For ease of reference we have provided our responses to the questions within the original discussion paper document in red text below.

Transcription

1 Insurance Brokers Association of New Brunswick Association des courtiers d assurances du Nouveau-Brunswick October 31, 2013 Insurance Division Financial and Consumer Services Commission PO Box 6000 Kings Place King Street Fredericton, NB E3B 5H8 information@fcnb.ca The Insurance Brokers Association of New Brunswick (IBANB) is pleased to submit the following submission in response to the Discussion Paper, Opportunities for Reforming the New Brunswick Licensing Framework for Other-than-Life Insurance Agents and Brokers dated August We have included, for reference, a copy of our original proposal relating to this same topic, Proposed Licensing Regime for Intermediaries in the Province of New Brunswick, dated February 7, Much of our enclosed submission to the discussion paper is taken from our original proposal. For ease of reference we have provided our responses to the questions within the original discussion paper document in red text below. Thank you for the opportunity to provide feedback on this important topic. We look forward to seeing many of these important changes to the current Regulations take place. Regards, Andrew McNair, CAIB, CAE Chief Executive Officer PO Box 1523, 590 Brunswick St., Suite 201, Fredericton, NB E3B 5G2 Tel: Fax:

2 DISCUSSION PAPER Opportunities for Reforming the New Brunswick Licensing Framework for Other-than-Life Insurance Agents and Brokers August 2013 Financial and Consumer Services Commission INSURANCE DIVISION 0

3 Background The Insurance Act ( the Act ) requires all individuals carrying on the business of insurance as agents or brokers to be licenced. Part XV of the Act deals with the licensing of agents and brokers and other intermediaries. The Agents and Brokers Regulation, which establishes the terms, conditions and qualifications for other-than-life agents and brokers, was first introduced in February 1995 and since that time the Regulation has not been updated. A copy of the current Act and Regulations can be viewed at: www2.gnb.ca/content/gnb/en/departments/attorney_general/acts_regulations.html Introduction The Insurance Division of the Financial and Consumer Services Commission will be developing and analyzing policy options to reform the current licensing scheme for otherthan-life insurance agents and brokers. As a first step in this review, the Insurance Division has prepared this Discussion Paper to facilitate dialogue and consultation with stakeholders who wish to provide feedback on reforming the current licensing framework. The main objective of this review is to ensure that the regulatory framework reflects the current insurance marketplace while providing robust protection for consumers. Submissions Submissions should be made electronically to information@fcnb.ca no later than October 31, Alternatively, written submissions may be sent by mail or fax to: Insurance Division Financial and Consumer Services Commission P. O. Box 6000 Kings Place King Street Fredericton, NB E3B 5H8 Fax: (506) Please note that we cannot keep submissions confidential. Any comments received during the comment period will be made public. 1

4 Issue 1 - Levels and Types of Licences The licensing provisions of the Insurance Act related to other-than-life intermediaries distinguish between residents and non-residents, and agents and brokers. Likewise, the Agents and Brokers Regulation establishes two levels of other-than-life agent licences (class I and class II) and four levels of other-than-life broker licences (class I, II, III, and IV). The discrepancies in the Insurance Act between non-residents and resident agents and brokers reflect a time when most individuals dealing with insurance clients were resident in the Province with a few non-residents doing infrequent business in the Province. Today s marketplace is significantly different. The Insurance Division believes that this distinction between non-residents and residents should be eliminated so that non-residents meet the same standards and operate within the same regime as resident agents and brokers. However, consideration must also be given to the Agreement on Internal Trade related to labour mobility which has recently incorporated individuals working within financial sectors. In the current marketplace, there are some agents who sell for more than just a specific insurance company and some brokers who have very restricted markets. This can create confusion for consumers. It also raises questions as to why they are treated differently and not on a level playing field. Most jurisdictions have eliminated the distinction between agent and broker and only issue agent licences. The Insurance Division believes that it is time for New Brunswick to follow suit. The Insurance Division believes that roles and responsibilities for a particular level of licence should be spelled out in the Regulation and that they should be consistent for all individuals whether they are agents or brokers and regardless of the size of their particular organization. Further, the role and responsibilities of a particular level of licence should relate to the educational requirements for that licence. Discussion Questions The responses to the discussions questions included in this submission by the Insurance Brokers Association of New Brunswick (IBANB) are, in most cases, in reference to IBANB s original proposal for changes to Regulations, Proposed Licensing Regime for Intermediaries in the Province of New Brunswick, dated February 7, For ease of reference, a copy of this proposal has been included with our submission. 1.1 Should the Insurance Act and Regulations be amended to eliminate the distinction between resident and non-resident other-than-life intermediaries? IBANB supports an amendment to the Insurance Act and Regulations that would require non-resident other-than-life insurance intermediaries to adhere to the same educational and licensing requirements as resident New Brunswick intermediaries. As stated in IBANB s original document Proposed Licensing Regime for Intermediaries in the Province of New Brunswick, dated February 7, 2012: A non-resident insurance intermediary must meet the same licensing requirements as a resident intermediary. Level of license held by a non-resident intermediary shall be 2

