No such thing as ‘incidental’ insurance sale, IBAC tells regulators

The standards of licensing and supervision of insurance sellers should be determined not by their “method of sale,” but by the substantive attributes of the product sold, the Insurance Brokers Association of Canada (IBAC) has told a working group of the Canadian Council of Insurance Regulators (CCIR).
The CCIR and the Canadian Insurance Services Regulatory Organization (CISRO) are seeking input from the insurance community on the topic of the ‘incidental’ sales of insurance.
In a discussion paper, ‘The Incidental Selling of Insurance,’ the regulators express concern about insurance products being sold as an ancillary part of a larger purchase.
The fear is that selling an unsuitable insurance product might lead consumers to pay for insurance they do not need, pay for coverage for claims for which they are not eligible, or obtain a claims result that they did not expect.
One example discussed is the difference between selling a ‘Replacement Warranty’ (offered at point of sale by Quebec’s car dealers) and a ‘Replacement Cost’ endorsement (offered by insurers and brokers after the point of sale).
IBAC believes the method by which the insurance product is sold is not the determining factor in the regulation of the product or the licensing of the insurance seller.
“The concept of an insurance sale that is said to be ‘incidental’ is a little troubling for us,” IBAC says in its submission to the regulators. “As distributors of insurance products, we believe that these transactions can very rarely be incidental.
“In the examples provided by [the working group], our submission is that automobile insurance is automobile insurance. The manner in which it is provided is irrelevant as to the product itself.
“Should the product be sold in conjunction with an automobile purchase, the fact remains that consumers deserve, require, and eventually purchase insurance coverage based on their needs for adequate and appropriate coverage.”