- 00:30:09,904
the average ages of a Credit Union member across Canada
00:30:09,904 -- 00:30:13,141
versus a median age in the low 40s for the population
00:30:13,141 -- 00:30:15,443
as a whole. That's an obvious challenge.
00:30:15,443 -- 00:30:18,045
And there is an obvious value proposition
00:30:18,045 -- 00:30:20,281
when you look at, again, the word I used was ethos.
00:30:20,281 -- 00:30:23,951
The, the, the ethos of, of, of, of the movement.
00:30:23,951 -- 00:30:24,752
You know,
00:30:24,752 -- 00:30:27,588
no other provider of financial services in Canada can,
00:30:27,588 -- 00:30:27,989
you know,
00:30:27,989 -- 00:30:29,557
reliably call itself a movement
00:30:29,557 -- 00:30:30,625
as the Credit Union
00:30:30,625 -- 00:30:33,427
Movement/sector industry often does,
00:30:33,427 -- 00:30:36,230
because it does have that co-operative history and ethos.
00:30:36,230 -- 00:30:39,333
We still have to compete, obviously, and, and, and,
00:30:39,333 -- 00:30:40,501
earn margins.
00:30:40,501 -- 00:30:42,770
But we do have a really compelling story
00:30:42,770 -- 00:30:45,373
to tell, particularly, I think, to young people.
00:30:45,373 -- 00:30:48,509
As a person who was young not that long ago.
00:30:48,509 -- 00:30:50,878
I'm sort of in between now, young and old.
00:30:50,878 -- 00:30:52,880
I think that, that opportunity is there.
00:30:52,880 -- 00:30:58,319
But of course, you got to have a digital offering that is,
00:30:58,519 -- 00:30:59,086
you know, that
00:30:59,086 -- 00:31:01,188
that my eight-year old daughter
00:31:01,188 -- 00:31:02,390
can navigate with ease,
00:31:02,390 -- 00:31:04,859
which is increasingly the norm across the sector.
00:31:06,060 -- 00:31:06,427
Okay.
00:31:06,427 -- 00:31:06,761
Well, one of
00:31:06,761 -- 00:31:08,696
the very big issues that need to be,
00:31:08,696 -- 00:31:11,866
needs to be resolved and solved for.
00:31:11,866 -- 00:31:13,501
Chris, I'm going to turn to you.
00:31:13,501 -- 00:31:15,469
Start this for the next question, please.
00:31:15,469 -- 00:31:17,872
How can Credit Unions leverage co-operative principles
00:31:17,872 -- 00:31:20,875
and social values for long term competitive advantage?
00:31:20,875 -- 00:31:23,010
Yeah, so let me tell you a little bit
00:31:23,010 -- 00:31:26,380
about the Vancity model.
00:31:26,380 -- 00:31:31,652
And there are a number of realities that we always face.
00:31:32,553 -- 00:31:35,089
The community need,
00:31:35,089 -- 00:31:39,427
is not necessarily a conventional banking solution.
00:31:39,427 -- 00:31:40,928
Take a housing co-op.
00:31:40,928 -- 00:31:44,598
How does it get the down-payment.
00:31:44,598 -- 00:31:47,635
Does it not need some kind of interest reserve in case
00:31:47,635 -- 00:31:49,837
some of the members are unemployed
00:31:49,837 -- 00:31:52,173
or have cashflow difficulties?
00:31:52,173 -- 00:31:55,042
So to structure a community solution,
00:31:55,042 -- 00:31:58,012
of course, the Credit Union steps up.
00:31:58,012 -- 00:32:02,216
But we had Vancity Capital that provided subordinated
00:32:02,216 -- 00:32:03,517
debt and patient capital.
00:32:04,518 -- 00:32:05,653
And we also had Vancity
00:32:05,653 -- 00:32:06,887
Foundation
00:32:06,887 -- 00:32:11,459
that would create a grant to not-for-profit or a co-op.
00:32:11,459 -- 00:32:16,463
So you could what I'm trying to paint is, the community need
00:32:16,497 -- 00:32:21,302
is very uniquely positioned as an opportunity
00:32:21,302 -- 00:32:26,173
at this point in time, demographically, politically
00:32:26,173 -- 00:32:29,443
and generationally.
00:32:29,443 -- 00:32:32,379
But the solution is not through a regulated deposit
00:32:32,379 -- 00:32:35,649
financial institution alone.
00:32:35,649 -- 00:32:39,887
In my work, you may have seen my badge with some of you.
00:32:39,887 -- 00:32:42,289
I am the Chair of Community Forward Fund,
00:32:42,289 -- 00:32:43,924
and we have the privilege
00:32:43,924 -- 00:32:48,929
of, managing the portfolio for the Canadian Cooperative
00:32:49,129 -- 00:32:51,432
Investment Fund.
00:32:51,432 -- 00:32:53,601
And so the Canadian Cooperative Investment
00:32:53,601 -- 00:32:56,637
Fund provides patient capital.
00:32:56,637 -- 00:32:57,738
The Credit Union provides
00:32:57,738 -- 00:33:02,209
the conventional loan, often with CMHC Insurance,
00:33:02,209 -- 00:33:03,677
with zero capital.
00:33:03,677 -- 00:33:06,880
And you have an efficient model.
00:33:06,880 -- 00:33:10,617
And the partnership increasingly has the government
00:33:10,617 -- 00:33:13,754
and CMHC saying, I'm looking for those partners.
00:33:13,754 -- 00:33:16,156
I'm looking for those partners in community,
00:33:16,156 -- 00:33:18,192
and then I'm looking for a financial institution
00:33:18,192 -- 00:33:23,197
that's not afraid of funding a co-op or a women's shelter,
00:33:23,230 -- 00:33:25,032
because the banks are afraid of catching that,
00:33:25,032 -- 00:33:28,635
because the publicity of foreclosure is their mentality.
00:33:28,635 -- 00:33:30,070
And oh, no, we can't let them do that.
00:33:31,171 -- 00:33:32,873
What I will say about
00:33:32,873 -- 00:33:35,175
Vancity is that we found a niche, maybe
00:33:35,175 -- 00:33:37,177
20 to 30% of the population,
00:33:37,177 -- 00:33:40,547
which is sufficient for scale and impact,
00:33:40,547 -- 00:33:43,450
but to the discipline of the long term strategy.
00:33:43,450 -- 00:33:47,287
This solidifies the brand and the value proposition,
00:33:47,287 -- 00:33:50,591
but it's not sufficient for financial solvency.
00:33:50,591 -- 00:33:52,493
You still need the other work
00:33:52,493 -- 00:33:55,129
that Lloyd talked about on, on margin
00:33:55,129 -- 00:33:57,698
and cost and attraction.
00:33:57,698 -- 00:33:59,433
So I think we're in the sweet spot
00:33:59,433 -- 00:34:02,469
of the opportunity through partnership.
00:34:02,469 -- 00:34:07,441
And I’ve named some of the players that Credit Unions can, you know.
00:34:08,876 -- 00:34:09,109
Thank you,
00:34:09,109 -- 00:34:11,111
Chris. So, Lloyd, as an operator
00:34:11,111 -- 00:34:14,348
who's operating in the Ontario system right now,
00:34:14,348 -- 00:34:18,352
to Chris's point on community and social values.
00:34:18,352 -- 00:34:20,554
What's your position on this?
00:34:20,554 -- 00:34:26,593
Yeah, I mean, I think, you go back to 80 years ago or so,
00:34:27,160 -- 00:34:28,262
people helping people.
00:34:29,663 -- 00:34:31,365
I think there's,
00:34:31,365 -- 00:34:33,200
lots of those co-operative,
00:34:33,200 -- 00:34:36,904
principles and values that we have where we can,
00:34:36,904 -- 00:34:37,337
you know, do
00:34:37,337 -- 00:34:40,040
well for our community and,
00:34:40,040 -- 00:34:43,443
and still be very viable and thrive in a market.
00:34:43,443 -- 00:34:44,978
At FirstOntario,
00:34:44,978 -- 00:34:49,149
we did a few interesting projects in support of community.
00:34:49,149 -- 00:34:50,050
One was we,
00:34:50,050 -- 00:34:52,719
you know, co-developed a nine-story apartment building,
00:34:52,719 -- 00:34:56,089
127 units, it was a big endeavor.
00:34:56,089 -- 00:34:57,157
We worked,
00:34:57,157 -- 00:35:02,129
very supportive with, the city and the, the Niagara region,
00:35:02,195 -- 00:35:03,430
giving it basically
00:35:03,430 -- 00:35:04,598
some certain designations
00:35:04,598 -- 00:35:06,700
that allowed us to create these units.
00:35:06,700 -- 00:35:08,935
As Chris said, you've got to look at the stock.
00:35:08,935 -- 00:35:12,572
And, we also had, support from,
00:35:12,572 -- 00:35:15,575
CMHC, who ultimately, is carrying,
00:35:15,575 -- 00:35:17,577
we have a COI on that mortgage.
00:35:17,577 -- 00:35:19,446
But, you know, again, that was a good example
00:35:19,446 -- 00:35:21,815
where we're trying to be part of the solution.
00:35:21,815 -- 00:35:23,817
Housing is, is obviously,
00:35:24,785 -- 00:35:26,853
terrible in all our communities.
00:35:26,853 -- 00:35:29,589
And so this is a particular, project
00:35:29,589 -- 00:35:32,225
that we're very proud of, the work we did,
00:35:32,225 -- 00:35:34,061
obviously we can't solve all the problems,
00:35:34,061 -- 00:35:36,029
but we just want to lead by example.
00:35:36,029 -- 00:35:38,565
A couple other small ones, I'll mention,
00:35:38,565 -- 00:35:40,734
around food insecurity.
00:35:40,734 -- 00:35:43,837
We try to support, various food banks, and their work,
00:35:43,837 -- 00:35:45,439
the good work that they're doing.
00:35:45,439 -- 00:35:48,608
Both in terms of, work in kind.
00:35:48,608 -- 00:35:50,444
Myself and other of our employees
00:35:50,444 -- 00:35:52,846
go out to various food banks and donate our time.
00:35:52,846 -- 00:35:54,981
We call it Blue Wave.
00:35:54,981 -- 00:35:57,284
But we also provide a monetary cheque
00:35:57,284 -- 00:35:59,286
to support those organizations.
00:35:59,286 -- 00:36:00,587
And the last one, I'll leave you with it,
00:36:00,587 -- 00:36:02,489
which is, one that is, it's
00:36:02,489 -- 00:36:04,958
a combination again of Blue Wave,
00:36:04,958 -- 00:36:07,160
and obviously providing, money.
00:36:07,160 -- 00:36:10,463
But we, we, we provide $250,000 a year,
00:36:10,463 -- 00:36:14,467
and that money goes to various, grade schools,
00:36:14,467 -- 00:36:16,803
and they use that money to buy food.
00:36:16,803 -- 00:36:19,005
And then again, our Blue Wave of volunteers
00:36:19,005 -- 00:36:19,506
go out
00:36:19,506 -- 00:36:23,109
and we work, sort of side by side with the teachers,
00:36:23,109 -- 00:36:25,912
and we get to, you know, make breakfast for the kids.
00:36:25,912 -- 00:36:28,148
It's an absolute blast that melts your heart.
00:36:28,148 -- 00:36:30,350
But you realize that obviously,
00:36:30,350 -- 00:36:31,618
that goes back to those
00:36:31,618 -- 00:36:32,052
what I call
00:36:32,052 -- 00:36:34,454
Credit union principles or people helping people.
00:36:34,454 -- 00:36:36,756
I do think that we have to, act
00:36:36,756 -- 00:36:38,858
and behave and work as a community.
00:36:38,858 -- 00:36:40,427
And that's a good example, again,
00:36:40,427 -- 00:36:42,095
of what we're doing for the small kids
00:36:42,095 -- 00:36:44,297
that, you know, are coming to school hungry.
00:36:44,297 -- 00:36:46,599
We're able to provide food for their,
00:36:46,599 -- 00:36:48,234
you know, in their stomach so they can learn.
00:36:49,502 -- 00:36:51,638
Can I just jump in real quick Mehrdad. Of course.
00:36:51,638 -- 00:36:54,975
Just to add to some of that. You know, the
00:36:54,975 -- 00:36:57,077
the banks are obviously big and
00:36:57,077 -- 00:36:59,479
and rich and well-resourced and everything else,
00:36:59,479 -- 00:37:02,048
but they're also giant, bureaucracies.
00:37:02,048 -- 00:37:03,416
They're not at all nimble.
00:37:03,416 -- 00:37:07,053
And more importantly, they don't, as we all know, exactly
00:37:07,053 -- 00:37:10,523
enjoy a surplus of public regard,
00:37:10,523 -- 00:37:12,292
if I can put it in such terms.
00:37:12,292 -- 00:37:16,896
You know, they're kind of seen as a necessary evil. And,
00:37:16,896 -- 00:37:19,299
my, my role, you know, it's national in scope.
00:37:19,299 -- 00:37:20,800
I have a sort of a view of what's,
00:37:20,800 -- 00:37:22,135
what's going on across country
00:37:22,135 -- 00:37:24,237
and in different jurisdictions.
00:37:24,237 -- 00:37:25,739
And, you know, Ontario, of course, is
00:37:25,739 -- 00:37:26,940
is the biggest province,
00:37:26,940 -- 00:37:30,210
the biggest share of, of our country's GDP.
00:37:30,210 -- 00:37:32,045
But, in the Credit Union sector,
00:37:32,045 -- 00:37:34,180
it's one of the lowest market share provinces.
00:37:34,180 -- 00:37:35,348
So I'm not sure why that is.
00:37:35,348 -- 00:37:37,984
That's a function of history and other, other factors.
00:37:39,085 -- 00:37:41,020
But in this province, there's, there's
00:37:41,020 -- 00:37:42,922
there's tremendous upside.
00:37:42,922 -- 00:37:43,189
You know,
00:37:43,189 -- 00:37:45,325
if we could just get a quarter of the way
00:37:45,325 -- 00:37:46,793
between where we are in Ontario
00:37:46,793 -- 00:37:48,461
to what the market share is in some,
00:37:48,461 -- 00:37:50,630
some other provinces of Canada,
00:37:50,630 -- 00:37:52,398
that's, that would be like bringing
00:37:52,398 -- 00:37:54,400
on hundreds of thousands of, of new members.
00:37:54,400 -- 00:37:57,370
And I know that there's no magic wand,
00:37:57,370 -- 00:37:58,938
that, that'll do that.
00:37:58,938 -- 00:38:01,407
But there is a tremendous upside in this province,
00:38:01,407 -- 00:38:02,709
I would say, just because,
00:38:02,709 -- 00:38:03,309
you know, frankly,
00:38:03,309 -- 00:38:04,744
our market share is lower here
00:38:04,744 -- 00:38:08,014
than in other parts of the country.
00:38:08,014 -- 00:38:09,082
Thanks, Michael. So Lloyd,
00:38:09,082 -- 00:38:11,684
I want to continue from where you left off.
00:38:11,684 -- 00:38:15,355
And tying this back to the challenges and opportunities.
00:38:15,355 -- 00:38:17,757
and I've heard you say, you know, Credit Unions,
00:38:17,757 -- 00:38:20,760
especially now need to, as they should,
00:38:20,760 -- 00:38:22,695
and they have in the past, they need to hold hands.
00:38:22,695 -- 00:38:27,033
So how can Credit Unions work together more effectively?
00:38:27,033 -- 00:38:28,134
Yeah. I think,
00:38:29,435 -- 00:38:31,838
again, one of the things that,
00:38:31,838 -- 00:38:33,239
we're, I'll say
00:38:33,239 -- 00:38:34,907
talking about at FirstOntario
00:38:34,907 -- 00:38:36,042
and one that we're,
00:38:36,042 -- 00:38:38,044
you know, certainly very happy to talk to other Credit Unions
00:38:38,044 -- 00:38:40,279
in the province is what we're calling,
00:38:40,279 -- 00:38:41,948
a Shared Service Model.
00:38:41,948 -- 00:38:43,983
And really, a Shared Service Model is about,
00:38:43,983 -- 00:38:45,885
you know, one Credit Union,
00:38:45,885 -- 00:38:47,887
sharing in what they're doing
00:38:47,887 -- 00:38:49,689
could be, on an expense
00:38:49,689 -- 00:38:51,524
reduction side or expense management
00:38:51,524 -- 00:38:54,894
or could be on a revenue, opportunity side.
00:38:54,894 -- 00:38:56,529
And, so that's something
00:38:56,529 -- 00:38:58,965
that, again, I think, where Credit Unions,
00:38:58,965 -- 00:39:01,134
a lot of Credit Unions are doing amazing work.
00:39:01,134 -- 00:39:03,069
And so I think the, the whole idea
00:39:03,069 -- 00:39:05,004
of working together and collaborating
00:39:05,004 -- 00:39:06,339
on some kind of Shared Service
00:39:06,339 -- 00:39:09,942
Model is something that I think we all need to embrace.
00:39:09,942 -- 00:39:13,246
I was talking, at the break there with Rob Patterson and,
00:39:13,246 -- 00:39:14,080
you know, again,
00:39:15,081 -- 00:39:15,882
we're not competitors.
00:39:15,882 -- 00:39:18,284
We're all part of this, wonderful sector
00:39:18,284 -- 00:39:18,951
and the
00:39:18,951 -- 00:39:20,653
Credit Union sector and again, working together,
00:39:20,653 -- 00:39:21,554
I do think to
00:39:21,554 -- 00:39:23,990
what Michael said, is that we can really dominate,
00:39:23,990 -- 00:39:26,859
or at least have a much, much bigger market share.
00:39:26,859 -- 00:39:30,329
Another area, again, where I think that,
00:39:30,329 -- 00:39:32,465
you know, Credit Unions can sort of work,
00:39:32,465 -- 00:39:34,267
I'll say, work better together.
00:39:34,267 -- 00:39:35,201
If you look in the U.S.,
00:39:35,201 -- 00:39:36,969
they have what I would call a CUSO,
00:39:36,969 -- 00:39:38,738
or a Credit Union Service Organization.
00:39:38,738 -- 00:39:41,707
I don't think we really have any good examples of that
00:39:41,707 -- 00:39:44,210
in Ontario or in Canada. If there are, I apologize.
00:39:44,210 -- 00:39:45,578
But the one that I would say
00:39:45,578 -- 00:39:48,648
maybe is the closest to that might be League Data,
00:39:48,648 -- 00:39:49,749
which is in the Maritimes,
00:39:49,749 -- 00:39:51,450
where they basically run,
00:39:51,450 -- 00:39:55,154
banking systems for 40 of the maritime Credit Unions.
00:39:55,154 -- 00:39:55,788
And so,
00:39:55,788 -- 00:39:56,255
you know, it
00:39:56,255 -- 00:39:58,257
just sort of dawns on me that there's opportunities,
00:39:58,257 -- 00:40:00,826
I think, for CUSO like organizations.
00:40:00,826 -- 00:40:02,528
And I'll give you one sort of idea
00:40:02,528 -- 00:40:04,130
that's sort of germinating my head is
00:40:04,130 -- 00:40:04,630
the banks
00:40:04,630 -- 00:40:06,165
have basically been doing back office
00:40:06,165 -- 00:40:09,669
processing through SIM core and inter i3 for decades.
00:40:09,669 -- 00:40:12,572
And again, they compete like crazy on street corners,
00:40:12,572 -- 00:40:13,439
but yet
00:40:13,439 -- 00:40:15,575
they basically have these back office companies
00:40:15,575 -- 00:40:18,344
that are obviously just processing and fulfillment.
00:40:18,344 -- 00:40:19,612
And they're good with that.
00:40:20,680 -- 00:40:25,451
Another idea that I keep wondering about is
00:40:25,451 -- 00:40:30,456
again, with I guess, with support of CCUA is, why we can't maybe host,
00:40:30,456 -- 00:40:31,324
some webinars
00:40:31,324 -- 00:40:33,459
and we have a sponsor Credit Union
00:40:33,459 -- 00:40:36,429
that basically is taking us all through,
00:40:36,429 -- 00:40:38,698
a use, study, or a case study
00:40:38,698 -- 00:40:40,299
on something particular
00:40:40,299 -- 00:40:41,133
that they've done in terms
00:40:41,133 -- 00:40:44,070
of solving a challenge or solving an opportunity.
00:40:44,070 -- 00:40:45,404
I think it would be,
00:40:45,404 -- 00:40:46,706
you know, very beneficial for us
00:40:46,706 -- 00:40:48,607
to all sort of learn from that and of course,
00:40:48,607 -- 00:40:49,942
then have it maybe written out.
00:40:49,942 -- 00:40:51,077
So there's a repository
00:40:51,077 -- 00:40:54,180
where you can access it on your own time.
00:40:54,180 -- 00:40:56,682
And the last thing I'll leave you with is,
00:40:56,682 -- 00:40:59,318
in Ontario, years ago,
00:40:59,318 -- 00:41:01,420
we had what was called the ALOCU.
00:41:01,420 -- 00:41:03,522
And it's the Alliance of Large
00:41:03,522 -- 00:41:06,525
Ontario Credit Unions...is the top ten.
00:41:06,525 -- 00:41:09,161
It's since somewhat, disbanded a little bit,
00:41:09,161 -- 00:41:11,397
but a few of my colleagues,
00:41:11,397 -- 00:41:13,866
were away last week, and we were talking about,
00:41:13,866 -- 00:41:15,167
I call it reconstituting.
00:41:15,167 -- 00:41:16,335
A repurposing ALOCU.
00:41:16,335 -- 00:41:18,871
And the intent of ALOCU for me
00:41:18,871 -- 00:41:21,707
is really about sort of addressing,
00:41:21,707 -- 00:41:23,609
issues or challenges or opportunities
00:41:23,609 -- 00:41:25,311
that are common to all of us.
00:41:25,311 -- 00:41:26,712
And with that, again,
00:41:26,712 -- 00:41:28,881
what we were talking about last week is,
00:41:28,881 -- 00:41:31,250
you know, certainly we should be looking to,
00:41:31,250 -- 00:41:32,051
communicate down
00:41:32,051 -- 00:41:34,720
to all Credit Unions on the work that we're doing.
00:41:34,720 -- 00:41:37,089
So I know that a few of us were talking last week,
00:41:37,089 -- 00:41:38,858
and I hope that we can actually bring
00:41:38,858 -- 00:41:41,126
the ALOCU back to life, I'll say.
00:41:41,126 -- 00:41:42,728
But certainly what comes out of that,
00:41:42,728 -- 00:41:45,664
make sure that we're sharing all of that knowledge,
00:41:45,664 -- 00:41:46,265
to everyone.
00:41:46,265 -- 00:41:49,101
So what I leave you with is for me,
00:41:49,101 -- 00:41:51,503
I think going forward over the next 3 to 5 years,
00:41:51,503 -- 00:41:54,173
it's really important that we information share
00:41:54,173 -- 00:41:57,243
that we obviously consider these service,
00:41:57,243 -- 00:41:59,845
or I guess, you know, Shared Service Models, ways
00:41:59,845 -- 00:42:01,547
in which we can collaborate and work together.
00:42:03,582 -- 00:42:04,083
Thanks, Lloyd.
00:42:04,083 -- 00:42:07,586
So, Michael, given that we've,
00:42:07,586 -- 00:42:09,822
talked about some of these problems
00:42:09,822 -- 00:42:10,956
each individual creditor
00:42:10,956 -- 00:42:12,458
may not be able to address on their own.
00:42:12,458 -- 00:42:17,463
And you through CCUA have visibility into many Credit Unions
00:42:17,763 -- 00:42:21,967
and all the Credit Unions definitely in Ontario.
00:42:21,967 -- 00:42:23,469
How do you think Credit Unions can work
00:42:23,469 -- 00:42:24,436
more effectively to address
00:42:24,436 -- 00:42:25,838
some of these challenges and opportunities?
00:42:25,838 -- 00:42:27,506
And can you choose those Credit
00:42:27,506 -- 00:42:29,108
Union Service organizations?
00:42:29,108 -- 00:42:31,977
Is there any agreement that occupies unions?
00:42:31,977 -- 00:42:32,978
We do we need some?
00:42:32,978 -- 00:42:35,514
Can we employ ones that are already existing?
00:42:35,514 -- 00:42:35,814
What's your
00:42:35,814 -- 00:42:37,750
perspective? Yeah, I don't think so.
00:42:37,750 -- 00:42:42,721
I mean, my earlier remarks spoke to, you know,
00:42:42,955 -- 00:42:45,190
some divisions that are sort of emerging,
00:42:45,190 -- 00:42:46,792
across the sector with regards
00:42:46,792 -- 00:42:47,893
to some of these major issues.
00:42:47,893 -- 00:42:49,261
You know, board governance is one of them.
00:42:49,261 -- 00:42:51,463
It's obviously a key issue,
00:42:51,463 -- 00:42:54,333
that regulators across the country are looking at.
00:42:54,333 -- 00:42:56,869
CCUA has, you know, we, we established partnership
00:42:56,869 -- 00:42:58,370
with ICD to, to
00:42:58,370 -- 00:43:00,005
to bring that rigor of,
00:43:00,005 -- 00:43:04,343
of, of Board Director education to the sector.
00:43:04,343 -- 00:43:06,311
But there's a wide degree of
00:43:06,311 -- 00:43:07,780
or a wide variety of views
00:43:07,780 -- 00:43:09,648
across the sector in terms of, of
00:43:09,648 -- 00:43:11,216
of what that should look like.
00:43:11,216 -- 00:43:12,184
And, you know,
00:43:12,184 -- 00:43:14,820
you also have to deal with the reality of on the ground
00:43:14,820 -- 00:43:16,755
in, you know, small communities.
00:43:16,755 -- 00:43:18,123
It's, it can be difficult
00:43:18,123 -- 00:43:20,192
to get the kind of expertise that you need to have,
00:43:21,627 -- 00:43:22,628
an effective Board.
00:43:22,628 -- 00:43:24,963
So that's certainly a challenge.
00:43:24,963 -- 00:43:26,798
When I look at my role and my team's role,
00:43:26,798 -- 00:43:29,501
I keep saying my role, but my team does all the work,
00:43:29,501 -- 00:43:32,905
so I have to give them all of the credit.
00:43:32,905 -- 00:43:35,107
You know, running a trade association
00:43:35,107 -- 00:43:38,177
in any sector is a challenge, particularly one
00:43:38,177 -- 00:43:43,181
such as ours with such a wide variety of,
00:43:43,649 -- 00:43:46,518
of, of members, a lot of industries out there,
00:43:46,518 -- 00:43:48,887
you know, they'll have a trade association, but
00:43:48,887 -- 00:43:51,924
the members are a lot more similar to one another.
00:43:51,924 -- 00:43:54,192
That's a completely not the case,
00:43:54,192 -- 00:43:56,295
in, in the Credit Union sector.
00:43:56,295 -- 00:43:57,963
So when we're trying to,
00:43:57,963 -- 00:44:01,066
you know, marshal our members on an issue of policy
00:44:01,066 -- 00:44:02,668
or a challenge with a government
00:44:02,668 -- 00:44:04,169
either in Ontario or elsewhere.
00:44:05,304 -- 00:44:06,672
You know, it's important for
00:44:06,672 -- 00:44:08,807
all individual Credit Unions
00:44:08,807 -- 00:44:10,943
to realize that, you know, sometimes for the greater
00:44:10,943 -- 00:44:11,543
good of the sector,
00:44:11,543 -- 00:44:13,412
you got to put a little bit of water in your wine.
00:44:13,412 -- 00:44:14,813
And, and, you know,
00:44:14,813 -- 00:44:17,482
we can't necessarily go lobby a government
00:44:17,482 -- 00:44:20,752
on an issue of importance to 2 or 3 members, even if it,
00:44:20,752 -- 00:44:23,689
you know, feels red hot to those 2 or 3 members.
00:44:23,689 -- 00:44:26,425
We really, like I said earlier, have to
00:44:26,425 -- 00:44:27,793
do the work to identify those issues
00:44:27,793 -- 00:44:28,960
that, that
00:44:28,960 -- 00:44:29,895
unify our members,
00:44:29,895 -- 00:44:30,962
but also from the member's
00:44:30,962 -- 00:44:32,130
point of view, from the Credit Unions
00:44:32,130 -- 00:44:34,332
point of view, that is to say,
00:44:34,332 -- 00:44:35,834
you know, it's important to understand
00:44:35,834 -- 00:44:37,969
that we all got to work together
00:44:37,969 -- 00:44:39,071
on some of these challenges.
00:44:39,071 -- 00:44:41,640
And that means sometimes you're not always going to get
00:44:41,640 -- 00:44:42,674
everything that you want.
00:44:42,674 -- 00:44:45,877
And an interesting example of that recently in Ontario was,
00:44:45,877 -- 00:44:46,311
you know,
00:44:46,311 -- 00:44:48,213
we had some back and forth, Mehrdad, with you
00:44:48,213 -- 00:44:50,916
and the team on EDC, on enhanced data collection.
00:44:50,916 -- 00:44:54,453
That was a heavy lift for a lot of the smaller,
00:44:54,453 -- 00:44:58,957
Credit Unions across the province in 2022 and 2023.
00:45:00,392 -- 00:45:00,926
And, you know,
00:45:00,926 -- 00:45:03,428
we acted as a bridge between your team
00:45:03,428 -- 00:45:04,696
and our members
00:45:04,696 -- 00:45:08,800
to, you know, I think pretty effectively deal with that.
00:45:08,800 -- 00:45:11,837
And we obviously recognize as you Credit Unions,
00:45:11,837 -- 00:45:13,905
here and elsewhere, that data is key.
00:45:13,905 -- 00:45:16,675
You can't measure, you can't regulate.
00:45:16,675 -- 00:45:18,910
You know, what you don't have key data on.
00:45:18,910 -- 00:45:22,113
So we're, we're fully on board with that,
00:45:22,113 -- 00:45:24,216
but, you know, there just has to be flexibility
00:45:24,216 -- 00:45:25,317
from, from the governments
00:45:25,317 -- 00:45:26,384
and the regulators point of view.
00:45:26,384 -- 00:45:28,086
And then from the Credit Unions point of view, again,
00:45:28,086 -- 00:45:29,588
there has to be an acknowledgment
00:45:29,588 -- 00:45:32,157
that, you know, sometimes we got to
00:45:32,157 -- 00:45:33,425
we got to buckle up a little bit
00:45:33,425 -- 00:45:35,660
and, and again, put a bit of water in our wine
00:45:35,660 -- 00:45:39,731
to identify those issues of, of, of, you know, common,
00:45:40,732 -- 00:45:41,132
you know,
00:45:41,132 -- 00:45:43,602
common issues that, that we have to work together for,
00:45:43,602 -- 00:45:45,937
for as a sector together.
00:45:45,937 -- 00:45:47,038
Thanks, Michael.
00:45:47,038 -- 00:45:48,940
So, panel members by now
00:45:48,940 -- 00:45:50,675
know they got to be careful what they say around me.
00:45:50,675 -- 00:45:52,844
So, Chris, I'm going to quote you again, right?
00:45:52,844 -- 00:45:54,312
I think I'm going to quote you.
00:45:54,312 -- 00:45:57,248
You said something. I think it was a couple of weeks ago.
00:45:57,248 -- 00:45:59,551
You said that, “there isn't just a path to efficient merger.”
00:45:59,551 -- 00:46:01,686
So talking about Credit Unions working together
00:46:01,686 -- 00:46:04,990
and gaining that effective scale that's needed.
00:46:04,990 -- 00:46:05,924
So what did you mean by it,
00:46:05,924 -- 00:46:10,628
“there was a just a path to effective mergers?”
00:46:10,628 -- 00:46:12,130
Chris.
00:46:12,130 -- 00:46:14,766
Yeah.
00:46:14,766 -- 00:46:16,668
I think when I,
00:46:16,668 -- 00:46:19,170
I'm, I'm not in the current operations
00:46:19,170 -- 00:46:24,776
like my colleagues here, but when, when I reflect on the
00:46:26,177 -- 00:46:26,978
energy that's
00:46:26,978 -- 00:46:30,448
going in, in different Credit Union constituencies and
00:46:30,448 -- 00:46:32,417
alliances or visions,
00:46:32,417 -- 00:46:33,952
I think we're all
00:46:33,952 -- 00:46:35,854
struggling to break through
00:46:35,854 -- 00:46:39,524
all of the issues that were at the front of the slide,
00:46:39,524 -- 00:46:41,726
for long term planning.
00:46:41,726 -- 00:46:45,096
And so probably for the next few years,
00:46:45,096 -- 00:46:49,300
that cohesion is going to look more like going off
00:46:49,300 -- 00:46:50,435
in different directions
00:46:50,435 -- 00:46:55,440
in order to find what is the strongest path.
00:46:56,341 -- 00:46:57,809
In British Columbia, there's
00:46:57,809 -- 00:47:01,579
there's a natural consolidation that's happening.
00:47:01,579 -- 00:47:06,151
Part of it is retirement and, inability to garner,
00:47:06,151 -- 00:47:08,620
the talent that's necessary.
00:47:08,620 -- 00:47:12,023
But the community presence is not going away.
00:47:12,023 -- 00:47:14,792
And so.
00:47:14,792 -- 00:47:19,097
I've studied different, different transformations.
00:47:19,097 -- 00:47:21,766
Some provinces accelerate.
00:47:21,766 -- 00:47:26,504
In the case of Australia, they actually changed regulations
00:47:26,504 -- 00:47:28,439
from a provincial level
00:47:28,439 -- 00:47:30,808
to a state level to a federal level,
00:47:30,808 -- 00:47:33,845
as many of you may have observed.
00:47:33,845 -- 00:47:35,647
But, but I would conclude
00:47:35,647 -- 00:47:38,650
that the strength is the community governance
00:47:38,650 -- 00:47:40,985
and that if you have the capital
00:47:40,985 -- 00:47:45,957
and hopefully the regulatory framework of operating
00:47:45,957 -- 00:47:48,226
with innovation,
00:47:48,226 -- 00:47:49,927
that we should just be patient
00:47:49,927 -- 00:47:54,165
and recognize that we're going to have a disparate period
00:47:54,165 -- 00:47:57,168
before some breakthroughs are stronger than others.
00:47:58,202 -- 00:47:59,504
Thank you, Chris.
00:47:59,504 -- 00:48:02,507
So, Jacquie the next question is for Boards.
00:48:02,507 -- 00:48:05,643
So you're the perfect person to answer it,
00:48:05,643 -- 00:48:07,879
given that the environment has become more complex,
00:48:07,879 -- 00:48:11,182
a lot more complex than even ten years ago,
00:48:11,182 -- 00:48:15,753
and the role of Board Directors has also become complex
00:48:15,753 -- 00:48:18,056
because of this.
00:48:18,056 -- 00:48:20,525
How does it work in practice regarding Board members
00:48:20,525 -- 00:48:25,530
and their accountability for the Credit Union strategy?
00:48:26,064 -- 00:48:28,766
So strategy is,
00:48:28,766 -- 00:48:29,901
a little bit of a challenge
00:48:29,901 -- 00:48:32,470
when you're in such a disruptive environment
00:48:32,470 -- 00:48:34,172
with so many factors.
00:48:34,172 -- 00:48:37,442
So I, I thought I would tell a little bit of a story,
00:48:37,442 -- 00:48:43,948
about a company that was incredibly successful in 2004.
00:48:45,183 -- 00:48:48,152
The company was called Blockbuster.
00:48:48,152 -- 00:48:50,655
Some of you may remember them.
00:48:50,655 -- 00:48:59,063
It had 84,000 employees and operated 9,000 stores in 2004.
00:49:00,331 -- 00:49:03,301
And they started losing money.
00:49:03,301 -- 00:49:05,703
And so I often wonder
00:49:05,703 -- 00:49:08,105
what the Board of Directors were saying
00:49:08,105 -- 00:49:10,708
that first year, that they lost money.
00:49:10,708 -- 00:49:14,445
So did they say, oh, it's okay,
00:49:14,445 -- 00:49:15,947
we're going to pay the bonuses
00:49:15,947 -- 00:49:19,750
to Senior Management anyway because we're nice?
00:49:19,750 -- 00:49:24,255
Or are they going to say, you know what, it was a Y2K issue
00:49:24,255 -- 00:49:26,991
or the Internet is overrated.
00:49:26,991 -- 00:49:29,560
It's just a blip.
00:49:29,560 -- 00:49:34,198
Ten years later, Blockbuster was bankrupt.
00:49:34,198 -- 00:49:38,703
It took ten years for them to go bankrupt.
00:49:38,703 -- 00:49:40,504
And in that time they weren't
00:49:40,504 -- 00:49:41,939
able as a Board
00:49:41,939 -- 00:49:46,277
to determine a change or a shift in their strategy.
00:49:46,277 -- 00:49:48,279
At the end of the day,
00:49:48,279 -- 00:49:49,714
it went bankrupt
00:49:49,714 -- 00:49:54,919
because they charged one of their owners $40 in late fees.
00:49:56,020 -- 00:50:00,891
And that owner, sorry, that customer, was named
00:50:00,891 -- 00:50:02,460
Reed Hastings.
00:50:02,460 -- 00:50:07,665
And Reed Hastings was so annoyed at being charged late fees
00:50:08,199 -- 00:50:14,372
that he started Netflix, and Netflix was a DVD, a mail DVD,
00:50:15,239 -- 00:50:17,108
subscription at that time.
00:50:17,108 -- 00:50:20,177
And obviously today, Netflix has soared.
00:50:20,177 -- 00:50:22,213
So when you put your mind
00:50:22,213 -- 00:50:24,281
in the mind of that Board,
00:50:24,281 -- 00:50:27,118
management is saying, let's double down.
00:50:27,118 -- 00:50:29,253
Our strategy is good, we're successful.
00:50:29,253 -- 00:50:31,555
We've been successful up to this point.
00:50:32,857 -- 00:50:36,160
As a Board Member, you have to say, and what if
00:50:36,160 -- 00:50:38,262
what if things do change?
00:50:38,262 -- 00:50:44,034
What if technology is going to dramatically change, like AI?
00:50:44,568 -- 00:50:45,936
We can't run away from it.
00:50:45,936 -- 00:50:48,472
We have to understand it
00:50:48,472 -- 00:50:52,977
and understand what's going to happen in, in five years.
00:50:52,977 -- 00:50:53,611
This morning
00:50:53,611 -- 00:50:55,546
we talked about a lot of things
00:50:55,546 -- 00:50:58,549
that have the opportunity to really shift
00:50:58,549 -- 00:51:00,784
our strategy in five years.
00:51:00,784 -- 00:51:05,789
And as Board Members, we have to understand what those,
00:51:07,925 -- 00:51:12,830
forces are and what they can, can prepare us for.
00:51:12,830 -- 00:51:18,068
And I think when we talk about our customers, our owners,
00:51:18,903 -- 00:51:23,908
there is a value proposition that we can provide to them,
00:51:23,941 -- 00:51:27,778
that is really secure. But we have to think about it.
00:51:27,778 -- 00:51:29,613
What does that value proposition
00:51:29,613 -- 00:51:32,916
look like in five years or in ten years?
00:51:32,916 -- 00:51:35,219
And stress test it based on the
00:51:35,219 -- 00:51:37,421
the environment that you operate in.
00:51:38,656 -- 00:51:41,392
In London, where we are headquartered,
00:51:41,392 -- 00:51:44,194
we have competing demands, right now.
00:51:44,194 -- 00:51:48,432
We have the migration of people from the GTA
00:51:48,432 -- 00:51:50,801
looking for homes that are affordable
00:51:50,801 -- 00:51:54,505
and, and a lifestyle that is, is comfortable.
00:51:54,505 -- 00:51:56,306
And they're coming into London
00:51:56,306 -- 00:52:00,477
and the surrounding small towns. At the same time,
00:52:00,477 -- 00:52:02,780
we have huge consolidation
00:52:02,780 -- 00:52:06,350
that has happened in our rural farming communities,
00:52:06,350 -- 00:52:10,788
and it's really challenging to actually get people to work,
00:52:10,788 -- 00:52:12,489
in some of the smaller communities
00:52:12,489 -- 00:52:15,292
because young people have left.
00:52:15,292 -- 00:52:18,362
The farmers are now large
00:52:18,362 -- 00:52:21,265
farms rather than small family farms.
00:52:21,265 -- 00:52:23,734
So you have this dichotomy.
00:52:23,734 -- 00:52:26,437
So when we look at our book
00:52:26,437 -- 00:52:28,605
and we are servicing those communities,
00:52:28,605 -- 00:52:30,507
what does that mean for us?
00:52:30,507 -- 00:52:35,979
Having a branch in a community of 5,000 people, do we stay?
00:52:35,979 -- 00:52:37,981
Do we go? And what does that mean?
00:52:39,116 -- 00:52:40,050
So when I look at
00:52:40,050 -- 00:52:45,055
strategy, I, I thought about a few things.
00:52:45,422 -- 00:52:49,359
We should be looking at if I can read them.
00:52:49,359 -- 00:52:53,397
The first thing I think is, is making sure we have the data.
00:52:53,397 -- 00:52:56,400
We really need to make decisions based on data,
00:52:56,400 -- 00:53:00,737
not based on antidotel information.
