Ontario’s Minister of Finance, Greg Sorbara, announced yesterday that the Financial Services Commission of Ontario has been invited to conduct a review of insurance industry compensation practices, and insurance brokers and property and casualty insurers have voluntarily agreed to a better system of disclosure.

The announcement came in the legislative question period yesterday in response to a question from NDP critic Peter Kormos. Kormos called for the government to conduct a public inquiry by convening a legislative committee to investigate whether Ontario’s insurance industry is afflicted with the same sort of abuses as New York State attorney general, Eliot Spitzer, has uncovered in the United States.

In response, Sorbara reiterated that it has asked FSCO to conduct a review, although, “there’s no evidence in Ontario of the kinds of allegations that are being discussed in New York state.”

In addition, he reported that his parliamentary assistant, Mike Colle, has asked brokers and P&C insurers to voluntarily agree to a better system of disclosure. “I’m happy to announce… that the insurers have agreed to just that kind of system of much better disclosure, so the problems that existed there never occur here,” Sorbabra said.

Sobara explained that Finance has had direct discussions with brokers and insurers and they have voluntarily agreed to bring in a new system of disclosure for base commissions and any contingent commissions that may exist. And, he said that FSCO will be working with the industry to develop and implement this new system.

The Insurance Brokers Association of Ontario says that it is concerned about recent allegations of “hidden” commission payments by insurance companies to insurance brokers. “Brokers have nothing to hide. Member brokers freely declare that they are compensated on both a fixed and contingent commission basis. This is standard contractual practice in the industry that rewards, as in any business, elite performance enhancing competition and service to the ultimate benefit of the consumer,” said Robert Carter, CEO of IBAO, in a statement.

“Regulators are fully aware of the commission arrangements including contingent commission that in no way is excessive or unusual. Member insurance brokers are proud of the service they provide to their customers and make no apologies for receiving reasonable compensation for the services they provide,” said Carter.

Dan Danyluk, CEO of the Insurance Brokers Association of Canada, said, “The allegations of fraud and bid rigging described in New York are repugnant to insurance brokers because they would represent a betrayal of their clients. These acts are illegal in both the United States and Canada and if proven, should be prosecuted to the full extent of the law. The allegations allude to unethical and illegal acts of those accused. These allegations should not be construed as representing industry-wide practice. In fact, in Canada, the recently released report of the Canadian Competition Bureau found no evidence of anticompetitive behaviour.”