The legislation and your code of ethics ¹ require you to act as a conscientious advisor, specifically by providing all necessary and useful information to your clients. Moreover, the fact that an insurer sends the renewal directly to the insured, even if it is done on your behalf or that of your firm, does not relieve you of your obligations as a certified professional.

Agents and brokers must take steps to ensure that the coverage provided in the contract always meets the client’s needs.  However, in the real world, it is not always possible to do a comprehensive analysis of the insured’s needs before every renewal. The ChAD therefore encourages you to create a system that enables you to update the files of all your personal-lines insurance clients every three years, and ideally every year, for commercial-lines clients.

The goal is to identify client-files that may need updating. To do so, establish selection criteria such as the amount of premiums, or contracts that have certain specific or excluded risks. For example, since sewer backup is the most common claim, prioritize contracts that exclude this coverage in order to verify whether the client still agrees with this decision. A computerized system can also segment your clients according to the criteria you set and draw your attention to files that have been inactive for up to three years. Finally, follow up with insureds who have informed you that they do not wish to renew in order to make sure you have followed the correct procedures.

Commercial-lines insurance files must be updated annually. Moreover,  if you suspect that the insurer will not renew a client’s contract, or intends to change the terms or increase the premium significantly, be proactive and promptly contact your client to share your concerns  and comments on market developments. You and your client can then decide on a course of action and explore other insurers that could potentially underwrite the risk, or you may have to inform your client that he will have to take certain steps on his own to find another insurer, since you are not empowered to do so. Be transparent and vigilant in your approach: explain any potential consequences and be fully accountable for the actions you do take.

Whether you are dealing with personal-lines or commercial-lines insurance, it is important for you to update your files before the insurer sends the renewal notice. Starting the renewal process 60 to 90 days in advance means the insured will ideally receive the terms of renewal of his contract 30 days before it expires. Please note that in personal-lines automobile insurance, there is a required deadline for notification: when the insurer changes the premium or coverage, it must notify the insured in writing at least 30  days before the renewal of the contract². Even though the legislation governing home and commercial-lines insurance does not specify a timeframe, the ChAD encourages you to be proactive in order to give insureds enough time to notify you of any changes to their needs, make enquiries with new insurers, and make an informed decision.

Step 2: Verify the coverage in force and advise the insured. Are there any changes to the endorsements, any new coverages available that would be better suited to the client’s needs, any coverages previously refused that might not be refused now, any exclusions provided for in the contract that are worthwhile re-explaining? Your duty to advise is at the heart of your profession. Make sure that you have provided all the necessary information and advice in relation to the client’s needs so that they can make an informed decision.

Do I have a duty to advise on amounts of insurance?

You must review the amounts of insurance provided for in the contract with your client. However, it is the insured’s responsibility to determine the appropriate amounts, such as the cost of rebuilding, the value of their assets, loss of business-related income, or the inventory of a fleet of vehicles or farm machinery.

Though the courts have confirmed that this is not the responsibility of the broker or the agent, it is your duty to advise your client and make appropriate recommendations with respect to assessing the amounts of insurance. For example, you could suggest a professional appraisal. This approach was used to exonerate a broker who was asked to compensate an insured for the difference between the coverage set out in the contract and the cost of rebuilding: the Superior Court⁴ found that the broker properly advised his client by recommending that an appraisal be carried out and by adjusting the amount of insurance on the building based on the conclusions of the appraisal.

Furthermore, your duty is not limited to recommending the use of an appraiser. Another Quebec Court of Appeal decision⁵ serves as a reminder of your duty to proceed with diligence when dealing with the appraisal report that you receive. In that decision, the court found that the broker had failed to act on the report’s recommendations to adjust the amount of insurance.

In addition, every five years, condominium corporations (syndicates of co-ownership) are now required to have an appraiser who is a member of the Ordre professionnel des évaluateurs agréés du Québec carry out an evaluation of the cost of rebuilding the condominium building. In order to ensure that appraisers adequately estimate the cost of rebuilding a condominium, the Ordre des évaluateurs agréés du Québec, in collaboration with the IBC and the ChAD, has revised the list of factors (in French only) that appraisers mandated by a syndicate of co-ownership must include in their reports. 

Finally, if you suspect that the amount the insured determined is insufficient, you must inform the insured, explain the co-insurance clause and the consequences in the event of a partial loss. You are not responsible for your clients’ choices, but make sure they have received all the information and advice they need to make an informed decision. Do not forget to scrupulously note your conversations in the client-file.