5 posted on the Regulatory Body website and by any other means to ensure transparency for consumers. 1.2 Should the Insurance Act and Regulations be amended to eliminate the distinction between agent and broker licences and move to a common licence for all other-thanlife insurance intermediaries? IBANB continues to recognize the need to define a difference between agents and brokers; primarily for the benefit of the consumer as we feel the consumer needs to understand that a broker can shop multiple companies to find the proper product for individual consumers. However for the purposes of licensing and regulations; IBANB does feel that both agents and brokers need to be licensed the same; as intermediaries Regulations should continue to define agent and broker ; however should add the following definition and verbiage into the Act and Regulations: Intermediary: Individuals licensed to sell other than life insurance products including agents, brokers, and those individuals holding a restricted license to sell insurance products. Reference: Proposed Licensing Regime for Intermediaries in the Province of New Brunswick, dated February 7, What levels of licences should there be, and what should be the corresponding role and responsibilities for each level? IBANB, has developed the following proposed levels of licensing as originally presented in our Proposed Licensing Regime for Intermediaries in the Province of New Brunswick, dated February 7, 2012 Pre Level 1 Trainee Registration The Trainee Registration is very restrictive. New employees to the general insurance industry are granted a one-time temporary exemption from licensing. In order to qualify, the person: must never have held an insurance intermediary license; and must be at least 18 years of age. The following restrictions apply to trainees: may only conduct personal lines transactions; and (our original proposal had this restriction included; however after further review we feel that there is no need to restrict personal vs. commercial for trainees as long as there is adequate supervision). must be under the direct supervision of a Level II or III licensee who initials or signs all transactions; and trainees are not allowed to conduct any form of insurance activities outside the premises of the employer under any circumstances. 3

6 A person may only hold a trainee registration for a total of one year. There is no cost associated with a Trainee Registration, however, an application form must be completed and submitted to the Regulatory Body. Once a Trainee Registration is issued, the regulating body will commence its screening process to determine if the trainee can be granted a Level I license upon completion of the educational requirements. Level 1 A person applying for a Level 1 license must successfully complete one of the following: the Fundamentals of Insurance course and examination; or the Canadian Accredited Insurance Broker (CAIB 1) course and examination; or Insurance Institute of Canada courses: C11Principles and Practices of Insurance, C12 Insurance on Property, C13 Insurance Against Liability Part 1, C14 Auto Insurance Part 1, C130 Essential Skills for Insurance Brokers and Agents and examinations And the Life Licensing Qualification Program (LLQP) Accident and Sickness course and examination A Level 1 Licensee shall not: act in the transaction of commercial lines of insurance unless supervised by a New Brunswick resident Level 2 Licensee or New Brunswick resident Level 3 Licensee who shall sign or initial all commercial transactions; manage an agency; act as a supervisor; be under the age of 18. A Level 1 Licensee may: sign personal lines applications and policies. Level 2 A person applying for a Level 2 license must meet the licensing qualifications for a Level 1 license and successfully complete one of the following: 4

7 the Canadian Accredited Insurance Broker (CAIB 2 and CAIB 3) courses and examinations; or the course of study leading to a Chartered Insurance Professional (CIP) designation and C72 Introduction to Risk Management and Commercial Lines and examination. A Level 2 Licensee shall not: Manage an agency. Level 3 A person applying for a Level 3 license must meet the licensing qualifications for a Level 2 license and successfully complete one of the following: the Canadian Accredited Insurance Broker (CAIB 4) course and examination; or the course of study leading to a Chartered Insurance Professional (CIP) designation, C131 Advanced Skills for the Insurance Broker and C132 Practical Issues in Broker Management courses and examinations. A Level 3 licensee shall not: manage an agency unless he or she has at least two years experience as a licensed intermediary within the past five years; manage or supervise more than three office locations. A Level 3 Licensee must have been consecutively employed in the insurance industry for a minimum of 5 years preceding the application date, with at least 3 of those years as a Level 2 Licensee or have equivalent insurance experience. 1.4 Which activities by staff of a brokerage or an agency should not require the individual to hold a licence? Any staff of a brokerage who are not engaged in providing consumers with any insurance related advice should not be required to be licensed. Duties such a data entry, mail, bank deposits, and other typical office administration duties should be included in the list of activities that should not require licensing. 1.5 Should a licence holder be obliged to move to the next level of licence? With the exception of the pre-level 1 training registration level identified in our response to 1.3 above, there should be no requirement to move to the next level of license. As an example, someone licensed as a level 1 in the regime suggested in 1.3 should be able to stay at that level if they are only dealing with personal lines and not commercial. 5

