The insurance industry is undergoing a shift in regulatory approach that will soon find its way to average advisors, says J-P Bernier, vice president and general counsel of the Canadian Life and Health Insurance Association.

Bernier made this remark during a presentation at the Independent Financial Brokers of Canada’s annual spring summit, which is being held in Toronto on May 30-31.

The Office of the Superintendent of Financial Institutions is imposing “reputational risk management,” otherwise known as the culture of compliance, on life insurance companies, says Bernier. On June 1, 2005, OSFI sent a letter to all CEOs of life insurance companies, setting out the principles that insurers are expected to adhere to; the principles are designed to ensure that compliance becomes an integral part of day-to-day business of the industry, says Bernier.

Some examples include:
-Compliance must be included as part of the promotion and performance review processes. “OFSI will be looking for that,” says Bernier.
-Companies will have to make it clear that they have a “zero tolerance” policy toward compliance breaches. “It speaks volumes when a rainmaker is fired for an ethics breach,” says Bernier.
-Ethics must be part of the daily operation of life insurance companies. For example, says Bernier, OFSI will be reviewing CEO speeches for references to ethical standards.

The move to reputational risk management is a shift from the checklist approach that OFSI took in the late 1990s, says Bernier. And companies can’t rest on their laurels by simply following a checklist approach.

These obligations don’t extend to MGAs because they’re not regulated by OSFI, says Bernier. Provincial insurance regulators — which regulate insurance market conduct, such as the Financial Services Commission of Ontario — are expected to follow OSFI’s lead and develop a similar principles-based approach for MGAs. That means advisor-screening will become even more important.

More than 1,000 delegates are attending the IFB spring summit, says executive director John Whaley: “It’s a record.”