Insurance framework in Québec

Harmonized framework

Insurance industry operates in a market that extends well beyond the borders of Québec, and that is why it is essential that insurance framework be harmonized and integrated into a coherent whole. The current framework, as well as costs and constraints, can be improved and better aligned with other jurisdictions in Canada by giving P& C insurers the flexibility to innovate and compete.

Preferred principle approach

The insurance framework must favour an approach whose conditions of application are based on principles.

Principles-based laws and regulations give insurers the flexibility to develop competitive services optimally, while protecting consumers.

In this way, insurers can more effectively implement new or updated rules. They can determine their actions in taking into account the nature, the size and the complexity of their activities, as well as their own risk profile in order to better achieve compliance objectives.

Compliance requirements and costs

An insurer doing business in Québec must comply with several laws¹ and more than twenty guidelines that govern the financial sector.

In addition, there are capital requirements whereby insurers must maintain reserves to meet their obligations and guarantee their solvency.

Such requirements and the bureaucracy related to result in significant operating costs for companies. They must increasingly allocate resources to carry out oversight and control activities in order to comply.

Taxes on insurance products

The many taxes on property and casualty insurance products have a definite impact on the cost of insurance for consumers.

In addition to the 9% sales tax, Québec policyholders indirectly pay a surtax of 3.30% on their premium. Thus, it is $112.79 that an insured must pay in taxes on a premium of $1,000.

In 2020, a total of $1.2 billion in sales taxes on insurance products were paid by consumers. In addition, $332 million in sales taxes on goods and services was paid by insurers for claims settlement to compensate their policyholders.

Insurance is there to protect the wealth of consumers and businesses. Excessive taxes can affect access to insurance; that is why IBC wants to reduce the tax burden on insurance products.

Government Policy and Insurance

Several federal and provincial government policies directly or indirectly affect the insurance industry. Each year, IBC comments on a number of bills and regulations, programs and policies to ensure that they take into account insurance impacts and do not unduly restrict access to insurance, among others.

In recent years, for example, IBC has commented on the reform of co-ownership, the protection of personal information, the official and common language of Québec, French and the management of flood zones. These are just a few examples where the implications may indirectly or directly affect the insurance market as well as the products and services offered to consumers.

Sustainable development and prevention

The principles of insurance are based on the idea of being able to collectively cover "the unexpected and the accident" in a relatively “predictable” environment in order to be able to properly assess the risks. For example, climate change, new technologies and cyber risks make this environment less predictable.

IBC advocates for laws and regulations that promote sustainable development policies that make communities more resilient to these issues and where insurance can play its role.

Innovation and new realities

Wherever the law intervenes, insurance plays a role, often unknown, but whose impacts can be real on the operations of insurers and therefore for consumers.

In a rapidly and constantly changing environment, the insurance industry is facing new realities (e.g., the sharing economy, cyber risks, social media and online sales) that have insurance implications.

Insurance regulations in Québec must also take into account these new realities and allow players in this market to adapt and innovate.