In the Matter of The FINANCIAL INSTITUTIONS ACT (RSBC 1996, c.141) (the "Act")
and The INSURANCE COUNCIL OF BRITISH COLUMBIA ("Council")
and HANIN INSURANCE SERVICES INC. (the "Agency")
ORDER
As Council made an intended decision on October 15, 2013, pursuant to sections 231, 236, and 241.1 of the Act; and
As Council, in accordance with section 23 7 of the Act, provided the Agency with written reasons and notice of the intended decision dated October 29, 2013; and
As the Agency does not wish to proceed with a hearing of Council's intended decision; Under authority of sections 231, 236, and 241.1 of the Act, Council orders: 1. The Agency is fined $5,000.00. 2. The Agency is assessed Council's investigative costs of$1,662.50. 3. A condition is imposed on the Agency's general insurance licence that requires it to pay the above-ordered fine and investigative costs no later than April22, 2014. If the Agency does not pay the ordered fine and investigative costs in full by this date, the Agency's general insurance licence is suspended as of April23, 2014, without further action from Council and the Agency will not be permitted to complete any annual filing until such time as the ordered fine and investigative costs are paid in full.
This order takes effect on the 22"d day of January, 2014.
Chairperson, Insurance Council of British Columbia
Rita Ager, CFP, CLU, CHS, CPCA, FEA
INTENDED DECISION of the INSURANCE COUNCIL OF BRITISH COLUMBIA ("Council")
respecting HANIN INSURANCE SERVICES INC. (the "Agency")
INTRODUCTION Pursuant to section 232 of the Financial Institutions Act (the "Act"), Council conducted an investigation into allegations that the Agency failed to ensure its licensed employees were properly supervised and operating in accordance with the conditions and restrictions on their licences.
As part of Council's investigation, on September 9, 2013, an Investigative Review Committee (the "Committee") met with the Agency's nominee (the "Current Nominee") to discuss the allegations. The Agency's former nominee (the "Former Nominee"), one of its Level2 general insurance agents (the "Level 2 Agent"), and a Level 1 general insurance salesperson from the Agency (the "Licensee"), also attended the meeting.
The Committee was comprised of one voting member and two non-voting members of Council. Prior to the Committee meeting, an investigation report was distributed to the Committee and the Agency for review. A discussion of this report took place at the meeting and the Agency was provided an opportunity to clarify the information contained therein and make further submissions. Having reviewed the investigation materials and after discussing this matter with the Agency, the Committee made a recommendation to Council as to the manner in which this matter should be disposed.
A report setting out the Committee's findings and recommended disposition, along with the aforementioned investigation report, was reviewed by Council at its October 15, 2013 meeting. At the conclusion of its meeting, Council accepted the Committee's recommended disposition and determined the matter should be disposed of in the manner set out below.
.. ./2
Intended Decision Hanin Insurance Services Inc. 167039-Il315 October 29, 2013 Page 2 of5
PROCESS Pursuant to section 23 7 of the Act, Council must provide written notice to the Agency of the action it intends to take under sections 231 and 23 6 of the Act before taking any such action. The Agency may then accept Council's decision or request a formal hearing. This intended decision operates as written notice of the action Council intends to take against the Agency.
FACTS The Agency has held a corporate general insurance licence with Council since July 2006. During the material time in this matter, the Former Nominee was the Agency's nominee. He has been licensed as Level3 general insurance agent since 1995. The Licensee, who was involved in this matter, was a Levell general insurance salesperson ("Salesperson") during the material time and had been licensed in this capacity for approximately two years.
With the assistance of his supervisor at the Agency (the Leve12 Agent), the Licensee procured commercial insurance for a sushi restaurant (the "Restaurant") in March 2010. In placing the insurance, the Licensee attended the Restaurant unaccompanied on a few occasions to gather information about the risk, take pictures of the Restaurant, and discuss the cost of the insurance with the Restaurant's owner. This was done at the direction of the Level2 Agent.
In December 2010, the Restaurant suffered a loss and made a claim for coverage under the commercial insurance policy. After it was determined that part of the loss would not be covered, a concern arose that the Licensee failed to place adequate coverage for the Restaurant, and also that he may have misled the Restaurant about the extent of coverage when discussing the claim with the Restaurant's owner.
The Licensee stated he had worked outside the Agency office on a number of occasions, contrary to a condition on his licence that prohibits Salespersons from engaging in insurance activities outside an agency office.
In response to the Licensee's conduct, the Current Nominee and the Former Nominee stated that while the Agency does not have a formal training manual on proper practices and procedures, Salespersons authorized to represent the Agency are reminded upon their hiring about the conditions on their licences, including that they cannot engage in insurance business outside the office, except to conduct Insurance Corporation of British Columbia roadrunner service, as permitted.
