Understanding level 1 general insurance salesperson licence restrictions and conditions
Published September 20, 2024
Level 1 general insurance salesperson licensees are often referred to as
level 1 licensees, but their official term is “
salesperson” and salesperson licensees have restrictions and limitations to their licence which limit their authority and scope of practice.
Some of the salespersons restrictions and limitations are rooted in the
Financial Institutions Act while others exist under
Insurance Council Rule 6(1) and 6(2). It is important to understand the distinction between a general insurance level 1 salesperson and a general insurance agent (e.g., a level 2 or level 3 general insurance agent).
Definitions
By definition, under section 168 of the
Financial Institutions Act, a level 1 salesperson is:
“...
an individual who is employed by an insurance agent or by an insurer to solicit, obtain or take an application for general insurance, or to negotiate for or procure general insurance, or to collect or receive a premium for general insurance.”
By definition, a general insurance agent is:
“...a person, other than an insurance company or an extraprovincial insurance corporation, who solicits, obtains or takes an application for insurance, or negotiates for or procures insurance, or signs or delivers a policy, or collects or receives a premium.”
There are two key differences in these definitions. First, a level 1 salesperson is defined as an employee, while a general insurance agent is not. Second, a general insurance agent can sign or deliver an insurance policy, whereas a level 1 salesperson cannot engage in either of these activities, except when conducting Insurance Corporation of British Columbia (ICBC) insurance transactions.
Council Rule
In addition to these differences, Council Rule 6(1), applies four specific restrictions to level 1 salesperson licensees:
- The licensee must not sign contracts on behalf of an insurer.
- The licensee must not carry on general insurance business in any place other than on the premises of the insurance agency the licensee is authorized to represent, except where the licensee has completed the Council Rules Course.
- The licensee must only conduct insurance business under the supervision of a general insurance agent.
- The licensee’s compensation must consist of a salary, whereby a minimum of 60% of the annual income is based on an hourly, daily, monthly, or other regular rate.
Restricted activities
Further, a level 1 salesperson cannot engage in the following activities at any time:
- be responsible, either directly or indirectly, for the supervision of other licensees, including level 1 salespersons;
- adjust or settle claims under a contract of insurance;
- advertise or promote their services as an insurance licensee in print, electronically, or in any form of social media;
- hold out as a producer, or anything other than as a level 1 salesperson or employee of an insurance agency;
- provide a member of the public with a phone number, email address or other means of contact that is not the contact information of the insurance agency that the level 1 salesperson is authorized to represent except as approved by th agency nominee;
- make a placement with an unauthorized insurer.
With the exception for ICBC insurance transactions, level 1 salespersons cannot:
- sign a policy, a binder, a certificate of insurance, interim receipt for insurance, or any document that is intended to represent evidence of a contract of insurance;
- deliver, collect, or receive any insurance documentation outside the agency office;
- collect or receive any money or signature from a person relating to an insurance transaction outside the agency office.
Insurance agencies and nominees are expected to ensure that their level 1 salespersons do not engage in insurance activities outside of their licence authority and should be able to demonstrate that the agency has procedures in place to ensure level 1 salespersons have sufficient supervision and oversight to monitor their activities and comply with the requirements.
Notice ICN 22-003 and
Guidelines for Supervision of General Insurance Level 1 Salespersons clarify the Insurance Council’s expectations for agencies, nominees and agents who supervise salespersons. The Guidelines also address expectations for those who provide oversight to salespersons working offsite or remotely, following the permanent removal of the location restriction from Insurance Council Rule 6(1)(b) in 2021.
For more information about salespersons restrictions and conditions, review
Appendix A of Notice ICN 20-002 or contact our Practice & Quality Assurance team at
practice@insurancecouncilofbc.com or 604-695-2008 or 1-877-688-0321.