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Bank Marketing, AIC Disciplinary Website, Consumer Protection in Travel Insurance

Posted By Thom Young, March 28, 2017

The Banks Are Coming, the Banks Are Coming—They Never Went Away

Recent media reports (e.g., Insurance Business) have revealed that once again the marketing departments of our federal banks are flouting the rules for insurance sales. The problem seems cyclical. About every four or five years for as long as I can remember, the marketing managers unfamiliar with regulations governing their industry (maybe they’re a new crop of managers) begin their never-ending search for success by generating new revenue streams for their employers. (Maybe they review the revenue ledgers for the profit centre they are responsible for and wonder why there’s so little in the ones for insurance.)

Bank officers seem to receive little in the way of training on the regulatory responsibilities limiting their operations. While they may understand that banks cannot sell insurance from their branches, they don’t seem to understand that promoting the products of a subsidiary that sells insurance from their branches is the same as selling the insurance itself. In my own personal dealings with banks and lenders, I’ve often seen the offer of financing come with recommendations for life insurance and General insurance sourced by bank officers. When I do, I immediately notify the regulators, but most non-industry-related borrowers would not have any idea that they were being unduly influenced and directed by the inclusion of an insurance agent’s business card or even a quote for coverage when they are in the process of arranging financing.

Unlike the credit unions which are for the most part provincially regulated on marketing rules, the chartered banks are governed by the federal Bank Act. The Act provides a number of regulations that limit the ability of banks to use their market dominance and biased influence to compete unfairly in our business. The good lobbying efforts of our industry associations have been able to continue this limitation on the banks’ entry in our insurance market. Still, the banks seem to need to be reminded on regular intervals that they’re welcome to compete with us in selling insurance so long as they play the game the same way we do. Under Alberta insurance regulations, employees of a lending institution and many other professions cannot hold an agent’s licence if what they do can be used unfairly to influence the buying public into purchasing policies from them. Bankers are also restricted from holding an insurance licence by the Bank Act, which limits them on this point for the same reasons.

Those of us required to hold a licence to sell insurance are personally responsible for upholding the rules. The regulations require us to understand the rules, and our very jobs hinge on our compliance. The individuals involved in the banking business have no licences to enforce their compliance. Their employers are bound by the regulations but are rarely sanctioned for their employees’ violation of them. When they are caught in activities outside of the rules, their regulator most often sends them a letter to deal with the infraction and orders them to cease from further activity that is outside of the rules. When the federal Minister of Finance gives them formal notice, they usually comply, but sometimes they push back.

The banks pushed back a few of years ago when they were developing websites with hyperlinks to their insurance divisions. Their web pages advertising insurance products were indistinguishable from their banking pages. When consumer groups and our national association brought this conflation of the bank and the insurer to the attention of the Minister of Finance, the minister issued a notice that in his view they were violating the provisions in the Bank Act that prohibit the sale of insurance in their branches. Initially the Canadian Bankers Association began lobbying against this interpretation and attempted to justify the activity. The appeal didn’t go so well. The minister sent them a letter clarifying why they were wrong. Arguing a point of interpretation with the people who make the regulations rarely wins. Sometimes new regulations may be introduced that clarify what the government meant. Sometimes these new rules may seem punitive to the industry being regulated. Our industry can attest to such futile struggle in several examples over the years, not the least of which is the ongoing structure of the Alberta auto reforms introduced by the Government in Alberta over a decade ago.

The federal financial watchdog has now formally given the banks notice that they are under investigation for their marketing methods. The findings will no doubt show that the banks continue to press against the marketing service limits set out in several fair market regulations, not just the insurance ones. Telemarketing ignoring the Do Not Call List and violations of tied-selling rules for bank products seem to abound. These issues should not recur cyclically. Perhaps a couple of multi-million dollar fines might get the attention of the banks’ own in-house compliance people. Who knows if even that would have any effect. When you make billions of dollars, a million dollar fine would just be chump change, wouldn’t it?

