CLHIA Comments on Manitoba's second draft for a proposed Restricted Licensing RegimeRelease Date: 01/06/2014 Staff Reference: Leslie Byrnes; Erica M Hiemstra
January 6, 2014
Deputy Superintendent of Financial Institutions - Insurance
Financial Institutions Regulation Branch
Dear Mr. Moore,
The Canadian Life and Health Insurance Association is pleased to provide comments in response to your December 9, 2013 letter and the second draft of Part 2, Restricted Insurance Agent Licences, of Manitoba's draft Insurance Agents and Adjusters Regulation.
We would like to commend Manitoba for the consultative approach that has been taken to develop the restricted licensing regime. We very much appreciate being involved in this process and acknowledge that many of the suggestions provided in our July 5, 2013 comments regarding the Regulation have been integrated into the current draft.
A few key issues remain for life and health insurers and are detailed in this letter. They include:
· Issues with respect to the proposed roster requirement.
· Clarification regarding Superintendent pre-licensing approval of some requirements.
· Clarification regarding statement of the number of persons transacting insurance.
· A drafting issue with respect to qualified entities.
· Use of the term "incidental sellers of insurance" to identify participants in the restricted licensing regime, which excludes certain products.
Issues With Respect to the Proposed Roster Requirement
It was very helpful to hear from you that restricted licence applicants will not be required to submit a copy of their roster with their restricted licence application or renewal. Rather, with a view to achieving an appropriate level of consumer protection, your intention is that restricted licence holders be able to make the roster information available upon request. That said, we see several issues related to the roster requirement and respectfully suggest that the consumer protection goal that we support is achievable without a roster, as it is currently done in Alberta and Saskatchewan. To provide context to this discussion, attached (on page 6) you will find a chart comparing some of the restricted licensing requirements in Alberta, Saskatchewan and Manitoba.
In both Alberta and Saskatchewan the goal of appropriate consumer protection is achieved through regulatory oversight of the restricted licence holder. That is, the organization holding the licence is held accountable for the actions of its employees. Each restricted licence holder names a designated representative who acts as the primary liaison with the regulator. In case of a consumer complaint, the regulator contacts the restricted licence holder's designated representative to address the matter. Manitoba's proposed regime provides for a similar approach, but then also adds the roster requirement.
It is worth noting, as shown in the chart on page 6, that the roster requirement is not a component of the restricted licensing regimes in Saskatchewan and Alberta today. In the case of Alberta, they initially required a roster but quickly discovered that it did not assist in meeting their objective of supervising restricted licence holders and abandoned it in the early days of their regime. As for Saskatchewan, it rejected a current roster requirement before finalizing its regulation. In both cases, the regulators appear to have concluded requiring restricted licence holders to submit rosters does not provide additional consumer protection and the resulting overhead costs on both regulators and restricted licence holders were not an effective use of scarce resources.
We strongly encourage Manitoba to reconsider the roster requirement. Given that the restricted licence holder is already responsible for its employees' conduct, and that Manitoba's regime requires each restricted licence holder to have a designated representative, it is unclear how the additional roster requirement in Manitoba will further protect consumers.
In terms of implementation timing, in the event that the roster requirement remains, insurers and licence holders will require a substantial amount of lead-time, of up to 18 months, in order to build the necessary roster support systems. If the restricted licensing regime moves forward without the roster requirement, we believe 6 months would be a reasonable timeframe for implementation.
Clarification Regarding Pre-Licensing Superintendent Approval Requirements
As drafted, the Regulation includes two provisions that appear to require the Superintendent's approval of certain materials before licensing. Thank you for your clarification that neither provision is intended to create a pre-approval requirement.
Here are the relevant provisions and suggested approaches to clarify that each is not a pre-approval requirement.
- Sub-clause 26(2)(d)(ii)
For clarity and to harmonize with the Alberta (Insurance Act, RSA 2000, c I-3, Section 486) and Saskatchewan (Saskatchewan Insurance Regulations, 2003, RRS c S-26 Reg 8, Sub-Section 15.3(1)) regimes, we recommend that subclause 26(2)(d)(ii) be deleted from the draft Regulation.
As currently drafted, this sub-clause could be interpreted as requiring the Superintendent to review and pre-approve a restricted licence applicant's policies and procedures to ensure that the applicant has knowledgeable staff, and for those policies and procedures to be submitted for approval alongside the restricted licence application.
We note that the requirement for restricted licence holders to have policies and procedures to ensure that their staff are knowledgeable and competent already exists under clause 30(1)(a) of the draft Regulation and as such meets the consumer protection goal.
As currently drafted, this subsection could be interpreted as a requirement that applicants file contracts with the Superintendent for review and approval prior to licensing. We recommend the following revision:
"27(2) A restricted licence holder may only act or offer to act as an agent through the employees of another entity if
(a) the entity provides its employees' services to the restricted licence holder under a contract that
the superintendent believes provides adequate consumer protection and adequate control by the restricted licence holder so that the restricted licence holder is able to meet its obligations under the licence and to comply with this regulation; and…"
Clarification Regarding Statement of the Number of Persons Transacting Insurance
Clause 26(2)(c) provides that an application for a restricted insurance agent licence must be accompanied by a "statement of the number of persons who will be authorized to negotiate, solicit or transact insurance on behalf of the applicant when and if the licence is issued".
We appreciate the clarification in our telephone discussion that this requirement will be limited to the initial application. As we understand it, licence holders will be required to provide a specific number of persons on the initial application. The statement of a specific number of persons will not be required on renewal as licence holders will select a numerical range of the number of persons, similar to the processes in place in Alberta and Saskatchewan.
Drafting Issue With Respect to Qualified Entities
By way of background, in our comments of July 5, 2013 we recommended that sub-clauses 30(2)(c)(i) and (ii), as well as 31(2)(b)(i) and (ii) be deleted for clarity, because they were duplicative of clause 30(2)(a). We note that the updated version of the proposed Regulation retains all these sub-clauses. We still believe that deleting these sub-clauses would bring more clarity to the Regulation.
If the sub-clauses are retained, we note that updated sub-clause 30(2)(c)(i) contains some needed clarification (i.e., the additional words "through the restricted licence holder or qualified entity or from an insurer specified by either of the"). However, equivalent adjustments have not been made to 31(2)(b)(i). We believe that the omission was inadvertent. To create consistency between the two sub-clauses, we recommend making similar (but not identical) amendments to 31(2)(b)(i).
"Incidental Sellers of Insurance" Excludes Some Products From the Proposed Regime
Your December 9, 2013 letter confirms that Manitoba intends to proceed with using the definition of "incidental sellers of insurance" to identify the participants in the regime, with the result that certain products will fall outside the scope of the regime. In our July 5, 2013 submission, we recommended that Manitoba harmonize with Alberta and Saskatchewan by introducing a restricted licensing regime, as Part 2 of the draft Regulation is indeed titled "Restricted Insurance Agent Licences", that does not rely on defining incidental sellers of insurance. Such an approach would give Manitoba the flexibility to include the products that are currently excluded. This remains an important issue for our industry, which, in the interest of harmonization, we hope can be resolved in the near future.
We very much appreciate the clarifications that Manitoba has provided and the opportunity to provide further input into the draft Regulation. We would be pleased to further discuss the timeframe for implementation and related issues at your convenience.
Original signed by
Vice President, Distribution and Pensions