E-Distribution of Insurance Products: the CCIR Publishes its Recommendations

June 1, 2013

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In January 2012, the Electronic Commerce Committee of the Canadian Council of Insurance Regulators (CCIR)¹ released an issue paper entitled “Electronic Commerce in Insurance Products”, through which it invited insurers and intermediaries to provide feedback on certain targeted issues respecting online insurance distribution.

Many stakeholders responded; 25 submissions were sent to the CCIR. The organization has just published its report under the form of a position paper in which it makes recommendations to online insurance providers.

CONTENTS OVERVIEW
The position paper deals with the following issues:

Information and advice to consumers
Identification of the online insurance provider and the complaint process
Disclosure of necessary information about the product
Opportunity to review the accuracy of information provided
Copies of the application and the contract
Reliability of transactions
Protection of personal information
Designation of beneficiary
Termination of insurance contract by the insurer
Comparison shopping sites
Social media

SUMMARY OF THE RECOMMENDATIONS
Here are the outlines of the CCIR report and its recommendations. The full version of the recommendations is available online at http://www.ccir-ccrra.org/en/pubs/

1. INFORMATION AND ADVICE TO CONSUMERS
The CCIR remarks that consumers must have access to all the necessary information in order to understand the product offered and make an informed purchase decision. The selected product must satisfy the consumer’s needs, irrespective of the means of communication chosen by consumers. The CCIR noted that some insurance products are more complex than others and the need for advice may vary from one person to another; in all cases the CCIR is of the view that the advice must be adapted to the type of insurance product offered and the client’s profile. Therefore, the CCIR believes that consumers should be presented with a disclosure stressing the importance of advice and how to obtain it.

2. IDENTIFICATION OF THE ONLINE INSURANCE PROVIDER
The CCIR states that consumers must have access to the information and coordinates which would allow them to identify the insurance provider and verify that it is a regulated entity registered with the regulator of its province. The CCIR also recommends that the coordinates and procedure for filing a complaint be disclosed on the website, including a link to the website of the regulator having jurisdiction over the entity in question.

3. DISCLOSURE OF NECESSARY INFORMATION ABOUT THE PRODUCT
The CCIR indicates that in order to make an informed decision, consumers must have access to certain specific information about the product, including the warranty, exclusions and limitations, the type of consumer for whom it is intended, the premium, the right to terminate the insurance contract, etc. This information must be presented in a simple, clear and timely manner.

4. OPPORTUNITY TO REVIEW THE ACCURACY OF INFORMATION PROVIDED
In the context of e-distribution of insurance products, consumers themselves complete the application form online. In order to avoid any error that would negatively affect consumers and providers, the CCIR recommends that consumers be given the opportunity to validate their answers once more before sending the online application.

5. TERMS AND CONDITIONS
The CCIR stresses the importance of consumers having a copy of the application and the contract that they can refer to following the transaction. Although the format of the documents must enable consumers to reproduce and store them, the method of communicating the documents is not specified.

6. RELIABILITY OF TRANSACTIONS
The CCIR notes the undesirable consequences of using a defective computer system network that can negatively affect the process and the fact that online insurance providers have the responsibility to ensure that the consumer’s personal information is secure.

7. PROTECTION OF PERSONAL INFORMATION
In order to avoid the inadvertent disclosure of personal information, identity theft, fraud, misappropriation and money laundering, the CCIR stresses the importance of protecting the personal information of consumers.

8. DESIGNATION OF BENEFICIARY
The CCIR discussion paper raised the issue of whether the designation or change of beneficiary through electronic means should be authorized. In the absence of specific legislative provisions authorizing the electronic designation of beneficiary, the CCIR notes that insurers currently continue to require that designations be made on paper. However, British Columbia and Alberta recently made changes to their respective regulations, which could make insurers more willing to authorize beneficiary designations through electronic means. The CCIR committee adopted a position recommending that insurers have in place effective systems for offering consumers the option of designating and changing beneficiaries by electronic means.

9. TERMINATION OF THE CONTRACT
In the January 2012 discussion paper, the CCIR asked whether insurers should be allowed to terminate a contract by electronic means if both parties consented. The CCIR mentions that British Columbia and Alberta recently chose to maintain the requirement of an insurance termination notice on paper. In light of the mixed opinions on the subject, the CCIR chose to maintain the status quo on that issue; it recommended no change to existing practices respecting contract termination for the time being.

