Chapter 15: Regulation of Brokers

Question 1

What is the Insurance Act?

Answer 1

the main piece of legislation governing insurance here in Canada (each province has own version)

Question 2

Who are the administration?

Answer 2

the responsibility of the Superintendent of Insurance

1. in BC: Superintendent of Financial Institutions
2. in ON: Commissioner
3. in BC, AB, SK, MB: licencing, complaint handling, trade practices and disciplinary issues are handled by Insurance Councils

Question 3

What are the qualifications for licensing?

Answer 3

1. must be licensed
2. must be sponsored by a brokerage/insurer
3. must be of good character and reputation

Question 4

3 step licensing system

Answer 4

level 1: can sell general insurance but restricted to brokerage office and must be supervised by level 2 or 3 broker

level 2: can sell general insurance inside or outside the brokerage but cannot own/manage

level 3: can manage/own a brokerage

Question 5

Class of license

Answer 5

all classes (other than life) cannot sell other types of insurance (ex. in ON: additional license needed to sell travel insurance)

Question 6

License term

Answer 6

sometimes need CE credits to renew license

in ON: 1 yr; in BC: annual filing; in NS: 3 yrs

Question 7

License jurisdiction

Answer 7

need license in each province you do business in (if insure property in another province, get it countersigned by a licensed broker)

Question 8

Broker’s license may be revoked for…

Answer 8

1. guilty of misrepresentation, fraud, deceit, dishonesty
2. contravenes any provision of the Insurance Act
3. fail to remit premiums to insurer in due time
4. places insurance with unlicensed insurers without complying with applicable legislation
5. proves to be incompetent or untrustworthy to transact in their licensed insurance business
6. misuses trust funds

Question 9

3 fundamentals principles of standards of conduct

Answer 9

1. priority of client’s interest
2. disclose conflicts of interest: including potential conflicts
3. product suitability: offer the most suitable product

Question 10

What are the broker’s duties in accordance with the standards?

Answer 10

1. integrity: (ie. not taking improper advantage of client’s inexperience)
2. competence: give competent guidance, should not act beyond level of competence
3. quality of service: (ie. not return calls, not give sufficient notice of non-renewal policy, not inform clients of alternations to coverages)
4. advising clients: must be honest with advice (no tied selling)
5. confidentiality: cannot share client info with other clients
6. fee disclosure: cannot charge any fees in excess of premiums unless clearly stated in writing with reason
7. encouraging public respect: enhance public image of the industry
8. maintain professional integrity: be professional, have good customer service and report any breaches of insurance regulations