All posts by Roisin Hutchinson

The Registered Insurance Brokers of Ontario (RIBO), the self-regulatory organization for insurance brokers in Ontario, has submitted proposed amendments to the Registered Insurance Brokers Act (RIBA) and its regulations, to the Ontario Ministry of Finance (collectively, the “Proposed Amendments”). The Proposed Amendments are intended to demonstrate RIBO’s alignment with the Ontario Government’s stated objective of increasing consumer protection related to financial services in Ontario.

RIBO says that the Proposed Amendments were made with a view to increasing transparency, addressing the provision of insurance advice through diverse digital platforms, and reflecting the increasing importance of consumer protection.

The Proposed Amendments include, among other things:

1. Opening hearings of RIBO’s discipline committee.
2. Enhancing enforcement powers by giving RIBO the ability to levy administrative penalties.
3. Giving RIBO the ability to characterize a broker’s failure to cooperate with RIBO as misconduct.
4. Imposing a duty on principal brokers to report certain suspected acts of misconduct.
5. Bringing fines and penalties that are available to RIBO’s discipline committee up to date.
6. Updating minimum errors & omissions limits.

The Proposed Amendments also include updates to brokers’ continuing education and professional development requirements, which would become effective in 2018. Although no additional hours would be required as part of the amendments to the education and professional development, a new ethical skills category would be created, as well as minimum requirements for technical skills, and a cap on the number of hours allowed for “personal skills”. The amendments related to continuing education are part of RIBO’s broad public protection mandate and are aimed at enhancing broker professionalism.

According to Tracy McLean, President of RIBO, the Proposed Amendments would the most comprehensive yet. In RIBO’s Fall 2017 Bulletin (here: https://www.ribo.com/index.php?option=com_content&view=article&id=39&Itemid=115), Tracy McLean reported that, after a meeting with the Ministry of Finance, RIBO’s Proposed Amendments were well received. The Proposed Amendments have not yet gone to the Legislative Assembly for first reading.

We will keep you updated with respect to the progress of the Proposed Amendments.

Bill 177, The Insurance Act (Saskatchewan) (the “Act”), received Royal Assent on May 14, 2017 and is expected to replace the century-old Saskatchewan Insurance Act in the spring of 2018. According to Justice Minister and Attorney General Gordon Wyant, the new Act will not only modernize insurance law in the province but will also increase consumer protection and help to harmonize insurance legislation in the Western provinces. On June 22, 2017, the government of Saskatchewan released The Insurance Regulations (the “Regulations”) which provide more guidance on how the new Act will affect the insurance industry.

1. Third Party Administrators

Of particular interest in the Act and its Regulations are new rules regarding a class of insurance intermediaries known as third party administrators (“TPA” or “TPAs”). The Regulations define a TPA as:

…a business that, for compensation, carries out activities to administer a contract of insurance on behalf of an insurer, other than solely clerical activities, but does not include a business that is licensed as an insurance agent or managing general agent;

When describing the licensing requirements for insurance intermediaries, Section 5-8 of the Act states:

No business or insurer shall act or offer to act as a third party administrator with respect to a class of insurance unless the business or insurer holds a valid third party administrator’s license for that class of insurance.

Sections 5-11 to 5-14 of the Act describe the process and form of application that is required in order to obtain a license, and detail the circumstances in which the Superintendent of Insurance (the “Superintendent”) may issue a license. Section 5-15(d) lists the categories of TPA’s licenses that may be issued, which include life insurance, accident and sickness insurance, and property and casualty insurance. The Act specifies that a copy of the contract between the TPA and the insurer must be filed along with the application for a TPA’s license, and the Superintendent has the right to require applicants or holders of a TPA license to submit “any other information or material” that the Superintendent requests.

2. Designated Representatives

In addition to setting out a licensing scheme for TPAs, the Act will require every business that is licensed as a TPA for a required class of insurance to assign an individual as a designated representative for that class of insurance. Section 5-20(1) of the Act states that “required class of insurance” means life insurance or property and casualty insurance, and the Regulations add that for the purposes of this section, accident and sickness insurance is included in the meaning of life insurance. According to the Act, the designated representative of a TPA must be someone who:

(a) is licensed in that required class of insurance;

(b) meets the prescribed requirements; […] and

(d) is responsible for receiving notices and other documents on behalf of the…third party administrator pursuant to this Act and for carrying out any other prescribed duties.

