How this regulator is approaching the ‘take-all-comers’ auto insurance rule

The Financial Services Regulatory Authority of Ontario (FSRA) is actively supervising insurers on its “take-all-comers” guidance.

“We’re requiring them to review their practices. We’re requiring them to report on this review later in [2022], and to establish remediation plans for any practices where there are breaches,” FSRA CEO Mark White said during the first-ever 2022 FSRA Exchange Event Thursday.

On Nov. 15, 2021, FSRA issued its take-all-comers guidance, which reiterated that auto insurers are required by law to provide all Ontario customers with timely auto insurance quotes and the lowest quotes available to them.

“This includes the obligation to accept all business that meets the insurers’ FSRA-approved underwriting criteria,” White said during a fireside chat on the future of financial services regulation, innovation and public. In Ontario, more than 10 million people have auto policies, and “we want to make sure that insurance is available to eligible consumers, that rates are just and reasonable, and that underwriting rules are fairly applied,” he said.

However, White said the regulator has observed through “surveillance and targeted examinations… that insurers and their distribution representatives may not be honoring their obligation to offer auto insurance to all eligible consumers at the lowest available rate.

“Now, this is a hidden harm, because consumers are likely not aware that there was an absence of a quote from an insurer that may have given them the benefit of a lower rate,” White said. “It’s an example of how FSRA has to be that voice for consumers where they can’t see what’s going on because of lack of transparency.”

iStock.com/Chakarin Wattanamongkol

White made his comments following a question from moderator Clare O’Hara, a wealth management reporter at The Globe and Mail, who asked what FSRA was doing to ensure fair treatment of consumers when they’re shopping around for auto insurance.

White recognized that some breaches of the take-all-comers rule may have been inadvertent or an attempt to reduce auto insurance fraud. But he also noted there were examples of insurers not offering coverage to renewal customers or those without a home insurance policy (auto-only customers). Other examples included not offering coverage to consumers that have had an accident, those residing in certain locations, or consumers that have short histories of obtaining insurance. FSRA is also examining situations involving withdrawal of authority from brokers and agents, and then some insurers not responding with a quote on a timely basis on its own.

White said the regulator looks at complaints to try and determine if there are patterns of behaviour. “Ultimately, as a risk-based regulator, we want to actually understand what are the processes within insurers and in their distribution channels that either protect consumers from unfair outcomes, or are resulting in practices that result in unfair outcomes.”

O’Hara also asked about underwriting practices that can affect insurance rates, such as the use of postal codes. Auto insurance rating territories, which includes postal codes, “has actually been in the law for years, and insurers are required to set rates using territories,” White explained.

He suggested that consumers who may be getting a higher rate because of factors like geographic location look at user-based insurance. “UBI is offered by quite a few insurers now,” White said. “It uses modern technology to assess actual driving behaviours, not just based upon criteria [where] you fit into different pigeonholes, and then it adjusts your rates accordingly based on your actual driving behaviour.”

White noted that FSRA guidelines permit insurers to include up to a 5% profit provision in their pricing. Pricing takes many factors into account, and ultimate costs from driving behaviour changes related to the pandemic won’t be known for several years because of the nature of injury claims.

“While this trend may not continue indefinitely, I’m very pleased that it has been widely reported from multiple sources that Ontario insurance rates declined materially in 2021, including declines on average across the province, and in many big markets like Toronto and Brampton,” White said.

To examine new auto insurance models, FSRA’s innovation office just launched its “test-and-learn” environment to “validate and assess new and innovative products, services and business models that don’t fit within the existing regulatory parameters to see if they can be introduced in Ontario without risk of public harm.”

Editor’s Note: This story continues to develop and more information will be added as it becomes available.

Feature image by iStock.com/Kameleon007