Licensee Responsibilities
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Life Insurance

Requirement to Represent an Insurance Company

A life insurance agent must have written authorization to represent at least one insurer authorized to do life insurance business in B.C. Where the agent no longer has such authorization for a period exceeding 21 calendar days, the licence is automatically suspended and the agent is required to notify Council within 5 business days of the suspension.

Should an agency’s licence be suspended, the authority of all of its licensed representatives is also suspended.

Errors & Omissions Insurance

All licensees must be covered under an E&O insurance policy with a minimum limit of $1 million per claim and a minimum aggregate limit of $2 million.

Any life agency that has more than one licensee authorized to represent it, regardless of the relationship of the licensees (such as family members), cannot rely on the vicarious liability of individual policies. The agency must have separate coverage on the agency itself. Only a life agency that has one individual life agent, is set up as a personal corporation and the individual life agent has an E&O insurance policy which extends coverage vicariously to the life agency is exempt from having its own coverage.

A licensee who is considered an employee of an insurer may be considered exempt, subject to meeting the requirements of Rule 7(11)(b).

A licensee (including a life agency) that does not meet the minimum coverage requirements of Rule 7(11) must immediately cease conducting any insurance activities and must notify Council within 5 business days. Read Council Rule in full for more information.

Council is conducting audits to ensure compliance and is taking disciplinary action where the required coverage is not in place.

Replacement

Agents replacing existing insurance must abide by the Replacement Regulation and ensure the replacement is genuinely beneficial to the interests of the insured. Where replacement could be detrimental to the interests of an insured, an agent must make every reasonable effort to maintain the existing policy in force.

This Regulation is intended to ensure the client receives full disclosure of the details, including the advantages and disadvantages of both policies, to allow an informed decision on whether to replace existing insurance.

A replacement occurs when, as a result of the purchase of a life insurance policy, any existing life insurance contracts are:

  • rescinded, lapsed or surrendered;
  • changed to paid-up insurance or continued as extended term insurance or under automatic premium loan;
  • changed to reduce benefits or release over 50% of the cash values; or
  • subjected to substantial borrowing.

The Replacement Regulation applies when the policy to be replaced is a:

  • life insurance contract;
  • temporary or interim life insurance contract*; or
  • a rider to a life insurance contract.

*A temporary or “interim” contract exists where a client has applied for insurance with and paid money to an insurer. Agents replacing such a contract must comply with the Replacement Regulation.

The Replacement Regulation does not apply when:

  • the existing policy is an annuity; or
  • the new or existing policy is group insurance; or
  • the new policy is an exercise of a contractual privilege under an existing policy with the same insurer.

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