Regulatory earthquake rocks the industry

By Daniela Cambone | January 19 2005 05:02PM

A regulatory earthquake continues to shake the country. While many provinces had not seen any changes made to their Insurance Acts in the previous two decades, this past year saw fundamental changes in each province, and 2005 promises regulation overhauls from coast to coast.

The Insurance Journal has compiled an overview of the regulatory changes affecting each jurisdiction. Starting from the west coast, we have outlined some of the major changes that will impact advisors and insurers in each province, both in the life and property and casualty (P&C) insurance sectors.

British Columbia

Advisors in British Columbia will no longer have to worry about life insurance sponsorship. Gerry Matier, executive director of B.C.’s insurance regulator, the Insurance Council of British Columbia, explains that it is doing away with life insurance sponsorship as part of the licensing process. He explains that the licensing criteria in place have not been updated much in the last 25 to 30 years, and sponsorship is still a requirement.

At press time, Mr. Matier was hoping that sponsorship would be eliminated before the beginning of 2005. “We have forwarded this to the Minister and hope that if it is approved, it will come into effect December 31, 2004.”

In doing away with sponsorship, B.C. is following in the footsteps of Ontario that did the same for level two agents. “People will no longer have to go out to find a sponsor. Even in the case of transfer of sponsorships, for example the Manulife Financial/ Maritime Life purchase, we are told that those people do not have to go out and get a new sponsor.”

This is a huge change from an administrative point of view, says Mr. Matier. “From our standpoint, the sponsorship didn’t offer a lot. We do not regulate insurance companies and we did not want to hold them accountable for any agent they sponsored. So doing away with sponsorship seemed most logical.”

From the advisor’s perspective, they no longer have to worry about losing a sponsor and not being able to sell. “To take someone out of the industry for a period of time didn’t seem to be in the best interest of the agent,” says Mr. Matier.

Continuous licensing is another major change the province is planning to implement within the next 12 months. Under the existing Act, all licenses have an expiry date of every two years. “We have opened up the door where we will go to continuous licensing in the near future, which will mean that a license never expires,” states Mr. Matier.

Biannual filings will still be required, but the process will be streamlined. There will be fixed filing dates that will also help improve attendance at continuous education (CE) courses, he adds. Course providers will know when licenses will be about to lapse and schedule their courses accordingly. “The best times to offer courses are November, December, January and February because those are the four months leading up to when people have to do their filing. This may help CE providers get bigger turnouts and make them more cost-effective.”

Mr. Matier adds that the province is also hoping to bring-in mandatory errors and omissions (E&O) insurance for advisors. This regulation is expected to be implemented by Jan. 1, 2006.

The Financial Institutions Commission of B.C. (FICOM) is also considering implementing a risk-based regulatory model for financial institutions. It plans to begin looking at this in 2005. The model is currently used by the Office of the Superintendent of Financial Institutions (OSFI), and it focuses on ensuring that the risks faced by insurers are adequately managed.


Alberta joins B.C. in being one of the few provinces which still does not have mandatory E&O insurance. However, in mid-2005, the Alberta Insurance Council (AIC) plans to make it mandatory.

But the major news in this province is in regards to auto insurance. On Oct. 1, 2004, Alberta imposed a new grid system. Basically, the grid creates a maximum premium, even if the insured is under the age of 25, has had recent multiple accidents and has not had continuous coverage. The premium pricing legislation has three components: immediate rebates, reduction of pricing for renewals and the Alberta government grid.

Joanne Abram, general manager of the AIC says that it will be working on refining the grid over the next year.

She adds that in 2005, the AIC will be working closely with the Canadian Council of Insurance Regulators (CCIR) and the Canadian Insurance Services Regulatory Organization (CISRO) on a number of issues. Especially since, Tom Hampton, associate general manager for Alberta, was named chair of CISRO for 2005.

“We are working closely on the committee of contingent profit commissions.” The committee is reviewing market practices between insurers and brokers. To do so, questionnaires were sent out to brokerages and insurers.