Intended Decision Hanin Insurance Services Inc. 167039-11315 October 29, 2013 Page 3 of5
The Level 2 Agent indicated that when he procures insurance coverage for clients, he has, on occasion directed an Agency Salesperson to attend the site of a risk to obtain more information. He did not provide specific details on what type of information would be gathered, or if the Salesperson was expected to meet with a client when outside the office. However, he indicated he was unaware that Salespersons could not at least engage in this type of activity outside the office. Similarly, the Former Nominee understood Salespersons could go outside the office unaccompanied to take pictures of risks.
The Current Nominee and the Former Nominee acknowledged they should not have allowed the Agency's Salespersons to conduct insurance activity outside the office on behalf of the Agency. As a consequence, the Agency is now encouraging their Salespersons to take the required education to upgrade their licences, and more Level 2 general insurance agents are being hired.
ANALYSIS Council reviewed the information pertaining to the placement of coverage for the Restaurant and the subsequent insurance claim. Council determined, based on the information before it, that it could not be established that the Licensee misled the Restaurant, either at the time insurance coverage was placed or during the claims process. However, it noted situations such as this reinforce the importance of ensuring that Salespersons are adequately supervised and conduct insurance activities in compliance with their licence conditions and restrictions.
However, the information provided by the Current Nominee, the Former Nominee, and the Level 2 Agent led Council to conclude that the Licensee was not being properly trained or monitored, and this was likely the case with other Salespersons authorized to represent the Agency. In particular, proper supervision would have prevented any confusion within the Agency about the limitations on a Salesperson licence and the Licensee would have been told that he could not engage in insurance activity outside its office in the manner that occurred.
While Council was comforted that the Level2 Agent was directly involved in placing the commercial insurance for the Restaurant in this matter, it did not believe this mitigated the fact that by attending the Restaurant to gather information about the risk and discuss insurance coverage with the Restaurant's owner, the Licensee engaged in insurance business outside the Agency's office, contrary to a licence condition.
Intended Decision Hanin Insurance Services Inc. 167039-!1315 October 29, 2013 Page 4 of5
Council ultimately found that the transgressions in this matter demonstrated there was an inadequate and incompetent level of supervisory oversight at the Agency, for which it bears significant responsibility. It is Council's position that an insurance agency bears responsibility in situations where employee misconduct can be attributed to insufficient oversight within the agency. The licence condition which prohibits a Salesperson from carrying on insurance business outside an insurance agency's office has been in place for decades and is fundamental to the protection of the public. Had the Agency had appropriate oversight in place, such a breach would not have occurred.
In determining an appropriate disposition, Council concluded that a meaningful fine was warranted against the Agency. It felt this would not only help to deter similar situations from arising at the Agency again, but would communicate to the industry the importance of ensuring there is adequate and proper supervision within an insurance agency. Council also concluded the Agency should be responsible for the investigative costs in this matter.
INTENDED DECISION Pursuant to sections 231,236, and 241.1 ofthe Act, Council made an intended decision to: 1. Fine the Agency $5,000.00. 2. Assess the Agency Council's investigative costs of$1,662.50. The Agency is advised that should the intended decision become final, the fine and costs will be due and payable within 90 days of the date of the order. In addition, failure to pay the fine and costs within the 90 days will result in the automatic suspension of the Agency's general insurance licence and the Agency will not be permitted to complete any annual filing until such time as the fine is paid in full.
The intended decision will take effect on November 19,2013, subject to the Agency's right to request a hearing before Council pursuant to section 23 7 of the Act.
RIGHT TO A HEARING If the Agency wishes to dispute Council's findings or its intended decision, the Agency may have legal representation and present a case at a hearing before Council. Pursuant to section 237(3) of the Act, to require Council to hold a hearing, the Agency must give notice to Council by delivering to its office written notice of this intention by November 18,2013. A hearing will then be scheduled for a date within a reasonable period of time from receipt of the notice. Please direct written notice to the attention of the Executive Director.
Intended Decision Hanin Insurance Services Inc. 167039-11315 October 29, 2013 Page 5 of5
If the Agency does not request a hearing by November 18, 2013, the intended decision of Council will take effect.
Even if this decision is accepted by the Agency, pursuant to section 242(3) of the Act, the Financial Institutions Commission still has a right to appeal this decision of Council to the Financial Services Tribunal ("FST"). The Financial Institutions Commission has 30 days to file a Notice of Appeal, once Council's decision takes effect. For more information respecting appeals to the FST, please visit their website at www.fst.gov.bc.ca or contact them directly at:
Financial Services Tribunal PO Box 9425 Stn Prov Govt Victoria, British Columbia V8W9Vl
Reception: 250-387-3464 Fax: 250-356-9923 Email: FinancialServicesTribunal@gov. be. ca
Dated in Vancouver, British Columbia, on the 29th day of October, 2013. For the Insurance Council of British Columbia
GM/cp