Issuance of restricted licences discontinued by the Insurance Council of British Columbia

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On March 1, 2021, the Insurance Council of British Columbia (ICBC) issued a notice advising that the ICBC has ceased issuing licences restricted to the sale or adjusting of one or more specific products (Restricted Licences).

Background

A recent legal review of the process for granting Restricted Licences determined that while the ICBC has the legislative authority to issue Restricted Licences under section 225.1 of the Financial Institutions Act (FIA), the process is not set out in the Insurance Council Rules (the Rules). As a result, the ICBC has determined that the act of granting these Restricted Licences is ultra vires, i.e., beyond the scope of the powers currently defined in the Rules. In order to avoid non-compliance with the Rules, the ICBC has ceased issuing Restricted Licences effectively immediately.

Restricted Licence holders may include, but are not limited to, motor vehicle dealership sales staff, extra-provincial travel agencies and intermediaries that are restricted to the sale of a specific product such as warranty insurance, title insurance or bond insurance.
Effect on licensees and consumers.

Licensees

The ICBC confirmed that no new applications for Restricted Licences are being accepted and all pending applications will be closed and related application fees refunded. According to the ICBC notice, there will be no disruption to current holders of Restricted Licences. Such licensees may continue to carry out the insurance activities for which they are licensed and will be able to renew their Restricted Licences as normal.

In addition, the ICBC confirmed that there would be no disruption to: (i) the standard licensing process for insurance agents, agencies or adjusters (General Insurance, Life and/or Accident & Sickness); or (ii) the licensing for British Columbia based travel agents or wholesalers with a restricted travel insurance agent license.

The standard insurance licensing process is more rigorous than the restricted licensing process and the requirements tend to be more onerous. In our view, the ICBC’s decision is unfortunate since the restricted licensing regime enables products to be offered to the public in a compliant and consumer-oriented way without requiring the distributors of the program to obtain full insurance licensing. Restricted Licence holders should ensure that their licences are renewed in a timely manner, as a failure to renew prior to the deadline will result in a loss of their licence and the inability to obtain a Restricted Licence until the ICBC resumes licensing activities in this regard.

Consumers

The ICBC anticipates that this situation will have minimal impact on consumers, as insurance products continue to be available through current restricted licence holders and licensed insurance agents and agencies. Furthermore, the ICBC advised that the validity of insurance products sold by holders of Restricted Licence is not affected.

Steps taken by the ICBC

The ICBC is currently assessing whether the creation of one or more new Rules is necessary. The ICBC expects this process to take anywhere from 18 to 24 months. As a result, the ICBC does not expect a new rule to be in place before August 2022.

Conclusion

Current holders of Restricted Licences may continue to carry on business within the parameters of their existing licence conditions and will be unaffected by the ICBC’s review process. All pending applications for Restricted Licences are effectively cancelled and no new applications may be filed in this regard until the ICBC resolves this issue.  Applicants who wish to sell or administer restricted insurance products have been advised to pursue licensing through the ICBC’s standard licensing process for insurance agents, agencies and adjusters.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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