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Insurance Brokers who own their own book of business and are contemplating moving to a new agency should be aware of a recent order dated April 27, 2018 from the Insurance Council of B.C. (“Council”) in which Council ordered the broker to pay a $2,500 fine as a result of transferring a client list without the express consent of both old and new agencies and of the clients. The client list contained personal information and included client names, policy numbers, and policy effective dates. See the Council’s order here.

In B.C., Council Rule 7(1) provides that licensees “must hold in strict confidence all information acquired in the course of the professional relationship concerning the personal and business affairs of a client” and prohibits licensees from using or disclosing such information without express authorization by the client. In this case, prior to becoming a representative of the agency, the broker had made a verbal agreement with the agency’s nominee that the clients would remain his. After joining the new agency, the broker had also called each client when their policies were up for renewal to advise them of his move to the new agency. However, the broker had not obtained the express consent of his clients to transfer their personal information to the new agency, nor did he obtain the consent of the old and new brokerages to the transfer of the clients’ information, and therefore the broker was in contravention of Council Rule 7(1).

Under Council Notice ICN 17-004 Reminder of Licensee Responsibilities Related to Disclosure or Transfer of Client Information (“Notice 17-004“), if a general insurance agent leaves one agency to represent another, such agent must not have any client information in their possession, and may not transfer client information from the former agency to the new agency without the consent of both agencies and express authority from the client to transfer their personal information.

Although Council Rule 7(1) and Notice 17-004 are only applicable in B.C., brokers in all provinces and territories must comply with the federal Personal Information Protection and Electronic Documents Act (or their province’s substantially similar legislation) which requires individuals to have knowledge of, and consent to, the use and disclosure of their personal information, with certain exceptions for business transactions.

Brokers who work within a corporate agency who intend to own their own books of business are therefore advised to obtain an express consent from each client which permits not only the corporate agency, but also the broker personally, to collect, use and disclose the client’s personal information and permits such information to be transferred to another corporate agency in the event that the broker decides to switch agencies.

On April 12, 2018, Quebec’s insurance regulator, the Autorite des marches financiers (the “AMF”) announced that it had entered into agreements with three separate Canadian-licensed insurers, and had imposed administrative penalties which in the aggregate equal $2,100,000, related to unauthorized sales practices used to offer insurance products to the credit card customers of at least two separate retailers.

Each of the three insurers, The Canada Life Assurance Company, Chubb Life Insurance Company of Canada and The Manufacturers Life Insurance Company, reportedly acknowledged that they did not follow sound business practices in relation to the distribution of the products, and had failed to comply with certain provisions of Quebec’s insurance legislation.

In each case it was reported that the insurers offered the products through employees of telemarketing firms, who were persons not certified by the AMF for this purpose, and that certified persons who were involved did not fulfill their required roles in relation to the distribution of the products in question.

Each of the insurers confirmed that the unauthorized sales practices were no longer being used, and each have committed to notify all policyholders who are still holders of the products concerned, that a certified representative will be available to answer any question related to the products.

Further details are available on the AMF’s website.

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.

The Forfeited Corporate Property Act, 2015 (the “FCPA”) is a new Ontario statute that came in force on December 10, 2016 and made changes to the law regarding forfeited personal and real property following the dissolution of a corporation. As part of such changes, the FCPA imposed certain amendments to the Ontario Business Corporations Act (the “OBCA”) and Ontario Corporations Act that relate to new record-keeping obligations for both, new and existing Ontario corporations. Below, we are focusing on the amendments to the OBCA. These amendments are likely intended to make it easier for the Province of Ontario to locate the assets of dissolved corporations and assist the Province to use or sell any forfeited property.

1. Register of interests in land in Ontario and supporting documents

A new section 140.1 has been added to the OBCA. Subsection 140.1 (1) provides that:
“A corporation shall prepare and maintain at its registered office a register of its ownership interests in land in Ontario.”

The OBCA does not define the term “ownership interest”. However, it has been suggested that the phrase extends to both legal and beneficial interests in land. Such register shall identify each property and show the date the corporation acquired the property and, if applicable, the date the corporation disposed of it.
In addition, corporations are required to keep supporting documents with the property register, such as a copy of any deeds, transfers or similar documents that contain any of the following with respect to each property listed in the register:

1. The municipal address, if any;
2. The registry or land titles division and the property identifier number;
3. The legal description; or
4. The assessment roll number, if any.

The wording of the new section 140.1 suggests that these new requirements do not extend to ownership interests situated outside Ontario and to other Canadian corporations (incorporated federally or in any other Province, except Ontario), even if they hold ownership interests in land in Ontario.

2. Timing of Compliance

The amendments to the OBCA come into force on December 10, 2016 and apply immediately to all corporations that are incorporated or continued under the OBCA on or after such date. Corporations that were in existence before December 10, 2016 should be aware that the same law will apply to them as of December 10, 2018.

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.