Back in January, I sent around an e-mail update regarding concerns and questions IBAS has fielded around Section 7-9 (2) of The Insurance Act, which pertains to ‘additional fees’ levied by brokerages over and above premiums.
To address those member queries, IBAS has met with representatives from both the General Insurance Council of Saskatchewan (GICS) and the Financial and Consumer Affairs Authority (FCAA) in recent weeks to discuss potential impacts on industry and determine how the legislation will be interpreted and enforced.
I’m pleased to report that we’ve arrived at a general consensus on the matter, which alleviates many of the initial concerns expressed by brokers. In accordance with that mutual understanding, please find below a set of principles to guide you in maintaining compliance:
- The overarching spirit of this provision is that brokerages must proactively and prominently make customers aware in writing of any fees in excess of premiums, along with the reason for collecting such fees, and that the consumer must agree to these fees before they are liable to pay. Examples of such fees include brokerage, administration, and service fees (similar to those routinely charged on commercial or specialty policies) as well as financing fees.
- ‘Agreement in writing’ does not necessarily need to be a separate signed document and may take on many different forms. For example, for a fee that is payable upon the completion of the sale, disclosure — including the fee rationale — may be made directly on the invoice or as part of a proposal document. Payment on the invoice will be deemed acceptance of the terms. In the case of online transactions, brokerages may opt to use a ‘checkbox’ accompanying disclosure to indicate acceptance.
- While late payment fees may not directly fall under Section 7-9 (2) of the Act, as per fair treatment of customer guidelines, disclosure of payment terms (i.e. Net 30 Days) and any late payment penalties should be included directly on invoices. Failure to disclose late payment fees may prevent brokerages from charging or collecting on them in the future.
- In situations where a client may be financing a premium through the brokerage, including whereby installment payment options are presented, so long as the client has received disclosure of both the ‘paid in full’ and ‘financed’ payment options prior to making the decision to bind coverage, no additional action is required by the brokerage. The client may also leverage third-party financing mechanisms made available through the brokerage, which will have separate processes external to the brokerage for approval and documentation.
- Any fee for service that will be levied to the client regardless of whether coverage is purchased through that brokerage requires signed authorization to be obtained prior to the commencement of the service for which the customer will be charged.
In the event of any formal complaint or dispute, regulation is often applied through the lens of intent and reasonableness. So, in your efforts to comply to Section 7-9 (2) of the Act, please ensure you endeavour to meet a high standard of those benchmarks. For instance:
- Do not use excessively small fonts or unclear language with respect to fee disclosures;
- Be as forthright as you can on the rationale for additional fees being charged (a line item simply stating ‘Administration Fee’ may not be sufficient);
- Make sure additional fees are communicated in advance of the customer making a coverage decision or an invoice being issued;
- Maintain digital or hard-copy documentation to support compliance to this (and all) legislative provision(s); and
- If you have questions, seek guidance. Call GICS or contact IBAS — we are always happy to liaise with GICS on our members’ behalf.
As always, if you have any further questions or comments, please don’t hesitate to shoot me an e-mail (email@example.com) or call my office line directly (306-525-4075). Thank you for your continued support!
Chief Executive Officer
Insurance Brokers Association of Saskatchewan