The AIC is also working closely with the Independent Insurance Brokers Association of Alberta to update the skills profile for new entrants in the P&C business. “We do want to make it more relevant to the marketplace in 2005,” says Mr. Abram.


Jim Hall, superintendent of insurance for Saskatchewan, explains that right now his province is concentrating on making legislative changes for mortgage brokers and real estate agents. However, he says, “We know we have to make changes with respect to the Insurance Act,” though there is nothing concrete on the agenda yet.

However, a big move started in the province is the ability to recognize advisors licensed in other provinces. “We have the ability to go the passport system. We have the ability to take on regulation from another jurisdiction or delegate regulation to another jurisdiction,” says Mr. Hall.

This regulation was put in place to facilitate the filing of financial information. For national insurers the financial information has to be filed in each jurisdiction. There is a need to have a system that can facilitate this, he says.

The province has also delegated all of the provisions for licensing brokers to the Saskatchewan Insurance Council. The Saskatchewan Financial Services Commission was also started this past year. This brought together securities, pensions and insurance all in one location.

“The superintendent still has his/her powers, but now the three sectors are all housed in the same office. If someone comes in with security issues, then we can deal with it at once,” states Mr. Hall.


Jim Scalena, superintendent of insurance for Manitoba, explains that a review of the province’s Insurance Act has not been done in 60 years. The Insurance Act Rewrite Committee was created to streamline and modernize the Act. Consisting of 20 members, the committee has been meeting for the past three years.

“We are hoping to finish this year! We are looking to update and modernize the Act. We are comparing it to other legislature in other jurisdictions and we are going through it section by section, part by part, and we are looking to come forward with amendments,” highlights Mr. Scalena.

The committee will make recommendations to the Minister of Finance, though it’s hard to say what recommendations will go full circle and become legislation, says Mr. Scalena. “We are hopeful that most of what we recommend will go forward in September of next year, then the government will have the pleasure to accept or reject the recommendations.”

To speed up the process, the committee will begin to meet twice a month until June 2005. Its next meeting was scheduled for Jan. 12.


This year, Ontario saw no shortage of new regulations. Grant Swanson, executive director of licensing and market conduct with the Financial Services Commission of Ontario (FSCO), explains that Ontario saw four major initiatives over the last year. “There was a theme that was running through all of that – we were looking at innovative ways to enhance consumer protection. The conflict of interest issue figured fairly large.”

The first initiative involves the joint initiative between the CCIR and CISRO to review the relationship between brokers and insurance companies. “It involves obtaining information from all life and P&C companies about relationships that exist. The focus of that is to look at whether or not conflicts of interest may exist in some of those arrangements,” states Mr. Swanson.

The amendment to Regulation 663, now replaced by Regualtion 347/04, was a second major initiative. “It was put in place to modernize rules of ownership and it eliminated some regulatory burden,” remarks Mr. Swanson. Two of its main features include providing an enhanced level of consumer protection and eliminating unnecessary barriers to licensing.

Therefore, someone can have a primary occupation and now be life-licensed, something which was not allowed previously. Lawyers and doctors are a few of a long list of professions that can now be life licensed in Ontario thanks to 347/04. Also under the regulation, Ontario advisors must disclose in writing any conflict of interest or potential conflict of interest associated with the transaction or advisor’s recommendation.

The third major initiative, involves dealing with reciprocal licensing. A committee was created to look at establishing the means for agents to do business in more than one province. It would mean that requirements be portable, says Mr. Swanson. “Right now they are pilot testing a harmonized application form for licensing. A number of companies have sponsored agents to complete the application form to see how well it works in each province,” he says. “We’re hoping that the questionnaire or application form could be available for an early adoption. Because the application form is established by regulators, you don’t have to change the law to change the application form,” he adds.

Market conduct regulation is the fourth major initiative Ontario is dealing with. “There are several aspects to that. Firstly, there was a review of segregated funds similar to the review that was being done for mutual funds that was done earlier this year. So we have been working with the industry towards a model of market conduct regulation. There are two aspects; one is the review of corporate governance and two, the gathering of information about consumer complaints.”