10. COMPARISON SHOPPING SITES
The CCIR raises some issues relating to comparison shopping sites, particularly as to their independence, the disclosure of information to consumers, whether or not these sites are involved in transacting insurance and whether or not they are subject to regulation. The CCIR prevailing view is that no additional rules appear to be necessary at this time. However, the CCIR adds that these sites should have the same obligations as regulated entities subject to the current regulatory framework and that regulators should require comparison shopping sites to comply with applicable legislation.

11. SOCIAL MEDIA
Due to the increasing use of social media in the insurance industry, particularly for marketing purposes, the CCIR is of the opinion that social media is a form of communication like any other and that the rules, particularly pertaining to ethics, advertising, suitability and record keeping must be complied with when insurers and representatives use social media.

NEXT STEPS
The CCIR has invited industry stakeholders to provide commentary on the CCIR recommendations by July 26, 2013. The CCIR will subsequently review the stakeholders’ comments. Final recommendations will then be adopted and published by the CCIR. It should be noted that submissions will be made publicly available by the CCIR.

CONCLUSION
These recommendations strive to harmonize provincial rules in the practice of the offer and distribution of insurance products in Canada. Considering the involvement of the Autorité des marchés financiers in the development of the position paper, these recommendations suggest the direction that the regulation of the online distribution of insurance products in Quebec should take. In the meantime, it will be interesting to see the industry reaction to the guiding principles suggested by the CCIR.
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¹ The CCIR is a national forum which promotes collaboration among the Canadian provincial regulators for improving insurance regulations and protect public interest.

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Clarifications regarding insurance products offered on the Internet

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As such, making the information accessible or referring to a policy is not enough.2 “Making visible at all times”: The information should be visible to the client at all times, regardless of the page the client is on. A representative’s contact information is the only information that must be visible on the digital transactional space at all times. Websites that are accessible to people who are blind or use a voice assistant must also have means to present this information.3 “Making a representative available”: The AMF only requires that representatives be available during regular business hours.4 “Making information readily accessible”: A client must have the option of taking cognizance of the information and be able to easily find it. The information must be accessible in one or two clicks. Including a hyperlink or an icon, for example, are ways of making information accessible.5 Under this obligation, a hyperlink may be used to redirect a client to a website or document external to the digital space.6 External documents that are accessible through hyperlinks, such as sample insurance policies, must be up to date. Summary of the complaint processing policy The AMF specifies that the summary of the complaint processing policy referred to in the RADM must be that of the firm running the transactional website, not of a third party. Thus, a property and casualty insurance brokerage cannot refer to an insurer’s policy summary.7 Identification of the firm A firm may display partner logos on its digital space only if doing so does not cause confusion. A client must know which firm runs the space and must be able to distinguish it from partners that do not offer the products or services.8 Product coverage, exclusions and limitations Further to its supervisory activities, the AMF has confirmed that product coverage appears to be well presented in digital spaces. However, exclusions and sometimes limitations are not as well presented. Given that exclusions and limitations constitute information that is necessary for a client to make an informed decision, the AMF urges firms to pay attention to these and to select them based on a proper analysis.9 Suspension of transactions The AMF has clarified how to apply the criteria under section 14 of the RADM, more specifically paragraph 3 of this section, which provides that a firm must suspend a transaction initiated through a digital space when no representative can immediately intervene with a client who asks to deal with a representative and there is a risk that the client will not be able to make an informed decision. The AMF specifies that it is up to the firm to assess and manage its risk. 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It can also be temporarily suspended while the client is informed of the consequences of making false statements and the importance of knowing their entire situation, for example, and to allow them to make corrections, if necessary.11 To better understand the obligations of the RADM, we invite you to consult our bulletin Bill 141: Checklist on insurance products offered via the internet and distribution without a representative. These are only available in French at this time; Regulation respecting Alternative Distribution Methods, CQLR, c. D-9.2, r. 16.1. Autorité des marchés financiers, Explications à l’égard du règlement – Le RMAD expliqué article par article (hereinafter the “Explanations”), ss. 7, 9, 11, 12 and 12.2. The terms “explaining information” or “providing information” under section 12.1 of the RADM should be interpreted in the same manner. Explanations, s. 8. Explanations, s. 8. Explanations, ss. 8 and 10. Explanations, ss. 8 and 10. A representative’s contact information does not have to appear on external documents and websites at all times. It is important to note that under section 9 of the RADM, a document that is to be “provided” or “presented” to a client cannot be located on an external website. Explanations, s. 8. Explanations, s. 8, para. 1. Explanations, s. 9. For example, a client declaring they have no children yet selecting insurance for their children constitutes a contradiction. Explanations, s. 14.