8 1.6 If a licence holder were obliged to move to the next level of licence, what should the time limit be for moving to the next level of licence? As outlined in in 1.5 above, IBANB does not feel that license holders should be required to move to the next level of license. We do; however support there being timeline limits on how quickly a licensee can move from one level to the next. For example, in our suggested regime we feel that a Level 3 Licensee must have been consecutively employed in the insurance industry for a minimum of 5 years preceding the application date, with at least 3 of those years as a Level 2 Licensee or have equivalent insurance experience. 1.7 Are there any other matters for consideration on this issue? One item that has been brought to the attention of IBANB by many of our member brokers is that of transfer of license. The example given is that when a licensee changes employers and is moving from one brokerage to another, the process currently in place to have a license transferred can be somewhat cumbersome. The main issue lies with the fact that by the time the licensees past employer provides a letter to cancel the license so that the licensee can then reapply for their new/transferred license the timeline can quite often leave the licensee without a license in the interim, leaving them unable to work at their new employers until they receive their license. IBANB is suggesting that there be a license transfer/temporary license made available to licensees for up to a 60 day period at the same level of license as they held while at their previous employer. This will enable them to continue to assist consumers while at their new employers while the full license is being processed. 6

9 Issue 2 - Educational and Experience Requirements Ensuring that insurance intermediaries have appropriate education is a key component of consumer protection. The educational requirements contained in the Agents and Brokers Regulation have not been updated in some time. As stated above, the Insurance Division believes that the roles and responsibilities attached to each level of licence should reflect the educational requirements of that level of licence. The Insurance Division believes that further information is required in order to determine what course requirements are appropriate for each different level of licence. Given that there are variations in educational requirements across the country, the licensing regime should permit the recognition of equivalent educational standards from other jurisdictions. While education is critical in the proper development of insurance intermediaries, practical experience gained through supervised on-the-job training ensures that intermediaries are properly trained. For new licence holders, direct supervision is necessary to ensure consumer protection and appropriate development. Some licensing regimes include probationary periods where a new licence holder s activities are restricted until they reach a minimum level of experience. Upon reaching the minimum level of experience, individuals would be free to work more independently and with fewer restrictions, if any, on their licences; although they are still subject to overall supervision by a managing licence holder. Discussion Questions 2.1 Referring back to question 1.3, what should the corresponding educational requirements be for each level of licence? Please refer back to question 1.3 where we have outlined out suggested licensing regime, including corresponding educational requirements. 2.2 Should there be a probationary period, for individuals entering the profession? If so, what should the probationary period be? As outlined in question 1.3 IBANB suggests the following probationary period for individuals entering the profession: Pre Level 1 Trainee Registration The Trainee Registration is very restrictive. New employees to the general insurance industry are granted a one-time temporary exemption from licensing. In order to qualify, the person: must never have held an insurance intermediary license; and must be at least 18 years of age. 7

10 The following restrictions apply to trainees: may only conduct personal lines transactions; and (our original proposal had this restriction included; however after further review we feel that there is no need to restrict personal vs. commercial for trainees as long as there is adequate supervision). must be under the direct supervision of a Level II or III licensee who initials or signs all transactions; and trainees are not allowed to conduct any form of insurance activities outside the premises of the employer under any circumstances. A person may only hold a trainee registration for a total of one year. There is no cost associated with a Trainee Registration, however, an application form must be completed and submitted to the Regulatory Body. Once a Trainee Registration is issued, the regulating body will commence its screening process to determine if the trainee can be granted a Level I license upon completion of the educational requirements. 2.3 If there is a probationary licence, what restrictions should be placed on a probationary licence? Outlined above in Should there be further educational requirements for an individual to move from a probationary licence? In order to move to a level 1 license within a year, as outlined in our suggested prelevel 1 trainee registration above, the licensee would need to complete the level one educational requirements as follows: the Fundamentals of Insurance course and examination; or the Canadian Accredited Insurance Broker (CAIB 1) course and examination; or Insurance Institute of Canada courses: C11Principles and Practices of Insurance, C12 Insurance on Property, C13 Insurance Against Liability Part 1, C14 Auto Insurance Part 1, C130 Essential Skills for Insurance Brokers and Agents and examinations And the Life Licensing Qualification Program (LLQP) Accident and Sickness course and examination 8

