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Licensee ResourcesBrokerage ResourcesThe Spot Check Process (Compliance Audit Program)

The Spot Check Process (Compliance Audit Program)

Spot Checks are an integral part of RIBO’s public protection mandate, as they involve a review of a brokerage’s operations and financial records to ensure compliance with the Registered Insurance Brokers Act, Regulation 991 and other applicable by-laws and guidelines.

If a brokerage has been selected for a Spot Check, a RIBO auditor will call to inform the Principal Broker and explain the process. After the call, the Principal Broker will receive an email with links to modules they must complete by a deadline.

Typically, there are several modules to be completed, and each covers a specific area within a firm. Some examples include office processes, financials, records and disclosure.

Sometimes, auditors may also conduct an on-site brokerage visit to meet the Principal Broker in person and to collect additional documents and information.

After the Principal Broker has submitted all the completed modules, the auditor reviews the information. They may request more information and/or require firms to complete additional modules. Generally, auditors will request a meeting with each Principal Broker to discuss the Spot Check.

Firms will be informed in writing of the Spot Check outcome. Where appropriate, auditors will work with brokerages to resolve minor deficiencies. Spot Checks that raise any serious regulatory issues that are deemed to be a high risk to the public will be referred to the Investigations Department.

For the Spot Check, Principal Brokers may be asked to provide the following information to the Compliance Auditor for review:

  • Balance Sheet
  • Income and Expense Statement
  • Aged Accounts Receivable Listing
  • Bank Statements and corresponding Bank Reconciliations
  • Cancelled Cheques (Trust and General Accounts)
  • Trust Investment documents
  • Insurer Accounts Payable Listing
  • Receipts and Disbursement journals
  • Prepaid Premium Listing
  • Retail Sales Tax Remittance file
  • General Ledger
  • Most recent externally prepared Financial Statements (including any year-end adjusting entries)
  • Working papers prepared by external accounting sources to complete Position Reports
  • Supporting documentation for Shareholder Loans/Advances
  • Disclosure of Facts provided to Insureds indicating Potential Conflict(s) of Interest
  • Point of Sale Commission Disclosure statement provided to Insureds
  • Client Consents for any Unlicensed Insurance used
  • Listing of all Markets including Sub-Brokers, Intermediaries, etc.
  • Current Errors and Omissions insurance and Fidelity Bond policies
  • Continuing Education compliance certificates for the previous two terms of October to September for all licensed individuals.

When a brokerage is selected for a Spot Check, the Principal Broker must:

  • Complete the assigned modules and provide all documents and information requested
  • Ensure that they respond to all requests in a timely manner
  • Make themselves available to discuss the Spot Check.

The Principal Broker may be asked to complete up to 13 modules, depending on the nature of the audit and other factors such as brokerage size, regulatory history and when the last Spot Check was done.

Consult the checklist below for Spot Check process guidance.

Introduction Module

The Introduction module collects general information about the premium volume of business of the licensee firm. Information requested includes:

  • Fiscal year end date
  • Breakdown of the total premium volume
  • Percentage of premium volume
  • Line of business.

Module A – Principal Broker

The Principal Broker module gathers information about a licensee firm’s policies, procedures and support services. Information requested includes:

  • Office policies and procedures
  • Compliance policies and procedures
  • Staff under supervision.

Module B – Deputy Principal Broker

The Deputy Principal Broker module gathers information about the assistance provided to the Principal Broker about a licensee firm’s policies, procedures and support services. Information requested includes:

  • Office policies and procedures
  • Roles, responsibilities and undertakings.

Module C – Fair Treatment of Customers

The Fair Treatment of Customers module gathers information about a licensee firm’s new business, disclosure requirements, needs assessment process, and written policies and practices. Information requested includes:

  • Client files
  • Written procedures for new business and renewals
  • Disclosure documentation in client files
  • Incentive programs.

Module D – Disclosure

The Disclosure module gathers information about a licensee firm’s ownership interest, financial relationship, and participation in commission programs. Information requested includes:

  • Incentives with any insurers
  • Exclusive contracts with insurers
  • Broker compensation.

Module E – Office Processes

The Office Processes module gathers information about a licensee firm’s policies and procedures. Information requested includes:

  • Policy and procedural manual(s)
  • Supervision plan
  • Work arrangements
  • Compliance and privacy
  • Continuing Education (CE)
  • E-transfers.

Module F – Take-All-Comers (TAC)

The TAC module gathers information about a licensee firm’s policies and procedures to ensure that the firm’s licensees comply with the TAC Rule. Specifically, whether consumers have access to affordable insurance and are being treated fairly. Client files are requested. We review the files for compliance with the TAC Rule including the following:

  • Quotations on new business
  • Auto quotation summary sheets
  • Written disclosure
  • Internal system notes
  • CISRO Principles of Conduct for Insurance Intermediaries
  • Fact Sheet About Your Registered Insurance Broker.

Module G – Information Technology

The Information Technology module gathers information about a licensee firm’s cyber security plan. Information requested includes:

  • Cyber liability insurance
  • Cyber security training
  • Cyber processes.

Module H – New Business

The New Business module gathers information about a licensee firm’s quality control processes for new business. Information requested includes:

  • Client files (new business)
  • Privacy consent forms
  • New business insurance form (checklist)
  • Mandatory disclosure requirements.

Module I – Renewals

The Renewals module gathers information about a licensee firm’s quality control processes for policy renewals. Information requested includes:

  • Client files (renewals)
  • Renewal letters
  • Requotes
  • Documentation in the Broker Management System (BMS)
  • Mandatory disclosure.

Module J – General

The General module gathers information about a licensee firm’s structure. Information requested includes:

  • Shareholder structure
  • E&O and Bond insurance policies
  • Out of province operations
  • Specialty/Niche programs
  • List of insurance markets and MGAs.

Module K – Financials

The Financials module gathers information about a licensee firm’s financial position (net trust position and equity position of the licensee firm), account designations and activities. Information requested includes:

  • Internal Financial Reports (Balance Sheet and Income Statement)
  • Trust Bank Statements
  • Trust Bank Reconciliations
  • Premium Receivable Listings
  • Insurance Company Payable Listings
  • Retail Sales Tax Payable Listings
  • Trust Investment Certificates (if any)
  • E-transfer deposits backup (if any).

Module L – Managing General Agents (For Brokers)

The MGA module gathers information about a licensee firm’s activities with MGAs. Information requested includes:

  • Contracts with MGAs
  • Lloyds cover holder status
  • MGA authority
  • MGA coverage offer
  • MGA exclusive specialty/niche programs
  • MGA employees
  • MGA E&O/Fidelity policy.

Module M – Wholesaler/Managing General Agents (For MGAs)

The Wholesaler/MGA module gathers information about an MGA’s licensee firm activities. Information requested includes:

  • Contracts with each insurance market
  • Delegated authority contracts/binders
  • Underwriting authority
  • Written policies and procedures
  • Claims handling authority
  • Firm compensation structure.
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