Why Quebec’s broker association calls replacement insurance changes ‘problematic’

Quebec’s broker association is displeased with the province’s deferment of a legislative amendment that will prohibit auto and recreational vehicle dealerships from offering replacement insurance.

The prohibition will now take effect Jan. 1, 2027, six months later than originally scheduled. It means ‘distributors’ — including auto and recreational vehicle dealerships — will no longer be permitted to offer replacement insurance related to vehicles they sell or lease. This product must instead be obtained through licensed representatives and firms in Quebec, such as property and casualty insurance brokers or agents, law firm Dentons says in a March 2 bulletin.

“This postponement provides insurers and other industry stakeholders with additional time to adjust their business models, and gives them the opportunity to realign their replacement‑insurance distribution networks,” Dentons says in the bulletin.

But Lucie Fréchette, president of the Regroupement des cabinets de courtage d’assurance du Québec (RCCAQ), calls the deferred changes “incredibly problematic,” saying they are not consumer-centric.

“The debate’s over, this is just postponing a decision that has already been made,” she says in an interview with Canadian Underwriter. “It is not in the best interest of the consumer, and there is enough choice out there for the consumer.”

Replacement insurance — known as Q.P.F. No. 5 (Quebec Policy Form No. 5) — is a replacement cost policy in which an insurer pays compensation to replace a vehicle at the dealership the insured has chosen. Among other things, the product protects against depreciation when the insured makes a claim in the wake of a total or partial loss and, for new vehicles only, allows the insured to choose a term between one and eight years at a fixed premium.

Fréchette says RCCAQ had written a letter to the provincial government asking that they maintain the July 1, 2026 implementation date. She says material published by Quebec’s financial services regulator, the Autorité des marches financiers (AMF), shows that the renumeration of a dealership on replacement products can sometimes be 30%-40% more expensive than if it was bought from a broker.

And while the average Quebec broker commission on an auto product is 12.5%, dealerships don’t have to declare their commissions to a consumer unless it’s over 30%, Fréchette reports. So, for example, if the consumer chooses a Q.P.F. No. 5 with a five-year term, the difference in commission could be close to $1,000.

“That’s huge,” Fréchette says.

In addition, a broker is held to a higher standard of consumer protection because of their licence. And they’re required in Quebec to present a consumer with three different choices for an auto product. “A dealership sells one product from one insurer,” she says. “The coverage is less transparent.”

Fréchette says a licensed insurance professional is better placed to sell an insurance product than a car dealership.

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“I think the rest of the country needs to stay very much aware of the risks of selling directly through somebody whose primary job it is to sell a consumer good, versus someone whose primary job is to look out for the insurance interests of a consumer. Which is the broker’s job,” she says.

Jason Contant

Jason has been an award-winning journalist with Canadian Underwriter for more than a decade, including the past three years as associate editor and, before that, as digital editor for seven years.