For TPAs licensed under the life insurance or accident and sickness insurance classes, the prescribed requirements are that the designated representative must: be an individual; meet the education and experience requirements described in the bylaws of the Life Insurance Council of Saskatchewan for licensed life agents that are able to supervise other life agents; and be recommended by the insurer that has entered into the contract with the TPA. Therefore, these individuals must have successfully completed the Life Licensing Qualifying Program course and examination and have at least three years of experience as a licensed agent or salesperson.

The requirements are similar for TPAs licensed under property and casualty insurance classes, with the difference being that the education and experience requirements that have to be met by designated representatives are described in the bylaws of the General Insurance Council of Saskatchewan for individuals who are able to manage a business as a licensed agent. These individuals need a Level 3 All Classes other than Life Agent license and at least two years of experience as a licensed agent or salesperson.

3. Concerns over TPA Licensing

In a feedback letter to the proposed Act, the Canadian Association of Financial Institutions in Insurance (“CAFII”) recommended that the provisions relating to licensing of TPAs be removed from the Act entirely, since any risks relating to TPAs are already in the hands of heavily regulated entities such as restricted insurance agents or insurers. CAFII also pointed out that the language “any other information or material” in relation to what can be requested by the Superintendent may be too expansive, and additionally expressed some concern over the potential complexity and costs of the licensing requirements. However, as evidenced by the Regulations and newest version of the Act, these recommendations were not followed by the Saskatchewan legislature.

The broad definition of TPA along with the regulatory scheme outlined by the Act indicates that many third parties that previously did not require licensing will now be captured under its provisions. Although this may be viewed by some as a welcome feature in terms of consumer protection, as the Act gives Saskatchewan more tools with which to regulate the insurance industry, the somewhat invasive requirements of the licensing process could potentially be of concern to parties wishing to shield the proprietary and confidential information found in their contracts. Furthermore, the additional costs that are likely to be incurred by TPAs and insurers in order to meet the licensing and designated representative requirements may possibly end up costing consumers in the form of more expensive policies.

On May 31, 2017, the Canadian Council of Insurance Regulators (the “CCIR”) released its Travel Health Insurance Products Position Paper (the “Position Paper”) in which CCIR makes recommendations to the insurance industry in response to stakeholder and consumer comments received through the consultation process conducted in 2016.

The CCIR is an inter-jurisdictional association of Canadian insurance regulators and their mandate is to facilitate and promote an efficient insurance regulatory system that serves the public interest. As a consumer protection association, the overarching concern of the CCIR is the fair and consistent treatment of consumers and, accordingly, the CCIR’s recommendations in the Position Paper are focused on improving consumer confidence in the travel health insurance (“THI”) marketplace.

CCIR’s recommendations set out in the Position Paper can be summarized as follows:

1. Simplification of Product Offerings. CCIR recommends that insurers simplify their product offerings in order to reduce the risk of sales of inappropriate THI policies to consumers. CCIR believes that insurers can amalgamate the various coverages and policy documents that are presented to consumers by (a) limiting the number of bundles and product options presented to consumers and (b) by making THI products and related materials more targeted to the specialized needs of consumers so that consumers are better able to understand the THI options that are available to them.

2. Simplification of Disclosure. CCIR recommends that consumer facing disclosure be succinct and made upfront, made specific to one plan, regime or option, and should draw consumers’ attention to information that is relevant to the decision to purchase THI products, such as exclusions and restrictions on claims. CCIR expects that insurers will publish disclosure documents and related policy specimens through the sales channels used for pre-purchase consultation, and without the obligation for the customer to close the transaction. Insurers should promote the availability of this information in their promotional and advertising material and, in particular, CCIR recommends that insurers provide a one page summary of the relevant information to the consumer prior to purchase and that the consumer has access to the policy contract itself.

3. Standardization of Terminology and Definitions. CCIR believes that creating and implementing standardized definitions and terms in the THI space will improve consumers’ understanding of medical questionnaires and the related exclusions and restrictions of coverage. Consistent, standardized terminology and terms will not only allow consumers to compare products, it will assist insurers in the training and education of sellers and their intermediaries. CCIR recommends that the industry produce a list of all the terms that should be included in the standardization and establish general rules regarding the use of defined terms and expressions.

4. Control and Oversight Over Distribution Channels and Third-Party Providers. As insurers are ultimately responsible for ensuring that individuals selling their products have sufficient knowledge and expertise to be able to adequately explain the product to consumers, insurers must have effective controls in place and oversight over all their distribution channels regardless of the type of sales channel. Such oversight includes the collection and monitoring of data. CCIR recommends insurers develop a method of testing the effectiveness of its disclosure in promoting consumers’ understanding of the coverage applicable to them.

