FSCO

(October 27, 2004) Regulatory scrutiny of the commission structure in the insurance industry has moved north of the border, as the Ontario government has directed the Financial Services Commission of Ontario (FSCO) to review the use of contingent commissions.

FSCO is remaining tightlipped about its role.

“We will be providing information to the ministry,” says Rowena McDougal, senior manager of public affairs for FSCO. “For the moment we’re monitoring developments in the United States, and we’ll be evaluating it to see if there are any implications for Ontario. We are working very closely with the Registered Insurance Brokers of Ontario (RIBO).”

Contingent commissions have come under fire in the U.S. recently, as New York Attorney General Eliot Spitzer launched his latest investigation into the financial services industry. These commissions are paid on top of regular fees, without disclosure to the client, creating at least the appearance of a conflict of interest.

The civil suits brought by Spitzer have already toppled Jeffrey Greenberg, the CEO of the largest insurance broker, Marsh & McLennan. The firm has joined other major brokerages in announcing it will no longer accept contingent commissions from insurers.

Two of Canada’s biggest insurance companies have already launched internal reviews of their own practices. Both Manulife Financial and Sun Life Financial are active in the U.S. market, making them possible targets for Spitzer’s probe of the insurance industry.

Filed by Steven Lamb, Advisor.ca, steven.lamb@advisor.rogers.com