How You're Protected
British Columbians benefit from a well-regulated insurance industry, and IBABC members are proud of their contributions to the development of this public policy over many decades.
Insurance is part of the financial services sector, and as such, is regulated by the Department of Finance federally and the Ministry of Finance provincially. In broad terms, insurance companies come under federal jurisdiction, although some smaller insurance companies headquartered in B.C. are regulated provincially; sales intermediaries (agents and brokers) come under provincial jurisdiction. At both government levels, life and health insurance is regulated separately from property and casualty insurance.
Federally regulated insurance companies must report certain financial information to the Office of the Superintendent of Financial Institutions. This information is made public and can be viewed on OSFI's website. In essence, insurance companies must demonstrate that they are maintaining adequate reserves in relation to the number of insurance policies they have issued so that they will be able to pay all claims, even in the event of a major catastrophic loss.
The federal government provides consumer information and protection through the Federal Consumer Agency of Canada.
Canada's property and casualty (P&C) insurance companies fund a special program, approved by government regulators, to protect policyholders and claimants. In the unlikely event of the collapse of a P&C insurer in Canada, the industry-funded, non-profit Property and Casualty Insurance Compensation Corporation will respond to claims of policyholders under most policies issued by P&C companies. You don't need to apply for protection; it is extended automatically to eligible policies.
The trade association for insurance companies is the Insurance Bureau of Canada.
Insurance sellers, or intermediaries, are regulated provincially. The Insurance Act mandates minimum requirements for insurance contracts in B.C. and the Financial Institutions Act (FIA) governs the market conduct of financial institutions and their intermediaries. The act gives the Financial Institutions Commission (FICOM) authority to administer statutes for the financial services sector in B.C. and the Insurance Council of B.C. to administer licenses for brokerages and individuals.
FICOM does not regulate the Insurance Corporation of B.C., which is itself a Crown corporation. ICBC has a legislated monopoly for universal compulsory auto insurance in B.C. under the regulatory supervision of the BC Utilities Commission. ICBC and private insurance companies offer optional auto insurance.
The Insurance Council of B.C. is the licensing and disciplinary body for insurance brokerages, as well as for individuals who work as salespersons, brokers, agents and adjusters. Visit the Council's website to find out if a certain individual or company is licensed to operate and whether there are any restrictions on that licence.
The Insurance Brokers Association of B.C. (IBABC) is the trade association of property and casualty insurance brokerages in B.C. It is the main provider of pre-licensing and mandatory continuing education for brokers. IBABC is the 'voice' of the insurance brokerage industry in B.C. and represents the interests of its members and consumers to government and to industry stakeholders. Membership is voluntary, and about 85% of the insurance brokerages in B.C. are members of the IBABC.
The federal Bank Act restricts the market conduct in how insurance is sold. Banks are permitted to sell certain authorized types of insurance such as creditors' insurance or mortgage insurance, and are allowed to promote those products. Banks are allowed to own insurance companies or brokerages that operate in separate and distinct premises from bank branches, but banks are prohibited from selling or promoting unauthorized types of insurance from their retail branches.
These prohibitions make it possible for consumers to access insurance products and service from professionals for whom insurance is their primary, and often only, line of business. That access to unbiased expert advice helps Canadians better manage their risk and ultimately prosper.
All persons engaged in the sale of insurance must pass a pre-licensing exam and police clearance. Once licensed they must adhere to the Insurance Council of B.C.'s Code of Conduct. The Council will investigate legitimate complaints about the conduct of a licensee under its jurisdiction.
Regulation sets out minimum standards of disclosure, to be made by the insurance broker to his or her client, verbally or in writing, of any details that could be considered a conflict of interest. Examples of such potential conflicts of interest could include a financial relationship between an insurer and a brokerage, or a fee paid to someone who refers a customer.
In addition to this regulation, the common law of agency should prevent any financial relationship between an insurer and a brokerage from impacting on the impartial advice and service an insurance broker provides to a customer. The insurance brokers' duty to place the risk in their clients' best interests, and their duty to disclose, supersedes any considerations of the brokers' financial obligations to one insurer over another. Any customer who feels the licensee has failed in either of these duties can initiate an investigation of the licensee's conduct and possible disciplinary action.
