Council Rules and Code of Conduct

Licensees who have business activities other than those authorized under their licences, must:

• Keep themselves up-to-date on Council’s decisions and its Conflict of Interest Guidelines.
• Modify insurance activities accordingly.

• A licensee must hold in strict confidence all information acquired during the professional relationship concerning the personal and business affairs of a client.
• A licensee must not divulge or use any such information other than for that transaction, or for a similar subsequent transaction between the licensee and the same client, unless expressly authorized by the client or as required by law to do so.

The nominee is responsible for all insurance activities of the agency or firm as per Council Rule 7(6).  This includes making sure all insurance activities of the agency or firm are appropriately supervised; there are sufficient procedures to facilitate compliance with Council requirements; and the public’s interest is properly served. This includes ensuring:

• Agency staff are appropriately licensed, as required.
• Corporate errors and omissions insurance is maintained.
• Notifications are provided to Council within five business days when a licensee ceases to represent an agency, the agency is disciplined by another regulator or other notifications, as required. 
• Level 1 general insurance salespersons abide by their licence restrictions and do not sign insurance binders or conduct insurance activities outside the office.
• Sufficient supervision is in place at all branches of the agency.
• Adequate steps are taken to ensure clients are immediately notified about a lack of insurance coverage.

A licensed level 3 general insurance agent must actively supervise all the insurance activities of every general insurance salesperson and agent authorized to represent the agency.

As each agency differs in size, nature of the business conducted, and experience of licensees, nominees must determine the appropriate level of supervision. Council holds nominees accountable for their decisions and may require them to clearly demonstrate the appropriateness of the supervision provided.

To determine the appropriate amount of supervision, consider:

• How many level 3 and level 2 agents are in the office.
• How many level 1 salespersons are operating from the office.
• The experience and qualifications of the licensees.
• The nature of the business conducted.
• The hours of operation.

Council acknowledges the demands and challenges nominees can face and that it may not always be possible to foresee or prevent non-compliant insurance activities. However, as nominees are ultimately responsible for the insurance activities of the agency or firm, if Council becomes aware of activity that is contrary to the Financial Institutions Act, it will be up to the nominee to demonstrate that sufficient procedures and oversight were, and are, in place.

Licensees must present themselves to the public (“hold themselves out” to the public) in the way they are licensed, so that the public knows with whom they are dealing:

• Letterhead, business cards, signage, and advertising must properly reflect the name(s) shown on the licensee’s licence and the agency or firm the individual is authorized to represent.
• Agents and salespersons who primarily deal with a single product or product line should be careful not to use the product name in their marketing strategies in a way that may mislead a member of the public into believing it is a trade name — such as answering a phone call with a product name.

Rules on finder or referral fees (“referral fee”) differ depending on whether the person receiving the compensation is an appropriately licensed insurance agent, and what insurance activities the third party has conducted:

• Appropriately Licensed Third Party: Insurance agents commonly work together to market insurance products to a client. More than one appropriately licensed insurance agent may share commissions earned resulting from a joint venture. Therefore, the sharing of commissions between appropriately licensed agents is allowable.
• Unlicensed Third Party: When making a referral, an unlicensed person can direct a client to a licensed agent or, at the direction of the client, provide the client’s name to a licensed agent. Referral fees may be paid to an unlicensed person. However, both the person paying the referral fee and the person being paid, must meet certain requirements:
• Licensees must be satisfied that the person to whom they are paying the referral fee did not engage in any insurance activities with the client. Insurance activities include discussing the merits of an insurance product or the client’s insurance needs.
• Once satisfied the third party did not act as an insurance agent, a written disclosure must be provided to the client stating that the person is being compensated for the referral. The written disclosure is to be provided before arranging an insurance transaction. It is strongly suggested that licensees maintain a copy of the written disclosure in their files as proof of meeting this licence condition.
• Note: If the person being paid the referral fee is licensed with Council, but not in the category of insurance that relates to the referral fee, then that person should be considered unlicensed for the purposes of the referral fee; for example, where a general insurance agent refers a client to a life insurance agent, the general insurance agent is considered an unlicensed person.

Licensees must sell insurance products and services on their own merits:

• Licensees may not discredit another licensee, an insurance company, or person.
• Licensees may not make any false or misleading statements or representation when conducting insurance activities.
• Licensees may not coerce a prospective buyer in any manner, including through the influence of business or professional relationships.

Licensees must maintain proper records and accounting books relating to their insurance activities, and where funds belonging to or received from a client are received, in accordance with Generally Accepted Accounting Principles:

• Licensees who do not have the required skill to maintain proper accounting records should seek professional expertise.
• Licensees are also expected to meet any requirements outlined in their contracts with insurers.
• Licensees should maintain their records in sufficient detail to ensure customer protection.
• Records should also show that certain licence conditions and the licensee’s duty to the client have been met. Depending on the type of business being conducted, licensees should consider maintaining detailed records of:
• Disclosures provided to a client
• Client consents
• Details regarding sub-brokering of business
• Correspondence between the licensee and the client
• Detailed notes on meetings or conversations with clients, insurers, or adjusters
• Requirements of insurers
• How long should licensees keep books and records? This will vary depending on the nature and complexity of the transaction; for example, the duty to maintain records on a six-month ICBC policy for a “transient” client would be lower than that of long term clients for a property and casualty, or whole life insurance contract.
• Licensees may be subject to requirements under various legislation including the Insurance Act, tax legislation, and the Companies Act, and may wish to obtain professional legal or accounting advice before finalizing retention policies.

Licensees must provide disclosure to the client:

• Before the sale of an insurance product.
• On every initial transaction with a client.
• On every subsequent transaction where there is a change in the information contained in the original disclosure; for example, if a product is being placed with a new insurance company, another disclosure is required.

The disclosure should outline:

• That the transaction is between the client and a named insurance company.
• The particulars of the relationship between the licensee and the insurance company.
• The nature and extent of any business or financial interest, if any, the licensee has in the insurance company; and the insurance company has in the licensee.
• The nature and extent of whatever interest, if any, the licensee has in the transaction; including, but not limited to, whether they have the right to receive a commission or other remuneration in respect of the transaction (the amount of remuneration or commission does not have to be disclosed).
• Where a commission or remuneration is payable, the identity of the company or person paying it.

Every agent is required to publicly disclose that they are an insurance agent, prior to conducting insurance activities and prior to soliciting any insurance business. To assist with meeting this licence condition, all insurance agents should:

• Include in advertising, and on letterhead and business cards, a reference that clearly identifies they are an insurance agent.
• Address this condition in verbal communications with the public; for example, the public is not always familiar with insurance designations (e.g. CLU or CAIB).
• Periodically review each form of communication to ensure the spirit of this licence condition is being met in all circumstances.
• Periodically review procedures and practices in relation to how they conduct business, to ensure prudent and proactive steps to meet the spirit of this condition are in place.

In a sub-brokered transaction, both brokers have responsibilities to the client and the insurance company:

• Both brokers must ensure all aspects of the insurance transaction are conducted properly.
• Both brokers must be licensed and satisfy themselves that the other broker is properly licensed.
• Both brokers must satisfy themselves that the other broker can fulfil their obligations.

Agents replacing existing insurance policies must 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.

The Replacement 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.

When does a replacement occur? When, because 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.
• Subjected to substantial borrowing.

When does the Replacement Regulation apply? When the policy to be replaced is:

• A life insurance contract.
• A temporary or “interim” life insurance contract.*
• 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.

When does the Replacement Regulation not apply? When:

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