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July 7, 2022

Amendments to the Charter of the French Language: Impacts on the Insurance Sector

Bill 96 – An Act respecting French, the official and common language of Québec (the “Act”) - was adopted on May 12, 2022 and assented to on June 1, 2022, its effective date. Certain provisions are already in force; for other provisions, a transitional period ranging from several months to three years will apply. This document provides an overview of the modifications included in the reform of the Charter of the French Language (the “Charter”) that will have an impact on various aspects relevant to insurance sector stakeholders doing business in Québec. Forming the centrepiece of the announced changes, the reform of the Charter includes strengthened oversight mechanisms governing the use of French as the language of commerce and business, as well as linguistic rights in the areas of employment and communications with agents of the State. Overseeing the language of commerce and business The reform of Section 55 of the Charter stipulates that contracts of adhesion and related documents must be drawn up in French. However, effective June 1, 2023, a French-language version of these contracts and documents must be provided to participants First Alinea of this amended section reads as follows: 55. Contracts pre-determined by one party and the related documents, must be drawn up in French. The parties to such a contract may be bound only by its version in a language other than French if, after its French version has been remitted to the adhering party, such is their express wish. The documents related to the contract may then be drawn up exclusively in that other language.1 Therefore, contractual clauses in which the parties simply indicate that they agree to be bound by a contract drawn up in a language other than French are no longer sufficient. The Civil Code of Québec stipulates that “A contract of adhesion is a contract in which the essential stipulations were imposed or drawn up by one of the parties, on his behalf or upon his instructions, and were not negotiable.”2 To qualify a contract, the importance of the negotiated terms and conditions and their connection with the contract must be analyzed. It is generally recognized that if the essential stipulations are not negotiable, the contract is a contract of adhesion, even though some less important terms and conditions may have been negotiated by the parties. This amendment codifies the interpretation adopted by the Office québecois de la langue française (“OQLF”) and the courts,3 particularly given that negotiated contracts were not covered by this provision. To remove any doubt concerning this interpretation, Bill 96 was amended so as not to extend the scope of this requirement to include contracts containing “printed standard clauses”. The insurance contract Since their essential stipulations are typically drawn up by the insurer, insurance contracts and their endorsements are contracts of adhesion, as a general rule. Therefore, the French-language version of all related documents — notices, letters, insurance product summaries — must be provided to clients before they can decide whether they will be bound by a version drawn up in another language. During the parliamentary debates, Minister Jolin-Barette commented that Section 55 of the Charter only referred to consumers and that contracts between two companies could be drawn up in the language of their choice if that was the express wish of both parties. The term “consumer”, however, is not defined in the Charter. Ambiguity remains as to whether the Minister’s comment only referred to contracts containing standard clauses or whether contracts of adhesion were included. We will have to wait for the publication of the interpretation bulletins and the annotated edition of the act to determine whether Section 55 of the Charter applies to commercial insurance policies. In the meantime, we are of the opinion that if Québec lawmakers had wanted to exclude commercial contracts of adhesion, they would have expressly done so by means of an amendment. Insurance contracts in effect before June 1, 2023 will not have to be translated, nor will insurance contracts renewed without modifications since under those circumstances, the contract would not be regarded as a new contract.4 However, if an existing insurance contract is renewed with significant modifications, it will be regarded as a new contract and the French-language version thereof must be provided to clients so they may validly express their wish to be bound by a contract drawn up in a language other than French. Given that in most cases, insurance contracts are sent out to policyholders by regular mail or email, effective June 1, 2023, insurers, agents or brokers, as applicable, will have to send both the French-language and English-language versions of the contract in the same mailing or simply send the French-language version thereof. It is important to note that the Act provides for an exception to the requirement to provide the French-language version if: The insurance policy has no equivalent in French in Québec; and The insurance policy is originates from outside Québec or is not widely available in Québec.5 [unofficial translation] In all likelihood, this exception will only apply to highly specialized insurance products and will be interpreted restrictively given the Act’s primary objective. Unlike insurance contracts and related documents, invoices, receipts, discharge notices and other similar documents may be sent out in English if the French-language version remains available on terms that are at least as favourable.6 Services and marketing in French The Act introduces the Charter’s new Section 50.2, which states that businesses must respect