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:
1. Information and advice to consumers
2. Identification of the online insurance provider and the complaint process
3. Disclosure of necessary information about the product
4. Opportunity to review the accuracy of information provided
5. Copies of the application and the contract
6. Reliability of transactions
7. Protection of personal information
8. Designation of beneficiary
9. Termination of insurance contract by the insurer
10. Comparison shopping sites
11. 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.
FOOTNOTES
1 The CCIR is a national forum which promotes collaboration among the Canadian provincial regulators for improving insurance regulations and protect public interest.
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.