Quebec Brokers: Back to School

Prior to the enactment of Bill-188, Quebec’s property and casualty insurance brokers were self-regulated. Regulation of all financial intermediaries now falls under the Bureau des Services Financiers, or the Financial Services Council. This includes p&c and life agents, claims adjusters and financial planners.

Starting from September 2001, the province’s 10,000 financial services intermediaries will have to earn at least 30 hours of continuous education credits over the next two years to maintain their right to practice. Of this, 20 credits must come from “administration” and/or “insurance” courses, while four credits must be gained from “laws and regulations”, with a further six from “professional development”. Needless to say, the race is on to provide accredited courses for all of the above, and there is obviously some concern as to costs and availability.

Disclosure requirements

A certain number of contentious sections of the bill have yet to be put into effect. These primarily deal with “disclosure requirements”, which the principle behind the new requirement is not the area of concern. Rather, brokers currently have no idea to how far the Bureau des Services Financiers is willing to go in enforcing the following clauses:

Commission disclosure, which could include other benefits such as a sales or retention bonus, possibly even profit sharing;

Disclosure of any business relationship between a brokerage firm and an insurer, as well as any direct/indirect interest held by an insurer, and any benefits granted by an insurer to the broker;

Disclosure of the name of insurers represented by the brokerage;

Disclosure of exclusivity, namely “bound to a single insurer”;

Disclosure of dual capacity as broker and adjuster.

The intended purpose of these sections is to insure that, before concluding an insurance contract, the consumer is well informed of the status of independence of the person providing the products or advice. The intent is quite legitimate, but the question remains as to how it will work.

Will the producing broker really have to disclose: his commission, the firm’s commission, if there is a profit commission arrangement, a sales bonus or contest or other incentive with the proposed insurer and then reveal if the insurer owns shares in the firm or vice versa? Finally, will the broker have to name every other insurer the firm deals with before concluding a contract? And, in some larger offices, will the producing broker even be aware of all that information?

Detailing coverage

Section 28 of Bill-188 really strikes fear in the hearts of brokers and agents alike. It reads: “Insurance representatives must before making an insurance contract, describe the product to the client, specify the nature of the coverage and indicate clearly all exclusions.”

All exclusions? Does the legislator intend that the broker explain every exclusion and limitation to the client before contracting coverage? If so, at what point of time exactly? Before or after having revealed all of the above commissions, shareholdings and the names of all other insurers the office deals with?

We all know we have an obligation to explain the product and offer all pertinent information to the client. Various courts have reminded us often enough of this obligation. But, the way this law reads, it would seem to force us into a practice that is far more stringent than the one imposed by legal precedents.

For instance, will brokers have to read out loud all the clauses of the insurance contract? In a contested claim, the client’s attorney may try to argue accordingly. The hope is the courts will not listen to such an interpretation that would in effect render the marketing of insurance products unfeasible.

Complexities

These problems have no doubt contributed to the delay in enacting the above mentioned sections of Bill-188. Many objections have been raised by brokers and direct writers alike. Since laws are difficult to amend, but can be more clearly defined through accompanying regulations, interested parties have offered to help formulate the rules. But, for now, the status quo remains and there is no fixed deadline to change it.