Those familiar with the regulation of the incidental sale of
insurance in Canada will recognize many aspects of Manitoba's
new regime1 from those in Alberta and Saskatchewan.
However, Manitoba – perhaps having used the opportunity to
consider the strengths and weaknesses of the other regimes –
has incorporated several features that, in this author's view,
deftly acknowledge the reality of the consumer electronics
marketplace in Canada.
One such feature is the availability of a restricted license to
a "portable electronics vendors" for the sale of
"portable electronics insurance"2.
A recent study by Catalyst revealed that more than half of all
Canadians own a smart phone3 and that the use of these
devices permeates every aspect of life. Given the ubiquitous
nature of smart phones and the relative ease with which they can be
lost, stolen or damaged, there is a market for an insurance product
that will soften or eliminate the financial impact of these events.
Generally speaking, products sold by a third party that provide
coverage in the event your device is lost, stolen or damaged
– that is, losses that are unrelated to a defect or
failure in the device – are considered "insurance"
and may only be offered and sold by a licensed insurance
agent. While there may be coverage for your smart phone under
your homeowner's policy (assuming you have one), it is likely
that your deductible exceeds or is equivalent to the out-of-pocket
cost to replace the device in any event.
Current provincial regulatory regimes in Canada effectively
prevent many smart phone vendors from offering customers the
opportunity to protect themselves in the event of a fortuitous
loss. The Insurance Amendment Act addresses this gap.
The definition of "portable electronics vendor" in the
Act expressly contemplates a person or entity who
"sells or leases portable electronics devices" or who
"otherwise provides portable electronics devices in connection
with a transaction between the person or entity and another person
or entity". This bifurcated definition incorporates both
hardware vendors as well as service providers who also sell
devices. The regime goes one step further by acknowledging
the reality that many entities in the marketplace are franchise
operations. The regime allows a licensee to act or offer to
act through the employees of another entity (subject to
certain requirements). This would allow a franchisee's
employees to offer and sell portable electronics insurance to
customers on the basis a restricted agent license obtained and
maintained by the franchisor. Again, it is clear that
Manitoba took a hard look at the reality of the consumer
electronics marketplace and focussed on establishing a regime that
addresses consumer protection and regulatory issues while allowing
for the transaction to occur at the point of sale.
The definition of "portable electronics insurance" in
the Act is not dissimilar to the definitions for
"product warranty insurance" used in British
Columbia4 and Alberta5 in that it simply
references "coverage against damage to or the loss of
" a device. There is nothing in the Act or the
regulations to suggest that this definition will be read down to
limit the "damage" and "loss" to only that that
is caused by a defect in the device itself.
It is important to note on a cautionary basis that the
Superintendent of Insurance in British Columbia recently released a
Bulletin6 confirming that its definition of
"product warranty insurance" should be interpreted as
only capturing loss or damage caused by a manufacturing
defect or defective installation. This is despite the fact
that such limiting language does not appear in the definition. For
a previous article on the issue, please see
'If it's Broke, Make Sure You're Allowed to Fix
It is also important to note that in expanding the type of
entity that may sell incidental insurance products, the
Act imposes various requirements both on the incidental
sellers and on the licensed insurers who underwrite the
insurance. The new regime comes into effect as of
January 1, 2015 with transitional provisions coinciding with the
June 1, 2015 licensing renewal cycle at the Manitoba Insurance
1. The Insurance Amendment Act, SM 2012, c 29,
s.380.1(2), cf. Insurance Agents and Adjusters Regulation
Man R 215/2014.
2. Insurance Agents and Adjusters Regulation Man
R 215/2014, s. 23.
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