11 2.5 Referring back to question 1.3, should there be minimal experience requirements to move to the different levels of licence? If so, what should those minimum requirements be? The only minimum experience requirements that we are suggesting for moving from one level to the next are to move from a level 2 to a level 3 as we have outlined under level 3 guidelines in 1.3. They are as follows: A Level 3 Licensee must have been consecutively employed in the insurance industry for a minimum of 5 years preceding the application date, with at least 3 of those years as a Level 2 Licensee or have equivalent insurance experience. 2.6 Should there be a requirement for licence holders to complete mandatory continuing education? There has not been mandatory continuing education requirements in New Brunswck before now; however IBANB does see value in exploring the possibility of implementing it and is very interested in being involved in any discussions or considerations pertaining to mandatory continuing education. 2.7 Are there any other matters for consideration on this issue? No 9

12 Issue 3 - Supervision Under the Agents and Brokers Regulation, a licensee with an other-than-life agent licence class I must be under the supervision of his or her employer. Similarly, a licensee with an other-than-life broker licence class I must be under the supervision of his or her employer. A licensee with an other-than-life broker licence class II must be under the supervision of a holder of a broker licence class III or IV. Going forward, the nature of supervision will depend greatly on the levels and types of licences that are in a new licensing regime. However, generally speaking the Insurance Division believes that the following are necessary key elements: a managing licence holder who is responsible to provide an effective level of oversight and active supervision of all insurance activities within an operation; on-sight supervision of branch offices by a senior licence holder; direct supervision of new entrants by a senior licence holder. Discussion Questions 3.1 What level of licence(s) should be subject to direct supervision under the Regulation? IBANB is suggesting that the only level of license that should require direct (on site) supervision should be the pre-level 1 trainee registration as outlined in question What should be the nature of supervision for each corresponding level of licence? In our original proposal dated February 7, 2012, IBANB defined supervision as follows: Supervision: It is the responsibility of the nominee to determine what constitutes adequate supervision at each agency location including virtual offices. When determining the level of supervision, the nominee is expected to take into account the number of intermediaries working in the office, the levels of qualification and experience of the intermediaries, as well as the extent of written procedures, Broker Management Systems and current technology available to intermediaries. The level of supervision must adequately protect consumer interests and take into account the Insurance Act and Regulations. All supervising level 3 licensees are responsible and accountable for overseeing the work of those in their area of responsibility and for adhering to office procedures that support the competent and ethical conduct of insurance business. We have highlighted the piece about technology in our definition in order to make the point that in today s business environment, business owners and managers are able to be highly connected to their offices through means of technology and therefore should not be required to be literally on site in order to supervise an office. As technology 10

13 advances at the rate that it does today and will in the future, Regulations need to be written, keeping this in mind. In question 1.3 we have outlined any supervision that we feel is required for each level of license in our suggested regime. 3.3 What requirements should an individual meet to be a supervisor? As identified in 1.3 under the suggested regime, only a pre-level 1 trainee registration and a level 1 would not be allowed to supervise. Both level 2 and 3 licensees would be able to act as supervisors. While a level 2 could act as a supervisor, the level 3 nominee as defined in our February 2012 proposal would ultimately be responsible as the nominee. Nominee A nominee must be an officer, director or partner of the agency or senior manager in the province of New Brunswick. 3.4 What obligations would the supervisor have, how long would the supervision last and how many licensees should an individual be able to supervise at one time? As outlined in the definition of supervision above in 3.2; the obligations of the supervisor, length of supervision and number of licensees able to be supervised by any one supervisor, should all be determined by the nominee. 3.5 Are there any other matters for consideration on this issue? No 11

14 Issue 4 - Licence Renewals Pursuant to the Insurance Act, the Superintendent of Insurance must determine whether an individual is eligible to have his or her licence renewed. Where issues arise with respect to an individual s eligibility, the Superintendent may require an investigation to be completed in order to assist in making a determination. Therefore, requiring a regular renewal allows for the confirmation of an individual s eligibility by sponsors and the Office of the Superintendent. The Licence and Examination Fees for Agents and Brokers Regulation establishes renewal periods for agents and brokers. In 2009, New Brunswick moved to two year licences for most licence holders to lessen the regulatory burden. As well, we staggered our renewal dates to increase the effectiveness of the application review process. These changes attempt to balance efficiency with regular monitoring to ensure consumer protection. The Insurance Division believes that these changes have improved the licence renewal process. That said, we are seeking feedback on other initiatives that could increase the efficiency of the renewal process while still ensuring a regular review of licence holders. The Insurance Act requires that applications be sworn. New Brunswick is the only jurisdiction that still has this requirement. While this adds some assurances as to the veracity of the information provided, it also adds to the administrative burden for the applicant. It is also a barrier to moving to an online licensing system. The Insurance Division believes that this requirement should be eliminated in favour of a certification as to the truthfulness of the information provided. There are times when issues going to eligibility are only disclosed when a renewal application is filed. The issues can require an investigation and, in some cases, a hearing. This can lead to delays in the licence being renewed and can result in individuals being unable to carry on business pending the investigation or a hearing. The Insurance Division believes that there should be authority to issue a temporary licence in situations where there is not a significant risk to consumers. Discussion Questions 4.1. What improvements could be made to increase the efficiency of the renewal process while ensuring a regular review of licence holders? An online renewal system would go a long way in improving the efficiency of the renewal process. IBANB has also heard from a lot of our member brokers that a common renewal date for licenses in any one office would greatly improve the process. While we realize it is the individuals who are licensed and not the brokerages (currently), we agree with our member brokers that having all licenses in one office with the same renewal date would create a much easier process for licensees. Renewals dates of licenses could simply be adjusted accordingly whenever someone moved from one brokerage to another. 12

