Insurance information that can be given by a real estate broker to his client

Brokers are required to inform the parties to a transaction of "products and services that concern heritage protection and relate to the transaction ", including insurance products. 

You want to inform your clients about insurance options available to them?  Here is an overview of the rules to observe.

It's important to know that the distribution of products and services related to damage insurance and insurance of persons is governed by the Act respecting the distribution of financial products and services (Distribution Act), which the Autorité des marchés financiers is mandated to administer.

In this regard, to avoid putting themselves in a situation where they contravene this Act, and more specifically so that they not engage illegally in the activities of a representative, within the meaning of the Distribution Act, brokers or agency executive officers must take certain precautions when providing information on products that concern heritage protection and relate to the transaction. According to the AMF, they must limit themselves to informing the parties of the type of insurance to protect their heritage. For example:

• Insurance of persons:
  • Individual or group insurance;
  • Life insurance;
  • Health and accident insurance, including disability insurance;
  • Critical illness insurance.

• Damage insurance:
  • Property insurance;
  • Liability insurance.

In order to direct their clients towards a product that will properly protect their heritage and help them seek the advice of a professional, brokers and agency executive officers may inform them of different types of insurance available of which they may decide to take advantage. 

However, the broker or agency executive officer must not go as far as suggesting a specific insurance product, depending on the needs of the client, or proposing the product of a given insurer.  According to the AMF, he would then be engaging in the activities of an advisor, which the Distribution Act reserves exclusively to representatives holding a certificate.

For example, a real estate broker could inform a buyer that he can protect his property against fire by procuring home insurance, but he could not go as far as suggesting the amount of coverage required based on the value of the property to be insured. Moreover, if he noticed a defect or an irregularity that may affect the transaction, he may inform the parties to the transaction of the existence and usefulness of title insurance. According to the AMF, he should encourage the client to consult an insurance representative  authorized to act in this capacity in Québec or an insurer to obtain more information on products and determine how these products may meet his insurance needs.

However, in the above example, the broker may not however determine whether it is appropriate to use such insurance in a specific case.

In all cases, the broker or agency executive officer must ensure the accuracy of information provided to his client and consider the limits of his own insurance knowledge.

Information on products and services relating to the heritage protection of parties to a transaction

The information that a broker can provide about insurance products is part of the broader obligation to inform the parties to a transaction of any fact relevant thereto, including regarding "products and services that concern heritage protection and relate to the transaction."

Theft or fire protection services or home insurance, title insurance, mortgage insurance or life and disability insurance products are all examples of products and services that may tend to protect the heritage of the buyer of an immovable that is the object of a transaction or a mortgage.

Under this duty to inform, a broker or agency executive officer may refer the parties to persons or partnerships offering such products and services.  The OACIQ then expects the broker to respect the following parameters:

• If he recommends only one person or partnership to the parties, he must state that products and services other than those offered by this person or partnership could provide heritage protection, and that other persons or partnerships are authorized or qualified to distribute such products or to provide such services;
• If applicable, he must immediately disclose in writing, to the party concerned, any remuneration agreement to his benefit with the person or partnership he recommends to a party. If, at the end of this agreement, he receives a non-monetary benefit, he must also disclose its nature.  Furthermore, a broker who acts for an agency, and who receives remuneration at the end of such an agreement, must pay this remuneration to his agency without delay.

The situations mentioned in this article can lead the broker to refer his client to an insurance representative or a firm authorized to act in this capacity in Québec (referral) and possibly share remuneration with them.

For more information on the distribution of financial products and services, visit the website of the Autorité des marchés financiers at www.lautorite.qc.ca.