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Insurance companies

Region: Ontario Answer # 1252

What does an insurance company do?

Insurance companies issue insurance policies, which provide a guarantee of compensation for a specified loss, damage, illness or death in return for payment of a fee, called a premium. The policy is a contract between you and your insurance provider to pay you a certain amount of money if the event (loss) you are insured against happens during the term of the policy.

What types of products do insurance companies offer?

Many different types of insurance are sold. Some specialize in specific types of insurance, such as automobile insurance, which is mandatory for drivers, while others provide different types of policies such as:

  • individual and group life insurance;
  • health insurance, including disability;
  • home, tenant and condominium insurance;
  • mortgage loan insurance;
  • business insurance;
  • auto insurance;
  • credit card balance insurance;
  • travel insurance, and so on.

For more information on the types of insurance available, refer to the Insurance Law section of Legal Line.

Are insurance companies regulated?

The Insurance Companies Act is the primary legislation governing all federally incorporated or registered insurance companies in Canada. Each province also has laws that regulate provincial companies incorporated in their province. This includes the Insurance Act in Alberta, New Brunswick, NWT, Nova Scotia, Ontario and PEI, the Insurance Companies Act in Newfoundland and Labrador, and An Act respecting insurance in Quebec.

The Financial Consumer Agency of Canada (FCAC)

The FCAC is responsible for administering sections of the Federal Act, specifically those relating to consumer actions, and it also monitors the insurance companies compliance with codes of conduct.

Regulations under the Act cover a number of issues, including:

  • Complaint information (both Canadian and foreign insurance companies)
  • Cost of borrowing (both Canadian and foreign insurance companies)
  • Credit information
  • Mortgage insurance disclosure
  • Negative Option Billing
  • Prepaid payment products

The Office of the Superintendent of Financial Institutions (OSFI)

OSFI regulates and supervises federally regulated life insurance companies and their subsidiaries, and federally regulated property and casualty insurance companies and their subsidiaries.

Provincial Superintendents of Insurance license insurance companies, and regulate insurance products and underwriting, rating, claims, and marketing practices of the companies incorporated in their province. Visit the Insurance Bureau of Canada website for more information.

What is the difference between an Insurance Broker and an Insurance Agent?

Insurance can be purchased from an insurance company through either an insurance broker or an insurance agent. Both insurance brokers and insurance agents act as intermediaries between the buyer and the insurance company. Insurance brokers and agents must be licensed to sell  insurance, and they must follow provincial and federal regulations. The main difference between an insurance broker and an insurance agent is who each represents:

  • a broker represents the insurance buyer
  • an agent represents a single insurance company

Insurance Brokers

  • work independently and can represent multiple insurance companies
  • must pass exams and be licensed by the governing body in the province(s) in which they work
  • will compare the coverage of various insurers to get you the best coverage and rates
  • look for opportunities to combine different types of insurances to obtain discounts or reduce premiums
  • can assist you when making a claim
  • are paid a commission by the insurance companies whenever they sell that company’s policies.

Insurance Agents

  • work for a single insurance company
  • are required to be licensed by the governing body
  • are only able to sell products offered by their specific insurance company
  • are paid by the insurance company they represent

For more information about insurance companies, visit canada.ca, the Financial Consumer Agency of Canada (FCAC), and our Links and Resources.

 





								

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