Article by Catherine Jenner, Stuart Carruthers, Fabian Firas Bargout and Andrew S. Cunningham
On June 13, 2019, the main provisions of the new Québec Insurers Act and amendments to the Act respecting the distribution of financial products and services (“Financial Products Act”) came into force. Among other things, these provisions set out the regulatory requirements for insurers and insurance intermediaries selling insurance online in Québec (online insurance has been sold in Québec for many years, but without formal regulation).1
The finalized Regulation respecting Alternative Distribution Methods (“Online Insurance Regulation”) sets out details of the new obligations on insurers and insurance intermediaries. The draft regulation (“Draft Regulation”) that was published in 2018 has undergone a number of changes in response to industry comments.
Insurers and insurance intermediaries have until June 2020 to comply with certain of their new obligations as set out below.
Framework for the Sale of Online Insurance
The Online Insurance Regulation regulates:
- online offers of insurance by intermediaries and insurers registered as a firm under the Financial Products Act (intermediaries and such registered insurers, collectively, “Firms”) without the intermediary of a natural person; and
- offers of insurance through a distributor.
The finalized regulation (taken together with the AMF’s commentary on it) excludes non-transactional websites, such as most websites that facilitate comparison shopping, unless, in consideration of a commission or any other remuneration, such websites redirect users to a Firm’s website to conclude an insurance policy. [s. 2; Financial Products Act, s. 71, para. 3] This exception was absent from the Draft Regulation.
Disclosures to the AMF
Initially, Firms must disclose certain information about their website and the products offered on it to Québec’s insurance regulator, the Autorité des marchés financiers (“AMF”). [s. 4] Firms are also required to make annual disclosures with respect to the:
- Amount of premium written;
- Number of policies issued;
- Number of financial plans prepared;
- Number of claims settled; and
- How often clients cancelled their policies within the 10-day period provided for by s. 64 of the Insurers Act. [s. 5]
Disclosures to clients
The final Online Insurance Regulation makes several changes to a Firm’s disclosure obligations, including:
- Firms are required to ensure that the means to interact with one of its representatives (e.g., a chatbox) is visible at all times [s. 8, para. 1]; and
- Firms are required to inform the client about his/her right of rescission or cancellation and the procedures for exercising it after the conclusion of the contract, not before. [s. 12, paras 1(3), 2]
The Online Insurance Regulation also contains provisions relating to the design, operation and monitoring of Firms’ websites. The Regulation makes the following notable changes:
- The scope of a Firm’s confidentiality and security obligations is broadened with respect to the storage of clients’ information as well as its collection, use, and delivery; [s. 13, para. 3]
- Firms are required to interrupt offers of insurance of persons that are likely replacing other contracts where the replacement cannot proceed through the website in accordance with s. 22 of the Regulation respecting the pursuit of activities as a representative; and [s. 14, para. 2]
- Firms are required to suspend proposals for insurance of persons where no representative can immediately interact with a client who has asked to interact with a representative and where there is a risk that the client, despite the information that the Firm sent to him or her, is unable to make an informed decision. [s. 14, para. 3]
Related advertising permitted
In a significant change from the Draft Regulation, the finalized Online Insurance Regulation does not prohibit advertising when the client is in the process of completing his application, unless it is “unrelated to the product or service”. While the AMF had previously argued for an outright prohibition, the government appears to have accepted industry submissions that related advertising could provide valuable information to a customer. [s. 18(1)]
Offers Through a Distributor
With respect to the distribution method of offering insurance, the Online Insurance Regulation modifies the obligations of both insurers and distributors.
With respect to the collection by distributors of a client’s medical or lifestyle-related personal information, the finalized Online Insurance Regulation requires the distributor to deliver a notice of specific consent to the client, but only if the distributor wishes to use the information for purposes other than those for which it was collected. [s. 25] The Draft Regulation included a broader notice requirement.
