Mandatory Disclosure FAQs - Registered Insurance Brokers of Ontario (RIBO) - Ontario's regulator of general insurance brokers"

Mandatory Disclosure FAQs

At our Townhall about Mandatory Disclosure Guidance held on October 17, 2024, we received many questions. Below are the answers to some.

Please check this webpage regularly, as we will continue to respond to your submitted questions on a rolling basis.

The presentation deck (PDF) and recording from the townhall are also available for your reference.

If you have any further questions, please email compliance@ribo.com.

Questions

Answers

General

1. Is this a new requirement?

Disclosure of conflicts and potential conflicts of interest including ownership by third parties and disclosure of commissions has been a long-standing requirement. Similarly, it’s been a requirement to share copies of the CISRO Principles of Conduct for Insurance Intermediaries and the Fact Sheet About Your Registered Insurance Broker documents.

The Guidance clarifies when the mandatory disclosures must be provided to clients. The Code of Conduct Handbook has also been updated to reflect these changes.

2. What does “before or no later than the time of quote” mean?

The quote is the broker’s formal recommendation of one or more policies/coverages that includes price, which may or may not be accepted by the client. RIBO expects brokers to communicate all disclosure requirements, conflicts of interest or potential conflicts of interest before or no later than the time at which a recommendation or quote is made.

Before you provide a prospective client with an estimated premium or coverage details based on client information and before your client agrees to make the purchase, you must communicate all disclosure requirements, conflicts of interest or potential conflicts of interest.

Even if most of the business was conducted over the phone, the mandatory disclosure requirement does not change. You are still required to provide mandatory disclosure no later than at the time of quote. You must also follow up all verbal disclosures and communications with written confirmation as soon as possible after binding. This ensures that written records of communications with clients are maintained in your client files. A client must be specifically drawn to the disclosure documents.

3. How do I meet this obligation when most of my business is conducted over the phone?

All information relevant to the insurance transaction must be disclosed verbally to ensure that the client can make an informed decision before purchasing.

Where binding takes place over the phone, before deciding to make a purchase, your client must be given an option to review and consider information about conflicts or potential conflicts of interest, or any other disclosure that may apply.

Consider using an automated message or directing clients to your brokerage’s website or email, where the information can be reviewed in detail.

You must provide written confirmation of discussions, including mandatory disclosure confirmation, as soon as possible when you deliver the policy or electronic proof of insurance documents.

4. What are the major components of RIBO licensees’ required disclosures?

Up to five types of disclosures (in writing) should be made and provided to your customers in writing:

Disclosing your duty of care to the customer as a licensee – Provide copies of the CISRO Principles of Conduct for Insurance Intermediaries and the Fact Sheet About Your Registered Insurance Broker.
If applicable, identify any insurer ownership, third-party ownership or financial relationship (including loans) the firm has with an insurer or other third-party.
Compensation and Commissions – Provide Letter / Commissions Disclosure Statement (see Code of Conduct Handbook – Commissions Disclosure protocol)
Sales Incentives – Mention if you participate from time to time, or add to your Disclosure Statement
If applicable, disclose all other conflicts of interest including potential conflicts.
- Examples include, but are not limited to, the following: single market program or limited market capacity; whether the firm offers its own premium financing or if it’s affiliated with the company financing the client’s premiums; receiving or paying referral fees, charging service fees, etc.

5. Does the disclosure requirement only apply to brokerages owned by insurers?

No. The disclosure requirement applies to all licensees/brokerages, regardless of whether they are owned by insurers, financial institutions, private equity firms, etc. Any conflict or potential conflict of interest due to third-party ownership must be disclosed.

At the minimum, disclosure concerning compensation and commissions, and the CISRO Principles of Conduct for Insurance Intermediaries and the Fact Sheet About Your Registered Insurance Broker should be provided. For more information about the requirement to share these documents, see the RIBO Guidance 003: CISRO Conduct Guidance.

6. Do I need to strictly follow RIBO’s recommendations or examples?

You are expected to comply with mandatory disclosure requirements. Example scripts and scenarios are not meant to be copied exactly.

It is up to the broker or brokerage to implement a solution that meets their clients’ needs while adhering to the Code of Conduct and the Registered Insurance Brokers Act.