The ongoing arguments about who can and how they can sell insurance products in Canada will continue. The banks invest millions of dollars in government advocacy and have whole departments in their organizations that develop strategy to get around rules and regulations that they see limiting their right to dominate any field in which they choose to compete. As with the stock brokerage investment business and before that the Trust business, they’ve been able to take over an entire industry and market sector completely with hardly any public notice. While some of our colleagues will argue the old laissez-faire point of view against regulations that limit or restrict access to markets, history repeatedly demonstrates that, without rules to ensure fair play, the marketplace does not play fair. This principle applies as much to those already in our business as it does to those who wish to expand their operations into it. Both the new entrants and the current players have to be watched closely as time and again insurers and large brokers try to dominate the market to the point that they can bypass competitive reality. Allowing anyone to do so is not going to benefit the consumer, the independent broker, or ultimately anyone. Market dominance destroys healthy competition by stifling the adaptation of price, service, and product to a competitive end. Without regulations to ensure fair play and proper enforcement of them, any marketplace won’t remain healthy or beneficial for long.

Transparency Is Important

The very public nature of our disciplinary matters has now become readily apparent in the Alberta Insurance Council’s new website. The public can now view the decisions of the disciplinary committees for the General Insurance Council, the Life Insurance Council, and the Adjusters Insurance Council, as well as the work of the appeal boards for each, at http://decisions.abcouncil.ab.ca/abic/en/nav.do.

As someone who has been involved in every one of the General Insurance Council decisions for the past four years, I like that the work being done is easily available for review. I think the very public and transparent record of these disciplinary matters will both encourage all licence holders to follow the rules properly and make the industry and public aware of the work being done to ensure that we serve the public properly!

If you are a DR for an insurance brokerage firm, I would encourage you to subscribe to this site for updates on who’s being disciplined for what. If your shop is large enough to have an HR person, I’d make certain that that person is subscribed too. You can subscribe to an RSS feed for email notifications of all new listings on the site at http://decisions.abcouncil.ab.ca/abic/en/l.do.

Speaking about the Regulations—Better Consumer Protection Is Needed

Ultimately, government regulations are enacted only to benefit the public. Whether the regulations are about the way insurance coverage is interpreted and adjudicated for losses or about keeping the market for these products competitive for the consumer, they’re all about the customer. The main lobbying point from the various associations representing all the participants in our industry is that making rules that benefit their operations will provide a better outcome for the public.

One issue that seems to cause recurring problems is distance from a licensed insurance agent. The further the insurance sale gets from the sales intermediary who is licensed and required by the regulations to have a standard of knowledge and professional conduct, the worse the outcome seems to be for the customer. The problem arises with many different kinds of insurance products. Take creditor life and disability insurance for example or equipment warranty coverage offered by equipment dealers. Travel insurance is another example. A report produced by insurance regulators has determined that a good number of travel insurance companies in Canada are not treating their customers fairly. Have any of you had the displeasure of reviewing one of these wordings for your clients after the adjuster tells them they’re not covered? In my experience with several situations, reviewing the wordings is complicated and discussing the coverage with the insurers confusing even for an insurance professional. The insured often times gives little thought to what the coverage is until such time as when a claim arises.

bitterness of poor quality remains long after the sweetness of low price is forgottenThe consumer’s assumption of comprehensive coverage seems to prevail as the seller puts little emphasis on pointing out the limitations of coverage and the seller’s knowledge of the product rarely amounts to little more than understanding where the insured is to sign on the application. Such deficiencies might be acceptable when the product is an extended warranty on a $135 ink jet printer but clearly not when a travel insurer may be adjudicating a US$50,000 hospital bill claim. This client might not have travelled to where the medical condition occurred had this client been aware that a claim arising from a condition that is already being treated may not be covered. Alternatively, this client might have been offered a product with a higher premium that was commensurate with the risk exposure for this client’s situation.

The real issue with travel insurance from an insurance perspective is that it is “post claim” underwritten. Few questions are asked in the application stage. The insurer thoroughly reviews the risk and makes a qualifying assessment only when a claim is made. Only then is the question asked, “Would we have insured this person for this risk?” If the answer is “no,” the applicants are left on their own to deal with the loss and not even given the basic assistance of adjudication by an insurer that often reduces the cost of a claim in the U.S. by more than half of the uninsured billings. Other than a few absolutes that limit or void coverage such as age and pronounced medical conditions, little in the process of obtaining travel insurance provides the applicants with the knowledge necessary to comprehend whether the policy actually provides the protection they expect it does. Involving an agent with an Accident and Sickness licence in the process provides a good chance that the client understands what a preexisting condition may be and how it is defined. Unfortunately, these contracts are more frequently arranged by travel agents or even completed online by the individual applicant dealing directly with the insurer than they are being completed with the assistance of an insurance professional. I recall reviewing a declined claim for an 83-year-old lady who bought a policy for a trip to Florida only to find that after a medical event leaving her with a $15,000 bill that the company she bought the coverage from didn’t insure anyone over the age of 65. She was even more confused because she had been buying the coverage from the same people for 15 years.

