Illustrated Code of Ethics – Damage Insurance Representatives
This is your code of ethics. Each section is illustrated with stories based on either actual disciplinary decisions, or deficiencies observed in the field or by the Syndic’s Office. Its goal is to encourage you, as damage insurance agents and brokers, to reflect on certain ethical breaches in order to help you adopt best practices and fulfill your ethical obligations.
Please note that the selection of stories is not exhaustive and the sections may apply to a variety of situations. Please do not hesitate to contact us if you have any questions about your ethical obligations.
We have standardized the terms used in each story to ensure the texts are easily understandable. The terms “agent” and “broker” designate damage insurance representatives; the words “damage insurance” have been removed for ease of reading.
General Provisions
Duties and Obligations towards the Public
Duties and Obligations towards Clients
Duties and Obligations towards Insurers
Duties and Obligations towards Representatives
Duties and Obligations towards the Autorité des marchés financiers and the Chambre de l'assurance de dommages
Breaches of the Code of Ethics
Division I General Provisions
Section 2
A damage insurance representative shall insure that he, his mandataries and his employees comply with the provisions of the Act respecting the distribution of financial products and services (chapter D-9.2) and the regulations thereunder.
During busy periods, a manager—who is himself an agent— regularly asks a non-certified employee to confirm with insureds the coverages included in their contracts.
This violates the Act respecting the distribution of financial products and services and the Code of ethics, since this action is reserved for agents and brokers. He should do this himself or mandate another agent to do so.
While the agent could have asked a non-certified employee to collect factual information, such as an address, profession, or details on the property to be insured, etc., agents remain responsible for analyzing the information they receive and ensuring that it is complete and accurate in order to give insureds proper advice based on their needs.
Resources :
- Procedure: Protection of personal information
- Re-read this article: Which acts are reserved for agents and brokers?
Section 3
A damage insurance representative must not, directly or indirectly, pay, compensate or give an advantage or allow the payment, compensation or giving of any advantage to a person who is not a representative in order for that person to act in that capacity or use that title.
A broker (independent representative) wants to spend a month in Europe. He asks a friend who retired from the profession two years ago and therefore has not renewed his certificate, to temporarily replace him in return for remuneration.
When talking with insureds, the former broker introduces himself as a temporary replacement. He listens to the insureds’ requests, makes changes to their contracts as per their requests, and provides advice on damage insurance products.
The broker should have hired a certified professional to replace him. A retired individual who does not hold a certificate does not have the right to carry out acts reserved for agents and brokers—not even for just a few weeks.
Resource: Re-read the following article: Which acts are reserved for agents and brokers?
Section 5
A damage insurance representative must not, directly or indirectly, be promised or receive a payment, compensation or advantage not authorized by the Act or the regulations thereunder from a person other than the person who used his services.
A broker has a cousin who is an autobody technician. At a family gathering, they chat about their respective jobs. The broker mentions that insureds contact him when they have a car accident and that he helps them start the claims process with their insurers.
The autobody technician suggests that he refer insureds whose vehicles have been damaged to his shop for repairs. In exchange, he offers to pay him $100 for each referral.
The broker agrees, thus putting himself in a conflict of interest since this scheme provides him with a direct benefit: the $100 from the autobody technician. He should have refused and explained that he does not have the right to receive an unauthorized benefit from someone other than the person who retained his services, pursuant to section 143 of the Act respecting the distribution of financial products and services.
Resource: Avis relatif à l’indication de clients en application de la Loi sur la distribution de produits et services financiers Notice regarding client referrals in application of the Act respecting the distribution of financial products and services [in French only]
Section 6
A damage insurance representative must not pay, offer to pay or undertake to pay to a person who is not a representative any payment, compensation or advantage, except where permitted by the Act.
An agent has a friend who is a sales representative for a luxury car dealership.
The agent asks her friend to systematically send her all his clients. In exchange, she promises to pay him a portion of her commission each time his referral results in an insurance sale.
The agent cannot offer to share the commission she makes on a sale with a non-certified person. However, remuneration can be paid for each client referred, though it cannot be tied to making a sale.
