Coercion, Fraud, Forgery and Policy Trafficking

A customer's decision must be meaningful

A client should be able to decide whether to buy insurance after receiving accurate information about the product and its consequences. Coercion uses a position of power or a threatened disadvantage to force the purchase. An employer, lender or trusted professional can influence a client without making an explicit physical threat.

An offer of employment conditional on buying unnecessary life insurance is a serious warning sign. FSRA has warned about false job opportunities linked to insurance purchases. A vulnerable client may see the premium as the price of obtaining work rather than a decision about financial protection. The agent must examine the arrangement's substance, not describe it as an ordinary voluntary sale.

Tied selling and coercion can arise through several legal regimes. Determine which organization, product and law govern the scenario before applying a particular prohibition.

Banking example and voluntary packages

• The current Bank Act addresses undue pressure or coercion to obtain a product or service as a condition of obtaining another product or service from the bank or its affiliates. It also addresses taking advantage of a person. This framework is distinct from provincial insurance licensing and sales rules.

• A lender can have a legitimate reason to require adequate security or protection for a loan. That does not automatically permit forcing the borrower to buy a particular affiliated policy. Explain any required coverage and the customer's choices under applicable law.

• Voluntary packages or pricing arrangements require their own legal assessment. Do not assume that every package is coercive, or that a disclosed discount is always lawful. Provincial life and A&S inducement restrictions still apply where relevant. The ability to decline, truthful explanation and compliance with product rules matter.

Fraud and misrepresentation

A material false statement can affect underwriting, pricing or claims. An agent must record the applicant's answers accurately, seek clarification where necessary and avoid coaching the applicant to conceal medical or financial information. “The insurer will not find out” is neither advice nor a lawful basis for completing an application.

Civil misrepresentation, regulatory misconduct and criminal fraud have different elements and consequences. Not every error proves criminal dishonesty. Nevertheless, an agent who discovers an inaccurate application should correct the information through the proper insurer process rather than allowing the false record to stand.

A claim can also involve fabricated receipts, altered dates or an invented medical event. Help the claimant present accurate evidence. Do not promise that exaggerating a loss is harmless because premiums have already been paid.

Signatures and authentic records

Signing a client's name, copying a signature image or changing a signed form can create serious legal and regulatory consequences. A client's casual request to “just sign for me” is not a sound substitute for a valid signature process. Use an authorized electronic signing method or a lawful representative signing openly in the correct capacity.

An attorney for property may have authority to sign a transaction, depending on the power and governing law. The representative should sign as representative, not impersonate the principal. Verify the authority, its scope and any restrictions on insurance transactions or beneficiary changes.

Never ask a customer to sign an incomplete application that can later be filled with answers the customer has not reviewed. A witness must accurately attest to what the witness observed. Backdating a disclosure to suggest it preceded a sale creates misleading evidence, even if the underlying recommendation would otherwise have been suitable.

Misappropriation of money

Premiums and other client funds must be handled through authorized processes. Depositing a customer's premium into a personal account or using it to pay another client's premium exposes the customer to loss and the agent to serious consequences. Later repayment does not erase the original misuse.

Keep accurate receipts, payment records and reconciliations. If a payment appears missing, investigate promptly and notify appropriate internal personnel rather than creating a false receipt. The insurer's coverage obligations depend on the facts and law; the agent cannot privately resolve every issue by promising that coverage definitely exists.

Trafficking in life policies

A lawful assignment of a policy is different from prohibited trafficking. Policyholders can have legitimate reasons to transfer rights, such as collateral security or estate planning, subject to the contract and law. A business that buys policies or promotes sales to strangers can raise separate prohibitions.

BC's Insurance Act prohibits specified trafficking or trading by persons other than an insurer or its authorized agent. BCFSA's guidance explains that a corporate policyholder can fall within the prohibition when a transfer forms part of a broader sale of business assets. Do not assume incorporation or bundling the policy with other assets creates an exception.

Rules differ by jurisdiction. Recognize the red flag, check the governing law and obtain qualified legal advice before arranging such a transaction. A policy's assignment provision does not override a statutory trafficking prohibition.

Responding to misconduct

Stop participating in the improper activity, preserve accurate records and follow applicable reporting obligations. Separate the immediate customer protection issue from the investigation. A regulator may discipline an agent even where no criminal charge has been laid, because licensing standards protect the public and have their own legal tests.

FSRA's employment-offer warning, the current Bank Act provision and BCFSA's trafficking guidance illustrate these distinct concerns.