Federal legislation deals with the financial solvency, corporate organization of federally incorporated and non-Canadian companies through the Insurance Companies Act. The Act sets out the powers held by the Superintendent of Financial Institutions to supervise the financial affairs of insurers under its mandate. It is this position which may make orders to compel a company to cease an unsafe practice or seize its assets when insolvent. Strict guidelines have been put in place to insure funding for future disability claims by the required funding of reserves and the obligation to maintain further capital of 150%, known as Minimum Continuing Capital and Surplus Requirements.

The broad range of power over the industry is regulated provincially. This includes licensing provincially incorporated companies, agents and brokers. This also includes the regulation of the contract between the insurer and the policyholder by legislation.

In all jurisdictions, Superintendent of Financial Services ¹ is given authority to regulate the contract of insurance and the business relationship between the insurer and the insured.

Ontario has appointed an Insurance Ombudsman who has authority to investigate complaints about the business affairs of an insurer and to resolve expressed concerns or to recommend an inquiry into a complaint.

All statutes allow for a complaint mechanism of a similar nature.

The solvency of insurers in all provinces is highly regulated. In the event of a bankruptcy of a life insurer, insured benefits would be paid by ² up to $2,000 a month or 85% of the monthly benefit, whichever is the greater of the two. The possibility of an insurer becoming insolvent is not imaginary. Union of Canada Life Insurance was ordered to be insolvent in February of 2012.

The Canadian Life and Health Insurance Association (CLHIA) regulates the relationship between the insurance industry and the public. It administers guidelines drawn up by the CLHIA which govern advertising, disclosure at the point of sale, activities of insurance agents and business practices of insurance companies. It has also adopted a Code of Ethics. These guidelines are just that and are not legally enforceable standards.

Guideline 39 relates to disclosure at the point of sale and states that a disclosure statement is to be delivered to the insured with the policy. It also mandates a ten day “free-look” period in which the insured may rescind the policy. The disclosure statement is to include a list of payments which will reduce the benefit sum.

The industry association has created a standard medical release for short and long term disability applications, and an ongoing long term disability.