00:53:00,737 -- 00:53:04,374
We also have to really look at what business are we in.
00:53:04,374 -- 00:53:05,609
We heard today
00:53:05,609 -- 00:53:08,879
lots of different areas that we can get involved in.
00:53:08,879 -- 00:53:13,150
Lots of community problems that we can try and solve.
00:53:13,150 -- 00:53:14,618
But at the end of the day,
00:53:14,618 -- 00:53:16,853
we have to be disciplined to say
00:53:16,853 -- 00:53:19,990
we're in the financial services business
00:53:19,990 -- 00:53:24,995
and if we do that well, then we are able to invest more.
00:53:25,195 -- 00:53:26,964
If we don't do that well,
00:53:26,964 -- 00:53:29,800
if we don't have enough capital, at the end of the day,
00:53:29,800 -- 00:53:31,835
then we're , no good for anyone.
00:53:33,337 -- 00:53:33,937
And I guess
00:53:33,937 -- 00:53:36,506
also who we serve as well,
00:53:36,506 -- 00:53:39,242
because we can't serve everybody.
00:53:39,242 -- 00:53:42,679
We may need to put, a had the discipline to say,
00:53:42,679 -- 00:53:43,880
this is the customer
00:53:43,880 -- 00:53:45,549
that we're going to serve,
00:53:45,549 -- 00:53:47,384
and they'll be another Credit Union
00:53:47,384 -- 00:53:50,020
who can serve a different customer.
00:53:50,020 -- 00:53:51,021
We do need...
00:53:51,021 -- 00:53:52,189
we have this year,
00:53:52,189 -- 00:53:55,058
actually demarcated a couple of businesses
00:53:55,058 -- 00:53:59,229
that were outside of our risk tolerance. And that's okay.
00:53:59,229 -- 00:54:03,300
We need to have the courage in order to do that.
00:54:03,300 -- 00:54:04,101
So I do...
00:54:04,101 -- 00:54:06,069
I'm going to end today with five cautions
00:54:06,069 -- 00:54:09,005
that I think we need to look at.
00:54:09,005 -- 00:54:10,407
One of them is don't get old
00:54:10,407 -- 00:54:14,478
because you can't read your notes.
00:54:14,478 -- 00:54:17,747
The first one, I think having a brand new CEO
00:54:17,747 -- 00:54:19,816
has highlighted this for me
00:54:19,816 -- 00:54:21,118
is that we really need
00:54:21,118 -- 00:54:24,454
to be cautious of using the past
00:54:24,454 -- 00:54:26,923
as a predictor for the future.
00:54:26,923 -- 00:54:29,626
Our future right now is very different
00:54:29,626 -- 00:54:31,495
than our past has ever been.
00:54:31,495 -- 00:54:36,566
And so we can't really, take one and implant on
00:54:36,566 -- 00:54:37,133
the other.
00:54:38,502 -- 00:54:39,936
And saying, having said that,
00:54:39,936 -- 00:54:42,839
there's always more than one possible outcome.
00:54:42,839 -- 00:54:44,774
We aren't on a trajectory
00:54:44,774 -- 00:54:48,511
where we're all going to be moving in the same direction.
00:54:48,511 -- 00:54:50,747
So we need to plan different scenarios.
00:54:50,747 -- 00:54:53,316
We need to plan different outcomes.
00:54:53,316 -- 00:54:55,018
If you had asked me ten years ago
00:54:55,018 -- 00:54:56,820
when I started on the board
00:54:56,820 -- 00:54:59,289
whether we were going to have a global pandemic,
00:54:59,289 -- 00:55:01,324
which was going to shut everything down
00:55:01,324 -- 00:55:04,628
and interest rates were going to go up so high,
00:55:04,628 -- 00:55:06,730
who would have thought,
00:55:06,730 -- 00:55:08,665
and we need to scenario plan
00:55:08,665 -- 00:55:12,502
so that we can stress test for those.
00:55:12,502 -- 00:55:15,038
Don't underestimate technology
00:55:15,038 -- 00:55:18,008
and the importance of technology to people.
00:55:18,008 -- 00:55:19,809
People like their technology.
00:55:19,809 -- 00:55:23,079
They like making things, their lives easier.
00:55:23,079 -- 00:55:24,848
If you can imagine,
00:55:24,848 -- 00:55:29,853
my grandfather just loved email because it was so seamless.
00:55:30,020 -- 00:55:31,955
Instead of taking six weeks
00:55:31,955 -- 00:55:33,723
to communicate with his friends,
00:55:33,723 -- 00:55:36,159
he could do it instantaneously.
00:55:36,159 -- 00:55:37,994
Today, he would have been the first person
00:55:37,994 -- 00:55:40,363
on video conferencing. He just loved it.
00:55:41,865 -- 00:55:46,403
But don't overestimate shiny things.
00:55:46,403 -- 00:55:47,904
Ten years ago, Bitcoin
00:55:47,904 -- 00:55:49,672
was going to put us all out of business.
00:55:49,672 -- 00:55:53,109
We were all going to be, crazy.
00:55:53,109 -- 00:55:55,945
And it was a shiny thing.
00:55:55,945 -- 00:55:59,649
And the final thing is
00:55:59,649 -- 00:56:03,520
to differentiate between your core fundamentals
00:56:03,520 -- 00:56:05,455
that can't change.
00:56:05,455 -- 00:56:08,124
It's the DNA of who we are
00:56:08,124 -- 00:56:12,762
and those traditions that can change and need to change,
00:56:12,762 -- 00:56:16,900
because it's time to change.
00:56:16,900 -- 00:56:17,567
Thank you, Jacquie.
00:56:17,567 -- 00:56:20,770
So, we've been talking about,
00:56:20,770 -- 00:56:22,872
solutions that the sector needs to come up with
00:56:22,872 -- 00:56:25,708
that needs to be sector led, sector driven.
00:56:25,708 -- 00:56:27,510
What do you think about Boards
00:56:27,510 -- 00:56:29,412
and not just their role and responsibility,
00:56:29,412 -- 00:56:32,582
which we know they have for their Credit Union strategy,
00:56:32,582 -- 00:56:37,554
but the role that they play for the sector strategy?
00:56:37,554 -- 00:56:40,790
I think Boards need to
00:56:40,790 -- 00:56:45,128
get out a little bit more and meet other Board members,
00:56:45,128 -- 00:56:50,099
because that Board-to-Board conversations, you realize that
00:56:50,500 -- 00:56:52,435
we're not different.
00:56:52,435 -- 00:56:55,805
As much as we like to say that we're all nuanced
00:56:55,805 -- 00:56:56,673
and we're all different,
00:56:56,673 -- 00:56:58,908
we're more alike than anything else.
00:56:58,908 -- 00:57:01,344
We're more alike than, than we are different.
00:57:01,344 -- 00:57:06,349
And in those conversations, solutions can come up.
00:57:06,582 -- 00:57:11,587
And we need to stop being quite so defensive of our turf.
00:57:12,055 -- 00:57:16,225
You know, we say we don't compete, but we do compete.
00:57:16,225 -- 00:57:18,261
I don't know if anyone's here from Windsor family,
00:57:18,261 -- 00:57:20,129
but when I saw
00:57:20,129 -- 00:57:23,199
WFU, it came into London, it's like, what the heck?
00:57:23,199 -- 00:57:25,101
This is my town. You can't come in here.
00:57:26,235 -- 00:57:30,740
So, you know, I think it's those kinds of reactions
00:57:30,740 -- 00:57:32,375
we need to get to know each other
00:57:32,375 -- 00:57:36,179
and get to know what the, the business model is.
00:57:36,179 -- 00:57:37,280
Thank you, Jacquie.
00:57:37,280 -- 00:57:39,816
Anybody else want to
00:57:39,816 -- 00:57:40,883
continue along that line,
00:57:40,883 -- 00:57:44,420
or should we move on to the next question?
00:57:44,420 -- 00:57:46,622
All right. We'll move on to the next question.
00:57:46,622 -- 00:57:48,291
I didn't want to get to this question, but,
00:57:48,291 -- 00:57:52,328
this one has to do with regulators, aka FSRA.
00:57:52,328 -- 00:57:53,229
And I promise you,
00:57:53,229 -- 00:57:56,232
we didn't feed the answers to the panel members.
00:57:56,232 -- 00:57:57,834
They're going to say what they want.
00:57:57,834 -- 00:57:59,469
So the question is, how can regulators
00:57:59,469 -- 00:58:02,105
support the Credit Union sector’s evolution?
00:58:02,105 -- 00:58:04,574
And this is to all of you, please.
00:58:04,574 -- 00:58:06,008
Who wants to take that first.
00:58:06,008 -- 00:58:08,044
I'll go. I'll, I'll stick my neck out.
00:58:09,645 -- 00:58:11,481
You know,
00:58:11,481 -- 00:58:14,183
if each one of us
00:58:14,183 -- 00:58:18,321
maintains the proper governance and the proper compliance
00:58:18,321 -- 00:58:20,623
and we're not being staged,
00:58:20,623 -- 00:58:23,226
then the regulator, in my opinion,
00:58:23,226 -- 00:58:26,395
has the capacity to go to the Minister of Finance
00:58:26,395 -- 00:58:26,863
and say,
00:58:26,863 -- 00:58:30,600
protect your regional financial institution network,
00:58:30,600 -- 00:58:34,270
which can be a driver for economic development.
00:58:34,270 -- 00:58:35,438
And in British Columbia
00:58:35,438 -- 00:58:37,773
right now, the Credit Unions deliver that,
00:58:37,773 -- 00:58:40,743
the accelerated housing,
00:58:40,743 -- 00:58:44,113
housing starts in the affordables, housing sector.
00:58:44,113 -- 00:58:45,848
But that's an accountability
00:58:45,848 -- 00:58:48,584
that is ours to enable
00:58:48,584 -- 00:58:49,852
the regulator
00:58:49,852 -- 00:58:54,357
to play the role of not going to the deposit insurance
00:58:54,357 -- 00:58:55,758
relief fund,
00:58:55,758 -- 00:58:59,028
but to provide relief to the province
00:58:59,028 -- 00:59:01,597
in terms of an economic engine,
00:59:01,597 -- 00:59:02,999
which then leaves us
00:59:02,999 -- 00:59:08,004
as Credit Union operators focused on member and community.
00:59:09,271 -- 00:59:13,042
It's a big, it's a big, big challenge to stay
00:59:13,042 -- 00:59:16,545
in that center of adequate liquidity , adequate capital
00:59:16,545 -- 00:59:19,615
and adequate return. But that's my vision.
00:59:22,885 -- 00:59:23,719
I'll go next.
00:59:23,719 -- 00:59:24,453
Oh, sorry, Jacquie.
00:59:24,453 -- 00:59:29,225
Did you raise your hand? Yeah. Okay. Go ahead. Oh, I did not...sure.
00:59:29,225 -- 00:59:31,627
I think one of the things the regulator can do
00:59:31,627 -- 00:59:33,429
is help us to determine
00:59:33,429 -- 00:59:37,199
what best practices are, through regulation.
00:59:37,199 -- 00:59:39,368
So I think it was mentioned this morning
00:59:39,368 -- 00:59:41,103
in the AI
00:59:41,103 -- 00:59:42,638
conversation that,
00:59:42,638 -- 00:59:43,506
you know, it's hard
00:59:43,506 -- 00:59:45,908
for us to know what best practices are
00:59:45,908 -- 00:59:49,078
and to have all that knowledge.
00:59:49,078 -- 00:59:52,548
Whereas if you have the assurance
00:59:52,548 -- 00:59:56,152
that if you're following the regulations, that by default
00:59:56,152 -- 00:59:57,787
you're doing best practices,
00:59:57,787 -- 01:00:00,122
then that's actually kind of helpful.
01:00:00,122 -- 01:00:03,392
So we know that if we meet your standard,
01:00:03,392 -- 01:00:07,863
then we're doing best practices.
01:00:07,863 -- 01:00:12,835
So I have thoughts. A couple of things.
01:00:12,835 -- 01:00:13,569
I would say just
01:00:13,569 -- 01:00:17,006
and this isn't just for, Ontario, but it’s in general,
01:00:17,006 -- 01:00:18,641
you know, be open to different strategies.
01:00:18,641 -- 01:00:19,942
You know, we have,
01:00:19,942 -- 01:00:21,644
modeling at the national level
01:00:21,644 -- 01:00:24,513
that suggests that in 2030, which is,
01:00:24,513 -- 01:00:27,850
you know, only a half a decade from now, believe it or not,
01:00:29,518 -- 01:00:31,220
you know, the sort of 80 or 90%
01:00:31,220 -- 01:00:32,788
confidence interval
01:00:32,788 -- 01:00:36,725
is somewhere between 90 and 110 Credit Unions in Canada.
01:00:36,725 -- 01:00:39,228
So roughly half of the number of institutions we have now.
01:00:39,228 -- 01:00:41,797
So that would suggest for Ontario, it's what,
01:00:41,797 -- 01:00:46,602
you know, 25 or 30, kind of ballpark.
01:00:46,602 -- 01:00:48,003
Obviously, the further out in the future
01:00:48,003 -- 01:00:50,439
you get, the less and less, reliable
01:00:50,439 -- 01:00:52,574
those, those predictions are.
01:00:52,574 -- 01:00:53,275
But, you know,
01:00:53,275 -- 01:00:53,542
it does
01:00:53,542 -- 01:00:56,045
suggest a certain, a pace of continued
01:00:56,045 -- 01:00:58,814
consolidation in this province and elsewhere.
01:00:58,814 -- 01:01:00,649
But it also suggests that you're going to continue
01:01:00,649 -- 01:01:03,519
to have in 2030 and 2040,
01:01:03,519 -- 01:01:08,390
a wide variety of institutions, to regulate,
01:01:08,390 -- 01:01:11,326
big, small and everything in between
01:01:11,326 -- 01:01:13,696
that are all going to have different strategies.
01:01:13,696 -- 01:01:16,832
Some of their strategies may be to eventually,
01:01:16,832 -- 01:01:21,070
consider, pursuing federal regulation.
01:01:21,070 -- 01:01:24,707
Some will, you know, merge with other institutions.
01:01:24,707 -- 01:01:26,642
Some may partner with,
01:01:26,642 -- 01:01:30,079
federally regulated Credit Unions in, in other provinces.
01:01:31,180 -- 01:01:32,915
And we know that there's,
01:01:32,915 -- 01:01:33,348
you know, one
01:01:33,348 -- 01:01:34,149
example of that
01:01:34,149 -- 01:01:35,617
that has started to take place
01:01:35,617 -- 01:01:39,221
between Alberta and Saskatchewan.
01:01:39,221 -- 01:01:41,657
So just be open to,
01:01:41,657 -- 01:01:43,025
you know, continuing to regulate,
01:01:43,025 -- 01:01:44,893
of course, a wide variety of institutions
01:01:44,893 -- 01:01:47,996
and be open to having a flexible approach
01:01:47,996 -- 01:01:50,499
in terms of what their respective,
01:01:50,499 -- 01:01:52,034
strategies are going to be.
01:01:52,034 -- 01:01:54,336
So that's request number one.
01:01:54,336 -- 01:01:58,240
Request number two, please, for the love of God,
01:01:58,240 -- 01:01:59,675
you know, work with Ottawa
01:01:59,675 -- 01:02:02,878
and the federal government, right. Like,
01:02:02,878 -- 01:02:06,682
if you think the banks are, are big and, and scary,
01:02:06,682 -- 01:02:09,618
the federal government is like, it's like a drunk elephant
01:02:09,618 -- 01:02:11,320
sometimes. It just stumbles around
01:02:11,320 -- 01:02:13,655
and it has the capacity to crush us.
01:02:13,655 -- 01:02:19,294
And, you know, by, neglect or ignorance or
01:02:19,328 -- 01:02:20,429
however you want to call it,
01:02:21,396 -- 01:02:24,099
you know, the feds have
01:02:24,099 -- 01:02:25,300
shown themselves
01:02:25,300 -- 01:02:27,502
capable of throwing up
01:02:27,502 -- 01:02:29,605
existential challenges to the Credit Union sector
01:02:29,605 -- 01:02:30,872
just because they don't
01:02:30,872 -- 01:02:32,841
have a direct line of sight into it.
01:02:32,841 -- 01:02:35,243
They think the financial sector in Canada
01:02:35,243 -- 01:02:36,812
is five institutions.
01:02:36,812 -- 01:02:38,180
When there's a crisis like COVID,
01:02:38,180 -- 01:02:42,451
they want to deal with five CEOs and not 200.
01:02:42,451 -- 01:02:45,420
But that has caused major problems for us in Ottawa.
01:02:45,420 -- 01:02:47,956
I can tell you that we're constantly,
01:02:47,956 -- 01:02:49,558
coming up against that reality.
01:02:49,558 -- 01:02:51,727
So please help us,
01:02:51,727 -- 01:02:52,160
you know,
01:02:52,160 -- 01:02:54,963
educate our federal colleagues
01:02:54,963 -- 01:02:58,000
and friends in, in, in the national capital
01:02:58,000 -- 01:02:59,935
that the provincially regulated
01:02:59,935 -- 01:03:00,569
Credit Union
01:03:00,569 -- 01:03:01,570
sector is,
01:03:01,570 -- 01:03:03,071
you know, obviously a key part
01:03:03,071 -- 01:03:05,807
of, of the landscape in Canada.
01:03:05,807 -- 01:03:07,242
All right. Lloyd, please.
01:03:07,242 -- 01:03:08,877
I think,
01:03:08,877 -- 01:03:10,879
again, was said earlier by Jacquie,
01:03:10,879 -- 01:03:14,783
the past isn't always the predictor of the future.
01:03:14,783 -- 01:03:17,319
And from the Credit Union perspective,
01:03:17,319 -- 01:03:18,653
I mean, it continues to evolve.
01:03:18,653 -- 01:03:20,088
And that's really what this whole,
01:03:21,189 -- 01:03:22,791
panel discussion today is around
01:03:22,791 -- 01:03:24,726
how the Credit Union sector is evolving.
01:03:24,726 -- 01:03:29,698
So I think from a regulator point of view, and regulation,
01:03:29,698 -- 01:03:31,366
I always say everyone has a job to do.
01:03:31,366 -- 01:03:32,534
And, and again,
01:03:32,534 -- 01:03:34,202
when it comes to regulation,
01:03:34,202 -- 01:03:35,737
it's an important element
01:03:35,737 -- 01:03:39,107
of what builds the public trust that we have in our sector.
01:03:39,107 -- 01:03:41,276
And I just think as business changes
01:03:41,276 -- 01:03:44,646
as, as the world changes, as technology,
01:03:44,646 -- 01:03:46,748
ultimately is going to change the way
01:03:46,748 -- 01:03:49,184
in which we as consumers live our lives.
01:03:49,184 -- 01:03:51,153
I think, as a regulator,
01:03:51,153 -- 01:03:52,888
it's important that they keep up as well.
01:03:52,888 -- 01:03:54,623
And they understand,
01:03:54,623 -- 01:03:55,524
you know, how the business
01:03:55,524 -- 01:03:57,292
is going to thrive into the future.
01:03:57,292 -- 01:03:59,327
So we really need,
01:03:59,327 -- 01:04:00,862
a strong working relationship
01:04:00,862 -- 01:04:03,598
with our regulator and obviously,
01:04:03,598 -- 01:04:05,066
one that obviously speaks to,
01:04:05,066 -- 01:04:07,035
you know, what's changing in our society today.
01:04:11,439 -- 01:04:16,244
Any last few comments before I go into questions?
01:04:16,244 -- 01:04:16,912
All right. Great.
01:04:16,912 -- 01:04:20,348
So we're going to, we're right on time.
01:04:20,348 -- 01:04:22,651
So we have time for questions.
01:04:22,651 -- 01:04:25,086
Looking at the monitor
01:04:25,086 -- 01:04:27,522
I don't see any popping up yet.
01:04:27,522 -- 01:04:28,356
Let's give it a minute.
01:04:28,356 -- 01:04:30,325
I'm sure some of you have questions.
01:04:30,325 -- 01:04:32,160
Oh my God I can't read that.
01:04:32,160 -- 01:04:34,296
Excuse me I'm going to come over here.
01:04:34,296 -- 01:04:34,729
Oh, this.
01:04:34,729 -- 01:04:37,165
Apparently that's so small.
01:04:37,165 -- 01:04:38,166
Check. Yes.
01:04:38,166 -- 01:04:41,436
Jacquie, what does that say? It says, false.
01:04:41,436 -- 01:04:43,338
Is there an opportunity for the sector to come together
01:04:43,338 -- 01:04:44,873
collectively to tackle significant
01:04:44,873 -- 01:04:49,344
socio economic challenges, such as affordable housing?
01:04:49,344 -- 01:04:50,712
Okay, that's for you guys, not me.
01:04:50,712 -- 01:04:53,281
So please go ahead.
01:04:53,281 -- 01:04:56,618
I read the question.
01:04:56,618 -- 01:04:59,554
The font is this big,
01:04:59,554 -- 01:05:01,890
Well, again, I'll, I'll just maybe,
01:05:01,890 -- 01:05:03,491
I'll start and maybe my colleagues here.
01:05:04,692 -- 01:05:07,295
Again, I gave an example of what,
01:05:07,295 -- 01:05:08,897
was done at FirstOntario.
01:05:08,897 -- 01:05:13,902
And again, what we tried to do was to just demonstrate,
01:05:14,135 -- 01:05:18,873
a model and one that, we were hoping others would pick up.
01:05:18,873 -- 01:05:21,409
Not necessarily Credit Unions, but certainly,
01:05:21,409 -- 01:05:23,144
other, builders and other,
01:05:23,144 -- 01:05:24,145
you know, folks,
01:05:24,145 -- 01:05:25,380
in that trade
01:05:25,380 -- 01:05:26,881
that would realize that there's
01:05:26,881 -- 01:05:30,151
a need for creating housing stock. So,
01:05:30,151 -- 01:05:32,020
again, it is a big problem.
01:05:32,020 -- 01:05:33,154
And we'd like to say that, you know,
01:05:33,154 -- 01:05:34,022
we can't solve it all,
01:05:34,022 -- 01:05:36,724
but we wanted to be part of the solution.
01:05:36,724 -- 01:05:40,862
So could we again use that example
01:05:40,862 -- 01:05:43,898
of what we did and share that and allow other,
01:05:43,898 -- 01:05:45,900
other folks in Ontario to come together?
01:05:45,900 -- 01:05:50,371
I think the answer is yes. That is a possibility.
01:05:50,371 -- 01:05:50,572
Yeah.
01:05:50,572 -- 01:05:53,575
And I think politically, like I said earlier,
01:05:53,575 -- 01:06:00,348
there seems to be a handout from federal agencies
01:06:00,348 -- 01:06:02,283
and they're looking for a partner
01:06:02,283 -- 01:06:06,387
who's capable of understanding the intricacies
01:06:06,387 -- 01:06:08,456
of what it takes to deliver
01:06:08,456 -- 01:06:09,290
non-market
01:06:09,290 -- 01:06:11,793
housing in a time of high interest
01:06:11,793 -- 01:06:14,562
rates and escalating construction costs,
01:06:14,562 -- 01:06:16,965
and often that's also a not for profit builder.
01:06:17,932 -- 01:06:19,934
So, I, I
01:06:19,934 -- 01:06:21,102
think that we have
01:06:21,102 -- 01:06:21,936
the alliance
01:06:21,936 -- 01:06:26,908
and the trust of all the, all the players in the chain.
01:06:27,041 -- 01:06:28,242
I'm not an
01:06:28,242 -- 01:06:30,812
I don't have a national view on this,
01:06:30,812 -- 01:06:35,516
but I know that in every province there's,
01:06:35,516 -- 01:06:38,686
A provincial housing cooperative federation
01:06:38,686 -- 01:06:43,057
and there are strong not for profit housing advocates.
01:06:43,057 -- 01:06:46,928
And I do think that they are naturally aligned.
01:06:46,928 -- 01:06:49,797
Our business losses,
01:06:49,797 -- 01:06:52,200
are not
01:06:52,200 -- 01:06:53,668
in the construction area
01:06:53,668 -- 01:06:57,338
usually because there's some CMHC insurance.
01:06:57,338 -- 01:06:59,674
But I do say it's a unique product
01:06:59,674 -- 01:07:02,710
because often it does need an interest reserve
01:07:02,710 -- 01:07:04,912
to solidify the tenancy.
01:07:04,912 -- 01:07:07,181
And solidify that debt servicing.
01:07:08,649 -- 01:07:11,919
I think there's also an opportunity for something
01:07:11,919 -- 01:07:14,756
a little bit new when it comes to mortgages.
01:07:14,756 -- 01:07:17,792
You know, we're talking about the amortization period,
01:07:17,792 -- 01:07:19,293
extending a little bit.
01:07:19,293 -- 01:07:24,298
But why not set up a rent own kind of environment?
01:07:24,398 -- 01:07:27,468
You can't do it again through your regulated body,
01:07:27,468 -- 01:07:29,837
but you have young people
01:07:29,837 -- 01:07:32,707
who have the money to pay a mortgage or rent.
01:07:32,707 -- 01:07:34,075
They can't pay both,
01:07:34,075 -- 01:07:36,010
so they can't save up their down payment
01:07:36,010 -- 01:07:38,813
because they're in the middle of paying rent.
01:07:38,813 -- 01:07:41,048
I have three of them. They're called kids.
01:07:41,048 -- 01:07:43,017
So, you know, having
01:07:43,017 -- 01:07:45,820
and they're fortunate because they have parents
01:07:45,820 -- 01:07:48,723
who are supporting and able to provide that.
01:07:48,723 -- 01:07:49,891
But what about the young people
01:07:49,891 -- 01:07:51,993
who don't have the ability to do that?
01:07:51,993 -- 01:07:54,028
So I think in that respects,
01:07:54,028 -- 01:07:56,964
being a little bit more creative about mortgage
01:07:56,964 -- 01:08:00,968
products would be, would be, something that'd be interesting.
01:08:00,968 -- 01:08:01,302
All right.
01:08:02,303 -- 01:08:03,404
Sorry if I could go.
01:08:03,404 -- 01:08:06,073
Of course. Quick.
01:08:06,073 -- 01:08:06,774
You know,
01:08:06,774 -- 01:08:08,976
one of the great things about Canada, really,
01:08:08,976 -- 01:08:12,480
and the way that the Federation is meant to work,
01:08:12,480 -- 01:08:14,415
though it doesn't always, of course,
01:08:14,415 -- 01:08:15,683
work perfectly
01:08:15,683 -- 01:08:16,150
is that,
01:08:16,150 -- 01:08:18,853
you know, good ideas from one part of the country can,
01:08:18,853 -- 01:08:21,489
can, can go across the rest of the country.
01:08:21,489 -- 01:08:23,391
So, from where I sit,
01:08:23,391 -- 01:08:26,527
I could see that being a potential answer to this question.
01:08:26,527 -- 01:08:28,462
We can't solve all of the world's problems.
01:08:28,462 -- 01:08:31,832
Obviously, these are very, very complicated issues.
01:08:31,832 -- 01:08:33,734
You know, climate, housing,
01:08:33,734 -- 01:08:36,804
all those giant mega issues that we're all aware of.
01:08:36,804 -- 01:08:38,906
But, you know, I can tell you that this is an example.
01:08:38,906 -- 01:08:40,341
The government of
01:08:40,341 -- 01:08:42,977
New Brunswick at the provincial level,
01:08:42,977 -- 01:08:46,180
reached out proactively to our sector in the province
01:08:46,180 -- 01:08:50,651
to design and deliver affordable housing,
01:08:50,651 -- 01:08:51,952
solutions and financing.
01:08:51,952 -- 01:08:53,687
And without getting into the details,
01:08:53,687 -- 01:08:57,491
you know, it's, it's, it's a model that could potentially,
01:08:57,491 -- 01:08:59,627
be, you know, exported,
01:08:59,627 -- 01:09:02,029
I guess, to other, other parts of the country.
01:09:02,029 -- 01:09:03,998
So, you know, it's a role that we can play.
01:09:03,998 -- 01:09:06,467
And I know that my team works together very closely.
01:09:07,568 -- 01:09:09,370
in, in the provinces, you know, obviously
01:09:09,370 -- 01:09:11,038
they cover their respective jurisdictions,
01:09:11,038 -- 01:09:12,940
whether it's Saskatchewan and New Brunswick or B.C.
01:09:12,940 -- 01:09:14,942
or Ontario.
01:09:14,942 -- 01:09:16,043
But when there is something
01:09:16,043 -- 01:09:17,845
that works in one province, there's no,
01:09:17,845 -- 01:09:20,181
no reason that it shouldn't work in another.
01:09:20,181 -- 01:09:21,115
And, you know, that's a
01:09:21,115 -- 01:09:22,049
that's an important part of the role
01:09:22,049 -- 01:09:23,317
that we play and, you know,
01:09:23,317 -- 01:09:25,452
helping to pitch those ideas,
01:09:25,452 -- 01:09:29,190
across the country to governments and regulators.
01:09:29,190 -- 01:09:29,590
All right.
01:09:29,590 -- 01:09:33,427
We'll try to give some more time to other questions.
01:09:33,427 -- 01:09:35,763
Hopefully the font is bigger this time.
01:09:35,763 -- 01:09:37,631
Okay. Yeah, it's the same size.
01:09:37,631 -- 01:09:40,634
Can somebody please read that? Okay, sure.
01:09:40,634 -- 01:09:41,335
How does
01:09:41,335 -- 01:09:42,536
how does the panel
01:09:42,536 -- 01:09:45,206
perceive the long term future of small
01:09:45,206 -- 01:09:47,942
to mid-sized community Credit Unions,
01:09:47,942 -- 01:09:50,044
giving the likes of technology,
01:09:50,044 -- 01:09:52,980
technological disruptions like AI,
01:09:52,980 -- 01:09:54,214
open banking,
01:09:54,214 -- 01:09:58,085
where larger Credit Unions and banks can afford to invest?
01:09:59,119 -- 01:10:01,088
So I can start this one and tell you
01:10:01,088 -- 01:10:06,060
that larger Credit Unions can't invest on their own either.
01:10:06,460 -- 01:10:08,462
When you talk about large Credit Unions,
01:10:08,462 -- 01:10:11,432
they don't have nearly the money that the banks
01:10:11,432 -- 01:10:13,867
have to invest in these technologies.
01:10:13,867 -- 01:10:18,305
And so the larger Credit Unions are actually cooperating,
01:10:18,305 -- 01:10:21,508
across the country in, in looking at right now,
01:10:21,508 -- 01:10:23,110
not AI in open banking,
01:10:23,110 -- 01:10:25,346
but through the payment modernization.
01:10:25,346 -- 01:10:26,914
And
01:10:26,914 -- 01:10:30,918
so I think it, it will require cooperation.
01:10:30,918 -- 01:10:33,220
And to me, the future of small
01:10:33,220 -- 01:10:35,989
and mid-sized community Credit Unions
01:10:35,989 -- 01:10:37,958
again, requires cooperation.
01:10:37,958 -- 01:10:40,360
We need to have joint services
01:10:40,360 -- 01:10:43,597
and build these technologies together.
01:10:43,597 -- 01:10:44,364
Otherwise
01:10:44,364 -- 01:10:49,369
none of us are going to be able to provide the services.
01:10:51,572 -- 01:10:54,208
Any other perspectives?
01:10:54,208 -- 01:10:55,576
But,
01:10:55,576 -- 01:10:58,512
you know, again, I will, just add to what Jackie said,
01:11:00,747 -- 01:11:01,148
I mean, at
01:11:01,148 -- 01:11:02,049
one point
01:11:02,049 -- 01:11:04,017
in time, many, many decades,
01:11:04,017 -- 01:11:06,453
there was about 1,000 Credit Unions in Ontario.
01:11:06,453 -- 01:11:09,723
And I think I heard this morning there's 58.
01:11:09,723 -- 01:11:12,459
So consolidation has been a part of,
01:11:12,459 -- 01:11:14,528
let's say, this Credit Union system for
01:11:14,528 -- 01:11:17,197
well over 30 years now.
01:11:17,197 -- 01:11:20,467
Is technology, you know, what's driving consolidation?
01:11:20,467 -- 01:11:22,169
Maybe it is.
01:11:22,169 -- 01:11:24,438
But I would say and I said earlier,
01:11:24,438 -- 01:11:25,906
I think the business world and,
01:11:25,906 -- 01:11:26,707
and the,
01:11:26,707 -- 01:11:27,641
the business models
01:11:27,641 -- 01:11:30,277
are changing and Credit Unions need to change with it
01:11:30,277 -- 01:11:32,980
in order for them to not only just survive but thrive.
01:11:32,980 -- 01:11:37,951
So I do feel that, it's going to be harder as,
01:11:39,186 -- 01:11:39,920
for smaller
01:11:39,920 -- 01:11:42,089
mid-sized Credit Unions to continue to invest in
01:11:42,089 -- 01:11:43,790
what is required to serve their members.
01:11:43,790 -- 01:11:45,158
But I think we,
01:11:45,158 -- 01:11:46,560
we heard this morning from
01:11:46,560 -- 01:11:49,329
I think it was Mark White who, who commented that, you know,
01:11:49,329 -- 01:11:52,232
there are certain small Credit Unions that can stay
01:11:52,232 -- 01:11:54,735
and thrive for their members forever.
01:11:54,735 -- 01:11:56,136
It all depends on your membership
01:11:56,136 -- 01:11:58,105
and what they're looking for.
01:11:58,105 -- 01:12:00,073
I think the reference to community Credit Union means,
01:12:00,073 -- 01:12:00,807
you know, it's
01:12:00,807 -- 01:12:02,075
obviously a little bit more challenging,
01:12:02,075 -- 01:12:03,710
I would say, because,
01:12:03,710 -- 01:12:05,112
those members have choices,
01:12:05,112 -- 01:12:06,780
as I said in my comments as well,
01:12:06,780 -- 01:12:09,616
there's so many choices that members have today
01:12:09,616 -- 01:12:11,585
to how they want to do business. So,
01:12:12,686 -- 01:12:15,822
again, cooperation and working together shared services.
01:12:15,822 -- 01:12:17,724
You heard me say that earlier.
01:12:17,724 -- 01:12:19,259
I do feel that's what's required
01:12:19,259 -- 01:12:22,029
for us to sort of, work together and,
01:12:22,029 -- 01:12:24,064
and support the small, medium sized Credit Unions.
01:12:24,064 -- 01:12:25,032
But,
01:12:25,032 -- 01:12:26,900
I would also say that just, you know,
01:12:26,900 -- 01:12:28,235
looking at the history,
01:12:28,235 -- 01:12:29,603
there's been a lot of consolidation.
01:12:29,603 -- 01:12:33,173
And I think it's because, you know, it is difficult as,
01:12:33,173 -- 01:12:33,940
things have changed
01:12:33,940 -- 01:12:36,009
and technology is definitely changing
01:12:36,009 -- 01:12:37,244
how business is being done.
01:12:37,244 -- 01:12:37,544
And that's
01:12:37,544 -- 01:12:42,549
putting a lot of cost pressures on Credit Unions.
01:12:42,849 -- 01:12:44,451
Thank you.
01:12:44,451 -- 01:12:46,620
I don't, let's see if there's another.
01:12:46,620 -- 01:12:51,625
The font got bigger so I can read it.
01:12:53,727 -- 01:12:54,728
That's the same question.
01:12:54,728 -- 01:12:55,128
Yeah.
01:12:55,128 -- 01:13:00,100
Is there another, a third question.
01:13:00,400 -- 01:13:02,669
Not yet.
01:13:02,669 -- 01:13:03,970
There's got to be a third question.
01:13:03,970 -- 01:13:05,438
Come on. I think we answered everything.
01:13:06,940 -- 01:13:08,408
Nobody has any questions.
01:13:08,408 -- 01:13:13,413
You can get up and say it if you like.
01:13:14,447 -- 01:13:15,015
You okay?
01:13:15,015 -- 01:13:18,051
You’ve asked questions. I just go through my...
01:13:18,051 -- 01:13:21,454
Please stand up and ask.
01:13:21,454 -- 01:13:23,857
...My question is how to
01:13:23,857 -- 01:13:24,257
Opinion.
01:13:24,257 -- 01:13:29,262
[unintelligble]...Board members are qualified
01:13:29,396 -- 01:13:42,342
[unintelligble]
01:13:42,342 -- 01:13:45,512
[unintelligble]
01:13:45,512 -- 01:13:49,215
I’m wondering, how do you deal with that?
01:13:49,215 -- 01:13:52,752
Okay, so it is a challenge.
01:13:52,752 -- 01:13:57,190
And we have a similar challenge, at Libro as well,
01:13:57,190 -- 01:13:59,626
because we're trying to track
01:13:59,626 -- 01:14:02,395
who have the expertise and the experience.
01:14:02,395 -- 01:14:05,131
I think one of the things that, we can do
01:14:05,131 -- 01:14:08,835
is to use the training that's provided,
01:14:08,835 -- 01:14:11,204
and I actually met a gentleman
01:14:11,204 -- 01:14:13,807
at a conference who had done their [unintelligble]
01:14:13,807 -- 01:14:17,277
training before they even got on to the Board.
01:14:17,277 -- 01:14:20,547
So I think that would be something that I would encourage
01:14:20,547 -- 01:14:23,950
is, is to have people thinking about it beforehand.
01:14:23,950 -- 01:14:26,920
But the other piece of it is through technology
01:14:26,920 -- 01:14:30,490
and through the video conferencing that we've had.
01:14:30,490 -- 01:14:33,093
You don't actually have to be limited
01:14:33,093 -- 01:14:35,862
to the community in which you operate.
01:14:35,862 -- 01:14:39,332
So we're hoping that, some of the, the,
01:14:39,332 -- 01:14:41,968
some of the stretch can be a little bit broader
01:14:41,968 -- 01:14:44,337
when it comes to getting those, people
01:14:44,337 -- 01:14:45,738
with good governance.
01:14:45,738 -- 01:14:48,908
And a lot of it, unfortunately, is training them up,
01:14:49,876 -- 01:14:54,881
and very quickly as well, which is a bit of a challenge.
01:14:55,748 -- 01:14:57,550
and it's an ongoing issue.
01:14:57,550 -- 01:14:58,551
Definitely.
01:14:58,551 -- 01:15:03,556
The, the main challenge, to be honest, is not the,
01:15:03,857 -- 01:15:06,659
helping them to understand what their role is versus
01:15:06,659 -- 01:15:09,662
what their role isn't. I think is the biggest problem.
01:15:09,662 -- 01:15:11,831
They think, they think they're going to be able
01:15:11,831 -- 01:15:14,934
to come in as customers and,
01:15:14,934 -- 01:15:15,768
you know, change
01:15:15,768 -- 01:15:16,669
service charges
01:15:16,669 -- 01:15:19,105
or, you know, give people loans or,
01:15:19,105 -- 01:15:22,308
you know, they come in with a very operational mindset.
01:15:22,308 -- 01:15:26,646
That's the mindset that's the hardest to get rid of.
01:15:26,646 -- 01:15:26,980
Thank you,
01:15:26,980 -- 01:15:28,548
Jacquie. I see another question that's come up here.
01:15:28,548 -- 01:15:30,016
It's about resources.
01:15:30,016 -- 01:15:31,584
What resources
01:15:31,584 -- 01:15:34,254
would you suggest for Board Directors
01:15:34,254 -- 01:15:35,288
who want to come up to speed
01:15:35,288 -- 01:15:37,123
with the challenges that we've talked about,
01:15:37,123 -- 01:15:39,826
and also about long term strategic planning?
01:15:39,826 -- 01:15:42,395
So we have a short amount of time,
01:15:42,395 -- 01:15:43,763
couple of minutes, maybe we can start that.
01:15:43,763 -- 01:15:45,164
But I suggest,
01:15:45,164 -- 01:15:47,066
if you can contact us at FSRA,
01:15:47,066 -- 01:15:49,135
we can talk to the panel members as well.
01:15:49,135 -- 01:15:52,238
And if we can gather maybe some of those resources,
01:15:52,238 -- 01:15:54,073
there might be some links that we can gather for you,
01:15:54,073 -- 01:15:55,508
and then we can send that to you.
01:15:55,508 -- 01:15:56,609
That might,
01:15:56,609 -- 01:15:57,877
satisfy
01:15:57,877 -- 01:16:00,146
your question here better than just a minute up here.
01:16:00,146 -- 01:16:02,915
But does anybody have any ideas at the moment?
01:16:02,915 -- 01:16:05,318
ICD, CCUA,
01:16:06,519 -- 01:16:11,090
Google.
01:16:11,090 -- 01:16:14,494
What Jacquie said.
01:16:14,494 -- 01:16:16,529
Chris, Lloyd?
01:16:16,529 -- 01:16:17,463
No, I again,
01:16:17,463 -- 01:16:18,531
I had the same kind of thoughts
01:16:18,531 -- 01:16:21,501
around the CCUA as an information source.
01:16:21,501 -- 01:16:22,735
And, obviously,
01:16:22,735 -- 01:16:24,237
I think a lot of Directors now
01:16:24,237 -- 01:16:27,840
are embarking on their ICD certifications.