In 2005, Mr. Swanson says FSCO plans to do further work on intermediary relationships in regards to market conduct. “There is a tremendous opportunity for the industry to demonstrate how it is working. This can ensure public confidence.” In conclusion, he adds, “This has been a landmark year, in terms of steps taken to enhance consumer protection through innovative regulatory approaches.”


On Feb. 1, 2004, Quebec became the second province to merge all regulators under one roof. The Autorité des marchés financiers (AMF) became the regulatory body that administers the framework governing Quebec’s financial sector. It has combined the operations and personnel of the following five organizations: the Bureau des services financiers, the Commission des valeurs mobilières du Québec, the Fonds d’indemnisation des services financiers, the Inspecteur général des institutions financières and the Régie de l’assurance-dépôts du Québec.

The AMF’s goal is to be a single window for consumer information and complaints processing.

An advocate of the passport system, Quebec also took steps to recognize the mutual fund licenses of other provinces this year. As of September, mutual fund reps can sell in Quebec, even if they do not live in the province. Therefore, a person in Alberta can obtain their license from the AMF and be able to sell in Quebec.

Prince Edward Island

P.E.I. is another Atlantic province that saw changes to its auto insurance in the past year. New rules were set out that established a maximum recoverable amount of $2,500 for minor personal injuries in automobile accidents. The superintendent was also given the discretion to approve reciprocal insurers that are financially viable.

New Brunswick

Suzanne Bonnell-Burley, assistant deputy minister of the justice services division for the province, explains that mostly auto insurance was affected in 2004. The year saw the creation of the New Brunswick insurance board, chaired by Lewis Ayles. The board’s primary goal is to rate auto insurance regulation.

The province will start a no-frills auto policy and was set to begin implementing a new system of direct compensation for property damage as of Jan. 1, 2005. “It is similar to Ontario and if you buy a no-frills policy, there will be a $1000 deductible,” says Ms. Bonnell-Burley. The direct compensation means that if the insured has an accident and they incur damage to the vehicle, they can seek reimbursement, regardless of fault, from their own insurer. “It’s of benefit to the consumer because it deals directly with the insurer.”

A new discount will also be available for recently licensed drivers. “If you are newly licensed and do not have driver training, you will essentially be credited with 3 years of claims free driving experience. If you have driving training, you will be credited with six years,” she says. It was brought in to increase the affordability of insurance for newly licensed drivers and, in some respects, to encourage safe driving habits by those drivers, she adds.

The province also plans to establish an Office of the Consumer Advocate for insurance. This would be for both P&C and life. “The legislation was passed and it is indicated that the consumer advocate will be named in the near future,” remarks Ms. Bonnell-Burley.

Nova Scotia

Following the theme of automobile insurance changes, Nova Scotia recently made changes on Nov. 1, 2004. Doug Murphy, acting superintendent of insurance for the province, explains that gender and marital status can no longer be used for underwriting purposes for auto insurance. “Premiums will now be based on experience. But younger drivers should still expect to see decreasing premiums,” he says. In 2005, the province will continue to review recommendations for auto insurance.

Newfoundland and Labrador

Doug Connolly, director of financial services regulation, explains that all of its changes have also been in regards to auto insurance. On Aug. 1, 2004, a slew of new legislation for auto insurance came into effect. The auto insurance reform measures are expected to achieve average overall savings of 15%. The savings will depend on the coverage purchased and where in the province the insured lives. These legislated reforms were based on the actuarial study completed by the Public Utilities Board, says Mr. Connolly. As well, rates were immediately frozen for one year, or until a new closed-claims study is completed and there is a hearing held by the Public Utilities Board.

Under the new regulation, a company will also no longer be able to refuse coverage based on: age, gender or marital status; age of vehicle (may request an inspection after eight years); not having other policies with the company, known as tied selling; the individual currently being in the Facility Association.

In regards to advisors, they must disclose, in writing if requested, the companies they represent and the quotes obtained. This ensures that policyholders are aware of the number of companies the broker represents.

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