What is your duty to advise when making sales online?
This real-life case is based on an investigation conducted by the Syndic’s Office that led to the filing of a formal complaint before the Discipline Committee. Its purpose is to help you reflect on best practices related to your ethical obligations.
An insured goes insurance shopping online for the car she has just leased for four years from a car dealership. After doing some research on the Internet, she purchases a contract online.
The next day, she submits her proof of insurance to the car dealership, which requires that she purchase endorsement “Q.E.F. 5a—Vehicles leased or under a contract of leasing.” This supplementary insurance coverage is necessary when the car is leased, and the vehicle’s owner and the lessee are named insureds on the contract.
The insured then contacts a damage insurance agent via the chat box on the website to notify the insurer that she must make a change to the contract she had purchased online the previous day. The agent fulfills the insured’s request, adding the lessor as a “named insured” and endorsement Q.E.F. 5a to the contract. Before logging off, the insured asks if everything else is in order. The agent replies in the affirmative.
A few weeks later, the insured has an at-fault accident, and the car is declared a total loss. Only then does the insured realize that she had only purchased Section A—Civil Liability, but not Section B—Damage to an insured vehicle. And yet, given the fact that she was not the owner of the vehicle, she should have been informed that if she had an at-fault collision, or the vehicle was stolen or vandalized, she would have to reimburse the lessor for the cost of the vehicle.
Going beyond the question asked
When an insured interacts with you on a digital platform, it is your duty as an agent or broker to comply with all your legal and ethical obligations, just as you would if this client were purchasing insurance over the phone.
When the insured asked the agent in the chat to add supplementary coverage to her automobile insurance contract (the Q.E.F. 5a endorsement), the agent should have:
- Reviewed the client’s overall needs and the information used to issue the contract.
- Provided the necessary information, in particular concerning Section B coverage for damages to a leased vehicle. In fact, creditors (lenders) and lessors often require such coverage for a leased vehicle. Moreover, when a creditor agrees to finance a vehicle, the agent or broker must propose and add Q.E.F. 23a —Notice to creditor endorsement to the contract. This endorsement obliges the insurer to notify the creditor at least 15 days in advance if it cancels or changes Section B coverage.
- Provided advice on appropriate coverage based on the insured’s situation so she can make an informed decision.
- Had the client refused Section B, explained to her the consequences in the event of an at-fault accident, including how they relate to her rental or leasing agreement.
At any point in the online transaction (before, during or after), when a client or a potential client contacts you to ask a specific question, you must not limit yourself to simply answering it. You must also think about other potential considerations in the contract and ask more questions, if necessary, to ensure that the client has purchased coverage that truly meets her needs.
Your advisory role online
The advisory role is central to your profession; do not wait for the client to ask for advice to inform her. Your skills and experience allow you to identify the client’s needs and the types of coverage required. No matter how you communicate with clients, you must always:
- Enquire into the client’s situation to identify his needs. Moreover, you cannot simply limit yourself to the client’s answers to the online form; you must make sure the client answered the questions properly;
- Properly advise the client, and if possible, offer a product that meets his needsProperly advise the client, and if possible, offer a product that meets his needs1;
- Describe to the client the proposed product and the nature of the coverage offered;
- Clearly explain the exclusions, if any, to the client and provide him with the required explanations regarding such exclusions2.
In short, no matter what the type of communication used to purchase an insurance product, you must do your part to protect consumers, since they usually know little about damage insurance. Your expertise, advice and explanations put you on the front line when it comes to protecting the public.
The firm’s role and responsibilities
If a firm creates digital platforms to offer products, it must take the necessary steps to ensure that its agents and brokers interact in a timely manner with clients who express the need to interact3. It must “make the means to interact with one of its representatives visible at all times. When the digital space does not use a visual interface, the firm must make the client aware of that fact when he initiates an action on the digital space and when he is about to enter into a contract.”4. A firm that offers a product via the Internet must comply with the obligations that apply to representatives 5 and therefore must “provide clients with appropriate advice as would representatives.”6.
Furthermore, managers must ensure that agents and brokers comply with their obligations when they interact with insureds needing assistance while purchasing a contract online 7.
Lastly, under certain circumstances, the firm must suspend entering into a contract online when the client expresses the need to interact with a representative but no representative is immediately available to do so8.
Remember that the ethical obligations of certified representatives take precedence over the instructions a supervisor or a firm might give their employees.
To learn more about the supervisor’s responsibilities (whether or not this person is certified), go to the Supervising Employees page.
1. Section 27 of the Act respecting the distribution of financial products and services and section 37(6) of the Code of ethics of damage insurance representatives.
2. Section 28 of the Act respecting the distribution of financial products and services.
3. Section 71.1 of the Act respecting the distribution of financial products and services.
4. Section 8 of the Regulation respecting alternative distribution methods.
5. Section 86.0.1 of the Act respecting the distribution of financial products and services.
6. AUTORITÉ DES MARCHÉS FINANCIERS. “Notice relating to the application of the Regulation respecting alternative distribution methods”, May 15, 2019.
7. Section 85 of the Act respecting the distribution of financial products and services and section 2 of the Code of ethics of damage insurance representatives.
8. Section 14 of the Regulation respecting alternative distribution methods.