01:16:27,840 -- 01:16:29,776
I think it's really just designed to sort of support
01:16:29,776 -- 01:16:31,811
you as Directors.
01:16:31,811 -- 01:16:33,579
As, again, the business model for Credit
01:16:33,579 -- 01:16:35,381
Unions is definitely getting more complex.
01:16:35,381 -- 01:16:36,582
So,
01:16:36,582 -- 01:16:39,552
supportive work with CCUA and ICD
01:16:39,552 -- 01:16:42,455
would be excellent for you.
01:16:42,455 -- 01:16:44,824
Right. Thank you.
01:16:44,824 -- 01:16:47,059
All right. We're just exactly on time.
01:16:47,059 -- 01:16:48,728
So we'll put up the last slide.
01:16:48,728 -- 01:16:52,098
And I think it's called, Wrap up.
01:16:52,098 -- 01:16:55,234
Do I need to push something?
01:16:55,234 -- 01:16:57,937
All right. Magic.
01:16:57,937 -- 01:16:58,371
All right.
01:16:58,371 -- 01:17:02,942
So this is called wrap up, but it's not really a wrap up.
01:17:02,942 -- 01:17:07,246
The point of this panel and this session was to
01:17:07,246 -- 01:17:11,717
I can't say, that the discussion and dialog started because,
01:17:11,717 -- 01:17:12,652
you can talk to Chris.
01:17:12,652 -- 01:17:15,755
This has been going on for decades, as it should.
01:17:15,755 -- 01:17:17,890
But there are certain things in the environment
01:17:17,890 -- 01:17:21,661
that are exaggerating and exacerbating the situation.
01:17:21,661 -- 01:17:25,298
So we do need some, as I've said, some sector led
01:17:25,298 -- 01:17:27,433
and sector solutions,
01:17:27,433 -- 01:17:27,934
worked out
01:17:27,934 -- 01:17:31,103
very soon for this sector to be long term viable
01:17:31,103 -- 01:17:33,205
for the foreseeable future.
01:17:33,205 -- 01:17:35,341
so, from FSRA’s perspective,
01:17:35,341 -- 01:17:37,376
we think it's very important, as you've heard,
01:17:37,376 -- 01:17:40,479
for, not just senior management to be involved,
01:17:40,479 -- 01:17:42,114
but for the Boards to be involved as well.
01:17:42,114 -- 01:17:46,319
And as Jackie said, for Boards to talk to other Boards,
01:17:46,319 -- 01:17:47,420
Senior management already do that.
01:17:47,420 -- 01:17:48,187
They talk to each other.
01:17:48,187 -- 01:17:49,989
But for Boards to talk to other Boards,
01:17:49,989 -- 01:17:52,858
because we do need a sector strategy
01:17:52,858 -- 01:17:54,527
and a sector solution going forward.
01:17:55,628 -- 01:17:59,565
And at FSRA, as, as it says here,
01:17:59,565 -- 01:18:03,602
we are very interested in working with you, Credit Unions
01:18:03,602 -- 01:18:04,437
to do what we can,
01:18:04,437 -- 01:18:07,006
given our legislative and mandate constraints,
01:18:07,006 -- 01:18:08,140
because we do those certain things
01:18:08,140 -- 01:18:09,809
we can do and other things we can.
01:18:09,809 -- 01:18:11,811
But given that we can do certain things,
01:18:11,811 -- 01:18:14,847
we would like to work with you on those proposed solutions,
01:18:14,847 -- 01:18:17,049
to implement them, to make them work.
01:18:17,049 -- 01:18:21,720
And so we're very interested in that work.
01:18:21,720 -- 01:18:24,056
I just wanted to thank a few people
01:18:24,056 -- 01:18:26,592
before we head off to reception,
01:18:26,592 -- 01:18:28,527
which I think is just going to be out here.
01:18:28,527 -- 01:18:33,199
So, Jacquie, Chris, Michael and Lloyd, thank you very much.
01:18:33,199 -- 01:18:38,204
That was a fantastic panel.
01:18:39,772 -- 01:18:40,306
As well,
01:18:40,306 -- 01:18:42,441
there were some other people, my FSRA colleagues,
01:18:42,441 -- 01:18:45,578
that were working on this to prepare us for this session.
01:18:46,912 -- 01:18:48,848
Where is Doug Macdonald?
01:18:48,848 -- 01:18:51,784
I saw him. Oh, Doug Macdonald is right there.
01:18:51,784 -- 01:18:54,420
Dan Oprescu is over there.
01:18:54,420 -- 01:18:55,387
David Maxwell.
01:18:55,387 -- 01:18:58,357
He's... at the back of the room.
01:18:58,357 -- 01:19:01,026
David Maxwell back there making sure everything goes well.
01:19:01,026 -- 01:19:02,928
So he's our Head of Regulation.
01:19:02,928 -- 01:19:04,897
Dan is our Head of Supervision,
01:19:04,897 -- 01:19:08,934
and Steve Kokaliaris who is our Director of Approvals.
01:19:08,934 -- 01:19:11,003
They were all very closely involved with panel
01:19:11,003 -- 01:19:12,271
and setting up this session.
01:19:12,271 -- 01:19:16,709
So thank you very much and see you all at reception.
01:19:16,709 -- 01:19:19,478
Thank you.
00:00:04,966 -- 00:00:06,366
Good afternoon, everyone.
00:00:06,366 -- 00:00:08,533
Welcome to the Pension break-up session.
00:00:08,533 -- 00:00:12,166
It's great to see everyone in person today.
00:00:12,166 -- 00:00:15,533
So just a few housekeeping items.
00:00:15,533 -- 00:00:18,000
So, today’s session is taped
00:00:18,000 -- 00:00:21,366
and we also have a French translation.
00:00:21,366 -- 00:00:23,266
So whoever needs
00:00:23,266 -- 00:00:24,400
French translation just raise their hands
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we have headsets available in this room.
00:00:26,600 -- 00:00:28,833
And for those joining us online,
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I was told that you can click on some button
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you can click on your initials.
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I was told,
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and then that you can do your language translation there.
00:00:40,700 -- 00:00:43,966
So we are truly a hybrid kind of platform.
00:00:43,966 -- 00:00:45,566
So to
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to get true spirit to it,
00:00:46,966 -- 00:00:48,500
we actually launching
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and using a platform called Chime to take questions.
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So we want to give the equal experience
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to both people in the room as well as people online as well too.
00:00:57,900 -- 00:01:00,966
So please do submit your questions through Chime.
00:01:00,966 -- 00:01:04,433
We have a question period at the end of the sessions.
00:01:04,433 -- 00:01:08,400
And if you have for some reasons and those in the room trouble
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entering the questions, please raise your hand.
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Somebody will be there to help you.
00:01:14,366 -- 00:01:16,900
So before I actually launch into the session,
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I want to do a little commercial.
00:01:18,500 -- 00:01:21,233
You've heard about the success of Pension Awareness Day.
00:01:21,233 -- 00:01:22,766
I want to take this opportunity
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to thank the entire sector for providing us with that support.
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The collaboration there is exemplary
00:01:30,433 -- 00:01:33,600
and in fact, we actually have a lot of questions now
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about how to get involved even more next year.
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It is our hope that every day from this day on
00:01:39,733 -- 00:01:42,333
would be Pension Awareness Day. That's my hope.
00:01:42,333 -- 00:01:45,100
Officially it is the third
00:01:45,100 -- 00:01:47,766
Thursday of every February of every year.
00:01:47,766 -- 00:01:50,266
And we want to make it a grassroot event
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that everyone will be able to participate in and talk about it
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and they'll take
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complete comfort in that
00:01:56,233 -- 00:02:00,400
we will get there and we actually even have other jurisdictions
00:02:00,400 -- 00:02:03,166
call me and say, “How do we do it?” How do we get on board?”
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So it is a great success
00:02:04,466 -- 00:02:06,366
and kudos to our Public Affairs team
00:02:06,366 -- 00:02:10,766
who have made me look really good. So thank you for that.
00:02:10,766 -- 00:02:17,300
So nice segue to our session today is all about PBR - Pension
00:02:17,300 -- 00:02:22,000
Benefits Regulation. No, it's about principles-based regulations.
00:02:24,866 -- 00:02:27,033
FSRA is a principles-based,
00:02:27,033 -- 00:02:29,366
risk based, outcome focused regulator.
00:02:29,366 -- 00:02:32,500
I'm sure you've heard a lot about that.
00:02:32,500 -- 00:02:36,400
I've been hearing about that since day one of FSRA launch.
00:02:36,400 -- 00:02:37,733
But what exactly is it?
00:02:37,733 -- 00:02:39,166
What does it mean?
00:02:39,166 -- 00:02:42,300
Joanne shared this morning talked about,
00:02:42,300 -- 00:02:44,533
there are some sentiment around,
00:02:44,533 -- 00:02:44,800
you know,
00:02:44,800 -- 00:02:47,300
concerns or maybe misunderstanding
00:02:47,300 -- 00:02:51,467
about exactly how this would be implemented through the sectors.
00:02:51,467 -- 00:02:53,867
I've been with FSCO / FSRA,
00:02:53,867 -- 00:02:57,967
for coming up six years. Believe it or not,
00:02:57,967 -- 00:03:03,367
the two most commonly heard comments are: at one end.
00:03:03,367 -- 00:03:06,967
It is. Well, there's so much ambiguity.
00:03:06,967 -- 00:03:08,867
How can I comply? You have no checklists.
00:03:08,867 -- 00:03:09,967
How can I comply?
00:03:09,967 -- 00:03:12,733
To the other end, as well,
00:03:12,733 -- 00:03:14,100
you guys are principles-based
00:03:14,100 -- 00:03:16,233
and you kind of ignore this, you know?
00:03:16,233 -- 00:03:20,100
So those are the two kind of goal poles that I kind of experience
00:03:20,100 -- 00:03:23,267
during my last few years as a Regulator.
00:03:23,267 -- 00:03:28,867
So our session today is exactly about demystifying what PBR
00:03:28,867 -- 00:03:30,000
means for pensions.
00:03:31,233 -- 00:03:33,400
It’s more than a few catchy phrases.
00:03:33,400 -- 00:03:36,200
I'm hoping that through our panel here
00:03:36,200 -- 00:03:37,267
to tell you a little bit
00:03:37,267 -- 00:03:40,567
of how we apply PBR in our day-to-day work.
00:03:40,567 -- 00:03:43,567
It will demystify for you what PBR actually means.
00:03:43,567 -- 00:03:47,767
So at its core, PBR is about collaboration,
00:03:47,767 -- 00:03:50,067
about shared understanding and commitment.
00:03:50,067 -- 00:03:54,100
It’s about, it's not about, it’s more than just about having rules
00:03:54,100 -- 00:03:58,900
that are principles-based, but it's also not about ignoring law.
00:03:58,900 -- 00:04:02,700
So without further ado, I want to introduce my panel
00:04:02,700 -- 00:04:07,433
who are all my colleagues from FSRA’s Pensions team,
00:04:07,433 -- 00:04:09,367
to my
00:04:09,367 -- 00:04:11,633
right, I mean, actually, but I can’t tell you from left to right,
00:04:11,633 -- 00:04:13,600
it's Reesha Hosein.
00:04:13,600 -- 00:04:18,633
She's the Director of Legal Services and Deputy General Counsel
00:04:18,633 -- 00:04:23,300
to the right of Reesha is James Hoffner, Chief Prudential
00:04:23,300 -- 00:04:25,767
Supervision Officer for large public sector,
00:04:25,767 -- 00:04:27,233
pension plans
00:04:27,233 -- 00:04:28,867
and the far right is Paul
00:04:28,867 -- 00:04:31,100
Martiniello, Director of Prudential Supervision,
00:04:31,100 -- 00:04:32,700
mostly for single-employer pension
00:04:32,700 -- 00:04:35,367
plans and multi-employer pension plans.
00:04:35,367 -- 00:04:37,700
To my left is Claire Woodcock.
00:04:37,700 -- 00:04:40,633
She is the Director of Pension Plan Operations
00:04:40,633 -- 00:04:45,000
and to the far left is Trevor Cartlidge, Deputy Chief Actuary
00:04:45,000 -- 00:04:47,633
and my name is Andrew Fung, acting
00:04:47,633 -- 00:04:50,933
EVP of FSRA and I will moderate the session today.
00:04:51,900 -- 00:04:52,900
So,
00:04:52,900 -- 00:04:58,800
without further ado, let me just start off with perhaps Reesha.
00:04:58,967 -- 00:05:01,033
We have a draft
00:05:01,033 -- 00:05:01,700
fiscal based
00:05:01,700 -- 00:05:07,600
regulation approach guidance that we consulted on in 2022.
00:05:07,700 -- 00:05:11,467
Can you give us a little bit of background about that guidance
00:05:11,467 -- 00:05:13,133
and share at the very high level
00:05:13,133 -- 00:05:18,200
a little bit about the comments that we have received so far?
00:05:18,200 -- 00:05:20,467
So, I think I'm going to start with that.
00:05:20,467 -- 00:05:24,300
Oh, by the way, so nice to see so many familiar faces.
00:05:24,300 -- 00:05:27,933
Thanks so much for joining us today and nice to see new faces,
00:05:27,933 -- 00:05:30,400
it's really great to be able to meet you.
00:05:30,400 -- 00:05:32,000
Thank you for the invitation
00:05:32,000 -- 00:05:34,267
to talk about principles-based regulation.
00:05:34,267 -- 00:05:38,534
So what I'm going to start off with is just a description of why
00:05:38,534 -- 00:05:39,834
principles-based regulation.
00:05:39,834 -- 00:05:42,500
We've been hearing a lot about it today.
00:05:42,500 -- 00:05:44,334
So as many of you know,
00:05:44,334 -- 00:05:46,067
before FSRA was created,
00:05:46,067 -- 00:05:48,034
there was an expert panel
00:05:48,034 -- 00:05:50,600
that was established to look at the mandates
00:05:50,600 -- 00:05:53,034
of both FSCO and DICO.
00:05:53,034 -- 00:05:54,200
And what they concluded
00:05:54,200 -- 00:05:55,534
is, as many of you are familiar
00:05:55,534 -- 00:05:56,800
with, hopefully,
00:05:56,800 -- 00:05:58,800
is that due to the quickly
00:05:58,800 -- 00:06:01,567
changing nature of financial services regulation,
00:06:01,567 -- 00:06:03,700
which we heard a lot about this morning,
00:06:03,700 -- 00:06:06,300
there was a need for an innovative,
00:06:06,300 -- 00:06:10,434
flexible, adaptive and responsive regulator.
00:06:10,434 -- 00:06:14,900
So an essential tool, this was their recommendation,
00:06:14,900 -- 00:06:16,800
in supporting this approach
00:06:16,800 -- 00:06:20,300
is the principles-based approach to regulation.
00:06:20,300 -- 00:06:21,267
By this,
00:06:21,267 -- 00:06:25,567
it means that FSRA will look to high level principles
00:06:25,567 -- 00:06:28,434
to guide our regulatory actions.
00:06:28,434 -- 00:06:30,200
So let me just start with a quick definition,
00:06:30,200 -- 00:06:31,934
and I know I'm going to sound like a total lawyer
00:06:31,934 -- 00:06:34,367
by starting with a definition, but,
00:06:34,367 -- 00:06:37,800
so let's talk about what is principles-based regulation,
00:06:37,800 -- 00:06:39,134
the classic example
00:06:39,134 -- 00:06:42,734
that’s used to demonstrate between a principles-based
00:06:42,734 -- 00:06:45,200
and a prescriptive approach to regulation
00:06:45,200 -- 00:06:48,400
is the highway traffic rule example.
00:06:48,400 -- 00:06:51,567
So in a prescriptive framework, you can go on to the highway
00:06:51,567 -- 00:06:54,134
and there is a clearly posted speed limit
00:06:54,134 -- 00:06:57,767
and you may not travel faster than a 100 kilometers an hour.
00:06:57,767 -- 00:07:01,600
Right? We’re all relatively familiar with all that.
00:07:01,600 -- 00:07:03,800
In a principles-based environment,
00:07:03,800 -- 00:07:07,000
the speed limit would be stated in a different way,
00:07:07,000 -- 00:07:11,500
looking at the outcomes that we are all trying to achieve,
00:07:11,500 -- 00:07:13,734
which is safe travel on a highway.
00:07:13,734 -- 00:07:18,967
So the rule or the requirement on the highway would be
00:07:18,967 -- 00:07:20,134
do not travel
00:07:20,134 -- 00:07:24,567
more than is reason, at a speed that is faster than is reasonable
00:07:24,567 -- 00:07:26,300
and prudent in the circumstances.
00:07:26,300 -- 00:07:30,500
So as many of us, because we are in Toronto, are familiar,
00:07:30,500 -- 00:07:31,900
when you're driving on the highway
00:07:31,900 -- 00:07:35,034
and they're conditions with black ice, you would be traveling
00:07:35,034 -- 00:07:38,800
perhaps 40 or 50 kilometers an hour, depending on the traffic.
00:07:38,800 -- 00:07:43,700
On clear day your car's well-tuned, gas in the tank,
00:07:45,200 -- 00:07:47,034
very little traffic you might,
00:07:47,034 -- 00:07:48,500
and I'm not encouraging you,
00:07:48,500 -- 00:07:50,900
to go a slightly above the speed limit.
00:07:50,900 -- 00:07:52,967
Perhaps you would say that
00:07:52,967 -- 00:07:54,634
120 kilometers an hour
00:07:54,634 -- 00:07:57,034
would be very reasonable in the circumstances.
00:07:57,034 -- 00:07:58,900
So that's the out...
00:07:58,900 -- 00:08:02,000
So what we're trying to focus on as Andrew,
00:08:02,000 -- 00:08:04,534
I think Mark mentioned this morning is focusing
00:08:04,534 -- 00:08:07,534
on the outcomes that we're trying to achieve.
00:08:07,534 -- 00:08:09,200
So
00:08:09,200 -- 00:08:12,500
you may ask, what are those outcomes?
00:08:12,500 -- 00:08:16,700
What we look to as a regulator are our statutory objects.
00:08:16,700 -- 00:08:20,234
You've been hearing a lot about that, but for the pension sector,
00:08:20,234 -- 00:08:24,767
it's the protection of plan, the rights and interests,
00:08:24,767 -- 00:08:26,134
rights and benefits.
00:08:26,134 -- 00:08:26,701
You'll forgive me.
00:08:26,701 -- 00:08:29,534
I should know this off the top of my head of plan beneficiaries
00:08:29,534 -- 00:08:32,434
as well as the good administration of pension plans.
00:08:32,434 -- 00:08:34,434
So these are the two key things
00:08:34,434 -- 00:08:37,401
as well as the other objects for financial services
00:08:37,401 -- 00:08:39,734
that will guide us in the way that we regulate
00:08:39,734 -- 00:08:40,767
the pension sector.
00:08:42,467 -- 00:08:46,734
So I would also say as legal director,
00:08:46,734 -- 00:08:47,434
the PBA,
00:08:47,434 -- 00:08:50,101
as many of you know and some of you have complained
00:08:50,101 -- 00:08:53,167
about, is a very prescriptive statute.
00:08:53,167 -- 00:08:54,567
So what we're trying to do
00:08:54,567 -- 00:08:58,567
and what we are doing in many cases, whether you see it
00:08:58,567 -- 00:09:00,967
clearly in our guidance or behind the scenes
00:09:00,967 -- 00:09:02,234
or even when you're talking
00:09:02,234 -- 00:09:07,101
with a pension officer or Claire or Paul or James
00:09:07,101 -- 00:09:10,134
is looking to an interpretation that supports
00:09:10,134 -- 00:09:12,967
the outcomes that we are trying to achieve.
00:09:12,967 -- 00:09:15,967
And it is a broad, purposive approach
00:09:15,967 -- 00:09:19,034
to regulation, sorry, to statutory interpretation.
00:09:19,034 -- 00:09:21,701
Now this is not a new concept.
00:09:21,701 -- 00:09:24,501
Many of you who went to law school with me
00:09:24,501 -- 00:09:27,067
just a couple of years ago
00:09:27,067 -- 00:09:29,901
would say that a broad purpose of approach
00:09:29,901 -- 00:09:33,001
to statutory interpretation is not new.
00:09:33,001 -- 00:09:34,401
What is new
00:09:34,401 -- 00:09:36,201
is the case law, administrative
00:09:36,201 -- 00:09:39,801
law, case law that talks a bit about what
00:09:39,801 -- 00:09:43,067
that framework for interpretation should be.
00:09:43,067 -- 00:09:45,634
So I would encourage lawyers in the room
00:09:45,634 -- 00:09:47,367
to look at the Vavilov case law,
00:09:47,367 -- 00:09:49,467
and there is a clear link
00:09:49,467 -- 00:09:52,501
to a rational connection to the statutory objects.
00:09:52,501 -- 00:09:54,701
It is not anything goes,
00:09:54,701 -- 00:09:58,001
but we will be guided by our statutory objects.
00:09:58,001 -- 00:09:59,034
So that's
00:09:59,034 -- 00:10:02,701
what we're doing and the outcomes that we're hoping to achieve
00:10:02,701 -- 00:10:05,534
is what I'd like to talk about a little bit next.
00:10:05,534 -- 00:10:10,701
So you heard today also that we're an outcomes focused regulator
00:10:10,701 -- 00:10:12,901
where do we get those outcomes?
00:10:12,901 -- 00:10:15,667
We get those outcomes by identifying
00:10:15,667 -- 00:10:17,967
with our expertise as the regulator.
00:10:17,967 -- 00:10:22,434
What are the problems that we see as we attempt to solve them?
00:10:22,434 -- 00:10:23,967
There's an opportunity
00:10:23,967 -- 00:10:27,901
in many circumstances for you to provide your feedback
00:10:27,901 -- 00:10:30,801
about what you think the desired outcomes should be.
00:10:30,801 -- 00:10:32,434
For an expert regulator
00:10:32,434 -- 00:10:35,134
that would be in guidance,
00:10:35,134 -- 00:10:39,067
the consultation process, or the consultation process with rules
00:10:39,067 -- 00:10:42,434
or even speaking to the pension officer
00:10:42,434 -- 00:10:44,467
that is reviewing your plan amendment
00:10:44,467 -- 00:10:47,134
or dealing with you on a transaction
00:10:47,134 -- 00:10:49,801
or with respect to potentially a member complaint.
00:10:50,834 -- 00:10:53,367
So I think I'm probably running out of time,
00:10:53,367 -- 00:10:56,301
but I'll quickly say the other important thing
00:10:56,301 -- 00:10:59,767
to think about is how we are regulating you.
00:10:59,767 -- 00:11:04,667
And that's what Andrew described as our principles,
00:11:04,667 -- 00:11:08,401
the guidance on principles for the pension sector.
00:11:08,401 -- 00:11:10,934
That's going to be rolled out into a new guidance
00:11:10,934 -- 00:11:14,268
that's likely going to be issued in the spring that talks about
00:11:14,268 -- 00:11:18,201
how we will regulate the sectors and what you can expect.
00:11:18,201 -- 00:11:19,968
You can expect us to be.
00:11:19,968 -- 00:11:22,234
And these are, I'm not going to go through the
00:11:22,234 -- 00:11:23,834
all of the guidance principles,
00:11:23,834 -- 00:11:25,134
but the key concepts
00:11:25,134 -- 00:11:28,034
I think for this audience would be
00:11:28,034 -- 00:11:31,868
that we're going to be risk based, we're going to be transparent,
00:11:31,868 -- 00:11:35,901
we're going to be collaborative as we try to identify
00:11:35,901 -- 00:11:39,834
the best approach to solving the difficult regulatory problems
00:11:39,834 -- 00:11:41,568
that we're faced with as a regulator.
00:11:44,401 -- 00:11:46,201
And that's pretty much it for me.
00:11:46,201 -- 00:11:49,001
Andrew, Thank you, Reesha.
00:11:49,001 -- 00:11:54,001
So this is a very helpful overview to frame our discussions.
00:11:54,001 -- 00:11:58,768
So PBR certainly doesn't mean that we disregard the law,
00:11:58,768 -- 00:12:00,801
but I think it requires the pension plans
00:12:00,801 -- 00:12:04,734
we regulate in administrating its requirements.
00:12:04,734 -- 00:12:06,068
We kind of take it up
00:12:06,068 -- 00:12:10,034
one notch higher by also considering the purpose
00:12:10,034 -- 00:12:12,001
and our objects, quite a deviation
00:12:12,001 -- 00:12:14,434
from the previous administration,
00:12:14,434 -- 00:12:18,034
so ambiguous it might be - think flexibility.
00:12:18,034 -- 00:12:21,268
Those two initials A&F is very dear to me.
00:12:21,268 -- 00:12:24,001
Andrew Fung, ambiguous flexibility.
00:12:24,001 -- 00:12:27,268
So think flexibility when you think about ambiguous.
00:12:27,268 -- 00:12:30,201
I think how plan administrators can develop
00:12:30,201 -- 00:12:31,001
their own ways
00:12:31,001 -- 00:12:33,968
to achieve the desired outcomes,
00:12:33,968 -- 00:12:34,901
you know, are best suited
00:12:34,901 -- 00:12:37,901
to each unique circumstances,
00:12:37,901 -- 00:12:41,168
but also take into consideration the purpose of our act.
00:12:41,168 -- 00:12:43,101
But there will be situations
00:12:43,101 -- 00:12:45,401
where we will impose kind of bright line
00:12:46,701 -- 00:12:49,168
requirements to ensure, for example,
00:12:49,168 -- 00:12:52,568
plan beneficiaries are adequately protected.
00:12:52,568 -- 00:12:54,568
Did I get that right Reesha?
00:12:54,568 -- 00:12:57,634
Absolutely, oops sorry.
00:12:57,634 -- 00:13:00,434
Yes, Andrew, I would agree with that.
00:13:00,434 -- 00:13:03,301
There is this concept that it's not unreasonable
00:13:03,301 -- 00:13:05,701
that when we talk about principles-based regulation,
00:13:05,701 -- 00:13:09,034
that there would be an absence of rules.
00:13:09,034 -- 00:13:11,434
So at a high level, that's correct.
00:13:11,434 -- 00:13:15,501
But I would also highlight that we're both a principles-based
00:13:15,501 -- 00:13:17,734
and outcomes focused regulator,
00:13:17,734 -- 00:13:22,368
and the rules are inherent to support the outcome
00:13:22,368 -- 00:13:24,334
that we're hoping to achieve.
00:13:24,334 -- 00:13:26,534
And also, underlie
00:13:26,534 -- 00:13:29,901
the principles that we are setting to establish.
00:13:29,901 -- 00:13:31,668
So there's another highway example,
00:13:31,668 -- 00:13:34,401
if you would permit me for another moment.
00:13:34,401 -- 00:13:35,968
It's the autobahn.
00:13:35,968 -- 00:13:37,134
My colleague Joan Small
00:13:37,134 -- 00:13:39,001
and I have been working a lot on training.
00:13:39,001 -- 00:13:41,268
We've been training internally with FSRA
00:13:41,268 -- 00:13:43,134
and it's interesting
00:13:43,134 -- 00:13:45,868
that there is this, you can drive as fast
00:13:45,868 -- 00:13:47,601
you want on the German autobahn.
00:13:47,601 -- 00:13:50,601
We're all relatively familiar with that concept, right?
00:13:50,601 -- 00:13:53,968
What we're not necessarily as familiar with is
00:13:53,968 -- 00:13:56,068
there are a list of rules
00:13:56,068 -- 00:13:57,501
or requirements
00:13:57,501 -- 00:13:58,701
that underlie
00:13:58,701 -- 00:14:02,301
that broadly based you can drive as fast as you want.
00:14:02,301 -- 00:14:07,435
Things like your you cannot run out of gas on the autobahn.
00:14:08,601 -- 00:14:10,868
Your car has to be well tuned.
00:14:10,868 -- 00:14:12,801
You have to drive on the road conditions.
00:14:12,801 -- 00:14:15,001
I can't remember all of them. I have to apologize.
00:14:15,001 -- 00:14:18,201
But there's a little list of at least five of them.
00:14:18,201 -- 00:14:20,835
And they are well known
00:14:20,835 -- 00:14:22,201
to all the people, particularly
00:14:22,201 -- 00:14:26,835
the Germans, who are driving on the Autobahn all the time.
00:14:26,835 -- 00:14:30,968
So I'd ask you to consider that that a principles-based
00:14:30,968 -- 00:14:33,535
framework is not inconsistent
00:14:33,535 -- 00:14:37,368
in some cases with having bright line rules,
00:14:37,368 -- 00:14:41,235
because one, sometimes rules are required to support
00:14:41,235 -- 00:14:43,701
the achievement of the principle
00:14:43,701 -- 00:14:47,168
and also in some cases we may decide that
00:14:47,168 -- 00:14:49,835
a bright line rule is what is required
00:14:49,835 -- 00:14:52,601
to support our statutory objects.
00:14:52,601 -- 00:14:54,168
Protection of plan beneficiaries
00:14:54,168 -- 00:14:57,168
and good administration of pension plans. So don't be surprised.
00:14:58,501 -- 00:14:59,935
Thank you, Reesha.
00:14:59,935 -- 00:15:05,435
I now want to turn to some real examples as to how we apply PBR
00:15:05,435 -- 00:15:06,101
in our work.
00:15:06,101 -- 00:15:07,868
So, Paul, can you share with us
00:15:07,868 -- 00:15:09,901
how you have been applying PBR
00:15:09,901 -- 00:15:12,501
in your day-to-day work, specifically with the single-employer
00:15:12,501 -- 00:15:14,968
pension plans and the multi-employer pension plans? Yeah.
00:15:14,968 -- 00:15:16,535
Thanks, Andrew, and good afternoon everyone.
00:15:16,535 -- 00:15:19,135
So I'm going to get my acronyms out of the way right away.
00:15:19,135 -- 00:15:22,068
Single-employer pension plans are SEPPS and multi-employer
00:15:22,068 -- 00:15:24,235
pension plans are MEPPS.
00:15:24,235 -- 00:15:30,135
I've had the pleasure of joining FSRA in late 2019 and
00:15:31,168 -- 00:15:33,201
just as we were
00:15:33,201 -- 00:15:35,235
developing our approaches
00:15:35,235 -- 00:15:37,601
to prudential supervision of MEPPS and SEPPS.
00:15:37,601 -- 00:15:38,468
And so
00:15:38,468 -- 00:15:40,901
we were really able to do that and build it on a
00:15:40,901 -- 00:15:44,635
on a PBR foundation, which we have done,
00:15:44,635 -- 00:15:47,901
and of course to support our FSRA objects and
00:15:50,135 -- 00:15:50,535
you know,
00:15:50,535 -- 00:15:52,401
I would say I'm going to say right off the top,
00:15:52,401 -- 00:15:55,468
the feedback we've received in our travels
00:15:55,468 -- 00:15:58,501
over the last several years has been positive.
00:15:58,501 -- 00:16:02,235
I think the approach has really resonated.
00:16:02,235 -- 00:16:04,468
This collaborative,
00:16:04,468 -- 00:16:06,201
transparent, proactive
00:16:06,201 -- 00:16:07,935
approach has really resonated with the sector.
00:16:07,935 -- 00:16:10,635
And if you think about the FSRA objects themselves
00:16:10,635 -- 00:16:11,901
as a pension administrator,
00:16:11,901 -- 00:16:13,568
that wouldn't be too dissimilar, right?
00:16:13,568 -- 00:16:16,501
In terms of ensuring good pension
00:16:16,501 -- 00:16:17,368
administration
00:16:17,368 -- 00:16:23,268
and ultimately protecting the benefit for the beneficiaries.
00:16:23,435 -- 00:16:25,268
So anyway, I'd love to hear others thoughts
00:16:25,268 -- 00:16:27,968
I have heard from some I know I recognize some faces in the rooms
00:16:27,968 -- 00:16:29,435
and if not in today's forum.
00:16:29,435 -- 00:16:31,535
And please don't
00:16:31,535 -- 00:16:34,801
hesitate to reach out one on one to us at any time.
00:16:34,801 -- 00:16:37,501
To step back a little bit about operationalizing this.
00:16:37,501 -- 00:16:39,301
Starting in 2019.
00:16:39,301 -- 00:16:39,535
You know,
00:16:39,535 -- 00:16:42,368
you can think about people process and technology, right?
00:16:42,368 -- 00:16:43,402
So one of the keys
00:16:43,402 -- 00:16:47,202
to being collaborative and proactive
00:16:47,202 -- 00:16:49,635
is to have a relationship management discipline in place.
00:16:49,635 -- 00:16:50,902
And so we have to build that out.
00:16:50,902 -- 00:16:52,835
We also, as part of Andrew's team,
00:16:53,802 -- 00:16:55,602
built up much broader and deeper
00:16:55,602 -- 00:16:56,535
skill set
00:16:56,535 -- 00:16:58,702
right across all aspects of managing
00:16:58,702 -- 00:17:01,468
and administering a pension plan.
00:17:01,468 -- 00:17:05,035
We added some tools in terms of allowing us to be more dynamic
00:17:05,035 -- 00:17:06,768
and being on top of what's happening
00:17:06,768 -- 00:17:09,202
in the economy and capital markets and
00:17:09,202 -- 00:17:11,735
and looking at credit ratings,
00:17:11,735 -- 00:17:13,935
sponsored risk, things of that sort.
00:17:13,935 -- 00:17:14,635
And, and,
00:17:14,635 -- 00:17:19,368
and we did this as we concurrently had established the TAC -
00:17:19,368 -- 00:17:20,535
Technical Advisory Committee.
00:17:20,535 -- 00:17:21,468
Here I go with another one.
00:17:21,468 -- 00:17:23,668
You heard that Joanne talking about that this morning.
00:17:23,668 -- 00:17:28,668
We have a DB SEPP TAC as well as a MEPP TAC.
00:17:28,668 -- 00:17:33,302
And, and really critical to helping guide us for the MEPPS.
00:17:33,302 -- 00:17:35,402
We've established a road map of the work
00:17:35,402 -- 00:17:39,135
we wanted to do over the next several years, five years
00:17:39,135 -- 00:17:42,535
and with the DB SEPP in particular, there's a
00:17:42,535 -- 00:17:43,435
there was a guidance
00:17:43,435 -- 00:17:46,835
put into place on our supervisory approach for single employer
00:17:46,835 -- 00:17:48,902
pension plans that are actively monitored.
00:17:48,902 -- 00:17:52,402
And this guidance is an excellent example of a of a PBR approach.
00:17:52,402 -- 00:17:55,535
It's a nice succinct seven-page guidance.
00:17:55,535 -- 00:17:56,268
If you haven't read it, I
00:17:56,268 -- 00:17:57,635
highly recommend it
00:17:57,635 -- 00:18:00,602
and it's really important for us and our team
00:18:00,602 -- 00:18:02,202
as a communication tool as well,
00:18:02,202 -- 00:18:05,302
because we basically are in a proactive way
00:18:05,302 -- 00:18:07,902
are taking the information that we have available
00:18:07,902 -- 00:18:10,335
to us through filings, through publicly available sources.
00:18:10,335 -- 00:18:12,102
Some of those tools I just mentioned
00:18:12,102 -- 00:18:14,502
and really establishing a risk profile.
00:18:14,502 -- 00:18:16,135
And if there are single employer
00:18:16,135 -- 00:18:18,335
pension plans that we're concerned about,
00:18:18,335 -- 00:18:21,702
then we want to proactively reach out to the
00:18:21,702 -- 00:18:24,568
fiduciaries to have a detailed conversation
00:18:24,568 -- 00:18:29,902
around some of these concerns. And, and so we
00:18:30,968 -- 00:18:34,202
assess things like sponsor risk, funding risk,
00:18:34,202 -- 00:18:36,002
investment management risk,
00:18:36,002 -- 00:18:37,435
compliance risk
00:18:37,435 -- 00:18:40,102
and these conversations that we have
00:18:40,102 -- 00:18:42,168
and usually they're attended by senior people
00:18:42,168 -- 00:18:44,668
fiduciaries of the plan
00:18:44,668 -- 00:18:46,368
are really,
00:18:46,368 -- 00:18:51,168
really insightful and critical for us to understand better.
00:18:51,168 -- 00:18:53,702
If our assessment of that risk level is accurate
00:18:53,702 -- 00:18:57,835
and to be able to reassess it and, and move forward there.
00:18:57,835 -- 00:18:59,735
So we take that information back.
00:18:59,735 -- 00:19:01,668
Essentially, it forms a feedback loop
00:19:01,668 -- 00:19:05,302
if you want to look at it that way, that we, we
00:19:05,302 -- 00:19:06,902
go back to an internal steering committee
00:19:06,902 -- 00:19:12,302
that we have that then helps us reset our engagement strategy.
00:19:12,302 -- 00:19:13,402
And we're very transparent
00:19:13,402 -- 00:19:15,568
with our, with the sector as we're
00:19:15,568 -- 00:19:17,435
we're going through these discussions as to
00:19:17,435 -- 00:19:20,668
what kinds of things were, what our views are, etc..
00:19:20,668 -- 00:19:23,802
So that's again, part of our commitment to, to
00:19:23,802 -- 00:19:25,002
maintain that transparency.
00:19:26,668 -- 00:19:28,235
It's been an interesting journey.
00:19:28,235 -- 00:19:30,102
We've had plans that
00:19:30,102 -- 00:19:33,269
we've noticed some behavior around fiduciaries
00:19:33,269 -- 00:19:36,635
taking the pension plan members much more into consideration
00:19:36,635 -- 00:19:39,969
when they're making decisions around capital cost
00:19:39,969 -- 00:19:41,935
allocations, for example.
00:19:41,935 -- 00:19:43,569
So in other words, treating the pensioners
00:19:43,569 -- 00:19:46,502
as a as a silent creditor, if you will,
00:19:46,502 -- 00:19:47,802
we've seen
00:19:47,802 -- 00:19:51,069
that certain plans make additional contributions
00:19:51,069 -- 00:19:53,769
above and beyond the minimum
00:19:53,769 -- 00:19:55,935
to their pension plans in advance,
00:19:55,935 -- 00:19:59,302
or maybe as part of making other capital allocations.
00:19:59,302 -- 00:20:00,802
We've seen de-risking activity
00:20:00,802 -- 00:20:04,635
take place in the form of immunizing a portfolio
00:20:04,635 -- 00:20:07,202
a little bit better or even annuitizing.
00:20:07,202 -- 00:20:09,735
And I'll make another comment.
00:20:09,735 -- 00:20:12,102
As you're probably familiar,
00:20:12,102 -- 00:20:14,335
the single employer pension plans in Ontario,
00:20:14,335 -- 00:20:17,269
how the PBGF for the Pension Benefit Guaranty Fund.
00:20:17,269 -- 00:20:19,935
And so the CEO of FSRA
00:20:19,935 -- 00:20:22,702
has a fiduciary responsibility to the PBGF.
00:20:22,702 -- 00:20:26,302
So this work helps the CEO discharge that responsibility as well.
00:20:27,269 -- 00:20:29,302
And on the MEPPS side,
00:20:29,302 -- 00:20:33,702
I mentioned we had a roadmap put into place. We,
00:20:33,702 -- 00:20:37,002
the first thing we did was a thematic review in 2019, 2020,
00:20:37,002 -- 00:20:39,235
where we looked at a third of the sector.
00:20:39,235 -- 00:20:40,602
That was really critical for us
00:20:40,602 -- 00:20:43,402
to get a better understanding of the kinds of
00:20:43,402 -- 00:20:45,535
of challenges, issues
00:20:45,535 -- 00:20:49,069
and also leading practices that exist in the multiemployer
00:20:49,069 -- 00:20:50,369
pension space.
00:20:50,369 -- 00:20:55,802
We then collaboratively again with the TAC, produced
00:20:55,802 -- 00:20:59,735
a leading practice guidance which was published in 2021,
00:20:59,735 -- 00:21:03,202
and those eight leading practices fall into three buckets
00:21:03,202 -- 00:21:06,035
governance, risk management and communications.
00:21:06,035 -- 00:21:09,035
And we in that leading practice guidance,
00:21:09,035 -- 00:21:13,102
we committed to then going forward and benchmarking,
00:21:13,102 -- 00:21:14,635
so having each MEPP in Ontario
00:21:14,635 -- 00:21:16,835
benchmarked themselves against those leading practices.
00:21:16,835 -- 00:21:18,969
And that's been a really fascinating exercise
00:21:18,969 -- 00:21:21,702
that's actually coming to a conclusion now.
00:21:21,702 -- 00:21:24,335
We've also seen some tangible
00:21:24,335 -- 00:21:24,935
improvements
00:21:24,935 -- 00:21:27,835
if you will, in our journey in the last few years in terms
00:21:27,835 -- 00:21:29,302
of fiduciaries
00:21:29,302 -- 00:21:31,635
of multiemployer
00:21:31,635 -- 00:21:32,735
pension plans,
00:21:32,735 -- 00:21:36,102
enhancing their overall governance and risk and communication
00:21:37,502 -- 00:21:39,069
approach, as well as policies
00:21:39,069 -- 00:21:41,069
like in some cases, their policies existed.
00:21:41,069 -- 00:21:43,802
They were, they were enhanced.
00:21:43,802 -- 00:21:45,435
In other cases, they didn't exist at all.
