In late February, the Québec insurance industry regulator, the Autorité des marches financiers (AMF), released a consultation paper concerning the online distribution of insurance products in Quebec. As we discussed in an Insurance Law Update earlier this year, a committee of the Canadian Council of Insurance Regulators (CCIR) also released a paper on the same subject a few months ago. The CCIR committee was chaired by the AMF, and while similar issues are considered in both publications, the AMF's consultation is intended to take into account the particular features of Quebec's regulatory landscape.
Much like the CCIR paper, the AMF's review found four main activities currently being carried out by insurance providers online, namely: (i) communicating information to consumers; (ii) offering a quote, (which for most providers, represents the end of the online distribution process); (iii) concluding the insurance contract online; and (iv) providing advice. The AMF paper also considers the advantages and risks for consumers of distributing insurance products online. The risks identified include concerns with respect to: (i) the information imbalance between consumers and insurers; (ii) the fallibility of computer systems; and (iii) information security and fraud.
According to the AMF, the current legislative framework permits only the dissemination of insurance information online, and does not allow for actual online transactions. The AMF came to this conclusion after considering Quebec's regulatory regime, notably the Civil Code of Québec (including the provisions relating to the exchange of consents and formation of insurance contracts), An Act to establish a legal framework for information technology and An Act respecting the distribution of financial products and services.
The paper proposes that Québec regulations be adapted to allow for the development of online insurance offerings. Specifically, the proposals would require that: (i) certain information be present on a provider's website, including a statement of AMF registration and information on filing a consumer complaint; (ii) stakeholders have input in determining the role of certified representatives in online insurance offerings; (iii) certain information, including main product features, coverage, and product exclusions and limitations, be brought to the consumer's attention before the completion of the application; (iv) providers ensure that consumers have read each individual item of essential information (although the steps that would have to be taken to satisfy this requirement are not provided); (v) the information provided to consumers before they complete an application be written in clear and simple language; (vi) providers provide consumers with a summary of the information used to prepare the quote and the essential information concerning the relevant product before the contract is entered into; and (vii) all online applications be followed with the contract documents sent to the consumer on a durable medium via the internet or mail, at the consumer's choice.
Where insurance is distributed other than through a representative, the AMF's proposals would require a distributor's website to contain relevant disclosure and information, as well as the distribution guide. Distributors would also have to ensure that consumers have read the distribution guide before purchasing insurance products.
The AMF paper further considers issues surrounding social media and online advertising. Specifically, providers would be prohibited from placing advertising on websites where consumers complete online insurance applications. Insurers and firms would also be encouraged to adopt social media policies and procedures to be able to monitor posted content and to ensure regulatory compliance. Meanwhile, the AMF is also seeking specific stakeholder views on the suitability of the existing regulatory framework to comparison shopping websites.
Ultimately, the AMF intends its proposals to ensure compliance with the current regulatory framework while mitigating the identified risks. According to the AMF, its proposals would assist consumers in making informed decisions while also being able to obtain advice as required. Comments on the consultation paper are being accepted until May 24, 2012, preferably by email.