Travel insurance is a lucrative business. Analysis of the returns on this product for the insurers show it to be a real money maker. More checks and balances seem needed in the process to protect the consumer better. Does anyone have different thoughts or some suggestions as to how to address this problem? Please send me a note!

In Conclusion

I was out last week for my first Canadian ride on a motorcycle this year. The roads are covered in sand and gravel, wet, and in shady spots even icy. With nearly 60 years of riding experience, I’m well aware of the technical issues of road conditions and am able to navigate these hazards without too much difficulty. The road conditions are a given, but the main hazard for bikers old and new are the people driving the four wheelers. Particularly in spring, they’re not used to motorcycles on the road and often enter the roadways or change lanes without consideration of the people on motorcycles. Our bikes are small, hard to see, and quicker than many expect them to be. It’s hard to judge how fast we’re coming at you when you’re making a left turn, and we fit too well into the blind spot beside your car. While we do our best defensively to avoid getting in your way, if you are not watching for us we can’t always be quick enough to avoid you. The first statement given by the driver of a car when explaining an accident with a motorcyclist is always “I didn’t see him.” The truth more properly told is that the driver wasn’t looking. As our spring continues to unfold into our brief summer, please give us a thought while driving, and take a little extra care looking for us! We’re not all wheelie popping head bangers on crotch rockets ripping up the roads. Some of us are quite harmless old papas just out enjoying a leisurely ride on a sunny spring day. My grandchildren will thank you if you watch out for me in your travels.

Are you getting ready for Convention? I’m excited this year and will be presenting an interesting topic for discussion at the Broker Town Hall. If you haven’t got yourself booked in yet, get yourself on the IBAA website and do it now!

Keep those ideas for discussion coming. My private email address is thom.young@landy.ca and you can get me on twitter @Thomcat04. Some of you have found me on LinkedIn and Facebook too.

The opinions expressed in this blog are not necessarily those of IBAA.
Comment on this post below or email Thom Young privately. Thom also encourages suggestions for topics.

 

Tags:  Alberta Insurance Council  Bank Act  banks marketing insurance  disciplinary website  insurance licence  motorcycle  travel insurance 

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Federal Lobby and National Insurance Education Standards—Strength in Unity

Posted By Thom Young, June 10, 2016

A Report from the Capital


This past week I participated for the first time in the annual Insurance Brokers Association of Canada lobbying efforts in our nation’s capital. Once again, we focused on maintaining the status quo in the upcoming parliamentary review of the Bank Act. Currently, banks are able to compete with brokers so long as they separate their insurance operations from their banking operations. Under the current regulations, they are restricted from offering insurance products out of their branches and restricted from advertising their banking products with their insurance products. The Bank Act comes up for review every five years, and the influence peddlers called lobbyists work very hard to convince the lawmakers to produce regulations that favour their competing business plans and interests.

This year, the task is particularly onerous for both sides of the argument. Last year’s election results produced the largest turnover of MPs in several decades, so many of them are receiving these messages for the first time. This freshness can be an advantage as these people are just as diverse as our population. While you may think that their political stripes set the baseline for their opinions, I have found in my years of talking with political representatives that most are willing to hear you out and listen to your thoughts on the topics. Granted, they may have preconceived opinions. Nonetheless, most are doing their best to learn about the issues while finding out what being a representative of the people is actually all about. Getting to talk with newly elected members of parliament is a golden opportunity to present a good case for your cause that will not only influence their perspectives but will also stimulate discussions and debate within their caucus. The challenge to get an effective message on behalf the insurance industry to these people is coordinated by IBAC and delivered by volunteers from insurance broker associations from all across our country.