00:21:45,435 -- 00:21:47,469
And they've been either put into place
00:21:47,469 -- 00:21:49,935
or in the process of being put into place.
00:21:49,935 -- 00:21:51,435
And the last comment I make on
00:21:51,435 -- 00:21:52,935
the MEPPS has to do with the fact
00:21:52,935 -- 00:21:55,135
that many of you're probably aware
00:21:55,135 -- 00:21:56,535
there's a target benefit framework
00:21:56,535 -- 00:21:59,002
that the Ministry of Finance has,
00:21:59,002 -- 00:22:01,269
has a proposal out there for a permanent framework.
00:22:01,269 -- 00:22:04,269
And the work we've done has a lot of synergy
00:22:04,269 -- 00:22:07,202
and integration with that work moving forward.
00:22:07,202 -- 00:22:11,302
So those are two examples of the work we do.
00:22:11,302 -- 00:22:15,636
I will mention quickly, Andrew, the examination work because we,
00:22:15,636 -- 00:22:16,136
our team
00:22:16,136 -- 00:22:18,069
also from a prudential supervision
00:22:18,069 -- 00:22:22,369
perspective, handled the examinations of plan administrators,
00:22:22,369 -- 00:22:24,336
specifically MEPPS and SEPPS.
00:22:24,336 -- 00:22:27,536
And we've, we've done a lot of work
00:22:27,536 -- 00:22:29,169
in revamping that process
00:22:29,169 -- 00:22:31,202
such that it becomes a principles-based .
00:22:31,202 -- 00:22:32,969
We've moved away from more of the prescriptive
00:22:32,969 -- 00:22:34,702
checklist approach.
00:22:34,702 -- 00:22:36,702
So we've been piloting that this past year.
00:22:36,702 -- 00:22:39,469
It's been a great exercise. We're now in the process of
00:22:41,036 -- 00:22:42,902
implementing that,
00:22:42,902 -- 00:22:43,802
moving forward
00:22:43,802 -- 00:22:46,769
and there'll be more to come in, in a webinar
00:22:46,769 -- 00:22:49,902
that we're going to be putting out there sometime in April
00:22:49,902 -- 00:22:52,002
or May of this year.
00:22:52,002 -- 00:22:52,669
Thank you, Paul.
00:22:52,669 -- 00:22:53,236
I think, Paul,
00:22:53,236 -- 00:22:56,336
you actually have highlighted for us
00:22:56,336 -- 00:22:58,102
through your work in the MEPP
00:22:58,102 -- 00:23:03,669
how FSRA may leverage a thematic review, might leverage a,
00:23:03,669 -- 00:23:09,036
you know, a set of best practices out there to, to guide us.
00:23:09,036 -- 00:23:11,769
These best practices are by no means
00:23:11,769 -- 00:23:13,902
compliance checklists that you have to do,
00:23:13,902 -- 00:23:17,069
but basically will give us as a regulator
00:23:17,069 -- 00:23:18,769
and the regulated entities,
00:23:18,769 -- 00:23:20,569
perhaps a baseline,
00:23:20,569 -- 00:23:21,702
a reference point
00:23:21,702 -- 00:23:22,969
for us to
00:23:22,969 -- 00:23:26,069
And, you as the regulated entities to evaluate
00:23:26,069 -- 00:23:28,802
how your own approach
00:23:28,802 -- 00:23:29,202
which may
00:23:29,202 -- 00:23:31,102
different from the best practice, will satisfy,
00:23:31,102 -- 00:23:35,202
you know, yourself in terms of achieving your own outcome.
00:23:35,202 -- 00:23:36,836
I think the MEPP work is also,
00:23:36,836 -- 00:23:37,636
you know, through your best
00:23:37,636 -- 00:23:41,036
practice paper, is a great example
00:23:41,036 -- 00:23:45,269
of how collaboration with the sector lead us to good results.
00:23:45,269 -- 00:23:47,036
And the TBP, for example,
00:23:47,036 -- 00:23:49,736
the funding framework for the Target Benefit Plan
00:23:49,736 -- 00:23:51,369
industry wants, know, prescribed
00:23:51,369 -- 00:23:54,902
PFADS, you know, Provisions For Adverse Deviation.
00:23:54,902 -- 00:23:57,002
I'm an actuary by training, by the way,
00:23:57,002 -- 00:23:59,002
but just forget some of the acronyms.
00:23:59,002 -- 00:24:00,702
This is what the industry is asking for.
00:24:00,702 -- 00:24:05,002
And, and we look forward to more collaboration
00:24:05,002 -- 00:24:08,869
because as we implement the regulatory guidance
00:24:08,869 -- 00:24:12,402
in respect to the new target benefit plan approach,
00:24:12,402 -- 00:24:14,236
there will be more conversation.
00:24:14,236 -- 00:24:16,836
There'll be a lot of open dialog
00:24:16,836 -- 00:24:18,602
that is required for the upcoming months.
00:24:18,602 -- 00:24:19,069
So
00:24:19,069 -- 00:24:21,669
and it will involve a lot more judgment
00:24:21,669 -- 00:24:24,969
than prescriptive, prescribed checklists and prescribed rules.
00:24:24,969 -- 00:24:27,736
So thank you for that part. So
00:24:28,702 -- 00:24:31,136
let me turn to James, so
00:24:31,136 -- 00:24:33,136
James is
00:24:33,136 -- 00:24:35,202
instrumental in, in
00:24:35,202 -- 00:24:39,369
leading the work of our large public sector pension plans.
00:24:39,369 -- 00:24:41,036
You heard Mark talk about why
00:24:41,036 -- 00:24:44,069
he's spending so much time on the JSPP work.
00:24:44,069 -- 00:24:44,436
James,
00:24:44,436 -- 00:24:48,369
can you tell us how risk management is factoring into your work
00:24:48,369 -- 00:24:50,802
on the large plans and
00:24:50,802 -- 00:24:51,569
tell us a little bit more
00:24:51,569 -- 00:24:53,069
about why,
00:24:53,069 -- 00:24:53,569
in addition
00:24:53,569 -- 00:24:55,002
to what Mark said this morning,
00:24:55,002 -- 00:24:57,636
we're developing a supervisory framework.
00:24:57,636 -- 00:25:02,036
That, and where we are today. Okay. Thanks, Andrew.
00:25:02,036 -- 00:25:05,436
So we are taking a bit of a different approach to the large plans
00:25:05,436 -- 00:25:06,303
than what
00:25:06,303 -- 00:25:07,069
Paul was describing,
00:25:07,069 -- 00:25:10,636
although there's a commonalities with, with Paul's approach.
00:25:10,636 -- 00:25:15,169
As noted, these plans manage complex investments.
00:25:15,169 -- 00:25:16,269
They are successful
00:25:16,269 -- 00:25:18,469
and I think it's fair to say they are well-regarded
00:25:18,469 -- 00:25:22,169
and they've been successful plans for our sector,
00:25:22,169 -- 00:25:24,936
but they also carry a fair amount of risk.
00:25:24,936 -- 00:25:28,503
And it's worth recalling the IMF report from a few years ago,
00:25:28,503 -- 00:25:32,869
which drew attention to the rise in risk taking out these plans,
00:25:32,869 -- 00:25:38,403
pointing to the increased leverage and increased illiquid assets.
00:25:38,403 -- 00:25:40,236
And from our perspective,
00:25:40,236 -- 00:25:44,036
the large plans are a major part of the pension sector.
00:25:44,036 -- 00:25:49,736
They account for 65% of pension assets and close to 40%
00:25:49,736 -- 00:25:52,069
of pension members. So
00:25:53,236 -- 00:25:54,903
it stands to reason, I think,
00:25:54,903 -- 00:26:00,803
that we need to have a supervisory strategy for these plans.
00:26:01,169 -- 00:26:04,403
If we focused only on a compliance approach
00:26:04,403 -- 00:26:09,036
to the prescriptive components of the PBA
00:26:09,036 -- 00:26:09,469
that won’t
00:26:09,469 -- 00:26:10,669
get us very far
00:26:10,669 -- 00:26:14,569
in terms of our statutory objects of protecting benefits,
00:26:14,569 -- 00:26:16,869
promoting good administration,
00:26:16,869 -- 00:26:21,136
contributing to public confidence, etc..
00:26:21,136 -- 00:26:24,669
Instead, we focus on the standard of care.
00:26:24,669 -- 00:26:26,436
We seek to understand
00:26:26,436 -- 00:26:32,336
and assess how plans are complying with their standard of care.
00:26:32,903 -- 00:26:35,503
In the past two or three years,
00:26:35,503 -- 00:26:37,269
we've been getting to know the plans.
00:26:37,269 -- 00:26:38,869
We've been learning their strategies.
00:26:38,869 -- 00:26:40,969
We've been learning about their risk exposures,
00:26:40,969 -- 00:26:42,969
their management techniques.
00:26:42,969 -- 00:26:46,236
We've also been building relationships
00:26:46,236 -- 00:26:47,469
and having good discussions
00:26:47,469 -- 00:26:53,369
with the plans about what supervision can mean for their sector.
00:26:53,503 -- 00:26:55,669
We're at a point in time now
00:26:55,669 -- 00:26:58,069
where it's appropriate for us to put our activities,
00:26:58,069 -- 00:27:02,536
to put pen to paper. These, are our activities.
00:27:02,536 -- 00:27:06,069
So you'll notice in the proposed statement of priorities
00:27:06,069 -- 00:27:07,903
that one of the priorities for the upcoming
00:27:07,903 -- 00:27:10,103
fiscal year to issue a guidance.
00:27:10,103 -- 00:27:13,669
So assuming those priorities are ultimately approved,
00:27:13,669 -- 00:27:15,369
that's something for you to look forward to.
00:27:16,969 -- 00:27:19,869
In the meantime, I want to share three ideas
00:27:19,869 -- 00:27:21,469
that illustrate how we think
00:27:21,469 -- 00:27:26,236
about the supervision of the large plans.
00:27:26,236 -- 00:27:29,836
First, we're focused on governance and risk management.
00:27:29,836 -- 00:27:31,903
Pension plans aren't banks,
00:27:31,903 -- 00:27:33,369
they're not commercial enterprises
00:27:33,369 -- 00:27:36,536
that are going to go out of business.
00:27:36,536 -- 00:27:39,769
So we're not going to take a Basel like solvency approach
00:27:39,769 -- 00:27:42,269
to supervising these entities.
00:27:42,269 -- 00:27:48,170
Our lane is about their governance and risk management practices,
00:27:52,236 -- 00:27:53,836
and there are established approaches
00:27:53,836 -- 00:27:55,336
to assessing these practices
00:27:55,336 -- 00:27:57,970
that other prudential regulators have developed
00:27:57,970 -- 00:28:00,603
that we can learn from, borrow and adapt
00:28:00,603 -- 00:28:03,636
as appropriate for the pension context.
00:28:03,636 -- 00:28:07,170
Second idea I want to raise is the principle of awareness.
00:28:07,170 -- 00:28:10,270
We are aware that plan administrators
00:28:10,270 -- 00:28:13,436
bear the responsibility of plan administration.
00:28:13,436 -- 00:28:15,870
Our role is not to set investment strategy.
00:28:15,870 -- 00:28:18,536
It's not to set risk appetite.
00:28:18,536 -- 00:28:21,670
Our role is to assess whether the governance
00:28:21,670 -- 00:28:23,270
and risk management activities
00:28:23,270 -- 00:28:25,536
are appropriate and effective
00:28:25,536 -- 00:28:26,703
and meet the standard of care
00:28:26,703 -- 00:28:29,570
for those investments and risk appetites.
00:28:30,770 -- 00:28:31,903
I'd like to take a moment to
00:28:31,903 -- 00:28:36,770
talk about the Aimco loss during the pandemic.
00:28:36,770 -- 00:28:37,936
So what happened here is that
00:28:37,936 -- 00:28:41,070
Aimco had a volatility trading strategy
00:28:41,070 -- 00:28:42,436
in 2018,
00:28:42,436 -- 00:28:47,403
it expanded the strategy to become both riskier and larger.
00:28:47,403 -- 00:28:48,970
But the problem was at the time
00:28:48,970 -- 00:28:52,270
the risk function had a legacy system
00:28:52,270 -- 00:28:55,836
that could not properly model the tail risk.
00:28:55,836 -- 00:28:57,836
With this investment.
00:28:57,836 -- 00:29:00,836
And this was the one at the time
00:29:00,836 -- 00:29:03,536
when the risk function was able to update its systems,
00:29:03,536 -- 00:29:04,336
it was too late.
00:29:04,336 -- 00:29:05,870
The pandemic happened,
00:29:05,870 -- 00:29:07,536
markets moved
00:29:07,536 -- 00:29:11,103
and Aimco lost over $2 billion before it could exit
00:29:11,103 -- 00:29:12,670
that strategy.
00:29:12,670 -- 00:29:16,503
So this is an example of a governance and risk management failure
00:29:16,503 -- 00:29:19,836
that could well have been avoided.
00:29:19,836 -- 00:29:22,970
The third idea I want to leave with you is one of expertise.
00:29:23,970 -- 00:29:28,570
Each of these plans employ smart, hardworking people.
00:29:28,570 -- 00:29:31,970
Our job is to access and leverage that expertise.
00:29:31,970 -- 00:29:35,070
So take the Aimco example.
00:29:35,070 -- 00:29:37,270
My team has some smart people on it,
00:29:37,270 -- 00:29:39,236
but if we were reviewing that, that
00:29:39,236 -- 00:29:40,236
investment strategy,
00:29:40,236 -- 00:29:43,670
I don't know if it would have been obvious to us
00:29:43,670 -- 00:29:46,436
that the model would have been deficient,
00:29:46,436 -- 00:29:49,903
but I'm not sure that, that is critical to our success.
00:29:49,903 -- 00:29:53,503
When we asked pension plans that demonstrate how they are
00:29:53,503 -- 00:29:54,803
meeting their standard of care
00:29:54,803 -- 00:29:57,903
and their risk management practices, we can ask them,
00:29:57,903 -- 00:30:01,370
do you have any gaps? Do you have any concerns?
00:30:01,370 -- 00:30:03,036
When's the last time you have had
00:30:03,036 -- 00:30:05,570
an external review of your models?
00:30:05,570 -- 00:30:08,470
Are there things that you're changing or want to change?
00:30:08,470 -- 00:30:10,170
Why do you want to change them?
00:30:10,170 -- 00:30:12,603
Among the various metrics or techniques.
00:30:12,603 -- 00:30:14,170
What, what do you rely on most?
00:30:15,536 -- 00:30:17,503
It's by asking questions like that
00:30:17,503 -- 00:30:19,070
and using our independence
00:30:19,070 -- 00:30:20,303
as a regulator
00:30:20,303 -- 00:30:22,603
and our view of the overall sector
00:30:22,603 -- 00:30:25,703
that we can have an informed view and engage with the plans.
00:30:25,703 -- 00:30:28,736
And that's ultimately how we see playing a role in the ecosystem
00:30:28,736 -- 00:30:30,070
that's constructive
00:30:30,070 -- 00:30:32,203
and that's how we can also demonstrate to our board
00:30:32,203 -- 00:30:35,037
that we're carrying out our statutory objects.
00:30:35,037 -- 00:30:38,303
So, Andrew, I'll stop there and turn it back.
00:30:38,303 -- 00:30:40,237
Thank you.
00:30:40,237 -- 00:30:43,503
Thank you. Hello.
00:30:43,503 -- 00:30:44,670
Thank you, James.
00:30:44,670 -- 00:30:48,737
So I think you actually have demonstrated that how
00:30:48,737 -- 00:30:51,803
we actually have interpreted the pension plans
00:30:51,803 -- 00:30:54,737
fiduciary duty, more contextually
00:30:54,737 -- 00:30:57,470
to determine that the requirements of large plans
00:30:57,470 -- 00:31:01,470
to have robust risk management practices.
00:31:01,470 -- 00:31:02,837
I think FSRA’s desire
00:31:02,837 -- 00:31:05,403
to ensure that risk management practices in place
00:31:05,403 -- 00:31:09,137
falls squarely within our statutory objective.
00:31:09,137 -- 00:31:11,170
I just want to repeat that we fully appreciate
00:31:11,170 -- 00:31:14,837
that these are very sophisticated plans.
00:31:14,837 -- 00:31:20,637
They actually have in place very robust strategy and whatnot.
00:31:20,637 -- 00:31:23,203
I just want to reiterate, what we are doing here
00:31:23,203 -- 00:31:25,803
is not to second guess any of the investment decisions.
00:31:25,803 -- 00:31:27,903
We don't have that expertise.
00:31:27,903 -- 00:31:31,370
We actually have been engaging the large plans over the last
00:31:31,370 -- 00:31:32,270
few years
00:31:32,270 -- 00:31:34,403
to actually have regular phone calls with them
00:31:34,403 -- 00:31:37,503
to make sure that we are on top of what they are doing.
00:31:37,503 -- 00:31:40,137
So it's really nothing more than that.
00:31:40,137 -- 00:31:42,970
We want to start understanding their practices.
00:31:42,970 -- 00:31:44,037
Joanne,
00:31:44,037 -- 00:31:47,403
our board chair, mentioned this morning we want to collect data.
00:31:47,403 -- 00:31:49,603
Our going in position is that these plans
00:31:49,603 -- 00:31:51,537
know what they're doing.
00:31:51,537 -- 00:31:54,103
We are there to verify that,
00:31:54,103 -- 00:31:55,970
you know, in discharging our duty
00:31:55,970 -- 00:31:58,603
to verify what they have done is in fact
00:31:59,737 -- 00:32:01,570
right and
00:32:01,570 -- 00:32:02,603
is really, is
00:32:02,603 -- 00:32:05,737
really, is really try to understand a little bit more
00:32:05,737 -- 00:32:07,137
how they structure themselves,
00:32:07,137 -- 00:32:10,137
how they structure a team as not to second guess their investment
00:32:10,137 -- 00:32:13,303
decisions whatsoever.
00:32:13,303 -- 00:32:17,470
So let me now turn a little bit more to
00:32:17,470 -- 00:32:20,870
to how our day-to-day work on the operations side.
00:32:20,870 -- 00:32:25,370
So can I turn to Claire and Trevor to perhaps,
00:32:25,370 -- 00:32:25,603
you know,
00:32:25,603 -- 00:32:30,203
let us know how you've been applying PBR in your day to day work,
00:32:30,203 -- 00:32:31,270
whether it is
00:32:31,270 -- 00:32:34,337
intake from an inquiry or a filings
00:32:34,337 -- 00:32:35,903
from a plan administrators
00:32:35,903 -- 00:32:37,270
and how, Trevor,
00:32:37,270 -- 00:32:38,870
you've been taking that principles
00:32:38,870 -- 00:32:44,503
in, in, in assessing, for example, the actuarial robustness
00:32:44,503 -- 00:32:47,170
you know of the plans.
00:32:47,170 -- 00:32:48,103
Thanks, Andrew.
00:32:48,103 -- 00:32:49,737
I think there's three main areas
00:32:49,737 -- 00:32:52,403
in which the operations team is trying to incorporate
00:32:52,403 -- 00:32:55,537
a PBR approach into our everyday work.
00:32:55,537 -- 00:32:57,737
Firstly, by taking a risk-based approach
00:32:57,737 -- 00:33:00,370
when performing our regular compliance reviews
00:33:00,370 -- 00:33:01,803
and related checklists
00:33:01,803 -- 00:33:05,237
so that not every tick box is given equal weighting,
00:33:05,237 -- 00:33:06,837
consistent with our guiding object
00:33:06,837 -- 00:33:08,970
to promote good plan administration.
00:33:08,970 -- 00:33:10,303
I think it's always important
00:33:10,303 -- 00:33:13,670
to point out deficiencies to plan administrators
00:33:13,670 -- 00:33:16,803
so that future applications have a stronger likelihood
00:33:16,803 -- 00:33:18,803
of being fully compliant.
00:33:18,803 -- 00:33:21,370
However, depending on the nature of the deficiency,
00:33:21,370 -- 00:33:23,970
FSRA may choose to overlook a requirement.
00:33:23,970 -- 00:33:26,670
If we view that there's little to no harm.
00:33:26,670 -- 00:33:27,504
For example,
00:33:27,504 -- 00:33:29,570
the notice requirements on asset transfers
00:33:29,570 -- 00:33:32,204
and conversions are quite prescriptive.
00:33:32,204 -- 00:33:36,204
Some of the information, if missing, may not impact transparency
00:33:36,204 -- 00:33:38,637
or overall consent levels if required.
00:33:39,870 -- 00:33:42,470
However, some information may be critical
00:33:42,470 -- 00:33:44,937
to a member's decision making process.
00:33:44,937 -- 00:33:47,470
For example, any information regarding benefits
00:33:47,470 -- 00:33:50,004
or entitlements or contributions.
00:33:50,004 -- 00:33:53,870
And if that's missing, we may require a supplemental notice to be
00:33:53,870 -- 00:33:55,370
mailed out.
00:33:55,370 -- 00:33:56,504
The secondary I'd like to
00:33:56,504 -- 00:34:00,704
highlight is how FSRA is trying to become more proactive
00:34:00,704 -- 00:34:02,004
than reactive.
00:34:02,004 -- 00:34:02,570
In the past,
00:34:02,570 -- 00:34:06,237
we've been very focused on information filings, the submissions
00:34:06,237 -- 00:34:08,804
been made to made to us, and less so
00:34:08,804 -- 00:34:12,804
on information that should have been filed with us but hasn't.
00:34:12,804 -- 00:34:16,104
Information that isn't filed us could be indicative of a problem
00:34:16,104 -- 00:34:19,104
in plan administration, plan governance,
00:34:19,104 -- 00:34:22,070
a corporate restructuring, or at the worst end
00:34:22,070 -- 00:34:24,770
an employer insolvency.
00:34:24,770 -- 00:34:26,404
In the summer of 2022,
00:34:26,404 -- 00:34:30,470
FSRA recommenced this process for going after outstanding filings
00:34:30,470 -- 00:34:33,770
and we reached out to over 250 plan administrators
00:34:33,770 -- 00:34:36,037
to find out why their findings were late.
00:34:36,037 -- 00:34:37,537
And the overwhelming reason
00:34:37,537 -- 00:34:40,470
why information was being delayed in the filing
00:34:40,470 -- 00:34:44,004
was because people were unaware of key filing deadlines
00:34:44,004 -- 00:34:47,837
or were not set up on the pension services portal correctly.
00:34:47,837 -- 00:34:49,804
As a result of that observation,
00:34:49,804 -- 00:34:52,470
we developed two at-a-glance documents
00:34:52,470 -- 00:34:55,537
that set out the requirements for DC plan administrators
00:34:55,537 -- 00:34:57,837
and mailed them out to all plans
00:34:57,837 -- 00:35:01,537
as well as mail them out to large insurance companies.
00:35:01,537 -- 00:35:05,270
The second thing we did was, created a short video to, to
00:35:06,337 -- 00:35:07,670
outline to plan administrators
00:35:07,670 -- 00:35:09,170
how they can update their information
00:35:09,170 -- 00:35:11,337
on the pension services portal.
00:35:11,337 -- 00:35:13,170
The third area I'd like to highlight
00:35:13,170 -- 00:35:15,870
is how we're trying to be more collaborative.
00:35:15,870 -- 00:35:18,737
We recognize that plan administration isn't easy
00:35:18,737 -- 00:35:21,870
and we're open to listening and providing feedback.
00:35:21,870 -- 00:35:23,270
Where you run into trouble,
00:35:23,270 -- 00:35:26,804
but not necessarily providing you with the exact answer.
00:35:26,804 -- 00:35:28,304
Administrative errors happen
00:35:28,304 -- 00:35:30,470
all the time as we all make mistakes.
00:35:30,470 -- 00:35:33,470
We’re open to having a dialog of what might be reasonable
00:35:33,470 -- 00:35:36,504
and appropriate in the situation to fix it.
00:35:36,504 -- 00:35:38,204
And we're open to also making sure
00:35:38,204 -- 00:35:40,504
that these errors don't happen again.
00:35:40,504 -- 00:35:41,537
Trevor?
00:35:41,537 -- 00:35:45,037
Well, alright,
00:35:45,037 -- 00:35:46,470
thanks Claire that was shocking.
00:35:46,470 -- 00:35:50,004
I'd like to thank Andrew for leaving me to the end
00:35:50,004 -- 00:35:51,937
and it's great to see everybody in person. I agree.
00:35:51,937 -- 00:35:55,070
I want to echo my fellow panelists. It's really nice to.
00:35:55,070 -- 00:35:56,504
I know too many people here,
00:35:56,504 -- 00:35:59,637
which means I've been working in this industry for too long.
00:35:59,637 -- 00:36:03,170
I've been at FSRA for almost a year now, and I'm really,
00:36:03,170 -- 00:36:06,370
I've had the opportunity just see PBR in action.
00:36:06,370 -- 00:36:07,837
So what I thought I'd do, again
00:36:07,837 -- 00:36:12,404
as the deputy chief actuary, and yes, I have a badge,
00:36:12,404 -- 00:36:14,637
as deputy chief actuary,
00:36:15,671 -- 00:36:18,071
I have an opportunity to engage with plans
00:36:18,071 -- 00:36:19,704
and really have some conversations.
00:36:19,704 -- 00:36:21,271
So I want to give you an example of something
00:36:21,271 -- 00:36:23,504
we actually did within the last few months.
00:36:23,504 -- 00:36:24,871
Now, hold your hats.
00:36:24,871 -- 00:36:27,671
We had a single employer pension plan
00:36:27,671 -- 00:36:31,637
that was transferring into a large JSPP.
00:36:31,637 -- 00:36:32,704
I know.
00:36:32,704 -- 00:36:36,337
Who would have ever thought such a crazy thing would happen?
00:36:36,337 -- 00:36:37,971
And following the transfer,
00:36:37,971 -- 00:36:39,771
there was only surplus assets
00:36:39,771 -- 00:36:42,704
remaining in the single employer pension plan.
00:36:42,704 -- 00:36:44,737
So the question was, well exactly, and shockingly,
00:36:44,737 -- 00:36:46,271
the employer wanted to share the surplus.
00:36:46,271 -- 00:36:48,271
How are we going to get this surplus assets out?
00:36:48,271 -- 00:36:49,837
What are the best ways?
00:36:49,837 -- 00:36:54,171
Well, unfortunately, after a transfer, the plan isn't wound up.
00:36:54,171 -- 00:36:55,904
So if you look, under the Pension Benefits Act,
00:36:55,904 -- 00:36:58,137
which I know we all do every night,
00:36:58,137 -- 00:36:59,837
you can see the only way to get surplus
00:36:59,837 -- 00:37:01,804
is really through winding up the plan
00:37:01,804 -- 00:37:05,237
or through a surplus application, through an ongoing plan.
00:37:06,204 -- 00:37:08,237
Well, we could have required
00:37:08,237 -- 00:37:10,304
the administrator to do a formal wind up,
00:37:10,304 -- 00:37:12,304
but that would have been engaging actuaries.
00:37:12,304 -- 00:37:14,304
And no one likes actuaries
00:37:14,304 -- 00:37:17,204
to produce a report with a bunch of zeros in it.
00:37:17,204 -- 00:37:20,237
And that would have been a lot of work and unnecessary work.
00:37:20,237 -- 00:37:21,404
So we worked with them.
00:37:21,404 -- 00:37:23,071
We consulted with them exactly
00:37:23,071 -- 00:37:24,937
the PBR approach we've been talking about.
00:37:24,937 -- 00:37:26,671
We had conversations with them
00:37:26,671 -- 00:37:28,737
as to what is the most appropriate,
00:37:28,737 -- 00:37:30,871
what's the quickest way, how can we do this
00:37:30,871 -- 00:37:33,537
so that everybody, you can get what they want,
00:37:33,537 -- 00:37:35,737
which in this case was a surplus of money out
00:37:35,737 -- 00:37:37,737
in the easiest case possible
00:37:37,737 -- 00:37:42,004
while still working with the Pension Benefits Act and regs.
00:37:42,004 -- 00:37:43,237
So that's what we did.
00:37:43,237 -- 00:37:46,971
So we actually went through the ongoing surplus application.
00:37:46,971 -- 00:37:48,171
It worked out well
00:37:48,171 -- 00:37:49,404
and then once all the money is out,
00:37:49,404 -- 00:37:51,971
they can apply for a simplified wind up.
00:37:51,971 -- 00:37:53,937
So I think that's really shows a great example
00:37:53,937 -- 00:37:56,071
of when a plan sponsor approached us.
00:37:56,071 -- 00:37:58,837
We came up with a collaborative approach
00:37:58,837 -- 00:38:01,271
on really how to make this work
00:38:01,271 -- 00:38:05,471
within the Act as well as really trying to be outcomes focused
00:38:05,471 -- 00:38:06,804
because what was the outcome we wanted?
00:38:06,804 -- 00:38:09,037
Let's get the surplus and they were able to.
00:38:09,037 -- 00:38:11,904
So good news all around. Andrew,
00:38:13,271 -- 00:38:13,804
thank you.
00:38:13,804 -- 00:38:16,271
Thank you, everyone.
00:38:16,271 -- 00:38:20,337
I want to pose questions to the panel.
00:38:20,337 -- 00:38:21,804
So you guys have been talking about
00:38:21,804 -- 00:38:24,404
how you apply PBR in your day-to-day work.
00:38:24,404 -- 00:38:27,471
You actually have shared with us some of the success stories,
00:38:27,471 -- 00:38:29,037
but can you also share with us
00:38:29,037 -- 00:38:32,671
some of the challenges that you've faced
00:38:32,671 -- 00:38:37,571
during the last few years as we were implementing the PBR?
00:38:37,571 -- 00:38:39,037
Who wants to start?
00:38:39,037 -- 00:38:42,971
I'll go first. Okay. First is the best.
00:38:42,971 -- 00:38:45,037
I think that...You're going to get Trevor to speak.
00:38:45,037 -- 00:38:45,437
Yeah, I will speak after,
00:38:45,437 -- 00:38:50,071
because actually we have two sides of the same coin, I think.
00:38:50,071 -- 00:38:53,538
And if I thought of Travis first, I would have taken it.
00:38:53,538 -- 00:38:56,104
I think in operations, I think the biggest challenge
00:38:56,104 -- 00:38:59,138
would be to make sure we ensure consistency
00:38:59,138 -- 00:39:00,871
when we're making PBR decisions
00:39:00,871 -- 00:39:04,371
that may not fully align with a plain reading of the PBA.
00:39:04,371 -- 00:39:06,338
Over the course of the last year,
00:39:06,338 -- 00:39:07,338
FSRA has solidified
00:39:07,338 -- 00:39:07,971
its thinking
00:39:07,971 -- 00:39:11,738
towards plan amendments after reviewing the PBA regulations
00:39:11,738 -- 00:39:13,404
as well as our objects.
00:39:13,404 -- 00:39:15,504
Our general expectation is that amendments
00:39:15,504 -- 00:39:18,171
should be filed before they're effective
00:39:18,171 -- 00:39:20,338
and that, but sometimes that won't happen
00:39:20,338 -- 00:39:22,871
and FSRA will need to take a PBR approach to determine
00:39:22,871 -- 00:39:24,604
whether that retroactive adverse
00:39:24,604 -- 00:39:26,971
amendment can be registered or not.
00:39:26,971 -- 00:39:28,238
In our proposed guidance,
00:39:28,238 -- 00:39:30,171
we actually encourage plan administrators
00:39:30,171 -- 00:39:31,538
who file amendments late
00:39:31,538 -- 00:39:33,304
to actually make a submission to us
00:39:33,304 -- 00:39:37,871
using our values of transparency, reasonableness and equity
00:39:37,871 -- 00:39:41,338
as to why the, why the amendment should be registered as is.
00:39:41,338 -- 00:39:42,038
And I think,
00:39:43,204 -- 00:39:44,971
you know, in some cases you could show that there's
00:39:44,971 -- 00:39:47,504
no negative impact on plan beneficiaries
00:39:47,504 -- 00:39:49,271
and we would just go ahead and register it
00:39:49,271 -- 00:39:51,471
in some cases, maybe not.
00:39:51,471 -- 00:39:52,071
Trevor?
00:39:52,071 -- 00:39:55,171
Yeah, the thing we're also very concerned about and taking a PBR
00:39:55,171 -- 00:39:57,871
approach is precedent setting and having,
00:39:57,871 -- 00:39:59,438
you know, consulting firms.
00:39:59,438 -- 00:40:01,804
Actuaries say, well, you applied it in this scenario.
00:40:01,804 -- 00:40:05,471
That means it applies in every possible scenario
00:40:05,471 -- 00:40:07,938
that we can think of, and that's not what our approach is.
00:40:07,938 -- 00:40:09,171
We're trying to take,
00:40:09,171 -- 00:40:10,138
again, an approach
00:40:10,138 -- 00:40:10,771
where we look
00:40:10,771 -- 00:40:12,471
at the individual circumstances
00:40:12,471 -- 00:40:14,638
of the plan and the situation that they're in,
00:40:14,638 -- 00:40:17,504
and we're going to apply a PBR approach to that
00:40:17,504 -- 00:40:20,638
and that does not necessarily expand
00:40:20,638 -- 00:40:24,071
to other plans who are in similar situations.
00:40:24,071 -- 00:40:24,871
So what we're again,
00:40:24,871 -- 00:40:27,338
why we're having these conversations while we're saying this,
00:40:27,338 -- 00:40:29,971
so that we're hoping to engage in more conversations,
00:40:29,971 -- 00:40:30,204
you know,
00:40:30,204 -- 00:40:31,971
with other actuaries, with plan sponsors
00:40:31,971 -- 00:40:33,771
so that we can make sure to know what applies
00:40:33,771 -- 00:40:35,304
and what doesn't, because we're really,
00:40:35,304 -- 00:40:36,571
you know, concerned with scope creep.
00:40:37,671 -- 00:40:39,638
Trevor just wants more lunches with people.
00:40:39,638 -- 00:40:44,638
I just, I like to eat.
00:40:44,638 -- 00:40:46,704
I would say, Andrew, that
00:40:46,704 -- 00:40:50,104
when we launched, there was certainly some trepidation, right?
00:40:50,104 -- 00:40:52,638
Like, what do you
00:40:52,638 -- 00:40:55,104
what's this conversation going to look like?
00:40:55,104 -- 00:40:56,938
And
00:40:56,938 -- 00:41:00,738
so I think the main you know, there's, there's,
00:41:00,738 -- 00:41:02,338
this is a journey right?
00:41:02,338 -- 00:41:04,371
I don't think we've used that term today, at least
00:41:04,371 -- 00:41:06,671
I don't recall hearing it. But any that's really critical, right?
00:41:06,671 -- 00:41:07,904
Like PBR,
00:41:07,904 -- 00:41:09,771
we said it from inception,
00:41:09,771 -- 00:41:12,471
but in in some cases, like I said earlier,
00:41:12,471 -- 00:41:14,204
I was blessed with the fact that I was able
00:41:14,204 -- 00:41:16,304
to start from scratch in some of the work we do.
00:41:16,304 -- 00:41:17,304
So a little bit,
00:41:17,304 -- 00:41:20,004
you know, easier to, to launch into versus others
00:41:20,004 -- 00:41:23,738
we’re transitioning we should talk about some of the guidance.
00:41:23,738 -- 00:41:25,671
So it's a journey, and a journey,
00:41:25,671 -- 00:41:27,371
and that requires trust building.
00:41:27,371 -- 00:41:29,671
And I think and I,
00:41:29,671 -- 00:41:30,871
I know from my own experience,
00:41:30,871 -- 00:41:32,204
but again, I would love to hear from others
00:41:32,204 -- 00:41:34,038
who who've been involved that
00:41:34,038 -- 00:41:35,971
that level of trust has improved,
00:41:35,971 -- 00:41:38,771
had increased, excuse me, fairly rapidly
00:41:38,771 -- 00:41:41,505
once we got into the discussions and just by the way,
00:41:41,505 -- 00:41:42,638
that supervisory approach
00:41:42,638 -- 00:41:44,105
I mentioned earlier that we published
00:41:44,105 -- 00:41:48,671
we published it on March 16th, Monday, March 16th of 2020.
00:41:48,671 -- 00:41:49,605
I think everybody in the room
00:41:49,605 -- 00:41:53,005
probably remembers what happened March 13th, the Friday before.
00:41:53,005 -- 00:41:57,405
Very fortuitous time to be publishing an approach such as that.
00:41:57,405 -- 00:41:59,205
And but on the flip side,
00:41:59,205 -- 00:42:01,971
it really challenged us and pushed us to, to, to
00:42:01,971 -- 00:42:03,438
work through this.
00:42:03,438 -- 00:42:03,905
So, so
00:42:03,905 -- 00:42:07,238
I guess the challenge is really the opposite of collaboration
00:42:07,238 -- 00:42:09,738
is not collaborating and not having that trust.
00:42:11,071 -- 00:42:11,371
You know,
00:42:11,371 -- 00:42:12,838
we're really
00:42:12,838 -- 00:42:15,238
trying to avoid the sense of setting people up
00:42:15,238 -- 00:42:17,271
for an I gotcha type moment.
00:42:17,271 -- 00:42:23,171
I had very fortuitously a conversation with a with a lawyer from
00:42:23,238 -- 00:42:24,138
in the insurance side.
00:42:24,138 -- 00:42:25,671
So I know she's not in the room here
00:42:25,671 -- 00:42:28,538
because she's told me she's going to another session.
00:42:28,538 -- 00:42:32,938
But it was exactly about this topic, about trying to understand,
00:42:32,938 -- 00:42:36,205
you know, like that trepidation as to
00:42:36,205 -- 00:42:37,905
in guiding her own clients
00:42:37,905 -- 00:42:39,805
as to whether or not they should speak to FSRA
00:42:39,805 -- 00:42:43,405
and never mind doing it proactively, like just when we reach out.
00:42:43,405 -- 00:42:45,838
So that that would be the biggest challenge.
00:42:45,838 -- 00:42:49,305
And I think, you know, moving forward to the,
00:42:49,305 -- 00:42:50,838
we talk about guidance, the guidance,
00:42:50,838 -- 00:42:52,871
you can't understate the importance of the guidance
00:42:54,171 -- 00:42:54,338
there
00:42:54,338 -- 00:42:56,371
are other guidances out there that we've, we've established
00:42:56,371 -- 00:43:00,305
like the roles and responsibilities that we use quite a bit.
00:43:00,305 -- 00:43:04,438
And as time goes on and we gain experience and, you know,
00:43:04,438 -- 00:43:10,338
those guidance will also be enhanced and improved in my opinion,
00:43:11,638 -- 00:43:14,505
I'd say, say two things are in terms of challenges.
00:43:14,505 -- 00:43:16,505
The first is pacing.
00:43:16,505 -- 00:43:18,438
We're, we're a bit unhealthy in that
00:43:18,438 -- 00:43:21,605
we think about the large plans every single day.
00:43:21,605 -- 00:43:23,905
That doesn't mean they need to hear from us every single day.
00:43:23,905 -- 00:43:26,638
So as you know, as we're,
00:43:26,638 -- 00:43:27,771
you know, for a puppy, but,
00:43:27,771 -- 00:43:31,571
you know, as we are growing and developing into a future state,
00:43:31,571 -- 00:43:35,571
I think we have to be efficient in terms of the resources that we,
00:43:35,571 -- 00:43:37,971
we have and also the resources that the plans have.
00:43:39,005 -- 00:43:40,405
But at the same time, I mean,
00:43:40,405 -- 00:43:43,805
we are a fully functioning up and running supervisor.
00:43:43,805 -- 00:43:46,538
So if something happens in the sector,
00:43:46,538 -- 00:43:50,738
we're ready to handle that and will, the resources we need
00:43:50,738 -- 00:43:52,371
for that.
00:43:52,371 -- 00:43:55,471
The second thing I'd say in terms of the challenge is tone.
00:43:55,471 -- 00:43:59,438
And I think Paul's team does a pretty good job at this.
00:43:59,438 -- 00:44:01,738
You know we're not we're not cops on the beat
00:44:01,738 -- 00:44:03,971
looking to issue tickets,
00:44:03,971 -- 00:44:05,571
although as a regulator, there
00:44:05,571 -- 00:44:08,905
is, there's ultimately an enforcement component.
00:44:08,905 -- 00:44:12,338
On the other hand, we're not necessarily friends either.
00:44:12,338 -- 00:44:14,371
You know, we need to be objective and critical.
00:44:14,371 -- 00:44:18,638
So we need to find the right kind of tone
00:44:18,638 -- 00:44:20,605
to establish our authority as the regulator,
00:44:20,605 -- 00:44:21,638
but at the same time
00:44:21,638 -- 00:44:25,471
to create a kind of a collaborative, cooperative
00:44:25,471 -- 00:44:29,638
kind of critical space for discussion on the key issues.
00:44:29,638 -- 00:44:31,805
And I think that's a bit of a challenge.
00:44:31,805 -- 00:44:33,172
Not that we're not doing a good job.
00:44:33,172 -- 00:44:34,205
I think we are doing that.
00:44:34,205 -- 00:44:37,305
But, but it is a, it's a fine line that we need to, to
00:44:37,305 -- 00:44:37,872
walk there.
