With COVID-19, Business Interruption Claims Will Not Be The Only Claims

The excerpted article was written by Mikel Pearce

There has been a lot of coverage, and a lot of ink spilled (does that expression even have meaning any more?) about the potential and actual business interruption claims that may be made by insureds arising out of the COVID-19 pandemic.

However, very little attention has been paid, at least so far, to the other potential claims that may arise, and the other classes of business that may be impacted as a result.

Personal Injury and Wrongful Dismissal

First, the pandemic and the resulting lockdown/quarantine have resulted in markedly decreased traffic of all kinds. People aren’t driving, going shopping, or going to movie theatres, concerts, plays, musicals, bars or restaurants. Some estimates indicate that automobile traffic has decreased by 80%.

This will result in a significant reduction in personal injury claims, just based on the math of fewer trips (pedestrian, vehicular or otherwise) resulting in fewer accidents.

This means that the plaintiff personal injury bar will be looking for something to fill the hole left by that lack of personal injury claims. Plaintiff counsel are nothing if not creative.

There is a distinct possibility that at least in part, they may attempt to bring claims against property occupiers on behalf of COVID-19 sufferers, alleging that their clients contracted COVID-19 in a given location, as a result of unsafe conditions at that location. Obviously this sort of claim will place a high burden on the plaintiff to establish that they actually contracted the disease at the alleged location, and not elsewhere, but I think it highly likely that some enterprising plaintiff’s counsel will attempt to bring such claims.

The other claim that plaintiff’s counsel may turn to in order to make up for the lack of personal injury claims is wrongful dismissal claims. At present, everyone who can work from home is working from home. However, at some point businesses will re-open, including those that are currently shut, and employers will tell their employees that they are required to return to work. Some will refuse, citing safety concerns, and they are likely to be dismissed, unless they call upon the Ministry of Labour to do a safety audit of their workplace, which finds it to be unsafe. Given the pervasiveness of the pandemic and the response to it, it is quite likely that the number of wrongful dismissal claims will easily outnumber the “missing” personal injury claims.

The one advantage to wrongful dismissal claims from an insurer perspective is that the indemnity portion of the claim (the claim for “pay in lieu of notice”) is not often insured, and the average spend on defence costs for a wrongful dismissal claim is in the range of $15,000 to $20,000. Even if indemnity is taken into account, the average indemnity payment for a wrongful dismissal lawsuit in Canada is $18,000 to $20,000.

Bankruptcy and Insolvency Claims

The next wave of insurance claims will be driven by the surge in bankruptcies that is likely to result from the prolonged shutdown of the economy.

There are several industries that come to mind that are likely to be affected in this manner.

First, the hospitality industry. There have been rumors that 40-50% of hospitality businesses could go bankrupt as a result of the COVID-19 pandemic and the resulting shutdown.

Hotels, restaurants, bars and other associated businesses have limited or zero revenue at present, and even if parts of the economy start to open up in the next 30-60 days, in my opinion the hospitality industry will be one of the last portions of the economy to restart, and will have a difficult time attracting patrons at anything like pre-COVID levels, until a vaccine is widely available.

It comes down to a simple question: Even if the restrictions are lifted and restaurants and bars are permitted to open again, how likely are YOU to go to one? Do you really want to be in a crowded bar, or even a restaurant, prior to a vaccine being available? I certainly do not, and most hospitality businesses need a certain level of “occupancy” in order to break even or be profitable.

In my opinion most are unlikely to be able to be profitable for some time, unless they revamp their business model and/or their pricing in a significant manner.

Bankruptcies (or CCAA proposals) in the hospitality sector will lead to a variety of claims against the Directors and Officers of those organizations. These may include claims for unpaid wages, unremitted source deductions, and a variety of other claims from bond or debt holders.

Second, the construction industry. In my view it is quite likely that many employers will look to downsize their physical space as they have been forced to recognize that a good percentage of their employees can be just as effective if they work from home. The second largest expense for many companies, after employee wages, is rent. Many organizations will be looking to cut costs following the pandemic, in order to recover from the economic impact of the shut down. If that happens, the construction of new office towers and new office space in general will grind to a halt, and this will have a ripple effect throughout the construction industry.

