New protection for whistle-blowers?

Canada’s insurance regulators are looking at ways to protect whistle-blowers against retaliation, such as civil actions.

The Canadian Council of Insurance Regulators (CCIR), an inter-jurisdictional association of insurance regulators, released a discussion paper at the end of 2005, entitled Privilege and Whistle-Blower Protection, asking for comments from industry stakeholders.

The paper proposes new rules that would make any self-assessment information collected by insurance companies or regulators, privileged.

Self- assessments — either voluntary or regulator required self-monitoring of company operations — are an important part of the plan to move to a risk-based regulatory system, CCIR says. “Self-assessment exercises, voluntarily undertaken, for internal operation purposes, constitute an effective method of responding to this governance need. Where practices are not in compliance, do not meet company set standards or do not achieve the expected results, appropriate changes should be made.”

Fear of civil litigation however, is hampering regulatory efforts to promote self-assessment in the industry. Currently, CCIR says there is little self-evaluative information available.

“Regulators have begun using mandatory self-assessments for market conduct examinations. With appropriate checks, this could minimize regulatory resources used in examinations of insurance companies,” say the paper’s authors. Regulators however, have come to realize, based on insurance company comments, that “the completion of voluntary or mandatory self-assessments could be negatively affected by the potential for that information to be used in civil actions against insurers. Representative Canadian insurers have confirmed that [their] behaviour is affected by considerations of litigation, particularly in regard to making decisions on whether and how to do voluntary self-assessments.”

To address these concerns, the CCIR paper suggests making any documents gathered in such an evaluation, either voluntarily or at the request of a regulatory authority, protected by privilege. The privilege would not apply in criminal or penal proceedings. As well, the CCIR says the model is not intended to impede, in any way, a regulator’s ability to use the information.

CCIR is also looking at whistle-blower protection to complement privilege for insurance company self-assessment documents.

Under the proposal, whistle-blowers would be protected against retaliation by way of civil action, so would be immune from liability to pay damages. But the protection would not extend to whistle-blowers from other retaliatory efforts such as termination of employment or contracts with insurers. “Regulators are not considering more than the provision of immunity,” but, say the authors, “privilege is being considered for the communication provided to the regulator.”

The whistle-blower would not have protection against a law suit if the information was not provided in good faith.

In a letter released this week, Advocis president Steve Howard expressed general support for the principles expressed in the discussion paper. “Indeed, whistle-blower protection provides an additional safeguard to ensure an open and honest marketplace exists for consumers.”

Currently, some form of whistle-blower protection is already in place in most of Canada, except Alberta, Northwest Territories, Nova Scotia and Nunavut.

“We encourage the four jurisdictions currently without whistler-blower protection to consider introducing relevant legislation in their jurisdictions,” writes Howard. “As regulators continue to move towards greater harmonization and coordination of financial service regulation, it will become increasingly important that all aspects of regulatory supervisions be based on a level playing field across all Canadian jurisdictions.”

A CCIR working group will determine whether to move forward with the privilege and whistle-blower protection recommendations, however each province and territory would have the final say on whether to implement them, since such rules would require new legislation.

Filed by Kate McCaffery, Advisor.ca, kate.mccaffery@advisor.rogers.com