15 4.2. Should there be a filing date for licence renewal applications which predates the expiry date with a late filing fee? In our original proposal of February, 2012, IBANB outlined our thoughts on the licensing period as follows: License period Licenses issued under the Act and Regulations shall be continuous and subject to an annual mandatory reporting period. The Regulatory Body shall publish a mandatory Fee Schedule. A licensee must submit to the Regulatory Body a filing including supporting documentation in a form required by the Regulatory Body by the deadline indicated in the notice sent to the licensee by the Regulatory Body. A licensee who fails to meet a filing deadline will be required to pay a late filing fee, in accordance with the Fee Schedule. The license of the licensee who has not met the filing requirements within 60 days of the filing date is automatically terminated, without the Regulatory Body taking any action. Extension of Time to Meet License Requirements Where a person cannot meet the requirements of the Act and Regulations for the granting or continuance of a license within the time prescribed, the person may apply for an extension of time to meet the license requirements. The Regulatory Body may grant or continue a license with an extension of time to meet the requirements where it is satisfied that: the application is being made in a timely fashion but not later than 60 days after the expiration of the time requirement; the applicant continues to meet the requirements of the level of license being applied for; the delay was beyond the control of the person seeking the extension of time; the requirement will be met within the extension of time requested; and issuing or continuing the license with the extension of time is not contrary to the public interest. 13

16 Where the Regulatory Body grants or continues the license it may impose limitations or conditions to ensure compliance with the Act and Regulations within the extension of time granted Should the Act authorize, in appropriate cases, the issuance of temporary licences pending an investigation or hearing respecting eligibility? Yes, as outlined above in Are there any other matters for consideration on this issue? Grandfathering needs to be taken into consideration when implementing any changes to existing licensing Regulation. The following recommendations with respect to grandfathering were outlined in our original proposal: Grandfathering On the commencement of this Regulation, a person who holds a license issued under Regulation 95-5 of the Insurance Act shall be deemed to have been issued a license of a kind determined in accordance with the following: Agents: An agent currently holding a Level 1 license will remain as a Level1 licensee. An agent currently holding a Level 2 license can qualify as a Level 2 or 3 licensee depending on qualifications. Brokers: A broker currently holding a Level 1 license will remain as a Level 1 licensee. A broker currently holding a Level 2 license will remain as a Level 2 licensee A broker currently holding a Level 3 license will remain a Level 3 A broker currently holding a Level 4 license will be issued a Level 3 license. As also identified in question 1.7: One item that has been brought to the attention of IBANB by many of our member brokers is that of transfer of license. The example given is that when a licensee changes employers and is moving from one brokerage to another, the process currently in place to have a license transferred can be somewhat cumbersome. The main issue lies with the fact that by the time the licensees past employer provides a letter to cancel the license so that the licensee can the reapply for their 14

17 new/transferred license the timeline can quite often leave the licensee without a license in the interim, leaving them unable to work at their new employers until they receive their license. IBANB is suggesting that there be a license transfer/temporary license made available to licensees for up to a 60 day period at the same level of license as they held while at their previous employer. This will enable them to continue to assist consumers while at their new employers while the full license is being processed. 15

