British Columbia Conducts Consultation on Restricted Licensing Regime for Incidental Insurance Sellers | Stikeman Elliott LLP
British Columbia Ministry of Finance conducts a consultation on the adoption of its project for a restricted insurance agent licensing regime for incidental insurance sellers. The proposal is similar to what is already in place in the other three western provinces (and, soon, in New Brunswick), but British Columbia reports that it could consider including additional industries and a additional flexibility in its plan. BC companies that see opportunities in this area should therefore consider submitting comments, which are due October 3, 2022.
The authorization of restricted insurance agents is provided for in art. 174.1 BC Financial Institutions Amendment Act, 2019, which will come into effect once the details of the Restricted Licensing Regime have been finalized. As described in the consultation paperthe BC consultation focuses on the regulations and rules that will accompany the legislation, and in particular on the following issues:
- The categories of restricted license holders (i.e. the types of businesses that will be eligible for restricted licenses);
- The classes of insurance which may be sold under a limited license; and
- How does this new regime will affect existing exemptions under the Regulation respecting insurance license exemptions.
Some of the topics raised during the consultation may be included in the Insurance Council of BC rules or in regulations and rules. The Insurance Council will consult separately on the proposed rules.
Categories of Restricted Licensees
The British Columbia Ministry of Finance proposes a “restricted license” regime under which certain business class may be granted insurance agent licenses which are limited to classes of insurance which are “incidental to the ordinary business of the licensee”.
Under similar regimes in place in Alberta, Saskatchewan and Manitoba (and planned for New Brunswick), the categories of businesses for which restricted insurance licenses may be issued include:
- Deposit taking institutions – credit protection, travel and life insurance;
- Transport companies – travel and freight insurance;
- Travel agencies – travel insurance;
- Dealerships of automobiles, recreational vehicles, personal watercraft and other vehicles and equipment – credit protection, equipment warranty and guaranteed asset protection insurance;
- Sales finance companies and mortgage brokers – credit protection insurance;
- Customs brokers and freight forwarders – cargo insurance;
- Funeral service companies – funeral insurance;
- Car rental agencies (and other vehicles) – insurance of rented vehicles; and
- Sellers of portable electronic devices – portable electronic device insurance.
While acknowledging the importance of consistency across provinces, the Department of Finance does not rule out the possibility of excluding some of the above items, or possibly adding some or all of the following:
- Storage companies – personal property policies;
- Event companies and ticket sellers – event cancellation policies;
- Leasing companies (movable property and office furniture) – damage protection and product warranty policies;
- Rental companies (equipment, vehicles, heavy machinery) – vehicle or product warranty policies;
- Educational institutions – travel medical policies for out-of-province students; and
- Tour operators and public carriers (airlines, bus companies, ferry companies) – trip interruption or cancellation policies.
British Columbia’s regime may end up differing from those of other provinces in another important respect: the Ministry of Finance has stated that it is open to considering the possibility of granting restricted licenses to British Columbia licensees -Columbia to sell classes of insurance that are notaccessory to their businesses. For this to happen, the ministry would have to be convinced of the benefits to consumers.
Future of existing ILER exemptions
The Department of Finance is proposing that certain existing exemptions under the Regulation respecting insurance license exemptions (“ILER”) either partially or totally repealed. If this happens, companies that have received ILER exemptions for any of the following may need to obtain one of the new restricted licenses:
- Product warranty insurance;
- Credit insurance (sold by lending institutions, mortgage brokers and others);
- vehicle warranty insurance (sold by motor vehicle dealerships);
- Travel insurance (sold by travel agents or transport companies); and
- Funeral services insurance (sold by funeral directors).
An example scenario for a partial repeal would maintain an exemption for products below a certain value, but require a restricted license for coverage above that threshold.
Classes of insurance
The Department of Finance proposes to prescribe (allow) certain classes of insurance under the restrictive licensing regime (in addition to the categories of licensees discussed above). In doing so, they would follow the example of other provinces, but the Department of Finance is clear that it may not prescribe exactly the same categories of insurance. Additionally, some classes that are currently exempt under the ILER could potentially be allowed under the Restricted Licensing Regime.
In addition to the above, the Department is considering including the following categories of insurance in the Restrictive Licensing Regime:
- Personal property insurance (storage companies);
- Purchase protection insurance (retailers, credit card companies);
- Marine craft rental insurance (marine craft rental companies);
- Damage insurance (mobile property and office furniture rental companies); and
- Event cancellation insurance (event and ticket companies).
The Department of Finance invites input from interested parties, including (but not limited to) industry views on issues such as the following:
- Which companies should and should not be named as potential licensees?
- Which lines of insurance should and should not be prescribed?
- Which ILER exemptions, if any, should be repealed in favor of offering one of the new restricted insurance agent licenses (and should the repeal be full or partial)?
- When (if any) should exceptions be made to the general expectation that restricted licensees will be limited to classes of insurance that are incidental to their ordinary business?
- Should there be license exemptions for low value products?
- Should there be a maximum value for insurance policies (or certain types of insurance policies) sold by holders of a restricted insurance agent licence?
- Would a delayed sale model be desirable for any category of restricted agent (i.e. a model in which insurance could only be offered a certain number of days after the main purchase )?
- What rules should apply to the conduct of a restricted licensee’s insurance business (eg regarding disclosure, cooling-off periods, commissions and fees, etc.)?
Please consult the consultation paper for the complete list of issues on which comments are requested.
As indicated above, public consultation is ongoing, comments due on or before October 3, 2022. The Department of Finance’s open and flexible approach indicates that industry submissions could have a significant impact on the final shape of the restricted licensing regime.