The Canadian Life and Health Insurance Association’s compensation disclosure guideline doesn’t adequately provide for transparency, according to a letter submitted by the Benefits Alliance Group Inc.
“The quasi regulatory role assumed by such a powerful trade association is littered with serious conflicts of interest,” the letter read.
It noted these’s an imbalance between the natural goals of the CLHIA, namely to represent the interests of its members, and those of the Canadian Council of Insurance Regulators and the Canadian Insurance Services Regulatory Organizations, which seek to ensure fair treatment of consumers. “The role of the CLHIA in acting like a regulator is concerning given the clear conflicts of interest, their remoteness to the plan sponsor and their oversight by the insurance companies,” the letter read.
As such, the Benefits Alliance put forward several recommendations regarding the guidance, stressing the need for plan sponsors to make a clear, unhindered decision by using straightforward and accurate information on the relevant products.
First, it recommended that the costs for an advisor’s services be made totally clear to the plan sponsor, focusing on an overall assessment. As well, the cost of services provided by an insurer or supplier using a direct-to-client business model should be totally transparent. Regardless of which method is used, both should be governed by the same disclosure policy, focusing on costs directly charged to the plan sponsor.
Further, the letter recommended that, where there are different costs associated with using different channels, this should be clearly presented to the plan sponsor. Current insurer-designed bonus arrangements could result in insurers or advisors behaving in a way that isn’t in the best interest of the plan sponsor, noted the Benefits Alliance, adding the proposed guideline doesn’t adequately recognize this as a conflict of interest.
As well, the letter said representative should be obligated to disclose services and compensation and provide confirmation of having done so, regardless of whether they’re independent advisors or direct insurers. The insurer should have the right to request disclosure confirmation, noted the Benefits Alliance, and there should be direct dealing statements to the consumer where an independent advisor is absent. The letter suggested plan sponsors often approach insurers with the assumption that dealing directly will reduce the costs of products and services. The disclosure of these costs will ensure they’re making an informed decision, rather than an assumption, creating a fairer market overall.
Finally, the letter recommended the regulatory environment acknowledge the value qualified advisors provide to plan sponsors in helping them make better informed choices in the marketplace.
The letter was signed by Gil McGowan, president of the Benefits Alliance Group, and noted the group hopes to partner with the CLHIA to resolve the issues it has raised.