AGENTS, BROKERS Renewing an Insurance Plicy This renewal prcedure is designed t help representatives respect their bligatins when renewing an insurance plicy. Essentially, these bligatins are spelled ut in sectins 39 f the Act respecting the distributin f financial prducts and services and 37(6) f the Cde f ethics f damage insurance representatives, and cncern, respectively: the bligatin, when renewing an insurance plicy, t take the necessary steps t ensure that the cverage prvided crrespnds t the client s needs; and the bligatin t act as a cnscientius advisr by infrming the client f his rights and bligatins and giving him all necessary r useful infrmatin cncerning the renewal f his plicy. Please nte: This prcedure replaces the existing prcedure fr renewing persnal-lines insurance plicies and is intended t apply t bth persnal lines and cmmercial lines. A representative must treat insurance plicy renewals as carefully and cnscientiusly as he wuld new business. He must be practive and, in particular, he must nt simply autmatically renew a plicy withut taking any further steps. The representative must therefre: 1. VERIFY THE INSURED S NEEDS AND REASSESS THEM; 2. VALIDATE THE COVERAGE THAT IS IN FORCE AND ADVISE THE CLIENT; 3. VERIFY THE RENEWAL THAT HAS BEEN ISSUED AND REVIEW THE TERMS OF PAYMENT. The representative s bligatin is t ensure that these steps are all taken during the renewal prcess, using the methd and means he deems mst apprpriate. He may fulfill his bligatins by: verbally cntacting the client; cntacting the client in writing; visiting the client n-site; r meeting the client at his ffice. At all times, the representative must be able t demnstrate that he has taken the necessary steps t ensure that the cverage ffered meets the insured s needs. IMPORTANT It is therefre imprtant t stress that an insurer s practice f issuing and directly sending the insured his renewal des nt relieve the representative f his bligatin t prperly perfrm all his prfessinal duties in rder t ensure that the renewal is suitable fr his client. - 1 -
1. VERIFY THE INSURED S NEEDS AND REASSESS THEM The representative must have a system r a methd that enables him t track and manage the renewals as they cme due fr prcessing. The representative must begin prcessing a renewal within a reasnable perid f time, in ther wrds, within a perid f time in which he can prperly perfrm all the necessary steps. Since the insured shuld preferably receive the cnditins f renewal f his plicy at least 30 days befre his plicy expires (a strict deadline fr car insurance in certain cases), it advisable fr the representative t begin prcessing the renewal at least 60 days befre the expiry date. In rder t verify the client s needs, the representative must update the client s infrmatin. He must therefre cntact his client in rder t prepare the insurance plicy renewal: If he cmmunicates with his client verbally, the representative must nt frget t nte dwn in the file the infrmatin he gathers frm his client. If he cmmunicates with his client in writing, cmmunicatin may take the frm f a ntice that draws the client s attentin t the imprtance f cntacting his representative t declare any change t the risk. Hwever, this ntice shuld nt be reduced t a simple sentence at the bttm f the plicy r the cver letter. It shuld take the frm f a separate dcument r a paragraph that is bth visible and explicit. NOTICE OF RENEWAL The ntice f renewal shuld: Appear n a separate sheet frm the ther dcuments sent when the plicy is renewed (using paper f a different clur is suggested); Be written in simple and cncise language; Mentin the imprtance f ntifying ne s representative f any changes t the risk; Prvide examples f changes that culd influence the acceptance f the risk r its pricing. Please nte that renewal ntices designed by the ChAD are available n its website: Ntice cncerning the renewal f a cmmercial-lines insurance plicy; Ntice cncerning the renewal f a cmmercial-lines autmbile insurance plicy; Ntice cncerning the renewal f a hme insurance plicy; Ntice cncerning the renewal f an autmbile insurance plicy. Regardless f the type f cmmunicatin used, the representative must: Make a certain number f phne calls per year, fllwing a methd determined by the firm. This methd can use different criteria, fr example: - 2 -
accrding t the targeted risks (fr example, when there is a significant difference between the amunt f insurance and the value f the huse r building, r the cmpany s assets r revenues); accrding t a cmputer prgramme that generates a list f clients (fr example, a list f clients wh have nt been cntacted r wh have nt cntacted the firm ver the past three years); accrding t a set percentage (fr example: 1/3 f clients every year) in rder t ensure that the entire client base is cntacted; etc. FOR COMMERCIAL-LINES INSURANCE Depending n the type f risk, it is advisable t visit the client s place f business r meet with the client regularly in rder t bserve and/r discuss any changes that culd affect the nature f the risk r the underwriting standards. Amngst ther things, an n-site visit allws the representative t make a gd assessment f the physical