CLHIA comments on "Opportunities for Reforming the New Brunswick Licensing Framework for Other-than-Life Insurance Agents and Brokers"Release Date: 10/28/2013 Staff Reference: Peter Goldthorpe
October 28, 2013
Financial and Consumer Services Commission
P.O. Box 6000
637-440 King Street
Fredericton, NB E3B 5H8
Dear Sir or Madam:
The Canadian Life and Health Insurance Association (CLHIA) is pleased to provide comments on the August 2013 discussion paper, Opportunities for Reforming the New Brunswick Licensing Framework for Other-than-Life Insurance Agents and Brokers that was prepared by the Insurance Division of the Financial and Consumer Services Commission (Insurance Division).
Established in 1894, CLHIA is a voluntary trade association that represents the collective interests of its member life and health insurers which, together, account for 99% of the life and health insurance in force in Canada. Our members contribute to the financial well-being of millions of Canadians by providing a wide range of financial security products, including over $3.9 trillion of life insurance coverage. During 2012 in New Brunswick, life and health insurers made benefit payments of $11.4 billion, or roughly $27.1 million a week, to policyholders and beneficiaries.
The Insurance Division's letter to stakeholders notes that some of the items discussed also impact other insurance intermediaries. CLHIA's comments are intended to address the possible application of the Insurance Division's questions to life agents. These comments are made solely in light of possible effects we believe specific proposals may have for life agents.
Resident and Non-Resident Licences
As the Insurance Division notes in its discussion paper, today's marketplace has changed. The Agreement on Internal Trade is based on the principle that individuals with the appropriate skills should be able to work in their field in any jurisdiction in Canada. As well, increasing use of electronic commerce has reduced the importance of a physical work site. In life and health insurance, the Life Licence Qualification Program (LLQP) has harmonized entry-level proficiency requirements for agents in the common law provinces and planned changes will extend this to include Quebec. For these reasons, CLHIA agrees that the concept of a unique non-resident licence is less relevant than in the past.
Probation and Supervision
In 2004, the common law provinces changed the licensing regime of life agents from a two stage licence (Level 1 and Level 2) to the single stage LLQP. The intent of the LLQP is to ensure that all agents satisfy basic entry-level proficiency requirements before they begin advising consumers. In light of the training and evaluation involved in the LLQP, a probationary period for life agents does not seem appropriate.
Four provinces (British Columbia, Manitoba, Quebec and Saskatchewan) require that new agents be supervised. The period and nature of supervision vary considerably among these jurisdictions. It is important to bear in mind that, in life insurance, the insurer has responsibility for the sale of its products and, on an on-going basis, must monitor the suitability of its agents. As explained in CLHIA Guideline G8, agent suitability includes complying with regulatory requirements and conducting business using acceptable sales practices. CLHIA suggests that the risk-based monitoring of all agents that is described in Guideline G8 makes mandatory supervision of new agents unnecessary.
Six provinces (i.e., Alberta, British Columbia, Manitoba, Ontario, Quebec and Saskatchewan) all have mandatory continuing education requirements for life agents. While there are other means for agents to stay up-to-date with changes in products, regulations and other matters that affect their practice, CLHIA agrees that mandatory continuing education is an important element of professionalism in the industry.
Over the years, CLHIA has encouraged jurisdictions to harmonize their continuing education requirements. If the Insurance Division decides to investigate the possibility of requiring continuing education for life agents, CLHIA encourages it to hold discussions with regulators in the other Atlantic provinces to see if there is a similar interest and, if so, potential for agreement on a harmonized approach.
Errors and Omissions Insurance
As is the case for continuing education, six provinces current require life agents to have errors and omissions insurance. CLHIA agrees that mandatory errors and omissions insurance provides a safe guard for consumers and enhances the professionalism of the industry.
Again, if the Insurance Division decides to investigate the possibility of requiring errors and omissions insurance for life agents, CLHIA encourages it to hold discussions with regulators in the other Atlantic provinces to see if there is a similar interest and, if so, potential for agreement on a harmonized approach.
In the life insurance industry, premiums and benefits generally flow directly between the insurer and the client. Although life agents, may, in some cases, physically handle cheques, they do not have control of the funds. For this reason, the requirement to have a trust account is inappropriate.
CLHIA understands that life agents may submit a Request for Trust Account Waiver. In light of industry practices, this waiver process seems unduly burdensome for both agents and the Insurance Division. CLHIA recommends that the New Brunswick Insurance Act be amended along the lines suggested by the Insurance Division so agents who do not receive payments from clients or insurers are not required to maintain a trust account.
Duty to Report
The Insurance Division correctly notes that timely self-reporting by the agent of criminal offences, civil proceedings involving fraud and disciplinary decisions by other regulators is an important element of consumer protection. CLHIA agrees that agents should have a duty to self-report.
The Insurance Division notes that regulations have never been created to put corporate licensing provisions into effect. Currently, a life agent in New Brunswick who wishes to incorporate may have a corporate name appearing on his or her individual licence. If the corporate licensing provisions were fully implemented, this would align with practices in other common law provinces and bring additional certainty and clarity to the applicability of the licensing regime for agents who carry on business through a corporation.
As the above comments suggest, CLHIA agrees in principle that many of the Insurance Division's suggestions for reforming the licensing framework for other-than-life agents and brokers have merit for life agents. There are, however, a number of important differences in industry practices that would need to be taken into account to ensure that licensing requirements are appropriate for life agents. If, following this consultation, the Insurance Division decides to consider similar changes for life agents, CLHIA would welcome the opportunity to discuss the details of these changes.
(Original Signed By)
Peter B. Goldthorpe
Director, Marketplace Regulation Issues