CCIR expressed concern about consumer reports of difficulty identifying insurers in cases where third party service providers were used. Insurers must provide consumers with all relevant disclosure, including who the insurer is, before, during and after the point of sale. CCIR reminds stakeholders that, in addition to the requirements of the Office of the Superintendent of Financial Institutions’ Guideline B-10, CCIR’s expectations regarding the use of third party service providers and related disclosure are set out in its 2012 position paper titled “Strengthening the Life MGA Distribution Channel”.

When an insurer outsources claims handling functions to a third-party service provider, the insurer must have oversight and control mechanisms in place to ensure that the third party is acting in accordance with the insurer’s documented claims handling processes and procedures. The insurer must also monitor the third party to ensure it is not engaging in any behavior that may result in unfair treatment of the consumer.

5. Eligibility Assessments. CCIR reports that, in 2014, 95% of the applicants for THI products were automatically accepted. CCIR believes that this high rate of acceptance indicates that consumers do not have an adequate understanding of the eligibility and suitability requirements for THI products. CCIR recommends improving the application and screening process so that consumers’ eligibility for a particular THI product is properly assessed in light of each consumers’ distinct needs. In particular, CCIR recommends that “insurers prominently inform consumers before purchase that the insurers will use the information collected during the application process to assess the eligibility for any claims made”.

6. Education. CCIR recommends improving education and training of sellers so that sellers of THI products are better able to explain key terms to consumers, including conditions and exclusions, the definition and impact of pre-existing medical conditions, and the consequences of any inaccurate information or misrepresentation made during the application process. Insurers should also prepare sellers so they are able to explain to consumers who, when, and where to go for guidance related to their policy or claim. CCIR further recommends that the industry educate consumers in respect of the different coverage options, and the many exceptions and limitations that can apply.

7. Complaints and Claims Management. Based on consumer feedback received during the consultation process, CCIR believes consumers perception is that insurer’s complaint processes are not clearly disclosed. CCIR recommends, among other measures, that insurers make their internal processes for timely complaint management and dispute resolution publicly available. These processes should include detailed directions for initiating a complaint, contact details, and the options available in the event disputes remain unresolved.

The CCIR will continue to monitor the industry’s progress in respect of its recommendations set out in the Position Paper. CCIR made its expectation clear that insurers put in place tools and processes to measure and evaluate the effectiveness of initiatives undertaken in response to the recommendations in the Position Paper.

Regulations governing the demutualization of federal property and casualty mutual insurance companies in Canada came into force on July 1, 2015 as . On January 14, 2016, the Office of the Superintendent of Financial Institutions (“OSFI”) released a Guide for property and casualty mutual insurance companies that have both mutual and non-mutual policyholders, which describes the relevant regulatory requirements for demutualization and sets out the information that must be provided to OSFI at each phase of the demutualization process. Click here to view the Guide.

Ontario credit unions and caisses populaires will be prohibited from directly or indirectly promoting non-authorized insurance products such as home, auto, health and life insurance, on their websites as of January 1, 2016, pursuant to legislative amendments recently introduced by the Government of Ontario. The amendments to Ontario Regulation 237/09, also known as the General Regulation under the Credit Unions and Caisses Populaires Act, 1994, S.O. 1994, c. 11, will restrict the promotion of non-authorized types of insurance on-line, which Ontario credit unions and caisses populaires are already prevented from doing in-branch. The Regulation currently prevents credit unions and caisses populaires from selling and promoting insurance in their branches unless the insurance is of an authorized type, such as creditor, mortgage or travel insurance.

This announcement from the Ontario Government echoes the history of the amendments to the federal Bank Act, S.C. 1991, c. 46, which only prohibited in-branch promotion of non-authorized insurance products by deposit-taking financial institutions in Canada until 2012, when amendments to the Bank Act came into force that extended the prohibition generally to the banks’ websites as well. The Ontario government have reasoned that this amendment will bring Ontario’s credit unions and caisses populaires under a consumer protection framework that is consistent with that of federally-regulated institutions.

The Financial Services Commission of Ontario announced the amendments in a Bulletin dated October 2, 2015, which links the full text of the amendments. The amendments will come into force on January 1, 2016, on which date the websites of Ontario credit unions and caisses populaires are required to be compliant with the new prohibition.