Construction tends to be a “cash flow” business. When business is good, everyone gets paid, jobs get done, and most disputes are resolved without resort to expensive and protracted litigation. However, when the economy contracts and contractors encounter financial problems, they are often faced with “breach of trust” claims from sub-contractors and suppliers, who allege that funds from a given project were not used to pay subcontractors and suppliers on that project. These breach of trust claims survive bankruptcy, and so can haunt contractors (and the insurers who end up defending them) long after everything else has been dealt with. The resultant litigation is often messy and expensive.

Third, oil and gas and mining. The price of a barrel of oil is at an historic low. For a brief period, some oil futures traded at negative values. Given the current cost per barrel of oil extraction in Canada, it may be a long time until oil production is profitable in Canada again. This will lead many producers to mothball wells, or to declare bankruptcy and abandon wells instead. Provincial governments (especially in Alberta) will be faced with huge remediation and clean up costs as a result of orphaned wells, and will likely seek to recoup those costs from the Directors and Officers of the former owners of orphaned wells.

This may lead to a resurgence of what is known as the “North Star” problem. In the case of North Star, the Ontario Ministry of the Environment issued remediation orders to the Directors and Officers of North Star following CCAA proceedings. As North Star had exhausted its D&O policy, the Directors and Officers were personally exposed for the clean up costs. While the case was eventually settled (for some $4,750,000), it highlighted a gap in coverage that some insurers and MGAs attempted to fill. Should this issue resurface, some of the impugned organizations will have “North Star” coverage, but many will not, and this could lead to years of litigation against insurers and brokers as a result.

Fourth, the retail industry. It was announced on May 7, 2020, that both Aldo Shoes and Neiman Marcus had begun bankruptcy proceedings. In addition, in the months leading up to the pandemic, a number of significant Canadian retailers had also succumbed to market forces. These included the Nygard Group, FHC Enterprises, Louis Garneau Sports, Le Cordée, Pier 1 Imports, Stokes, and SFP Canada. The retail industry has faced significant challenges from online retailers, and the pandemic will only serve to exacerbate those issues. The resulting bankruptcies or CCAA filings will no doubt lead to a multitude of litigation and insurance claims.

Fifth, the airline industry. No one knows how long it will be before international travel (including travel to the U.S.) is opened up again. Even once it is “allowed”, the number of people willing to travel internationally is likely to be a fraction of what it was prior to the pandemic. The airline industry will face similar challenges to the hospitality industry, in addition to massive class action claims for refunds on cancelled flights, rather than credits toward future flights, which are currently being offered.

Securities Class Actions or Derivative Claims

The final potential claim that I will mention are securities class action claims against corporations, and their Directors and Officers, arising from the massive share price drops caused by the pandemic and the resulting lockdown. Many corporations are now incurring business interruption losses for which they may be uninsured. However, both Marsh and Berkshire Hathaway have publicly stated that they were offering so-called “pandemic coverage” to certain insureds prior to the COVID-19 crisis, but that very few corporations could be convinced to purchase the coverage.

Plaintiffs counsel may commence securities class actions alleging that the corporation would not have sustained such heavy losses (and the resulting share price drop) had the board of directors agreed to purchase the offered “pandemic coverage”.

The All England Tennis Club may be used as an example, given reports that it received a $200,000,000 (CAN) payout from its pandemic coverage policy, as a result of the cancellation of the Wimbledon tennis tournament.

Alternatively, this type of claim could be brought by shareholders as a derivative action on behalf of a given corporation, against the Directors and Officers, alleging that they failed in their duty to protect the corporation by failing or refusing to purchase pandemic coverage.

