Quebec financial services regulator urges caution over peer-to-peer risk sharing platforms

Quebec’s financial services regulator is urging caution following the “recent emergence of peer-to-peer risk sharing platforms.”

The Autorité des marchés financiers (AMF) said in a press release on Tuesday that it has noticed that companies are offering consumers platforms where they can form pools to protect similar property without using an insurer. “Consumers are asked to determine the risks they want to cover, premiums and claims processing, since the pool’s participants decide together on the eligibility of claims,” the release said.

Although the AMF said it is in favour of the development of new financial technologies that meet the needs of consumers of financial products, “it would also like to remind them that any offering of insurance products or services, whether through a web-based platform or in person, is a regulated activity.” Therefore, any company wishing to market an insurance product in Québec must hold a licence issued by the AMF. Certain insurance policies must be approved by the AMF before the insurer can offer them to the public, and products must be offered in accordance with An Act respecting the distribution of financial products and services.

Some platforms, which are gradually available in Québec via the Internet or phone apps, allow participants to share certain risks related, in particular, to health, travel, events, cars, homes and job loss. “Based on information currently available, the AMF is of the opinion that products or services offered in this way are similar to insurance products,” the regulator said. “The AMF has yet to decide on the compliance of these products or services and the companies offering them. In the interim, it is asking consumers to be careful.”

The AMF suggested that consumers could be exposed to losses, for example, if pool participants unreasonably refuse to pay a claim or if the pool has insufficient funds. In addition, in the event of insolvency, losses would not be covered under current compensation regimes, since they only protect consumers who have taken out insurance from an insurer licensed with the AMF.

“Before making a transaction via a peer-to-peer risk sharing platform, make sure that you check first with the AMF to ensure that the person or company you plan to deal with is licensed by the AMF,” the release said. “The AMF also reminds anyone wishing to offer financial products and services via new technologies that they should contact the AMF to determine whether they are subject to the existing regulatory framework.”