In the past, BridgePoint Indemnity Company (“BridgePoint”) was adamant that their product was not insurance and was not governed by the Insurance Act…..”their product was different, it was an indemnity, not an insurance policy.”
Like an Oreo Cookie without the creamy middle
An indemnity is a “contracted promise, an obligation by a person or company to provide compensation for a particular loss suffered by another person or company.” The problem is that an indemnity may be unsupported. An indemnity is also the underpinning of all insurance contracts (i.e. insurance indemnifies but indemnities are not necessarily insurance), but in the case of an insurance policy, the promise is supported by the capital structure of the insurance company and the overview of the Regulators.
Companies that provide non-insurance indemnities are not licensed insurers and, consequently, are not required to comply with the Insurance Act and other insurance legislation. They do not have to demonstrate to regulators that they have sufficient capital or reserves to meet future claims. They are not supported by the PCICC in the event that they should become insolvent. Customers are not able to have their concerns investigated by the insurance Ombudsman or complaint process. In short, they cannot rely upon the legal protections offered by the Canadian Insurance Regulation.
Therein lies the rub—The Ontario Superintendent on insurance was of the opinion that Legal Cost Protection (the “Product”), a product offered for purchase by BridgePoint Indemnity Company (Canada) Inc. meets the criteria to be classed as insurance pursuant to the Insurance Act, R.S.O. 1990, c. I.8 (the “Act”). Section 40(2) of the Act states that no person shall carry on business as an insurer or engage in an act constituting the business of insurance in Ontario without a license under the Act. BridgePoint is not licensed. The Superintendent at that time issued a cease and desist order. In essence, the Product that BridgePoint was offering was insurance, but they had NOT met the licensing requirements to be an Insurance Company.
Interim Arrangement – Not Business as Usual
BridgePoint does have in place an interim arrangement with the FICOM and the FSCO that would allow BridgePoint to resume partial operations – allowing it to service its pre-existing agreements under the umbrella of a 3rd party licensed broker. However, they remain unable to sell the product to any new clients.
Best Practice Solutions
The bottom line: learning about licensed ATE insurance products from a qualified broker and putting in a proper program now will protect you from unnecessary risk in the future.
We are here to help. Call us to find out more about the licensed ATE insurance products we offer, how they work, and how they can protect you and your client.