BI is not the end of the Story

While it may be the case that the vast majority of business interruption losses are not covered (pending various U.S. state legislatures passing laws to the contrary), that is not the end of the story for the insurance implications of the current pandemic. We will be seeing the repercussions of this event for a number of years, and the current pandemic may also contribute to what commentators were already saying was a coming “hard market” where insurance premiums increase, and coverage is narrowed.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Mondaq

Meal delivery drivers often not insured if using personal car, broker warns

Most personal auto insurance policies don’t cover vehicles for food or package delivery

The xxcerpted article was written by Paula Duhatschek · CBC News 

Drivers making deliveries for some popular food delivery apps might be unaware their auto insurance may not cover them in the event of a collision, potentially leaving them on the hook for a big bill.

Gary Cormier, 49, of Kitchener, Ont. wants to avoid that situation. He’s been trying for weeks to find a car insurance policy that he can afford, and that will cover him while making deliveries.

Cormier signed up with both DoorDash and Uber Eats this spring and was quickly accepted as a driver after submitting proof of his car ownership, driver’s license and personal insurance.

But when he told his insurance broker about the plan, Cormier says he was told his existing policy with Intact wouldn’t cover him.

Cormier says he contacted three other brokers for good measure and was told the same thing.

“If I was just driving on personal insurance … my claim could be declined,” said Cormier, who says he stopped making deliveries after that point.

Cormier says his broker later gave him a quote for a commercial driving insurance policy, costing about $10,200 annually.

“It’s just not feasible,” said Cormier, whose personal driving insurance currently costs about $1,500 a year.

Most personal auto insurance policies don’t allow the use of personal vehicles for food or package delivery, according to the Financial Services Regulatory Authority of Ontario.

That means drivers might not be covered if they use their vehicles for business purposes, the agency said.

‘You could lose everything’

Insurance broker Joseph Carnevale says many drivers are likely delivering food and other items without realizing their personal auto insurance policy doesn’t apply to their present circumstance.

Anyone making money by delivering something needs to tell their insurance broker about it, says Carnevale, and in most cases, a delivery driver would likely need to take out a commercial insurance policy to be covered.

“The problem we face is that someone who’s just trying to make a few dollars on the side then has to [pay] a substantial amount of money for a proper and legal commercial insurance auto policy,” said Carnevale, who is also president of the Insurance Brokers’ Association of Ontario.

“And so there’s a scenario out there right now that probably … the vast, vast majority of people don’t have the proper policies in place and that puts them at risk.”

Although every situation is different, Carnevale says a delivery driver who didn’t have commercial insurance and who submitted a claim after causing serious property damage would likely prompt an investigation and be denied coverage by their insurer.

That kind of accident could put them on the hook for between $5,000 and $100,000, he says. A worst-case scenario type of collision involving multiple deaths could cost millions, he adds.

“You could lose everything,” said Carnevale.

Company policies vary

CBC News asked DoorDash, Skip the Dishes and Uber Eats what kind of insurance their Ontario drivers need to carry.

DoorDash pointed to a statement on the company’s FAQ page saying it does provide excess auto insurance, but this policy only applies toward damage drivers might cause to third parties and only to accidents that happen when a driver is in possession of goods to be delivered.

A spokesperson for Skip the Dishes said in an email that couriers are independent contractors, and it is their responsibility to “obtain and maintain all necessary insurances, permits, and/or licenses required by applicable laws in the region they operate.”

READ MORE HERE: 

Canada Life Reinsurance enters into major longevity risk reinsurance agreement

WINNIPEG, May 20, 2020 /CNW/ – Canada Life Reinsurance is pleased to announce that it has entered into a long-term longevity reinsurance agreement with NN Life covering €5.3 billion of in-force liabilities. Close to 82,000 of in-payment defined benefit pensioners will be reinsured by Canada Life Reinsurance under this agreement.

Jeff Poulin, Global Head of Canada Life Reinsurance said this agreement is another example of Canada Life Reinsurance’s strength as a partner for reinsurance longevity transactions globally.

“I’m pleased that despite a significantly altered work environment due to Covid-19, Canada Life Reinsurance and NN Life’s teams worked together to complete this major transaction,” said Poulin. “It will allow us to further expand and diversify our global longevity business in 2020 and beyond.”

