A proposal submitted by the Financial Services Regulatory Authority of Ontario (FSRA) aimed at enhancing consumer protection within the life insurance space has been approved by the Minister of Finance.
Taking effect on June 1, FSRA’s Amended Unfair or Deceptive Acts or Practices (UDAP) rule will eliminate the practice of charging customers for early withdrawals of their investments in segregated fund contracts, known as deferred sales charges (DSCs).
In a statement announcing the rule’s approval, FSRA executive vice president of market conduct Huston Loke expressed the importance of empowering consumers and ensuring their access to their own investments.
“When people have to pay to withdraw their own money from segregated funds, they feel they are being cheated,” said Loke. “We’ve now banned these charges on new sales to better protect consumers.”
Under the Amended UDAP rule, life insurers and agents will be prohibited from issuing and selling new individual segregated fund contracts that impose DSCs on customers.
Details of the amendment first came to light in April when FSRA submitted its proposal to the Minister of Finance. At that time, the regulator said that the plan is part of a wider effort to improve transparency and fairness for customers who purchase segregated fund contracts.
Along with announcing the approval of the Amended UDAP rule, FSRA revealed that it is planning to launch consultations on an updated version of another amendment to the UDAP Rule that would address existing concerns regarding DSCs in contracts that are already in force.
Outside of life insurance, the Ontario regulator has recently established a 15-member committee tasked with providing expert advice to advance a strategy to reform the auto insurance system in the province.
“We will be looking to these new committee members to provide us with expert insight and advice on ways to reform the regulation of auto insurance rates and underwriting in Ontario, which is critically important work,” said Tim Bzowey, executive vice president for auto insurance products at FSRA.
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