April 26, 2005 by Canadian Underwriter
The Consumers Association of Canada (CAC) is hailing a report by Quebec’s insurance regulator, but brokers in the province have a different view.
The report, released by the Autorite des Marches Financiers (AMF), says broker practices in the damage insurance sector have hurt consumers because there are inherent conflicts of interest. The report found that brokers are not independent of insurers, with many concentrating business on just one or two carriers, and that there are many other ties between brokers and insurers such as loans, ownership and contingent commissions which “are not in the best interest of consumers”. For example, the report suggests 90% of small brokers and 86% of large brokers accept contingent commissions, while 5% of small firms and 32% of large firms had received some form of loan from an insurer.
However, the report also stresses that the kinds of activities which have been alleged in the U.S. are not present in Quebec.
The AMF intends to talk with the industry and consumers before taking action, but says three options are currently being considered: banning practices “likely to inject bias into the role of brokers as advisors” (i.e. loans, block transfers of business, etc.); disclosure provisions; creating a separate title of “independent broker” with stricter provisions to meet this designation.
The CAC says the report is “startling” and says regulators in Ontario and Alberta should follow the lead of the Quebec regulator rather than taking a “business as usual” approach to broker practices.
The province’s broker association, the Regroupement des Cabinets de Courtage Assurance du Quebec (RCCAQ), says it is “perplexed” by the report and its conclusions. The information presented in the report was already widely known, the association says in a notice on its website, adding it does not understand the purpose in attacking the reputation of the province’s brokers. The association says it will not permit unjust treatment of its members and will continue to meet with regulators as the process moves forward.