Derek Popkes, Chief Operating Officer at Canada Life Reinsurance, agreed, adding, “Canada Life Reinsurance remains focused on delivering for our clients in these challenging times. We look forward to a long and mutually beneficial relationship with NN Life. Our commitment to the Dutch market and our strong financials make us a good partner in the Netherlands.”

Canada Life Reinsurance offers a range of innovative risk and capital management solutions for life, health and non-life risk to insurers, reinsurers and pension funds globally.

About NN Life 

NN Life is a subsidiary of NN Group. NN Group is an international financial services company, active in 18 countries, with a strong presence in a number of European countries and Japan. With all its employees, the Group provides retirement services, pensions, insurance, investments and banking to approximately 18 million customers. NN Group includes Nationale-Nederlanden, NN, NN Investment Partners, ABN AMRO Insurance, Movir, AZL, BeFrank and OHRA. NN Group is listed on Euronext Amsterdam (NN).

About Canada Life Reinsurance

Canada Life Reinsurance is a division of The Canada Life Assurance Company and includes certain of its subsidiaries and affiliates. The Canada Life Assurance Company is a subsidiary of Great-West Lifeco Inc.

About Great-West Lifeco Inc.

Great-West Lifeco is an international financial services holding company with interests in life insurance, health insurance, retirement and investment services, asset management and reinsurance businesses. We operate in Canada, the United States and Europe under the brands Canada Life, Empower Retirement, Putnam Investments and Irish Life. At the end of 2019, our companies had approximately 24,000 employees, 197,000 advisor relationships, and thousands of distribution partners – all serving our more than 31 million customer relationships across these regions. Lifeco and its companies have over Can$1.5 trillion in consolidated assets under administration as of March 31, 2020 and are members of the Power Corporation group of companies. Lifeco trades on the Toronto (TSX) Stock Exchange under the ticker symbol GWO. To learn more, visit greatwestlifeco.com.

SOURCE Canada Life Reinsurance

DYK – In Canada, men pay more than women for car insurance across all age groups

DYK – In Canada, men pay more than women for car insurance across all age groups

TORONTOMay 20, 2020 /CNW/ – Auto insurance premiums are determined using a variety of factors, including a person’s driving record, years of driving experience, insurance history, vehicle make and model, type of usage, type of coverage, deductible, and so on. But one of the many factors that also has an impact on what people pay for auto insurance is gender.

It’s generally understood that men pay more than women for car insurance, particularly when they’re young and signing onto their first policy. What isn’t clear is how men fare over time. “To understand the correlation between age, gender and auto insurance premiums, we used our car insurance quoter to collect test data for male and female drivers aged 17-60, from three major Canadian cities,” said Justin Thouin, Co-Founder and CEO of financial rate comparison site LowestRates.ca. Today, the company released a report to illustrate how gender affects auto insurance in TorontoMontreal and Calgary. While the data looks at three cities, these trends are similar across all of Canada.

The report shows:

In Downtown Toronto:

  • Between the ages of 17-19, men pay 27% more annually for car insurance than women
  • Between the ages of 20-24, men pay 11% more annually for car insurance than women
  • Between the ages of 25-30, men pay 3% more annually for car insurance than women
  • Between the ages of 31-40, men pay 5% more annually for car insurance than women
  • From the age of 40 onwards, men and women pay equally for car insurance

In Downtown Montreal:

  • Between the ages of 17-19, men pay 16% more annually for car insurance than women
  • Between the ages of 20-24, men pay 14% more annually for car insurance than women
  • Between the ages of 25-30, men pay 19% more annually for car insurance than women
  • Between the ages of 31-40, men pay 14% more annually for car insurance than women
  • Between the ages of 40-50, men pay 11% more annually for car insurance than women
  • Between the ages of 50-60, men pay 11% more annually for car insurance than women

In Downtown Calgary:

  • Between the ages of 17-19, men pay 12% more annually for car insurance than women
  • Between the ages of 20-24, men pay 2% more annually for car insurance than women
  • Between the ages of 25-30, men pay 2% more annually for car insurance than women
  • Between the ages of 31-40, men pay 3% more annually for car insurance than women
  • Between the ages of 40-50, men pay 5% more annually for car insurance than women
  • Between the ages of 50-60, men pay 4% more annually for car insurance than women

Thouin said there are several reasons why men are charged more than women for auto insurance in Canada. “Statistics show that men are far more prone to road accidents, and they are also over three times more likely to drive under the influence of drugs and alcohol than women. We’ve also seen that men are also more likely than women to commit traffic infractions, such as dangerous driving.”

