Insurance regulator explains why it slashed 73% of regulatory guidance

Ontario’s new financial services regulator launched last June with a mission to reduce the regulatory burden for industry players. One year into the job, that’s exactly what the Financial Services Regulatory Authority of Ontario (FSRA) has done.

On Monday — a year to the day after its launch —FSRA sent out a newsletter outlining its accomplishments, which include eliminating 51% of the regulatory guidance it inherited from its predecessors, the Financial Services Commission of Ontario (FSCO) and the Deposit Insurance Corporation of Ontario.

“We’re very pleased with our burden reduction efforts,” Mark White, FSRA’s CEO, said in an interview with Advisor’s Edge. “Burden reduction is about making sure you’re efficient as a regulator.”

If that’s the case, FSRA has become remarkably more efficient in the life and health insurance sector, where it has eliminated 73% of the regulatory guidance it inherited from FSCO. But some of those cuts may have come at the expense of consumer protection.

Harold Geller, a lawyer with Ottawa-based MBC Law Corporation, noted that “key consumer protection initiatives,” such as LH-01/98, FSCO’s guidance on reporting unsuitable activities by life insurance agents, appear to have been eliminated. That particular piece of guidance does not appear in FSRA’s active guidance listing.

“Burden reduction is a good idea in general, but it has to be led with [FSRA’s] mandate to protect the consumer,” Geller said. “Burden reduction just for the sake of having fewer rules is bound to be harmful.”

But White said the public “should rest assured” that none of the cuts will hurt consumer protections.

“We’ve cut back quite dramatically, but we have not cut away anything that’s important,” White said.

FSRA has a Consumer Advisory Panel (CAP), but the cuts to guidance were made in February 2019, before CAP was established in January 2020. However, FSRA indicated that it planned to consult with CAP on regulatory matters in the future.

“FSRA will continue to work closely with the Consumer Advisory Panel to ensure that the perspectives of consumers inform our direction and decisions, including on FSRA’s priorities supporting efficiency and effectiveness,” a spokesperson wrote in an email.

White said FSRA inherited an “overgrown garden” of guidance from its predecessors, resulting in a lack of clarity for the insurance industry. He said FSRA is now taking a “principles-based” approach to guidance.

“Our guidance tends to be quite focused and clear in what it is trying to achieve, and we think that will also reduce burden,” White said.

White also argued that fewer regulations can lead to a better consumer experience.

“Consumers want choice,” he said. “They want flexibility in how they buy products, including insurance, and companies want to be able to innovate for their customers. To be able to do that, you can’t have the old style of regulation, which tended to be prescriptive.”