RECA Launches Mandatory E&O Insurance for Alberta Mortgage Brokerages
| June 23, 2011
Beginning September 1, 2011, all Alberta mortgage brokerages will be required to have insurance against liability for errors and omissions, and additional coverage for loss resulting from fraudulent acts in the carrying on of the business of a mortgage broker. The new errors and omissions insurance requirement will improve professionalism within Alberta’s mortgage brokerage industry and will provide consumers with another avenue of recourse should an innocent mistake occur.
“Real estate professionals in Alberta have always been required to carry errors and omissions insurance with fraud coverage and now that this coverage has been extended to mortgage professionals, consumers will enjoy an enhanced level of protection,” says Robert Telford, Chair of the Real Estate Council of Alberta (RECA), which is responsible for the regulation of Alberta mortgage brokerage professionals. Real estate appraisers in Alberta are also required to carry errors and omissions insurance.
Unlike in the real estate sector, the errors and omissions insurance requirement rests with the mortgage brokerages as opposed to individual industry professionals. Alberta mortgage brokerages will be required to have a minimum coverage of $500,000 for a single occurrence and $1,000,000 for all occurrences in a 365-day period for both the liability insurance and the fraud coverage. Errors and omissions policies for Alberta mortgage brokerages will cover all persons engaged by the insured brokerage in connection with the work performed for the brokerage, including licensed brokers and associates who the brokerage authorizes to deal in mortgages on the brokerage’s behalf, employees and former industry members and former employees.
RECA will not authorize an entity as an Alberta mortgage brokerage without proof of errors and omissions insurance, and an additional fraud endorsement from an approved insurer and mortgage brokerages will not be able to renew in September 2011 without first obtaining the required errors and omissions insurance with additional fraud coverage.
RECA’s errors and omissions program for mortgage brokerages is the result of extensive industry consultation. Seventy-four percent of mortgage broker respondents to a RECA survey indicated support for mandatory E & O insurance for Alberta mortgage brokerages, and both the Alberta Mortgage Brokers Association and the Canadian Association of Accredited Mortgage Professionals indicated their support for the E&O requirements.
“The harmonization of mortgage brokerage requirements across Canada is a huge step forward for our industry,” says Telford. “The implementation of mandatory E&O insurance in Alberta will facilitate inter-provincial free trade agreements and assist brokerages with operations in multiple jurisdictions.”
Further strengthening the consumer protection aspects of the errors and omissions requirement is that RECA itself must first approve an insurer before the insurer is able to provide errors and omissions insurance to Alberta mortgage brokerages. All insurers wishing to be approved as providers must enter into an agreement with RECA through which they agree to abide by RECA’s Errors and Omissions Insurance Guidelines.
This ensures that insurance being provided to Alberta mortgage brokerages will provide an appropriate amount of protection for Alberta consumers and protection for industry professionals as a result of any fraud claims.
How else can we improve professionalism and enhance consumer protection in Alberta’s mortgage industry?