Thouin emphasized that while gender and age do play a role in determining car insurance premiums, these factors don’t supersede other important parameters like a clean driving record, having no insurance gap or claims history. ” Irrespective of gender, anyone who drives safely, follows traffic rules, and has no insurance gap for a significant amount of time can reduce their insurance premiums.”

About LowestRates.ca

LowestRates.ca is an online rate comparison site for insurance, mortgages, loans and credit card rates in Canada. The free, independent service connects consumers directly with financial institutions and providers from all over North America to offer Canadians a comprehensive list of rates. LowestRates.ca’s mission is to help Canadians become more financially literate, with the near-term goal of saving them $1 billion in interest and fees.

SOURCE LowestRates.ca

 

Coalition Launches Disruptive Cyber Insurance & Security Offering In Canada

Leading cyber insurance provider takes aim at the new threats technology brings to Canadian businesses

Coalition, the leading cyber insurance and security company in the US, today announced it is expanding its offering to Canada-based companies, providing proactive cybersecurity products and services and best-in-class cyber and technology error & omissions insurance to help keep businesses safe. Coalition will offer up to CAD $20 million of comprehensive insurance coverage supported by the financial strength of Swiss Re (A.M. Best A+) to companies with up to CAD $1 billion in annual revenue. Through Coalition’s online platform, licensed insurance brokers are able to generate a quote in minutes and also provide their clients with access to Coalition’s proprietary cybersecurity tools and services that are designed to detect, mitigate, and contain threats at no additional cost.

Cyber threats know no boundaries — technology has introduced a range of new threats to businesses irrespective of their location that are not well covered by traditional insurers. Coalition’s global cybersecurity platform provides businesses the risk management support they need most, including help preventing incidents in the first place, and support during and after a crisis. With this expansion, Coalition is proud to advance its mission to solve cyber risk together with Canadian businesses by not only helping to prevent cyber attacks, but helping businesses survive them when they occur.

“Cyber risk is a global problem in need of a global solution,” said Shawn Ram, Head of Insurance at Coalition. “The future of cyber security and insurance are integrated solutions to protect against cyber incidents across all asset types. We’re excited to make this future a reality across the Canadian market.”

Coalition’s approach to cyber insurance is rooted in risk management and mitigation, bringing together cyber security expertise with the safety of insurance to provide the first truly holistic approach to solve cyber risk:

  • Risk mitigation: Coalition provides free cybersecurity tools to help businesses manage and mitigate cyber risk, and comprehensive cyber insurance to help them recover after an incident. Coalition’s comprehensive solution helps companies improve their cybersecurity, mitigate incidents when they occur, and help companies recover financially in the aftermath.
  • Superior claims handling and incident response: all policyholders receive 24/7/365 access to Coalition’s in-house team of security and incident response experts. Together with hand-picked partner firms (including public relations, legal, and crisis management experts), Coalition stands ready to help organizations quickly recover from a cyber incident.
  • Aligned incentives: Coalition is changing the paradigm in cybersecurity by aligning economic incentives with its customers. Unlike a traditional cybersecurity company, Coalition shares its customer’s incentives to prevent and mitigate losses.

“Coalition is more than just an insurance solution,” said Joshua Motta, CEO of Coalition. “Our expansion into Canada will give us greater visibility into cyber losses, and even more resources to combat cybercrime, on a global basis.”

For more information, visit coalitioninc.ca.