This year, we had nine people on task from Alberta and were very well received by everyone we met. Our message was brief and concise: our concern continues to be that, if banks and other credit-granting institutions are allowed to retail insurance from their branches, the public will be unfairly coerced into the purchase of insurance products. If the products are offered at the same time a loan is granted, the inference that the loan is conditional on acceptance of other services deters consumers from assessing the comparative value of the product for their circumstances and puts the insurer at an unfair advantage. If the bank doesn’t directly sell the products required to mitigate its loan risk, then consumers (or their brokers) are more motivated to shop for the best product. Since 1991, the banks have been restricted from selling insurance products from their branches, and the evidence shows the consumers well served by a competitive insurance marketplace. We’d like to see that competition continue.

My personal observations of the process were very positive. I’ve been to the Hill more than a dozen times in my life: as a child, a student, a soldier, and often just as a tourist. I recall a visit with my grandfather when I was very young. He was good friend of John Diefenbaker, and I was given what I thought of then as a very boring tour of the place by these two old fellows. I still recall some significant insights imparted to me then that remain in my mind today, especially the point that this is the people’s house and no part of it should ever be unavailable to the people. While some of our freedoms have been necessarily impeded as a result of the need for security (as evidenced by the bullet holes in parts of the building), parliament remains a very open place available to anyone willing to suffer the indignities of the countless security check points. I’m not really complaining about security though. The only downside of the lobbying was the amount of walking needed get to the appointments. It seemed we would just finish a meeting in the Justice building on the west side of the Hill and the next one would be at the East Block and then back to Justice. The timing and location was dictated by the people we were meeting with and not scheduled with our convenience in mind. Accordingly some 14 or more kilometers were recorded in the process by my group.

I found all of the MPs we met with to be interested and glad for the information we imparted. I was most impressed with the Senators we met. As to the issues and our concerns, they very much aware of the discussions and asked the most intelligent questions. Perhaps I’ll have to rethink my opinion of this institution as it does appear that good work is done by many of them regardless of the aberrations that we constantly hear about in the media. Recent changes to the manner in which the Senate works were also explained to me, and I was genuinely convinced that these people want to fulfill their constitutional obligations. Now they are freed from the yoke of political affiliation, they may well able to live up to their intent. Perhaps that’s a topic for a future issue.

Outside of our issues, many of the MPs we met with enlightened us with the concerns of their constituents. I was asked many questions about the impact of the assisted-dying legislation on the life-insurance business. Of topical concern, of course, were the recent fire losses in Fort McMurray. Most of the people we were talking with are following the media coverage. Expiry of the mass evacuation coverage was mentioned several times, as was the industry’s response to the proposed rezoning that would restrict rebuilding in certain areas in order to secure a proper fire break. We able to answer most of the questions, although they showed that much confusion still exists. Flood coverage was raised in almost every encounter we had. Many wanted to discuss the challenges in coverage variances and availability where it’s needed. These discussions left little doubt that our industry and what we do is very important to these people!

Hill Day was a great experience and, if you ever get a chance to go, don’t miss it. The strength and power of participating in a national association is an awesome thing to experience. Meeting with other brokers and discussing the common issues that concern us bonds us with a purpose. While we all compete with each other as we sell insurance, we also face the same disrupters to our business. As a group, our voice is loud and clear. Individually, we have only local influence that won’t protect us from the national challenges we share.


On the Topic of National Standards, What about Education?


Insurance is insurance is insurance, right? I think I could walk into an office in any country in Europe, build on the knowledge I have obtained in my years as an insurance professional, and find myself in very short order apprised of the small differences in the wordings or intent of the coverage offered to the public. I know I can read an insurance policy from England or the U.S. and interpret the coverages and limitations provided by it. In my career, I have completed the review of a number of different wordings originating in other countries that have become available in our Canadian market. I know I can determine in short order the differences in automobile coverage between all the Canadian jurisdictions and provide an overview to clients that would be sufficient for their understanding, albeit limited by the short notice. Where I don’t know the differences in coverage between Alberta and anywhere else, I can find them out quickly and report them accurately. I know I’m not special or different from many other insurance professionals who have not only acquired the body of knowledge needed to answer questions but also acquired the ability to learn and report on topics about our craft. We are always learning and, even without the regulatory requirement to demonstrate an effort each year, those of us who wish to remain competitive spend much more time learning to respond to our markets’ need for answers to questions than we are ever accredited with CE credits.

