Quebec’s brokers association says the province’s proposed changes for the sector would undermine many brokerage firms and could even result in some going out of business or becoming absorbed by major industry players.
In a position paper submitted recently to the province’s regulator, the Autorité des marchés financiers, the Regroupement des cabinets de courtage d’assurance du Québec addressed four particular areas of the draft regulations for p&c intermediaries, including the proposed creation of a hybrid agency model.
The RCCAQ said creating a new agency model could sow confusion among personal and commercial insurance clients.
“Under this model, direct insurers would be authorized to have a 100% ownership stake in this type of agency while owning and controlling commercial damage insurance activities via brokers,” the brokers association said.
“In contrast with the legal objective of clarifying the difference between an agency and a brokerage firm — and the distinct role of each professional working there — this structure would only serve to increase confusion among clients who already have difficulty navigating the system.”
Furthermore, it said, since this option would enable direct insurers to retain brokerage operations within an agency, consumers would face a major reduction in the number of available distribution options.
The RCCAQ also addressed the proposal for a new requirement that brokers have at least three insurer markets.
“The proposed compliance process seems at odds with the realities facing the brokerage industry,” it said. “For reasons outside their control — geographical location, company size, insurer conditions — some firms might not be able to achieve the stated target.
Another area addressed in the position paper is disclosures to consumers.
The RCCAQ said it recognizes the essential nature of consumer protection in the general insurance brokerage sector, together with the importance of disclosing relevant information to consumers with a view to clarifying the choices available to them.
“However, the RCCAQ cannot support the new disclosure measure proposed under the AMF’s draft regulation. This new measure would primarily entail disclosing the percentage of premium volume by insurer when brokers are getting ready to interact with clients, thus leading to a higher administrative burden, not to mention an ill-considered intrusion into brokerage firms’ strategic business data.”
The association said this additional requirement would have a significantly negative impact on clients’ experiences without improving their coverage.
“In addition, it would weaken each firm in the eyes of its competitors and could even jeopardize business relations with insurer partners.”
Meanwhile, the RCCAQ said it does not want the oversight process for general insurance brokers to result in operational imbalance.
“The process should be comparable for brokerage firms and for direct insurers,” the RCCAQ said. “For example, in addition to the aforementioned impacts, the AMF is prepared to create a new form containing information already disclosed annually in the required maintenance formula required by all brokerage firms.
“It is actually a question of modifying the current form so a new one does not need to be added.”
It said that if the regulation is adopted in its current form, the client experience would be diminished, brokerage firms would be less common in some regions and insurance premiums would go up.
“These are examples of likely impacts that would occur and would work against the client’s interests.”
The RCCAQ also noted that the proposed framework does not strike a careful balance between public protection and market conditions. It called on the AMF to re-evaluate the consequences of the proposed regulation and to consider other ways might pave the way for a truly balanced experience.
“It is important for us to take a stand because the future of the brokerage industry is at stake here,” said RCCAQ chair Patrice Pouliot.
“We recognize the AMF’s work in this regard and we reiterate that we and the regulator share the same goal of protecting consumers. Indeed, consumers’ interests are the central concern of our profession. However, under the proposed draft regulation, consumers will not be better protected and will not have access to better services.”
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