18 Issue 5 - Compliance and Enforcement Matters The Insurance Division believes that there are some minor changes needed related to enforcement and compliance under the Act and Regulations. The intent is to ensure that the process is more effective and efficient. There are many incidents where the Insurance Division must investigate general business practices of insurance intermediaries and deal with unlicenced individuals engaged in the business of insurance. Further, as financial regulators adopt risk based approaches to compliance, greater reliance is placed on the gathering of information through questionnaires and surveys of market participants and similar methods. Therefore, the Division believes that the Act should be amended to clarify the Superintendent s power to obtain information relating to any contract of insurance, relating to any settlement or adjustment, or respecting any activities related to the business of insurance. Section 352 of the Insurance Act allows for the revocation or suspension of a licence on particular enumerated grounds. The Insurance Division would like to know if the enumerated grounds are appropriate or should they be amended. Further, should other regulatory sanctions be available. The Division believes that the Act should permit interim suspensions of a licence or the imposition of restrictions pending an investigation and/or hearing where there is a significant risk to the public. Individuals should not be permitted to avoid enforcement action simply by surrendering their licence. If the matter is not dealt with, the individual may seek a licence at a later time when it may be more difficult to deal with or he or she may seek a licence in another jurisdiction. Therefore, the Insurance Division believes that the Act should be amended to clarify the Superintendent s jurisdiction to deal with individuals who are no longer licenced. The Insurance Division believes that the Act should be amended to authorize the publication of decisions by the Superintendent to grant or refuse a licence or to revoke or suspend a licence. The publication of decisions will make the licensing process more transparent for licence holders and consumers. Further, publication of decisions will help educate other licenced individuals on the appropriate conduct in carrying on the business of insurance. Finally, publication would allow insurance regulators in other jurisdictions to be informed of determinations with respect to individuals who may be or may wish to be licenced in their jurisdictions. Discussion Questions The Insurance Division does not have any specific questions with respect to this section. However, we welcome any feedback on the proposals set out above. IBANB submitted a proposal dated June 25, 2012 outlining our thoughts on the possibility of implementing an Insurance Council in New Brunswick. A council model would be very beneficial in providing a stable and effective mechanism related to compliance and enforcement. We encourage Government to further review this proposal. 16

19 Issue 6 - Trust Accounts Section 364 of the New Brunswick Insurance Act requires all life and other-than-life agents and brokers to hold a trust account. Agents and brokers are required to pay any payment received from an insurer or an insured into the trust account immediately. Trust accounts offer consumer protection as well as protection for the insurer. Several jurisdictions require trust accounts. Licence holders are not permitted to co-mingle other funds in trust accounts and are not entitled to use the funds in the trust account for any purpose not authorized by section 364. Agents and broker are not permitted to withdraw money from a trust account, unless the withdrawal is for money paid to or on behalf of an insurer or an insured, the money is payment of commission, or the money paid into the trust account was done by mistake. In the current insurance marketplace, there are a significant number of agents and brokers who do not receive payments from clients or insurers, as many payments are made directly to the insurer or the insured. There are also agents who work directly for an insurer and can deposit any payments directly into the insurer s account. In light of these facts, the Insurance Division is considering an amendment to the Act so that the trust account requirements apply only to agents and brokers who receive trust funds. Also, the Insurance Division is considering requiring annual trust reconciliation statements. Discussion Questions 6.1 Should the Act be amended so that agents and brokers who do not receive any payments from clients or insurers are not required to maintain a trust account? If an intermediary can show that they are 100% direct bill and not handling money, they should be able to get permission to be exempt from requiring a trust account. 6.2 Should the Act be amended so that employees of an insurer who deposit payments directly into an insurer s account and whose access to the account is limited to making deposits are not required to maintain a trust account? Although IBANB does not support legislation requiring intermediaries to have a trust account; we do feel that it if is legislated that ALL intermediaries handling any money should be required to have a trust account. 6.3 Should the Act be amended to include other instances where an agent/broker can withdraw money from a trust account? If yes, which specific withdrawals should be allowed and why? In our original proposal of February, 2012, IBANB outlined our thoughts on trust accounts as follows: IBANB does not support Trust Account legislation, however, proposes the following to accompany our current legislation. 17

20 Funds shall not be withdrawn from a trust account except for payment of: a refund of premiums to the insured; a payment to the insurer of premiums owed; a payment of claims to an insured which has been authorized by the insurer; for the purpose of an investment (a deposit made in trust for a term not exceeding one year where the principal sum is evidenced by a receipt, certificate or other instrument and is redeemable on demand); a payment of commission owed to the intermediary or agency. interest and service charges funds deposited in error funds authorized by year-end adjustments identified in annual financial statements prepared by an accountant another disbursement authorized in writing by the Regulatory Body 6.4 Should licence holders be required to file an annual reconciliation? No. 6.5 Are there any other matters for consideration on this issue? No 18

