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Practice Advisory


Licensee responsibility and delegated authority from insurers

Date issued: July 24, 2024; updated July 25, 2024

 

In brief:
What:
 		 Responsibilities of licensees carrying out functions delegated by insurers.
 
Who:
 		 Applies to all licensees
 
When: Ongoing

 


A recent report published by the BC Financial Services Authority (BCFSA), titled Insurer Oversight of Functions Delegated to Intermediaries in British Columbia has identified areas of concern for insurer oversight functions delegated to insurance intermediaries. BCFSA is encouraging insurers operating in BC to review and assess the effectiveness of their oversight of delegated functions and strengthen their internal controls. 
 
While the report focuses on the sale of insurance products through automobile dealerships, all licensees are reminded that they must meet the requirements under the Insurance Council’s Rules and Code of Conduct, the Financial Institutions Act and the Insurance Act; and must always conduct insurance business with integrity, competence and good faith.
 
As general, life, and accident & sickness insurance licensees may conduct business that involves carrying out functions delegated by insurers, licensees are reminded that they must meet the Insurance Council’s requirements under the Code of Conduct for licensees dealing with insurers (section 8) and the public (section 10). This includes placing the interests of the client first and not engaging in practices that place the interests of others ahead of the client's interests.

 

Licensee responsibilites

When taking on functions delegated from an insurer:
  • It is incumbent upon an agency to clearly understand an insurer’s expectations under the agency/insurer contract and, where necessary, seek written clarification. If the contract includes delegated duties that are not in line with licensees’ regulatory requirements, they should not be carried out or accepted by the agency.
  • Licensees must not make any false or misleading statement in the solicitation of or negotiation for insurance. As agencies distribute marketing material on behalf of the insurer, an agency should make every effort to ensure the material is a clear and accurate representation of the product and/or the concept presented. Where there is any doubt about the clarity or accuracy of the material, the agency should seek clarification from the insurer or cease distributing the marketing materials. The Code of Conduct requires that licensees make full and fair disclosure of all material facts to enable clients to make informed decisions regarding their insurance, and requires that licensees not use sales materials or illustrations that are misleading or unnecessarily confusing (Section 7.3.6 and 7.3.7 of the Code of Conduct).
  •  Licensees are required to disclose all material facts to enable clients to make informed decisions regarding their insurance (Section 7.3 of the Code of Conduct). This includes:
    • That the licensee is an insurance agent prior to conducting the insurance activity;
    • All real, potential or apparent conflicts of interest;
    • Disclosing in writing any fee the licensee charges in addition to the policy premium and include separate dollar values for the total insurance premium charged by the insurer, the total additional fee charged by the licensee and any premium finance fees charged by the licensee;
    • Any fee or compensation paid to a third party;
    • Any arrangement to place the client’s insurance through another agent;
    • All aspects of the insurance products they purchase, including any changes that occur during the term of the policy;
    • All disclosure requirements under the Financial Products Disclosure Regulation​* under the Financial Institutions Act for each insurance transaction:
      • The name of the insurance company whose service or product is being provided,
      • Any relationship (over and above the contractual relationship to represent) between the insurance company and the licensee offering to provide the service or product, and
      • Whether a commission or compensation is to be paid by the financial institution to the licensee offering to provide the service or product.
 
  • Licensees should ensure they are selling products that the insurer has authorization to underwrite.
  • Agencies are required to ensure that staff engaged in the sale of insurance products are properly licensed.
  • Agencies have an obligation to ensure that all licensees engaged in the sale of insurance products are competent, qualified and adequately trained to sell products on behalf of insurers.
  • Licensees have an obligation to deal with all formal and informal complaints or disputes in good faith and in a timely and forthright manner—including, when necessary, referring the complainant to other more appropriate people, processes and/or organizations.

 

Regulatory requirements

All licensees are expected to be aware of and comply with their duties and obligations under the Insurance Council’s Rules and Code of Conduct, the Financial Institutions Act and the Insurance Act.

Have questions about practice advisories or licensee requirements? Contact us at practice@insurancecouncilofbc.com or call 604-695-2008.


*This reference to the Financial Products Disclosure Regulation has been updated to correct the previously cited Marketing of Financial Products Regulation, which was repealed and replaced by the Financial Products Disclosure Regulation.