Resource: Avis relatif à l’indication de clients en application de la Loi sur la distribution de produits et services financiers Notice regarding client referrals in application of the Act respecting the distribution of financial products and services [in French only]
Section 8
A damage insurance representative must make himself available.
An insured receives the renewal notice for his commercial lines insurance. He realizes he needs to make some changes to certain coverages since his needs have changed. He contacts an agent working for his insurer.
The insured and the agent speak several times over the following days, but after that the insured hears nothing more from the agent. He leaves the agent detailed messages concerning the required changes to his coverages. The agent is teleworking and very busy. He does not check his voice mail and therefore does not take note of the insured’s requests for changes or respond to his needs.
The agent should have been available, returned the calls and followed up on his files in a timely manner or ensured that someone else followed up for him to avoid harming the insured.
Resources:
- Read the procedure and the checklist on renewals for personal lines insurance and commercial lines insurance.
- Re-read this article: Telework and Ethics: Eight Best Practices.
Section 9
A damage insurance representative must not neglect the professional duties relating to the carrying on of his activities; he must carry out such duties with integrity.
An insured calls a broker to purchase home insurance. The broker speaks to the insured three times but fails to note the dates of these conversations or summarize any of their discussions, the explanations he gave her or the decisions she made.
When the broker begins sounding out potential insurers, he has no notes to remind him of the details of their conversations; he simply asks the insurer for coverages from memory, without confirming them with the insured.
The broker was negligent. He should have noted in the client-file the details of each discussion in order to ask for appropriate coverages, as requested by the insured.
Resources:
- Take the training on Record Keeping for representatives.
- Read the procedure on record keeping and notes in client records.
Division II Duties and Obligations towards the Public
Section 12
A damage insurance representative must support any measure likely to improve the quality of service in the field in which he carries on his activities.
The Syndic’s Office receives a complaint against an agent. After conducting an investigation, the Office concludes that the agent committed a technical error and imposes an administrative measure, asking that he change his professional practice. The breach observed would thus not lead to a formal complaint before the Discipline Committee, while the adjustment required would help to improve the quality of services his clients receive.
However, the agent does not want to change his practice, believing that he acted appropriately, and that the client complained without full knowledge of the facts.
Administrative measures are preventive in nature: the agent must correct his professional practice and, if necessary, ask for support from his employer. This adjustment could help him to avoid committing a breach that might lead to more serious consequences both for the client and the agent himself.
Resource : Re-read this article: Consequences…
Section 13
A damage insurance representative must promote measures designed to provide education and information in the field in which he carries on his activities.
A broker who is very up-to-date on major changes to co-ownership insurance receives a number of calls from worried clients. They are unclear on the extent of their insurance obligations.
LThe broker tells them not to worry, that he is there for them. He will contact them at renewal time. “No worries until then,” he tells them.
The broker should have explained the actions that they could have taken immediately to ensure compliance with the new rules. He should have also mentioned potential impacts on renewing their contracts. After all, he took training on the changes to co-ownership insurance in order to properly advise his clients.
Resources :
- Re-read this article: Changements à l’assurance des copropriétés [Changes to co-ownership insurance, in French only]
- Read the checklist for personal-lines insurance renewals
- Register for training in co-ownership insurance [in French only]
Section 14
The conduct of a damage insurance representative must be characterized by objectivity, discretion, moderation and dignity.
An agent has a bad day at work. That evening, he sits down at the computer and decides to vent his frustrations on social media.
He writes a vicious post about his clients and his colleagues. The next day, he learns that several of his clients have called the firm to have their file transferred to another insurer, and his colleagues will no longer talk to him.
The agent behaved rudely. He should have conducted himself professionally and shown restraint. Even under difficult circumstances, he should have acted in a way that promoted healthy interpersonal relations. Furthermore, representatives should always comply with their firm’s internal policies when using social media. Here is some advice on the topic. Remember that even if a social media account is personal, a certified professional must demonstrate professionalism, discretion and moderation in the comments he posts.
