ID
2024-007

Type
Rules
Sector
Life and Health Insurance
Status
Open
Date
Comment Due Date

Ontario’s financial services regulator (FSRA) is taking steps to better protect life insurance customers with individual segregated fund contracts (seg funds).

FSRA is proposing a Rule that would require insurers to provide customers with improved annual statements about the performance and embedded costs and fees associated with owning seg funds. If approved, the approach to disclosing total costs and fees will be consistent for investment and seg fund holders, making it easier for consumers to compare and decide on the product that’s right for them.

FSRA has been working with the Canadian Council of Insurance Regulators, as well as with the Canadian Securities Administrators, to enhance and harmonize how performance and fees are disclosed for investment and seg funds.

Insurers are required to provide annual statements right now. The FSRA rule will increase the information insurers would be required to provide on the annual statements, such as:

  • informing customers of the total cost of investing, including ongoing embedded fees such as management expenses and trading expenses
  • improving customer awareness of their segregated fund investment performance
  • advising customers of their rights to guarantees under their segregated fund contracts and how certain actions might affect their guarantees
  • allowing customers to more easily compare the cost of owning segregated funds with the cost of owning other investments

Some insurers already provide some of the above information on a voluntarily basis.

The proposed Rule will set out requirements that would be applied consistently across the sector in alignment with the Individual Variable Insurance Contract Ongoing Disclosure Guidance published by the Canadian Council of Insurance Regulators in 2023.

The consultation period for the proposed Rule is now open and will close on July 26, 2024. FSRA invites stakeholders to review the proposed Rule and submit their feedback.

Learn more:

FSRA continues to work on behalf of all stakeholders, including consumers, to ensure financial safety, fairness, and choice for everyone.

Learn more at www.fsrao.ca.

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Sector Comment Date posted
Financial Planners and Advisors
[2024-007] John Armstrong - Maia & Associates
I feel like regulators such as FSRA and CIRO put a "dangerous" amount of emphasis on fee disclosure. Let’s put aside for a moment the image of the purse snatching swindler conjured up every time you read an investment statement thanks to what’s been done so far. The FSRA is contributing to greatly misleading the investing public in terms of the cornerstone criteria for investment success. Other than in a mathematical equation inside a sterile classroom or a Fintech robo advisor advertisement, fees have little or absolutely nothing to do with investment SUCCESS. I know you think your studies and surveys put your finger on the pulse of what is important to customers but you couldn't be more wrong on this. The regulatory framework on the insurance side (you) and on the securities side (now CIRO) have done billions of dollars of damage to the finances of the Ontario investing public in the last 5 years inadvertently through how you communicate and emphasis what you refer to as "transparency".

90% of the investment outcome the average person receives is behavioural. Very simply put, did they constantly add money to the account regardless of market situation and did they leave it in long term in great companies. That’s it. The other 10%+ would be planning and advice. Fees are like maintenance on a car. You can buy a used Mitsubishi Mirage for $15K today. Your insurance rates, gas mileage and maintenance costs will plummet. I bet the cost of ownership for whoever reads this note would drop by over 50%. So why aren't you doing it? Maybe because performance, safety, comfort and overall picture matter more. Why aren't you giving that same advice to consumers whose interests you purport to represent?

It would take hours and hours to convey everything I want to say about this topic to you. If you are interested in learning more about how you can really help financial services consumers from someone who has seen and lived it all in the trenches, let me know. Happy to flesh out in finite detail every single comment I've made in this note.

Regards,
John
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