7. Until now, we only sent a copy of the commission disclosure to our insured. We are not affiliated with any insurance company. Should we only send the RIBO and CISRO sheet that was produced by RIBO? Are we able to brand these documents?

The new guidance clarifies that in addition to sharing information about the commission ranges your brokerage receives, and informing clients about all other conflicts or potential conflicts of interest, you should also be providing them with copies of the CISRO Principles of Conduct for Insurance Intermediaries and the Fact Sheet About Your Registered Insurance Broker documents. Both documents provide customers with information about your duty to act in their best interest and about consumer protections in place.

The CISRO Principles of Conduct for Insurance Intermediaries document must be clearly identified and branded as a CISRO document, as it is not produced by RIBO.

The Fact Sheet About Your Insurance Broker that was created by RIBO may be branded by your company and/or reproduced in another format, if the content and wording remain unchanged.

8. Is it sufficient to link to the brokerage website where the commission disclosure is outlined?

You must continue to maintain written records of verbal or email communications with every client, including explicitly disclosing conflicts of interest in writing.

We encourage you to review the disclosures with clients and distribute the disclosures in ways you feel are most effective.

RIBO does not recommend any one method of directing the client’s attention to the disclosures, as each firm has unique workflows. However, one way of meeting this requirement would be to provide the disclosure document(s) via a link to a webpage and specifically drawing the client’s attention to it. When doing so, you should also highlight the type of information that may be found in the disclosure document(s).

If asked, be prepared to answer clients’ questions about the information that was disclosed.

9. Does the requirement for clients to receive a written disclosure summary at binding mean that I must provide a webpage link with disclosures at the time of quote first and then provide written PDF disclosures after binding?

A short explanation of the requirement to provide disclosure along with a link to additional details on a webpage can suffice when sharing information in writing before quoting. Any follow-ups in writing, could include attaching actual PDF copies of the disclosure letter and other required documents and information would be an example best practice, but not an explicit requirement.

To ensure your approach complies with the requirements:

At quoting, the link provided should give clients access to full disclosure information.
After binding, your documentation can include a more structured written summary confirming the disclosures that were provided.

10. Does a standard email template that provides links to disclosures on the brokerage website satisfy the requirement to provide disclosure no later than at the point of quote?

RIBO’s Mandatory Disclosures Guidance and subsequent communications provide licensees with clarification on what needs to be disclosed and disclosure timing. See our webpage for examples of communication strategies for your brokerage.

A standard email template, providing links to the appropriate disclosures on the brokerage website would be sufficient, as long as you:

Provide the mandatory disclosure to your client no later than at the time of quote, or when the policy is set to renew (in the case of a renewal),
Verbally communicate the mandatory disclosures to clients,
Follow up your verbal discussion with written confirmation of the discussion, and
Maintain written records of communications with your clients in their client files.

RIBO provided the above as examples of how a brokerage or broker can direct the client’s attention to the disclosures. You are expected to make your own judgement and consider clients’ needs to determine which communication method works best. If asked, you should be prepared to answer clients’ questions about the information that was disclosed.

For more information, refer to the RIBO Code of Conduct Handbook.

11. What should we do if the client wants only a quote and not disclosure?

Disclosures are mandatory. Even if the client does not wish to receive them, you must provide them to comply with RIBO regulations.

In this case, you must give your client an option to review and consider information about conflicts of interest before they decide to make a purchase. An example of this is directing them to the broker’s website or email where the information can be reviewed in detail if the client wishes to.

You must provide written confirmation of discussions, including confirmation of all mandatory disclosures as soon as possible when you deliver the policy or electronic proof of insurance documents.

12. Is disclosure required if a Vancouver-based client requires Toronto-project-specific insurance?

Yes. Disclosure is required for any client purchasing insurance in Ontario, regardless of their location. The key is the location of the insurance risk, which makes disclosure mandatory under Ontario regulations.

Disclosure of Fees, Commissions, and Practices

1. What is the Point-of-Sale Commission Disclosure statement, and when is it provided? Does a firm have to publish compensation ranges on their website?