00:44:39,872 -- 00:44:42,372
Anything for you Reesha?
00:44:42,372 -- 00:44:43,405
Okay, good.
00:44:43,405 -- 00:44:46,072
So I still recall the days,
00:44:46,072 -- 00:44:47,338
you know, 2020
00:44:47,338 -- 00:44:49,072
was when we first issued the guidance
00:44:49,072 -- 00:44:51,172
on actively monitored pension plans.
00:44:51,172 -- 00:44:55,072
We have our fair dose of pushback and look at,
00:44:55,072 -- 00:44:55,272
you know,
00:44:55,272 -- 00:44:55,872
four years
00:44:55,872 -- 00:45:00,005
now is all part of our DNA in terms of how we manage
00:45:00,005 -- 00:45:02,672
and how we supervise the single employer pension plans.
00:45:02,672 -- 00:45:03,372
So, so I'm
00:45:03,372 -- 00:45:04,772
very hopeful that, you know,
00:45:04,772 -- 00:45:06,505
we will achieve the same thing for, you know,
00:45:06,505 -- 00:45:09,405
all the other plans across the sector.
00:45:09,405 -- 00:45:11,472
One more question for the panel.
00:45:11,472 -- 00:45:13,672
So you heard a little bit about PBR.
00:45:13,672 -- 00:45:17,972
You heard a little bit about what we, we what it really means.
00:45:17,972 -- 00:45:20,805
But what does it mean when the sector
00:45:20,805 -- 00:45:22,972
is going to interact with us in the future?
00:45:22,972 -- 00:45:26,605
How is that experience going to be, look like
00:45:26,605 -- 00:45:29,138
we were doing away with compliance checklists.
00:45:29,138 -- 00:45:31,705
There's no more checklists or less of those.
00:45:31,705 -- 00:45:34,538
So, so, what, what would be the experience with
00:45:35,572 -- 00:45:39,538
FSRA going forward?
00:45:39,538 -- 00:45:41,805
How about I go first, Andrew?
00:45:41,805 -- 00:45:45,872
So, some of you know, I am a parent of a teenager right now.
00:45:45,872 -- 00:45:49,538
It's a very painful experience.
00:45:49,538 -- 00:45:52,372
So, when, so bear with me for a second.
00:45:52,372 -- 00:45:56,272
When my son was little, I'd sit him down,
00:45:56,272 -- 00:45:58,072
do your homework, right.
00:45:58,072 -- 00:45:59,272
This is the expectation.
00:45:59,272 -- 00:46:00,772
These are the 2 hours
00:46:00,772 -- 00:46:05,572
that I'm allotting to force you to do your reading and your math.
00:46:05,572 -- 00:46:07,405
We did this for years.
00:46:07,405 -- 00:46:09,405
Now that he's a teenager,
00:46:09,405 -- 00:46:11,938
I have a different way of approaching him.
00:46:11,938 -- 00:46:13,172
My expectation,
00:46:13,172 -- 00:46:17,072
I will tell him and I'll tell you honestly, he doesn't listen,
00:46:17,072 -- 00:46:21,205
is that he does his homework, that he attends school.
00:46:21,205 -- 00:46:23,072
I don't force him to do it.
00:46:23,072 -- 00:46:25,238
I expect that he does do it
00:46:25,238 -- 00:46:28,238
because he understands that that is the outcome
00:46:28,238 -- 00:46:31,138
that we're hoping to achieve, that he will graduate high school,
00:46:31,138 -- 00:46:33,438
that he will pass all his classes.
00:46:33,438 -- 00:46:34,605
So,
00:46:34,605 -- 00:46:36,572
when you're approaching FSRA,
00:46:36,572 -- 00:46:37,138
you've got,
00:46:37,138 -- 00:46:40,438
and I tend to see, to be quite frank,
00:46:40,438 -- 00:46:44,505
the more complex, difficult, ambiguous problems.
00:46:44,505 -- 00:46:48,205
So this is my suggestion and actually my request to you
00:46:48,205 -- 00:46:49,572
when you're faced
00:46:49,572 -- 00:46:53,172
with one of those complex, difficult questions
00:46:53,172 -- 00:46:56,272
that you are interacting with us on,
00:46:56,272 -- 00:46:57,305
think about
00:46:57,305 -- 00:47:00,138
what are the outcomes that we've articulated
00:47:00,138 -- 00:47:02,372
that we are hoping to achieve.
00:47:02,372 -- 00:47:04,472
They are in our statutory objects.
00:47:04,472 -- 00:47:08,238
They are protect plan beneficiaries
00:47:08,238 -- 00:47:11,138
and support the good administration of pension plans.
00:47:11,138 -- 00:47:15,172
With that framework, look and think about the particular problem
00:47:15,172 -- 00:47:16,839
that you are faced with
00:47:16,839 -- 00:47:18,072
and let me know
00:47:18,072 -- 00:47:21,672
because I'm going to me or one of the members of my team
00:47:21,672 -- 00:47:24,439
are going to be reviewing your submissions.
00:47:24,439 -- 00:47:26,439
Tell us why
00:47:26,439 -- 00:47:32,339
we should permit whatever it is that you are asking us to permit.
00:47:32,405 -- 00:47:34,005
Like what is the basis,
00:47:34,005 -- 00:47:37,539
not just because it's a good outcome in your opinion,
00:47:37,539 -- 00:47:39,905
but that it's a generally good outcome
00:47:39,905 -- 00:47:42,739
for plan beneficiaries,
00:47:42,739 -- 00:47:46,305
that it supports the good administration of pension plans
00:47:46,305 -- 00:47:49,872
that it supports to the extent that we can,
00:47:49,872 -- 00:47:53,039
supports innovation, flexibility,
00:47:53,039 -- 00:47:55,472
better protection for plan beneficiaries.
00:47:56,505 -- 00:47:58,505
I can't guarantee you,
00:47:58,505 -- 00:48:02,372
that I'm necessarily going to agree or, we will,
00:48:02,372 -- 00:48:06,339
the royal we, will agree with your interpretation.
00:48:06,339 -- 00:48:08,872
But there are a variety of tools
00:48:08,872 -- 00:48:10,972
that we may use in the circumstances.
00:48:10,972 -- 00:48:14,105
As Trevor has identified with this surplus example,
00:48:14,105 -- 00:48:16,439
to support the outcome that you're hoping to achieve.
00:48:16,439 -- 00:48:18,539
We're trying not to shackle you.
00:48:18,539 -- 00:48:22,372
We're trying to empower you to find solutions that work.
00:48:22,372 -- 00:48:25,705
One of the things I hear a lot about the pension sector
00:48:25,705 -- 00:48:28,605
is that it's very unique and it's true.
00:48:28,605 -- 00:48:31,972
We have small, single employer
00:48:31,972 -- 00:48:35,639
defined contribution pension plans to large
00:48:35,639 -- 00:48:39,639
public sector, multibillion dollar pension plans.
00:48:39,639 -- 00:48:42,072
So one size isn't going to fit all.
00:48:42,072 -- 00:48:45,805
So when you're dealing with one of those complex problems,
00:48:45,805 -- 00:48:49,505
tell me why should we as the regulator,
00:48:49,505 -- 00:48:55,105
be exercising our discretion or Mark's discretion to support the
00:48:55,105 -- 00:48:57,305
the outcome that you're hoping to achieve?
00:48:57,305 -- 00:48:59,539
So think of it a little bit differently. Don't, I
00:49:01,672 -- 00:49:02,905
would encourage you
00:49:02,905 -- 00:49:08,805
to think of it as what is your administrators fiduciary duty?
00:49:09,105 -- 00:49:10,872
Are you satisfying that duty
00:49:10,872 -- 00:49:14,205
when you come to us with that problem?
00:49:14,205 -- 00:49:18,939
And tell us how you did and again, how what it is
00:49:18,939 -- 00:49:21,605
that you're hoping to achieve supports
00:49:21,605 -- 00:49:22,205
your plan
00:49:22,205 -- 00:49:28,105
and is consistent with our statutory objects and the PBA.
00:49:28,139 -- 00:49:31,805
If I could add to that, I just say it's important
00:49:31,805 -- 00:49:34,872
that you come to us with solutions as well. We're not here.
00:49:34,872 -- 00:49:36,439
I think Claire said it earlier,
00:49:36,439 -- 00:49:38,839
we're not here to give you the answers.
00:49:38,839 -- 00:49:40,172
If there's a complex problem
00:49:40,172 -- 00:49:42,505
and you've got a potential solution for it
00:49:42,505 -- 00:49:45,772
and you want to, you know, “workshop” or discuss it with us,
00:49:45,772 -- 00:49:47,039
hey, we're open to do that,
00:49:47,039 -- 00:49:50,239
but what we're not here to do is tell you the answer,
00:49:50,239 -- 00:49:53,839
especially in a complex situation that may not fit directly
00:49:53,839 -- 00:49:57,905
within the Act and regs. So again, it's a bit of a give and take.
00:49:57,905 -- 00:49:59,672
You know, Andrew asked, What are we looking for?
00:49:59,672 -- 00:50:01,539
Well, again, we're looking for collaboration.
00:50:01,539 -- 00:50:02,939
We're looking to have a conversation.
00:50:02,939 -- 00:50:05,472
We may not always agree with you.
00:50:05,472 -- 00:50:07,072
There's been instances in the last six months
00:50:07,072 -- 00:50:07,972
that I've been working here,
00:50:07,972 -- 00:50:09,906
I've been working with different consulting firms
00:50:09,906 -- 00:50:11,639
where they've come to us to say, we want to do this.
00:50:11,639 -- 00:50:12,739
And we're like,
00:50:12,739 -- 00:50:14,672
Yeah, I know you want to,
00:50:14,672 -- 00:50:17,872
but unfortunately I don't think you can, right?
00:50:17,872 -- 00:50:19,272
And then we said, Can you go back,
00:50:19,272 -- 00:50:21,606
think some more, and give us another possible solution
00:50:21,606 -- 00:50:22,906
where they've come back to us.
00:50:22,906 -- 00:50:24,372
That may happen.
00:50:24,372 -- 00:50:25,572
But the key point I want to make
00:50:25,572 -- 00:50:26,339
is that we're not here
00:50:26,339 -- 00:50:28,572
to actually give solutions to you, but we're here to,
00:50:28,572 -- 00:50:29,872
you know, work with you. on it.
00:50:34,339 -- 00:50:35,406
Am I gonna go first?
00:50:35,406 -- 00:50:37,706
I would say patience.
00:50:37,706 -- 00:50:40,739
I think I think in the past,
00:50:40,739 -- 00:50:43,372
FSRA has been very much a case by case,
00:50:43,372 -- 00:50:46,606
kind of like looking at individual problems.
00:50:46,606 -- 00:50:48,772
And I think PBR
00:50:48,772 -- 00:50:50,506
kind of like requires, it
00:50:50,506 -- 00:50:52,372
necessitates a holistic approach to problem
00:50:52,372 -- 00:50:56,072
solving and problems take, solutions take time to develop.
00:50:56,072 -- 00:50:57,772
So I think it's just really being patient
00:50:57,772 -- 00:50:59,872
with us as we kind of think through
00:50:59,872 -- 00:51:01,439
what PBR looks like in a,
00:51:01,439 -- 00:51:06,606
in a very prescriptive piece of legislation.
00:51:06,606 -- 00:51:10,906
I think we're kind of speaking to a theme here
00:51:10,906 -- 00:51:12,872
in terms of what supervision looks like.
00:51:12,872 -- 00:51:16,339
I, the buzz word that I had was highly analytical.
00:51:16,339 -- 00:51:16,706
You know,
00:51:16,706 -- 00:51:19,972
I think I see this revision as a historical kind of activity.
00:51:19,972 -- 00:51:21,606
And by that
00:51:21,606 -- 00:51:23,606
what I mean is we really need to understand
00:51:23,606 -- 00:51:25,739
the facts, the policies, procedures
00:51:26,839 -- 00:51:29,872
and the context of each plan, and it’s only by having
00:51:29,872 -- 00:51:31,539
that understanding
00:51:31,539 -- 00:51:33,172
can we, you know, be in a position
00:51:33,172 -- 00:51:36,372
to have a principles-based response.
00:51:36,372 -- 00:51:38,606
So that means looking at documents, that look,
00:51:38,606 -- 00:51:41,606
that means looking at internal reports,
00:51:41,606 -- 00:51:45,472
talking to people, you know, asking questions
00:51:45,472 -- 00:51:48,406
and really digging into the issue.
00:51:48,406 -- 00:51:52,072
I think when it comes to, you know, developing a view,
00:51:52,072 -- 00:51:55,639
there will be some issues which are clear and obvious,
00:51:55,639 -- 00:51:58,206
and then there'll be other issues where, where
00:51:58,206 -- 00:51:59,572
that's not the case.
00:51:59,572 -- 00:52:02,839
And in those situations, it's important for us to be
00:52:02,839 -- 00:52:06,206
very clear and transparent about our, our premises
00:52:06,206 -- 00:52:08,772
and our reasons for coming to a particular view.
00:52:08,772 -- 00:52:11,772
So I think it's, a it's a highly analytical process.
00:52:11,772 -- 00:52:13,406
I mean, this feeds off the things
00:52:13,406 -- 00:52:14,606
we've talked about earlier around ambiguity,
00:52:16,539 -- 00:52:17,672
but I think that's the,
00:52:17,672 -- 00:52:22,372
that's the reality of principles-based regulation. Thanks.
00:52:22,372 -- 00:52:25,639
And from my perspective, I just,
00:52:25,639 -- 00:52:28,972
so I mentioned early on, on the single employer side
00:52:28,972 -- 00:52:34,039
how we implemented our new approach during a tumultuous time.
00:52:34,039 -- 00:52:35,272
So the analogy is,
00:52:35,272 -- 00:52:37,839
you know, flying the plane as you're as you're building it.
00:52:37,839 -- 00:52:39,239
And, and we were also learning
00:52:39,239 -- 00:52:41,472
how to fly it and going through turbulence
00:52:41,472 -- 00:52:42,872
that's now steady state.
00:52:42,872 -- 00:52:44,139
I don't even want to use that word
00:52:44,139 -- 00:52:47,506
because actually we've got a team now built,
00:52:47,506 -- 00:52:49,506
and we're really focusing on it, on our own.
00:52:49,506 -- 00:52:51,006
I’ll call it internal governance
00:52:51,006 -- 00:52:53,139
or how do we continually improve on our approach.
00:52:53,139 -- 00:52:55,073
So that's why I'm really anxious
00:52:55,073 -- 00:52:58,039
to get feedback and encourage that again.
00:52:58,039 -- 00:52:59,539
And on the multiemployer side,
00:52:59,539 -- 00:53:01,539
really exciting times in my opinion,
00:53:01,539 -- 00:53:03,806
I feel really blessed to be
00:53:03,806 -- 00:53:05,273
having a front row seat to a time
00:53:05,273 -- 00:53:07,773
where, where we have this permanent
00:53:07,773 -- 00:53:11,339
framework being moved across the finish line,
00:53:11,339 -- 00:53:15,439
right as we ourselves are wrapping up the several years of work
00:53:15,439 -- 00:53:18,139
we've been doing, very collaborative with the sector that are,
00:53:18,139 -- 00:53:19,739
as I said earlier, are very integrated.
00:53:19,739 -- 00:53:21,873
So that's going to be an exciting
00:53:23,173 -- 00:53:24,906
time coming up over the next year.
00:53:24,906 -- 00:53:27,039
And then lastly, the examinations approach.
00:53:27,039 -- 00:53:29,373
I didn't get much into it.
00:53:29,373 -- 00:53:30,339
Happy to go into it
00:53:30,339 -- 00:53:32,039
more and very much looking forward
00:53:32,039 -- 00:53:34,939
to getting feedback from those in the room
00:53:34,939 -- 00:53:36,306
or anybody who's, who's
00:53:36,306 -- 00:53:38,839
part of our future state examination process
00:53:38,839 -- 00:53:39,306
to make sure
00:53:39,306 -- 00:53:45,206
we are truly being principles-based , as, as we'd like to be.
00:53:45,306 -- 00:53:47,839
Thank you.
00:53:47,839 -- 00:53:49,839
Thank you, everyone.
00:53:49,839 -- 00:53:52,373
Hello? Yeah, thank you, everyone.
00:53:52,373 -- 00:53:58,273
So we've spoken for good 50 minutes and it's time to open
00:53:58,773 -- 00:54:01,373
the floor, to questions to the floor.
00:54:01,373 -- 00:54:04,806
So if you have any questions.
00:54:04,806 -- 00:54:08,739
Sorry. What? Oh, good.
00:54:08,739 -- 00:54:13,039
okay. So I'm sorry. Next question.
00:54:13,039 -- 00:54:17,306
So please submit your questions through, through the app.
00:54:17,306 -- 00:54:19,939
So the first question is, is FSRA
00:54:19,939 -- 00:54:22,739
overextending its interpretation
00:54:22,739 -- 00:54:27,006
of the authority of the PBA Pension Benefits Act?
00:54:27,006 -- 00:54:28,939
I think that's probably...I think that's you.
00:54:31,673 -- 00:54:33,673
No,
00:54:33,673 -- 00:54:36,273
next question. Yeah.
00:54:36,273 -- 00:54:41,206
So no, I would not be sitting here
00:54:41,206 -- 00:54:45,173
saying that so confidently if I didn't believe it to be true.
00:54:45,173 -- 00:54:47,806
It's not just a glib answer,
00:54:47,806 -- 00:54:51,439
I would say, and this is a little bit behind the scenes.
00:54:51,439 -- 00:54:55,639
We are quite rigorous in our interpretations.
00:54:55,639 -- 00:54:59,973
When there is a particularly controversial interpretation,
00:54:59,973 -- 00:55:02,039
we go outside
00:55:02,039 -- 00:55:03,073
to make sure
00:55:03,073 -- 00:55:06,806
that our interpretation isn't just supporting
00:55:06,806 -- 00:55:11,306
the outcome that we want or we desire. Right?
00:55:11,306 -- 00:55:14,873
So it's careful, it's rigorous.
00:55:14,873 -- 00:55:19,973
But I would say this, and there's disagreement on this, in
00:55:19,973 -- 00:55:22,839
some relatively recent guidance.
00:55:22,839 -- 00:55:27,439
You're not going to agree with us necessarily,
00:55:27,439 -- 00:55:29,839
but I would say our interpretation
00:55:29,839 -- 00:55:32,639
fits within the scope of the PBA.
00:55:32,639 -- 00:55:36,473
It fits consistently with our statutory objects
00:55:36,473 -- 00:55:39,240
and it is supported by case law.
00:55:39,240 -- 00:55:40,973
You may not like the outcome
00:55:40,973 -- 00:55:46,406
that we are hoping to achieve or the interpretation that we take,
00:55:46,406 -- 00:55:49,773
but I wouldn't say that we're overextending.
00:55:49,773 -- 00:55:52,706
It probably is a surprise to many of you,
00:55:52,706 -- 00:55:54,673
some of the positions that we're taking,
00:55:55,673 -- 00:55:58,006
some of you may not agree with them,
00:55:58,006 -- 00:56:01,740
but I would say they're rigorous and careful and they're vetted.
00:56:01,740 -- 00:56:07,506
I mean, I would say without going
00:56:07,506 -- 00:56:08,873
too much behind the scenes,
00:56:08,873 -- 00:56:09,240
that there's
00:56:09,240 -- 00:56:12,973
a very long process before we come up with guidance
00:56:12,973 -- 00:56:13,506
that starts
00:56:13,506 -- 00:56:16,706
with the identification of a regulatory problem
00:56:16,706 -- 00:56:20,240
that we did that Claire spoke to in the plan amendment guidance,
00:56:20,240 -- 00:56:23,773
what are the outcomes that we hope to achieve?
00:56:23,773 -- 00:56:30,173
Consultations with a variety of stakeholders, multiple times.
00:56:31,140 -- 00:56:35,506
So if there is an overextension of our authority,
00:56:35,506 -- 00:56:37,640
that truly was the case of,
00:56:37,640 -- 00:56:39,106
up and overextension
00:56:39,106 -- 00:56:40,640
then I think it would come to light
00:56:40,640 -- 00:56:45,040
well before the guidance was actually published
00:56:45,040 -- 00:56:47,840
and certainly before it is public.
00:56:47,840 -- 00:56:50,773
But that doesn't mean that everybody's going to agree with me.
00:56:50,773 -- 00:56:53,573
But I will say I will stand behind our interpretations.
00:56:54,973 -- 00:56:58,540
Thank you Reesha, I think also is,
00:56:58,540 -- 00:57:01,706
sometimes is, the environment.
00:57:01,706 -- 00:57:03,906
The sector is evolving as well, too,
00:57:03,906 -- 00:57:05,306
so we have no choice
00:57:05,306 -- 00:57:06,840
but to interpret it, you know,
00:57:06,840 -- 00:57:07,940
and we have to apply
00:57:07,940 -- 00:57:09,540
a principles-based approach
00:57:09,540 -- 00:57:11,673
to interpreting the act, you know, again,
00:57:11,673 -- 00:57:13,940
laying over it, you know, the our object.
00:57:13,940 -- 00:57:14,473
I again,
00:57:14,473 -- 00:57:19,106
I turn to the target benefit blend plan funding framework is one
00:57:19,106 -- 00:57:21,606
where you don't have prescribed PFAD.
00:57:21,606 -- 00:57:22,940
And so what are we going to do?
00:57:22,940 -- 00:57:25,173
We have going to use a lot of judgment,
00:57:25,173 -- 00:57:26,873
applying the principles-base
00:57:26,873 -- 00:57:29,273
in terms of how we're going to be administrating,
00:57:29,273 -- 00:57:32,073
the act and the regulations thereunder.
00:57:32,073 -- 00:57:36,306
So next question.
00:57:36,306 -- 00:57:37,940
I'm sorry, I have to read. It's a long one.
00:57:37,940 -- 00:57:41,006
So there is a perspective that the large public sector
00:57:41,006 -- 00:57:44,206
pension plans are too big to fail.
00:57:44,206 -- 00:57:47,173
Can you tell us about what you see are
00:57:47,173 -- 00:57:49,740
benefits of supervisory framework
00:57:49,740 -- 00:57:52,840
that is planned for release in 24-25?
00:57:52,840 -- 00:57:56,940
And what are you hearing about it from the sector,
00:57:56,940 -- 00:58:00,306
how it's being received? I think this belongs to you, James.
00:58:02,740 -- 00:58:03,773
It's an interesting question.
00:58:03,773 -- 00:58:08,540
I think, you know, large public sector plans too big to fail.
00:58:08,540 -- 00:58:11,073
You know, that's sort of bringing a banking kind of analogy
00:58:11,073 -- 00:58:14,006
or banking idea over into the pension context.
00:58:14,006 -- 00:58:16,506
But we know that
00:58:16,506 -- 00:58:17,673
the Bank of Canada
00:58:17,673 -- 00:58:20,107
in the last, in the pandemic established
00:58:20,107 -- 00:58:23,507
a liquidity facility for a number of the large plans.
00:58:23,507 -- 00:58:26,373
So to the extent that the bank, pension
00:58:26,373 -- 00:58:29,673
needed that facility to avoid default,
00:58:29,673 -- 00:58:32,373
I guess you could say they're too big to fail.
00:58:32,373 -- 00:58:34,740
You know, in terms about, you know,
00:58:34,740 -- 00:58:36,607
you know, whether governments would permit reduction
00:58:36,607 -- 00:58:40,573
in benefits, that's a, that's an entirely separate discussion.
00:58:40,573 -- 00:58:40,773
You know,
00:58:40,773 -- 00:58:42,740
the benefits of the supervisory framework,
00:58:42,740 -- 00:58:44,273
I think, you know, partly it's, it's
00:58:44,273 -- 00:58:46,873
just being transparent to the sector
00:58:46,873 -- 00:58:50,473
as to the principles by which we are,
00:58:50,473 -- 00:58:53,573
you know, undertaking our supervisory activities.
00:58:53,573 -- 00:58:57,040
So there's transparency and predictability and there's a basis
00:58:57,040 -- 00:59:00,740
to have discussion on those principles.
00:59:00,740 -- 00:59:03,107
And I see the question has disappeared.
00:59:03,107 -- 00:59:05,873
Which was the second part of the question?
00:59:05,873 -- 00:59:08,840
What do you see as the benefit of the supervisory guidance?
00:59:08,840 -- 00:59:10,207
Yeah, I think the benefit is again,
00:59:10,207 -- 00:59:13,007
just being transparent about how we do that.
00:59:13,007 -- 00:59:14,340
And the key thing about,
00:59:16,007 -- 00:59:16,640
you know, our
00:59:16,640 -- 00:59:19,207
prudential supervision, I think the too big to fail
00:59:19,207 -- 00:59:21,240
brings in this concept of, you know, our
00:59:21,240 -- 00:59:22,840
you know, are these plans systemic?
00:59:22,840 -- 00:59:25,007
Do we have to worry about systemic issues?
00:59:25,007 -- 00:59:26,873
And I think our, our view is that,
00:59:26,873 -- 00:59:27,240
you know, as
00:59:27,240 -- 00:59:30,007
prudential regulators, if we keep the plans
00:59:30,007 -- 00:59:34,040
or if the plans are able to govern and manage their own risks,
00:59:34,040 -- 00:59:35,340
hopefully they don't get to a spot
00:59:35,340 -- 00:59:37,107
where there's any systemic implications.
00:59:37,107 -- 00:59:40,373
So that's how I sort of rationalize that.
00:59:40,373 -- 00:59:43,873
So some of you know that I've been in industry for a while.
00:59:43,873 -- 00:59:46,040
I'm coming up 38, 39 years.
00:59:46,040 -- 00:59:47,673
So I've been around
00:59:47,673 -- 00:59:50,440
and my career spanned not just consulting, but
00:59:50,440 -- 00:59:53,973
a stint with a large plan. So too big to fail.
00:59:53,973 -- 00:59:57,707
Not in a sense that it will be insolvent in that sense,
00:59:57,707 -- 01:00:00,273
but there will be hiccups.
01:00:00,273 -- 01:00:02,607
You know, along the way, I joined a large plan.
01:00:02,607 -- 01:00:05,607
I started signing the large plans in 2002
01:00:05,607 -- 01:00:07,740
and I joined the plan in 2008.
01:00:07,740 -- 01:00:09,073
Bad time to, you know,
01:00:09,073 -- 01:00:12,307
effectively associate with the large plans.
01:00:12,307 -- 01:00:13,807
My fate that is.
01:00:13,807 -- 01:00:16,940
But, there will be hiccups along the way, right.
01:00:16,940 -- 01:00:20,540
And the road to recovery will generally be very long.
01:00:20,540 -- 01:00:22,340
And so what do you do in between?
01:00:22,340 -- 01:00:25,273
Well, you can either, as I think Mark mentioned this morning,
01:00:25,273 -- 01:00:28,007
you can either increase contributions or cut benefits.
01:00:28,007 -- 01:00:29,840
But when you look at some of the large plans,
01:00:29,840 -- 01:00:32,107
the contribution rates are 20%
01:00:32,107 -- 01:00:34,940
plus employee employer side combined.
01:00:34,940 -- 01:00:37,940
And so there's really not a lot of room to go.
01:00:37,940 -- 01:00:38,440
So again,
01:00:38,440 -- 01:00:40,407
we're not there to question,
01:00:40,407 -- 01:00:42,073
but we are there to kind of monitor
01:00:42,073 -- 01:00:45,240
and make sure that the right protocols in place,
01:00:45,240 -- 01:00:49,173
we're not there to try to replace the board, to be the fiduciary,
01:00:49,173 -- 01:00:52,773
but you know, what we're doing will hopefully help, you know,
01:00:52,773 -- 01:00:53,640
spotlight there.
01:00:55,173 -- 01:00:59,607
So, we still have some question time.
01:00:59,607 -- 01:01:02,440
So if Restated plan text
01:01:02,440 -- 01:01:05,773
are filed retroactive to the amendment date
01:01:05,773 -- 01:01:08,874
with no material impact on members
01:01:08,874 -- 01:01:11,707
would it be agreeable with FSRA? Thanks.
01:01:11,707 -- 01:01:13,574
And this is in light of your comments
01:01:13,574 -- 01:01:15,640
to file amendments prospectively.
01:01:15,640 -- 01:01:16,940
So for those,
01:01:16,940 -- 01:01:18,207
I hope everyone is aware
01:01:18,207 -- 01:01:22,207
that we actually had a consultation just finished, second, second
01:01:22,207 -- 01:01:24,440
consultation just concluded on the plan
01:01:24,440 -- 01:01:27,507
amendment guidance, specifically with retroactive amendments.
01:01:27,507 -- 01:01:31,140
There's been, attracting a lot of comments. I’ll let Claire?
01:01:31,140 -- 01:01:33,907
You speak to it first? Sure, I'll speak to it first.
01:01:33,907 -- 01:01:36,440
I mean, a material impact on members.
01:01:36,440 -- 01:01:37,340
I'm not sure what that means.
01:01:37,340 -- 01:01:40,707
I mean, I think I'll take a bit of a back step.
01:01:40,707 -- 01:01:40,974
I mean,
01:01:40,974 -- 01:01:43,007
I think in the operations team,
01:01:43,007 -- 01:01:44,974
we see like six types of amendments,
01:01:44,974 -- 01:01:48,540
six types, of types of amendments being filed with us.
01:01:48,540 -- 01:01:51,374
Housekeeping. We don't care about those ones.
01:01:51,374 -- 01:01:53,407
Benefit improvements, all good.
01:01:54,907 -- 01:01:56,007
What else?
01:01:56,007 -- 01:01:58,974
Legislative required, legislative visible.
01:01:58,974 -- 01:02:01,574
And we see collective bargaining amendments
01:02:01,574 -- 01:02:04,107
that are filed late with us and they're collectively bargained.
01:02:04,107 -- 01:02:05,907
So we're not going to interfere with that practice.
01:02:05,907 -- 01:02:09,440
And it's really those retroactive adverse.
01:02:09,440 -- 01:02:12,474
We're going to have to think through
01:02:12,474 -- 01:02:15,540
I mean, the way one example I was going to say in my speaking
01:02:15,540 -- 01:02:19,074
remarks was FSRA reviews
01:02:19,074 -- 01:02:22,207
an increased DC member contributions as being adversed.
01:02:22,207 -- 01:02:23,840
If filed late.
01:02:23,840 -- 01:02:25,474
Let's say it's filed a year late.
01:02:25,474 -- 01:02:29,374
Well, would we go back and require those contributions to be,
01:02:29,374 -- 01:02:31,107
you know, given back to the members?
01:02:31,107 -- 01:02:32,607
That seems like an odd thing for us
01:02:32,607 -- 01:02:35,974
to do of giving them back pension or retirement money.
01:02:35,974 -- 01:02:40,407
This was in a pension plan. So I think it really depends. Reesha?
01:02:42,840 -- 01:02:44,907
It's hard to
01:02:44,907 -- 01:02:46,640
answer the question, to be honest,
01:02:46,640 -- 01:02:49,340
because it's going to be very case specific.
01:02:49,340 -- 01:02:51,740
So how about this? I'd flip it
01:02:51,740 -- 01:02:57,140
if you're filing a restated plan text and it is retroactive,
01:02:57,140 -- 01:03:02,207
why don't you make a submission as to why we should file it
01:03:02,207 -- 01:03:03,607
in light of the guidance
01:03:03,607 -- 01:03:04,840
which outlines
01:03:04,840 -- 01:03:06,574
what are the things that we're going to think about.
01:03:06,574 -- 01:03:09,907
So I think the principles were transparency,
01:03:09,907 -- 01:03:12,674
transparency, reasonableness and equity. Equity.
01:03:12,674 -- 01:03:17,640
So did you notify members that there was
01:03:17,640 -- 01:03:22,074
a file plan text?
01:03:22,074 -- 01:03:23,240
Do they know?
01:03:23,240 -- 01:03:25,207
Were they notified of any of the changes
01:03:25,207 -- 01:03:29,440
which are in this case non-material?
01:03:29,440 -- 01:03:34,640
What are the non-material changes that may impact members?
01:03:34,640 -- 01:03:36,574
Can you outline those for us?
01:03:36,574 -- 01:03:37,574
Are they equitable?
01:03:37,574 -- 01:03:40,307
So, you know, if you answer
01:03:40,307 -- 01:03:42,707
like if it's transparent,
01:03:42,707 -- 01:03:46,407
equitable, not really taking anything away, the chances are good.
01:03:46,407 -- 01:03:47,807
But make a submission
01:03:47,807 -- 01:03:51,107
call up and talk to your pension officer and Claire
01:03:51,107 -- 01:03:52,307
and chat about it and
01:03:53,374 -- 01:03:55,707
we'll talk about it.
01:03:55,707 -- 01:03:57,107
I think that's quite,
01:03:57,107 -- 01:03:59,941
quite a learning in terms of drafting guidance
01:03:59,941 -- 01:04:00,974
that are principal-based,
01:04:00,974 -- 01:04:03,841
because as I mentioned before previously
01:04:03,841 -- 01:04:05,774
a previous regime,
01:04:05,774 -- 01:04:09,707
would have very prescribed details as to how you comply
01:04:09,707 -- 01:04:10,907
and not complying.
01:04:10,907 -- 01:04:13,374
We'll never be able to write a guidance
01:04:13,374 -- 01:04:16,674
that will be exhaustive enough to cover all situations.
01:04:16,674 -- 01:04:20,407
We tried to clarify it through our guidance by giving examples
01:04:20,407 -- 01:04:22,541
and yet some of the comments we receive is, well,
01:04:22,541 -- 01:04:24,441
your example is it's not exhaustive enough.
01:04:24,441 -- 01:04:27,474
Well, does that equal prescription?
01:04:27,474 -- 01:04:28,807
I'm not, I'm not, you know,
01:04:28,807 -- 01:04:30,941
I think all comments are welcome here,
01:04:30,941 -- 01:04:33,141
but I think people need to be aware
01:04:33,141 -- 01:04:37,574
that this will be part of the principles-based regulations.
01:04:37,574 -- 01:04:39,807
So, so I'll leave it at that.
01:04:39,807 -- 01:04:42,941
The other thing, too, is that, you know,
01:04:44,907 -- 01:04:46,807
there are different views out there.
01:04:46,807 -- 01:04:52,707
Certainly some people who wrote to us feel that we actually have
01:04:52,874 -- 01:04:57,274
overextended our ability to, or authority to interpreted the PBA.
01:04:57,274 -- 01:05:00,007
But there's also a whole different side
01:05:00,007 -- 01:05:03,141
where they're very supportive of what we're doing.
01:05:03,141 -- 01:05:04,674
So there's always two sides to it.
01:05:04,674 -- 01:05:06,541
But we, we haven't concluded that we’ll
01:05:06,541 -- 01:05:08,241
also continue to dialog with the sector.
01:05:08,241 -- 01:05:12,507
So Reesha, you’re good
01:05:12,507 -- 01:05:13,607
with that?
01:05:13,607 -- 01:05:18,541
Enough time for a few more questions.
01:05:18,541 -- 01:05:20,307
Okay. What is the future?
01:05:20,307 -- 01:05:23,541
I'm not editing it. I'm just trying to, to read it.
01:05:23,541 -- 01:05:26,807
What is the future of single employer DB plans?
01:05:26,807 -- 01:05:31,841
Will PBR mean more work for single employer pension plans?
01:05:31,841 -- 01:05:33,641
Who wants to answer it?
01:05:33,641 -- 01:05:36,007
I can answer it, but you can too.
01:05:36,007 -- 01:05:37,274
It might be teamwork here,
01:05:37,274 -- 01:05:38,241
but because I mean,
01:05:38,241 -- 01:05:39,774
there are two very different questions, right?
01:05:39,774 -- 01:05:44,774
What is the future of, of SEPPS or single employer DB plans?
01:05:44,774 -- 01:05:46,007
That's
01:05:46,007 -- 01:05:47,307
that's a big broad question
01:05:47,307 -- 01:05:49,341
which I think a lot of people have an opinion on.
01:05:49,341 -- 01:05:52,507
I mean, they've clearly been on the decline
01:05:52,507 -- 01:05:54,141
and I don't think that's any big secret.
01:05:54,141 -- 01:05:56,841
They've been that, that's been the case for a long time.
01:05:56,841 -- 01:06:01,107
And then now we've got the Pension Protection Act on the table.
01:06:01,107 -- 01:06:03,541
So I mean we're all trying to figure out
01:06:03,541 -- 01:06:04,907
what the implication of that is.
01:06:06,574 -- 01:06:08,841
In terms of the PBR, though,
01:06:08,841 -- 01:06:10,507
the second part of the question,
01:06:10,507 -- 01:06:11,741
or really the second question,
01:06:11,741 -- 01:06:13,341
which is will PBR mean more work
01:06:13,341 -- 01:06:15,741
for single employer pension plans?
01:06:15,741 -- 01:06:18,741
I think my short answer would be no.
01:06:18,741 -- 01:06:21,441
I'd love to know more, about the context behind this question,
01:06:21,441 -- 01:06:23,207
it's in an anonymous question,
01:06:23,207 -- 01:06:25,007
but please reach out to me directly
01:06:25,007 -- 01:06:26,841
if you want to give me some more
01:06:26,841 -- 01:06:30,207
as to what that, what's, what's behind that thinking?
01:06:30,207 -- 01:06:32,041
Maybe just about the examination process.
01:06:32,041 -- 01:06:33,841
As one example, though,
01:06:33,841 -- 01:06:36,341
we definitely are very, very much aware
01:06:36,341 -- 01:06:38,174
and as we are with our single employer approach.
01:06:38,174 -- 01:06:42,774
And, then the future state MEPP approach is about burden, right?
01:06:42,774 -- 01:06:43,474
And, and
01:06:43,474 -- 01:06:44,874
then you know what you might think
01:06:44,874 -- 01:06:47,341
or maybe the questions stemming from this data collection
01:06:47,341 -- 01:06:49,674
and the engagements and the time involved in.
01:06:49,674 -- 01:06:52,408
Yeah, certainly that that could be considered work.
01:06:52,408 -- 01:06:54,041
But I would suggest that
01:06:54,041 -- 01:06:57,808
the outcomes of our work and the takeaways
01:06:57,808 -- 01:07:01,074
is much more value add to the, to the fiduciary
01:07:01,074 -- 01:07:02,374
and understanding,
01:07:02,374 -- 01:07:02,608
you know,
01:07:02,608 -- 01:07:03,608
what is going
01:07:03,608 -- 01:07:06,241
well and maybe where there's opportunities for improvement
01:07:06,241 -- 01:07:09,541
and the examination process is going to very much move away
01:07:09,541 -- 01:07:09,974
from that
01:07:09,974 -- 01:07:13,641
where we select plans much more on a on a dynamic
01:07:13,641 -- 01:07:15,941
basis, it's risk based.
01:07:15,941 -- 01:07:18,574
And in the one word we haven't used,
01:07:18,574 -- 01:07:21,341
or at least I don't recall hearing, is proportionality, right?
01:07:21,341 -- 01:07:23,708
Is the amount of effort that we're going to put into
01:07:24,741 -- 01:07:26,841
our engagements and then the examinations
01:07:26,841 -- 01:07:29,708
is going to be proportional to the to the level of risk.
01:07:29,708 -- 01:07:33,708
So ideally, the work will actually shrink if it's less risky.
01:07:33,708 -- 01:07:35,774
So, so let me add my perspective.
01:07:35,774 -- 01:07:39,108
I'm a pension geek all through and through.
01:07:39,108 -- 01:07:45,574
I certainly would like the the future of single employer DB plans
01:07:45,574 -- 01:07:51,874
to continue to continue to flourish may not be the right word.
01:07:51,874 -- 01:07:54,041
At least stop the bleeding.
01:07:54,041 -- 01:07:56,574
I think it's again picking, pegging,
01:07:56,574 -- 01:07:58,974
picking, picking up from the Pension Awareness Day.
01:07:58,974 -- 01:07:59,941
I think
01:07:59,941 -- 01:08:01,441
retirement security is going to be more
01:08:01,441 -- 01:08:02,808
and more important going forward,
01:08:02,808 -- 01:08:03,774
You know, with people
01:08:03,774 -- 01:08:06,641
living longer and longer with an aging population, we,
01:08:06,641 -- 01:08:09,141
we will collectively find a way
01:08:09,141 -- 01:08:11,708
to make sure that there would be more pension coverage,
01:08:11,708 -- 01:08:13,508
whether it's through a single employer pension plan
01:08:13,508 -- 01:08:16,541
or through a multiemployer pension plan or large plans.
01:08:16,541 -- 01:08:19,108
Will PBR mean more work to single employer pension plans?
01:08:19,108 -- 01:08:20,608
It might.
01:08:20,608 -- 01:08:22,374
You know, it's kind of funny
01:08:22,374 -- 01:08:25,274
because I certainly was on the other side.
01:08:25,274 -- 01:08:28,474
I certainly had my fair share of complaints to then regime.