risk, verify the cnditin f the site and the equipment, validate measures taken t prtect the site, nte any neighburing risks and review inventry management. Whether it be thrugh a visit r a meeting, it is wise t cntact the client at least nce a year t update the insurance prpsal, validate the type f business activities and review the amunts f insurance. This review ften enables the representative t suggest new prducts r cverage, fr example: A manufacturer may have develped a new prduct that uses a ptentially envirnmentally dangerus material. New cverage fr this type f risk culd be ffered. A building cntractr may have hired an engineer t sign ff n building plans. A new prfessinal civil liability prduct culd be ffered. A jewellery stre may have started ffering tatting services. This increased risk culd be such that the insurer will refuse t renew the plicy. When, fr example, a client cntacts his representative t make a change t his current plicy, the representative shuld take advantage f this pprtunity t review the file with his client. - 3 -
2. VALIDATE THE COVERAGE THAT IS IN FORCE AND ADVISE THE CLIENT A representative must make sure that the cverage in frce cntinues t be that which best suits the insured s needs. Shuld this n lnger be the case, he must ffer the insured suitable cverage and prtectin, which entails revalidating the amunts f insurance. Regardless f whether r nt the client s needs have changed, the representative must advise him regarding newly available cverage. On ccasin, certain new prducts that better meet the client s needs may nly becme available after the plicy was purchased r perhaps the client is nly nw eligible fr certain cverage that he culd nt have purchased the preceding year. The representative shuld als make sure that the insured remains uninterested in purchasing cverage that he previusly refused. In rder t prperly fulfill his rle as an advisr, at all times when carrying ut his prfessinal activities the representative must be n the lkut fr new prducts arriving n the market. With respect t the amunt f insurance, the representative must prperly infrm his client regarding the appraisal f the prperty and the crrespnding cverage: The representative is nt bliged t assess the value f the prperty; hwever, if he has reasn t believe that the amunt f cverage is insufficient r that this will sn be the case, he is duty bund t infrm the insured s that the insured may then cnsult a prfessinal appraiser. The representative has the bligatin t prvide advice n the amunt f insurance. It is up t the insured after having been advised t determine the required amunt f insurance. Using supprting dcuments, he shuld fully explain insurers requirements with respect t the prprtinal rule (the c-insurance clause) and the resulting cnsequences. NOTES IN THE FILES The representative must carefully nte in the file all relevant details including advice given, cverage ffered and refused, instructins received, etc. T learn mre abut this tpic, please read Tenue des dssiers clients et ntes aux dssiers [Hw t keep client-files and make ntes in the file], available in French nly. 3. VERIFY THE RENEWAL ISSUED AND REVIEW THE TERMS OF PAYMENT Upn receiving the renewal, the representative must verify it t make sure that it des nt cntain any errrs and that it cmplies with the instructins and the changes that the client requested. The representative must review the terms f payment with the insured and, fr example, clearly indicate t him the date f the first withdrawal r whether r nt the insurer requires payment in full in advance. If pre-authrized payments (pre-authrized debit) are used, the representative must cmply with the requirements f the Canadian Payments Assciatin and ensure that the frm signed by the client is sufficient. - 4 -
Inasmuch as pssible, the insurance plicy renewal must be sent 30 days befre it cmes int frce. If the representative is unable t send the plicy, he must nevertheless ntify the insured that he will receive his insurance plicy in the near future and, in the meantime, send him an insurance binder that cnfirms the insurer s name, the insurance perid, the cverage, the deductibles and the amunts f insurance. The plicy renewal shuld be sent with a cver letter that specifically includes the fllwing infrmatin: THE RENEWAL LETTER* The renewal letter shuld: Mentin under a separate heading the insurer s name, the plicy number and the perid in questin; Summarize the cverage, the deductible and the amunts f insurance in frce; Mentin, where applicable, if changes were made with respect t the previus plicy (i.e.: an increase in the amunt f the deductible); If applicable, remind the insured f any cverage he has previusly refused and update him n cverage that has becme available in the meantime; Suggest new cverage related t the client s needs and an increase in the amunt f insurance, if applicable; Mentin that an increase in the amunt f the deductible culd bring dwn the cst f the premium; Cnfirm payment terms and ffer alternative ptins that the insured culd use if the current payment terms n lnger suit him. *This infrmatin may als be fund in the insurance binder. - 5 -