consumers’ fundamental linguistic right to be informed and served in French. The same section reiterates this requirement with respect to “a public other than consumers” to whom are offered goods and services and who must henceforth be informed and served in French by businesses. Unlike consumers, however, clients who are businesses do not enjoy a fundamental linguistic right protected by the Charter. As regards marketing, the addition of the words “regardless of the medium used” to Section 52 of the Charter confirms that marketing documents in “hard copy” format must be in French, as must websites. If a version is available to the public in a language other than French, the French-language version must be available on terms that are at least as favourable. This provision took effect on June 1, 2022. Chat-type platforms or those facilitating direct communications with the insurer should make it possible for members of the public to communicate with the insurer’s representatives in French at all times. Communications with insurance agents and brokers Effective June 1, 2022, insurers are required to communicate in French with insurance agents and brokers who express the desire to do so.7 In addition, all information documents sent to insurance agents and brokers regarding underwriting or claims must be in French if they so wish. As regards contractual agreements between insurers, insurance agents and brokers, the need to provide a French-language version depends on the nature of the contract, i.e. whether it can be qualified as a contract of adhesion. French in the workplace Effective June 1, 2022, all companies doing business in Québec must comply with the following requirements in the area of employment rights: Respect employees’ right to work in French8; Use French in all written communications sent to employees; Ensure that all offers of employment, promotion or transfer; individual employment contracts; employment application forms; and documents concerning employment conditions and training sent to employees are drawn up in French;9 Take all reasonable means to avoid requiring employees to have knowledge or a specific level of knowledge of a language other than French for employees to obtain employment or to maintain their position, including in particular: Assess the actual needs associated with the duties to be performed; Make sure that the language knowledge already required from other staff members was insufficient for the performance of those duties; Restrict as much as possible the number of positions involving duties whose performance requires knowledge of or a specific level of acknowledge of a language other than French.10 It should be noted that individuals whose employment contracts are currently drawn up in English have until June 1, 2023, to ask their employer to translate their contract. Effective June 1, 2025, businesses with 25 employees or more in Québec must meet additional francization requirements for their Québec employees to obtain a francization certificate, including: Registering with the OQLF; Submitting an analysis of the status of the French language within the business; Putting in place a francization program within three months following an OQLF request to that effect. The above requirements were already in effect for businesses with more than 50 employees in Québec. French as the language of the civil administration The Act includes various modifications with respect to French as the language of the civil administration. The Québec government will be required to make exemplary and exclusive use of French, with certain exceptions. Effective June 1, 2023, all agents of the State and provincial government bodies will be required to communicate in French with all persons, including business representatives. All documents exchanged with the civil authorities, as well as all contracts and permits, must be drawn up in French. Insurance sector stakeholders outside Québec should expect to receive more communications in French from the Autorité des marchés financiers (“AMF”) given that the AMF is a body of the “civil administration”. Penalties It should be noted that new powers will be granted to the OQLF enabling it to conduct investigations and impose administrative and disciplinary penalties. As regards infractions of the Charter’s provisions, the Act provides for fines ranging from $3,000 to $30,000 for businesses and from $700 to $7,000 for individuals. These fines are doubled for a second offence and tripled for further offences. In addition, if an infraction continues for more than one day, each day constitutes a separate infraction. If an infraction is committed by a corporate director or officer, the Act provides for fines ranging from $1,400 to $14,000. Questions of interpretation Various provisions have raised questions of interpretation that are still difficult to resolve at the time of writing. Interpretation bulletins and an annotated edition of the act will be published by the provincial government with a view to guiding businesses in the application of the Act; they will also help to clarify certain provisions that remain ambiguous for the time being. For further information on changes concerning trademarks, please consult a recent publication by our colleagues specializing in intellectual property. Sec. 55, Para. 1 of the Charter. Civil Code of Québec, CQLR ch. CCQ-1991, Sec. 1379, Para. 1. Westboro Mortgage Investment vs. 9080-9013 Québec inc., 2018 Superior Court of Québec 1. Leave to appeal dismissed 2019 Court of Appeal of Québec 1599. Didier LLUELLES, Droit des assurances terrestres, 6th ed., Montréal, Éditions Thémis, 2017, Para. 186. Sec. 21.5 and Sec. 55 of the Charter. Sec. 57 of the Charter. Sec. 50.2 of the Charter. Sec. 5 and Sec. 50.2 of the Charter. Sec. 41 of the Charter. Sec. 46 of the Charter.