The Commission Disclosure statement (formerly called the Point-of-Sale Commissions Protocol) outlines the commission class and range for the insurance class provided (e.g. personal lines auto and property, commercial lines), along with an explanation of what basis contingent profit commissions may be earned or paid. You should also disclose which insurers pay Contingent Profit Commissions (CPCs) in your statement.

Disclosure must be in writing and provided to the client no later than the time of quote. As per the Code of Conduct Handbook, a Commission Disclosure letter can be provided to your client directly, which lists the compensation ranges. Many brokerages post the letter on their website, where it can be updated easily.

You must also bring any subsequent increase to the commission schedule or material change to the brokerage compensation arrangement to your client’s attention. (This could be an email link to a webpage that you draw your client’s attention to.) When doing this, highlight the information that can be found in the disclosure document(s).

2. Do premium financing fees and commission structures with premium financing companies require mandatory disclosure?

Although a separately established business, brokers and brokerages involved in the financing business are still subject to the requirements outlined in the RIB Act and Regulations, including the RIBO Code of Conduct. Clients must be advised of available alternatives, including low cost or no cost premium payment plans, which may be offered by insurers for the class of business involved. The availability of insurance through the brokerage must not be made contingent upon the client agreeing to use the brokerage’s premium financing terms. The cost of borrowing and service charges must be clearly stated, as required by the Ontario Consumer Protection Act, 2002.

3. Does the percentage of ownership need to be disclosed?

No. The percentage does not need to be disclosed and there is no minimum or material percentage of third-party ownership that triggers the need to disclose ownership. However, any third-party ownership or financial links that could be considered a conflict of interest should be disclosed. This includes any direct or indirect ownership interest by an insurer or financial conglomerate, private equity firm or holding company; and, any loan, credit facility or other financial relationship.

4. Does a brokerage need to disclose that they receive contingent profit from various companies, or just commissions?

Yes. All commission structures must be disclosed under the Commission Disclosure Protocol including contingent profit commissions (CPCs), book-rolls, overrides, and any commissions from premium financing. The client should know if a broker may receive such commissions in the future (even if its not guaranteed). See RIBO Guidance: Mandatory Disclosures and the Commissions Disclosure Protocol found in the Code of Conduct Handbook for more information.

Timing and Method of Disclosure

1. Can disclosure be provided at the time of quoting, or do we need to conduct a follow-up?

Disclosure should initially be made verbally (or in writing) before providing a recommendation or no later than at the time of quote.

Provide confirmation to your clients of all discussions, including information about mandatory disclosures as soon as possible after binding.

It is not a requirement to obtain a signed acknowledgement that your client received and read all disclosure documentation prior to binding. For every transaction, keep a record of all correspondence, including verbal discussions with your clients.

2. Is verbal disclosure sufficient, or do we need written proof for compliance?

Written proof is required. While initial verbal disclosures are allowed, written confirmation of the disclosure must follow as soon as possible after binding and delivery of electronic proof of insurance documents.

3. How do we handle disclosure requirements with clients who don’t have email or internet access?

Provide a physical copy. The disclosure must still be provided in writing, even if it means providing a physical copy to the client. As soon as possible after binding, provide written confirmation to your client of the transaction and relevant discussions, including information about mandatory disclosures.

4. When we re-market an existing client, do we need to provide the same mandatory disclosure again?

It depends. If any new conflicts or changes arise, the disclosure must be provided again. For example, this could include payments or any additional compensation a brokerage receives for remarketing a book of business. A broker’s duty to disclose new conflicts could also arise if an insurer purchased the brokerage mid-year.

If your existing clients have not yet been provided with all mandatory disclosures, renewal time can be a convenient time for you to contact your client and provide them with the information.

5. Do we need to disclose when cross-selling to an existing client (e.g. adding a dual policy to a monoline customer)?

It depends. Any new transaction or recommendation involving new conflicts or potential conflicts requires disclosure.

In this example, if the client already received a copy of your disclosure letter or statement, you could provide an additional copy of the information as a courtesy to your client.

6. Do we need to keep records of disclosure provided during quotes, even if there is no sale?

Yes. You must maintain comprehensive records of all client interactions, including any disclosures made at the time of quoting. This is part of your duty to ensure transparency and compliance.

