Insurance advisors who have been sanctioned for misconduct could soon see that enforcement activity recorded in a centralized, Canada-wide database, as regulators aim to make it easier for consumers to identify those advisors who have breached the rules.
The Canadian Council of Insurance Regulators (CCIR) has established a committee to explore the feasibility of this kind of national database. The idea is to allow consumers, regulators and firms to search a single database to determine whether an insurance advisor has faced disciplinary action in any province across the country. The database would include listings for both life and property and casualty agents.
“I think this is a way that we can help consumers better ascertain whether the agent that they’re dealing with is reputable; that [the agent is] not on a disciplinary action list,” says Grant Swanson, executive director of licensing and market conduct at the Financial Services Commission of Ontario (FSCO).
Under the current system, information about disciplinary action is scattered among multiple databases across the country, as this task is handled by provincial insurance regulators. Thus, even if an advisor is licensed in multiple jurisdictions, details of any disciplinary action against that advisor appear only on the website of the regulator in the province in which the misconduct took place.
“It’s time-consuming,” says Swanson, “for the public and the industry to conduct a search to determine whether there’s been disciplinary action against an individual. There are a lot of websites to go to.”
Moreover, some provinces, such as Alberta, don’t post information about enforcement activity at all. As a result, even clients who search all of the available disciplinary databases may still not get a complete picture of whether an advisor has a history of misconduct.
“Some jurisdictions publish a summarized version of disciplinary decisions; some don’t publish at all,” says Tom Hampton, chief operating officer at the Alberta Insurance Council (AIC) in Calgary. “There’s no uniform approach to what’s published or not published.”
A centralized database could provide more consistency, says the submission to the CCIR by Toronto-based Advocis: “A national database for substantiated complaints and disciplinary measures would eliminate existing reporting gaps between sectors and jurisdictions.”
Other industry associations are also supportive of the initiative. They suggest that the database would prove useful for insurers and managing general agencies (MGAs) that need to keep track of advisors they contract with.
“We think it’s an excellent idea,” says Leslie Byrnes, vice president of distribution and pensions with the Canadian Life and Health Insurance Association Inc. (CLHIA). “To have a cross-country picture of an agent would be extremely useful.”
Although the vast majority of advisors act in the best interest of their clients, Byrnes says, a single database would make it easier for firms and consumers to identify the advisors who don’t.
“This would certainly help prevent bad apples from slipping between the cracks,” she says. “They can’t just slip easily from one jurisdiction to another.”
Existing disciplinary reporting practices vary significantly among provinces, Byrnes agrees, which can present problems for insurers. In particular, not all regulators report disciplinary action right away; in some cases, she says, decisions are reported up to three months later. As a result, insurers are sometimes unaware when an advisor’s licence has been suspended.
“They need to have that information to know whether or not to accept the business,” says Byrnes, who expects that a centralized database would expedite the reporting process.
The CLHIA is urging the CCIR to take the national database concept even further by including not only disciplinary details but also licensing information for all insurance agents, as this information is also dispersed among different databases across the country.
“On a day-to-day basis,” Byrnes says, “just having the licensing information in one spot would be fabulous.”
Regulators might consider that in the future, Swanson says, but the focus right now is squarely on agents who have faced disciplinary action: “Generally, that’s where the risk is. We’ve focused on where the largest immediate benefit could be obtained.”
Despite the broad support for the national database, the committee responsible for the project must overcome a variety of technological, legal and operational hurdles in order to implement the database. For example, from a legal perspective, access to information laws vary slightly among the provinces, so regulators must ensure the database is constructed in compliance with the laws of each province. From an operational standpoint, there are challenges associated with distinguishing between agents with the same name: regulators want to avoid having an advisor with a clean record mistaken for one with a history of misconduct.
“If you come to our website and go looking for ‘John Smith’,” says Hampton, “you may have some difficulty identifying which John Smith you’re looking at.”
To address this issue, the AIC is pushing for each insurance advisor across the country to be assigned a registration number. “If you know that John Smith’s number is 456,” Hampton explains, “it’s easy for you to determine that you’re looking at the right John Smith. That’s our goal.”
Byrnes anticipates that it could take a couple years for regulators to address these and other issues: “I don’t think this is coming to a theatre near you too quickly.”
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