Chapter 6 - The Regulations of Insurance Brokers

Question 1

RIB Act

Answer 1

outlines the code of conduct, standards of integrity, self-discipline, and the minimum of standards & performance for all licensed insurance brokers.

The aim is to offer greater consumer protection by creating a standards framework all members are held accountable to.

Question 2

Chapter 19

Answer 2

Elections are held yearly to vote 3 new members and for role changes for a limit of 3 years. Because brokerages are diverse, there are two categories for voting;

1: 20 or fewer,
2: 20 or more brokers.

1. Council is responsible to administer RIBO’s affairs.
2. The council may pass By-Laws relating to its administrative and domestic affairs.
3. Establishes and outlines the mandates of 3 key Committees.

Question 3

Reg 989

Answer 3

This is specific to the composition of the council, who gets on and who they represent

Lieutenant Governor to appoint to the council is set at 4; public or appointees.

The number of individual members elected to the Council is set at 9.

Question 4

Reg. 990

Answer 4

These are the exemptions; namely, those who are Risk Management Consultants who do not perform the duties of an insurance broker are exempt from the RIB Act.

Question 5

Reg. 991

Answer 5

This is the core of the RIB Act, which introduces the definition of an insurance broker, misconduct, the Code of Conduct, E&O, and more.

Question 6

RIBO Council

Answer 6

1. Lieutenant Governor
2. 9 Elected Brokers
3. 4 Public Members

Question 7

RIBO Council - Qualifications and Registration Committee

Answer 7

The Qualification and Registration Committee, also known as Q&R, oversees insurance broker candidacy.

After candidates (who are qualified under the Regulations) have passed the examinations approved by the Council, the Manager refers these candidates to the Q&R Committee to issue certificates of registration and renewals.

Question 8

RIBO - Complaints Committee

Answer 8

The Complaints Committee will investigate complaints regarding any member of the Corporation for conduct or actions.

Each Complaints Committee is composed of any number of people the RIBO Council determines necessary; however, at least 1 member of the Complaints Committee must not a member of the Corporation and been appointed to the RIBO Council or panel of laypersons by the Lieutenant Governor in Council.

Question 9

Discipline Committee

Answer 9

The RIBO Council determines the size of the Discipline Committee; however, at least 4 members of the committee must be people who are not members of the Corporation but were appointed to the Council or to the panel of laypersons by the Lieutenant Governor in Council.

Some of the things the Discipline Committee can do are;

Revoke the certificate.
Suspend the certificate.
Reprimand the member.
Impose a fine on the member, to be paid to the Treasurer of Ontario into the Consolidated Revenue Fund.
Suspend or postpone for a period as determined by the committee.
Reimburse the person who registered the complaint for their costs.

Question 10

An insurance broker is

Answer 10

Get money, negotiates insurance contracts, risk management, consulting, reviews insurance ..

Any person who, for any compensation, commission, or other thing of value, with respect to persons or property in Ontario, deals directly with the public

AND

1. Acts or aids in any manner in soliciting, negotiating, or procuring any contract of insurance or reinsurance whether or not the person has agreements with insurers, allowing the person to bind coverage and countersign insurance documents on behalf of insurers,
2. Provides risk management services, including claims assistance where required,
3. Provides consulting or advisory services with respect to insurance or reinsurance,
4. Holds themselves out as an insurance consultant or examines, appraises, reviews or evaluates any insurance policy, plan or program, or makes recommendations or gives advice with regard to any of the above.

Question 11

Who can be an Insurance broker?

Answer 11

Reg. 991, Section 5

1. Age of majority
2. Good Character
3. Not been convicted of any offence which renders him or her unfit
4. Has not been refused a license under the Insurance Act or had a license suspended or revoked
5. Satisfies the educational and experience requirements established by Q&R committee
6. complied with the provisions of this regulation
7. only business employment - broker or life agent
8. 75% or higher

Question 12

What is an insurance brokerage?

Answer 12

There are 3 business models of a brokerage;

Corporation,
Partnership,
Sole Proprietorship.

