Canada: Online Insurance Products In Canada: Challenges For Regulators In Updating The Law

Every generation brings with it a different way of doing business. As the baby boomers leave the workplace, an entire generation weaned on the conveniences of the internet is coming to the fore of Canadian society and industry. As the millennials take up the mantle of acquiring wealth, buying homes, opening businesses, and moving into positions of leadership in the marketplace, their demand for insurance products will only continue to grow.

For insurers, success in this marketplace will require focusing on the needs, the wants, and the business mentality of a new generation that has grown up with the world at their fingertips. Every transaction is available online, from buying a pizza to investing in mutual funds. Expectations are no different when it comes to insurance: buying it should be quick, convenient, and available to anyone with a smartphone.

In Canada, insurance regulators have begun to anticipate the changing tide and are preparing the groundwork for the growing market pressure to make insurance available online.

In 2015, Quebec's financial services regulator, the Autorité des marchés financiers (AMF), released its findings and guidelines for the online distribution of insurance1.

The guidelines suggest that regulators are prepared to take a generally permissive approach to the online distribution of insurance products.

Even so, they must address concerns about public protection, which is why they are calling for safeguards. Among them, the online provider must put in place an adequate online self-assessment tool that consumers can use to make informed decisions about the insurance products they need. The tool would have to, at least, allow access to an insurance representative and would have to remind consumers of the value of obtaining expert advice from certified insurance professionals.

The AMF would also require that the online system clearly bring product features, coverage, exclusions, premiums, and rights to cancellation, among other important facets, to consumers' attention in a "step-by-step" approach designed to have them read key information about the transaction. Given that an expert intermediary is not present to interpret any technical jargon, the insurance product must be written in plain language.  

The AMF's position appears to be in line with that of the Canadian Council of Insurance Regulators (CCIR) on the use of electronic commerce in insurance products2. The CCIR also takes a permissive approach and has indicated that Canadian regulators will accommodate the seemingly inevitable shift to increasing e-commerce in the insurance industry.

A potential difficulty lies in the handling of more complex and tailor made policies. A one-size-fits-all approach to purchasing insurance products online won't always be suitable for more complicated policies that are difficult to translate into layman's terms. Access to professional advice should be tailored to the complexity of the product.

Currently, the relevant legislation in Quebec, An Act Respecting the Distribution of Financial Products and Services3, does not account for insurance e-commerce and there is growing pressure to update the law. Lawmakers in Quebec are contemplating4 whether they need to intervene to better regulate an increasingly popular means of financial product distribution. The goal, in such modernization projects, is to give industry the means to adapt to a changing market while remaining sufficiently open to constant evolution. Given the growing consensus among Canadian regulators, it is likely that any future government action will largely follow their recommendations.

Whatever form regulation may take, the fact remains that online insurance distribution is here to stay.

The challenge for all industry players is to find a balanced approach that meets clients' desire for online options while adequately protecting them in their haste to click "I agree."


1 Autorité des marchés financiers, Internet Insurance Offerings in Québec (April 2015).

2 Canadian Council of Insurance Regulators, Position Paper – Electronic Commerce in Insurance Products (October 2013).

3 An Act Respecting the Distribution of Financial Products and Services, CQLR c D-9.2.

4 Finances Québec, Rapport sur l'application de la Loi sur la distribution de produits et services financiers (May 2015).

Online Insurance Products In Canada: Challenges For Regulators In Updating The Law

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