Commercial practices report: the AMF cautions insurers

By Hubert Roy | August 18 2015 08:00AM

Quebec’s financial sector regulator, the Autorité des marchés financiers (AMF), has asked insurers to be cautious about certain commercial practices.In a report released in mid July, Results of the Commercial Practices Self Assessment – Insurers, the AMF shows that there is a gap in its perception of sound commercial practices and that of insurers. Incentives such as sales contests, for example, concern the regulator. The report suggests that some incentives were such that “they were likely to create the appearance of a conflict of interest”. Although some parts of the report may alarm the industry, Patrick Déry, AMF’s superintendent of solvency, says this is not the intention.

Watchful approach

Rather than adopting a punitive strategy, Déry says the AMF prefers to take a watchful, prudential approach to encourage insurers to better manage their business practices. “We want the industry to mature on this subject, so that some situations do not occur,” he says. “We do not want to be alarmist. However, we want to avoid seeing a company suffer damage to its reputation, face public criticism, and get into financial difficulties as a result.”

The report says a contest that is focused on a particular product may boost its sales at the expense of the consumer’s actual needs. The AMF, however, expects that consumers “should be able to trust that the products recommended to them are truly suited to their circumstances.”

The AMF’s report does offer two examples of good business practices that are related to sales incentives. First of all, the regulator observes that all of the insurers’ incentive programs contained a triggering element that is tied to customer satisfaction, namely the willingness to recommend the insurer and the advisor to a friend. If this condition is not fulfilled, no incentive is paid. The AMF also notes that insurers’ incentive management policies state that a failure to comply with underwriting rules or codes of ethics, which include elements that deal with the fair treatment of consumers, can result in incentive payments being suspended.

Patrick Déry explains that the AMF wanted to take a step back from what had been done previously. “We do not mean to say that sales incentives are not good. We do not want to intervene in a harsh way,” he said. “Overall, insurers have very good business practices, but there are areas to be watched,” he comments.

Déry also wants to ensure that manufacturers have the same view of business practices as the AMF with regard to their distribution obligations. “It is not forbidden for licensed representatives to participate in sales contests, but it should not influence their judgment,” he said.

Déry adds that, to be prudent, the AMF does not want insurers to put advisors in a difficult situation by encouraging them to sell a specific product that may not be the best choice for the customer.

Is the AMF planning to abolish sales contests? “We are not at that point in our thinking,” replies Déry. And what about incentives? “Whether it is money, a trip, a motorcycle, or anything else that the company wants to offer, we are not against it. However, it should not have a negative effect on the fair treatment of consumers,” he says.


In the sections of the report that deal with governance and corporate culture, the AMF’s report indicates that few insurers have ethical and conduct codes that make the fair treatment of consumers a clear objective. In addition, the regulator says that few insurers have “clearly designated” someone to be responsible for the fair treatment of consumers; in the case of those who have done so, the person named usually does not have a specific and documented mandate.

If necessary, Déry says the regulator may hold individual meetings with insurers to discuss any risk areas that have been identified.

“A few years ago, when we published a number of guidelines, it made waves. We don’t hear anything about them today. They have been well integrated. The same thing applies in this case,” he comments.

Déry therefore considers it to be a matter of slowly building awareness, and he also points out that the International Monetary Fund (IMF) raised the issue of commercial practices in its review of the AMF in 2013. The next review is scheduled for 2018. As chair of the Canadian Council of Insurance Regulators (CCIR), Déry notes that all provincial regulators are interested in this subject.

By way of clarification, he adds that the AMF’s comments apply to both life insurers and general insurers, and that they are not directed at one sector any more than the other.

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