British Columbia’s Financial Institutions Commission (FICOM) has issued Information Bulletin INS-15-002?, which sets out FICOM’s expectations for insurers, exempt sellers and creditors regarding creditor’s group insurance (CGI) being offered in British Columbia. The Information Bulletin was published as a result of FICOM’s concerns over the sale and distribution of CGI products. Lenders and their third-party service providers should be aware of FICOM’s new expectations and the dates for implementing amendments to existing CGI contracts.
The Information Bulletin outlines a number of expectations on insurers, exempt sellers (which in some instances may be lenders, depending on their role in the sale or distribution of CGI products) and lenders. The expectations on lenders will apply to a lender’s third-party agent undertaking certain activities. In cases where a third-party agent is used, the lender will retain ultimate responsibility for ensuring FICOM’s expectations are met.
Under the Insurance Licensing Exemptions Regulation, CGI can be sold incidentally to the arranging of credit by exempt sellers that are not licensed insurance agencies. In some cases, a lender will be an exempt seller and therefore subject to the following expectations related to knowledge, training and the distribution of CGI. FICOM outlined that it expects exempt sellers of CGI to:
- Possess sufficient knowledge and training on eligibility requirements and product features to ensure ineligible customers are not being enrolled
- Be able to identify instances where they should direct customers to contact the insurer for further information or clarification
- Provide clear information to customers on the terms and conditions of all CGI products
- Refrain from engaging in coercive practices or imposing undue pressure on individuals to obtain CGI coverage
- Provide proper disclosure to all customers on the voluntary nature of CGI
- Communicate to customers how they can contact the insurance company for clarification regarding eligibility, the terms and conditions of the coverage, the claims process, or any other matters related to the coverage
In addition to the expectations for insurers and exempt sellers, FICOM outlined the areas in which lenders must play an active and substantial role. FICOM directed insurance companies to ensure that the lender under a CGI plays this active and substantial role in the following areas:
- Procurement of the insurance contract
- Product design, including all related forms and materials, to ensure that the product is designed to be suitable to the needs of the creditor’s debtors
- Negotiation of the terms and conditions under which the insurance coverage will be offered to its debtors, including who will be permitted to enrol customers into the CGI program
FICOM recognized that a lender can explicitly assign a third-party to undertake the role of effecting a CGI product on its behalf. The insurer and lender will nonetheless retain responsibility for ensuring that all regulatory expectations are met.
TIMING OF IMPLEMENTATION
CGI contracts that are set to be renewed or expire on or before December 31, 2017 need not be revised. Any CGI contract with a duration longer than December 31, 2017 will need to be renegotiated with the lenders’ involvement by March 31, 2016. Contracts do not need to be resubmitted to FICOM for approval.