About Coalition
Coalition is the leading provider of cyber insurance and security, combining comprehensive insurance and proactive cybersecurity tools to help businesses manage and mitigate cyber risk. Backed by leading global insurers Swiss Re Corporate Solutions, Lloyd’s of London, and Argo Group, Coalition provides companies with up to USD $15 million of cyber and technology insurance coverage in all 50 states and the District of Columbia, as well as CAD $20M of coverage across all 10 provinces in Canada. Coalition’s cyber risk management platform provides automated security alerts, threat intelligence, expert guidance, and cybersecurity tools to help businesses remain resilient in the face of cyber attacks. Headquartered in San Francisco, Coalition has presences in New YorkLos AngelesChicagoDallasWashington DCMiamiAtlantaDenverAustin, and now Vancouver and Toronto.

SOURCE Coalition

Related Links

http://coalitioninc.ca

Ontario Removes Prohibition On Auto Insurance Premium Rebates

In a move prompted by the COVID-19 crisis, the Ontario government modified the “Unfair or Deceptive Acts or Practices” regulation under the Insurance Act of Ontario in order to reduce barriers to rebating or reduction of automobile insurance premiums by automobile insurers or brokers of automobile insurance policies.

The prohibition against rebating has typically been a consumer protection measure to prevent insurers or brokers from offering an inducement to insureds to purchase policies, with an understanding that the insureds would get some additional benefit, beyond the insurance policy itself. Apart from protecting consumers from being misled, this prohibition also provides consumer protection against discrimination. Similar prohibitions exist in other provinces and territories of Canada.

The regulatory prohibition in section 2 of O. Reg. 77/00, the Unfair or Deceptive Acts or Practices regulation is against, among other things:

  1. making, or attempting to make, directly or indirectly, an agreement with an insured or applicant for insurance, as to the premium to be paid for an insurance policy that is different than the premium stated in the policy;
  2. paying, allowing, or giving, directly or indirectly, or offering or agreeing to give, a rebate of all or part of the premium stated in the policy to an insured or applicant for insurance; and
  3. paying, allowing, or giving, directly or indirectly, or offering or agreeing to give, consideration or other value intended to be in the nature of a rebate of premium to an insured or applicant for insurance.

However, as a result of the spread of COVID-19 and the declaration of an emergency in the province of Ontario under the Emergency Management and Civil Protection Act, automobiles are being used much less frequently, which means that, taken together, the risk assumed by automobile insurers is less than existed at the time of application or underwriting of the applicable policies. Accordingly, some automobile insurers had expressed a willingness to refund to insureds portions of annual premiums, or to reduce monthly charges of insurance premiums, based on reduced vehicle usage during the declared emergency. The regulatory prohibition on rebating had caused some uncertainty for insurers or brokers looking to provide this relief.

As a result of the change, a rebate or reduction of automobile insurance premium is not considered to be an unfair or deceptive act or practice if:

  1. an emergency is declared under Ontario’s Emergency Management and Civil Protection Act;
  2. the rebate is issued in response to that declared emergency; and
  3. the automobile insurer files an undertaking with the Chief Executive Officer of the Financial Services Regulatory Authority (FSRA). FSRA has provided a sample form of undertaking as a starting point for insurers, which effectively commits the insurer to offering premium rebates in a manner consistent with applicable law and FSRA’s regulatory guidance.

Rebates of all or part of an automobile insurance premium are not considered an unfair or deceptive act or practice from the date of declaration of an emergency (in the case of COVID-19, March 17, 2020) to the date that is one year after the date that the declared emergency is terminated.

Ontario is the first Canadian jurisdiction to loosen restrictions on rebating during a declared emergency. We expect some other jurisdictions to similarly permit premium rebate or reduction programs. As we noted previously, the Office of the Superintendent of Financial Institutions – the leading financial and solvency regulator of insurers in Canada – has made it easier for insurers to grant deferrals for payment of insurance premiums.