Sharpen your skills with the short training activity Au chalet, à l’heure de l’apéro, the third installment of the animated A/T Risques series.
Section 16
A damage insurance representative must avoid any misrepresentations as to his level of competence or the effectiveness of his services or those of his firm or independent partnership.
A broker certified in commercial lines insurance sends all his business clients a Christmas card. In it, he mentions that in addition to their business needs, he is always available to help them find coverage to meet their residential and personal automobile needs as well. He signs the card with the title “damage insurance broker.” Furthermore, he also uses this signature on his welcome and renewal letters.
The broker is not certified in personal lines damage insurance. He therefore cannot manage personal-lines damage insurance files, despite what he indicated on his greeting cards. This is a case of false representation, both with respect to the sector in which he is authorized to practice and his competency level. He should have signed with the title “commercial-lines damage insurance broker.”
Resource : Rules regarding professional cards and other representations, Autorité des marchés financiers.
Division III Duties and Obligations towards Clients
Section 17
Before accepting a mandate, a damage insurance representative must take into account the limits of his abilities and knowledge and the means available to him. He must not undertake or continue a mandate for which he does not have the necessary skills, without obtaining the proper assistance.
A businessman calls a friend who is certified in personal lines insurance to ask her whether she can write a policy for him to cover his commercial vehicles. The agent responds that it is not a problem, and she will take care of it since she is certified to sell automobile insurance.
Not only does this certification not exist, but the agent is not certified in commercial lines insurance, which is required to insure commercial vehicles used to transport merchandise.
Before accepting this mandate, the agent should have taken into account the limits of her abilities and knowledge and referred the file to a colleague who holds a certificate in the correct sector and has the necessary skills to insure commercial transport vehicles.
Resource : read the page on representations.
Section 19
A damage insurance representative must always place the interests of the insured and of all prospective clients before his own interests and those of any other person or institution.
An insurer offers its agents a sales incentive: for every Q.P.F. no. 5 sold, the agent will receive a $25 commission.
One of the firm’s agents is excited about using this incentive to help fund her travel plans down south. She systematically offers Q.P.F. no. 5 to every client she speaks to. Furthermore, she decides not to mention Q.E.F. no. 43 or compare the two products.
This agent has put her interests before those of her insureds. She should have offered the proper coverages to meet her insureds’ needs.
Section 21
Where he is not paid exclusively on a percentage basis, a damage insurance representative must charge and accept remuneration or compensation that is fair and reasonable given the services rendered. In particular, he must take into account the following factors in determining his remuneration or compensation:
1° his experience;
2° the time devoted to the matter;
3° the difficulty of the problem submitted;
4° the importance of the matter;
5° the responsibility assumed;
6° the provision of unusual services or services requiring exceptional competence or speed;
7° the result obtained.
An insured is finalizing the purchase of home insurance with a broker. At the end of the discussion, the broker tells him that a fee of $200 will be added to his $600 premium in compensation for arranging to have the insurer issue the contract.
The insured is surprised and displeased. The broker explains that he bills these fees every time, no matter what the file’s degree of complexity.
The compensation the broker requested is not reasonable, given the services rendered. Nothing justifies such fees since the file was a relatively straightforward personal-lines damage insurance contract. The broker must adjust his fee schedule to take into account factors such as his experience, the difficulty of the case, and the amount of time spent on it.
Resource : Read this article: Honoraires et frais divers : quand faut-il en informer le client? [Fees and other costs: when do you need to inform the client? in French only]
Section 22
A damage insurance representative must notify his client of all costs which are not included in the amount of the insurance premium.
An agent spends a long time on the phone with an insured, explaining the clauses in her replacement insurance contract (Q.P.F. no.5). Satisfied with the explanations, the insured announces that she would like to add this product to her automobile insurance contract. The agent informs her that the product costs $1,100 but fails to tell her that the financing company will add further fees if she decides to spread her payments over several months.
A few days later, the insured receives the documents and notices that the product will cost her $1,500 over five years, instead of the $1,100 the agent had indicated.
Agents must inform their insureds beforehand of all costs in addition to the premium that they are billed. The agent should have called the insured to explain the situation to her.
