The Reason Why Letter, explained.

What is a Reason Why Letter?

A Reason Why Letter is a short, plain-language letter from you to your client explaining why the product you recommended fits the needs you identified. It's one of the core elements of a needs-based sale in CLHIA's The Approach, and it's the piece of the file that records not just what you sold, but why.

The Approach — CLHIA's reference document on needs-based sales practices, used across the Canadian life-insurance industry — breaks a sale into supporting elements: disclosure to the client, client expectations, fact finding, needs assessment, recommendations and advice, and the Reason Why. Its general principle is that the recommended product has to be appropriate for the client's needs as determined by a needs-based assessment. The Reason Why element is the written half of that: the client gets the reasoning in writing, not just across the table.

It isn't only industry convention. CCIR and CISRO — the national bodies of Canada's insurance and intermediary regulators — publish Fair Treatment of Customers guidance that sets conduct expectations for insurers and intermediaries across the country, and it expects the reasoning behind a recommendation to be documented, not just delivered verbally.

It goes by a few names — reason why letter, reason-why documentation, written explanation of advice. The substance doesn't change: a written record, kept in the client file, that connects the client's identified needs to the advice you gave.

What must a Reason Why Letter contain?

A Reason Why Letter contains, at its core, three things in plain language: your recommendation, the client needs it addresses, and enough of the client's circumstances to connect the two. The test is whether someone who wasn't in the meeting — the client re-reading it years later, a reviewer auditing the file — can follow the line from the client's facts to their needs to your advice.

Asked what needs to be included, The Approach's explanatory notes say:

Briefly and in plain language describe the client needs that are addressed by the recommendation.

CLHIA, The Approach: Serving the Client Through Needs-Based Sales Practices, Explanatory Notes Q28, November 2016

The same notes also ask for a brief, plain-language summary of the key client circumstances identified during fact finding. That's the raw material for the link — a letter that names the need but not the circumstances behind it reads like a conclusion without evidence.

The Approach doesn't prescribe a template or a length. A useful test: someone picking the letter up cold should understand what was recommended and why it fits this client. A paragraph that clears that bar beats three pages that don't.

• The recommendation — the product and coverage amount you advised, stated plainly.
• The carrier and the product, named — The Approach's checklist asks for both, identified by brand name and type of insurance.
• The identified need it meets — the specific need from your needs analysis, not a generic category. Income replacement while the kids are dependent does the job; a vague reference to insurance needs doesn't.
• The line from facts to needs to recommendation — the key circumstances from fact finding that produced the need, so the reasoning stands on its own.
• Plain language throughout — the letter is written for the client, not the file. If it reads like a policy contract, it isn't doing its job.
• If there's a shortfall, say so — where the client chose less coverage than the identified need, a letter that records the gap and the client's decision is stronger than one that pretends the need was fully met.

Who receives it — and by when?

Your client — the person the recommendation was made to — and no later than the day they receive the policy. Earlier is fine; later isn't. The client doesn't sign the Reason Why Letter: it's advice delivered in writing, not a consent form. What your file needs instead of a signature is dated proof of what was sent, to whom, and when.

Asked when the letter has to be delivered, The Approach's explanatory notes answer:

You should provide it to the client no later than the date he or she receives the policy.

CLHIA, The Approach: Serving the Client Through Needs-Based Sales Practices, Explanatory Notes Q30, November 2016

The same answer adds that you can give it to the client earlier if you wish — and in practice, earlier is better. A client who reads the reasoning before the policy arrives has a real chance to question it, which is what the letter is for.

The no-signature point trips people up. Most of the compliance chain collects signatures — the disclosure, the consent, the application. The Reason Why Letter doesn't. It's advice delivered in writing, not a form the client agrees to, so the burden shifts from collecting ink to keeping evidence: a dated record showing the letter went out before or with the policy.

Is it required on every sale?

Treat the Reason Why Letter as standard practice on every insurance sale, segregated funds included. The Approach's practices scale with the complexity of the transaction — a straightforward term sale needs a shorter letter, not no letter. The one case where you don't write a separate one is a replacement: the replacement paperwork's written explanation generally covers the reason-why requirement.

Scalable means the depth changes, not the existence. A simple term case supports a short letter; a universal life case with an investment component supports a longer one. What doesn't scale to zero is the letter itself.

