Insurance agents get their passport

Canadian insurance agents and brokers can now work anywhere in the country. In June, the Canadian Council of Insurance Regulators and the Canadian Insurance Services Regulatory Organization approved a reciprocal licensing system, similar to the passport model talked about in the securities industry.

The reliance model, which quietly came into effect on July 4, will increase harmonization of the Canadian insurance industry, allowing registered brokers to work in other provinces, providing they follow the rules in their home jurisdiction and in some instances, meet further requirements specific to certain jurisdictions. It’s a great step forward for insurance agents, considering that the securities industry still hasn’t managed to get its passport model approved in all provinces, even though these initiatives both started about the same time.

Under the agreement, the continuing education credits that insurance agents and brokers earned in their home province will be recognized by other jurisdictions. The plan also allows for errors and omissions insurance to follow brokers who wish to register in another province.

But there are some caveats, particularly around the issue of continuing education credits. “B.C. had their heels dug in and they were going to insist on 60 hours [worth of CE credits],” says Jim Bullock, registrar of the Peel Institute, who sat in on the committee reviewing these changes. Other provinces, such as Ontario, require only 30 CE credit hours. “In the end they left their heels dug in.”

The provinces eventually agreed not to impose any further CE requirements on a non-resident agent or broker who has also satisfied those requirements in their home Canadian jurisdiction. But here’s the catch. If the agent or broker wants to work in a province that asks for more CE credits than required in their home province, they will have to make up the difference. This will mean, for example, that, agents from Ontario will have to pick up an additional 30 CE credits before being approved in B.C.

The rules around E&O were also massaged. Under the proposal, “jurisdictions that currently limit the maximum policy deductible, will accept a policy where the first dollar of any claim is to be paid directly to the claimant to be equivalent to zero deductible.” Ontario, Quebec and Newfoundland and Labrador are the three provinces that limit the size of policy deductible.

Bullock says this is a good development for all involved in the insurance industry. “It reduces the mindless paperwork that primarily the corporations face in trying to deal with multiple jurisdictions.”

Grant Swanson, who chaired the reciprocal licensing standards committee and is a senior manager with the Financial Services Commission of Ontario, says there was never any disagreement about whether this was a worthwhile proposal.

“The model is reflecting the fact that if you are already licensed in one province you are not a new person to the insurance system in Canada, you’ve already been regulated by somebody who has checked out your suitability, made sure you’ve had the required educational proficiency, made sure you are compiling with your errors and omissions insurance requirements [and have] made sure you are complying with the continuing education requirements.”

So why did it take four years? One of the reasons Bullock suggests is the delays caused by the different cycle registrations periods in each province. Swanson adds that the development of a common application form was a complicated thing to do that required time to be constructed.

Even at four years, the CCIR and CISRO were able to work faster than the securities industry. “On the insurance side, the insurance companies were putting a lot of pressure on the government to harmonize all of this,” says Bullock. “One of the observations I have of the Canadian securities industry is that the regulation of it is hopelessly fragmented because you got governmental organizations, the securities commissions, in theory responsible for it but they farmed it out to a loosey-goosey network of subcontractors called the IDA who aren’t recognized in law.”

The new Investment Industry Association of Canada sees moving forward on the passport model of regulation as a prelude to adopting a single regulator model. Earlier this year, the premiers of seven provinces endorsed the passport system, although not all have followed through with legislation. Ontario is the main passport holdout, while Quebec supports the initiative while continuing to oppose the creation of a national securities regulator.

Filed by Mark Brown, Advisor.ca, mark.brown@advisor.rogers.com

(07/28/06)