21 Issue 7 - Errors and Omissions Insurance A licence holder can be exposed to liability to an insured or an insurer. Therefore, professional liability insurance is a key element of consumer protection. It can also protect the licence holder by covering potential losses and defraying costs of defending an action. Most jurisdictions require that licence holders carry errors and omissions insurance and many also require fidelity insurance against losses arising from dishonesty of employees, a proprietor or partners, directors and officers. Some jurisdictions require that the policy include an extended reporting period. The Insurance Division is considering introducing a requirement for licence holders to carry errors and omissions insurance issued by an insurer licenced in New Brunswick and a further requirement to hold fidelity insurance issued by a licensed insurer. Proof of insurance would be a prerequisite to the issuance or renewal of a licence. Further, a licence holder s licence would be automatically suspended on the effective termination or nonrenewal date of the insurance policies. The policy would require the insurer to notify the Office of the Superintendent when the policy is terminated or not renewed. The minimum errors and omissions coverage in the other jurisdictions is either $500,000 or $1,000,000 for any one occurrence with an aggregate amount of $2,000,000 or $5,000,000. The minimum coverage for fidelity insurance for those jurisdictions where it is required is $100,000. Discussion Questions 7.1 Should the Insurance Act and Regulations be amended to require that every general insurance licensee or agency that holds a general insurance licence have errors and omissions insurance? Yes. 7.2 What should be the elements of the insurance coverage? In our original proposal of February, 2012, IBANB outlined our thoughts on Errors and Omissions and Fidelity Insurance as follows: Errors and Omissions and Fidelity Insurance 1) Every general insurance licensee or agency which holds a general insurance license shall have and maintain errors and omissions insurance: a. to a minimum amount of not less than $1,000, in coverage with extended coverage for loss resulting from fraudulent acts of employees; or b. some other form of financial guarantee that has been approved by the Regulatory Body of not less than $1,000, in coverage of any one occurrence. 19

22 2) Every general insurance agency which holds a general insurance license shall maintain fidelity insurance against losses arising from dishonesty of employees, a proprietor or partners, directors and officers: a. in a form approved by the Regulatory Body for an amount of not less than $25, in coverage. b. some other form of financial guarantee that has been approved by the Regulatory Body of not less than $25, in coverage of any one occurrence. 3) Every insurance policy referred to in subsections (1) and (2) shall contain an endorsement stipulating that the Regulatory Body shall be given written notice by certified mail by the insurer of any cancellation or non-renewal of the policy and that the cancellation or non-renewal of the policy shall not become effective until thirty days after actual receipt of the notice by the Regulatory Body. 4) Subject to subsection (3), a general insurance intermediary s or agency's license expires on the date of the effective cancellation or non-renewal of an errors and omissions or fidelity policy referred to in subsections (1) and (2) unless before that date the insurance is replaced or the intermediary or agency otherwise satisfies the Regulatory Body that the insurance intermediary or agency is in compliance with subsections (1) and (2). 7.3 Should the coverage include an extended reporting period and, if so, what should that period be? Should not be mandatory. 7.4 What is the appropriate amount of coverage for errors and omissions coverage? See 7.2 above for details on this. 7.5 What is the appropriate amount of coverage for fidelity insurance coverage? See 7.2 above for details on this. 7.6 Are there any other matters for consideration on this issue? No 20

23 Issue 8 - Duty to Report Issues of consumer protection can arise where a licence holder is subject to disciplinary action by another regulatory entity, has been charged or convicted of an offence or has had a civil judgment against him or her. Currently, there is no obligation for the licence holder to report these matters to the Office of the Superintendent until the individual applies to renew his or her licence. This has the potential to cause consumer harm and may require immediate action by the Office. Further, where matters are only disclosed upon a renewal application, this can delay the renewal of an individual s licence as the Insurance Division obtains information and reviews the matter. The delay can be even greater where a hearing is required. The Adjusters Regulation requires adjusters to report these types of issues to the Insurance Division within 10 business days. We believe establishing a similar mandatory self-reporting requirement in the Agents and Brokers Regulation would enhance consumer protection and resolve the challenges outlined above. The requirement would be that all licence holders notify our Office within 10 days of any disciplinary investigations or decisions, civil judgements involving fraud, breach of trust, or criminal charges and convictions. Further, licence holders should be required to report the following information to the Insurance Division within 10 days: Change in name; Change in contact information; Change in employer. Some of these changes would require a new application and the issuance of a new licence. Discussion Questions 8.1 Should the Regulation be amended to require a mandatory self-reporting requirement for agents and brokers? Yes; however need to be cognizant of what the repercussions are and how long the reporting period deadline is. The following outlines IBANB s position on this issue from our original proposal of February, 2012: License period Licenses issued under the Act and Regulations shall be continuous and subject to an annual mandatory reporting period. The Regulatory Body shall publish a mandatory Fee Schedule. A licensee must submit to the Regulatory Body a filing including supporting documentation in a form required by the Regulatory Body by the deadline indicated in the notice sent to the licensee by the Regulatory Body. 21