The 2015 publication of Getting the Deal Through, is now available, and includes our updated summary guide to the regulation of insurance and reinsurance in Canada.   Click here for access to a pdf version of the Canadian chapter.

We also have a limited number of hard copies of this publication, which are available on request.

Reproduced with permission from Law Business Research Ltd. This article was first published in Getting the Deal Through: Insurance & Reinsurance 2015, (published in June 2015; contributing editors: William D Torchiana, Mark F Rosenberg and Marion Leydier, Sullivan & Cromwell LLP). For further information please visit www.gettingthedealthrough.com.

The Government of Saskatchewan has given its first reading to Bill 177: The Insurance Act. The new legislation will replace The Saskatchewan Insurance Act, which has not been revised substantially in several decades. Bill 177 aims to modernize the regulation of the insurance industry in the Province of Saskatchewan, improve consumer protection measures and increase harmonization with the insurance legislation of the other western provinces. The full text of Bill 177 can be viewed here.

The following excerpt from a Government of Saskatchewan press release provides more detail concerning the proposed legislation:

““A lot has changed in the industry since revisions were last made to the Act, especially when it comes to technology,” Justice Minister and Attorney General Gordon Wyant said.  “The new Act will give the insurance sector the flexibility it needs to evolve in a rapidly changing environment, strengthen consumer protection, and move toward harmonizing insurance legislation with Alberta and BC.”

Changes proposed in The Insurance Act include:

• Better protection for consumers through market conduct standards, which identify unfair practices;
• Streamlining the appeal process;
• Restructuring the Saskatchewan Insurance Councils and allowing them to conduct audits and investigations;
• Requiring insurance companies to recommend and screen those applying to be intermediaries as well as supervise them once approved;
• Updating licensing categories and requirements including licensing employees that sell insurance as insurer’s representatives, which requires the same level of training as insurance agents;
• Permitting insurance agents to adjust insurance claims to a prescribed amount; and
• Requiring insurers to point to specific clauses in a policy where there are limits on the amount payable.

Work to develop the new Act involved interprovincial comparisons and review of other provincial and national projects on insurance and financial services, but the model used in Alberta was deemed to best fit Saskatchewan’s needs.  Alberta’s legislation is similar to that in BC, meaning Saskatchewan will share similar insurance regulation with all provinces in the New West Partnership Trade Agreement.

A number of industry associations were consulted, including the Insurance Brokers Association of Saskatchewan and the Saskatchewan Insurance Councils and they have expressed their support for modernization of the Act.”

On January 1, 2015, certain amendments to Manitoba’s The Insurance Act came into force requiring incidental sellers of insurance to hold a restricted insurance agent’s license in Manitoba as of June 1, 2015. See Section 72 of the The Insurance Amendment Act  S.M. 2012, c. 29 (“Bill 27”) for full text of the amendments. These amendments in Bill 27 are the second instalment in a series of amendments that were proclaimed to come into force in three parts: on September 1, 2014, January 1, 2015 and March 1, 2015, and which bring Manitoba’s The Insurance Act closer in line with Alberta’s Insurance Act.

This second group of amendments implements a restricted insurance agent licensing regime similar to those in place in Alberta and Saskatchewan. In addition to the amendments to The Insurance Act, the Manitoba Insurance Agents and Adjusters Regulation was also amended to set out the particulars of the new licensing regime (see M.R. 215/2014 for the amendments to the regulation proclaimed in force on January 1, 2015). Under the new restricted agent licensing regime, incidental sellers of insurance are required to obtain a restricted insurance agent license from the Insurance Council of Manitoba. Incidental sellers of insurance that will require a restricted agent license include deposit-taking institutions, travel agencies, mortgage brokers and funeral directors and other specified entities that, in the course of selling certain goods or services to their customers or clients, offer certain classes of insurance that relate to those goods or services.

The Insurance Council of Manitoba has announced that it will begin accepting applications for restricted insurance agent licences on February 1, 2015, and has advised that applications must be received prior to April 30, 2015 to ensure they are issued prior to June 1, 2015. The Insurance Council of Manitoba issued a Notice in December 2014 with further information about the transition, which is available here.

In the issue of the Canada Gazette released today, the federal government published long-awaited draft regulations which will permit Canada’s federal property and casualty mutual insurance companies to demutualize.   The text of the draft regulations can be seen by clicking here.  Interested parties are invited to make representations concerning the proposed regulations within 30 days.