Since Bill 150 was tabled, the RCCAQ has worked tirelessly to ensure that the provisions concerning brokers' role and the rules governing firm ownership will be beneficial to all stakeholders and applicable in today's marketplace. Yesterday evening, a number of amendments tying in with our recommendations were introduced by the finance minister and adopted in connection with the National Assembly's detailed review of Bill 141.

In our view, the proposed measures will provide an effective framework for firms seeking to develop while also ensuring that consumers have a clear choice.

The main aspects of the provisions are detailed below. Four main areas are affected:

• CHOICE: In the area of personal insurance, each brokerage firm must have at least three distribution agreements in place with insurers that are not in the same financial group. The legislation no longer requires a certain number of products to be offered for each quote. Commercial insurance is not affected.

• TRANSPARENCY: The disclosure rules geared towards consumers have been modified to ensure greater transparency.

• SHAREHOLDING: A financial institution can hold an ownership interest in a firm up to a limit of 50% of the value of the firm's equity, provided that the shares making up the 50% do not represent more than 20% of the voting rights.

• DEVELOPMENT: The financing agreements and service contracts already authorized by the Autorité des marchés financiers (AMF) are maintained.

Choice lies at the heart of brokers' role

Bill 150's original provisions concerning brokers' role posed major application problems since brokers would have been required to offer a choice of products from at least four insurers for each quote.

The new provisions now clearly state that insurance brokers are not required to offer a certain number of products to each client. Instead, they are defined by the choice of insurers they can offer to consumers and by the advice they provide.

Under the new amendments, a brokerage firm must have at least three distribution agreements in place for each category of individual insurance products (these categories will be defined by the AMF at a later date).

Commercial insurance and specific personal insurance cases

This requirement does not pertain to commercial insurance. If firms are not able to put three distribution agreements in place (as required), a provision will enable them to document and justify their situation in the event of an AMF inspection.

This might apply, in particular, to cases of sub-standard personal insurance or to start-up firms that only have access to two agency contracts, e.g. due to minimum business volume requirements.

New disclosure rules

In its June 2017 position paper, the RCCAQ suggested that the disclosure rules in effect should be reviewed in order to benefit consumers. The new amendments take a step in that direction. In the future, brokerage firms will be required to disclose:

• The name of the financial institution (or financial group or related legal entity) holding shares whose value represents more than 20% of the firm's equity. It should be noted that in this case, preferred shares are excluded from the equity value calculation and that the ownership interest may not exceed 50%.

• The name of any insurer to which more than 60% of written premiums are paid. This data must be provided by product category in the area of personal insurance only (e.g. home/auto insurance).

This information must be clearly posted on the brokerage firm's website, as well as in all of the firm's written communications involving clients.

Ownership interest in brokerage firms

After Bill 150 was tabled, the RCCAQ recognized the need to maintain the rules set out in the AMF's 2007 staff notice, on which brokerage firms have built their business models.

The new measures are aimed at maintaining a financial partner's shareholding limit via a system that, although it is not 100% identical to the AMF staff notice, does offer financing possibilities.

Two criteria must be met:

• An institution's ownership interest must not enable it to exercise more than 20% of the voting rights attached to the firm's shares.
• This ownership interest must not exceed 50% of the value of the firm's equity (taking into consideration again that the equity calculation does not include preferred shares).

Financing agreements and service contracts are maintained

The new proposed provisions include the possibility of entering into financing agreements or service contracts by brokerage firms and financial institutions. The provisions that you complied with in the past in this regard, in accordance with the AMF staff notice, have been maintained.

Focusing on what brings us together

As entrepreneurs, our business models reflect our specific realities. But above and beyond what sets us apart, we all share the same desire to serve and advise our clients, to guide them through the claim process and to defend their interests in dealings with insurers.

Meanwhile, the RCCAQ's role is to take all possible steps to defend the brokerage sector and represent your interests in dealings with decision makers. Starting today, we will be continuing our work with the AMF with a view to laying out effective benchmarks for the regulatory framework accompanying the new law.

We firmly believe that these amendments will enable brokerage firms to develop in an ever-changing market, regardless of their size, geographic location or business model. This new framework will also be the starting point of a unifying discussion on brokers' future role.
 

Christopher Johnson
RCCAQ Chair