Disclosure to the AMF
Insurers must disclose to the AMF information that is similar to what must be disclosed in the case of online insurance (see above):
- Amount of premium written;
- Number of insurance policies and certificates issued;
- Number of claims and amount of indemnities paid;
- Number of rescissions and cancellations; and
- Remuneration paid to distributors and third parties. [s. 21]
If an insurer removes a distributor from its distributors’ list, it must inform the AMF of the reason. [s. 20, para. 3] One other change from the Draft Regulation is that insurers will be given 30 days to disclose any changes in their initial disclosure. [s. 20, para. 2]
Disclosure to clients
The Online Insurance Regulation requires insurers to require distributors to deliver a product summary at the time they offer the product to clients, together with a fact sheet in a form prescribed by the Online Insurance Regulation. The fact sheet is a document prepared by the AMF that lists relevant consumer rights, whereas the summary is a concise document that is prepared by the insurer to explain its product, both broadly and through such specific information as the product coverage, exclusions, and limitations. [ss. 22, 28–29, Sched. 2] A summary and a specimen of an insurance product policy should be available on the insurer’s website if the product is offered by distributors. [s. 32]
As part of insurers’ obligation to supervise and monitor their distributors’ offering of products, insurers are required to adopt and implement procedures to supervise and train distributors and their representatives [s. 33]. These procedures may be helpful because insurers are liable for any acts of distributors or their representatives in connection with underwriting an insurance policy or enrolling a participant [Insurers Act s. 65].
Finally, the Online Insurance Regulation establishes several prohibitions relating to how insurers pay distributors, including a prohibition on profit-sharing and bonuses. [s. 35(2)]
Next Steps: Effective Date and Transitional Provisions
The Online Insurance Regulation came into force on June 13, 2019, with the exception of certain provisions that will not take effect until June 13, 2020. These include the requirements:
- to make readily accessible on their websites a specimen of the policy for each offered product and any available endorsement, if applicable;
- to adopt and implement a procedure regarding the design, use, and maintenance of their websites and regarding the management and mitigation of risks; and
- to adopt and implement procedures to supervise and train distributors and their representatives.
In addition, until June 13, 2020, the insurer’s new obligation to deliver a summary and a fact sheet to distributors is deemed to be satisfied by delivering to clients a distribution guide that was provided to the AMF before June 13, 2019 in accordance with the requirement that existed prior to the coming into force of the new regime.
1. The amendments also set out rules for offering financial planning and claims adjustment services online which will not be summarized here.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
ILSTVNews Canada’s Source For Insurance Professionals is taking this coming summer off to spend time with loved ones, family and friends. For subscribers to the ILSTV Insurance Industry Newsletter, your daily dose of Canadian Insurance News returns to your inbox on Tuesday, Sept 10th.
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QUEBEC CITY, July 15, 2019 /CNW Telbec/ – Already a leader in instant acceptance with its EVO platform, iA Financial Group continues to innovate to make underwriting its individual life insurance products easier and quicker.
iA Financial Group today announced that medical requirements, like a blood profile, vital signs or urine test, will no longer be systematically required for clients 50 and under who buy up to one million dollars in life insurance.
This simplification to the underwriting process is possible thanks to technological advances, such as the use of predictive analytics models to evaluate applications. Going forward, advisors can confirm instant acceptance for most clients after completing a simple medical questionnaire.
“Constant innovation in our underwriting processes and instant acceptance at the point of sale consolidate our long-term relationship with our advisors and is a part of our commitment to make it quicker and easier to do business with us,” confirms Valérie Lelièvre, Vice-President, Business Solutions, Distribution and Marketing. “The news announced today calls on the newest technologies to offer our clients and advisors an unrivalled underwriting experience.”
About iA Financial Group
iA Financial Group is one of the largest insurance and wealth management groups in Canada, with operations in the United States. Founded in 1892, it is one of Canada’s largest public companies and is listed on the Toronto Stock Exchange under the ticker symbols IAG (common shares) and IAF (preferred shares).
iA Financial Group is a trademark and business name of iA Financial Corporation Inc. and Industrial Alliance Insurance and Financial Services Inc.
SOURCE Industrial Alliance Insurance and Financial Services Inc.
