Canadian regulators are increasingly focused on the sale of unlicensed embedded insurance products, as the sector faces evolving challenges with artificial intelligence and non-traditional distribution channels prompting tighter oversight and new licensing regimes.
Dentons says scrutiny of embedded insurance is intensifying in Canada, with regulators increasingly focused on whether products are being sold by people or businesses that are not properly licensed. Marisa Coggin, a partner at the firm, told the Insurance Bureau of Canada’s InSight Summit that investigations and inquiries in this area have risen sharply, and warned that the issue is likely to grow as artificial intelligence and affinity partnerships become more common in distribution.
The central worry, she said, is that insurance can be introduced to customers too early or too casually in a purchase journey, without the safeguards that normally come with licensed advice. In her view, that creates the greatest risk in embedded models: consumers may be offered cover as part of buying another product or service, even though they were not actively seeking insurance and may not realise what they are agreeing to.
According to Coggin, Canadian regulators are not ignoring the shift. Several provinces have begun building restricted licensing regimes that allow retailers and other non-traditional market participants to take part in distribution while remaining under supervision. British Columbia is expected to roll out its framework in 2027, while New Brunswick already has a system that combines exemptions for incidental sales with restricted licensing. Quebec has also created a Distribution without a Representative model for certain products.
But the Quebec regime has become a flashpoint. The province’s broker association has objected to dealerships offering replacement insurance, and the government has now delayed a planned prohibition until 1 January 2027. After that date, distributors will no longer be allowed to sell that cover in connection with vehicles they sell or lease, and consumers will need to obtain it through licensed representatives or firms.
Coggin said the next phase of embedded insurance in Canada may move beyond relatively simple consumer products. She sees little activity yet in cyber cover and other complex commercial lines, but expects that to change as markets that have already adopted embedded distribution elsewhere influence Canadian practice. For those products, she added, the industry will need much more discussion about how digital sales can work without the traditional role of a broker.
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Source: Noah Wire Services
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