The Canadian Life and Health Insurance Association Inc. (CLHIA) has commented on British Columbia’s plans to introduce a new restricted insurance license regime in the province. Commenting on behalf of the life and health insurance industry only – including those who sell travel insurance, but not property and casualty insurance – the CLHIA recommends repeatedly that the government of British Columbia harmonize their approach as much as possible with other provinces that already have restricted licensing regimes.

In general, the association commends the government for taking steps to introduce a restricted insurance agent’s license in that province, saying it can provide consumers with economical and easily accessible insurance solutions that may not otherwise be available.

The British Columbia Ministry of Finance, in its call for public consultation on restricted insurance agent licenses, says “restricted insurance agent licenses are corporate-level licenses in that they will authorize a corporate licensee (e.g., businesses that are sole proprietors, corporations, partnerships, etc.), through its employees and agents in B.C., to sell insurance. They will generally authorize the sale of insurance where it is sold incidentally to the licensee’s ordinary business.” 

The introduction of restricted licenses is part of Bill 37 in the province, the Financial Institutions Amendment Act, 2019, which was passed by the British Columbia legislature in 2019. “Bill 37 is being brought into force in stages and consideration is now being given to bringing into force sections that will implement the framework for a restricted insurance agent license in BC,” the Consultation Regarding Restricting Insurance Licenses consultation paper states. “The scope of this consultation is limited to the regulations required to introduce a restricted insurance agent license in BC.” 

Brent Mizzen, assistant vice president of market conduct policy and regulation at the CLHIA, citing statistics from LIMRA (formerly the Life Insurance and Market Research Association), says the “adequacy of insurance coverage is decreasing for all Canadians,” in the association’s covering letter accompanying their suggestions related to the restricted licensing consultation.

“The industry supports restricted licensing regimes as one way of promoting access to insurance which can help Canadians protect themselves from unexpected events and financial burden,” they add in their submission 

In addition to calling for an approach that is harmonized with other jurisdictions, the association also calls for the proposed rules to be written in clearer language, pointing out instances where language can be subject to interpretation.

“Post-claim underwriting” 

It also points out where the province is making use of phrasing and terminology which doesn’t exist in the industry. The use of the phrase “post-claim underwriting” in particular raises concerns with the association.

“The term post-claim underwriting is a new concept to our industry and does not accurately describe the process by which insurers assess claims for material misrepresentations during the application process,” the CLHIA writes, adding that it has raised concerns with the Ministry of Finance about the use of the term in amendments. “The industry strongly recommends that this term be removed from any proposed rules or regulations. As well, the industry strongly wishes to be consulted if any regulations related to ‘post-claim underwriting’ are planned to be introduced.” 

They add: “Post-claim underwriting is not a term used by the industry. Post-claim underwriting suggests that insurers are not assessing the risk of providing coverage at the time the insurance is applied for. This is not correct.” 

It further calls out issues related to the use of the word “incidental” to describe insurance purchases related to the consumer’s primary purchase, saying the term could imply that the insurance is not important, deterring some customers from properly considering their coverage options. 

Insurance agent’s responsibilities 

The submission also discusses the requirements and insurance agent’s responsibilities at the time of purchase and within 20 business days of the insurance coverage coming into force. It considers the right of recission, discusses compensation structures and value limits.

“Any additional value limits on types of insurance that restricted insurance agents can sell would be an additional regulatory burden that does not exist in any other Canadian jurisdiction with a restricted licensing framework,” they write. “Insurers would have to develop specific policies and procedures in British Columbia to adhere to any additional value limits, which would increase the costs associated with providing these coverages in British Columbia, which would ultimately be passed on to customers.” 

Deferred sales model 

It also discourages the province from adopting a deferred sales model where insurance products could not be marketed for a set number of days until after the primary purchase is made. They say this could lead to further underinsurance in Canada and leave customers without important coverages during the deferred sales period. They add that the model is also an ineffective safeguard against sales misconduct. 

In the submission, the CLHIA also discusses the inclusion of provisions and clauses which give the superintendent discretion to insert clauses, add categories and make certain decisions without the need to redraft the regulations.

It also points to bulletins which require revision for regulations to be harmonized within the province itself. Without such revisions, they say the proposed act could increase regulatory burden and create a patchwork of expectations which put the regime at risk of not being effectively implemented.