Quebec Commercial Practices Guideline

 

The AMF has published a draft commercial practices guideline for comment by March 31, 2010. The guideline is intended for insurers of persons (life and health), damage insurers, portfolio management companies controlled by an insurer, mutual insurance associations, financial services cooperatives as well as trust and savings companies which are governed by the Acts that the AMF administers. The AMF has taken a principles-based approach rather than a specific rules-based approach. The AMF believes that  “ financial institutions, as producers, promoters or distributors of financial products and services, have the responsibility to act in the best interests of their clients.” The guideline is set up in 2 parts; Part A is a general cross-sectoral approach, Part B is divided into the specific types of institutions and sets out more specific expectations with respect to product, service or activity. The AMF expects each institution to develop strategies, policies and procedures based on its nature, size, complexity and risk profile, to ensure compliance with the expectations set out in the guideline.

 

Section A 

A1 The board of directors and senior management are to participate actively  in designing and implementing sound commercial practices aimed at protecting the interests of consumers.  This section includes having a compensation system for senior management geared to long term results.

A2 Financial institutions are to develop a framework to reduce the risk of sales inappropriate to consumers’ needs, from the point of selection or design of financial products and services to distribution. The company must have policies, procedures, and controls to identify the clients for whom the product or service is likely to be unsuitable.

A3 Financial institutions are to ensure the delivery of quality advice. (The guideline acknowledges that certain financial products and services offered on the market present few risks for consumers and do not require advice).

A4 Financial institutions are to examine consumer complaints fairly, in accordance with a policy and with straightforward, accessible and effective procedures.

A5 Financial institutions are to handle information obtained from consumers with the appropriate degree of confidentiality.

 

Section B

 

B3-1. Examination and settlement of claims

The AMF expects insurers to interpret policy clauses consistently and settle claims in a prompt and fair manner, according to a straightforward, accessible and effective process.

B6-1. Block transfers of business

Any new contract issued by a damage insurer benefiting from a block transfer is to provide the same or greater coverage than that offered in the previous contract, insofar as such coverage still meets the needs of the insured. Block transfer are to include a right allowing the insured to review and cancel the contract within 10 days of the date the contract comes into effect.

B6-2. Financial activities of insurers with brokerage firms

Damage insurers are to disclose to consumers any business relationship they have with brokerage firms that could undermine the advisory role that brokers assume with respect to consumers.