Premium financing can be arranged through a third-party financing company, the brokerage, or a separate financing entity owned by the brokerage or its brokers.
The impact of financing depends on the method used. Brokerages financing premiums internally must transfer the financed amount from their operating accounts into the trust account to pay insurers, as using other trust funds violates Ontario Regulation 991, Section 16. Simply put, you cannot use Person A’s money to pay Person B.
If a brokerage establishes a separate financing entity, it must obtain a Secondary Business exemption from the Qualification & Registration Committee. Any premiums financed through this entity must be promptly transferred to the brokerage’s trust account. Failure to do so constitutes non-compliance with Ontario Regulation 991, Section 16.
Brokerages should not have outstanding financed premiums over 90 days, and any overdue amounts must be deducted from the trust balance when filing the Form 1 Position Report.
Even if operating through a separate entity, brokers and brokerages involved in premium financing must comply with the Registered Insurance Brokers Act, Regulations, and the RIBO Code of Conduct. Clients must be informed of alternative payment options, such as low-cost or no-cost plans offered by insurers. Insurance availability must not be contingent on using the brokerage’s financing terms, and the cost of borrowing must be clearly disclosed in accordance with Ontario’s Consumer Protection Act.
Failure to refund any monies due, including applicable premium sales tax, is considered misconduct and may lead to referral to the Complaints Committee for non-compliance.