Ontario regulations address affiliated insurers
The Financial Services Commission of Ontario (FSCO) has made changes to Ontario Regulation 7/00: Unfair or Deceptive Acts or Practices (UDAP Regulation.) The amended UDAP Regulation takes effect September 1, 2010.
The updated regulation addresses issues of affiliated insurers and their distribution methods. FSCO says: "an insurer is considered to be affiliated with another insurer if one of them is the subsidiary of the other, both are subsidiaries of the same body corporate, or each of them is controlled by the same person.
The affiliated insurer rule applies only to automobile business for which an affiliated insurer is required to file rates or risk classification systems with the Superintendent for approval. This includes personal vehicles, public vehicles and any commercial automobile insurance business, with the exclusion of fleets and garage policies.
The requirement to provide the lowest rate available applies at the policy level (i.e., to a contract of automobile insurance), which may include more than one vehicle or exposure. For example, a single policy may cover automobiles, snowmobiles, ATVs and commercial vehicles.
Where a consumer qualifies for coverage with more than one affiliated insurer by virtue of an overlap in their approved declination rules, the requirement arises to provide the consumer with the lowest rate available, having regard to all circumstances including means of distribution."
Other important points laid out in the FSCO bulletin include:
- The new UDAP Regulation will require all affiliated insurers and agents/brokers to whom it applies to provide a rate on renewal for all of the affiliates the consumer qualifies for in accordance with the insurers’ declination rules and approved risk classification systems.
- Only approved declination rules may be relied upon to determine which affiliated insurers and agents/brokers are required to provide a rate to a consumer.
- Affiliated insurers and their agents/brokers concerned about providing the "lowest rate available" in respect of such contracts could comply with the UDAP Regulation by providing the consumer with a quote (or renewal offer) for each of the affiliated insurers with whom the consumer qualifies for coverage through the applicable means of distribution, and allow the consumer to decide which to accept under the circumstances.
- The new UDAP Regulation does not distinguish between group and non-group business. Group business and non-group business are not by themselves considered to be separate means of distribution.
- FSCO will not tolerate artificially created or subdivided distribution channels designed to circumvent the new UDAP Regulation.
- Insurers with specialty markets need to have filed with FSCO, and received approval of, declination rules that assist in determining the parameters of these types of programs, and that clearly illustrate the population they are intended to serve. For example, antique or collector car programs could have a rule declining any automobiles that are less than 25 years old and that have no valid appraisal.
- Affiliated insurers that specialize in standard and non-standard markets, and wish to keep those markets separate, may file to amend their declination rules to eliminate any overlap that would otherwise make a given risk eligible for both markets.
- If an insurer purchases another insurer or the business of another insurer, FSCO will allow the companies a short period of time (but no longer than deemed absolutely necessary in the circumstances by FSCO) to bring their pricing and business practices into compliance with the new UDAP Regulation. Activities by companies during this period may include amending declination rules and rates and risk classification systems of the newly-affiliated insurers and updating systems to ensure that the lowest rates available are provided.
- The Facility Association is not considered an "insurer" for the purposes of the UDAP Regulation.
Insurers must send an original Attestation of Compliance in the form attached, signed by the President, CEO or most senior officer responsible for the insurer’s operations in Ontario, to FSCO by October 15, 2010, certifying that the insurer is in compliance with the new UDAP Regulation as of September 1, 2010. This requirement is imposed under section 31 of the Insurance Act. The Attestation of Compliance can be found here (PDF):
FSCO says signed attestations should be sent to the attention of:
Bruce Green Manager, Automobile Insurance Compliance Automobile Insurance Services Branch
Financial Services Commission of Ontario
5160 Yonge Street, Box 85
Toronto ON M2N 6L9
The UDAP Regulation was initially amended by Ontario Regulation 37/10 to prohibit automobile insurers and their agents/brokers from using credit information for specified automobile insurance purposes.
The amendments include:
• A definition of "credit information."
• Prohibiting insurers and their agents/brokers from requiring that a consumer consent to the collection and use of his/her credit information before providing an insurance quote or offering to renew a policy.
• Prohibiting insurers and their agents/brokers from using credit information when they respond to requests for quotes, or process applications for automobile insurance or renewals of policies.
• Requiring affiliated insurers and their agents/brokers to provide a consumer with the lowest rate that is available having regard to all of the circumstances, including the means of distribution.
