six life insurance firms were being probed by a regulator
in the UK after concerns were raised that some customers may not have been told when certain charges were applied. Now the Financial Advisors Association of Canada (Advocis) has spoken to Life and Health Professional
about the obligations that advisors have with regards to insurance contracts on both sides of the Atlantic.
Ed Skwarek, vice president of regulatory and public affairs at Advocis, believes that the obligations that have potentially been overlooked by some insurers in the UK are worth noting in Canada: and that it’s vital for advisors to ensure their clients are fully informed.
“Insurance contracts both in Canada and elsewhere can be complex, and financial advisors have an obligation to ensure that their clients fully understand the structure, benefits, and risks of the products they purchase,” he said. “Transparency is crucial in the relationship between the advisor and their client. Disclosure of compensation arrangements is important so that clients understand their obligations in relation to these products.”
So what steps should advisors take?
“Advisors need to make sure they are having clear discussions with their clients and that their clients understand the products they are in and any associated fees or charges,” Skwarek continued.
“The relationship between the advisor and the client is ongoing, and is holistic in nature, so as the client’s needs, circumstances, or goals change, so too may the product advice.”
Over in the UK, six firms have come under investigation – Police Mutual, Abbey Life, Old Mutual, Scottish Widows, Prudential and Countrywide – with the Financial Conduct Authority (FCA) attempting to determine if they have failed to meet standards and if further action needs to be taken.
The probe is taking place after the FCA conducted a review examining 11 firms with 9.4 million customers. It found evidence of concerns among “closed book” customers – those who have been with a company for such a length of time that their products are not actively marketed – as to how information was given on both exit fees and paid-up fees, which is when customers stop paying but still have a policy. There is concern that some customers may not have been told at the time that these fees applied.
It is likely that the probe will take several months to complete.
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