For a couple of years now, as a member of the General Insurance Council of Alberta (GIC), I’ve been working on educational issues and reviews of educational materials. It was determined a number of years ago that the licensing examinations had fallen behind and were not testing on changes in forms and coverages in use in our industry and that, with the regulatory changes in Alberta providing for three different levels of licenses, new examinations had to be prepared to address the expected Level 2 and Level 3 hierarchy of knowledge. The consequent changes proved to disrupt the process of getting people licensed as Level 1 agents and advancing them to Level 2. As a result, industry pressure on the regulator saw both the materials used to study for the exams and the questions used in the exams reviewed, reworked, and adjusted. The process is a long one involving competing educational interests and the mandate of the regulator to ensure the public is well served by intelligent and proficient general insurance brokers. The issue was not just that the exams were too hard. The study material has also been challenged as perhaps inadequate.

The process of reviewing the material used to study for the exams, preparing curriculum design documents, and preparing new exam questions that match the new curriculum has been underway for quite some time. The educators are still adjusting their course material so their students are well prepared for the exams. The process isn’t over yet but is well underway. My intent here is not to focus on this progress but to comment on the standards and, in particular, the criticism that the standards set by the Insurance Institute courses and the CAIB program are not relevant.

For quite some time now I’ve been trying to track down the origin of these challenges, and I’m distressed to learn that most of it seems to be coming from our sister association members of IBAC who have their own educational programs and who apparently see themselves as competing with the national program. They believe that the national program is lacking in content and in need of an update. Granted, our GIC committee’s very thorough content review of both the CAIB program and the CIP program did find a number of parts in need of updating, but we also found in both programs that the material referenced in the curriculum design documents (the content informing the examination questions for the license levels) was all adequately covered, with the exception of the specifics of automobile insurance in Alberta.

This discontent with the national education programs concerns me greatly. The influence it has with regulators in other provinces filters into our communication with our and other regulators through the Canadian Council of Insurance Regulators and, in particular, into our communication with the Western Provinces Council of Insurance Regulators. The view that the national programs in place are lacking and insufficient both to learn from and measure equivalencies to the licensing standards has created havoc. As you may remember from a blog many months ago, our committee presented its work on equivalencies to the GIC, which recommended to our government that CIP and CAIB designation holders be granted equivalencies for each level of licensing in Alberta. The response from our regulator has been to tell us it may take a year or more before the government will address this issue. Reasons for the delay include the change in government, among other similar issues, but I have also been informed that the validity of the equivalencies is being questioned at the interprovincial meetings of the regulators.

I find it very strange that any provincial entity would want to undermine the validity of a national program provided by its parent association. Certainly, provincial qualification and licensing courses that meet the burden of content for passing a provincial examination are valuable, but the value of a professional designation that has national recognition can’t be discounted. Do we want to see the letters showing our professional achievements suffixed in brackets with our provincial abbreviation? I don’t. Where a provincial association sees a part of the national program in need of review or update, the inclination should be to fix it and to see the nominal cost of that fix as a contribution to betterment of the profession, not an inconvenience caused by the national organization’s failure to get it done in as quick a fashion as desired. For the record, the CIP and CAIB programs are constantly under review, and volunteers like me are actively involved in rewriting the parts that need updating. Don’t let anyone tell you that process isn’t ongoing—it is!

In Closing


I may be stepping on a few toes with this issue. It’s been a while since I took on as controversial a topic as this, but I am saddened to see our lack of unity. It devalues the status of those of us who have put in the time and effort to get a professional designation that, through the national efforts of IBAC, is recognized from Vancouver to St. John’s as a standard of excellence in the delivery of General insurance! We also look like a bunch of kids arguing in a candy store when the regulators meet to deal with our issues.

The opinions expressed in this blog are not necessarily those of IBAA.
Comment on this post below or email Thom Young privately. Thom also encourages suggestions for topics.

 

Tags:  assisted-dying legislation  Bank Act  building codes  CAIB  Canadian Council of Insurance Regulators  credit-granting institutions  evacuation coverage  flood  Fort McMurray fire  General Insurance Council  Hill Day  IBAC designations  licensing courses and exams  Licensing Level 1  Licensing Level 2  Licensing Level 3  life insurance  property coverage  Senate reform  Western Provinces Council of Insurance Regulators  zoning bylaws 

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