BrokerExamA broker’s mandatory disclosures are due “no later than at the time of quote”. That is the headline of RIBO Guidance RIBO-002, Mandatory Disclosures, which the Registered Insurance Brokers of Ontario (RIBO) last updated on April 17, 2024 and brought into force on October 1, 2024. RIBO-002 defines a quote as a recommendation of one or more policies or coverages that includes a price. The point of sale, binding, is later, and disclosure made only then is late.
RIBO’s Level 1 competency profile and blueprint names “Disclosure requirements” among the broker’s ethical obligations, and lists “Discloses any real, or potential conflicts of interest prior to making a recommendation to the client” as a task.
The rules underneath
RIBO-002 is guidance. The duties it times are in the Code of Conduct, s. 14 of O. Reg. 991, and the guidance names three of its paragraphs as the key requirements:
| Paragraph | What it requires |
|---|---|
| 4 | “A member shall be both candid and honest when advising the member’s client.” |
| 7.1 | Disclosure in writing to a client or prospective client of any conflict of interest or potential conflict of interest associated with a transaction or recommendation |
| 8 | No fee that is not fully disclosed, or whose basis is not fully disclosed, before the service is rendered, and no fee so disproportionate as to be unconscionable |
Two other sections of the regulation carry their own disclosure. s. 12(1) requires a member who proposes to charge a fee for service on top of the retained premium to disclose, before placing the insurance, the amount of the fee, the portion of the premium retained and the total remuneration on the transaction. s. 10(1) bars placing insurance with an unlicensed insurer unless the member has told the client four listed risks of an insurer not licensed under the Insurance Act, has the client’s written consent, and cannot get sufficient insurance from licensed insurers at reasonable rates or on the form of contract the client needs.
By-Law No. 3 ties the guidance in. Its definitions in s. 1.1(b) make “Guidelines” part of the “Applicable Laws”, and describe Guidelines as covering, among other things, disclosure of conflicts of interest. Under s. 6.1(d)(i), a Principal Broker’s direction and supervision includes making sure the licensees they supervise comply with the Applicable Laws. The general practice section has questions on conflict of interest disclosure and on the Take-All-Comers rule.
The new business list
RIBO-002 sets out what must be disclosed, verbally or in writing, when it is present in any new business transaction. New business, in its definitions, includes new clients, endorsements and add-ons. The list:
- Duty of care. A copy of, or a link to, the CISRO Principles of Conduct for Insurance Intermediaries and RIBO’s Fact Sheet About Your Registered Insurance Broker.
- Compensation and commissions. The forms of compensation the broker and the brokerage are entitled to, contingent commissions included, and where the brokerage’s statement of compensation can be found.
- Third-party financial interest. Whether an insurer, an affiliate of it, or any company whose products the broker is paid to distribute has a financial interest. RIBO-002 says there is no minimum material threshold.
- Sales incentives. Whether the broker receives incentives for selling the policy.
- Anything else pertinent to the quote. RIBO-002’s examples: an exclusive arrangement with a single insurer, affiliation with a network, premium financing offered by or affiliated with the brokerage, placement with an unlicensed insurer, and referral fees paid or received.
A contingent commission is disclosed even though it may never be paid. RIBO-002 describes it as depending on the profitability of the broker’s whole book with an insurer, or on volume or growth targets, and not guaranteed; the possibility of receiving it is the thing to disclose.
One insurer, or a short list
RIBO’s Code of Conduct Handbook (last updated April 2024) reads paragraph 4 to cover the markets a broker can reach. A broker who can offer only one company’s quote has to make that limitation known before accepting and placing any business, and the same openness applies where the broker can place only with a single insurer or a limited number that may not represent the whole market. The Handbook’s reading of paragraph 7.1 reaches the same point from the conflict side: a broker who is not offering a choice of insurers discloses that, whether the cause is an exclusive contract, a program written with one insurer, or a market that has cancelled or withdrawn.
Form, records and software
RIBO-002 is specific about form as well as timing:
- Written confirmation. At binding, the client receives a written summary of the disclosures made, and the confirmation has to be specifically drawn to the client’s attention.
- Not buried. RIBO will consider a broker not to have complied if the disclosure is unclear or vague, for example buried in a package of voluminous documents. The Handbook’s version of the same warning is a disclosure “intentionally buried in a twenty page document that no one will read”.
- Records. The brokerage keeps client records, such as notes, emails, broker management system entries or call recordings, that show the disclosures were made, and produces them to RIBO on request.
- Automated quoting. Quoting software has to deliver the mandatory disclosures at the point of quote, drawn to the customer’s attention before documents go out for signature.
At renewal
The guidance does not stop at the first sale. If a new conflict from the list above arises after the policy was issued, it is disclosed; RIBO-002’s example is an insurer buying the brokerage mid-year. For renewals, the disclosures may go in the renewal package. The Handbook, under paragraph 3 of the Code, separately lists among conduct found not to meet that paragraph failing to tell a client before renewal of a change of insurer and the reason for it, and failing to tell a client of changes in policy conditions or premium.
Take-All-Comers and the quote
Automobile insurance adds a disclosure concern of its own at the quote. The Financial Services Regulatory Authority of Ontario (FSRA) guidance on Take-All-Comers, AU0135INT (last updated April 7, 2022), states that an insurer asked for a quote, directly or through a broker, must provide one consistent with its FSRA-approved underwriting rules. FSRA says it is particularly concerned where a consumer relies on a broker for quotes and the broker does not tell the consumer that an insurer declined to respond or refused to quote in breach of the rule, where that quote would have been cheaper. The consumer then does not know they were harmed, and loses the chance to get that quote another way, such as through a different broker. The auto practice section has a Take-All-Comers question as well.
Read that guidance with its date. Part of it interprets Regulation 7/00, which was revoked on April 1, 2022 and replaced the same day by FSRA Rule 2020-001, since amended. It is read here for the Take-All-Comers principle and FSRA’s stated concern, not as the current rule’s text.
RIBO checks the same ground at the brokerage. Its 2024-2025 Spot Check Report still found disclosure given at or before the point of sale instead of at quotation, and client files missing summary quotation sheets showing all available markets, including the lowest available rate. The report’s figures on disclosure records and Take-All-Comers timing are set out in What RIBO spot checks found in 2024-2025.