Compliance & Regulation
The insurance contracts and services provided by the property and casualty insurance industry are governed by many statutes and regulations to ensure consumers are adequately protected and served with professionalism. When it comes to safeguarding the assets and financial prosperity of Canadians, having stringent regulations in the financial services sector is necessary and beneficial.
Generally speaking, insurance companies are regulated federally by the Office of the Superintendent of Financial Institutions. Insurance companies that are not national, but are operating in B.C., are regulated by the Financial Institutions Commission. Insurance intermediaries – brokers and managing general agents – are regulated provincially. The Insurance Council of B.C. is mandated by the Financial Institutions Act to administer licensing of brokerages and brokers.
- The role of licensees
- The role of IBABC
- Insurance-related legislation and regulation: Provincial
- Insurance-related legislation and regulation: Federal
Licensees’ responsibilities are set out in legislation, regulation, Insurance Council of B.C. rules and the Code of Conduct. Failure to perform these daily business requirements could result in a breach that could lead to disciplinary action. Licensees should be familiar with the information at Licensee Responsibilities on the Council website. Ignorance of the law is no excuse when facing a court judge or disciplinary hearing.
Knowing the source of these regulatory requirements can provide clarity and perspective, and can help brokers provide more knowledgeable explanations to their clients. In addition brokers can effect change by advocating with insurers, regulators, Crown corporations, and governments.
The Insurance Brokers Association of B.C. is a trade association for property and casualty insurance brokerages in B.C. Membership is voluntary and about 90% of the insurance brokerages in B.C. are members. IBABC and its counterpart associations in every province are members of the Insurance Brokers Association of Canada. Many initiatives are shared across Canada by this association network.
IBABC monitors and influences public policy for property and casualty insurance at the municipal, provincial and federal levels of government. IBABC facilitates grassroots interactions between member brokers and elected officials. As insurance professionals who are face-to-face with consumers all day every day and who know their needs and concerns, brokers bring a knowledgeable and unique perspective to the public-policy arena.
IBABC reports to members about legislative and regulatory changes, providing education, interpretation and resources to assist members in understanding and complying with regulatory amendments.
Sets out Statutory Conditions and other requirements for insurance contracts in the main areas of life, property and casualty, accident and sickness, group and others. The Insurance Act affects nearly every insurance policy a broker sells.
Covers how motor vehicles and drivers must be licensed and how vehicles are to be operated. It includes vehicle and driver licensing, and the penalties for violations. Many of an Autoplan broker's daily tasks involving license plates and vehicle registration are dictated by this act.
This act governs all aspects of vehicle insurance – both the basic compulsory insurance provided by ICBC and the optional coverage provided by ICBC and private insurers.
The original act established ICBC as the monopoly supplier of compulsory auto insurance. In 2003 the B.C. Utilities Commission was given responsibility for setting ICBC's basic insurance premiums and for ensuring there is no cross-subsidization between ICBC's basic and optional operations.
Governs all provincially regulated financial institutions including trust companies, insurance companies and credit unions. It also provides the licensing and regulatory framework for insurance agents, salespersons and adjusters. The act defines salesperson (Level 1) and agent (Levels 2 and 3) and empowers the Insurance Council of B.C. to administer licenses and make rules.
Notable Regulations: The Marketing of Financial Products Regulation requires that prior to the sale of an insurance product, disclosure must be provided to the customer, outlining the relationship and extent of any business or financial interest, if any, the licensee has with the insurance company. While the regulation does not state disclosure must be in writing, many brokers still base their disclosure on the "Section 90" disclosure form, a term that relates to an earlier version of the FIA.
The Shared Premises Regulation requires that, with some exceptions, the business office of an insurance agency must be located in premises that are separate and distinct from the business office of a savings institution.
The three statutes guiding brokers are:
- The federal Personal Information Protection and Electronic Documents Act (PIPEDA) governs the collection, use and disclosure of personal information by private-sector businesses.
- Its provincial counterpart called the Personal Information Protection Act (PIPA) is substantially similar, but adds a "reasonable person" test, which allows for implicit consent.
- The Freedom of Information and Protection of Privacy Amendment Act (FIPPA) establishes privacy requirements for government ministries, agencies and Crown corporations such as ICBC.
Along with the mandated periodic reviews of these statutes, advances in technology are leading to new compliance requirements. Please see Privacy Resources.
The Strata Property Act provides a framework for the creation and operation of strata developments in B.C., and sets out the guidelines under which strata corporations must operate. Part 9 sets out the insurance provisions, for example, requiring strata corporations to obtain liability insurance, and to review and report on insurance coverage annually.
Sets out basic standards of compensation and conditions of employment. Level 1 licensees (defined by the Financial Institutions Act as “salespersons”) are entitled to the provisions of the Employment Standards Act; they work inside the office under the supervision of others. Level 2 and 3 (“agents”) are able to work outside the office, manage their own time, and are more likely to work on commission and have employment contracts. Section 31 of the ESA states that "the act does not apply to an employee who is (g) a person licensed as an insurance agent or adjuster under the Financial Institutions Act." In practical terms, however, the level of job functions a licensee performs may determine whether or not ESA provisions are in order. It makes good sense for a brokerage – like any other business – to have equitable, defensible employment practices.
The Labour Standards Branch deals with union-related disputes. The Employment Standards Tribunal deals with non-union employment complaints.
The federal Bank Act regulates the market conduct of the financial services sector. Insurance brokers, for nearly a century, have worked with government to maintain the restrictions in section 416 that state: 1) "A bank shall not undertake the business of insurance except to the extent permitted by this act or the regulations," and 2) "A bank shall not act in Canada as agent for any person in the placing of insurance and shall not lease or provide space in any branch in Canada of the bank to any person engaged in the placing of insurance." In early 2011 regulations extended that prohibition to banks’ websites. The federal Bank Act maintains insurance as a financial pillar separate from other financial products so that its integrity and function of indemnification against pure risk can be maintained.
The Competition Act is a federal law governing business conduct in Canada. It contains both criminal and civil provisions aimed at preventing anti-competitive practices in the marketplace. Major revisions to the act in 2012 introduced these changes:
- Increased penalties for deceptive marketing practices and expressly empowering the courts to award restitution to victims of false or misleading representations.
- New guidelines for the mergers review process.
- Allowing the Competition Tribunal to award administrative monetary penalties against companies who have abused a dominant position in the marketplace.
Because association activities by definition involve the interaction of direct competitors, they can in some cases raise serious competition law concerns under the act. IBABC has developed a compliance policy and is operating in accordance with competition law best practices with regards to information sharing, meetings, membership and general conduct.