On February 6, 2012, the Canadian Council of Insurance Regulators ("CCIR") released a CCIR issues paper entitled Electronic Commerce in Insurance Products ("Issues Paper"). The purpose of the Issues Paper is to educate, stimulate debate, launch a process of consultation and build a common understanding for regulators and stakeholders regarding electronic commerce in the insurance industry.

Currently in Canada, there is no regulatory framework specifically applicable to the online distribution of insurance products, although a number of voluntary and legislated schemes that apply to electronic transactions generally exist. Further, there has been little guidance provided by the Office of the Superintendent of Financial Institutions Canada and the provincial and territorial insurance regulators. Most regulators appear to take the position that the current rules regarding the traditional sale of insurance apply equally to online transactions.

The following are key aspects of the Issues Paper:

2. Current Use of Electronic Media – The Issues Paper outlines the current use of electronic media in Canada to advertise, distribute and maintain insurance products. In particular, the Paper identifies four main activities relating to the online distribution of insurance: 1) providing information to consumers, 2) obtaining a quote, 3) concluding an insurance contract, and 4) obtaining advice. The information was compiled based on a review of a collection of websites operated by insurance intermediaries and insurance companies in Canada.

The CCIR seeks stakeholders' comments on the accuracy of its findings.

2. Consumer Protection – The Issues Paper outlines a number of potential consumer protection issues which may be of concern to regulators. Some of these issues include risks to consumers relating to:

  1. the absence or weakening of advice from licensed intermediaries;
  2. lack of understanding as to whether the service provider is a regulated entity;
  3. lack of accessibility to necessary information about the insurance product;
  4. lack of opportunity to review the accuracy of the information provided to the service provider;
  5. lack of awareness of the terms and conditions of coverage;
  6. reliability of the online transaction; and
  7. security of personal information.

The CCIR discusses possible ways to address these consumer protection issues.

The CCIR seeks stakeholders' comments on whether the issues identified are significant, whether all significant issues have been identified, and how best to achieve consumer protection goals in the electronic commerce context.

3. Existing Paper Transactions – The Issues Paper outlines the current practice of paper beneficiary designations and termination of insurance policies by registered mail or personal delivery. In some instances, these paper transactions are currently mandatory under the applicable insurance legislation or regulation.

The CCIR seeks stakeholders' comments on the current practice of designating beneficiaries and terminating insurance policies by paper transactions.

With the increasing importance of e-commerce, it is hoped that this Issues Paper will lead to the establishment of a harmonized regulatory framework in Canada governing electronic commerce in insurance. However, any regulatory change should be flexible enough to accommodate the increasing frequency with which changes occur in Internet technology and usage.

Paper

The Issues Paper is available by clicking here or on CCIR's website (www.ccir-ccrra.org).

Submissions

Stakeholders may submit comments to the CCIR by April 27, 2012, preferably by electronic means to the CCIR Secretariat at ccir-ccrra@fsco.gov.on.ca.

The CCIR intends to publically post all submissions on its website.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.