Consultation on the draft Regulation respecting damage insurance brokerage
Longueuil, September 24, 2019 - The Regroupement des cabinets de courtage d’assurance du Québec (RCCAQ) has submitted a position paper to the Autorité des marchés financiers (AMF) in connection with the consultation on the draft Regulation respecting damage insurance brokerage. In its current form, this regulation would undermine many brokerage firms across Quebec and could even result in their going out of business or being absorbed by major insurance sector players. This would reduce the range of choices available to consumers.
"lt is important for us to take a stand because the future of the brokerage industry is at stake here," said RCCAQ chair Patrice Pouliot. "We recognize the AMF's work in this regard and we reiterate that we and the regulator share the same goal of protecting consumers. Indeed, consumers' interests are the central concern of our profession. However, under the proposed draft regulation, consumers will not be better protected and will not have access to better services. This offer could even shrink because firms might be simply swallowed up by the direct insurers."
Four main issues are raised in the RCCAQ's position paper: 1) the concept of "hybrid" agencies; 2) overseeing the offer of the three personal insurers; 3) disclosure provisions; and 4) operational inequities brought to our attention.
"Hybrid" agency model in the damage insurance sector
In the RCCAQ's view, creating a new agency model could sow confusion among personal as well as commercial insurance clients. Under this model, direct insurers would be authorized to have a 100% ownership stake in this type of agency while owning and controlling commercial damage insurance activities via brokers. In contrast with the legal objective of clarifying the difference between an agency and a brokerage firm (and the distinct role of each professional working there), this structure would only serve to increase confusion among clients who already have difficulty navigating the system.
Moreover, since this option would enable direct insurers to retain brokerage operations within an agency, consumers would face a major reduction in the number of available distribution options.
Three personal insurers
As regards the three companies offering automobile and home insurance coverage, it should be noted that to ensure that consumers have access to a wide range of options, the oversight process should be tailored to the highly complex reality of brokerage firms. It is essential that brokers and firms fulfil the responsibility to meet the requirements of the new law. Nevertheless, the proposed compliance process seems at odds with the realities facing the brokerage industry. For reasons outside their control (geographical location, company size, insurer's conditions), some firms might not be able to achieve the stated target. For the RCCAQ, it is evident that amendments to the law, amid a concentrated and highly volatile market, entail an "obligation of means". The oversight process for brokerage firms should be based on that same principle. The RCCAQ appreciates the AMF's willingness to regard internal operational organization as a prerogative of the firm's owner.
Disclosures to consumers
The RCCAQ recognizes the essential nature of consumer protection in the damage insurance brokerage sector, together with the importance of disclosing relevant information to consumers with a view to clarifying the choices available to them. However, the RCCAQ cannot support the new disclosure measure proposed under the AMF's draft regulation. This new measure would primarily entail disclosing the percentage of premium volume by insurer when brokers are getting ready to interact with clients, thus leading to a higher administrative burden, not to mention an ill-considered intrusion into brokerage firms' strategic business data. This additional requirement would have a significantly negative impact on clients' experience without improving their coverage. In addition, it would weaken each firm in the eyes of its competitors and could even jeopardize business relations with insurer partners.
Operations
In addition, the RCCAQ does not want the oversight process for damage insurance brokers to result in operational imbalance; indeed, the process should be comparable for brokerage firms and for direct insurers. For example, in addition to the aforementioned impacts, the AMF is prepared to create a new form containing information already disclosed annually in the required maintenance formula required by all brokerage firms. It is actually a question of modifying the current form so a new one does not need to be added.
If the regulation were adopted in its current form, the client experience would be diminished, brokerage firms would be less common in the regions and insurance premiums would go up. These are examples of likely impacts that would occur and would work against the client's interests.
The RCCAQ also notes that the proposed framework does not strike a careful balance between public protection and market conditions. The RCCAQ thus calls on the AMF to re-evaluate the consequences of the proposed regulation and to consider other ways might pave the way for a truly balanced experience.
The RCCAQ's position paper is available here.
About the RCCAQ
In addition to creating wealth and high-paying jobs, the RCCAQ's member firms represent the interests of 4,150 certified damage insurance brokers in all regions of Quebec. All in all, these brokers work for 500 different firms and branch offices around the province.
At the national level, the RCCAQ counts on the support of the Insurance Brokers Association of Canada (IBAC), which brings together 11 provincial associations representing over 35,000 P&C brokers.
The RCCAQ seeks to promote and defend the interests of damage insurance brokers by giving them a voice in dealings with legislators and regulatory organizations, as well as with members of the public.
In fulfilling its mission, the RCCAQ ensures that the measures adopted by legislative and regulatory authorities foster healthy competition between all actors in the distribution chain while protecting consumers' interests.
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Information:
RCCAQ
Typhaine Letertre
Director, Communications and Public Affairs
(450) 674-6258, ext. 229
tletertre@rccaq.com
