No handicap for new entrants in innovation race, CLHIA urges FSRA

by Leo Almazora02 Dec 2021

The association representing Canada’s life and health insurers is supporting Ontario’s financial services innovation agenda, though it does have some concerns.

Responding to a consultation by the Financial Services Regulatory Authority of Ontario (FSRA), the Canadian Life and Health Insurance Industry Association (CLHIA) said it generally supported the guiding principles behind a proposed innovation framework for the province’s financial sector.

“We believe that they strike an appropriate balance between driving new innovation in the province while ensuring principles are in place to mitigate any risks to consumers,” the CLHIA said.

The association underscored the life and health insurance industry’s role in developing affordable and low-cost solutions for clients and policyholders, including those in Ontario. It cited companies’ efforts to provide access to mental health supports and other virtual care services, which proved vital during the COVID-19 crisis.

In the consultation paper, the FSRA asks stakeholders whether its current regulatory toolbox is enough to support innovation while protecting the public interest. The CLHIA said it believes no additional consumer protection measures are needed, though it urged the regulator to “ensure that new entrants are held to the same standards with respect to responsible innovation and consumer protection as existing regulated entities.”

To enable successful innovation, the CLHIA added, requires a regulatory environment where companies can test and implement new technologies in a timely manner, which includes a risk framework that’s not overly prescriptive so as to allow technology to outpace regulation.

The association also described the current process of bringing new opportunities or innovative ideas before FSRA as “relatively ad-hoc,” noting that even small changes proposed during the pandemic had to go through a lengthy approval process. And while innovations generally will require legislative changes that should go through the Innovation Office, the CLHIA said some developments – the acceptance of digital signatures, for example – should not be coursed through the office as they are “simply an evolution of the way the life and health insurance industry provides services to customers.”

Commenting on the new process for applications being proposed by FSRA, the CLHIA said “there does not appear to be opportunities to allow for companies to modify their proposals or offerings. … [T]here should be room for companies to be able to adjust their offerings as needed without having to go through the application process all over again from the start.”

To better facilitate innovation outcomes, the association suggested that FSRA should have an understanding of new products and services in other jurisdictions and sectors, which would reduce the time spent by industry players to prove a solution is viable. Similarly, it argued that if one company has already taken a product or service to market, other companies should not be made to go through the review process again before they can launch the same product or service.

Innovators might be disinclined to participate in FSRA Test and Learn Environments, the CLHIA added, considering how most companies will want to propose innovations that are proprietary.

“It is important that details on these new innovations are kept confidential during the test and learn process to ensure proprietary innovation is not made public before launch,” the CLHIA said.