Distribution without Representation

The issue of distribution without representatives in Quebec did not just arrive overnight. When Bill 188 on the distribution of financial services and products was adopted in 1998, the subject was a concern for brokers. In clear terms, the new legislation provided for four methods of distributing financial products and services, including — for the first time in Quebec law — distribution without a representative.

Johanne Lamanque, executive director of the Quebec broker association Regroupement des cabinets de courtage d’assurance du Quebec (RCCAQ), says that in order to prevent overlapping or shifting, the Act clearly mentioned products for which this type of distribution is allowed. According to her, from the beginning, “distribution without representatives was presented as an exceptional situation.” But since that assurance was given, she says, “we’ve seen the emergence of parallel distribution networks that are not subject to any rules.”

In October 2006, the RCCAQ took part in a consultation led by the Autorit des marchs financiers (AMF) on replacement guarantees. At the heart of the discussion is the difference between a replacement cost endorsement offered by insurers and brokers and a replacement warranty offered by the province’s car dealers. The two guarantees are somewhat different, but consumers are exposed to the dealers’ replacement warranty earlier in the sales process, denying brokers and insurers to counsel consumers about other available alternatives.

In its consultation with the AMF, RCCAQ made its position extremely clear: replacement guarantees of any kind are insurance products that must be distributed by certified representatives. Once again invited to take a position on this issue last April, the Regroupement repeated its demands to the Canadian Council of Insurance Regulators (CCIR). In its submission, RCCAQ pressed the AMF to take a position in order to halt current practices, and particularly to prevent the emergence of parallel distribution networks that will have adverse effects on consumers and the brokerage network.

“For the brokerage network, distribution without representatives as we see it at this time — particularly in the automobile, recreational vehicle and agricultural machinery sector — poses significant risks of eroding our market,” Lamanque says. “We cannot allow parallel networks to emerge that are not subject to the same rules, particularly since we have spent the last 10 years meeting a level of requirement that ensures a quality practice that favours the consumer. We need to act.”

CONCRETE ACTIONS

On the political scene last April, the Regroupement submitted its position concerning distribution without representatives to the CCIR special committee on the sale of supplementary insurance. Discussions have also started up again on this issue with the AMF.

To encourage awareness among its membership, the Regroupement initiated a series of regional meetings during which the issue of distribution without representatives was discussed in depth. During these meetings, Quebec brokers talked about the phenomenon, its extent, its current scope and the risks it poses. Measures to be taken were also suggested. RCCAQ’s ultimate goal is to mobilize all of its members. The association appealed to its member brokers in July 2008 to gather information on non-compliant practices so that the RCCAQ could measure the extent of the phenomenon.

At the same time, RCCAQ arranged a series of meetings with several pivotal players in the province’s property and casualty insurance industry to identify allies that might help support the brokers’ position.

The next RCCAQ convention, to be held from Nov. 12-14, 2008, will offer an opportunity for the brokers to publicly show their support. An information session will be part of the program, informing brokers that they will have to take a stand on this issue during the annual general meeting.

When the RCCAQ refers to the law and respect of the law, it of course refers to the regulatory body and the legislator. But the outcome of this file also has a political component, Lamanque notes. “If we really want to reverse the direction, we need to be present and visible among Quebec’s political players,” she says. “We must make sustained representations and lobby the Autorit des marches financiers (AMF) as well as the Ministre des Finances. We must make our messages heard.”

AFFIRMING OUR PRESENCE

At the moment, “the Quebec brokerage network is somewhat behind the times in this regard,” Lamanque says. “On the national level, one of the principal issues of the hour, the revision of the Bank Act, had a favourable outcome for brokerage firms due to the pressure exercised by brokers on MPs, and federal ministers and senators. We have a lot to learn about ways of doing things. Most Canadian provinces have become organized over the years and frequently communicate their messages to elected officials.”