P&C industry agrees to full compensation disclosure

(November 12, 2004) Canada’s property and casualty (P&C) insurance industry has agreed to provide full disclosure of how brokers are compensated, beginning in the new year. But it’s too early to say if the life and health side will take similar steps, according to an industry spokesperson.

The Insurance Bureau of Canada (IBC) announced today that P&C insurers will be required to provide full disclosure on their websites by January 1, 2005 of information concerning the way in which all sales intermediaries are compensated.

“We recognize the need for clarity to help consumers make informed and confident choices when they buy insurance,” says IBC president Stan Griffin. “Regulators have always had the responsibility of collecting information on how insurance representatives are paid. Today’s initiatives will put this information directly into the hands of consumers.”

Point-of-sale disclosure information must also be provided by insurers who sell through dedicated agents or other intermediaries, IBC added. “It will indicate whether these intermediaries are paid a salary and list the range of potential contingent compensation available to intermediaries that work for a given insurer.”

The Insurance Brokers Association of Ontario (IBAO) moved quickly to adopt the IBC’s recommendation, releasing its point-of-sale protocol for disclosure of broker commission. “As brokers, we have always been willing to reveal our compensation terms if asked by our client,” said IBAO president Robert Carter. “With this document, we will be advising our clients at the point-of-sale how we are compensated, and any other financial terms that we have with insurers without the client needing to ask.”

The changes come in the wake of an investigation of the U.S. insurance industry by New York State Attorney General Eliot Spitzer and pressure from Canadian consumer advocacy groups for increased transparency.

So far, the probe has focused on the P&C industry. But last month, the Canadian Council of Insurance Regulators announced it was launching a joint investigation with the Canadian Insurance Services Regulatory Organizations into relationships between insurers and insurance brokers.

Representatives of the life and health insurance industry will be meeting with regulators later this month, says Wendy Hope of the Canadian Life and Health Insurance Association.

“There’s nothing to report yet and it’s too soon to speculate about what might happen,” Hope says. “But the property and casualty and life and health insurance industries are very different.”

Life insurance firms will also be participating in the discussions. “We accept and welcome a higher degree of scrutiny,” Sun Life president Donald Stewart said in a recent conference call. “And we support the concept of greater transparency around broker compensation.”

Filed by Doug Watt, Advisor.ca, doug.watt@advisor.rogers.com