01:08:28,474 -- 01:08:29,441
It's sort of like, okay,
01:08:29,441 -- 01:08:32,308
well so prescribe you're, you're
01:08:32,308 -- 01:08:33,408
increasing burden you're
01:08:33,408 -- 01:08:36,274
driving the last nail to the coffin we’ll
01:08:36,274 -- 01:08:37,841
now make it a little bit more flexible
01:08:37,841 -- 01:08:40,708
and hopefully, you know as small as that
01:08:40,708 -- 01:08:41,941
it might mean more work,
01:08:41,941 -- 01:08:47,341
but value add work to make it work and to make it flexible.
01:08:47,341 -- 01:08:48,141
And I would say
01:08:48,141 -- 01:08:51,608
there's a possibility in a mature
01:08:51,608 -- 01:08:54,274
framework for PBR that's actually less work.
01:08:54,274 -- 01:08:56,841
That's what I'd hope, right, less burden.
01:08:56,841 -- 01:08:59,174
So let's talk about well-managed plans
01:08:59,174 -- 01:09:01,308
that beneficiaries are protected.
01:09:01,308 -- 01:09:04,441
And if you have a problem, you call up the regulator
01:09:04,441 -- 01:09:07,341
and we try to develop
01:09:07,341 -- 01:09:11,741
a solution that doesn't require you to do unnecessary work.
01:09:11,741 -- 01:09:14,841
So there are examples of that that come up.
01:09:14,841 -- 01:09:17,808
Trevor's example on the surplus, there could have been, you,
01:09:17,808 -- 01:09:20,974
we could have said you need to go through a formal surplus
01:09:20,974 -- 01:09:22,308
sharing regime.
01:09:22,308 -- 01:09:25,908
You need to submit a surplus sharing application
01:09:25,908 -- 01:09:30,141
or an opinion on historical entitlement. We didn't do that, right.
01:09:30,141 -- 01:09:32,575
We found a solution that worked. So
01:09:34,175 -- 01:09:36,141
the other thought I have
01:09:36,141 -- 01:09:39,141
is that we certainly are in a transition, right?
01:09:39,141 -- 01:09:40,641
We're all trying to figure out
01:09:40,641 -- 01:09:43,408
what are the shared outcomes that we should be achieving
01:09:43,408 -- 01:09:44,375
and how to do that.
01:09:44,375 -- 01:09:46,175
So it'll take time.
01:09:46,175 -- 01:09:48,708
And I think, Claire, I would I appreciate that.
01:09:48,708 -- 01:09:50,808
Let's be patient with each other.
01:09:50,808 -- 01:09:54,075
We're not trying to actually increase the burden.
01:09:54,075 -- 01:09:55,075
I think, as Andrew said, we're
01:09:55,075 -- 01:09:58,375
trying to increase flexibility, support innovation
01:09:58,375 -- 01:10:01,941
while trying to achieve our statutory objects.
01:10:01,941 -- 01:10:05,275
So I think it could be good.
01:10:05,275 -- 01:10:06,308
It may not be good
01:10:06,308 -- 01:10:10,041
always, particularly in the more complex circumstances or easier,
01:10:10,041 -- 01:10:12,741
but the idea is
01:10:12,741 -- 01:10:16,608
hopefully more effective
01:10:16,608 -- 01:10:21,341
supervision that focuses on the real problems that matter.
01:10:21,341 -- 01:10:22,208
Thank you.
01:10:22,208 -- 01:10:24,275
Do I have time for one more question with you? Right. Okay.
01:10:24,275 -- 01:10:28,008
Thank you. So this question is for you, Trevor.
01:10:28,008 -- 01:10:30,775
So as an actuary dealing with numbers,
01:10:30,775 -- 01:10:33,108
seems like it's always black and white.
01:10:33,108 -- 01:10:35,208
How do you balance the rigor
01:10:35,208 -- 01:10:36,475
of working with numbers,
01:10:36,475 -- 01:10:38,608
with the flexibility of PBR in your work?
01:10:39,675 -- 01:10:45,441
People know that actuaries are not that black and white.
01:10:45,441 -- 01:10:47,108
I always joke that I'm not good at numbers.
01:10:47,108 -- 01:10:49,541
That's why I became an actuary.
01:10:49,541 -- 01:10:52,408
First of all, thank you for naming me in the question
01:10:52,408 -- 01:10:54,675
as opposed to the other one which anybody could have answered.
01:10:54,675 -- 01:10:55,975
But again,
01:10:55,975 -- 01:10:56,941
I think that's something we're dealing
01:10:56,941 -- 01:10:59,775
with as the regulator right now, is that, again,
01:10:59,775 -- 01:11:02,175
the answer isn't necessarily like, again,
01:11:02,175 -- 01:11:03,475
liabilities are liabilities,
01:11:03,475 -- 01:11:05,008
but the way we get there may be different
01:11:05,008 -- 01:11:06,275
and what we're actually going to do with them
01:11:06,275 -- 01:11:07,641
and how we approach them.
01:11:07,641 -- 01:11:09,308
What we're really looking at is,
01:11:09,308 -- 01:11:12,108
again, different circumstances and special situations
01:11:12,108 -- 01:11:15,075
that the Act and regs may not specifically apply to
01:11:15,075 -- 01:11:16,575
or if you as a plan sponsor.
01:11:16,575 -- 01:11:18,108
If you're working with a plan sponsor,
01:11:18,108 -- 01:11:19,941
there's a situation that's,
01:11:19,941 -- 01:11:20,175
you know,
01:11:20,175 -- 01:11:22,675
a little ambiguous within the Act or you want more guidance.
01:11:22,675 -- 01:11:25,508
That's the PBR, approach, especially within the actuarial team
01:11:25,508 -- 01:11:26,008
that we're looking
01:11:26,008 -- 01:11:27,608
to have conversations about
01:11:27,608 -- 01:11:28,675
or if there's a difficulty,
01:11:28,675 -- 01:11:31,308
if there's something within the Act and regs that you can't,
01:11:31,308 -- 01:11:32,541
you know, that
01:11:32,541 -- 01:11:33,941
that goes, it’s contrary to
01:11:33,941 -- 01:11:36,475
what you want to do with the ultimate goal of the plan sponsor.
01:11:36,475 -- 01:11:38,241
How can we work with that?
01:11:38,241 -- 01:11:40,908
We're not looking to change the numbers.
01:11:40,908 -- 01:11:42,341
Numbers are what the numbers are.
01:11:42,341 -- 01:11:45,008
That's why it's great to be an actuary.
01:11:45,008 -- 01:11:46,508
But at the same time,
01:11:46,508 -- 01:11:48,608
we want to be collaborative and work with you on it.
01:11:50,208 -- 01:11:51,708
It's great.
01:11:51,708 -- 01:11:55,008
So, do we have more questions or should I?
01:11:55,008 -- 01:11:55,475
One more.
01:11:55,475 -- 01:11:56,341
Okay, last one.
01:11:56,341 -- 01:12:02,075
And before I close.
01:12:02,075 -- 01:12:05,141
If you have a concern about the risk management
01:12:05,141 -- 01:12:09,608
governance issues, the JSPP or large public sector pension plans,
01:12:09,608 -- 01:12:13,808
what will you do about it, James? What will you do about it?
01:12:13,808 -- 01:12:18,542
Personally James, what will you personally do about it?
01:12:18,542 -- 01:12:22,075
I'll sit on it for a few weeks and
01:12:22,075 -- 01:12:24,408
think about how to broach the subject with Andrew
01:12:24,408 -- 01:12:26,508
and then further up the food chain.
01:12:26,508 -- 01:12:32,408
So this is a good question, so it speaks to a few things
01:12:33,642 -- 01:12:36,442
because, you know, so what we can do as a prudential regulator
01:12:36,442 -- 01:12:39,975
and also as a process. So,
01:12:39,975 -- 01:12:42,042
you know, if we have a concern, I think, well,
01:12:42,042 -- 01:12:42,908
you know, we would
01:12:42,908 -- 01:12:45,542
first of all have to identify that there's a concern
01:12:45,542 -- 01:12:47,642
and then there's a bit of a progression involved.
01:12:47,642 -- 01:12:50,042
That is, you know, we'll have to think internally.
01:12:50,042 -- 01:12:52,342
Okay, is this, is this really a concern?
01:12:52,342 -- 01:12:54,142
We have internal expertise.
01:12:54,142 -- 01:12:56,108
We have senior advisors that assist us.
01:12:56,108 -- 01:12:57,375
We have other people that,
01:12:58,342 -- 01:13:01,208
you know, within our organization that are fairly experts.
01:13:01,208 -- 01:13:04,642
So they've been internal discussion about, you know, are,
01:13:04,642 -- 01:13:06,575
you know, is this a real issue?
01:13:06,575 -- 01:13:09,142
Second is then we have conversations
01:13:09,142 -- 01:13:10,575
with the plan, plan management.
01:13:10,575 -- 01:13:13,608
Okay, are we are understanding this right.
01:13:13,608 -- 01:13:15,308
You know, how do you see the issue?
01:13:15,308 -- 01:13:16,842
And then ultimately,
01:13:16,842 -- 01:13:17,008
you know,
01:13:17,008 -- 01:13:18,142
we would look to the management
01:13:18,142 -- 01:13:21,142
to see if there's a way to remedy that,
01:13:21,142 -- 01:13:23,375
depending on the severity and the process.
01:13:23,375 -- 01:13:24,975
I think what we could see
01:13:24,975 -- 01:13:26,208
is then
01:13:26,208 -- 01:13:28,942
a situation where we would make our views known,
01:13:28,942 -- 01:13:31,742
assuming that we're correct, that there is an issue we could
01:13:31,742 -- 01:13:32,675
we would have a process
01:13:32,675 -- 01:13:36,908
where we could make our views known to the, the plan, likely
01:13:36,908 -- 01:13:39,075
through, through correspondence
01:13:39,075 -- 01:13:41,942
that would be accessible by the board as well as management.
01:13:41,942 -- 01:13:44,842
And we'd look to the plan, to
01:13:44,842 -- 01:13:48,375
either rectify that issue or give us satisfactory explanation
01:13:48,375 -- 01:13:49,842
as to why
01:13:49,842 -- 01:13:55,042
no action is taken. That kind of a process, ultimately
01:13:55,042 -- 01:13:56,908
is one of transparency
01:13:56,908 -- 01:14:00,708
and it allows the plan visibility in to concerns,
01:14:00,708 -- 01:14:04,408
but also allows the fiduciaries of those plans.
01:14:04,408 -- 01:14:06,542
I’m thinking here specifically the board
01:14:06,542 -- 01:14:08,908
and the executive management,
01:14:08,908 -- 01:14:11,542
they also have visibility and they can,
01:14:11,542 -- 01:14:12,742
you know, with that information,
01:14:12,742 -- 01:14:17,142
they can then decide what their fiduciary duty is and respond
01:14:17,142 -- 01:14:17,942
to that issue.
01:14:19,042 -- 01:14:21,442
So that's how I see what we will do about it.
01:14:21,442 -- 01:14:21,675
You know,
01:14:21,675 -- 01:14:23,508
I think there's you know, ultimately
01:14:23,508 -- 01:14:25,542
we have to rely on the plans
01:14:25,542 -- 01:14:29,475
as plan administrators to exercise their fiduciary duty
01:14:29,475 -- 01:14:32,708
and depending on the situation, we'll see where things go.
01:14:32,708 -- 01:14:35,608
And in a way that's not different from how we've been handling
01:14:35,608 -- 01:14:38,242
single employee pension plans and multiemployer pension plans.
01:14:38,242 -- 01:14:40,042
We have a dialog to understand
01:14:40,042 -- 01:14:42,275
where the gap is, where our perspective,
01:14:42,275 -- 01:14:43,875
have a mutual understanding,
01:14:43,875 -- 01:14:46,042
and then, and then and take it from there
01:14:46,042 -- 01:14:50,242
in terms of coming up with a remedial solutions.
01:14:50,242 -- 01:14:51,342
So time is up.
01:14:51,342 -- 01:14:55,742
I want to conclude by giving you
01:14:55,742 -- 01:14:58,975
I guess, summarizing what I believe to be
01:14:58,975 -- 01:15:01,942
principals-based regulations, hearing
01:15:01,942 -- 01:15:05,142
from my fellow panelists, I'm a simple guy.
01:15:05,142 -- 01:15:08,842
I like to leave you with three thoughts, just three things.
01:15:08,842 -- 01:15:12,542
First, PBR is a cultural change.
01:15:13,509 -- 01:15:15,942
It's a change management
01:15:15,942 -- 01:15:18,109
on a part of the regulator,
01:15:18,109 -- 01:15:21,342
but it's a two way street, also a change to the sector.
01:15:21,342 -- 01:15:22,109
We changed.
01:15:22,109 -- 01:15:25,175
We're doing away with prescribed rules, we're doing away
01:15:25,175 -- 01:15:28,542
with prescription lists and all that stuff.
01:15:28,542 -- 01:15:31,942
But it's also a culture change on the part of the sector.
01:15:31,942 -- 01:15:32,909
We need
01:15:32,909 -- 01:15:35,642
a certain level of open mindedness
01:15:35,642 -- 01:15:40,009
to be able to make PBR a success going forward.
01:15:40,009 -- 01:15:42,409
So that's point number one.
01:15:42,409 -- 01:15:46,275
Point number two is good faith and trust.
01:15:46,275 -- 01:15:49,075
As I mentioned before, our going in position,
01:15:49,075 -- 01:15:50,875
when we look at the pension plan,
01:15:50,875 -- 01:15:51,942
whether single employer,
01:15:51,942 -- 01:15:53,742
multiemployer or LPSPP,
01:15:53,742 -- 01:15:54,675
is that
01:15:54,675 -- 01:15:58,009
the going assumption is that you know what you're doing,
01:15:58,009 -- 01:16:00,709
you know what fiduciary duty is.
01:16:00,709 -- 01:16:03,309
We're not there to catch you. We're not there to catch thieves.
01:16:04,342 -- 01:16:08,009
We are there to collect data to verify
01:16:08,009 -- 01:16:10,175
that you are doing what you're doing.
01:16:10,175 -- 01:16:12,742
Show us as opposed to just tell us what you do.
01:16:12,742 -- 01:16:18,342
It is a verifying exercise to exercise and discharge our duty.
01:16:18,342 -- 01:16:23,175
A third one is collaboration, and cooperation is a key thing.
01:16:23,175 -- 01:16:26,175
You've heard the example through the single employer-pension
01:16:26,175 -- 01:16:28,009
plan, the multi-employer pension plans,
01:16:28,009 -- 01:16:33,009
and I'm hoping to see that from the large plans as well to
01:16:33,009 -- 01:16:37,909
PBR might feel that is two step forward, one step backwards.
01:16:37,909 -- 01:16:40,875
That's growing pain, unique time to adjust.
01:16:40,875 -- 01:16:41,975
Well, where is the list, right?
01:16:41,975 -- 01:16:45,542
That first question that came, where's the list? There's no list.
01:16:45,542 -- 01:16:46,742
Okay.
01:16:46,742 -- 01:16:49,042
People might think that this is,
01:16:49,042 -- 01:16:52,409
I was once in the conference about a year ago
01:16:52,409 -- 01:16:54,709
and I was on the
01:16:54,709 -- 01:16:55,642
panel list like this,
01:16:55,642 -- 01:16:59,842
and they said, well, this is a rise in regulatory activism.
01:16:59,842 -- 01:17:02,042
And I said, well, that's a good thing.
01:17:02,042 -- 01:17:02,875
That's a good thing
01:17:02,875 -- 01:17:06,409
because rise in regulatory activism means that we care.
01:17:06,409 -- 01:17:09,909
It doesn't mean that we got it right the first time. We care.
01:17:09,909 -- 01:17:12,142
We have the courage to try,
01:17:12,142 -- 01:17:13,642
and if it's wrong,
01:17:13,642 -- 01:17:17,175
we rely on the feedback loop to course correct immediately.
01:17:17,175 -- 01:17:18,775
So that's the all the three points
01:17:18,775 -- 01:17:21,142
that I want to leave the sector with.
01:17:21,142 -- 01:17:25,209
Again, I want, let me repeat ,as a culture change two way street
01:17:25,209 -- 01:17:29,375
faith and commitment. Trust is critical.
01:17:29,375 -- 01:17:31,842
And collaboration and continued communication.
01:17:31,842 -- 01:17:36,375
So I want to thank everyone for participating. Great questions.
01:17:36,375 -- 01:17:39,042
I want to thank my colleagues and the panel
01:17:39,042 -- 01:17:42,975
to share their experience with us. We will be around.
01:17:42,975 -- 01:17:44,509
I hope to see some of you
01:17:44,509 -- 01:17:49,309
staying behind, you know, for our refreshment bar, open bar
01:17:49,309 -- 01:17:50,342
or something like that. But
01:17:52,309 -- 01:17:54,009
so thank you very much, everyone.
00:00:04,270 -- 00:00:07,273
Good afternoon, everybody.
00:00:09,442 -- 00:00:11,444
Welcome to the FSRA
00:00:11,444 -- 00:00:14,514
2024 Auto Panel discussion.
00:00:14,881 -- 00:00:18,418
Today we're going to be talking about auto insurance rating and underwriting
00:00:18,418 -- 00:00:22,722
supervision and the new guidance that will be released later this year.
00:00:22,756 -- 00:00:26,493
So, I'm looking forward to a really lively discussion with everybody.
00:00:26,493 -- 00:00:29,262
Before we get into the panel conversation.
00:00:29,262 -- 00:00:31,865
Just a few kind of housekeeping things.
00:00:31,865 -- 00:00:36,402
The session, of course, is being recorded as were all of the other FSRA sessions.
00:00:36,402 -- 00:00:39,172
If you need a simultaneous French, French
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translation that is available, so put your hand up.
00:00:42,208 -- 00:00:44,811
And there are some instructions on the slide as well, for those of you
00:00:44,811 -- 00:00:48,515
that are virtual that might want to receive French translation
00:00:48,515 -- 00:00:51,417
through the web portal.
00:00:51,417 -- 00:00:52,819
So please go ahead and do that.
00:00:52,819 -- 00:00:53,920
If you want to ask a question, please
00:00:53,920 -- 00:00:57,390
submit it online through the, the conference channel.
00:00:57,824 -- 00:01:00,727
You can also raise your hand and write down your question
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and then it will pop up on the screen for me
00:01:02,495 -- 00:01:04,998
and we can answer it during the Q&A session.
00:01:05,932 -- 00:01:06,733
So that's it.
00:01:06,733 -- 00:01:08,067
We'll get started.
00:01:08,067 -- 00:01:10,904
There will be, we're going to go through a panel discussion, of course,
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and then there will be some time for audience Q&A at the end as well.
00:01:14,774 -- 00:01:16,976
If we don't have time to get through all the questions, don't worry.
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We will answer every single question that comes to us.
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Some of them will be responded to via a Q&A
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after the panel discussion sometime later this week.
00:01:27,787 -- 00:01:29,155
So we'll get started.
00:01:29,155 -- 00:01:32,125
I want to take a few minutes just to introduce our panelists.
00:01:32,125 -- 00:01:33,993
I'll start with myself just very briefly.
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My name is Michelle Dodokin,
00:01:35,161 -- 00:01:38,531
and I'm the new Head of Auto Insurance Supervision with FSRA.
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This is my seventh week, so it's still really new,
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but I am not new to the industry.
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I have 15 years experience in property and casualty insurance,
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and I've worked for some of the largest P&C companies in Canada.
00:01:51,644 -- 00:01:55,915
So bringing a lot of experience, very, very excited about the transformation
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that's happening at FSRA and really excited to talk to you today
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about principles based regulation and the new supervisory guidance.
00:02:03,856 -- 00:02:06,192
I'm going to start with Roosevelt.
00:02:06,192 -- 00:02:11,297
Roosevelt is a Principal and Consulting Actuary with Pinnacle Actuary Resources.
00:02:11,297 -- 00:02:14,066
He's an expert in predictive analytics applications
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for all insurance functions, rate making and product development,
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strategic reviews, competitive, competitive analysis and litigation support.
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Roosevelt is recognized as an industry expert in the analysis of unfair
00:02:26,045 -- 00:02:30,950
discrimination and bias in rating, really important topic for today.
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Roosevelt is on the leading edge of research on this issue
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and also provides services to clients in this area, including testing
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insurance company processes and providing training.
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Roosevelt is past president of the Casualty Actuarial Society.
00:02:44,997 -- 00:02:47,833
Has served as Vice President of Marketing Communications
00:02:47,833 -- 00:02:50,836
and is the Board Chair, of CAS.
00:02:51,437 -- 00:02:55,308
Roosevelt is also a board member on the International Association of Black
00:02:55,308 -- 00:03:00,479
Actuaries Foundation and is an Emeritus Trustee of the Actuarial Foundation.
00:03:01,547 -- 00:03:03,316
Turning to Michelle Huang,
00:03:03,316 -- 00:03:06,786
Michelle Huang is a seasoned leader in advanced analytics and corporate
00:03:06,786 -- 00:03:10,790
risk management in her 18 year career in banking and insurance.
00:03:10,790 -- 00:03:13,292
She's taken various modeling and risk management
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roles from market risk to vice president of Capital Modeling,
00:03:16,862 -- 00:03:19,799
collateral analytics and model validation
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to head of model risk management.
00:03:22,535 -- 00:03:26,105
She's currently senior director of model validation at Discover
00:03:26,105 -- 00:03:30,176
Financial Services, overseeing validation and risk management of
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AI and ML models used for consumer credit underwriting,
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portfolio risk management, marketing, fraud detection and collection.
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Michelle has a Ph.D.
00:03:40,686 -- 00:03:44,156
in Mechanical and Aerospace Engineering and a Masters of Science
00:03:44,156 -- 00:03:47,159
in Statistics from Rutgers University.
00:03:48,361 -- 00:03:49,261
On my far
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left, we have Liz Bellefleur-MacCaul.
00:03:52,665 -- 00:03:56,402
Liz is a Senior Actuarial Analyst at Definity.
00:03:56,402 -- 00:03:59,538
Liz is primary responsibility is the development of predictive models
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and analytics solutions, both for traditional pricing
00:04:02,575 -- 00:04:05,578
use cases and non-pricing business needs.
00:04:05,578 -- 00:04:09,215
Since its inception, Liz has been an active and inaugural member of Definity’s
00:04:09,215 -- 00:04:13,452
cross-functional working group for addressing the impact of social bias
00:04:13,452 -- 00:04:16,789
and fairness in predictive modeling and analytics.
00:04:17,289 -- 00:04:20,593
Liz is also Vice Chair of the Women's Empowerment Group and as a champion
00:04:20,593 -- 00:04:24,463
of inclusion, diversity, equity and accessibility in the workplace.
00:04:24,930 -- 00:04:28,000
This year she'll be stepping out of that role to advance Definity’s
00:04:28,000 -- 00:04:31,237
work around disability and accessibility.
00:04:31,570 -- 00:04:35,608
As a community member herself, Liz envisions a workplace where disability is
00:04:35,608 -- 00:04:39,912
embraced as an integral part of diversity, such that employees of all abilities
00:04:39,912 -- 00:04:43,482
can bring their authentic selves to work and to thrive.
00:04:44,683 -- 00:04:47,553
So thank you for joining us today.
00:04:47,553 -- 00:04:48,787
I thought maybe
00:04:48,787 -- 00:04:50,689
this is a panel discussion, but I thought maybe a good place to start
00:04:50,689 -- 00:04:55,694
would be to give an overview on FSRA’s auto rate and underwriting strategy.
00:04:55,761 -- 00:04:58,564
And then a bit of a primer on principles based regulation
00:04:58,564 -- 00:05:01,834
and then a summary of our supervisory guidance.
00:05:02,434 -- 00:05:06,071
So starting with our overall strategy, there are three pillars to the strategy.
00:05:06,438 -- 00:05:10,743
The first, no surprises here, is a fair rating and underwriting.
00:05:10,743 -- 00:05:14,680
So this is the basis for which, how we evaluate
00:05:14,680 -- 00:05:17,683
whether rates are considered just and reasonable.
00:05:17,683 -- 00:05:18,917
And we'll be talking a lot
00:05:18,917 -- 00:05:23,055
about, about that because that's the basis of our supervisory guidance.
00:05:23,055 -- 00:05:26,692
The second one is about promoting market health and efficient regulation.
00:05:26,692 -- 00:05:32,031
So this is about more competition, more innovation, more choices for consumers.
00:05:32,031 -- 00:05:35,834
And the third pillar is informed decision making.
00:05:35,834 -- 00:05:39,204
So this is a topic, of course, that is not new to the industry,
00:05:39,204 -- 00:05:43,042
helping consumers better understand what they're covered for,
00:05:43,042 -- 00:05:47,813
how their premium is calculated, what their choices are in terms of pricing
00:05:47,813 -- 00:05:50,182
and other aspects that they might want to consider in terms
00:05:50,182 -- 00:05:51,417
of the value proposition.
00:05:53,685 -- 00:05:56,688
So Joanne, this morning did a very, did
00:05:56,688 -- 00:06:00,559
an excellent job actually of explaining principles based regulation
00:06:00,559 -- 00:06:04,730
and how that's different from a rules based regulatory model.
00:06:04,730 -- 00:06:06,365
Maybe we can delve a little bit deeper
00:06:06,365 -- 00:06:08,801
in terms of what that means for auto insurance.
00:06:08,801 -- 00:06:12,070
So in a rules based model, of course,
00:06:12,271 -- 00:06:15,274
it's a very, it's a much more prescriptive environment.
00:06:15,407 -- 00:06:16,408
We know what that's all about.
00:06:16,408 -- 00:06:18,477
It's the environment that we've been operating in.
00:06:18,477 -- 00:06:22,748
But the challenges associated with that are just more lag in the system.
00:06:22,748 -- 00:06:24,983
Change tends to happen slowly.
00:06:24,983 -- 00:06:27,853
There are a lot of constraints and it really inhibits innovation
00:06:27,853 -- 00:06:31,023
that some of the things that we're trying to promote with our new strategy.
00:06:32,090 -- 00:06:35,694
Generally speaking, for auto insurance companies,
00:06:35,694 -- 00:06:39,131
that also means that rates lag the trends as well.
00:06:39,131 -- 00:06:42,501
So you're always kind of behind and trying to catch up with rates
00:06:42,501 -- 00:06:46,705
because, because it takes a long time to move rates through.
00:06:46,705 -- 00:06:49,875
And, and there's an onerous regulatory process.
00:06:49,875 -- 00:06:52,544
So we've been making some of those changes within FSRA
00:06:52,544 -- 00:06:53,812
over the last couple of years.
00:06:53,812 -- 00:06:57,249
And the supervisory guidance is a really big step
00:06:57,249 -- 00:07:00,385
in terms of moving forward to principles based regulation.
00:07:00,385 -- 00:07:04,056
And so it makes sense for us to spend a lot of time both in this session
00:07:04,056 -- 00:07:07,392
and I think in the coming months, really understanding what that means
00:07:07,392 -- 00:07:11,663
in terms of how FSRA will work together with the industry in the future.
00:07:12,564 -- 00:07:13,832
So within the context of
00:07:13,832 -- 00:07:17,135
principles based regulation, the focus is on outcomes.
00:07:17,135 -- 00:07:19,971
So not so much on rules, but on outcomes.
00:07:19,971 -- 00:07:21,573
But it doesn't mean that there are no rules.
00:07:21,573 -- 00:07:26,511
There are still rules, but the rules are aligned to the desired outcomes,
00:07:26,511 -- 00:07:30,816
and there's more flexibility around how they are applied and the rules are in line
00:07:30,816 -- 00:07:34,152
with achieving those desired outcomes.
00:07:34,319 -- 00:07:36,955
So within that flexibility, we're hoping again,
00:07:36,955 -- 00:07:40,859
that's going to stimulate more competition in the industry and new business
00:07:40,859 -- 00:07:45,630
models, new product ideas, and really start to reduce that
00:07:45,630 -- 00:07:48,233
regulatory lag that I was talking about before with rates
00:07:48,233 -- 00:07:51,236
and trends.
00:07:51,436 -- 00:07:53,105
So here is an example
00:07:53,105 -- 00:07:56,741
of, real life example, of principles based regulation.
00:07:56,741 -- 00:08:00,145
The autobahn is one example that comes up often.
00:08:00,145 -- 00:08:00,812
And so I thought
00:08:00,812 -- 00:08:03,982
maybe we could look at this and look at the difference between a rules
00:08:03,982 -- 00:08:07,519
based regulatory model and a principles based regulatory model.
00:08:07,819 -- 00:08:12,457
So in a rules based model, we say, okay, the speed limit is 100 kilometers an hour
00:08:12,624 -- 00:08:16,728
and a principles based model we say, okay, our principle is safe driving
00:08:16,728 -- 00:08:20,665
and our desired outcomes are fewer accidents, injuries and fatalities.
00:08:20,665 -- 00:08:23,068
And what's important about that also is
00:08:23,068 -- 00:08:25,770
that the outcome is all, is measurable.
00:08:25,770 -- 00:08:27,539
And so we know what the principle is.
00:08:27,539 -- 00:08:30,208
We can all agree that it's really important and the outcome
00:08:30,208 -- 00:08:33,545
is easy for us to measure in terms of whether or not it's been achieved.
00:08:34,012 -- 00:08:36,314
But even in this context, where there are fewer
00:08:36,314 -- 00:08:39,150
prescriptive rules, there are still rules.
00:08:39,217 -- 00:08:41,486
There are guidelines on the autobahn.
00:08:41,486 -- 00:08:46,925
So there's an, out of, an advisory speed of 130 kilometers an hour.
00:08:46,925 -- 00:08:50,362
And then, of course, you need to use your judgment around road conditions.
00:08:50,362 -- 00:08:53,732
You know, if there's bad weather, if there's heavy traffic, you need to decide, you know,
00:08:53,732 -- 00:08:58,770
what's an appropriate speed, even though there isn't an enforceable speed limit.
00:08:58,770 -- 00:09:01,206
And in most parts of the autobahn.
00:09:01,906 -- 00:09:03,141
There are also rules.
00:09:03,141 -- 00:09:05,777
Some of them are enforceable with fines as well.
00:09:05,777 -- 00:09:07,445
So the roads are monitored.
00:09:07,445 -- 00:09:08,513
Stay right.
00:09:08,513 -- 00:09:11,683
Stay to the right, keep safe distance, distance from other drivers.
00:09:11,683 -- 00:09:15,286
So no tailgating, no passing zones, things like that.
00:09:15,353 -- 00:09:18,390
So you can be pulled over and you can be fined for some of those things.
00:09:18,390 -- 00:09:20,258
And then there are circumstance rules.
00:09:20,258 -- 00:09:24,763
So in scenarios where there's construction on the road, for example,
00:09:24,763 -- 00:09:30,135
there might be posted speed limits and then again those are enforceable.
00:09:30,135 -- 00:09:33,872
So we can see here how there is more flexibility in the principles
00:09:33,872 -- 00:09:37,709
based model, but there are still rules that create structure.
00:09:37,709 -- 00:09:40,612
So it's almost like guardrails to ensure
00:09:40,612 -- 00:09:44,282
that everyone stays on track to reach the desired outcomes.
00:09:46,384 -- 00:09:49,220
So this is a bit of a sneak peek
00:09:49,220 -- 00:09:52,791
into our auto rating and underwriting supervisory guidance.
00:09:52,791 -- 00:09:56,027
This is still in draft, I think, which which most of you know.
00:09:56,027 -- 00:09:57,762
So we're going to have some good discussions around this today.
00:09:57,762 -- 00:10:01,132
But keeping in mind that it's still very much in development.
00:10:01,566 -- 00:10:05,069
This will be released for consultation in the fall to the industry.
00:10:05,069 -- 00:10:07,539
So we'll be looking forward to your feedback.
00:10:07,539 -- 00:10:11,109
But that doesn't mean that we shouldn't have any discussions between now and then.
00:10:11,109 -- 00:10:14,245
This is a bit of an introduction and it opens the conversation
00:10:14,245 -- 00:10:17,248
and we'll keep talking about that as time goes on.
00:10:18,683 -- 00:10:21,252
So there are four chapters in the new supervisory guidance.
00:10:21,252 -- 00:10:23,421
The first one is fairness.
00:10:23,421 -- 00:10:27,258
We've, it's not our only principle for rating and underwriting,
00:10:27,258 -- 00:10:30,828
but it is a really critical one and we want to make sure that we get it right.
00:10:30,828 -- 00:10:33,565
We've dedicated a whole chapter to that.
00:10:33,565 -- 00:10:37,368
It's not surprisingly also really difficult for the industry
00:10:37,368 -- 00:10:41,072
to agree on a common definition of fairness.
00:10:41,072 -- 00:10:42,307
It's really challenging.
00:10:42,307 -- 00:10:45,209
You could look at this from a number of different angles.
00:10:45,209 -- 00:10:49,280
Our approach has been to focus, not surprisingly, on principles,
00:10:49,280 -- 00:10:53,751
and some of those principles are unfair bias, discrimination, proxy
00:10:53,751 -- 00:10:56,821
discrimination, rating accuracy, things like
00:10:56,821 -- 00:11:00,358
that as being really core elements to fairness.
00:11:00,358 -- 00:11:04,962
And again, how we evaluate whether rates are just and reasonable.
00:11:05,997 -- 00:11:07,799
The second pillar
00:11:07,799 -- 00:11:11,302
is what we call operations, governance and control.
00:11:11,302 -- 00:11:14,906
So this would be akin to, you know, what you would think about
00:11:14,906 -- 00:11:18,910
is your operational risk management processes within your organization.
00:11:18,910 -- 00:11:22,547
These will be very familiar to insurers.
00:11:22,547 -- 00:11:25,983
A statement of risk appetite with thresholds and limits.
00:11:25,983 -- 00:11:27,585
We all know about that.
00:11:27,585 -- 00:11:31,089
Three lines of defense and risk management clearly defined roles
00:11:31,089 -- 00:11:32,557
and accountability.
00:11:32,557 -- 00:11:37,695
So governance, strong data governance and model risk management.
00:11:37,695 -- 00:11:41,866
So these are really, really key capabilities that exist
00:11:41,866 -- 00:11:46,003
within most mid-sized to large size organizations.
00:11:46,003 -- 00:11:49,974
It could be that there's some strengthening that's needed in
00:11:49,974 -- 00:11:51,209
some of these areas.
00:11:51,209 -- 00:11:54,879
And so as we build out the the supervisory
00:11:54,879 -- 00:11:58,983
guidance, we'll provide more detail in terms of what our expectations are.
00:11:58,983 -- 00:12:02,420
But I think the key takeaway here is that most organizations
00:12:02,420 -- 00:12:04,121
already have these capabilities.
00:12:04,121 -- 00:12:07,792
So it's really just about tightening them and making sure that there's a really
00:12:07,792 -- 00:12:09,193
strong base to work from.
00:12:10,394 -- 00:12:10,862
The third
00:12:10,862 -- 00:12:14,832
chapter is our assessment guidance.
00:12:15,233 -- 00:12:17,969
So as many of you would know,
00:12:17,969 -- 00:12:22,206
in and that we've shared previously, within the supervisory guidance,
00:12:22,206 -- 00:12:25,810
there will be an opportunity for companies to become accredited.
00:12:26,043 -- 00:12:28,779
And when a company becomes accredited, that gives them
00:12:28,779 -- 00:12:32,750
the opportunity to enjoy more streamlined
00:12:32,750 -- 00:12:37,121
filing requirements, just a faster speed to market, things like that.
00:12:37,288 -- 00:12:41,993
So chapter three outlines the process
00:12:41,993 -- 00:12:45,596
for achieving accreditation, which is the assessment.
00:12:46,230 -- 00:12:49,600
So we'll be looking at fairness practices,
00:12:49,600 -- 00:12:51,635
certainly within your organization.
00:12:51,635 -- 00:12:55,006
And many companies are already working on that as well as some of those
00:12:55,006 -- 00:12:57,508
ORM capabilities that are related to
00:12:57,508 -- 00:13:00,511
rating and underwriting.
00:13:00,845 -- 00:13:02,480
Not every company needs
00:13:02,480 -- 00:13:05,616
to pursue accreditation and you get to choose the timing as well.
00:13:05,616 -- 00:13:09,053
So organizations will decide, when they're ready
00:13:09,053 -- 00:13:11,922
to undergo an assessment with FSRA and decide
00:13:11,922 -- 00:13:15,326
whether or not they feel that that's right for them.
00:13:15,559 -- 00:13:19,463
I would expect that most medium to large size organizations
00:13:19,463 -- 00:13:22,500
will pursue accreditation when they feel that they're ready.
00:13:22,633 -- 00:13:25,669
It could be that small organizations choose not to.
00:13:25,669 -- 00:13:29,206
It could be organizations that file very infrequently.
00:13:29,206 -- 00:13:34,512
But our hope certainly is that most of the industry pursues accreditation
00:13:34,512 -- 00:13:37,548
and can start to enjoy some of the benefits of that,
00:13:37,548 -- 00:13:41,018
of additional flexibility and innovation and things like that.
00:13:42,186 -- 00:13:42,920
The final chapter in
00:13:42,920 -- 00:13:46,724
the guidance is the new, new filing guidance.
00:13:46,724 -- 00:13:50,594
So the intention is to replace our existing standard filing guidance
00:13:50,594 -- 00:13:55,332
and our major filing guidance and consolidate that in chapter four.
00:13:55,499 -- 00:13:57,735
So the chapter four filing guidance
00:13:57,735 -- 00:14:03,173
will include the filing requirements for organizations that are accredited
00:14:03,173 -- 00:14:06,610
and also non-accredited organizations.
00:14:10,848 -- 00:14:14,118
So as I mentioned before, many companies are already on this journey.
00:14:14,118 -- 00:14:17,788
We did some work in the fall, sent out some surveys to the industry
00:14:17,788 -- 00:14:21,725
to try to understand where they're at in terms of their ORM
00:14:21,892 -- 00:14:25,262
capabilities and where they're at in terms of their fairness journeys.
00:14:25,262 -- 00:14:27,765
And what we found was that more than two
00:14:27,765 -- 00:14:31,135
thirds of organizations are already on this path.
00:14:31,135 -- 00:14:34,204
Numbers, in fact, even a little bit, a little bit higher than that.
00:14:34,204 -- 00:14:35,973
But there are some
00:14:35,973 -- 00:14:39,176
some gaps just through conversation that we're starting to uncover.
00:14:39,176 -- 00:14:44,114
So I would say those areas are things like model risk management,
00:14:45,215 -- 00:14:48,719
data governance, three lines of defense, and ensuring
00:14:48,719 -- 00:14:52,690
that you have technical capabilities built into second line
00:14:52,690 -- 00:14:55,259
so that they can provide support to first line.
00:14:55,259 -- 00:14:57,995
So those are some of the areas that we'll dig into a little bit deeper.
00:14:57,995 -- 00:15:00,330
And our panelists will have a perspective on that,
00:15:00,330 -- 00:15:03,500
that I think is really, will be really important to share today.
00:15:04,935 -- 00:15:05,936
And again, as I mentioned
00:15:05,936 -- 00:15:09,940
before, insurers are in control of the timeline
00:15:09,940 -- 00:15:12,910
just in some of the conversations I've had with, with the industry
00:15:12,910 -- 00:15:17,081
since I've been at FSRA, there are some misconceptions about
00:15:17,081 -- 00:15:22,252
how the assessment process will work or whether it will be required.
00:15:22,252 -- 00:15:25,322
And so I just wanted to make sure that we got some of those messages out
00:15:25,322 -- 00:15:28,325
and made sure that that was clear.
00:15:30,160 -- 00:15:32,830
I'm not going to spend a lot of time on this slide, but certainly
00:15:32,830 -- 00:15:37,234
there's been a tremendous amount of work that has gotten us to this point
00:15:37,234 -- 00:15:40,604
research, consultations with various different
00:15:40,604 -- 00:15:44,074
stakeholders and all of that feedback and all of that research has helped
00:15:44,074 -- 00:15:49,146
to inform the supervisory guidance that is currently being drafted now.
00:15:49,146 -- 00:15:52,716
So if you have any questions about that, we can, happy to chat with you about it.
00:15:53,951 -- 00:15:55,152
So here's what we're going.
00:15:55,152 -- 00:15:58,589
You know, lots of actions to date for sure.
00:15:58,589 -- 00:16:02,626
The supervisory guidance is currently being drafted by our team.
00:16:02,626 -- 00:16:05,495
We're sharing that with the technical advisory committees,
00:16:05,495 -- 00:16:08,498
which on the technical advisory committees, we have representatives
00:16:08,498 -- 00:16:13,470
from across the industry that are already beginning to provide feedback.
00:16:13,837 -- 00:16:16,974
That guidance will be released to the industry
00:16:16,974 -- 00:16:19,409
in August/September of this year.
00:16:19,409 -- 00:16:22,212
It will be finalized in March of next year
00:16:22,212 -- 00:16:26,049
and then will be in effect towards the end of 2025.
00:16:27,517 -- 00:16:30,754
If there are insurers out there that are, already know
00:16:30,754 -- 00:16:34,191
that they're interested in pursuing accreditation, we'd like to hear from you.
00:16:34,191 -- 00:16:37,794
We're looking for organizations that would like to be part of a pilot
00:16:37,794 -- 00:16:40,497
as we start rolling out the supervisory guidance.