High ethical standards
Members of the Insurance Brokers Association of B.C. voluntarily adhere to levels of disclosure and accountability over and above regulations. Please see You can expect a fair transaction.
All insurance brokers must meet mandatory continuing education requirements during the term of their licenses to be eligible for renewal. The IBABC is the primary provider of high-quality pre-licensing and continuing education for the insurance brokerage industry in B.C.
It's necessary to obtain private information about a client in order to recommend the best coverage, and to assess ongoing needs. Insurance brokers meet the requirements of federal and provincial privacy legislation in the collection, storage and sharing of personal information.
As experts with constant daily contact with the needs of the public, insurance brokers are uniquely qualified to promote the interests of their clients in a number of ways. First and most important is when a client suffers a loss and files a claim. Insurance brokers work on behalf of their client to get the best possible compensation from the insurance company. Brokers also serve on a wide range of committees, councils and task forces with insurance companies, government and other stakeholders to improve insurance policy wordings distribution systems. Insurance brokers influence public policy by making recommendations to government. (See Advocacy.)
How insurance brokerages are paid for their services
Insurance brokerages get paid a commission by the insurance companies whose policies they sell. Brokerages don't determine the prices of insurance policies or their commission levels. Out of that commission brokerages pay for office expenses and wages for employees. Commission is earned over the term of the policy. If the policy is cancelled before the end of its term, the policy-holder receives a refund, and the brokerage only receives remuneration for the earned portion.
It is an allowable practice to charge a service fee to a client, either instead of collecting a commission or in addition to receiving a commission from an insurer. However, when a service fee is charged, it is necessary to disclose, in writing, the amount of such a fee and the fee must be shown separately from the insurance premium.
Insurance protects your most important assets and makes it possible for you to obtain credit, free up capital and create wealth. Property and casualty (P&C) insurance brokers take their role in protecting people's assets very seriously.
When you buy P&C insurance you can expect to receive a fair transaction based on these principles:
- Your interests come first, before the interests of P&C insurance brokers and the companies they represent.
- You should expect to have your P&C insurance needs assessed by that individual and, when he or she makes a recommendation, to be offered products that meet your needs.
- You should expect a P&C broker to enable your purchasing decision to be based solely on the attributes of the insurance product or service being offered, including the value of the services of the P&C broker.
- You should expect your instructions to be carried out faithfully. Your P&C broker must not transact business which is unlawful.
- You should expect your transactions to be handled with professionalism by a qualified P&C broker. If you have any doubts you may inquire about the P&C broker's qualifications or conduct with the appropriate regulatory body. In B.C., the Insurance Council of B.C. has the government mandate to regulate and govern the insurance brokerage industry. For information go to www.insurancecouncilofbc.com.
- You should expect to have your personal information safeguarded and only used for the purpose for which it was originally collected, unless you have given permission for it to be used for other reasons. Your personal information may be divulged without your consent to law enforcement agencies when required or authorized by law.
- You should expect to be informed if he or she has a conflict of interest, and you should be given the opportunity to halt further dealings with him or her.
- You are entitled to receive all relevant information before making a decision about a financial product. This includes product features, risks and benefits, and the company involved.
- You should expect to have any complaints dealt with in a timely and forthright manner. In the event that a dispute with an insurance industry practitioner cannot be resolved, you should be given information about available avenues for resolving your complaint.
In your dealings with a P&C insurance broker, you should always seek further information if you do not feel comfortable with your level of understanding of products or services that you are purchasing. Asking questions will help you avoid any potential misunderstandings regarding the information that is being presented to you.
Occasionally a misunderstanding or failed expectation can occur. In that event, first let the manager at the brokerage know about your problem. In many cases it may have been due to a lack of communication and can be easily rectified. Give the brokerage manager the opportunity to correct the problem.
Next, there are a number of organizations that can assist you, depending on the nature of the problem:
- For general information, Insurance Brokers Association of B.C.
- For dispute resolution, General Insurance OmbudService, Mediate BC or the ICBC Fairness Process
- For compliance issues, Insurance Council of B.C.
- For privacy issues, Office of the Privacy Commissioner
This information is brought to you by the members of the Insurance Brokers Association of B.C. To find an IBABC-member broker near you, click here.