7 February, 2018 10:55
Carlos J. Leitão | Photo : Denis Méthot
Worried for a long time by the undue influence of the insurers to the brokers in damage insurance, thefinancial markets Authority claims to the government the means necessary to ensure and maintain a healthy independence in the interest of consumers.
The organization of regulation and supervision does not rest the responsibility solely on the shoulders of the brokerage firms. It considers that it is «clear» to insurers who choose to distribute their products through dealers to comply with the necessary independence of the latter.
The practices of insurers
During the recovery to a parliamentary committee on Tuesday in Quebec city during the consultations over bill 150, the CEO of the Authority, Louis Morisset, has recommended to the minister of Finance, Carlos J. Leitão, further frame the practices of insurers in order to reduce their level of influence on brokerage firms. Mr. Morisset has requested the necessary tools to enforce this principle.
«What we propose,» said Mr. Morisset, it is to strengthen the legislative solutions proposed by the government by principles that would be enshrined in law and that would give a legislative base much more strong in order to strengthen the independence required of the insurers to the brokers. «
The nature of the tools required by the Authority, however, has not been specified by the representatives of the organization.
Louis Morisset | Photo : Denis Méthot
«The law has been circumvented»
The Authority is said to have found in the context of its supervisory work to a real problem of transparency : the consumer does not know if he is truly dealing with a broker-dealer independent of an insurer, she says. The Authority has noted that, over the years, the law has been bypassed, and believes that the decision of the minister to ensure their independence in the part of the law is fully justified.
Bill 150 proposes changes to the Act respecting the distribution of financial products and services (distribution ACT) to review the ownership of brokerage firms in damage insurance and to specify the obligations related to the use of the title of broker.
«It is necessary, she wrote in his memory, a legislative solution that preserves the principle of the independence of dealers in respect of insurers. «
Not for a total ban
The Authority considers that the solutions contained in the bill 150 are interesting and have the merit of being clear. It considers, however, that in the current situation of the market, these provisions may not have all the desired effects. She is of the opinion that the terms and conditions of the funding agreements may, in certain circumstances, constitute sources of influence undue to the place of a broker.
Then, should he prohibit the financing of firms by insurers ? The Authority does not believe it, because it allows some firms, recognize it, develop their activities and provides them with financial stability while allowing insurers to consolidate their distribution network.
The Authority considers that article 253 of bill 150 will not measure if the funding granted by an insurer to a broker allows him to exercise undue influence over, or control de facto.
Adding a standard
Two requirements are considered by the government to ensure a real independence of the brokers vis-à-vis insurers : offer a minimum number of proposals from different insurers, and limits on the ownership of firms.
These measures are not, however, sufficient for the Authority, which proposes to add a standard additional, providing the independence required to use the title of broker. These principles reinforce the distinction between the agent and the broker-dealer, the independence with respect to an insurer, the transparency of the links or the concentration of business, absence of conflicts of interest or undue influence.
«A standard that would have an impact in the reality of the market today, like the one of tomorrow, and which could not be indirectly bypassed. «
Not in the name of affiliated broker
Questioned by the minister of Finance, Carlos J. Leitão, on the suggestion that was made last week to create a third form of practice and name, is that of » broker affiliate «, the CEO of the Authority was polite while denying this avenue.
«It seems to me that this is an idea carrier, he repeated two times. In the end of the runway, the broker has obligations towards his client and must act, to shop. Ultimately, if the broker is affiliated with a single insurer, I think it has to truncate the notion that we want to preserve between an agent and a broker. «