Question 13

Reg 991 - Section 14 - Code of Conduct

Answer 13

A code of conduct states, very clearly, what should and should not do in the course of their career as an insurance broker.

his code does not state “why” actions should be done. Its purpose is to make it clear if someone Did or Did Not follow the code

Question 14

Reg 991 - Section 15: Misconduct

Answer 14

Discipline Committee is involved:

Never do:

1) Insurance policies that are inaccurate
2) Gifts or rebates to get new business

Question 15

Reg 991 - Section 15.1: incompetence

Answer 15

Discipline Committee.

people who do not have the knowledge or seem to know what they’re doing

Question 16

Reg 991: Section 19 - E&O

Answer 16

Brokerage E&O Policy Limit $3,000,000

Member - $25k fine
Brokerage - $100k fine

Question 17

Reg 991: Section 20 - Fidelity

Answer 17

Like many policies, there are deductibles. Section 20 is to ensure that there are enough funds availlabe to the brokerage to cover all the deductibles from the cliams made against the brokerage.

In the case where the brokerage is found guilty, they must also have sufficent coverage to pay the fine against them. As you recall from Section 6.4.3.2 in your textbook, there are different types of brokerages!

Fidelity Policy Limit $100,000 (because of the max fine)

Brokerage type:

Sole proprietor - $2.5k
Corporation - $5k
Partnership - $5k

Question 18

Reg 991 - Section 21

Answer 18

The Form 1 Position Report is a standard financial report created by RIBO and applied to all member Brokerages to report back to RIBO.

When you attain your Level 1 license, you will not be required to engage with or use this report; this is solely for the Brokerage Principal to generate for RIBO.

This report must be sent to RIBO twice a year, at certain times, based on the brokerage’s financial year-end.

Question 19

By-Law 20

Answer 19

By-Law 20 stipulates the requirements for membership in RIBO. This must be maintained by each broker & brokerage on a yearly basis. The term period is between October 1 to September 30 each year.

Any information about the broker that has changed, like brokerage, legal name, or address, must update this change to RIBO within 30 days of the change.

Question 20

By-Law 21

Answer 20

RIBO’s council also has to be representative of the population it regulates. By-Law 21 lists how the RIBO council is composed and the election process.

Question 21

Incapacitated Members

Answer 21

a member suffering from a physical or mental condition or disorder of a nature and extent making it desirable in the interest of the public or the member that he or she no longer be permitted to carry on business as a registered insurance broker or that his or her business be restricted.”

The member may be required to submit to a mental or physical examination by a qualified person. If the member fails to submit to the examination, the board may order the member’s certificate suspended until the member complies. Following the inquiry, the Q&R Committee will determine:

Whether or not the member is incapacitated.
If the member is incapacitated, whether to revoke, suspend, or attach terms and conditions to the member.

Question 22

Investigation of Members

Answer 22

When the Manager believes on reasonable and probable grounds that a member has committed an act of misconduct or incompetence, they may appoint one or more persons to open an investigation to determine if such act has actually occurred and report back to the Manager. If the member committed an act of misconduct or incompetence involving trust funds, then two individuals from the insurers for whom the funds were to be held in trust must be added to the investigation.

The member under investigation must allow the investigator to enter their premises at any reasonable time to examine the books and records of the brokerage, and is not allowed to obstruct the investigator. If the investigator is obstructed, they will attain a warrant to enter the premises with or without police, at any time between sunrise to sunset (unless a judge allows the premises to be searched at night).

Question 23

Fines of Contravention of the RIB Act

Answer 23

f a member contravenes any provision of the RIB Act and is found guilty of an offence, they will be liable upon their conviction for a fine of $100,000, or imprisonment for a term up to six months, or both.

If the guilty member is a corporation (that is, a company or brokerage), then the maximum fine imposed is $200,000.

Question 24

Regulation 990: Exemptions

Answer 24

In addition to the administrative staff noted above, risk management consultants are also exempted from the licensing requirements. Although these professionals may speak about insurance in their discussions with their clients, they do not engage in the same type of activities as brokers. While their work may seem similar to what brokers do, risk management consultants have separate guidelines and expectations under another regulator (Risk Management Consultants of Ontario).

Question 25

Regulation 991: General Regulations Section 5 - Who can be a broker

Answer 25

Must have reached the age of majority (18).