00:16:40,497 -- 00:16:44,368
So at a separate time, reach out to us and let us know
00:16:44,368 -- 00:16:46,236
and then we can start planning for that.
00:16:48,538 -- 00:16:49,139
Okay.
00:16:49,139 -- 00:16:53,710
So what we're talking about today, obviously really understanding the
00:16:53,710 -- 00:16:57,914
benefits of principles based regulation as it relates to auto insurance,
00:16:58,048 -- 00:17:00,650
how to deeply embed some of those
00:17:00,650 -- 00:17:03,386
ORM practices into the organization.
00:17:03,386 -- 00:17:07,290
What we're finding is that these practices are really well
00:17:07,290 -- 00:17:12,262
known in the pricing and actuarial areas and in risk management.
00:17:12,262 -- 00:17:14,264
But sort of beyond that, there,
00:17:14,264 -- 00:17:18,368
you know, there's, there's less knowledge, less awareness.
00:17:18,468 -- 00:17:22,205
You know, they're not necessarily built in to decision making.
00:17:22,205 -- 00:17:25,208
So those are things that are going to be really important for the future
00:17:25,208 -- 00:17:28,812
mitigation of bias and discrimination
00:17:28,812 -- 00:17:31,515
in rating and underwriting models.
00:17:31,515 -- 00:17:34,317
Again, not a new topic, but a lot more focus
00:17:34,317 -- 00:17:37,854
and a lot more discussion about how to do this properly,
00:17:37,854 -- 00:17:41,958
how to make sure that those processes are embedded
00:17:41,958 -- 00:17:45,996
in your decision making and how to evaluate,
00:17:45,996 -- 00:17:50,400
how to evaluate your models and underwriting policies.
00:17:50,400 -- 00:17:52,602
And then the last point is just about
00:17:52,602 -- 00:17:56,006
working together as an industry to lead through the change.
00:17:56,006 -- 00:17:59,776
Mark and Joanne stressed this morning that within the context of a principles
00:17:59,776 -- 00:18:03,413
based model, there is a lot of ongoing discussion
00:18:03,413 -- 00:18:07,651
between the regulator and the, and the regulated industry.
00:18:08,018 -- 00:18:10,754
There's more data sharing, there's more conversation,
00:18:10,754 -- 00:18:14,457
there's a responsibility on the part of the regulator to understand
00:18:14,457 -- 00:18:16,826
the business context and the business strategy
00:18:16,826 -- 00:18:19,462
to be able to properly apply some of the principles
00:18:19,462 -- 00:18:23,199
that will be important to our decision making in the future.
00:18:25,135 -- 00:18:25,835
So I’ll pause
00:18:25,835 -- 00:18:29,139
there, and we will move to our panel discussion.
00:18:29,139 -- 00:18:32,142
I'm going to keep the slide up on the screen so
00:18:32,642 -- 00:18:34,577
so you can address our panelists by
00:18:34,577 -- 00:18:37,580
and, by name, which I think is important.
00:18:37,881 -- 00:18:40,884
And just one moment here.
00:18:41,751 -- 00:18:42,152
Okay.
00:18:42,152 -- 00:18:46,556
So my first question is going to be for Roosevelt.
00:18:46,556 -- 00:18:50,326
Roosevelt, can you talk to us about how principles based
00:18:50,860 -- 00:18:54,297
regulation enhances consumer protection?
00:18:54,297 -- 00:18:54,731
Sure.
00:18:54,731 -- 00:18:56,599
Thank you, Michelle.
00:18:56,599 -- 00:18:57,834
And I apologize upfront.
00:18:57,834 -- 00:19:00,503
I don't know what I'm dealing with, but
00:19:00,503 -- 00:19:03,907
my voice is kind of going in and out, so hopefully you can hear me okay.
00:19:04,441 -- 00:19:08,178
And I appreciate the opportunity to be here with you today.
00:19:08,178 -- 00:19:11,514
I actually got a chance to speak last year at the FSRA exchange,
00:19:11,514 -- 00:19:14,851
and I must not have done too badly since you invited me back.
00:19:14,851 -- 00:19:17,120
So, so thank you for that.
00:19:17,120 -- 00:19:20,223
So, I think a number of points
00:19:20,223 -- 00:19:23,326
highlighted in the slides that, that Michelle went through,
00:19:23,326 -- 00:19:26,529
really sort of zeroed the focus in on
00:19:26,529 -- 00:19:29,265
on consumer protection.
00:19:29,265 -- 00:19:32,702
But I think it's called out really specifically
00:19:32,702 -- 00:19:37,207
in one of the FSRA regulation guidelines.
00:19:37,207 -- 00:19:41,144
And, it's simply stated, a customer centric principle.
00:19:41,144 -- 00:19:44,714
And the idea is that the customer is,
00:19:44,714 -- 00:19:48,751
is at the center of the outcomes that you're trying to achieve.
00:19:48,751 -- 00:19:52,755
And so if you look at a lot of the things that are described,
00:19:52,755 -- 00:19:56,559
improving consumer outcomes,
00:19:56,626 -- 00:19:59,629
encouraging innovation,
00:19:59,729 -- 00:20:01,597
encouraging benefits for customers,
00:20:01,597 -- 00:20:06,736
a lot of that will lead towards customer, customer protection.
00:20:06,736 -- 00:20:09,305
And so
00:20:09,305 -- 00:20:10,840
fair treatment for
00:20:10,840 -- 00:20:14,477
customers, delivering value to the customers, fostering
00:20:14,477 -- 00:20:19,615
informed decision making in a rules based environment.
00:20:19,615 -- 00:20:22,151
But it's oftentimes
00:20:22,151 -- 00:20:25,121
the, the will of the,
00:20:25,121 -- 00:20:29,892
the lawmakers, the will of the regulators to, to try and establish rules
00:20:29,892 -- 00:20:34,063
that those who established them, rightly so, believe that,
00:20:34,063 -- 00:20:37,467
that will lead to that appropriate consumer outcome.
00:20:37,467 -- 00:20:42,305
But, but oftentimes you don't leave in those rules
00:20:42,305 -- 00:20:46,175
to flexibility to be able to adjust when perhaps those rules
00:20:46,175 -- 00:20:49,579
don't exactly have the outcome that that you that you so desire.
00:20:49,579 -- 00:20:53,749
And so the idea of the principles based guideline
00:20:53,749 -- 00:20:58,454
is that you've got companies and you've got regulation working together
00:20:58,454 -- 00:21:02,325
to focus on that true, the true customer outcome.
00:21:02,325 -- 00:21:07,497
And when you when you're able to do that, that allows both, again,
00:21:07,497 -- 00:21:10,833
the companies and regulators the flexibility to test
00:21:10,833 -- 00:21:14,670
whether those outcomes are happening and if they're not or if there are
00:21:14,670 -- 00:21:17,139
adjustments that need to be made, you can do that within the principles
00:21:17,139 -- 00:21:17,974
based environment.
00:21:19,475 -- 00:21:21,010
Roosevelt, is it really important
00:21:21,010 -- 00:21:23,479
for those outcomes to be measurable?
00:21:23,479 -- 00:21:28,918
I think having measurable outcomes is important.
00:21:28,918 -- 00:21:31,988
I also think it's important to recognize that not
00:21:31,988 -- 00:21:34,557
everything is going to be measurable as well.
00:21:34,557 -- 00:21:39,095
There are things that that that we’ll, we'll be able to test.
00:21:39,095 -- 00:21:43,599
In terms of fairness, which I know Liz is going to talk about here in a bit.
00:21:43,599 -- 00:21:46,969
There are things like fairness that we will be able to test.
00:21:46,969 -- 00:21:51,140
There are things like customer impact that we will be able to test,
00:21:51,140 -- 00:21:53,542
especially in the context of things like rates.
00:21:53,542 -- 00:21:55,878
But, but they're also going to be
00:21:55,878 -- 00:21:57,480
some elements that
00:21:57,480 -- 00:22:01,884
may not necessarily lend themselves to a direct
00:22:01,884 -- 00:22:06,088
testable measure with the pass/fail kind of, kind of approach.
00:22:06,088 -- 00:22:09,792
But again, it's sort of like the
00:22:09,792 -- 00:22:13,696
I'll know if there's a problem when I maybe when I see it.
00:22:13,696 -- 00:22:16,899
And so you've got to understand that the outcomes
00:22:16,899 -- 00:22:18,200
certainly should be measurable.
00:22:18,200 -- 00:22:22,304
And I think it does provide that, that level
00:22:22,304 -- 00:22:25,441
or at least the, the known playing field.
00:22:25,441 -- 00:22:29,145
But you've also got to, to realize and I think it was said earlier
00:22:29,145 -- 00:22:31,914
this morning that, that there will at some point,
00:22:31,914 -- 00:22:33,516
there will be some rules that are necessary.
00:22:33,516 -- 00:22:36,752
There will be some things that that have to continue
00:22:36,752 -- 00:22:41,891
in terms of rules, just because you can't necessarily measure
00:22:41,891 -- 00:22:46,128
and, and, and tune to every single outcome.
00:22:47,863 -- 00:22:49,632
I wonder if Michelle or
00:22:49,632 -- 00:22:52,635
Liz would have more that you like to add to that
00:22:53,202 -- 00:22:56,572
about measuring outcomes?
00:22:56,572 -- 00:22:59,208
So, first now, I would like to,
00:22:59,208 -- 00:23:01,277
thanks to Michelle
00:23:01,277 -- 00:23:05,481
for having me here and for the organizers
00:23:05,481 -- 00:23:10,419
of this wonderful event. So first,
00:23:10,419 -- 00:23:14,156
from my risk analytics experience.
00:23:14,156 -- 00:23:17,226
For sure, there are some things we can measure.
00:23:17,226 -- 00:23:21,463
It's actually, it's related to, the exactly
00:23:21,463 -- 00:23:23,699
it’s related to the risk management,
00:23:23,699 -- 00:23:27,236
identify, measure, mitigate,
00:23:28,337 -- 00:23:30,639
monitor and reports.
00:23:30,639 -- 00:23:33,976
So you hear [unintelligible], for a company, you need to have
00:23:33,976 -- 00:23:36,679
some metrics
00:23:36,679 -- 00:23:40,349
and key RI like a key risk indicators
00:23:40,349 -- 00:23:44,853
and the corresponding, you will establish some thresholds
00:23:44,853 -- 00:23:49,892
based on your practice, based on your domain knowledge, your experience.
00:23:49,892 -- 00:23:51,927
So put them together.
00:23:51,927 -- 00:23:54,997
Of course it is measurable.
00:23:58,600 -- 00:24:01,937
Roosevelt, can you comment on some of the challenges
00:24:01,937 -- 00:24:06,475
in this transformation from a rules based model to a principles based model?
00:24:06,475 -- 00:24:08,243
Sure.
00:24:08,243 -- 00:24:12,114
Well, so, so first, I think one of the challenges is, is really
00:24:12,114 -- 00:24:16,785
just kind of managing the change associated with, with going from
00:24:16,785 -- 00:24:20,122
what has been a rules based environment
00:24:20,122 -- 00:24:22,891
to a principles based environment.
00:24:22,891 -- 00:24:25,761
And so it's really sort
00:24:25,761 -- 00:24:28,297
of reinforcing the mindset that,
00:24:28,297 -- 00:24:33,869
there may be a tendency, especially as you go into it, that
00:24:33,869 -- 00:24:37,806
that you, you still maybe want to make sure you're satisfying some of the old rules
00:24:37,806 -- 00:24:41,310
because, because you might believe that, that, that is still important.
00:24:41,477 -- 00:24:45,714
But, but it's important to to really kind of sort of
00:24:45,714 -- 00:24:48,717
become,
00:24:48,717 -- 00:24:53,856
kind of exercising the muscle that, that says, okay, we're changing here
00:24:54,056 -- 00:24:58,327
and how do we continue to reinforce that, that change.
00:24:58,460 -- 00:25:03,899
It's also challenging to, to really
00:25:04,566 -- 00:25:07,502
is, as you go, as you begin to focus on
00:25:07,502 -- 00:25:10,472
some of these other outcomes like fairness as an example,
00:25:10,472 -- 00:25:14,977
as you, as you go down the path of fairness and,
00:25:14,977 -- 00:25:19,414
you know, consumers understanding and insurers realize that that fairness
00:25:19,414 -- 00:25:24,553
becomes an important focus for, for the principles based regulation.
00:25:24,987 -- 00:25:29,258
One of the challenges might be the perception of
00:25:29,258 -- 00:25:34,162
of why now the regulation and industry is focused on, on fairness.
00:25:34,162 -- 00:25:37,833
Was there a problem before that that, that has always existed
00:25:37,833 -- 00:25:40,135
that I should now be, be upset or concerned about?
00:25:40,135 -- 00:25:44,072
Or the flip side is
00:25:44,339 -- 00:25:48,410
perhaps, there some, that are potentially afraid of, of
00:25:48,410 -- 00:25:51,413
what might be found as you, again, go down this path.
00:25:51,780 -- 00:25:56,752
So I think it's important to, to continue to
00:25:57,285 -- 00:26:01,056
highlight the benefits of, of, of what this can do
00:26:01,056 -- 00:26:03,525
for consumers in terms of protection, in terms
00:26:03,525 -- 00:26:06,695
of, of improving consumer outcomes,
00:26:06,695 -- 00:26:11,066
and also the flexibility that, that it allows for companies
00:26:11,066 -- 00:26:14,703
to, to really improve the consumer experience, to really improve
00:26:14,703 -- 00:26:19,341
the outcomes that get consumers, may and potentially will see.
00:26:23,111 -- 00:26:26,281
Roosevelt, we spent a lot of time talking about innovation
00:26:26,281 -- 00:26:30,952
and how our principles based regulation can encourage innovation.
00:26:30,952 -- 00:26:34,890
I don't know that, that, that necessarily within the industry
00:26:34,890 -- 00:26:37,125
there's a clear connection between the two.
00:26:37,125 -- 00:26:39,628
And I'm, I'm hoping you can discuss that a little bit.
00:26:39,628 -- 00:26:40,695
Yeah, sure.
00:26:40,695 -- 00:26:43,698
And I,
00:26:43,698 -- 00:26:46,168
you probably recognize this from my introduction,
00:26:46,168 -- 00:26:48,937
but I'll say it just to make sure everyone understands.
00:26:48,937 -- 00:26:52,607
I'm obviously I'm from South of the border and so I will,
00:26:52,607 -- 00:26:55,577
I will maybe sprinkle in some examples from my U.S.
00:26:55,577 -- 00:26:57,913
experience and sort of how that relates to
00:26:57,913 -- 00:27:00,916
to the experience that I've had here, here in Ontario.
00:27:01,249 -- 00:27:05,420
But, but the, the, the idea of of innovation
00:27:05,420 -- 00:27:09,758
within a principles based environment I think fits much more
00:27:10,592 -- 00:27:11,560
comfortably,
00:27:11,560 -- 00:27:14,563
than it does in a rules based environment.
00:27:14,829 -- 00:27:17,799
In a lot of cases, in a rules based environment,
00:27:18,233 -- 00:27:20,702
you, the rules don't
00:27:20,702 -- 00:27:24,940
necessarily develop fast enough or develop
00:27:24,940 -- 00:27:30,211
in the way that they need to, to encourage innovation by companies.
00:27:30,211 -- 00:27:34,749
And so the challenge then that, that, that creates is, is
00:27:34,749 -- 00:27:38,453
companies have to attempt to innovate, but do so
00:27:38,453 -- 00:27:42,324
within a set of rules that they maybe even don't, don't yet,
00:27:42,324 -- 00:27:45,293
don’t still completely apply in today's environment.
00:27:45,293 -- 00:27:48,930
If we think about how fast the auto,
00:27:48,930 -- 00:27:52,167
the automobile, has, has changed over the years,
00:27:52,467 -- 00:27:56,237
the automobile that I'm driving today is, is radically different
00:27:56,237 -- 00:27:59,541
than the auto, automobile that I've drove 15, 20 years ago.
00:27:59,541 -- 00:28:04,946
But in some cases and like I say this, for certain in the U.S.,
00:28:05,046 -- 00:28:09,517
the regulatory structures that, that, that, that govern
00:28:09,517 -- 00:28:14,456
auto insurance are still for 15, 20, sometimes even longer ago.
00:28:14,456 -- 00:28:20,128
And so because you you don't have that, that
00:28:20,128 -- 00:28:23,465
environment that encourages innovation, a lot of times
00:28:23,465 -- 00:28:27,235
what you see is that that innovation lags within the insurance industry
00:28:28,603 -- 00:28:32,474
over the last, you know, probably decade.
00:28:32,474 -- 00:28:36,010
Now, there are a lot of companies, Insuretech companies,
00:28:36,010 -- 00:28:39,781
that came to the insurance space that that were going to take over
00:28:39,781 -- 00:28:41,916
the insurance space because they were going to come in
00:28:41,916 -- 00:28:45,119
and innovate all of the existing companies out of business.
00:28:45,119 -- 00:28:47,989
And what they realized is that when they came to insurance,
00:28:47,989 -- 00:28:53,127
they had to deal with sometimes archaic, sometimes old rules that didn't
00:28:53,127 -- 00:28:56,364
allow for the kind of innovation that they desire to do.
00:28:56,364 -- 00:29:00,101
And so it ultimately tamped down
00:29:00,101 -- 00:29:03,805
in some cases, just they went off and did something else somewhere else
00:29:03,805 -- 00:29:07,342
because they realized they couldn't do it in insurance.
00:29:07,508 -- 00:29:12,447
And, and, so one of the and we've got a couple of examples in the US,
00:29:12,447 -- 00:29:17,285
although one of those gaps might go away if the legislature had their way.
00:29:17,285 -- 00:29:20,488
We've got one example in the US of a state that really
00:29:20,488 -- 00:29:25,193
is more of a principles based environment than it is a rules based environment,
00:29:25,193 -- 00:29:29,530
and a lot of insurance companies use that state as a testing ground.
00:29:29,831 -- 00:29:31,099
They'll, they'll innovate.
00:29:31,099 -- 00:29:34,635
They'll, they'll roll out new things there, they'll refine them, see how they work,
00:29:34,635 -- 00:29:37,939
and then they will modify or adjust it
00:29:37,939 -- 00:29:40,942
maybe to fit in some of the other states that they operate in.
00:29:40,942 -- 00:29:42,010
But, but
00:29:42,343 -- 00:29:45,880
I think the insurance industry, especially in the U.S.
00:29:45,880 -- 00:29:49,250
and the lack of innovation that's happened there is
00:29:49,250 -- 00:29:52,153
kind of a testament to
00:29:52,153 -- 00:29:56,023
sometimes just the, the, the way that rules based environments
00:29:56,023 -- 00:29:59,794
don't work for innovation and also just the way
00:29:59,794 -- 00:30:03,297
in some cases that companies have been conditioned that, that it's
00:30:03,297 -- 00:30:06,534
not going to make sense to try to innovate because I won't be able to do it.
00:30:08,136 -- 00:30:12,373
That's, that's really interesting that PBR states are actually used
00:30:12,373 -- 00:30:16,944
as a testing ground for new ideas that can later be rolled out
00:30:16,944 -- 00:30:20,181
in rules based environments where there are more constraints or more
00:30:20,181 -- 00:30:22,083
that where, there's more lagginess.
00:30:22,083 -- 00:30:23,518
for sure.
00:30:23,518 -- 00:30:25,987
I'm going to move to Michelle now and Michelle,
00:30:25,987 -- 00:30:29,257
maybe we can switch to OGC
00:30:29,257 -- 00:30:32,293
and ORM and dig a little bit deeper there.
00:30:32,293 -- 00:30:35,863
Can you talk to us a little bit about how insurers can leverage
00:30:35,863 -- 00:30:39,433
the new rate and underwriting guidance to be more resilient?
00:30:40,101 -- 00:30:40,668
Sure.
00:30:40,668 -- 00:30:43,037
This is a very good question.
00:30:43,037 -- 00:30:48,209
So first that I think for most of you in the audience, maybe wondering why
00:30:48,209 -- 00:30:53,581
Michelle from Discover Financial Services Company is here actually
00:30:53,581 -- 00:30:58,319
by following the responsible maybe some insights from my end.
00:30:58,319 -- 00:31:01,022
Well, just to remove or
00:31:01,022 -- 00:31:04,091
maybe clarify, your wondering.
00:31:04,558 -- 00:31:06,360
And so
00:31:06,360 -- 00:31:09,363
what I wanted to say, is
00:31:09,530 -- 00:31:15,403
I worked in, for most of my career and the for my, my for most of my career,
00:31:15,403 -- 00:31:18,339
I worked in financial industry
00:31:18,339 -- 00:31:21,342
and financial services companies.
00:31:21,342 -- 00:31:24,378
But for more than two years
00:31:24,378 -- 00:31:27,782
in my past, I worked for an insurance company,
00:31:28,015 -- 00:31:31,419
American Family Insurance Enterprise.
00:31:31,419 -- 00:31:35,222
So then I have two sides of this story, right?
00:31:35,222 -- 00:31:39,493
And now I would like to say it's across the industry
00:31:39,493 -- 00:31:40,294
experience.
00:31:40,294 -- 00:31:43,297
Knowledge easier can be learned from each other,
00:31:43,531 -- 00:31:47,301
and especially of financial industry, like our principle based
00:31:47,301 -- 00:31:51,305
regulatory requirements are much easier.
00:31:51,305 -- 00:31:54,141
For example, for my, the
00:31:54,141 -- 00:31:59,180
most, from my most recent experience working on model risk management,
00:31:59,180 -- 00:32:03,083
it's really, it's principle based like in U.S.
00:32:03,184 -- 00:32:06,554
We have SR11-7.
00:32:06,821 -- 00:32:09,957
So this is supervisory guidance
00:32:10,124 -- 00:32:14,929
from FRB from OCC, from FDIC, and
00:32:14,929 -- 00:32:19,733
from like a credit, from the government entities.
00:32:20,401 -- 00:32:22,069
So principle based.
00:32:22,069 -- 00:32:26,440
And the for each financial company, they have their own understanding,
00:32:26,440 -- 00:32:30,444
interpreting, interpretation of this guidance
00:32:30,444 -- 00:32:35,216
and are based on their firm's unique risk profile.
00:32:35,216 -- 00:32:40,721
And there being this models they come up with their own solution.
00:32:40,721 -- 00:32:44,325
So this principle based approach is definitely,
00:32:44,325 -- 00:32:48,996
it's innovative and will help insurers
00:32:48,996 -- 00:32:53,167
with new technologies regarding this
00:32:53,167 -- 00:32:56,270
like pricing how insurers
00:32:56,270 -- 00:32:58,706
leverage this rules based,
00:32:58,706 -- 00:33:01,108
principle based risk management
00:33:01,108 -- 00:33:04,078
to help with their business model
00:33:04,078 -- 00:33:07,081
to help their risk management.
00:33:07,114 -- 00:33:11,819
I think the first I would like to say is to establish
00:33:11,819 -- 00:33:15,322
your operational risk management framework.
00:33:15,322 -- 00:33:16,190
So what is a
00:33:16,190 -- 00:33:16,757
framework?
00:33:16,757 -- 00:33:19,793
Framework is basically, it's about like a governance,
00:33:20,294 -- 00:33:24,365
about your operational risk management
00:33:25,232 -- 00:33:28,235
policies, standards, procedures,
00:33:28,435 -- 00:33:30,738
all kinds of templates, job aids.
00:33:30,738 -- 00:33:33,741
So our firm has to have all those
00:33:34,808 -- 00:33:37,111
those things like
00:33:37,111 -- 00:33:40,848
a policy procedures in place.
00:33:40,848 -- 00:33:43,751
And after that, you need to, like Michelle mentioned,
00:33:43,751 -- 00:33:46,720
you need to have like a different
00:33:46,720 -- 00:33:48,922
line of, different lines
00:33:48,922 -- 00:33:52,326
of defense, majorly it’s three lines
00:33:52,326 -- 00:33:55,295
of defense model
00:33:55,295 -- 00:33:59,566
so this is a free market establishment after that it’s
00:33:59,566 -- 00:34:03,036
about the implementation, about execution,
00:34:03,036 -- 00:34:07,174
you can't adjust to have, to have things in paper
00:34:07,174 -- 00:34:09,776
just to have to talk the talk,
00:34:09,776 -- 00:34:14,114
and then you need to walk the walk, so this is execution.
00:34:14,114 -- 00:34:17,584
And after that, executing how to manage it.
00:34:17,584 -- 00:34:20,487
And the question has me ask it’s
00:34:20,487 -- 00:34:26,193
about your risk identification, measurement,
00:34:26,193 -- 00:34:29,897
your [unintelligible] establishment, your metrics,
00:34:29,897 -- 00:34:35,035
your thresholds for example, if you put like a below 5% it’s green
00:34:35,035 -- 00:34:39,573
and between 5% to 10% is yellow
00:34:39,806 -- 00:34:42,643
and if it’s above 10% it’s red.
00:34:42,643 -- 00:34:45,646
So it's a very obvious variable.
00:34:45,646 -- 00:34:48,181
And after then it’s risk
00:34:48,181 -- 00:34:51,285
mitigation, and the work is conducted
00:34:51,285 -- 00:34:55,122
by human, and human creates errors and mistakes.
00:34:55,122 -- 00:35:00,160
So everywhere there is a risk, there is issue.
00:35:00,160 -- 00:35:03,930
So when we identify it, we needed to have work plan,
00:35:03,930 -- 00:35:08,669
we needed to mitigate it and eventually the risk got controlled.
00:35:08,669 -- 00:35:13,507
So this is, also includes contingency planning.
00:35:13,507 -- 00:35:16,777
If the risk is huge, you should have
00:35:16,777 -- 00:35:19,713
some contingency plan in place.
00:35:19,713 -- 00:35:24,885
And I go, for example, a system failure. If it happens, what should we do?
00:35:25,085 -- 00:35:30,891
So this kind of response needs to be in place and that monitoring
00:35:30,891 -- 00:35:34,061
and the reporting, report and, report to your risk
00:35:34,061 -- 00:35:36,730
committee, to your board of directors.
00:35:36,730 -- 00:35:40,400
So they see your executives in the C3
00:35:40,400 -- 00:35:44,905
can be very aware of their firm's unique
00:35:45,238 -- 00:35:50,477
risk profile and they can be very much responsive.
00:35:50,477 -- 00:35:53,513
And after that, I think this is not,
00:35:53,513 -- 00:35:56,550
not that they lost the thing, but the it's a very important
00:35:56,550 -- 00:35:59,853
the firm needs to be compliant
00:36:00,253 -- 00:36:03,590
with the law, with the regulations.
00:36:03,590 -- 00:36:05,959
So this is a fundamental part
00:36:05,959 -- 00:36:11,031
to run our business, especially for a consumer based business.
00:36:12,499 -- 00:36:13,166
Michelle, in
00:36:13,166 -- 00:36:17,671
your consulting work, where do you typically see the biggest gaps?
00:36:18,772 -- 00:36:21,441
Yeah, mentioning.
00:36:21,441 -- 00:36:26,046
And if we talk about the gaps, because I have this
00:36:26,046 -- 00:36:30,684
consumer financial services, the experience and also insurance
00:36:30,684 -- 00:36:33,987
experience and that this,
00:36:34,220 -- 00:36:38,224
I don't want to just frustrating you but I think this
00:36:38,224 -- 00:36:43,496
not only my personal experience but for most folks if they have across
00:36:43,496 -- 00:36:48,335
the industrial experience, they may have kind of impression.
00:36:48,335 -- 00:36:50,770
So financial, financial
00:36:50,770 -- 00:36:52,605
firms, maybe it's more innovative,
00:36:52,605 -- 00:36:55,842
for talking about risk management
00:36:55,842 -- 00:36:58,912
might be more effective and efficient.
00:36:59,479 -- 00:37:02,482
So comparing to industries,
00:37:02,515 -- 00:37:07,887
I feel there are several gaps that I would like to mention.
00:37:08,355 -- 00:37:12,659
For example, lack of clear definition of
00:37:12,659 -- 00:37:16,162
stakeholder roles and responsibilities.
00:37:16,596 -- 00:37:20,333
This is, is so important because once you set up
00:37:20,333 -- 00:37:24,771
very clear roles and responsibilities, people can just work out their,
00:37:24,771 -- 00:37:27,607
their job requirements.
00:37:27,607 -- 00:37:33,079
And then there is a no just arguing and the who should do this,
00:37:33,079 -- 00:37:37,050
who should do that, so everyone is clear
00:37:37,283 -- 00:37:40,286
that this is my upstream responsibilities.
00:37:40,720 -- 00:37:43,723
This is downstream responsibilities.
00:37:43,890 -- 00:37:49,195
So people are in place to take care of their own plate.
00:37:49,195 -- 00:37:52,599
This is very clear, this lack of
00:37:52,632 -- 00:37:57,904
definition of the roles and responsibilities,
00:37:57,904 -- 00:38:01,207
after that is, for example, lack of effective
00:38:01,207 -- 00:38:04,210
risk management systems
00:38:04,744 -- 00:38:08,381
like a GRC, governance risk and control.
00:38:08,381 -- 00:38:13,386
So if our firm has a very good, has vast GRC system,
00:38:13,386 -- 00:38:16,589
actually, all kinds of risks can be well managed,
00:38:16,589 -- 00:38:19,259
not only operational risk management
00:38:19,259 -- 00:38:21,794
under its models risk management
00:38:21,794 -- 00:38:26,799
at the same time your, for example, the creditors
00:38:26,799 -- 00:38:30,003
your credit and risk management,
00:38:30,436 -- 00:38:35,408
your P&C related risk management
00:38:35,408 -- 00:38:38,478
and the top of the house level, if you, say you
00:38:38,511 -- 00:38:40,847
would like to have a have a risk report.
00:38:40,847 -- 00:38:45,652
So just to go through this systemically, because some partners
00:38:46,119 -- 00:38:51,524
so in the end all kinds of risk profiles that can be aggregated
00:38:51,524 -- 00:38:53,793
and the report
00:38:53,793 -- 00:38:56,796
can be correspondingly
00:38:57,030 -- 00:39:00,700
And again, it's lack of talents
00:39:00,700 -- 00:39:03,736
in the current era of AI, GNI,
00:39:03,736 -- 00:39:06,906
data scientists and data
00:39:06,906 -- 00:39:10,109
engineer engineers and the modelers.
00:39:10,543 -- 00:39:12,912
And also the staff turnover is very,
00:39:12,912 -- 00:39:17,216
very quick, very frequent and the knowledge transfer
00:39:17,283 -- 00:39:21,821
and you know, it's pretty much is there and related to this one,
00:39:22,021 -- 00:39:26,359
and what I would like to maintain are another gap it’s model
00:39:26,359 -- 00:39:30,563
not only model documentation but also all kinds of [unintelligible]
00:39:30,563 -- 00:39:32,565
related documentation.
00:39:32,565 -- 00:39:38,004
So you it's not comprehensible, not transparent,
00:39:38,004 -- 00:39:41,607
and especially for some key business processes.
00:39:41,607 -- 00:39:44,277
You know, it's not well documented,
00:39:44,277 -- 00:39:48,414
and again for people and the new hires,
00:39:48,848 -- 00:39:52,752
it's very challenging for them to follow
00:39:53,085 -- 00:39:56,923
the key processes,
00:39:57,123 -- 00:40:00,026
key requirements to fulfill their job
00:40:00,026 -- 00:40:03,029
responsibilities.
00:40:03,763 -- 00:40:06,132
Michelle, I wonder also if you can comment
00:40:06,132 -- 00:40:09,335
on some of the challenges that organizations face
00:40:09,335 -- 00:40:13,406
in really embedding the right mindset into their organizations.
00:40:13,406 -- 00:40:16,909
And as I mentioned before, not just in the pricing area,
00:40:17,343 -- 00:40:20,579
not just amongst risk management experts,
00:40:20,579 -- 00:40:24,617
but across the organization and embedded right into the business.
00:40:25,551 -- 00:40:27,586
Yeah. Thank you
00:40:27,586 -- 00:40:29,989
Michelle for another wonderful question.
00:40:29,989 -- 00:40:33,693
I think, for this one, the first challenge
00:40:33,726 -- 00:40:37,897
I would like to say in the past, for example, in the era of rule based
00:40:37,897 -- 00:40:40,132
regulatory requirements,
00:40:40,132 -- 00:40:46,472
I feel incentives for insurers were not strong.
00:40:46,472 -- 00:40:49,342
Sometimes it's very late,
00:40:49,342 -- 00:40:52,345
because the cost was huge,
00:40:52,345 -- 00:40:58,718
their checklist is so long and there are lots to do
00:40:58,718 -- 00:41:01,721
and the transferring from this rule based
00:41:01,721 -- 00:41:04,457
requirements to principle based on requirements.
00:41:04,457 -- 00:41:08,694
As we just discussed, flexibility is much easier
00:41:09,028 -- 00:41:13,999
and especially the incentives to insurance are very obvious.
00:41:13,999 -- 00:41:16,602
For example, if you show your evidence,
00:41:16,602 -- 00:41:19,805
you have a very robust risk management.
00:41:19,805 -- 00:41:23,609
ORM is so strong. Documentation
00:41:23,609 -- 00:41:26,812
is in place, it's a very comprehensive well,
00:41:27,046 -- 00:41:30,649
and therefore you are being this decision making, you'll have rationale.
00:41:30,749 -- 00:41:31,917
Strong rationale.
00:41:31,917 -- 00:41:34,053
Justification,
00:41:34,053 -- 00:41:38,757
and the regulators come to exam and then provide
00:41:38,757 -- 00:41:44,196
green light and then, like an incentives you can see the new filing guidances as well
00:41:45,030 -- 00:41:46,365
will
00:41:46,365 -- 00:41:49,668
provide a very fast filing process
00:41:49,668 -- 00:41:54,473
for the accredited companies and then for this company
00:41:54,473 -- 00:41:56,876
there are new products, new services
00:41:56,876 -- 00:42:00,512
that go to markets that go into markets that will be very fast.
00:42:00,512 -- 00:42:04,250
And then it's very competitive and that they can make
00:42:04,283 -- 00:42:06,719
a lot of revenues and the profits.
00:42:06,719 -- 00:42:12,057
So this one, it’s the, first the challenge, the second one is, I feel,
00:42:12,057 -- 00:42:15,060
it's most of all companies.
00:42:15,060 -- 00:42:16,962
A lack of
00:42:16,962 -- 00:42:19,365
strong risk culture
00:42:19,365 -- 00:42:22,334
and most of them it’s very much
00:42:22,334 -- 00:42:25,738
reactive for, like it’s not proactive
00:42:26,005 -- 00:42:29,541
or even like proactive when the active
00:42:29,541 -- 00:42:33,612
so you, this way, when, like bad things happen
00:42:33,879 -- 00:42:38,550
and they just very much use reactive, their solution is one time
00:42:38,817 -- 00:42:40,619
not sustainable, not scalable
00:42:40,619 -- 00:42:44,523
and they put them together actually, this, the cost
00:42:44,623 -- 00:42:49,061
is a huge for your company but they have take this
00:42:49,061 -- 00:42:52,464
principle based approach eventually, you know
00:42:52,464 -- 00:42:58,203
their system will be very robust and that it’s very, very straightforward
00:42:58,203 -- 00:43:01,974
and a very comprehensive and very efficient.
00:43:01,974 -- 00:43:04,910
I think an agile ecosystem, reactive,
00:43:04,910 -- 00:43:08,981
very fast solutions are very sustainable.
00:43:08,981 -- 00:43:12,918
So cost is a much saved, another one,
00:43:12,918 -- 00:43:18,157
I would like to say it’s the operational risk management,
00:43:18,157 -- 00:43:22,494
actually, is an integral part of what enterprises risk management.
00:43:22,494 -- 00:43:25,597
So if the, the third challenge is,
00:43:25,597 -- 00:43:29,568
I think it's like our firm's ERM
00:43:29,768 -- 00:43:33,238
is a bottom up, not a top down.
00:43:33,238 -- 00:43:36,041
So it's harder for bottom level
00:43:36,041 -- 00:43:39,077
individuals to pursue innovation.
00:43:39,077 -- 00:43:43,248
So, if there is, something from the top advocates,
00:43:43,248 -- 00:43:48,987
for example, CEO says let's do ORM, let’s do MRM.
00:43:48,987 -- 00:43:50,355
So you can imagine.
00:43:50,355 -- 00:43:55,093
This effect is a huge, it's easier for people to follow.
00:43:55,694 -- 00:44:00,265
And the last one I would like to mention is the gap.
00:44:00,265 -- 00:44:02,134
It's a very lagged.
00:44:02,134 -- 00:44:05,537
Adoption of modern risk management.
00:44:05,537 -- 00:44:09,041
The concept, the framework especially
00:44:09,074 -- 00:44:13,745
we’ve talked about AI generated for AI a lot.
00:44:13,745 -- 00:44:17,282
So for companies everyone
00:44:17,316 -- 00:44:20,118
either to you have a very adaptive mindset,
00:44:20,118 -- 00:44:25,090
open minded to learn from outside and to be,
00:44:25,090 -- 00:44:29,828
to be more like a modern technology
00:44:29,895 -- 00:44:33,832
oriented and as you act, act fast.
00:44:34,399 -- 00:44:35,233
Thank you, Michelle.
00:44:35,233 -- 00:44:40,238
I'm sure there are many challenges associated with making this shift
00:44:40,238 -- 00:44:42,808
and really developing new processes and getting attention
00:44:42,808 -- 00:44:46,711
from across the organization and not just where some of these practices
00:44:46,711 -- 00:44:50,048
have historically sort of been siloed within organizations.
00:44:50,048 -- 00:44:51,616
Yeah. Thank you so much.
00:44:51,616 -- 00:44:55,620
I think maybe we'll switch now to a discussion on unfair bias
00:44:55,620 -- 00:44:56,688
and discrimination.
00:44:56,688 -- 00:45:00,792
So I'm going to turn our attention to Liz, who's a bit of a change maker
00:45:00,792 -- 00:45:04,729
at Definity, and I'm hoping you could share a bit about your story there.
00:45:04,729 -- 00:45:06,965
Liz, we'll start with the first question.
00:45:06,965 -- 00:45:10,368
How can actuaries identify, measure and mitigate unfair
00:45:10,368 -- 00:45:12,804
bias and discrimination in their models?
00:45:12,804 -- 00:45:15,740
It's a big question. It is a big question.
00:45:15,740 -- 00:45:19,511
Yes. Again, I just want to thank you for having me today
00:45:19,511 -- 00:45:21,479
and to be a part of this really important discussion.
00:45:21,479 -- 00:45:24,216
I think that there's a huge responsibility
00:45:24,216 -- 00:45:27,252
for actuaries and data scientists to take this into consideration
00:45:27,252 -- 00:45:29,054
throughout the predictive modeling lifecycle.
00:45:29,054 -- 00:45:32,357
So when we talk about different bias considerations, I think for a
00:45:32,357 -- 00:45:36,895
lot of folks, the default is to just check at the model evaluation step.
00:45:36,895 -- 00:45:39,898
But realistically, bias can be introduced at any point in the predictive
00:45:39,898 -- 00:45:41,166
modeling lifecycle.
00:45:41,166 -- 00:45:44,569
So there's, there's very important considerations that have to be made
00:45:44,569 -- 00:45:47,772
that might be specific to certain parts of your,
00:45:47,906 -- 00:45:51,977
your model risk management or your predictive modeling plan.
00:45:51,977 -- 00:45:53,545
So there might be considerations that you would need
00:45:53,545 -- 00:45:57,482
to make at the planning phase versus your data extraction or your preparation
00:45:57,482 -- 00:46:00,251
phase and understand thing is my data is inherently biased,
00:46:00,251 -- 00:46:02,554
and if the inputs are biased, what are my model results
00:46:02,554 -- 00:46:03,622
going to look like?
00:46:03,622 -- 00:46:06,558
So there's different detection tests that we can leverage
00:46:06,558 -- 00:46:08,927
depending on the type of model that we're building.
00:46:08,960 -- 00:46:11,463
So if we're thinking about it from an actuarial perspective
00:46:11,463 -- 00:46:14,632
and maybe something that's more traditional in the pricing sense.
00:46:14,632 -- 00:46:17,502
So a lot of us are familiar with the development of loss cost models,
00:46:17,502 -- 00:46:21,573
which are typically one that has a continuous response variable.
00:46:21,573 -- 00:46:26,344
So for things that are of the similar nature rather than a classification model,
00:46:26,344 -- 00:46:29,447
there would be certain techniques I would want to employ to detect bias.
00:46:29,447 -- 00:46:33,451
That being said, what works well for one type of model might not work
00:46:33,451 -- 00:46:34,352
well for another.
00:46:34,352 -- 00:46:37,789
So we really have to be conscientious of what that use case is
00:46:37,789 -- 00:46:40,358
and whether it makes sense for what we're building.
00:46:40,358 -- 00:46:43,394
But the same can be said about the mitigation techniques that we're using.
00:46:43,528 -- 00:46:47,999
So mitigation techniques also need to be specific in understanding
00:46:47,999 -- 00:46:50,368
what it is that our model's output is.
00:46:50,368 -- 00:46:54,205
And do these outputs result
00:46:54,205 -- 00:46:57,408
in unfair outcomes that we can control.