Resource : Re-read the Regulation respecting information to be provided to consumers.
Section 23
A damage insurance representative must respect the secrecy of any personal information that he obtains about a client and use the personal information for the purposes for which he obtained it, unless he is relieved of that obligation by a provision of law or an order of a competent court.
A broker has a large client-base from a particular cultural community and earns high commissions from the insurer he uses for these clients. Following a change in the insurer’s underwriting standards, the broker decides to transfer his insureds’ contracts to another insurer.
Without their authorisation, he sends the insureds’ automobile insurance and banking information to the new insurer, thus using this information for purposes other than those for which it was obtained.
The broker did not respect the confidentiality of the insureds’ personal information. He should have obtained his clients’ consent before sharing their personal information.
Section 24
A damage insurance representative must not disclose personal or confidential information he has obtained, other than in accordance with the Act, and he must not use such information to he detriment of his client or with a view to obtaining a benefit for himself or for another person.
The owner of an apartment building investigates one of his tenants to find out whether this tenant is having financial difficulties. The tenant did not pay his rent the previous month and the landlord is trying to evict him. Since the landlord and the tenant do business with the same broker for their home insurance, the landlord decides to contact her.
The broker sympathizes with the landlord and decides to help him out. She discloses to the landlord that the tenant has indeed defaulted on his insurance payments and that his insurance contract is about to be cancelled.
The broker failed to comply with her professional responsibilities: she cannot disclose personal information on an insured or his file to a third party without the insured’s consent. She should have refused to disclose this information to the landlord or obtained the tenant’s consent to do so.
Section 25
A damage insurance representative must carry out the mandate accepted by him in a transparent manner.
A broker is working on a client-file that is affected by difficult market conditions. The insured is a businessman who frequently uses his vehicle out of province.
The broker informs the insured that he will approach an insurer who, in his experience, insures this type of risk at a reasonable cost, and immediately confirms with the insured that he will be able to place this risk. However, the insurer refuses.
The broker feels uncomfortable calling the insured back to announce the bad news and decides to approach other insurers without telling the insured.
The broker should have been more transparent with his insured and told him about the insurer’s refusal and the steps he was taking to remedy the situation.
Resource : Re-read this article: It’s a hard market. What’s a broker to do?
Division IV Duties and Obligations towards Insurers
Division V Duties and Obligations towards Representatives
Division VI Duties and Obligations towards the Autorité des marchés financiers and the Chambre de l'assurance de dommages
Section 34
A damage insurance representative must answer without delay any correspondence from the syndic, the co-syndic or an assistant to the syndic in the performance of the duties devolved upon them under the Act and the regulations thereunder.
An agent is the subject of a complaint filed with the Syndic’s Office of the ChAD. The investigator assigned to the file tries to contact him by phone to ask him to answer some specific questions and send him documents related to the file in question.
The agent does not answer his calls. The investigator leaves two further messages in his voice mailbox and sends him a letter asking him to contact the Syndic’s Office. Despite all the investigator’s efforts, the agent does not respond to his requests, which impedes the Syndic’s Office’s investigation.
The agent should have called the investigator back without delay, answered his questions in good faith, and sent all the documents requested.
Resource : Read the Frequently asked questions page [in French only] on how complaints are processed.
Section 34.1
A damage insurance representative must, in particular, appear before the syndic, an assistant of the syndic or a member of their staff as soon as he is required to do so.
An agent who is the subject of a complaint filed with the Syndic’s Office is summoned to a meeting with an investigator.
The agent is extremely nervous about the complaint process and fails to attend the meeting.
The agent has shown a lack of cooperation with the Syndic’s Office, which is tasked with protecting the public, as stipulated in the Act respecting the distribution of financial products and services. The agent has a duty to attend any meeting called by the Syndic’s Office.
Resource : Read the Frequently asked questions page [in French only] on how complaints are processed.
Section 35
A damage insurance representative must not, directly or indirectly, obstruct the work of the Authority, the Chamber, one of its committees, the syndic, the co-syndic, an assistant to the syndic of the Chamber or a member of their personnel.