Article by Deepshikha Dutt and Stevan Manojlovic
On June 18, 2019, the Nova Scotia Court of Appeal released its decision in the case involving Trisura Guarantee Insurance Company of Canada (Trisura) and Duncan et al. This decision is noteworthy, as it may lessen an insured’s obligation to notify and disclose potential claims, and increase the burden of diligence on the insurer.
Trisura provided professional liability coverage to Keybase National Financial Services Inc. (Keybase) from July 2008 to July 2012. Gregory Duncan and James White (Duncan and White) were Keybase advisors during this time.
Duncan and White assumed responsibility for John Allen’s (Allen) clients. Allen was also a Keybase advisor. He was dismissed by Keybase in September 2007. Allen was sued by his former clients in 2009. Allen was convicted for criminal offences, and his former clients were successful in their action against him (2014 NSSC 31 (CanLII)).
However, following the 2014 decision against Allen, the clients (Allen Clients) turned around and commenced a claim against Duncan and White as well, complaining of improper advice concerning mitigation of losses caused by Allen (2015 Action).
Duncan and White applied for, and were granted, an order compelling Trisura to defend the 2015 Action (2018 NSSC 92). Trisura appealed this decision. It asserted that the Court erred: (1) in its interpretation of notice obligations under the policy; (2) in finding that Duncan and White complied with those obligations; and (3) in finding that relief from forfeiture was available in the circumstances. The decision was upheld.
The Appellate Court’s decision
Trisura stated that: (1) it was not notified of any claims or potential claims during the policy periods; and (2) Keybase knew or should have foreseen that Duncan and White had exposure when Keybase first applied for insurance in 2008.
With respect to Trisura’s first argument on notification, the Court disagreed. Although the 2015 Action arose after the Trisura policy expired, the policy afforded coverage if Trisura was notified during the policy period. In 2010, Keybase’s third party insurance consultant (the “Consultant”) had reported potential claims from the Allen Clients. Trisura argued that these reports were related to Keybase and Allen’s negligence. They argued that “notice” was not collective. Further, notice respecting one Duncan and White client could not be notice for all clients. The circumstances needed to be differentiated.
The Court stated that Trisura’s knowledge of what transpired between Keybase, Allen and the Allen Clients underpinned its understanding of how Duncan and White, as subsequent advisors, were exposed to claims of liability. Trisura, as a sophisticated player in the insurance industry, with the benefit of prior knowledge and context, should have known the potential for further claims. Without prior knowledge, it was safe to assume that Trisura would have sought more explanation in the reports.
Trisura’s argument that notification with respect to potential liability regarding one client cannot be notification with respect to the others failed, because there was no material difference between the former Allen Clients’ claims against Duncan and White, and the losses sought.
In June 2010, the Consultant indicated there were seven client complaints against Allen and “two current agents”. Furthermore, on July 2, 2010, Trisura received an adjuster’s report stating:
“There could be exposure for the alleged failure by the subsequent Keybase advisors (Jim White and Greg Duncan) to rectify the situation or to have caused an aggravation of the situation”.
Trisura argued that the report was misconstrued. The actual focus was whether potential claims against Duncan and White should have been disclosed prior to placement of coverage with Trisura.
Nevertheless, on December 29, 2010, the Consultant wrote to Trisura’s adjuster:
“We confirm that any subsequent claims will be treated by Trisura as having arisen in the period in which these circumstances were reported … July, 1, 2009 to July 1, 2010.”
Trisura did not respond.
Trisura also argued that claims against Duncan and White were not commenced during the policy period, because Duncan and White themselves did not think they had any exposure. However, the Court noted that it was unnecessary for the insured to provide notice personally. Additionally, the Consultant was reporting to Trisura on behalf of Duncan and White, and Keybase. The purpose of notice was satisfied in light of the adjuster’s assessment of the potential exposure.
Considered alone, this is not a novel decision. However, it may form part of a broader legal framework, which will make it difficult for insurers to challenge the adequacy of notification and disclosure moving forward.
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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances. Specific Questions relating to this article should be addressed directly to the author.