The Registered Insurance Brokers of Ontario (“RIBO”) has issued a Consultation Paper on Broker Responsibilities (“Consultation Paper”). The Consultation Paper aims to discuss the important role of the Principal Broker (“PB”) in ensuring regulatory compliance of a brokerage and its individual licensees. It also seeks comment from stakeholders as to how RIBO might better support PBs, and by doing so, benefit consumers. RIBO is considering changes to its current PB model which allows PBs to be responsible for more than one firm (the “Multi-Firm PB Model”). Following the consultation, RIBO could amend Regulation 991 to prohibit a PB from being associated with more than one firm. The consultation period will run until April 30, 2021.

Background

On March 17, 2021, RIBO presented a virtual session for PBs on RIBO’s 2021 priorities review. In its virtual session, RIBO reviewed its action plan for 2021, which included, among other things, a review of its PB responsibilities and the Multi-Firm PB Model. There are currently no regulatory restrictions or guidelines relating to how many brokerages and/or individual licensees a single PB can supervise. As a result, RIBO advised that they would be releasing a consultation paper to review the responsibilities of PBs and the Multi-Firm PB Model.

Consultation Paper

The Consultation Paper provides a comprehensive background on the roles and responsibilities of a PB under the applicable Registered Insurance Brokers Act, Regulations and Bylaws and their importance in ensuring consumer protection irrespective of the brokerage business model. This includes issuing better guidance for insurtech or online-focused brokerages.

The Consultation Paper considers whether a single PB may provide meaningful oversight when they are responsible for multiple firms and firms with a wide ranging geographic presence. While audits suggest no direct link between compliance concerns and PBs overseeing multiple firms, RIBO nevertheless believes that there is a heightened risk of consumer protection issues where PB oversight is not robust. As a result, RIBO wants to ensure its member PBs have the appropriate tools and guidance to ensure oversight of the Multi-Firm PB Model. The Consultation Paper notes that a complete ban of the Multi-firm PB Model may not be necessary and suggests that RIBO may plan an inspection blitz focused on brokerages where a Multi-Firm PB Model exists as well as PBs of large brokerages with multiple locations to help identify any existing compliance concerns.

In considering the above-proposed amendments, RIBO would like stakeholders to respond to a set of consultation questions. The following is a summary of these questions:

1. What are the benefits or risks of the ‘multi-firm PB’ model?
2. If the “multi-firm PB” model is to remain, does it require some parameters?
3. Is RIBO’s current “principles-based” approach effective in our oversight of PBs?
4. Should additional RIBO reporting requirements be required for brokerages using “multi-firm PB”?
5. Should ‘best practices’ guidance for these ‘multi-firm PB’ arrangements be created? If so, what issues should be included?
6. How can RIBO better support PBs in fulfilling their compliance responsibilities?

A link to RIBO’s Consultation Paper can be found here. Written submissions to the consultation questions should be provided to RIBO by email at communications@ribo.com by no later than April 30, 2021.

Consultation timelines and proposed next steps

Following the consultation period, RIBO will review feedback and consider potential options relating to the Multi Firm PB Model including: (i) continue to monitor and collect more data; (ii) review and revise existing policies and guidance materials by implementing immediate changes to ensure best practices are being followed by firms using the Multi-Firm PB Model; or (iii) propose amendments to Regulation 991 to prohibit a PB from being associated with more than one firm. Following the review, RIBO will seek council’s direction on a recommended proposal. RIBO expects to communicate changes to membership and proposed timelines by Fall 2021.

Conclusion

RIBO would like stakeholders to review and consider its Consultation Paper on the responsibilities of PBs and the Multi-Firm PB Model and respond to its questions to assist RIBO in developing a proposal that will assist PBs in the effective management and supervision of insurance brokerages.

In our view, there is no evidence to suggest that a PB cannot effectively supervise and oversee multiple firms if a robust compliance regime is adopted, protocols and procedures are adhered to, and timely reporting and communication between the PB and individual brokers are maintained. Broker management platforms and other intellectual technology solutions can ensure proper oversight and supervision by the PB of multiple firms. A complete prohibition of the Multi-Firm PB Model is not warranted based on the current data available to RIBO. Proposed changes could cause significant and unnecessary challenges to a large number of brokerages regulated by RIBO. As such, any proposed changes by RIBO to the current PB model should focus on comprehensive compliance systems, timely reporting and proper oversight of brokerages while considering their respective size, scale and complexity.

We would encourage brokerages and PBs who successfully manage under a Multi-Firm PB Model to provide submissions to RIBO about how the Multi-Firm PB Model poses no more of a concern to consumers than a single PB model and that the principles based regulation by RIBO ensures adequate protection of individual insureds but permits various business models to thrive in the Ontario insurance market. PBs must advise RIBO on how the potential changes may adversely affect their businesses and operations in Ontario.

Please do not hesitate to contact a member of Dentons’ Insurance team with any questions or if you require assistance with a licensing matter.