British Columbia's Financial Institutions Commission (FICOM)
has issued Information Bulletin INS-15-002, which
sets out FICOM's expectations for insurers, exempt sellers and
creditors regarding creditor's group insurance (CGI) being
offered in British Columbia. The Information Bulletin was published
as a result of FICOM's concerns over the sale and distribution
of CGI products. Lenders and their third-party service providers
should be aware of FICOM's new expectations and the dates for
implementing amendments to existing CGI contracts.
The Information Bulletin outlines a number of expectations on
insurers, exempt sellers (which in some instances may be lenders,
depending on their role in the sale or distribution of CGI
products) and lenders. The expectations on lenders will apply to a
lender's third-party agent undertaking certain activities. In
cases where a third-party agent is used, the lender will retain
ultimate responsibility for ensuring FICOM's expectations are
Under the Insurance Licensing Exemptions Regulation, CGI can be
sold incidentally to the arranging of credit by exempt sellers that
are not licensed insurance agencies. In some cases, a lender will
be an exempt seller and therefore subject to the following
expectations related to knowledge, training and the distribution of
CGI. FICOM outlined that it expects exempt sellers of CGI to:
Possess sufficient knowledge and training on
eligibility requirements and product features to ensure ineligible
customers are not being enrolled
Be able to identify instances where they should
direct customers to contact the insurer for further information or
Provide clear information to customers on the terms
and conditions of all CGI products
Refrain from engaging in coercive practices or
imposing undue pressure on individuals to obtain CGI
Provide proper disclosure to all customers on the
voluntary nature of CGI
Communicate to customers how they can
contact the insurance company for clarification regarding
eligibility, the terms and conditions of the coverage, the claims
process, or any other matters related to the
In addition to the expectations for insurers and exempt sellers,
FICOM outlined the areas in which lenders must play an active and
substantial role. FICOM directed insurance companies to ensure that
the lender under a CGI plays this active and substantial role in
the following areas:
Procurement of the insurance
Product design, including all related forms and
materials, to ensure that the product is designed to be suitable to
the needs of the creditor's debtors
Negotiation of the terms and conditions under which
the insurance coverage will be offered to its debtors, including
who will be permitted to enrol customers into the CGI
FICOM recognized that a lender can explicitly assign a
third-party to undertake the role of effecting a CGI product on its
behalf. The insurer and lender will nonetheless retain
responsibility for ensuring that all regulatory expectations are
TIMING OF IMPLEMENTATION
CGI contracts that are set to be renewed or expire on or before
December 31, 2017 need not be revised. Any CGI contract with a
duration longer than December 31, 2017 will need to be renegotiated
with the lenders' involvement by March 31, 2016. Contracts do
not need to be resubmitted to FICOM for approval.
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.
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