Canadian regulators release discussion paper on rebating, tied selling

In an effort to harmonize insurance practices across the country, the Canadian Council of Insurance Regulators (CCIR) is looking for input on market conduct issues, including inducements, rebating and tied selling.In a consultation paper, the CCIR is asking for response to proposals arising from a consultation process begun in May, 2002. On the subject of inducements (i.e. offering something as an incentive to purchase an insurance product, which could come in the form of a rebate), the industry is proposing the removal of all restrictions on the practice. The argument goes that other retailers offer such inducements to sell products. However, other proposals include only partial bans, such as banning rebates but not other inducements, or establishing a maximum value for incentives. Another suggestion is to allow inducements which have a risk management purpose, such as smoke alarms or anti-theft devices. The CCIR is also hoping for feedback on whether a distinction should be made between an incentive for requesting a quote versus one tied to a purchase.The second issue, involving the practice of bundling financial services products or “tied selling”, is prohibited in most jurisdictions, the CCIR notes, in an attempt to protect consumers from being coerced into buying products they do not want. The industry proposal would see bundling of products allowed so long as it does not require a customer to buy unwanted products (i.e. there may be a cost reduction for buying more than one product, but products can nonetheless be purchased separately). Companies argue that it is less expensive to administer bundled programs.The CCIR notes that this may be more an issue of wording and interpretation of existing legislation, with regulators supporting choice and benefits to consumers from bundling in the absence of the coercive nature of tied selling.Submissions on the consultation paper, which is available at www.ccir-ccrra.org, are due by May 21, 2004.