The Financial Services Regulatory Authority of Ontario (FSRA) has set up an innovation office to identify, support, and enable innovation opportunities within the financial services sector.
FSRA executive vice president Glen Padassery said this new initiative aims to “help emerging and existing innovators develop their ideas while maintaining consumer confidence in financial service.”
To do this, FSRA’s innovation office has released a framework that standardises the review process for new ideas, products, and services. It also established a test-and-learn environment to evaluate proposed advancements before their integration into the Ontario market.
The office has already approved its first test-and-learn application in response to an insurance company proposing to test a new way to distribute commercial insurance products called the direct access model.
The model in question is an arrangement between insurers and other entities, according to FSRA, through which one insurer’s agents, acting under the purview of a common managing general agent, would provide their clients access to a “suite of niche commercial insurance products from different insurers.”
This means the insurance company’s agents could “offer commercial insurance products on the basis that the various entities supporting the direct access model are in an 'affiliated group of insurers,'" the FSRA said. The Insurance Act currently limits licensed general insurance agents to act for a single insurer unless insurers are “carrying on business in a common undertaking.”
“It is FSRA's view that, in this case, this novel distribution model has the potential to provide significant benefits to consumers and possibly facilitate the modernization of insurance distribution in Ontario,” said Padassery.
“However, we will work closely with the applicant to ensure that undesirable consumer outcomes are avoided and appropriate safeguards are developed to protect individuals and families across the province.”
As the insurance company goes through the testing phase, it would have to ensure the competence of its agents while upholding the fair treatment of clients and establishing proper effective governance and agent oversight, FSRA said.
The regulator added that the company would also need to provide agents with tools and resources, including proper training.
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