The requirements outlined in the RIB Act, Section 32 and Ontario Regulation 991, Sections 16 and 17 for the trust account and record keeping is very specific.

Trust monies are ALL funds received from a client in payment of Insurance Premiums for payment to an Insurer and ALL funds received from an Insurer for refund to a client.

Brokers Having Claims Payment Authority

Some brokerage contracts with licensed insurers include specific and limited authority to act on the company’s behalf and pay claims to provide prompt payment for claims within guidelines set out by the company. The claim payments made on behalf of the insurer are then offset against the accounts payable to the insurer.

Brokerages that have claims payment authorization must maintain accurate records to ensure that any claims payments made on behalf of that insurer are paid only with funds specifically held in trust for that insurer. Should any payment for claims be made in excess of the funds held in trust for that insurer, the excess must be paid from the brokerage’s own financial resources and not from the funds held in trust for members of the public or other insurers.

Best Practices

Brokerages wishing to employ “Best Practices” in management of authorized claims payment can establish/maintain a separate trust bank account and separate trust accounting for each insurer whose Broker Contract includes authority to pay claims for all business transacted with that insurer. The accounting records and trust bank account must meet RIBO regulation requirements and are subject to review during a spot check or upon request by RIBO.

Brokers Should Review Late Charges On A Regular Basis

Late charges are charges made by the brokerage on overdue accounts. It is not a trust asset as it is not money held to be paid to an insurer or on behalf of an insurer to an insured. These items are excluded when calculating the trust position of the brokerage.

Late charges included in the trust premium receivable portion of the Form 1 may accumulate over a lengthy period of time and potentially overstate the trust assets when not properly aged. Late charges should be reviewed on a regular basis a procedure adopted to clear the uncollectible amounts and ensure proper aging of the remaining charges. Late charges should be aged exactly like premiums receivable to ensure a proper calculation of the over 90 day amounts.