Even if a sale is not completed or coverage is not bound, maintaining records of the disclosure provided ensures that you can demonstrate adherence to the mandatory disclosure requirements during potential audits or compliance checks. If requested, these records must also be provided to RIBO.

Compliance

1. How will RIBO verify compliance?

Compliance with disclosure requirements will continue to be monitored as part of the Spot Check program to ensure that licensees meet these standards and maintain transparency with clients.

You should maintain records of communications with clients in their client files. Be prepared to provide them to RIBO, upon request.

Records include, but are not limited to, phone call recordings and broker notes within a broker management system.

RIBO encourages you to have internal policies and training on disclosure and conflict of interest management. Employees should have easy access to resources that help them to identify when disclosure is required and how to effectively communicate the disclosure to clients.

2. I have concerns about a licensee’s compliance with these new requirements.

Complaints regarding non-compliance can be investigated. You can also submit a complaint.

If a broker provides disclosure in an unclear way to their client, such as being buried in a package of numerous documents that could easily be missed by the client, RIBO will consider that broker to have not complied with the disclosure requirements.

3. What are the penalties for non-compliance? (e.g. If a Spot Check finds evidence lacking that adequate disclosures were made)

If a RIBO auditor determines non-compliance during a Spot Check, it will be addressed on a case-by-case basis. In some cases, matters may be transferred to the Investigations Department for further action.

4. Do you have a sample document or script that meets full compliance requirements?

Yes, you can find some examples on our Providing Mandatory Disclosure webpage and consult sample procedures for verbal binding.

5. Is a follow-up required to ensure clients understand the disclosure, even if they verbally agree?

It is important that your clients understand the information and advice that you provide, so they can make informed insurance purchasing decisions. You know your clients best and how to support them.

There is no requirement for obtaining written confirmation from your client that they received and read the disclosure either pre- or post-binding, as it might impose additional burdens on your client. However, if your process already requires sign-offs, a signed acknowledgement could be the best practice for you to add to your process.

6. Does RIBO receive complaints from clients who don’t know brokers are paid a commission?

Yes. This is why it is critical to disclose commissions clearly. Clients have the right to knowhow you are compensated. When they know, it helps to avoid misunderstanding and mistrust.

Renewals

1. Do I need to contact all my clients and provide them with these mandatory disclosures?

No. Since October 1, 2024, the disclosure guidance applies to only new business transactions.

In these new business transactions, you must disclose to clients any changes in fees, commissions, financial interests or other disclosures that may apply that were not initially present or disclosed when the original policy was issued.

If updates have occurred, such as changes to your Commissions or insurer contracts for example, consider ways to communicate this to your client, including at the next renewal or as part of any mid-term changes.

Doing so, ensures transparency throughout the duration of the broker-client relationship and guarantees that clients are always informed of any material changes that could affect their policy and choice of insurer.

Managing General Agents (MGAs)

1. How do mandatory disclosures apply to MGAs when they don’t deal directly with the public?

MGAs that are RIBO-licensed on a voluntary basis have elected to comply with RIBO’s regulatory framework including, but not limited to, the Code of Conduct and related guidance.

While MGAs do not deal directly with insureds, MGAs are required under the Code of Conduct to disclose conflict of interest and fees to the broker.

Communicating relevant information to licensees, which form the MGA’s client base, helps ensure transparency, especially about matters that may influence the broker’s recommendations to their client, such as fees and commissions information.

MGAs would not be required to provide copies of the Fact Sheet About Your Insurance Broker or CISRO Code of Conduct for Insurance Intermediaries documents to their broker clients, as these are designed for insureds only.

However, MGAs are still required to disclose information about direct or potential conflicts of interest such as ownership information, commission structure information and fees. MGAs can follow the Commission Disclosure Protocol found in the Code of Conduct Handbook and adopt it for their own use.

2. Do I need to disclose the commissions I receive from MGAs?

You must disclose the commission received from MGAs when preparing the Broker Compensation letter or statement. This information may be pertinent to a client’s decision about whether to purchase or renew a policy.

The purpose of disclosure is to help clients make informed decisions. It is meant to promote transparency.

You have a duty to ensure that clients are aware of the products they are purchasing, including the markets you represent and the commissions you receive.