Brokerage fined for rollover process after insurer cancels contract

Alberta’s broker regulator has fined a brokerage $1,000 for transferring the insurance policies of its clients from one insurer to another without the informed consent of the clients.

The brokerage, Billyard Insurance Group, executed what’s called an insurance policy “rollover” process after an insurer cancelled a contract with the brokerage. Billyard found a proposed new insurer for the clients who had placed their business with the insurer that cancelled the contract.

However, out of 577 policies scheduled to be transferred from one insurer to another, the insurance policies of 38 clients were placed with the proposed new insurer without informed consent of the clients, the Alberta Insurance Council (AIC) ruled in a decision released in May.

“Clients have a right to be made aware of changes in their insurance policy coverage and have a right to execute the action of informed consent,” AIC wrote in its decision. “If there was no responsibility on the insurance intermediary to seek the full and informed consent of their clients, then this would leave clients at risk of having products that are not suitable for them or they do not want, and for paying increased premiums for insurance products they did not consent to.

“Therefore, it is not unreasonable to expect a high standard of due diligence, honesty, and integrity be practiced by insurance intermediaries when making changes to their clients’ insurance policies.”

In making its decision, AIC pointed to the contents of a Mar. 25, 2024, letter the brokerage sent to the council’s investigators, identifying how it had changed its rollover process to answer council’s concerns.

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In its letter, the brokerage stated that under its old rollover policy, “rollovers were submitted to [the proposed insurer] 45-60 days before the renewal date, providing clients with ample time to contact their broker or explore alternative options if they preferred not to remain with the proposed insurer.”

But under its “enhanced” rollover policy, Billyard said, among other things: “The quoted [proposed insurer’s] rollover premium will be obtained from [the proposed insurer] without issuing the policy.”

Billyard’s brokers would then simultaneously contact clients within 30 days before the renewal date to provide accurate market quoting. (Insurance companies guarantee quotes within 30 days of the policy’s effective date.)

Under this new rollover procedure, “armed with both the [proposed insurer’s] rollover premium and remarket quotes, brokers will present clients with options to choose from,” Billyard’s Mar. 25, 2024, letter to AIC states. “To ensure clients fully understand their options, an email outlining the premium options (draft attached) will be sent.”

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The brokerage intended the Mar. 25, 2024, letter to communicate it was taking a proactive approach to address council’s concerns. However, AIC interpreted the letter as an admission the brokerage’s initial rollover process had indeed breached the council’s code of conduct.

“The above statements made it clear that the agency automatically transferred insurance policies from the former insurer to the proposed insurer without providing a comparison to other potential policy options from other insurers and without seeking the direct informed consent of the client to transfer their insurance policy,” AIC concluded.

In a correspondence to AIC in September 2024, the brokerage requested council for an “administrative caution” instead of a penalty, outlining how the brokerage was cooperating with AIC’s investigation by addressing council’s concerns. It pointed out the brokerage had sought guidance from AIC and RIBO on how policy transfers should be conducted.

AIC went ahead and ordered a $1,000 fine, acknowledging, however, that the brokerage had made efforts to reduce the impact of its previous rollover policy. Council noted it could have ordered a $1,000 fine “per demonstrated offence,” and that there were 38 insurance policies in question.

“Given the evidence that the agency had contacted the AIC inquiring about guidelines for portfolio transfers from one insurer to another, the agency cooperated with the investigation, and that the agency has promptly made commitments to adjust their processes going forward, the council considers this violation of [the Code of Conduct] involving the thirty-eight (38) insurance policies as one incident and therefore one demonstrated offence and orders a civil penalty of $1,000.00 be levied against the agency.”

David Gambrill

David has twice served as Canadian Underwriter’s senior editor, both from 2005 to 2012, and again from 2017 to the present.