Ain’t No Stopping Us Now: Online Sale of Insurance in Quebec

19 October 2018

On June 13, 2018, the National Assembly of Quebec adopted an Act mainly to improve the regulation of the financial sector, the protection of deposits of money and the operation of financial institutions ("Bill 141"). This new bill will have repercussions on many institutions and stakeholders, as more than 60 laws governing the financial sector in Quebec (some of which have not been revised for decades) were amended.

Bill 141 was introduced on October 5, 2017 and was passed in principle on February 15, 2018. It was then reviewed by the Public Finance Committee, which submitted many amendments. When first introduced, the bill proposed to abolish the Chambre de la sécurité financière and the Chambre de l'assurance de dommage, two non-governmental self-regulatory organizations responsible for providing discipline and supervision in the insurance sector, and to integrate them into the Autorité des marchés financiers ("AMF"). One of the most important amendments under the assented version of Bill 141 is that those two organizations will remain in place and autonomous.

Of the many changes enacted by Bill 141, a significant one is a framework allowing insurance brokerage firms to offer insurance products, without the involvement of an individual natural person (Bill 141, s. 525). This general framework will allow the sale of insurance products and services online without specific regulation (with, however, the AMF receiving a mandate to draft a regulation containing details as to how this would work. (Bill 141, s. 557). In 2015, the AMF conducted a consultation regarding the sale of insurance online, subsequent to which as many as 20 memoranda were submitted from insurance firms, financial institutions, consumer groups and certified representatives. More details on the framework and application of Bill 141 will therefore be determined by the AMF in light of the submissions of those key players in the insurance industry. The new framework will be included in amendments to the Act respecting the distribution of financial products and services (chapter D-9.2) (the "Distribution Act") and is expected to come into effect June 13, 2019 (Bill 141, s. 814(4)).

While some consumer groups expressed concerns regarding the online sale of insurance, Bill 141 includes certain consumer protection measures. Section 525 of Bill 141 provides that a firm must take the necessary steps to ensure that its representatives engage, in sufficient time, with clients who express the need to interact with a representative and that the firm must inform its clients that such representatives are readily available. Furthermore, in order to offer insurance products or services directly to the public without the involvement of an individual, a firm or an independent partnership must be registered with the AMF as a distributor (Bill 141, s. 588).

Additionally, a new provision of the Distribution Act will include a requirement for damage insurance brokers to obtain quotes from at least three different insurers who do not belong in the same financial group when offering insurance products to a client who is an individual (Bill 141, s. 517, 527(4)). This requirement only pertains to damage insurance products intended to meet personal, family or household insurance needs and it will come into effect December 13, 2019 (Bill 141, s. 814(5)).

Another significant change enacted by Bill 141, is that the Act respecting insurance (chapter A-32) will be replaced by the new Insurers Act. This new act proposes to modernize the supervision and control of insurance business and the activities of licensed insurers in Quebec, by reinforcing governance standards applicable to them. The Insurers Act will also introduce regulations for the online distribution of insurance products by insurers, without the intermediation of an individual or a firm.

Allowing insurance brokers to offer insurance products online represents a modernizing leap forward for the insurance industry in Quebec. Bill 141 seeks to simplify the process of purchasing insurance coverage and, as a result, puts Quebec on a level playing field with other jurisdictions that have already put this change into place such as the United States and the countries comprising the European Union.

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