Replacement of Life Insurance Contracts Regulation under the Insurance Act
Bill or Act:
Summary of Decision:
The proposed amendments change the point of sale consumer protection material that a life insurance agent would be required to provide a consumer when a replacement of one or more life insurance policies is intended and would also provide the insurance regulator with the authority to approve the form of a consumer information document.
August 17, 2010
Summary of Proposal:
The Replacement of Life Insurance Contracts Regulation is a consumer protection regulation which applies to a transaction where one or more life insurance policies are intended to be replaced in a single transaction. The regulation currently contains a form for use by agents at point of sale in order to provide disclosure and comparison information to the consumer. The comparison is done by the agent answering the same specified questions in the form about the current policy and a proposed replacement policy. The proposed amendments would remove the form that is currently in the regulation and allow the Superintendent of Financial Services to approve the form of the consumer information document. It would also require the agent to prepare a written description of the advantages and disadvantages of the proposed replacement.
The amendments are being proposed for several reasons. The current form, with its fixed set of comparison questions, may not be suited for use when replacing older life insurance products with some of the newer life insurance products. The current form’s format, which compares one life insurance policy against another, is not suitable when the replacement involves replacing more than one policy or when proposing more than one replacement policy. The written comparison permits the agent the flexibility to tailor the comparison to the specific replacement, including whether more than two policies are involved. Approval of the form of the consumer protection information document by the Superintendent of Financial Services streamlines the process for making changes in it as needed because changes can be made without modifying the regulation each time. Also, approving the form of such document is an appropriate responsibility for the Superintendent of Financial Services.
The Superintendent of Financial Services in the approval of the form of the consumer information document would take into account the requirements of the regulation and national harmonization of such consumer information documents.
Industrial & Financial Policy Branch
Ministry of Finance
Frost Building North, 4th Floor
95 Grosvenor Street
Toronto, ON M7A 1Z1
April 1, 2011