Federal vs. Provincial Regulations

January 27, 2019 0 By c.boersma

If you’ve already read the section on the History of Canadian Insurance Regulations.  You’ll be aware that the federal government has very strict rules regarding what legislation they can create.  As a result, several portions of the federal Insurance Acts over time have been flagged as unconstitutional.  The federal government as per the British North American Act can regulate:

  1. Trade and commerce
  2. Raising of money by any mode or system of taxation
  3. Banking
  4. Bankruptcy and insolvency
  5. Naturalization and aliens,
  6. Criminal law
  7. Peace, Order and Good Government

This is not exhaustive list but relates to issues that were discussed in relation to insurance.

Federal Regulations

With regards to the financial soundness of a federally incorporated insurance company is concerned with the following:

  1. Conditions that must be satisfied for a company to enter the business of insurance
  2. Reports relating to the financial condition of the company that must be submitted at regular intervals
  3. Control over the investments, calculation of asset values and policy reserves (what this exam is all about)
  4. Protecting the interests of policyholders in areas other than those related to the control of insurance

Provincial Regulations

Supervising the soundness of provincially incorporated insurance companies: In some smaller provinces they do not have staff to review statements and reports and arrangement shave been made with the federal Department of Insurance to carry out this role.

If a provincially incorporated company carries on business in a province other than where it was incorporated, the province of incorporate will usually supervise the company’s affairs and the other provinces will rely on this supervision.

Provincial legislation is also designed to protect the policyholder by regulating the insurance contract and the transaction of the business of insurance included such contract matters as:

  1. Contents
  2. Insurable interest
  3. Contract taking effect
  4. Payment of premiums
  5. Duty to disclose
  6. Incontestability
  7. Reinstatement
  8. Designation of beneficiaries
  9. Insured dealing with the contract

And transaction matters:

  1. Licensing of agents
  2. Unfair practices, and
  3. Claim procedures