00:46:57,408 -- 00:47:01,379
But there is also times in which we need to be considerate of tradeoffs.
00:47:01,379 -- 00:47:05,183
So it's possible that you build a model where you've detected bias,
00:47:05,183 -- 00:47:09,087
you can mitigate it and the accuracy and the predictive power of your model
00:47:09,087 -- 00:47:11,556
is more or less the same. And that's very straightforward.
00:47:11,556 -- 00:47:15,760
But as Michelle was alluding to, there might be situations where
00:47:15,760 -- 00:47:16,494
that isn't the case
00:47:16,494 -- 00:47:19,264
and you do have this sort of tradeoff that you have to be considerate of,
00:47:19,264 -- 00:47:21,866
which is why it's important to build a model risk
00:47:21,866 -- 00:47:25,403
management framework that has the sort of ecosystem, right.
00:47:25,403 -- 00:47:29,474
So it's not just the responsibility of the actuary or the data science
00:47:29,474 -- 00:47:34,045
or the predictive analytics practitioner having this sort of cross-functional group
00:47:34,045 -- 00:47:36,748
to assess your models and properly vet the considerations
00:47:36,748 -- 00:47:40,752
and what outcomes look like for consumers is imperative.
00:47:40,752 -- 00:47:42,754
And without having that
00:47:42,754 -- 00:47:46,691
level of consideration and due diligence is very difficult
00:47:46,691 -- 00:47:51,062
to ensure that we truly do have fair outcomes for our consumers.
00:47:52,830 -- 00:47:55,033
I wonder, Liz, if you can
00:47:55,033 -- 00:47:59,871
talk a little bit about the journey at Definity, just at a really high level
00:47:59,871 -- 00:48:03,641
because you've really been such an integral part of them
00:48:04,075 -- 00:48:08,379
understanding fairness within their own organization
00:48:08,379 -- 00:48:12,250
and how to address it not just in modeling but in other areas of the organization
00:48:12,250 -- 00:48:12,717
as well.
00:48:12,717 -- 00:48:14,519
Can you tell us a bit about that? For sure.
00:48:14,519 -- 00:48:16,954
So a little bit of background
00:48:16,954 -- 00:48:20,992
about our journey we've formally formed our Working Group
00:48:20,992 -- 00:48:24,462
to address bias and fairness in predictive models in 2022.
00:48:24,462 -- 00:48:27,598
But that doesn't mean we weren't actively doing it prior to that.
00:48:27,598 -- 00:48:31,269
The issue was that we were seeing these gaps across different departments,
00:48:31,269 -- 00:48:34,972
so some departments were very active and proactive
00:48:34,972 -- 00:48:36,474
about doing these sorts of checks,
00:48:36,474 -- 00:48:39,444
whereas some departments were more reactive in nature.
00:48:39,444 -- 00:48:43,014
And like Michelle was talking about earlier, being reactive
00:48:43,014 -- 00:48:45,583
is not sustainable, but it's also quite harmful.
00:48:45,583 -- 00:48:49,153
And so having this proactive approach is beneficial
00:48:49,153 -- 00:48:53,024
not just for the model risk management perspective, but also for the consumers
00:48:53,024 -- 00:48:54,025
at the end of the day.
00:48:54,025 -- 00:48:58,462
So recognizing that we had this gap was a true driving force
00:48:58,462 -- 00:49:00,464
for developing our working group
00:49:00,464 -- 00:49:03,901
and to determine what it is that we wanted to achieve
00:49:03,901 -- 00:49:06,838
because like we were saying earlier, it can be very overwhelming.
00:49:06,838 -- 00:49:07,939
You don't know where to start.
00:49:07,939 -- 00:49:09,607
There are many different considerations
00:49:09,607 -- 00:49:13,110
that need to be made, but we're actually lucky to be here today
00:49:13,110 -- 00:49:16,847
with one of the authors of some of the CAS research paper series,
00:49:16,847 -- 00:49:20,751
and we used a lot of their work to determine what it is
00:49:20,751 -- 00:49:23,921
that we wanted to achieve and what made sense for our book of business.
00:49:23,921 -- 00:49:27,625
So we took a look at the literature and the research that was out there
00:49:27,625 -- 00:49:30,828
to determine, okay, what can we develop as practical tools
00:49:30,828 -- 00:49:34,365
that folks can leverage based off of the projects that they're working on
00:49:34,365 -- 00:49:38,603
and not being overly prescriptive on very specific use cases.
00:49:38,603 -- 00:49:43,474
Now, that doesn't mean that we don't have this sort of lack of rules,
00:49:43,474 -- 00:49:47,511
if that makes sense, because you need to understand the why behind the how.
00:49:47,511 -- 00:49:51,449
And the why is something that we identified as a major barrier
00:49:51,449 -- 00:49:55,386
in our organization, because for a lot of folks who work as either
00:49:55,386 -- 00:49:59,523
actuaries or data scientists or anything else, it's very analytical of nature.
00:49:59,523 -- 00:50:02,493
More likely than not, your undergraduate degree
00:50:02,493 -- 00:50:05,496
or your post-secondary education was within STEM.
00:50:05,496 -- 00:50:08,332
But historically, a lot of STEM degrees don't really address
00:50:08,332 -- 00:50:11,602
the effects of systemic bias on predictive models.
00:50:11,602 -- 00:50:14,071
And I don't know if they even do it today.
00:50:14,071 -- 00:50:17,108
They might, but I wish I had that when I was in university and I didn't.
00:50:17,108 -- 00:50:22,113
So knowing that even though actuaries go through this sort of very rigorous
00:50:22,113 -- 00:50:25,316
exam process, but this is actively addressed
00:50:25,316 -- 00:50:28,119
in our literature, it's a, it's a gap that needs to be addressed
00:50:28,119 -- 00:50:32,189
because it's one thing to do the how, it's one thing to apply the tools.
00:50:32,189 -- 00:50:35,392
But if you're not fully understanding why you're doing it
00:50:35,392 -- 00:50:38,762
or if you don't fully understand what you're doing,
00:50:38,996 -- 00:50:42,466
it makes it very difficult to ensure that what you're doing is promoting
00:50:42,466 -- 00:50:45,870
positive outcomes. And you don't even know what you're looking for.
00:50:45,903 -- 00:50:46,871
That's it. Yeah.
00:50:46,871 -- 00:50:48,405
Do you want to add anything on that, Roosevelt?
00:50:48,405 -- 00:50:50,541
Well, there's, there's a lot of
00:50:50,541 -- 00:50:55,513
I maybe pick up on one point that then there's may
00:50:55,513 -- 00:50:59,450
I can't underscore enough that question
00:50:59,450 -- 00:51:03,487
of understanding the outcomes that you're seeing in fairness test
00:51:03,487 -- 00:51:06,924
and then identifying the appropriate way to address those outcomes
00:51:07,458 -- 00:51:10,094
is one of the challenges is
00:51:10,094 -- 00:51:13,864
that we're wrestling with in the U.S.
00:51:13,898 -- 00:51:15,666
is that
00:51:15,666 -- 00:51:18,202
there's sort of two sides of the coin there.
00:51:18,202 -- 00:51:23,007
There's some regulators that believe, if I define this very specific test
00:51:23,007 -- 00:51:27,878
and I define a very specific parameter or a very specific outcome that, that,
00:51:27,878 -- 00:51:30,247
that determines pass or fail,
00:51:30,247 -- 00:51:33,784
then I've satisfied the fairness criteria.
00:51:34,251 -- 00:51:37,254
And, and one of the things that we've been
00:51:37,988 -- 00:51:40,524
saying to anybody that will listen is that,
00:51:40,524 -- 00:51:43,027
testing is one thing.
00:51:43,027 -- 00:51:46,797
What you do with that test is critically important
00:51:47,197 -- 00:51:50,034
because ultimately you could actually end up
00:51:50,034 -- 00:51:53,504
creating a worse situation on the outcome
00:51:53,504 -- 00:51:56,507
than, than if you did nothing at all.
00:51:56,774 -- 00:52:00,577
And unfortunately,
00:52:00,577 -- 00:52:04,314
especially in kind of the world today,
00:52:04,314 -- 00:52:07,785
the headlines drive more of the policy than, than
00:52:07,785 -- 00:52:10,587
sometimes the scientific reality.
00:52:10,587 -- 00:52:14,691
And so I, it for those that, that,
00:52:14,691 -- 00:52:17,661
that, that are involved in this I can't underscore that enough.
00:52:17,661 -- 00:52:20,230
Yeah, there's one thing to test for fairness.
00:52:20,230 -- 00:52:23,066
What you do with the results of that test is
00:52:23,066 -- 00:52:26,069
vitally more important than even the test.
00:52:26,336 -- 00:52:29,006
And maybe just to build on that, Michelle was talking
00:52:29,006 -- 00:52:32,276
about how we have different levels of signoff, right?
00:52:32,276 -- 00:52:36,113
So a definitive part of that model
00:52:36,113 -- 00:52:39,550
risk management element is when we're building a new model
00:52:39,550 -- 00:52:42,786
that has a certain level of risk associated to it.
00:52:42,786 -- 00:52:46,723
Not only are we showing that the model was properly built and whatnot,
00:52:46,723 -- 00:52:50,928
but we are also showing the proper bias detection and mitigation techniques
00:52:50,928 -- 00:52:52,029
that were applied.
00:52:52,029 -- 00:52:56,366
And when we are showing these things, it's not just to a VP who's also an actuary.
00:52:56,366 -- 00:52:59,903
There's this understanding that model explainability is not just
00:52:59,903 -- 00:53:03,607
from the perspective of data scientists, but to folks who might be non-technical
00:53:03,607 -- 00:53:05,008
in their day-to-day job.
00:53:05,008 -- 00:53:07,344
So if we have folks who are in legal, for example,
00:53:07,344 -- 00:53:09,746
and we even saw this in our talks earlier today,
00:53:09,746 -- 00:53:13,350
they might not be analytics practitioners, but they understand the outcomes.
00:53:13,350 -- 00:53:18,422
And so when we, when we talk about bias and fairness and the ways in which we are
00:53:18,422 -- 00:53:21,458
mitigating it, having a layered
00:53:21,458 -- 00:53:24,828
approach and not just a siloed one is crucial.
00:53:24,828 -- 00:53:29,199
And I think that if FSRA is moving forward with this sort of approach
00:53:29,199 -- 00:53:33,637
with PBR, it's going to force folks to get on to the same page.
00:53:33,637 -- 00:53:35,772
I think that's such a great point.
00:53:35,772 -- 00:53:40,677
I wonder also, Liz, if, if the job is becoming more difficult with things
00:53:40,677 -- 00:53:45,215
like artificial intelligence and machine learning, it's just complex stuff.
00:53:45,215 -- 00:53:46,383
It is.
00:53:46,516 -- 00:53:49,786
Even with the rise of Gen AI, we have to sort of think
00:53:49,786 -- 00:53:52,589
outside the box as to how we can address bias with that, right?
00:53:52,589 -- 00:53:55,125
Because even if we think about large language models,
00:53:55,125 -- 00:53:57,094
there is an example that was being provided today
00:53:57,094 -- 00:54:01,098
and the previous talk about the app that was built.
00:54:01,098 -- 00:54:03,500
It was essentially a chat bot about foot pain.
00:54:03,500 -- 00:54:04,101
Right?
00:54:04,101 -- 00:54:08,038
And there was a clear bias in the way that the question was being built.
00:54:08,038 -- 00:54:11,174
And so naturally the outcomes are going to be biased as well.
00:54:11,174 -- 00:54:11,775
And so
00:54:12,008 -- 00:54:14,111
it's, it's complex,
00:54:14,111 -- 00:54:18,315
but I think it's something that we need to be actively thinking about.
00:54:18,315 -- 00:54:22,119
And by building PBR, it's
00:54:22,219 -- 00:54:24,721
going to be formulated in a way where we don't have to go
00:54:24,721 -- 00:54:27,357
well, we've never seen before, so we don't really know what to do.
00:54:27,357 -- 00:54:30,927
It gives us the framework and the tools to think, well,
00:54:30,927 -- 00:54:33,463
I've seen something similar before, how is this different?
00:54:33,463 -- 00:54:37,467
How can I leverage that and have this sort of transferable ability
00:54:37,467 -- 00:54:40,871
or tool kit to then assess something new that I've never seen before,
00:54:40,871 -- 00:54:43,874
but I understand it from other perspectives.
00:54:46,209 -- 00:54:47,143
Ok. So this is,
00:54:47,143 -- 00:54:50,080
this is more of an exploratory question, and I'll pose it to you, Liz,
00:54:50,080 -- 00:54:54,017
but I welcome anyone else on the panel that wants to jump in.
00:54:54,918 -- 00:54:58,154
How do you define what is fair?
00:54:58,154 -- 00:55:00,457
And do we need one definition of fair?
00:55:00,457 -- 00:55:02,759
Do we need to define it?
00:55:02,759 -- 00:55:04,261
Yeah, that is a hard question.
00:55:04,261 -- 00:55:05,729
Thank you so much for asking it.
00:55:05,729 -- 00:55:07,764
Yeah, everyone's wrestling with it.
00:55:07,764 -- 00:55:10,667
Everyone and I understand why.
00:55:10,667 -- 00:55:15,472
Even if we think about how we define fairness from a purely data science
00:55:15,472 -- 00:55:18,975
or machine learning or AI perspective, there is no one definition.
00:55:18,975 -- 00:55:21,845
And so this comes to be a problem
00:55:21,845 -- 00:55:25,015
for how we define it globally, right?
00:55:25,015 -- 00:55:27,984
So in the context of this, I think it's important
00:55:27,984 -- 00:55:32,055
that we can't take a sort of one size fits all approach.
00:55:32,055 -- 00:55:36,159
It really has to be in relation to what we're talking about.
00:55:36,159 -- 00:55:41,231
So if we're talking about unfair outcomes with respect to, let's say,
00:55:41,231 -- 00:55:44,167
auto pricing, that might be different in terms
00:55:44,167 -- 00:55:47,003
of considerations that we would have for underwriting.
00:55:47,003 -- 00:55:50,106
And if, with what FSRA is developing,
00:55:50,106 -- 00:55:53,877
I think what's important here is that they have the ability to be
00:55:55,044 -- 00:55:57,514
not overly prescriptive in terms of
00:55:57,514 -- 00:56:00,383
what's considered to be fair, because for
00:56:00,383 -- 00:56:05,388
if we're asking the industry to define fairness on their own,
00:56:05,488 -- 00:56:08,491
you are going to have multiple different answers.
00:56:08,858 -- 00:56:12,462
And that makes it very difficult to ensure proper, fair outcomes.
00:56:12,462 -- 00:56:17,133
But if we have the sort of guidance about what does fair mean in this context,
00:56:17,133 -- 00:56:19,803
then the insurers can go ahead and say,
00:56:19,803 -- 00:56:22,272
Well, that makes sense given the business that I underwrite.
00:56:22,605 -- 00:56:25,909
And it allows the insurers to be on the same page.
00:56:25,909 -- 00:56:30,046
It also sort of a risk mitigation technique for the regulator themselves
00:56:30,046 -- 00:56:31,047
because you're ensuring
00:56:31,047 -- 00:56:34,050
that everyone is on the same page, that they have the tools to assess
00:56:34,050 -- 00:56:35,018
what makes sense
00:56:35,018 -- 00:56:39,022
for their specific use cases, again, without being overly prescriptive.
00:56:39,022 -- 00:56:42,158
So I know it's not really an answer because I don't fully have an answer,
00:56:42,158 -- 00:56:46,429
but I think that rather than having a one-size-fits all approach,
00:56:46,429 -- 00:56:50,099
it's important just to formulate your considerations
00:56:50,099 -- 00:56:53,002
based off of what it is that you're working on.
00:56:53,002 -- 00:56:54,504
Do you think organizations need
00:56:54,504 -- 00:56:58,041
to be declarative about what their fairness definition is?
00:56:58,041 -- 00:57:00,043
It's another tricky one. That is a tricky one,
00:57:01,611 -- 00:57:02,412
Very tricky.
00:57:02,412 -- 00:57:05,415
I think it's something to consider moving forward with this.
00:57:05,882 -- 00:57:06,482
Okay.
00:57:06,482 -- 00:57:10,520
It's a conversation starter, certainly. For sure.
00:57:11,387 -- 00:57:12,088
Okay.
00:57:14,023 -- 00:57:15,124
The relationship
00:57:15,124 -- 00:57:18,895
between insurers and the regulator
00:57:18,895 -- 00:57:22,532
will change in the context of principles based regulation.
00:57:22,799 -- 00:57:24,600
How do you see that?
00:57:24,600 -- 00:57:26,436
Well, how do you see it changing?
00:57:26,436 -- 00:57:27,970
What will work best?
00:57:27,970 -- 00:57:30,606
What support is needed for the industry?
00:57:30,606 -- 00:57:35,178
It's just a kind of an open ended question and maybe everyone can comment on that.
00:57:35,845 -- 00:57:37,480
Do you want to start Roosevelt?
00:57:37,480 -- 00:57:40,183
Sure, sure.
00:57:40,183 -- 00:57:43,720
So I, one of the refreshing things
00:57:43,720 -- 00:57:46,923
that I've seen as part of the,
00:57:46,923 -- 00:57:51,027
the principles based regulatory structure, is really just
00:57:51,027 -- 00:57:55,198
the collaborative environment that, that's been set up here.
00:57:55,198 -- 00:57:58,367
It's unlike anything I've ever seen in my career.
00:57:58,367 -- 00:58:02,205
And I think you're, you're really onto something here.
00:58:02,271 -- 00:58:07,076
But I think, that, that, that idea of the regulator
00:58:07,076 -- 00:58:09,579
and the industry collaborating
00:58:09,579 -- 00:58:12,215
to focus on the consumer
00:58:12,215 -- 00:58:16,953
outcomes is, it's the way really that that regulation
00:58:16,953 -- 00:58:20,356
should work to be, to be honest, is that if everybody's
00:58:20,356 -- 00:58:23,259
kind of pushing in the same direction and focused on the consumer.
00:58:23,259 -- 00:58:27,363
Then, then that hopefully that change will, will continue.
00:58:27,930 -- 00:58:33,135
You know, certainly kind of reinforcing the principles based guidelines.
00:58:33,135 -- 00:58:36,606
Again, with change, it's sometimes easy to revert back to
00:58:36,606 -- 00:58:39,442
what we know on both sides, industry and regulation.
00:58:39,442 -- 00:58:43,879
And so, really kind of reinforcing the fact that, that, that this really
00:58:43,879 -- 00:58:47,583
is a changing environment and that we really want to do
00:58:47,583 -- 00:58:51,621
what's best for the consumer, I think we’ll begin
00:58:51,621 -- 00:58:55,424
require everyone to kind of flex their change muscles.
00:58:55,791 -- 00:59:00,997
But, but it, is continuing to to collaborate and
00:59:00,997 -- 00:59:03,466
and seeing the benefits of that collaboration,
00:59:03,466 -- 00:59:06,836
I think will just continue to strengthen the environment going forward.
00:59:07,770 -- 00:59:08,204
I agree.
00:59:08,638 -- 00:59:09,872
Michelle, would you like to comment?
00:59:09,872 -- 00:59:14,010
Yeah, I feel this one will bring good things
00:59:14,010 -- 00:59:16,846
for both, both sides.
00:59:16,846 -- 00:59:20,116
And I echo, I just, I would like to echo
00:59:20,116 -- 00:59:23,786
what those words just said.
00:59:23,786 -- 00:59:28,324
So more collaborative being on the
00:59:28,324 -- 00:59:30,860
Regulators and insurers will be
00:59:30,860 -- 00:59:34,330
more collaborative in the collective efforts,
00:59:34,330 -- 00:59:37,133
so it’s not just the one side for example
00:59:37,133 -- 00:59:41,604
Usually in the past, the regulation was the legacy governance
00:59:41,604 -- 00:59:44,440
body there and the insurers that have to follow
00:59:44,907 -- 00:59:48,978
all kinds of rules, checklist, but going forward,
00:59:49,145 -- 00:59:52,348
because it is a principle based and then,
00:59:52,348 -- 00:59:55,618
there will be lots of conversations, so
00:59:55,618 -- 00:59:58,888
there will be a lot of mutual understanding.
00:59:58,888 -- 01:00:02,158
Consensus for this, for this specific business
01:00:02,158 -- 01:00:05,928
requirements situation and in the end,
01:00:05,928 -- 01:00:10,266
following that principle and the solutions will be much,
01:00:10,266 -- 01:00:12,768
much, much better.
01:00:12,768 -- 01:00:16,138
And they're also easier and agile
01:00:16,372 -- 01:00:19,375
based and agile solutions.
01:00:19,375 -- 01:00:23,546
And at the same time, I mean, solutions, would it be
01:00:23,546 -- 01:00:29,218
very sustainable and scalable, not just a mega B to this specific rules,
01:00:29,218 -- 01:00:33,222
but the principles, these kind of a and, is a high, high level.
01:00:33,222 -- 01:00:38,761
So I would like to use towards a sustainable and the scalable to describe
01:00:38,761 -- 01:00:40,896
that.
01:00:40,896 -- 01:00:44,433
I really like what you said about it being a collective thing
01:00:44,733 -- 01:00:48,370
because fairness is a collective issue like even if we strip away
01:00:48,604 -- 01:00:51,941
this sort of pathway to an accelerated filing process,
01:00:51,941 -- 01:00:54,943
if some insurers are doing it really well, but others aren't,
01:00:55,477 -- 01:00:57,146
you haven't mitigated bias.
01:00:57,146 -- 01:00:58,347
It's still going to be there.
01:00:58,347 -- 01:01:02,151
If you have these pockets of industry where some industry,
01:01:02,151 -- 01:01:04,586
some insurers are doing it really well and others aren't really addressing it
01:01:04,586 -- 01:01:08,590
at all, then you were still looking at unfair outcomes.
01:01:08,590 -- 01:01:11,360
These disparities will still be present.
01:01:11,360 -- 01:01:15,497
That's why I think that it's important that FSRA is taking that
01:01:15,497 -- 01:01:19,368
on, and integrating it intentionally and not being reactive.
01:01:19,368 -- 01:01:24,640
Because, if everyone is on that sort of same page, and understanding of fairness
01:01:24,640 -- 01:01:28,877
that will ensure that will ensure fair outcomes for our consumers.
01:01:28,877 -- 01:01:30,312
And ultimately, at the end of the day,
01:01:30,312 -- 01:01:32,681
we're in the business of consumer protection.
01:01:32,681 -- 01:01:37,119
Consumer protection is a collective that is not something that one
01:01:37,119 -- 01:01:42,124
insurer does and the others just follow in whatever way they say makes sense.
01:01:42,124 -- 01:01:45,494
It's something that we all need to be buying into, and I'm hoping that
01:01:45,494 -- 01:01:48,864
with this supervisory framework moving forward that insurers
01:01:48,864 -- 01:01:52,868
will understand and put in the work and the time to understand
01:01:52,901 -- 01:01:55,938
why this is important, why this is valuable, and why this can't
01:01:55,938 -- 01:02:00,442
just be the responsibility of one specific team in organization.
01:02:01,009 -- 01:02:01,710
I love that.
01:02:01,710 -- 01:02:05,480
And I love this idea of the principles almost like being shared
01:02:05,480 -- 01:02:08,550
values between the regulator and the industry.
01:02:08,550 -- 01:02:12,554
And we're all working together in order to achieve the same,
01:02:12,554 -- 01:02:15,357
the same outcomes for sure, and more dialog.
01:02:15,357 -- 01:02:18,393
So we talked about that this morning and I mentioned it earlier in the talk
01:02:18,393 -- 01:02:22,664
that there just really needs to be more exchanged between FSRA
01:02:22,664 -- 01:02:27,436
and the industry in order to make PBR a success going forward.
01:02:27,436 -- 01:02:28,937
So we're looking forward to that.
01:02:28,937 -- 01:02:32,474
This is one of many discussions that we'll be having with the industry
01:02:32,474 -- 01:02:36,645
and you'll see us out meeting with insurers and responding to questions
01:02:36,645 -- 01:02:39,881
and providing all the support that's needed to make sure that
01:02:39,881 -- 01:02:43,719
this is a really successful transformation and that everyone wins.
01:02:43,719 -- 01:02:44,786
Consumers win
01:02:44,786 -- 01:02:48,156
because we achieve all the outcomes that we were talking about before,
01:02:48,156 -- 01:02:53,061
and insurers are able to innovate and bring products
01:02:53,061 -- 01:02:57,065
to market more quickly, to move rate changes through more quickly.
01:02:57,065 -- 01:03:01,069
And all of that, all the flexibility that's needed for a healthy marketplace.
01:03:01,069 -- 01:03:04,639
So that concludes our formal panel discussion.
01:03:05,007 -- 01:03:10,412
We are now going to take questions online. And, and in the room,
01:03:10,579 -- 01:03:13,181
and if there are any questions that are left unanswered, as I mentioned
01:03:13,181 -- 01:03:17,152
before, we'll catch up with those separately.
01:03:18,920 -- 01:03:19,521
Okay.
01:03:19,521 -- 01:03:23,658
The first question, which is anonymous, was,
01:03:23,658 -- 01:03:27,929
when, FSRA has its supervisory framework and new guidance live.
01:03:27,929 -- 01:03:30,599
What happens to UDAP and TAC.
01:03:30,599 -- 01:03:35,771
So I think everyone is familiar with UDAP, but for anyone on online,
01:03:35,871 -- 01:03:38,874
Unfair, Deceptive Acts or Practices
01:03:38,874 -- 01:03:42,010
and TAC is the Take All Comers Rule.
01:03:42,010 -- 01:03:44,679
So the short answer to this question is nothing.
01:03:44,679 -- 01:03:47,516
Nothing changes with either a UDAP or TAC.
01:03:47,516 -- 01:03:50,018
TAC is part of the Insurance Act.
01:03:50,018 -- 01:03:51,353
And UDAP is a rule.
01:03:51,353 -- 01:03:53,889
So effectively they're both legislation.
01:03:53,889 -- 01:03:57,692
The supervisory framework is guidance that will be issued.
01:03:57,692 -- 01:04:01,730
So Joanne mentioned this morning that we're moving to
01:04:01,730 -- 01:04:05,267
kind of a hybrid model where there's principles, but there are also rules.
01:04:05,267 -- 01:04:07,702
And so those are rules that will remain in place
01:04:07,702 -- 01:04:09,771
and we'll continue to supervise against them.
01:04:11,973 -- 01:04:13,909
The next question
01:04:13,909 -- 01:04:17,145
is will FSRA define fairness for insurers?
01:04:17,145 -- 01:04:20,148
How will FSRA evaluate fairness?
01:04:20,248 -- 01:04:24,085
So fairness is chapter one in the supervisory guidance.
01:04:24,085 -- 01:04:28,323
As I mentioned, we're working through some of the principles of fairness.
01:04:28,323 -- 01:04:31,393
So unfair bias, discrimination, proxy
01:04:31,393 -- 01:04:34,829
discrimination, rating accuracy, things like that.
01:04:34,829 -- 01:04:38,033
So we're working through all of those pieces right now.
01:04:38,300 -- 01:04:43,138
Whether there will be one common definition of fairness,
01:04:43,438 -- 01:04:46,207
I would say there will be common principles
01:04:46,207 -- 01:04:49,577
that we'll all be measuring ourselves against, and we'll have to think
01:04:49,577 -- 01:04:53,081
about what some of the outcomes are that we will test within the context
01:04:53,081 -- 01:04:56,084
of the new guidance.
01:04:57,886 -- 01:04:58,887
The next question
01:04:58,887 -- 01:05:01,856
is, besides fairness and transparency,
01:05:01,856 -- 01:05:04,993
what are the other principles for auto insurance?
01:05:05,126 -- 01:05:07,929
So FSRA has six key principles
01:05:07,929 -- 01:05:10,765
that are listed in our standard filing and guidance.
01:05:10,765 -- 01:05:13,568
Certainly, fairness is one of them.
01:05:13,568 -- 01:05:16,504
As part of our consumer focus principle.
01:05:16,504 -- 01:05:20,742
But there are also things like sustainability, innovation,
01:05:21,009 -- 01:05:24,913
transparency and other measures that will be part
01:05:24,913 -- 01:05:28,316
of chapter four and the new guidance, the new filing guidance.
01:05:28,316 -- 01:05:30,685
So the standard filing guidance will go away.
01:05:30,685 -- 01:05:32,687
All of the principles are articulated there.
01:05:32,687 -- 01:05:35,390
They'll become part of the new supervisory guidance.
01:05:39,127 -- 01:05:40,395
The next
01:05:40,395 -- 01:05:43,264
question is for insurers that are accredited,
01:05:43,264 -- 01:05:47,101
I guess the accreditation status will be good for several years.
01:05:47,101 -- 01:05:50,705
Can you please clarify. You mentioned proactive supervision.
01:05:50,705 -- 01:05:55,410
Does it mean that FSRA will continuously monitor and audit insurers?
01:05:55,410 -- 01:05:57,512
This is a great question.
01:05:58,079 -- 01:06:00,848
The, the timeframe
01:06:00,848 -- 01:06:04,285
that we're working with right now for accreditation is three years.
01:06:05,053 -- 01:06:08,189
So you go through the assessment process, you become accredited
01:06:08,189 -- 01:06:13,161
and then officially or formally you won't be reassessed for three years.
01:06:13,161 -- 01:06:15,496
But during that time they'll still be ongoing
01:06:15,496 -- 01:06:18,499
monitoring what we call proactive supervision.
01:06:18,900 -- 01:06:21,336
So there will be regular data exchange,
01:06:21,336 -- 01:06:24,872
regular interactions with insurers
01:06:24,872 -- 01:06:28,910
and testing of some of the principles to make sure that they're being applied
01:06:28,910 -- 01:06:33,581
consistently, consistently, and that we're achieving the right outcomes.
01:06:33,581 -- 01:06:37,919
So there will be, there will be ongoing
01:06:37,919 -- 01:06:42,490
monitoring and supervision even after accreditation takes place.
01:06:42,490 -- 01:06:45,193
And then, of course, another formal process in three years.
01:06:49,097 -- 01:06:51,699
The next question is, my
01:06:51,699 -- 01:06:55,036
organization has operational risk management in place.
01:06:55,036 -- 01:06:57,438
Does FSRA expect insurers to
01:06:57,438 -- 01:07:00,675
create a new one for Ontario Auto Insurance?
01:07:00,875 -- 01:07:05,646
Will FSRA's new ORM framework benefit consumers?
01:07:05,646 -- 01:07:08,483
So I'll answer the first question.
01:07:08,483 -- 01:07:10,985
No. Organizations are not expected to,
01:07:10,985 -- 01:07:15,490
to create a new ORM for auto insurance.
01:07:15,623 -- 01:07:18,759
A lot of those practices are already in place
01:07:18,759 -- 01:07:21,762
within most organizations, as I mentioned before.
01:07:21,762 -- 01:07:24,532
I would say in small organizations that would be
01:07:24,532 -- 01:07:29,070
maybe a difference just due to resources and the size of business.
01:07:29,070 -- 01:07:31,205
And, and having that sort of infrastructure
01:07:31,205 -- 01:07:35,276
within their organization isn't necessarily warranted.
01:07:35,610 -- 01:07:38,613
So we'll be applying the principles
01:07:38,613 -- 01:07:42,650
of proportionality when we're doing the accreditation.
01:07:42,650 -- 01:07:45,653
If those organizations pursue accreditation.
01:07:45,653 -- 01:07:49,123
But we're not expecting companies to create anything new,
01:07:49,123 -- 01:07:53,828
but we will have minimum requirements in each one of those areas.
01:07:53,828 -- 01:07:57,031
And it's important that those that their ORM is robust
01:07:57,031 -- 01:08:01,102
and that it is consistently followed.
01:08:01,102 -- 01:08:04,972
And so they'll be testing for processes and that sort of thing.
01:08:04,972 -- 01:08:06,507
Hopefully that answers that question.
01:08:07,475 -- 01:08:09,010
The next question, does it
01:08:09,010 -- 01:08:12,780
mean that accredited insurers will get the approval
01:08:12,780 -- 01:08:16,317
for new products and business models much easier and faster?
01:08:16,317 -- 01:08:19,387
Will accredited insurers need to file at all?
01:08:22,757 -- 01:08:25,426
So accredited insurers will need to file.
01:08:25,426 -- 01:08:27,561
The requirements for filing will be different
01:08:27,561 -- 01:08:31,399
for accredited companies than it will be for non-accredited companies.
01:08:31,399 -- 01:08:35,436
But the idea here is that will increase speed to market.
01:08:35,436 -- 01:08:39,540
So accredited insurers, you know, having demonstrated
01:08:39,540 -- 01:08:42,777
that they're already operating in line with our principles and their serving
01:08:42,777 -- 01:08:46,447
target consumer outcomes, we'll have a streamlined process
01:08:46,447 -- 01:08:49,917
for applying for rate changes, product
01:08:49,917 -- 01:08:52,286
changes, model changes, things like that.
01:08:52,286 -- 01:08:54,955
But one of the things that I really want to impress
01:08:54,955 -- 01:08:59,627
is that it is possible to test new products and new business ideas today.
01:08:59,627 -- 01:09:01,862
We have the Innovation Office.
01:09:01,862 -- 01:09:05,699
We wish that the Innovation Office was busier than it is,
01:09:05,699 -- 01:09:10,204
but we do have the ability even today, to review those new business ideas,
01:09:10,204 -- 01:09:14,441
and we're very much eager to hear about those ideas
01:09:14,441 -- 01:09:17,444
and provide opportunities for organizations to test
01:09:17,444 -- 01:09:21,315
new business model ideas, new product ideas, things like that.
01:09:21,515 -- 01:09:25,085
So I guess from this question I'd like to impress on everybody is that
01:09:25,085 -- 01:09:29,590
we're open for business from that perspective,
01:09:29,590 -- 01:09:33,027
and we'd really like to hear more of those proposals coming forward.
01:09:36,931 -- 01:09:37,831
The next
01:09:37,831 -- 01:09:43,404
question is, is FSRA's accreditation system created for large insurers?
01:09:43,404 -- 01:09:45,606
Only small insurers do not have resources.
01:09:45,606 -- 01:09:49,610
How will small insurers be evaluated in the accreditation system?
01:09:49,610 -- 01:09:54,682
So as I mentioned before, our expectations for small organizations
01:09:54,782 -- 01:09:57,518
with small books of business and
01:09:57,518 -- 01:10:00,254
and that have
01:10:00,254 -- 01:10:04,391
less risky profiles will be different than the accreditation
01:10:04,391 -- 01:10:07,728
requirements for larger and more complex organizations.
01:10:07,728 -- 01:10:10,998
The details of that will be articulated in the supervisory...
01:10:10,998 -- 01:10:16,337
in the supervisory framework, but the short story is that small,
01:10:16,337 -- 01:10:19,273
there will be advantages even for small organizations
01:10:19,273 -- 01:10:22,876
to achieve accreditation and will be reasonable in terms of how
01:10:22,876 -- 01:10:26,480
we approach those requirements and what our expectations will be.
01:10:29,350 -- 01:10:30,617
The next question is,
01:10:30,617 -- 01:10:33,620
what are the timelines for accreditation to start?
01:10:33,887 -- 01:10:36,557
When will companies be able to start applying?
01:10:38,158 -- 01:10:39,626
So the new supervisory
01:10:39,626 -- 01:10:44,098
framework will be in effect towards the end of 2025.
01:10:44,631 -- 01:10:47,968
We're hoping that some insurers will come forward earlier
01:10:47,968 -- 01:10:51,972
in the process and express interest in being part of our pilot.
01:10:52,740 -- 01:10:55,175
But it's not too soon
01:10:55,175 -- 01:10:58,812
for us to start hearing from organizations and start lining that up.
01:10:58,812 -- 01:11:01,782
But the assessment process won't start until towards
01:11:01,782 -- 01:11:04,785
the end of next year.
01:11:06,019 -- 01:11:08,589
The next question is,
01:11:08,589 -- 01:11:11,825
why is PBR good for consumers
01:11:11,825 -- 01:11:14,161
and good for insurers?
01:11:14,161 -- 01:11:17,397
So I think we covered this question at length.
01:11:17,831 -- 01:11:20,167
But just to summarize for consumers,
01:11:20,167 -- 01:11:23,136
certainly fairness in rating,
01:11:23,370 -- 01:11:26,139
more choice through innovation,
01:11:27,474 -- 01:11:30,711
rating accuracy, I think all of those things are wins
01:11:30,711 -- 01:11:34,181
for consumers, more value for money through innovation and new products
01:11:34,181 -- 01:11:36,183
coming to market, things like that.
01:11:36,183 -- 01:11:40,888
For organizations, I think it's more flexibility.
01:11:40,888 -- 01:11:43,557
So, with, being focused on outcomes,
01:11:43,557 -- 01:11:47,160
then it gives insurers the flexibility to,
01:11:47,261 -- 01:11:50,530
you know, solve, solve for that, have more, more flexibility
01:11:50,530 -- 01:11:54,067
as long as they're achieving the target outcomes so they can decide
01:11:54,067 -- 01:11:56,403
how they, the achievement, achieve them.
01:11:56,403 -- 01:11:59,072
And there's more flexibility around that.
01:12:01,408 -- 01:12:04,144
A question maybe for Liz and Michelle.
01:12:04,144 -- 01:12:07,114
For those of us who are not underwriters or developing models,
01:12:07,114 -- 01:12:10,751
can you give an example of how bias may come up?
01:12:12,185 -- 01:12:13,720
Do you want to start?
01:12:13,754 -- 01:12:15,756
I can start.
01:12:15,756 -- 01:12:18,759
Yeah, thanks for this question
01:12:19,893 -- 01:12:24,998
and for any business actually there are models around,
01:12:24,998 -- 01:12:28,201
model outputs are used in our strategy.
01:12:28,201 -- 01:12:31,772
In your business decision sometimes, you know,
01:12:31,772 -- 01:12:36,109
for another set of strategies use, use cases.
01:12:36,109 -- 01:12:39,546
Actually, there is a no model involvement
01:12:39,546 -- 01:12:42,549
but there are some that casual based
01:12:43,683 -- 01:12:46,186
decision making processes
01:12:46,186 -- 01:12:51,391
and the just the, because of, of for example rule based that you factor based
01:12:51,391 -- 01:12:54,795
so the rule and a factor may contain some
01:12:54,795 -- 01:12:58,064
you know negative bias related for example
01:12:58,064 -- 01:13:00,700
PII related information.
01:13:00,700 -- 01:13:03,170
And then, in the end the business
01:13:04,137 -- 01:13:06,406
solutions decisions
01:13:06,406 -- 01:13:10,744
may contain bias, something.
01:13:11,044 -- 01:13:14,347
So there this is a one example I can provide.
01:13:14,347 -- 01:13:16,516
So it is you can, yeah.
01:13:16,516 -- 01:13:17,250
And then more.
01:13:17,250 -- 01:13:19,119
You said exactly what I was going to say so thanks,
01:13:19,119 -- 01:13:22,556
but I will expand a bit on that because I think that
01:13:22,556 -- 01:13:26,459
for, for some folks at least what we've seen internally is that
01:13:26,459 -- 01:13:29,863
this is the responsibility of the actuaries,
01:13:30,030 -- 01:13:33,033
the data scientists, the analytical folks.
01:13:33,033 -- 01:13:35,001
Bias can be as simple as a rule, right?
01:13:35,001 -- 01:13:36,436
It could be something that's exclusionary.
01:13:36,436 -- 01:13:40,941
It could be something that is unfair, that isn't the result of a model output.
01:13:40,941 -- 01:13:42,609
But I don't think enough folks realize
01:13:42,609 -- 01:13:46,046
that a lot of the business decisions are from model outputs.
01:13:46,046 -- 01:13:48,348
They're just not directly building them.
01:13:48,348 -- 01:13:51,851
They're using what was the outcome of that model.
01:13:51,851 -- 01:13:56,056
So I think it's important to not just understand that,
01:13:56,056 -- 01:13:58,191
but to challenge your own internal biases.
01:13:58,191 -- 01:13:59,659
Everyone has bias.
01:13:59,659 -- 01:14:02,896
That's not a social commentary on whether you are a good or bad person.
01:14:02,896 -- 01:14:05,165
Everyone has a bias that is normal,
01:14:05,165 -- 01:14:08,134
but understand how that relates to your work that you do, how that relates
01:14:08,134 -- 01:14:11,304
to the consumers that you're serving, and reflect upon that actively.
01:14:11,304 -- 01:14:15,675
Because when it comes to the notions of bias and fairness, it's not a checkbox,
01:14:15,675 -- 01:14:17,077
it's a journey. At the end of the day.
01:14:19,112 -- 01:14:21,381
Thank you so much, Liz.
01:14:21,381 -- 01:14:24,784
I think we're at time, so thank you everyone for joining us today.
01:14:24,784 -- 01:14:28,354
And I want to say thank you to Roosevelt, Michelle and Liz for joining us,
01:14:28,354 -- 01:14:31,357
and we look forward to more conversations with you in the future.
01:14:31,658 -- 01:14:32,158
Thank you.