In addition to this regulatory change, Ontario’s FSRA, as the market conduct and consumer protection regulator in Ontario, issued a regulatory guidance with the following highlights:

  1. In order for premium rebating as described above (whether a refund, rebate, or reduction of insurance premium) not to constitute an unfair or deceptive act or practice, it must be:
    1. consumer-focused (providing financial relief where premium charged was based on risk factors that are no longer “just and reasonable” and have materially reduced during a specified period of time related to the applicable emergency);
    2. transparent and disclosed through clear and public communication by the insurer;
    3. equitable, by being consistent and not discriminatory among insureds, for example the benefit to consumers varies only based on premium paid;
    4. fair, by not being a prohibited anti-competitive practice such as tied selling, or an inducement to purchase or renew an insurance policy; and
    5. time-limited, by being undertaken during or immediately following an emergency declared under Ontario’s Emergency Management and Civil Protection Act, with a goal of providing financial relief to consumers in respect of that emergency.

Where the above criteria are satisfied, FSRA has expressed support for premium repayment programs, given the mismatch between premium levels and associated risk, and the nature of these programs as directed at relieving financial hardship among consumers, rather than permitting insurers to obtain an unfair competitive advantage or unreasonably preferring certain consumers over others.

FSRA has recommended that insurers engage with FSRA early in the design of a premium rebate program to confirm that the intended program is appropriate. In particular, FSRA has requested from insurers the following premium rebate program information prior to implementation:

  1. how rebates will be calculated;
  2. how rebates will be provided to customers;
  3. at a high level, how customers will be impacted by the rebate program;
  4. how the rebates will comply with FSRA’s principles; and
  5. the intended form of undertaking to FSRA’s Chief Executive Officer that commits an insurer to developing a rebating program and implementing this program in accordance with the above-noted principles.

FSRA will sign and return to insurers undertakings as evidence for the insurer that the undertaking has been approved, with a new undertaking filed for each premium rebate program established by an insurer. FSRA has noted that insurers who fail to administer their rebating programs in accordance with FSRA guidance and their undertakings will lose the benefit of the waiver of the prohibition against rebating.

  1. FSRA expects insurers to maintain records of rebates provided to their customers for use in future supervisory activity and reporting.
  2. Automobile insurance is a heavily-regulated industry, with mandatory rate filings. FSRA provided an approach to principles, processes and practices that it will follow when considering applications from insurers to reduce insurance rates in order to provide rate reductions or other relief to consumers.

Principles of the emergency rate review include:

  1. rate increases will not be considered at this time; only rate reductions will be considered, including new or increased discounts, lower (or eliminated) surcharges, lower (or eliminated) fees, and lower (or eliminated) charges on instalment payments;
  2. the proposed changes may not result in a premium rate increase to a customer on renewal, assuming a static book; and
  3. rate reductions may be implemented on a “use and file” basis, by which they may take effect prior to being reviewed by FSRA, let alone approved, provided that FSRA will work with applicable insurers to resolve issues that FSRA identifies and, if the issues are not resolvable, then FSRA may require the insurer to cease use of the revised rate filings.
  1. FSRA provided automobile insurers with a summary of some actions that insurers may take without FSRA review or approval, including:
  1. re-rating policies based on changes in risk profile;
  2. if appropriate and relevant, modifying or temporarily suspending the effective dates of filings to defer the implementation of rate increases;
  3. being flexible in exercising contractual and statutory rights, such as those relating to:
    1. payment plans and premium payment deferral;
    2. underwriting rules and allowing exceptions for customers experiencing a period of financial difficulty, such as deferring decisions to non-renew customers who might otherwise be lawfully non-renewed; and
    3. cancelling policies or suspending coverage;
  4. allocating more resources to insurer call centres and underwriting;
  5. extending certain coverages where appropriate (e.g. to non-owned vehicles, or to loss of use); and
  6. waiving certain standard policy exclusions (e.g. use of personal vehicles to deliver food and other products).

It is likely that FSRA will ask insurers to report on actions taken during or as a result of the COVID crisis, along with the impact on customers of these actions.

The McCarthy Tetrault LLP Insurance Law team is available to assist insurers and brokers who have questions about proposed rebating programs, including draft undertakings, or other regulatory or transactional matters.

Source: Mondaq

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