24 A licensee who fails to meet a filing deadline will be required to pay a late filing fee, in accordance with the Fee Schedule. The license of the licensee who has not met the filing requirements within 60 days of the filing date is automatically terminated, without the Regulatory Body taking any action. Extension of Time to Meet License Requirements Where a person cannot meet the requirements of the Act and Regulations for the granting or continuance of a license within the time prescribed, the person may apply for an extension of time to meet the license requirements. The Regulatory Body may grant or continue a license with an extension of time to meet the requirements where it is satisfied that: the application is being made in a timely fashion but not later than 60 days after the expiration of the time requirement; the applicant continues to meet the requirements of the level of license being applied for; the delay was beyond the control of the person seeking the extension of time; the requirement will be met within the extension of time requested; and issuing or continuing the license with the extension of time is not contrary to the public interest. Where the Regulatory Body grants or continues the license it may impose limitations or conditions to ensure compliance with the Act and Regulations within the extension of time granted. 8.2 If the Regulation was amended to include mandatory self-reporting, what types of incidents should agents and brokers be required to report? Any self-reporting regulation implemented needs to also take into account the licensees fiduciary duty. That is to say, that unless the incident is somehow related to the licensees fiduciary duty, they should not be required to report it. 8.3 How much time should an insurance intermediary have to report an issue? As soon as practical after conviction rather than after investigation / charge. 30 days for change of name, employer, contact information. 22

25 8.4 Which type of these issues should require a new application? Any changes or issues would have been captured in the self-reporting process; therefore no need for new application. 8.5 Are there any other matters for consideration on this issue? As previously identified in question 1.7: One item that has been brought to the attention of IBANB by many of our member brokers is that of transfer of license. The example given is that when a licensee changes employers and is moving from one brokerage to another, the process currently in place to have a license transferred can be somewhat cumbersome. The main issue lies with the fact that by the time the licensees past employer provides a letter to cancel the license so that the licensee can then reapply for their new/transferred license the timeline can quite often leave the licensee without a license in the interim, leaving them unable to work at their new employers until they receive their license. IBANB is suggesting that there be a license transfer/temporary license made available to licensees for up to a 60 day period at the same level of license as they held while at their previous employer. This will enable them to continue to assist consumers while at their new employers while the full license is being processed. 23

26 Issue 9 - Lapse in Licence / Reinstatement Where an agent or a broker ceases to hold his or her licence for a period of time, issues of eligibility to obtain a new licence may arise. Neither the Insurance Act nor the Regulations contain any provisions related to the reinstatement of a licence. The Life Insurance Agent Licensing Regulation provides that a life insurance agent who ceases to hold his or her licence for two years is required to retake the Life Licensing Qualification Program examination. Likewise, the Adjusters Regulation includes provisions for the reinstatement of a licence. To ensure consumer protection, the Insurance Division believes that agents or brokers who have not been licenced for an extended period of time should be required to requalify by taking courses and to be under direct supervision. Further, where appropriate, some individuals who have not been licenced for a lesser period could have conditions imposed on their licences. Discussion Questions 9.1 What is an appropriate period for requiring an individual who has had a lapse in their licence to requalify? IBANB s position on lapse of license / reactivation of license, as outlined in our February 2012 proposal is as follows: Reactivation provision An applicant, who previously held a license within the 5 years preceding the application date, may apply for the same license subject to: the class of license being issued under the Act and Regulations; the applicant having held a license of the same class; a) for 5 of the 7 years preceding the application date; or b) for the 2 years preceding the termination date of the license and being able to demonstrate that the applicant was actively engaged in the business of insurance authorized under that license for that 2 year period; and any other provision of the Act and Regulations 9.2 What should the requalification requirements be for the various licence levels? Should they vary based on the individual s length of absence? If yes, how should they vary? Outlined above in

27 9.3 What information should be provided by someone who is seeking reinstatement? Anyone seeking reinstatement should be required to submit a complete application. 9.4 Are there any other matters for consideration on this issue? No 25

28 Issue 10 - Partnership or Corporate Licence The Insurance Act permits (but does not require) the issuance of agents or brokers licences to a partnership or corporation that is incorporated expressly for the purpose of acting as an insurance agent, broker, adjuster or damage appraiser. However, regulations have never been created to put these provisions into effect. The Insurance Division is considering regulatory amendments to allow for the licensing of partnerships or corporations subject to the provisions in the Act. Individuals would still be required to obtain individual licences. Discussion Questions 10.1 Should other-than-life insurance agencies or brokerages be required to obtain a partnership or corporate licence? Please elaborate on why? Yes 10.2 What should be the requirements on an agency or brokerage applying for a partnership or corporate licence? As originally outlined in IBANB s proposal of February 2012, the following is how we feel corporate licenses should be dealt with: Resident and Non-Resident Intermediaries Corporate License There are a number of requirements to become licensed as an other than life insurance agency. Requirement to Represent an Insurance Company: An agency must obtain and maintain the ability to represent at least one insurance company authorized to conduct business in the province. Nominee: The agency must have a designated Level 3 licensee to act as its nominee. This individual takes on the rights and privileges of the corporate license and is responsible and accountable to the Regulatory Body for all insurance activities undertaken by the agency and its employees. A nominee must be an officer, director or partner of the agency or a senior manager residing within the province. Office Supervision: Each location must come under the supervision of a Level 3 licensee. Corporate Name: The corporate name must be registered with New Brunswick Corporate Registry. 26