BC regulator lays down law on third-party insurance sales

The Financial Institutions Commission issued an order to Western Life Assurance last week

BC regulator lays down law on third-party insurance sales
British Columbia’s insurance regulator has warned providers that deceptive sales practises in the industry will be weeded out. 

This follows an order from The Financial Institutions Commission issued to Western Life Assurance last week to stop selling policies through two payday lenders.

Western subsequently released a statement that it would fully comply with the terms laid out by the regulator.

Those terms mean the firm will no longer sell group creditor insurance in the province through the lenders named, Venue Financial and Cashco Financial, and will provide refunds to the customers that were misled.

According to Deputy Superintendent at The Financial Institutions Commission, Chris Carter, the issue of insurance being sold through third parties has been a focus of the regulator for some time now.

“In September 2015, we issued a bulletin of expectations regarding insurers’ oversight and control over distribution through co-exempt sellers,” he says. “Payday lenders is one avenue, mortgage brokers is another, but there are a variety of different ways insurance can be distributed through exempt channels.”

He continues: “The reason we issued that bulletin was precisely because we had concerns over insurers’ oversight and control over distribution. That includes insufficient training, aggressive sales practises and inadequate disclosures.”

In the case of Western Life Assurance and the group creditor insurance being sold by Venue Financial and Cashco Financial, the regulator found a litany of violations. During its investigation, the commission discovered that consumers were not made aware that the insurance was voluntary, with some not even informed they were signed up.

“Consumers weren’t placed in a position to make an informed decision,” says Carter. “There are certain eligibility requirements for the insurance and eligibility wasn’t discussed with consumers either, which means some were signed up for insurance they didn’t qualify for, which wouldn’t be available for them when they most need it.”

On top of that, legally required disclosures weren’t provided to consumers, so most weren’t aware of policy terms, or even who the insurer was. Responding to the regulator’s order, Western Life President, Louise Mitchell, vowed to address the oversight that led to this deception.

"The fair treatment of our customers and compliance with our regulatory obligations are our top priorities," she said "We are concerned by what we read in the order and are launching an investigation so that we can ensure complete compliance by our distribution partners in the future."

The response was welcomed by The Financial Institutions Commission, and Western has committed to contacting those insured to inform them of the particulars of the insurance they purchased. The insurer must also confirm eligibility, and offer to cancel the insurance and refund the premium if the consumer so wishes.

In Carter’s opinion, the Western Assurance case should serve as a wake-up call to providers when it comes to co-exempt sellers.

“We set out our regulations in 2015; we expect insurers to take them seriously and to oversee and control the distribution of their products to ensure consumers aren’t being harmed,” he says. “If we receive evidence that those obligations aren’t being met, then we will not hesitate to act.”

Related stories:
BC rules complicate creditor life insurance for clients
Longer life expectancy for Canadian patients could be down to healthcare