• Must be of good standing in the community.
• Have not been convicted of an offence.
• Have not been refused an insurance broker license, had one suspended, or had one revoked in the past.
• Have completed and passed (75% or higher) the RIBO Entry Level (Acting Under Supervision) exam.
• Confirm that insurance broker will be the sole profession they will work in, as either a broker or life broker/agent
• Confirm that any other business practice they wish to pursue while working as an insurance broker has been pre-authorized by the Q&R Committee.
• Will meet and continue to meet the continuing education requirements established by the RIBO Council.

Question 26

Corporation:

Answer 26

A large organization with multiple layers of ownership and management, such as a board of directors.

Question 27

Partnership

Answer 27

Owned by two or more people, where the majority of equity interest and voting shares must be held by persons who are Registered Insurance Brokers.

Question 28

Sole proprietorship

Answer 28

A business owned by a single individual.

Question 29

Regulation 991 - Section 8 - Conflicts of Interest Preventing Issuance of Certificates of Registration

Answer 29

The Q&R Committee will not issue a certificate of registration to anyone whose office space, by virtue of being located on the same premises, is in a position to offer inducement, or use coercion or undue influence in order to control, direct, or secure insurance business. This Regulation makes it clear that lending institutions, such as banks or credit unions, cannot provide insurance products in the same office location. For example, if a bank issues a car loan and sells insurance products in the same location, the bank staff could have intimate knowledge of the customer and could then be incentivized to add automobile insurance into the sale of the loan. To protect the public from potential conflicts of interest, these two entities must be separated both physically (that is, separate offices/locations) and through business functions (that is, a loan officer cannot be a licensed insurance agent).

Question 30

Regulation 991 - Section 9 - Certificates of Insurance

Answer 30

When members of the public place insurance with one or more insurers, they must be provided with a certificate of insurance within 21 days after the insurance has been secured or confirmed.

The certificate of insurance must contain the following:

• The name and mailing address of the insured.
• A description of the coverage provided.
• The full name of each insurer, or other person authorized to undertake the contract.
• The amount of insurance placed with each insurer.

Question 31

Regulation 991 - Section 10 - Using Unlicensed Insurers

Answer 31

Most insurance policies are placed with federally or provincially licensed insurers. All insurance companies in Ontario are regulated by the Superintendent of Insurance. However, some exposures are too great a risk for insurance companies to protect. In these circumstances, one might look to place these insurance policies with unlicensed insurers.

This is not a common process, but it does exist as a legitimate possibility for insurance brokers facing a difficult risk to insure. When placing insurance with unlicensed insurers, the following requirements apply:

•The broker has informed the member of the public that:

○The insurer is not licensed in Ontario.

○The insurer is not subject to regulations under the Insurance Act.

○The orderly payment of claims may be more difficult when the insurer is not under regulation of the Insurance Act.

○The Superintendent of Insurance has no authority over this insurer or its policies.

○The broker must submit provincial and federal taxes.

• The broker must obtain written permission from the insured before the policy is placed.
• If the risk is automobile coverage, the minimum amount of liability ($200,000) must be placed with a licensed provincial insurer.
• The broker must inform the Superintendent of Insurance within 30 days of each quarter of all policies placed with unlicensed insurers

Question 32

Regulation 991 - Section 12 - Fees Charged in Addition to Commissions Received

Answer 32

In some cases, brokers will charge a fee to a client in addition to the commission received under the policy. This is a common practice and occurs when the servicing of a policy requires extra administration activities to properly maintain a client’s file (such as a business’s commercial fleet policy).

In these circumstances, the broker must advise the policyholder prior to charging the fee, and it must be clear that this fee is in addition to the premium being charged. The broker must clearly declare to the client:

• The amount of the fee being charged.
• The portion of the retained premium.
• The total remuneration on the transaction.

Question 33

Regulation 991 - Section 14 - Code of Conduct

Answer 33

All professionals who are regulated under the RIB Act are also expected to uphold the insurance profession in a fiduciary capacity. Regulation 991, Section 14 describes the proper behaviours members must adhere to at all times when acting as an insurance broker.