A broker is the subject of numerous complaints to the Syndic’s Office. The broker systematically refuses to cooperate with any investigation. The size of the file and the evidence the Syndic presents are so compelling that the ChAD’s Discipline Committee orders the immediate temporary cancellation of the broker’s certificate during this preliminary stage of the investigation.
The investigation continues, but the broker persists in refusing to cooperate following the cancellation. He fails to provide the documents and information the Syndic’s Office needs to pursue its investigation, despite numerous written and verbal requests from the investigator. He even goes as far as to destroy certain pieces of evidence.
The broker should have cooperated and sent in all the requested documents and information.
Resource : Review this page: The Role of the Discipline Committee..
Division VII Breaches of the Code of Ethics
Section 37 PAR. 1
The fact that a damage insurance representative acts contrary to the honour and dignity of the profession constitutes a breach of the Code of ethics, including:
carrying on activities dishonestly or negligently.
Story 1 : Dishonesty
An agent learns that her brother is in dire straits, having lost his job only a few weeks after his spouse gave birth to twins. The agent tries to find a quick way to help him out financially.
Since she is the treasurer of her firm’s social committee, she decides to dip into the fund and takes $2,500 to give her brother.
The agent has acted dishonestly. She should not have taken money entrusted to her in the workplace to use for personal reasons. This is a serious violation of her ethical obligations.
Story 2 : Negligence
An agent is going through a challenging time in her personal life and has trouble concentrating on her work. She rarely makes notes in the client-file about the conversations she has with insureds.
An insured calls the agent to tell her that she has had a new radio installed in her car as well as a more powerful engine, so that the agent can notify the insurer of these changes, which may have a significant impact on the risk assessment and the premium. The agent, having failed to note the insureds requests in her file, declares the new radio to the insurer, but forgets the changes to the engine.
The insured has an accident, and the vehicle is deemed a total loss; however, the insurer refuses to compensate her for the full value of the new engine since it had not been declared. To avoid performing her duties negligently, the agent should have been more thorough in her note taking.
Resource : Read the procedure on record keeping and notes in client records for representatives.
Section 37 PAR. 4
The fact that a damage insurance representative acts contrary to the honour and dignity of the profession constitutes a breach of the Code of ethics, including:
failing to report on the carrying out of any mandate.
A broker receives a notification from an insurer explaining that it will no longer underwrite a particular type of risk and that it will therefore not be renewing a contract scheduled to expire in three months. The broker calls her client to notify him and tells him that she will have no trouble finding another insurer to underwrite the risk.
After contacting a number of insurers and with only three weeks left before the contract expires, the broker has still not found a contract for this type of risk.
She therefore contacts the insured to inform him of the situation. The insured is angry and tells her that he is in a very risky situation since he has little time left to consider other options.
As soon as the situation became clear, the broker should have informed the client of the steps she had taken, and which insurers had refused to underwrite the risk. She should have given the insured more time to explore other options.
Resources :
- Re-read this article: It’s a hard market. What’s a broker to do?
- Review the page on deadlines.
Section 37 PAR. 6
The fact that a damage insurance representative acts contrary to the honour and dignity of the profession constitutes a breach of the Code of ethics, including:
failing to act as a conscientious advisor by not informing his clients of their rights and obligations and not giving them all necessary or useful informations.
An insured is about to buy his first home. He contacts his broker for a home insurance quote. The broker collects all the necessary information and tells him that he will call back shortly with offers from insurers in his network.
Two days later, the broker calls the insured back and tells him that he has found a quote that provides coverages to meet the insured’s needs at a reasonable premium. The insured asks a few questions to find out further details, but the broker merely gives him a quick overview of the coverages included in the contract.
A few months later, the insured’s new house suffers water damage due to a sewer backup. When he begins the claims process, the insurer informs him that he will not be compensated since his contract does not include an endorsement for sewer backup.
In order to advise the insured properly and meet his needs, the broker should have given a detailed explanation of the main coverages and exclusions in the contract, as well as the most commonly available endorsements.