Replacements are the exception because the replacement paperwork already contains the reasoning. Outside Quebec, a replacement is documented with a Life Insurance Replacement Declaration (LIRD) and a written explanation of the advantages and disadvantages of replacing the contract — in Ontario, both are required by regulation under the Insurance Act (R.R.O. 1990, Reg. 674). That written explanation generally satisfies the reason-why requirement, so the file carries one document doing the job rather than two overlapping ones.

Quebec runs its own replacement regime under the AMF. The Notice of Replacement of Insurance of Persons Contract is completed for each contract being replaced, the client initials every page, it carries the representative's certificate number, and a copy goes to the head office of each insurer whose contract is likely to be cancelled — within five working days of signing the proposal. Quebec's regulation also sets the default posture: existing contracts should be kept in force unless replacing one is justified as being in the client's interest, and the representative doing the replacing has to demonstrate that.

How does PlanTogether write the Reason Why Letter?

From the completed needs analysis. PlanTogether drafts the letter out of work you've already done — the recommendation, the specific need it meets, and any shortfall the client acknowledged — addressed to the insured person, in plain language. Delivering it stores the record, date-stamps it, and archives the PDF, so the client file holds dated proof of what was sent and when.

The letter is one link in a chain. PlanTogether's Sale-Level Compliance module runs on every life sale: the needs analysis, the sale documents, and gating that keeps them in the sequence an auditor checks — every step dated. A sale can't start until the foundation forms are in place (advisor disclosure, privacy consent, fact find), so by the time the Reason Why Letter is drafted, the needs analysis it references actually exists — and the need in the letter is the need in the file, figure for figure.

The facts underneath are the client's own. The fact find is a living document: the client reviews their data in the app and confirms it's accurate, and a material change invalidates that confirmation until they re-confirm. If the client acknowledged a shortfall — chose less coverage than the analysis identified — the letter says so rather than smoothing it over.

Delivery is the easiest place for a file to fall down, so delivery is what the module pins. Emailing or delivering the letter stores the record, date-stamps it, and archives the PDF. Nobody reconstructs a paper trail from a sent folder two years later — the client file holds the dated proof.

On a replacement, the module collects the LIRD and its written explanation instead — or the AMF Notice of Replacement in Quebec — since that explanation covers the reason-why requirement. Rules are per-jurisdiction for every Canadian province and territory, including Quebec, where the needs analysis is mandatory.

None of it makes the judgment call for you — the recommendation is yours. What the module does is make sure the file holds what a reviewer asks for: the right documents, generated from the client's confirmed data, in the right order, each one dated.

What goes wrong without one?

Three failures leave the same hole in a file: no letter at all, a letter with no date and no proof of delivery, and a boilerplate letter that never names the client's actual needs. In each case the file shows what was sold but not why — and that's exactly the question a review, a complaint, or a claim asks first.

The missing letter is the obvious one. A sale can be perfectly suitable and the file still can't show it — the needs analysis says what the client needed, the application says what they bought, and nothing in between says why.

The undated letter is subtler. A letter with no delivery record is hard to distinguish from one written after the fact, and that's how a skeptical reviewer reads it. The Approach's deadline is policy delivery; without a dated record, you can't show you met it.

The boilerplate letter fails the content test. A template that could be mailed to any client — this product meets your insurance needs, signed, dated — describes no one's actual needs, and describing the client's needs is the letter's whole job.

This isn't only an industry-guidance concern. CCIR and CISRO's Fair Treatment of Customers guidance — the national conduct standard for insurers and intermediaries — puts written advice and record-keeping in a single expectation:

Where advice is provided, this is communicated to the Customer in written format, on paper or in a durable and accessible medium, and a record kept in a “client file”.

CCIR & CISRO, Guidance: Conduct of Insurance Business and Fair Treatment of Customers, Advice section — Expectations to achieve this outcome, p. 19

The same section expects the reasoning behind a recommendation to be documented, with particular weight on complex products and anything with an investment element. A file built in order and dated as it goes answers that expectation without anyone writing prose under pressure years later.

The Reason Why Letter is one link in the document chain PlanTogether builds and dates for every life sale — see how the compliance module works, or see pricing.

Updated July 2026.