The Canadian Life and Health Insurance Association is seeking feedback on a number of areas related to its new compensation disclosure guideline.
Last month, the CLHIA released a guideline for disclosing compensation paid by insurers to intermediaries in group benefits and retirement services. Under the guideline, insurers will soon begin to disclose direct, in-direct and in-kind compensation paid to advisors in a written report provided to plan sponsors at least annually. For new contracts, they’ll provide the report on or before the effective date. The CLHIA expects all of its members to conform to the guideline.
More recently, it released a series of explanatory notes about the guideline as part of a draft document aimed at answering key questions. Some of the points addressed include:
- The group benefits component does include administrative services-only arrangements.
- The guideline covers employee assistance programs, human resources services, financial wellness programs and other ancillary services offered as part of a group benefits or retirement services program to the extent that the insurer contracts or administers them and pays compensation to an intermediary.
- The scope of the guideline includes payments to third-party administrators or other organizations in their role as an intermediary.
- Examples of direct compensation include all forms of commission, any predetermined bonus specific to the plan and fees.
- Indirect compensation includes bonuses for achieving sales targets, block profitability payments and marketing allowances.
- In-kind compensation includes incentive travel and conferences, loan forgiveness and preferred-rate loans and gifts or entertainment valued at $500 or more per person. It doesn’t include non-preferred-rate loans for the purposes of the guideline.
- There’s no need for disclosure to a plan member.
- When it comes to the form of disclosure, insurers should report group benefits compensation as a percentage of premiums or claims paid, if applicable, and as a real dollar value. For group retirement services, they’ll report compensation as a percentage of contributions received and assets under administration and as a real dollar value. For indirect compensation paid to an intermediary with respect to an aggregated book of business, they should assign amounts to specific contract holders based on the relative amounts of premium paid by each one.
- While insurers will provide the disclosure for new contracts on or before the effective date, for ongoing business, they’ll have discretion as to whether to disclose at renewal or on a calendar basis. When there’s an increase in direct compensation to an intermediary, the insurer will provide notice on or before the effective date of the change.
The CLHIA is requesting feedback on the draft document, particularly on whether there are further details to add or areas to address. It’s asking people to make any submissions in writing by March 2, 2018, to email@example.com. It has also begun holding information sessions across the country about the guideline and will be continuing them this month in Vancouver (Feb. 6), Calgary (Feb. 8), Winnipeg (Feb. 9) and Halifax (Feb. 14). It has also added sessions in Vaughan, Ont., on Feb. 26.
The association is phasing in the new approach, starting with disclosure of new sales as of Jan. 1, 2019. For renewal business, insurers will start tracking ongoing compensation on Jan. 1, 2019, with disclosure beginning on Jan. 1, 2020.
Editor’s note: Article updated on Feb. 2 at 3:30 p.m. to reflect the fact that the CLHIA has recently pushed back the disclosure implementation date for new business by six months to Jan. 1, 2019.