The RCCAQ’s efforts are always focused on the key aspects of its mission, namely defending and promoting its members’ interests. With those concerns top-of-mind, the RCCAQ’s Board was asked by Intact Insurance (Intact) to analyze the new brokerage contract proposed by the insurer. By the way, the RCCAQ is appreciative and grateful for Intact’s collaboration.
It is important to point out that as far as the RCCAQ is concerned, the analytical process was carried out with the guidance of our legal partners. After validating certain aspects with them, the RCCAQ’s representatives proposed a number of modifications to the contract with an eye to positioning the insurer and brokerage firms as business partners while attempting to avoid any actual or perceived imbalances within the partnership. It should also be noted that a number of these modifications were accepted by Intact.
Respecting the regulator (AMF)
Despite a mutual attitude of open-mindedness and the fact that each brokerage firm is ultimately responsible for deciding whether it should sign a contract, at this stage the RCCAQ cannot advise its members to sign the new brokerage contract proposed by Intact.
First, the new contract includes the implication that the insurer is positioned as a second regulator, alongside the AMF. It should be remembered, however, that a brokerage contract should not be regarded as overriding existing legislation or related regulations. Instead, it should spell things out clearly while reiterating that brokerages and their representatives must comply with the laws in effect and all related regulations.
Against that backdrop, in our view, the new contract is barely acceptable. Needless to say, we have concerns about protecting brokerage firms’ autonomy, as set out in the existing legal framework, including the Act respecting the distribution of financial products and services. Intact’s proposed contract should be a mutually agreed distribution agreement; it should not seek to provide a legislative framework.
Key concerns
The RCCAQ cannot share Intact’s new proposed brokerage contract in its entirety here; it is Intact’s prerogative to share the contract’s provisions. Nevertheless, without fully going into the reasons underlying the Board’s decision to withhold its recommendation with respect to signing the new brokerage contract (various other issues are also in play), here are some key factors:
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⇒ As mentioned previously, the insurer is positioning itself as a second regulator, in particular by using the expression “oversee its distribution network”. Instead, the RCCAQ suggests setting out the insurer’s expectations towards its partners. Overseeing brokerage firms is the regulator’s responsibility, not the insurer’s.
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⇒ Insurance brokers must have the freedom to consult not only their legal advisors, but also any other consultants or specialists with a view to advising insureds and ensuring that they exercise their rights in a timely manner, particularly since brokers must act in their clients’ best interests, as set out in Québec’s Civil Code.
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⇒ In terms of insurer branding, certain requirements could end up undermining insurance brokers’ ethical obligations, including the need to provide objective advice and recommendations. Insurance brokers should not be subject to any constraints or pressure tactics while providing clients with professional services. Requiring brokerage firms to help promote the insurer’s brand, among other things, means imposing a pattern of behaviour or directives that are likely to influence their client advisory duties (Code of Ethics). Article 14 of the Code of Ethics states that “The conduct of a damage insurance representative must be characterized by objectivity, discretion, moderation and dignity”. In the RCCAQ’s view, the framework imposed by the insurer undermines that objective.
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Continuing the analysis
The RCCAQ remains open to continuing the analysis and (who knows?) potentially recommending that its members sign a different version of Intact’s new proposed brokerage contract. In that regard, the RCCAQ’s Board would like to establish a working group made up of some of its members.
To recap, the RCCAQ’s Board completed an initial analysis with the guidance of our legal partners. Now, the goal is to put together a group of representatives of our member firms tasked with carrying out a more detailed analysis and issuing an opinion on it, i.e. whether it reflects brokerage firm’s realities. Depending on its opinion, the working group may submit recommendations to the RCCAQ’s Board, which will then consider the next steps to take.
Message to RCCAQ members
The RCCAQ is always available to address members’ concerns and to support them as they form an opinion of contracts submitted by insurers. Of course, that includes Intact’s contract in its new proposed version. Please feel free to contact the RCCAQ if you have any needs in this regard.
If a representative of your firm would like to join the working group that will be reviewing the Board’s analysis of Intact’s new contract, please send us an email (communications@rccaq.com) by June 7, 2022.