Resource : Re-read this article: Listen carefully, advise properly.
Section 37 PAR. 7
The fact that a damage insurance representative acts contrary to the honour and dignity of the profession constitutes a breach of the Code of ethics, including:
making a statement which is false, misleading or liable to be misleading.
At renewal time, an insured who owns a gas station asks her broker to increase her civil liability coverage from $500,000 to $1,000,000 to include pollution risk.
The broker immediately sends the insured an insurance binder that falsely states she has $1,000,000 in civil liability coverage that includes pollution risk. However, the limit in the contract remains at $500,000 since the insurer refused to increase it.
The broker should have told the insured that he first had to contact the insurer to find out whether it would agree to increasing coverage before he issued the insurance binder, which turned out to be misleading.
Resource : Review the page on insurance binders.
Section 37 PAR. 9
The fact that a damage insurance representative acts contrary to the honour and dignity of the profession constitutes a breach of the Code of ethics, including:
participating in gathering or in conserving evidence or a document that he knows is false.
In the wake of an inspection, an insurer makes a serious recommendation concerning a residence that a broker has insured: the staircase leading to the front balcony must be repaired since it poses a risk of injury and therefore increases the potential for a civil liability claim.
The broker sends the report with the recommendation to the insured, asking for his signature once the work has been completed. He follows up several times but receives no answer. Contract renewal time arrives, and the broker must send the signed report to the insurer confirming that the work has been done. Otherwise, he will have to place the risk with another insurer.
Since he has still not received an answer from the insured, the broker forges his signature and confirms with the insurer that the repairs were done. He believes that by stalling a bit longer, he will succeed in contacting the insured and convincing him to do the work quickly, if it has not already been done.
This false statement is contrary to the honour and dignity of the profession. The broker cannot submit a document that he knows to be false in order to facilitate his own work. He should have notified the insurer and tried to obtain an extension or begun taking steps to place the risk with another insurer while keeping the insured up to date on his actions.
Resource : Review the procedure for renewing an insurance policy.
Section 37 PAR .10
The fact that a damage insurance representative acts contrary to the honour and dignity of the profession constitutes a breach of the Code of ethics, including:
concealing or knowingly withholding that which a legislative or regulatory provision requires him to disclose.
An insured contacts a broker with whom he has never done business to purchase automobile insurance. He immediately makes it clear that he is dissatisfied with his current insurer and does not want a contract with this insurer. He asks her to place his risk with another insurer. .
The broker accepts the mandate without revealing to the client that his current insurer, with whom he no longer wishes to do business, is a shareholder in the firm where she works.
The broker should have disclosed her business relationship with the insurer as soon as she received the request for a quote and before the insured purchased a contract, even though she did not place the contract with this insurer.
Section 37 PAR. 11
The fact that a damage insurance representative acts contrary to the honour and dignity of the profession constitutes a breach of the Code of ethics, including:
advising or encouraging a client to do something that the representative knows is illegal or fraudulent.
An agent contacts an insured to update his file before renewing his home insurance contract. One of the things she would like to discuss is the hot water tank, which was installed about 12 years ago.
Since the insurer requires that tanks be less than 10 years old, the agent encourages the insured to sign a document confirming that he changed his hot water tank a few months ago, although she knows he has no intention of doing so.
The agent should not have encouraged the insured to make a false statement to the insurer. She should have taken the time to explain to the insured how important it was to change the hot water tank and what the consequences of not doing so would be.
Resource : Review the procedure for renewing an insurance policy.
Section 37 PAR. 12
The fact that a damage insurance representative acts contrary to the honour and dignity of the profession constitutes a breach of the Code of ethics, including:
carrying on activities with persons not authorized to carry on such activities by the Act or the regulations thereunder, or using their services to do so.
A firm director is short-staffed; two of his brokers are on sick leave. He uses a non-certified employee to take care of requests for changes and contract cancellations.
The non-certified employee gives insureds information, listens to their needs, advises them and drafts contract cancellation requests that she sends to the insurers.
The manager should have entrusted these tasks to a certified professional.
Resources :
Accent déonto
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