Those familiar with the regulation of the incidental sale of insurance in Canada will recognize many aspects of Manitoba’s new regime from those in Alberta and Saskatchewan. However, Manitoba – perhaps having used the opportunity to consider the strengths and weaknesses of the other regimes – has incorporated several features that, in this author’s view, deftly acknowledge the reality of the consumer electronics marketplace in Canada.
One such feature is the availability of a restricted license to a “portable electronics vendors” for the sale of “portable electronics insurance”.
A recent study by Catalyst revealed that more than half of all Canadians own a smart phone and that the use of these devices permeates every aspect of life. Given the ubiquitous nature of smart phones and the relative ease with which they can be lost, stolen or damaged, there is a market for an insurance product that will soften or eliminate the financial impact of these events. Generally speaking, products sold by a third party that provide coverage in the event your device is lost, stolen or damaged – that is, losses that are unrelated to a defect or failure in the device – are considered “insurance” and may only be offered and sold by a licensed insurance agent. While there may be coverage for your smart phone under your homeowner’s policy (assuming you have one), it is likely that your deductible exceeds or is equivalent to the out-of-pocket cost to replace the device in any event.
Current provincial regulatory regimes in Canada effectively prevent many smart phone vendors from offering customers the opportunity to protect themselves in the event of a fortuitous loss. The Insurance Amendment Act addresses this gap.
The definition of “portable electronics vendor” in the Act expressly contemplates a person or entity who “sells or leases portable electronics devices” or who “otherwise provides portable electronics devices in connection with a transaction between the person or entity and another person or entity”. This bifurcated definition incorporates both hardware vendors as well as service providers who also sell devices. The regime goes one step further by acknowledging the reality that many entities in the marketplace are franchise operations. The regime allows a licensee to act or offer to act through the employees of another entity (subject to certain requirements). This would allow a franchisee’s employees to offer and sell portable electronics insurance to customers on the basis a restricted agent license obtained and maintained by the franchisor. Again, it is clear that Manitoba took a hard look at the reality of the consumer electronics marketplace and focussed on establishing a regime that addresses consumer protection and regulatory issues while allowing for the transaction to occur at the point of sale.
The definition of “portable electronics insurance” in the Act is not dissimilar to the definitions for “product warranty insurance” used in British Columbia and Alberta in that it simply references “coverage against damage to or the loss of ” a device. There is nothing in the Act or the regulations to suggest that this definition will be read down to limit the “damage” and “loss” to only that that is caused by a defect in the device itself.
It is important to note on a cautionary basis that the Superintendent of Insurance in British Columbia recently released a Bulletin confirming that its definition of “product warranty insurance” should be interpreted as only capturing loss or damage caused by a manufacturing defect or defective installation. This is despite the fact that such limiting language does not appear in the definition. For a previous article on the issue, please see 'If it’s Broke, Make Sure You’re Allowed to Fix It!' .
It is also important to note that in expanding the type of entity that may sell incidental insurance products, the Act imposes various requirements both on the incidental sellers and on the licensed insurers who underwrite the insurance. The new regime comes into effect as of January 1, 2015 with transitional provisions coinciding with the June 1, 2015 licensing renewal cycle at the Manitoba Insurance Council.