The following list summarizes the 15 items constituting good behaviour:

1) Discharging your duties to the public with integrity.
2) Owing a duty to be competent when performing on behalf of clients and prospective clients.
3) Being conscientious, diligent, and efficient, and providing a quality of service equal to other members.
4) Being both candid and honest.
5) Holding information of clients in strict confidence (unless negotiating with underwriters).
6) Following all rules and laws in safekeeping information and property of clients.
7) Conducting business so that any other business associations will not jeopardize the member’s role as an insurance broker.
a) Disclosing in writing, in advance, any financial relationship with insurers.
8) Fully disclosing any fee charged and ensuring that such fees are proportionate for the services provided.
9) Encouraging public respect.
10) Making services available in an efficient and convenient manner.
11) Assisting in maintaining the integrity of the vocation.
12) Assisting in preventing others who are not authorized to sell insurance as members.
13) Acting with courtesy and good faith.
14) Co-operating in any investigation conducted by the RIBO.
15) Notifying RIBO of incompetence and misconduct in any other jurisdiction.

Question 34

Regulation 991 - Section 15 - Misconduct

Answer 34

Regulation 991, Section 15 outlines the actions that brokers should never take. The following list summarizes the 16 items constituting bad behaviour:

1) Using methods of soliciting with incomplete and/or false statements of the insurance contract.
2) Using incomplete comparisons to induce a prospective client to agree to an insurance contract.
3) Using any payment, allowance, or gift as an inducement for prospective clients to change brokers.
4) Rebating any portion of the premium to be paid.
5) Using a professional or business relationship to coerce or induce to control a prospective client.
6) Advertising under a different member’s name or brokerage than what is registered through RIBO.
7) Causing any unreasonable delay or resistance of fair payment of claims.
8) Failing to carry on business consistent with the Code of Conduct.
9) Failing to comply with the Act, Regulations, or By-laws of RIBO.
10) Acting as an insurance agent.
11) Being convicted after October 1, 1981 of a criminal offence under the Insurance Act.
12) Charging or paying a referral fee or finder’s fee, other than with occupations currently allowed under the Regulations.
13) Serving as a director, officer, or principal broker and concurring with misconduct of a member of a sole proprietorship, partnership, or corporation.
14) Providing false or misleading information to RIBO.
15) Acting as a principal broker when failing to comply with the educational requirements.
16) Serving as a principal broker and failing to report that a member broker of the brokerage has committed misconduct.

Question 35

Regulation 991 - Section 16 - Trust Funds and Trust Accounts

Answer 35

All premiums received by members are called trust funds. These amounts must be deposited into the brokerage’s named trust account and designated as a trust fund. The transfer must be made no later than three banking days after the day the trust money is received. These trust funds are payable to the insurance companies under a specified time period, with conditions defined in the contract with the insurance company.

The premiums received by the brokerage also include the commissions that will be made payable to the brokerage. These commissions must be transferred from the trust account directly into the general account at a separate time. The general account is a business bank account that is held under the brokerage’s name, with the same financial institution as the trust account. The financial institution must be approved by RIBO Council.

Question 36

Form 1 Position Report

Answer 36

The Form 1 Position Report is a financial report that identifies a brokerage’s financial year-end trust account, general account, and equity total. This report is signed by the principal broker and must be completed and received by RIBO within 90 days of the brokerage’s fiscal year-end. A second Form 1 Position Report must be filed six months after the brokerage’s fiscal year-end, within 90 days.

Question 37

Section 15.1: Classes of Membership

Answer 37

Restricted to accident and sickness.

• Restricted to other than accident and sickness.
• Restricted to acting under supervision.
• Specific restrictions.
• Restricted to consulting.
• Principal broker or designated individual, in which case:

○Each brokerage must have a principal broker (as per Regulation 991, Section 7.2) who is responsible for the entire brokerage’s operations and the actions of every member.

○The key role of the principal broker is to direct and supervise each individual member of the brokerage.

• Out-of-province class member.
• Non-active firm class of member.
• Active firm class of member.

Question 38

By-law No. 20: Membership Renewal and Information Changes

Answer 38

The renewal application, along with all renewal fees, must be filed with RIBO no later than August 31 each year. If the application and fees are not filed in time, the broker’s membership will be suspended as of September 30 of that year. The member has one year to renew their membership. If the renewal is not received within one year by RIBO, the certificate will expire.

Additionally, any information about the broker that has changed — such as their brokerage, legal name, or address — must be updated with RIBO within 30 days of the change.

Question 39

Certificates of Insurances

Answer 39

Due within 21 days of after insurance has been secured or confirmed