Report concerning the sale of insurance products by dealers

June 3, 2020 Insurance

Montréal – The Autorité des marchés financiers (AMF) today published the 2016–2018 Insurer Disclosure Analysis Report – The offering of insurance products by automobile and recreational and leisure vehicle dealers in Québec (pdf - 703 KB)This link will open in a new windowUpdated on June 1^st, 2020This analysis report is based on data collected from 20 insurers for the years 2016, 2017 and 2018. It provides a picture as at December 31, 2018 of the market for insurance products offered by dealers, namely replacement insurance (Q.P.F. No. 5) and debtor life, health and employment insurance (DLHE).. Using the picture of practices provided by this report, the AMF will, over the coming months, be able to measure the effects of new actions aimed at enhancing existing commercial practices in this market.

Findings

The data collected by the AMF exposed four main issues related to commercial practices:

Concerning levels of remuneration for the distribution network
Limited added value for consumers in the case of Q.P.F. No. 5 products owing to the high price paid in the dealer distribution network
A high claim denial rate for debtor life, health and employment (DLHE) insurance products
Issues related to the premium refund in the event of policy cancellation

“The AMF has undertaken efforts in recent years to bring this sector into line, including publishing multiple notices, establishing a round table and imposing penalties on specific dealers and an insurance firm,” said AMF President and CEO Louis Morisset. “Based on the data collected by the AMF, those efforts have not yielded the desired results. Now that it has a more accurate picture of the market, the AMF is going to continue to strengthen its actions to correct persistent improper practices.”

Actions to be taken

Planned actions will focus on four objectives:

Offer consumers, through dealers, products that have a similar added value to that of comparable products currently offered through the traditional distribution network
Require remuneration practices that promote the fair treatment of consumers
Pursue initiatives to educate and improve disclosures to consumers
Have an effective deterrence effect with respect to improper sales practices

The AMF will continue to closely monitor the market for insurance products offered by dealers. Annually collected data will be analyzed in order to track developments in this market.

A reminder to consumers

The AMF wishes to remind consumers that:

They should always take the time to shop around for insurance products and check whether they are not already covered
They are under no obligation to purchase an insurance product offered by a dealer

The Autorité des marchés financiers is the regulatory and oversight body for Québec's financial sector.

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Information:

Media only:
Sylvain Théberge: 514-940-2176

Information Centre:
Québec City: 418-525-0337
Montréal: 514-95-0337
Toll-free: 1-877-525-0337
Twitter: @lautorite This link will open in a new window
LinkedIn: Autorité des marchés financiers (Québec) This link will open in a new window

Appendix

Some highlights Sale of insurance products through automobile, recreational and leisure vehicle dealers in Québec (2018)
$424,481,540 Total premiums associated with sales of insurance products by automobile, recreational and leisure vehicle dealers 56% of insurance premiums sold by dealers, representing $236,657,881, are paid as remuneration	Q.P.F.No. 5 products $2,005 Average cost of the premium paid by the consumer $2,851 Average value of indemnities paid to the consumer
29% of claims related to DHLE products sold by dealers are DENIED In comparison: Group LTD insurance products: 12 % of claims denied Group STD insurance products: 5 % of claims denied	1 out of every 4 Most consumers pay the premium in full when purchasing the insurance product, whereas 1 in every 4 certificates (or policies) will be cancelled before the contract expiry date

Some highlights

Sale of insurance products through automobile, recreational and leisure vehicle dealers in Québec (2018)

$424,481,540

Total premiums associated with sales of insurance products by automobile, recreational and leisure vehicle dealers

56%

of insurance premiums sold by dealers, representing $236,657,881, are paid as remuneration

Q.P.F.No. 5 products

$2,005

Average cost of the premium paid by the consumer

$2,851

Average value of indemnities paid to the consumer

29%

of claims related to DHLE products sold by dealers are DENIED

In comparison:

Group LTD insurance products: 12 % of claims denied

Group STD insurance products: 5 % of claims denied

1 out of every 4

Most consumers pay the premium in full when purchasing the insurance product, whereas 1 in every 4 certificates (or policies) will be cancelled before the contract expiry date

Data from the 2016-2018 Insurer disclosure analysis report - The offering of insurance products by automobile and recreational and leisure vehicle dealers in Québec. (pdf - 703 KB)This link will open in a new windowUpdated on June 1^st, 2020This analysis report is based on data collected from 20 insurers for the years 2016, 2017 and 2018. It provides a picture as at December 31, 2018 of the market for insurance products offered by dealers, namely replacement insurance (Q.P.F. No. 5) and debtor life, health and employment insurance (DLHE).