Regulatory Affairs Symposium: IBC seeking “a few good companies” for SABS pilot

The Insurance Bureau of Canada (IBC) is looking for insurers to participate in a pilot program which could be a first step to risk-based regulation of market conduct. Attendees of the IBC’s Regulatory Affairs Symposium learned Thursday that the IBC and the Financial Services Commission of Ontario (FSCO) are set to pilot a program for self-audit of statutory accident benefits (SABS) systems.The pilot is part of the IBC’s push for balance in regulation, says Jane Voll, IBC chief economist. Overall, the desire is to get away from transact-based regulation and “not monitoring and data collection for the sake of monitoring and collection, not intervention for the sake of intervention”. She sees a greater scope for product innovation, time and financial savings, more flexible regulation and a shifting of regulatory focus to those companies most in need of oversight, as the natural offshoot of risk-based regulation. An example of a risk-based approach is the current response of regulators to the broker compensation controversy. On behalf of all Canadian insurance regulators, FSCO has issued a questionnaire to insurers to self-report on their compensation systems, with responses expected back in mid-November, explains FSCO superintendent Bryan Davies. “The industry is showing initiative by proposing it will go further and look at its own practices and procedures,” he says, noting that the questionnaire looks not only at contingent commissions, but also profit sharing, loans, ownership arrangements and sales incentives relative to the broker-insurer relationship.”The media events of the last week have again put a spotlight on our industry. Our credibility is being questioned, and we face a very serious issue of consumer confidence,” says Igal Mayer, CEO of Aviva Canada. He says the industry can gain marks by dealing with the issue head-on and taking a risk-based approach.Mayer also put out the call to companies to take part in the SABS pilot, saying, “what’s very exciting is for the first time our industry has the opportunity to influence and design our own system of delivery, and do it from the inside out.”The pilot involves reporting of internal corporate governance and self-auditing on the part of insurers, with regulators monitoring the overall system and focusing on companies which show need for reform of internal market conduct controls. Davies notes that those companies involved in the study will be temporarily exempt from the traditional transaction-based regulation.One outstanding issue is that of privilege there exists the chance that insurer self-audits could be used against companies, for example in a lawsuit. While regulators are protecting from having to give such information out, insurers could be compelled to do so if statutory protections are not in place. Davies says his office is working on a solution to this issue, but it will take cooperation on the part of provincial attorneys general to ensure self-audits are privileged. Voll adds the IBC is also working on the issue, but notes that the six companies already signed up for the SABS pilot are willing to do so irrespective of the privilege issue in order to pursue the benefits of the risk-based approach.