Incidental Selling of Insurance –  Final Report

CCIR-CISRO released the final report on ISI which contained four recommendations.

1. Improve the application forms and other documents

Application forms contain eligibility criteria, and exclusions restrictions and limitations (ERL’s).  Some consumers may fail to understand the material or are unaware of the consequences of inadequate answers. Some applications are considered “complex” based on the Flesch reading ease test. The report recommends that insurers adopt plain language and that consumers be made aware of the consequences of improper filing of forms.

The CCI R has designated the CCIR Standards of Practice Committee as a venue for providing feedback, monitoring progress and addressing the issues noted above.

2. Improve the training and supervision of sellers

The report notes consensus on the importance of training ISI sellers. Training programs should focus on understanding the product, eligibility and extent of coverage, ERLs, pre-existing conditions and general elements of the application and enrolment process. The paper recommends that insurers provide a call center to answer inquiries during the sales process. Insurers should be accountable for the training by either developing or approving the content, delivery method and frequency of training for all sellers. Insurers must monitor the process to ensure sellers apply what they learn. Insurers should be able to demonstrate internal controls over the distribution network.   The validation by regulators of the training, supervising initiatives and internal controls implemented by the industry will influence the nature of the intervention required by regulators.

3. Provide consumers with an opportunity to reassess purchase of the product

The paper notes that ISI fills a part of the insurance needs of many Canadians by allowing them to access a product designed to protect financial liabilities. It notes that “Incidental insurance may be the only insurance product offered to them because they are not targeted by traditional distribution channels.” The paper recommends that information should be provided to consumers to advise them of the potential relevance of consulting with an insurance professional and to inform them of similar products offered through different channels. The paper also advises that the period during which the product can be rescinded and refunded without penalty should be extended longer than the current 10 days to allow consumers the opportunity to assess their options. Alternatively, industry could offer a less punitive refund calculation. Disclosure of such a provision would be required.  

4. Obtain statistical information

Complaint data should be obtained.  The report also recommends gathering statistics either through a change in the annual filings or through a market survey of insurers involved in ISI.

The CCIR will establish a new committee to determine what statistics are required to further assess the conduct of this business and enable regulators to make timely and effective regulatory decisions. The report of the working group will be reviewed by CCIR in one year's time.