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May 2, 2022

Complaint processing: New framework to come for financial institutions and financial intermediaries

Last September, the AMF published its draft Regulation respecting complaint processing and dispute resolution in the financial sector (the “Draft Regulation”). The consultation period for it ended on December 8, 2021. The AMF is currently reviewing the many comments it received. The Draft Regulation1 aims to harmonize and improve complaint processing in the financial sector by providing for new mechanisms to ensure prompt and efficient complaint processing, among other things. In the insurance industry, only firms and insurers are currently required to adopt and apply a complaint processing and dispute resolution policy. The Draft Regulation will make these obligations apply to independent partnerships and representatives. It also introduces new requirements and restrictions as well as monetary penalties for not including mandatory content in communications to a complainant, for example. Here are some of the Draft Regulation’s new provisions: Broadening of the definition of “complaint” to: Any dissatisfaction or reproach; That cannot be remedied immediately and for which a final response is expected; In respect of a service or product offered by a financial institution or financial intermediary; That is communicated by a person who is a member of the clientele of the institution or intermediary. The Draft Regulation does not contain a requirement that a complaint must be made in writing.2 It does make it mandatory for financial institutions and financial intermediaries to implement a complaint drafting assistance service.3 It also requires that a note be left in each record to indicate whether a complainant requested this service. Prohibition on the use of the term “ombudsman” in any representation or communication intended for the public to refer to the complaint process or to the persons assigned to its implementation.4 Specific requirements as concerns the mandatory content of a complaint processing policy, an acknowledgment of receipt and final response to a complainant, a complaint record and a complaints register. For each complaint received, the complaint record must include the following information: The complaint Whether the complainant requested the complaint drafting assistance service The complainant’s initial communication A copy of the acknowledgment of receipt sent to the complainant Any document or information used in analyzing the complaint, including any communication with the complainant A copy of the final response provided to the complainant New time limits: Within 10 days of receiving a complaint, the insurer must notify the complainant in writing that they must also file the complaint with any other financial institution, financial intermediary or credit assessment agent involved, and the insurer must provide the complainant with their contact information.5 The complainant must be given 20 days to assess and respond to an offer to resolve the complaint, with sufficient time for the complainant to seek advice for the purpose of making an informed decision.6 If the complainant accepts the offer, the insurer has 30 days to respond.7 Financial institutions and financial intermediaries have a strict 60-day time limit to provide the complainant with a final response.8 There is a new 15-day time limit to send the complaint record to the AMF.9 There is a streamlined process for complaints that are resolved within 10 days of being recorded in the complaints register: The final response serves as an acknowledgment of receipt and must contain the following information: The complaint record identification code The date on which the complaint was received by the insurer or insurance representative The name and contact information of the employee responsible for processing the complaint referred to in section 7 of the Draft Regulation or in the Sound Commercial Practices Guideline A summary of the complaint received The conclusion of the analysis, including reasons, and the outcome of the complaint A reference to the complainant’s right to have the complaint record examined by the AMF The signature of the complaints officer A statement to the effect that the complainant has accepted the offer to resolve the complaint New monetary administrative penalties The Draft Regulation also provides for monetary administrative penalties ranging from $1,000 to $5,000 for failure to comply with certain requirements and prohibitions of the Draft Regulation. For example, the following will be subject to a monetary administrative penalty of $5,000: Attaching a condition to an offer to prevent the complainant from fully exercising their rights. Using the term “ombudsman” or any other similar title in any representation or communication intended for the public to refer to the complaint process or the persons assigned to its implementation to suggest that such persons are not acting on behalf of the financial institution or financial intermediary. In the latter case, a monetary administrative penalty may be imposed even where no complaint is involved, because the prohibition covers “any representation or communication intended for the public.” Insurers and financial intermediaries should review their communications as soon as possible, and especially the summary of their complaint processing policy appearing on their website. It concerns all entities regulated by the AMF, but the bulletin more specifically addresses financial institutions and financial intermediaries in the insurance industry. As currently indicated on the AMF’s website. Draft Regulation, s. 11. Id., s. 26, para. 2. Id., s. 15. Id., s. 13. Id. Id., s. 12, para. 4. Id., s. 25.

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