Insurance And Financial Planning

Below are a few examples of how a personal insurance advisor may find themselves in a conflict of interest:

  • The advisor approaches a client who received a benefit on an insurance policy and asks the client to lend them (or a third party) some or all of the sum received.
  • The advisor pays an insurance premium on behalf of a client in order to avoid losing a sale or to accommodate the client.
  • The advisor persuades a client who was unable to pay their premium to transfer their insurance policy to the advisor in order to avoid a policy lapse.
  • The advisor encourages a client to name them (or a member of their family or other connected person) as beneficiary on the client’s insurance policy despite not having any personal ties to the client.
  • The advisor replaces an insurance product that suits the client’s situation, or that could have been simply modified, with an insurance product that allows the advisor to earn a higher commission.
  • The advisor promotes an insurance offer with the aim of participating in a contest [or a promotion] tied to sales volume.

Business relationship

If a client purchases a product through an advisor from an insurer with which the advisor has a business relationship, or if the advisor’s independent partnership or firm has such a relationship, the advisor must disclose the existence of such business relationships to the client. This disclosure obligation allows the advisor to offer the client products from an insurer with which they have a business relationship, since this client will have been informed of the potential conflict of interest resulting from this relationship.

Here are some examples of business relationships that would need to be disclosed:

  • The advisor acts on behalf of a firm which is an insurer.
  • The advisor acts on behalf of a firm which is tied to an insurer through an exclusivity agreement.
  • The advisor’s firm owns an interest in the insurer whose product was purchased.
  • The advisor takes out a product from an insurer that owns an interest in the advisor’s firm.
  • The insurer grants the advisor an advantage or interest as determined by regulation.