August 1, 2012
Mergers and acquisitions in corporate Canada are shaking up the market for the independent broker channel. As many of these clients continue to expand their businesses nationally and beyond, questions are arising around inter-provincial licensing requirements for brokers. For example, if a broker’s commercial clients are managing business in several provinces, does a broker have to be licensed in each of these provinces in order to place their business?
The short answer is yes, according to Ron Fullan, executive director, Insurance Councils of Saskatchewan, and chairman of Canadian Insurance Services Regulatory Organizations (CISRO). Fullan adds not only is it simple to obtain a license in another province (typically the broker must provide documentation including proof of good standing and licensing in home province, and pay a nominal fee), but it also protects the broker against E&O exposure.
Patrick Ballantyne, general counsel at the Registered Insurance Brokers of Ontario (RIBO), agrees. “It would make sense [for a broker to get a non-resident license] where a significant part of their business involves a client with insurable interests in more than one jurisdiction.”
Canadian Insurance Top Broker interviewed Fullan and Ballantyne to get some additional answers to common questions around non-resident licensing for brokers.
Q. What are some of the characteristics of brokers who choose to be licensed in other provinces?
Fullan: A typical example would be a broker who lives close to provincial borders and therefore is more likely to have clients conducting business in both provinces. Also, brokers with large national accounts whose clients have locations and manage businesses in several provinces.
Q. What are the main requirements for non-resident licensing?
Ballantyne: RIBO treats all non-residents the same as Ontario residents—a full application package must be completed, and a criminal record verification letter provided. Individuals who are currently licensed in another jurisdiction or who are licensed as “Other Than Life (OTL)” with the Financial Services Commission of Ontario (FSCO) may qualify to write our equivalency examinations (RIB Act, Regulations & By-laws and Ontario Automobile), instead of the full three-hour examination, and must submit the following for review:
Q. Why must a broker get licensed in each province they place business in? Why isn’t the initial license sufficient?
Fullan: Each province has its own Insurance Act, and is responsible for enforcing rules within their Act. Additionally, each province has its own laws and regulations in the auto market, and this further varies insurance requirements. For example, in Ontario, you purchase a license plate and buy insurance separately. In Saskatchewan, however, there is a base amount of auto coverage that comes with your plate, and if you want more coverage then you go to your broker and buy the extension coverage. There’s a completely different approach to how insurance is put in place in the automobile world, and therefore different sets of rules on how that works.
Ballantyne: With respect to RIBO, our legislation requires licensing of “any person who for any compensation, commission or other thing of value, with respect to persons or property in Ontario, deals directly with the public and acts or aids in any manner in soliciting, negotiating or procuring the making of any contract of insurance or reinsurance.” Further, insurance legislation varies from province-to-province. One clear example relates to auto insurance where some provinces have a public auto scheme, and some, such as Ontario, are private. Further, RIBO regulates trust funds, where other provinces do not. As part of our public protection mandate, we expect applicants to demonstrate some understanding of these local requirements before they are registered. That said, where an applicant is already licensed in another province, most typically they will be given a comparable license at RIBO, subject to demonstrating knowledge of RIBO specific matters through equivalency exams. Exemptions from technical exams may also be available, allowing an applicant to receive an unrestricted license where they have demonstrated expertise or credentials.
Q. What are the penalties for conducting business as a broker in a province where you are not licensed?
Fullan: The Saskatchewan Insurance Act allows for significant fines, and possible imprisonment for violating the Act. Those would obviously be extreme sanctions. Acting without a license would be deemed as violating the Act. We’ve had situations in Saskatchewan in the past where we’ve taken individuals to court. If they’re found guilty they are subject to sanctions that the court feels are appropriate. Additionally, acting without a license raises questions about a broker’s credibility—there’s definitely a reputational risk.
Ballantyne: A person found in violation of the Registered Insurance Brokers Act (e.g. acting as a broker in Ontario without a license) may be subject to a maximum fine of $100,000 ($200,000 for corporations).
Q. What are the potential consequences for a broker’s clients if the broker placed their business without being properly licensed?
Fullan: If a claim occurs, there’s a chance the insurance company might not accept the risk. On the other hand, the Act requires insurers to make sure they’re not accepting business from brokers who aren’t licensed within the province. It’s important that all parties work together to ensure there is no detrimental effect to the client.
Q. Is there any movement across Canada by regulators and/or brokers to ease inter-provincial licensing requirements?
Ballantyne: Provincial insurance intermediaries, working through CISRO, have made significant strides over the years in harmonizing their respective registration schemes. One example of this would be the recognition of local Continuing Education (CE) requirements for out-of-province registrants. That body meets regularly and, among other things, seeks to address any perceived obstacles for registrants seeking to operate in multiple provinces. Similarly, the Agreement for Internal Trade initiative has required that all Canadian jurisdictions, including RIBO, review their registration requirements to identify any unreasonable obstacles to labour mobility.
Non-resident Licensing Facts
Source: RIBO and Insurance Councils of Saskatchewan
Copyright 2012 Rogers Publishing Ltd. This article first appeared in the May 2012 edition of Canadian Insurance Top Broker magazine.
This story was originally published by Canadian Insurance Top Broker.