The know-your-client (KYC) obligation has a documentation dimension: the agent must maintain records of the needs assessment, the information gathered, the products considered, and the recommendation rationale. This documentation serves multiple purposes:
- It demonstrates suitability if the recommendation is challenged by the client or a regulator
- It provides the insurer with the underwriting information required to price and issue the policy
- It supports renewal and review conversations by preserving the baseline
KYC documentation must be accurate, complete, and updated when material information changes. An agent who records inaccurate client information, or who fails to update records when a client reports a change in circumstances, breaches the KYC obligation.
Record retention periods vary by province. Agents should retain client files for a minimum of seven years in most jurisdictions; some provincial rules require longer retention. FINTRAC record-keeping obligations (covered in Module 3) have their own retention schedule.
Common mistake: keeping only the signed application as the KYC record. The application captures underwriting data. The KYC record is broader, capturing the needs analysis, alternatives considered, and the reason for the recommendation.
Recall: Name two purposes that KYC documentation serves. What is a reasonable general minimum for record retention?