Quebec Finance Minister Carlos Leitao has decided to define what it means to be a general insurance broker in the province. Those who wish to call themselves brokers will have to offer their clients products from at least four different insurers that do not belong to the same financial group.
This decision comes at a time when the Quebec industry is debating the definition of brokerage. This debate was initiated by a consultation relating to a 20 per cent shareholding rule which refers to the maximum ownership stake that can be held by an insurance company in a brokerage firm.
The Quebec government will amend section 244 of the Act respecting the distribution of financial products and services to specify that a broker must present a minimum of four insurers’ products. Previously, this article mentioned “several” insurers.
Registration as an agency or firm
The new version of section 244, amended by Bill 150, also indicates that in the event that a broker is unable to offer his clients insurance products from at least four insurers per proposal, he must retain the necessary information to prove that he made every effort to comply with the provisions. He can then proceed to offer these insurance products.
The government has gone further with Bill 150, tabled Oct. 31. It indicates that firms will have to register either as an agency or brokerage firm. It will prohibit the firm from registering as a brokerage firm if a financial institution, a financial group or a legal person affiliated with them has a significant interest in the firm’s decisions or equity. In particular, it mentions an equity stake of 20 per cent or more.
Disclosure of links with insurers
Another change to the Act concerns the disclosure to consumers of brokers’ ties to insurers.
A general insurance agency or a general insurance brokerage firm must disclose, on its website and in its communications with its clients, the names of the insurers for whom it offers insurance products. If need be, it must specify those with which it is bound by an exclusivity contract and the products covered by this contract.
The bill will provide for the terms under which a brokerage firm, which does not meet these obligations, must change its registration to that of an agency. Various sources told The Insurance and Investment Journal that the government intends to pass this bill by spring.