Chapter 12 – Regulation of Automobile Insurance in Ontario
Regulatory structure
· The financial services commission of Ontario act, 1997, created a new regulatory structure to administer insurance regulation in the province of Ontario
o FSCO was created and regulates insurance, pension plans, loan and trust companies, credit unions, and caisses populaire, mortgage brokers and co-operatives
o FSCO comprises of 3 elements:
§ The commission or ‘board’
§ The financial services tribunal
§ The superintendent of financial services and staff
o The commission or ‘board’ has 5 members:
§ The chair
§ 2 vice-chairs
§ The director of arbitrations
§ The superintendent of financial services
o The director of arbitrations is responsible for the auto insurance dispute resolution system
o The financial services tribunal is an independent body that hears appeals of regulatory decisions and reviews proposed orders of the superintendent
o The superintendent of financial services is responsible for administering and enforcing the act
Consumer protection legislation
· The act prescribes the info to be given to applicants and insureds and such info is party of the application which is incorporated into the policy
· A broker shall provide on request, the names of all insurer w/ whom the broker has an agency contract relating to auto insurance and all info obtained by the broker relating to quotations on auto insurance
Unfair or deceptive acts and practices
· A person designated may direct to an insurer any inquiry related to the contracts, financial affairs or the acts and practices of the insurer
· Persons who are licensed under the Act shall on request furnish the superintendent or person designated w/ full info relating to:
o Any contract of insurance issued by an insurer
o Any settlement or adjustment under a contract of insurance
o Any activities related to the business of insurance
· An insured shall furnish any contract of insurance issued to the insured or any settlement or adjustment affecting the insured person
· RIBO must report annually to the superintendent of financial services and provide any info requested
· For the purposes of the definition of unfair or deceptive acts and practices, the following actions are included:
o The commission of any act prohibited under the act or regulations
o Any unfair discrimination b/w individuals of the same class and of the same expectation of life
o Any unfair discrimination in any rate or schedule of rates b/w risks in Ontario
o Any illustration, circular, memorandum or statement that misrepresents the terms, benefits, or advantages of any policy or contract of insurance
o Any false or misleading statement as to the terms, benefits or advantages of any contract or policy of insurance
o Any incomplete comparison of any policy of insurance w/ that of any other insurer for the purpose of inducing an insured to lapse, forfeit or surrender a policy
o Any payment, allowance or gift, or any offer to pay, allow or give any money or thing of value as an inducement to any prospective insured to insure
o Any charge for a premium allowance or fee other than as stipulated in a contract of insurance upon which a sales commission is payable to such person
o Any conduct resulting in unreasonable delay or resistance to the fair adjustment and settlement of claims
o Making the issuance of a policy conditional upon the purchase of another insurance policy
o Misclassifying the person or vehicle under the risk classification system used by the insurer or that the insurer is required to use by law
· A person committing conduct in an unfair or deceptive act; the Act authorizes the superintendent to give notice to the person to:
o Cease doing any act or pursuing any course of conduct identified by the superintendent
o Cease engaging in the business of insurance or any aspect of the business of insurance specified
o Perform such acts as are necessary to remedy the situation
· A person has a limited time to request a hearing by written notice to the superintendent
Registered insurance brokers of Ontario (RIBO)
· Regulations to the registered insurance brokers act defines ‘misconduct’:
o The use of methods of solicitation and advertising that are not compatible w/ the code of conduct
o The use of any incomplete comparison of any policy of insurance w/ that of any other insurer for the purpose of inducing the insured to lapse, forfeit or surrender a policy
o The use of any payment allowance or gift or any offer to pay, allow or give any money or thing of value as an inducement to any prospective insured to insure
o Directly or indirectly making or attempting to make an agreement as to the premium to be paid for a policy other than as set forth in the policy
o Coercing a prospective buyer of insurance through the influence of a professional or business relationship or otherwise to give a preference that would not otherwise be given
o Holding oneself out or advertising in any other manner than the name in which the individual or the corporation of which the individual is the designated representative is registered
o The use of any practice or conduct that results in unreasonable delay or resistance to the fair adjustment of claims
o Failure to carry on business in a manner consistent w/ the code of conduct
o The use of any referral fees to any person who is not a registered insurance broker
· A broker’s own insurance requirements:
o Errors and omissions insurance w/ coverage for loss resulting from fraudulent acts and fidelity insurance against loses arising from dishonesty of employees, directors, shareholders
Cancellations, refusal to renew
· The Insurance Act gives the superintendent the authority to:
o Establish requirements that must be met b4 an insurer declines, terminates, or refuses to renew a policy
o Prescribe grounds for which an insurer cannot decline, terminate, or refuse to renew a policy
· Insurers must file w/ the financial services commission a list of grounds for which the insurer declines, terminates, or refuses to renew a policy
· The superintendent may require insurers to provide such info, material and evidence necessary to determine the manner in which any ground is applied by the insurer
· An insurer shall not decline to issue, terminate or refuse to renew a contract except on a ground set out in the list filed w/ the financial services commission
· The superintendent may order a hearing w/ respect to any ground set out in the list filed if the manner in which it is applied:
o Is subjective
o Is arbitrary
o Bears little or no relationship to the risk to be borne by the insurer in respect of an insured
o Is contrary to public policy
· Following a hearing w/ respect to a ground, the superintendent may prohibit an insurer from:
o Declining, terminating, or refusing to renew any contract of that ground or
o Applying that ground to decline, terminate or refuse to renew any contract
Non renewal procedures
· If an insurer does not intend to renew a contract or proposes to renew a contract on varied terms, the insurer shall,
o Give the insured not less than 30 days notice in writing
o Give the broker 45 days notice in writing
· A broker to whom an insurer has given notice shall give the insured not less than 30 days notice in writing of the insurer’s intention
· Notices given shall set out the reasons for the insurer’s intention
· Where, b4 a broker is required to have given notice, the broker places w/ another insurer a replacement contract containing similar terms as the expiring contract, the broker is exempted from giving notice
· A contract of insurance is in force until there is compliance
Sample Review Questions - Automobile Insurance (Part 1)
1. FSCO administers insurance regulation in Ontario
2. The 3 elements in the government regulatory structure for insurance are:
a. The Commission or ‘Board’
b. The Financial Services Tribunal
c. The Superintendent of Financial Services and staff
3. The Director of Arbitrations is responsible for the auto insurance dispute resolution system.
4. The Superintendent of Financial Services is responsible for administering and enforcing the Act.
5. The Insurance Act includes provisions to protect consumers.
6. Persons who are licensed under the Act shall on request furnish the Superintendent w/ full info relating to:
a. Any contact of insurance issued by an insurer
b. Any settlement or adjustment under a contract of insurance
c. Any activities related to the business of insurance
7. Practices of insurer considered unfair or deceptive include:
a. The commission of any act prohibited under the Act
b. Any unfair discrimination b/w individuals of the same class and of the same expectation of life in the amount or payment or return of premium or rates charged for contracts of life insurance or annuity contracts
c. Any unfair discrimination in any rate or schedule of rates b/w risks in Ontario
d. Any illustration, circular, memorandum or statement that misrepresents the terms, benefits, or advantages of any policy
e. Any false or misleading statement as to the terms, benefits or advantages of any contract of insurance
f. Any incomplete comparison of any policy w/ that of any other insurer for the purpose of inducing or intending to induce an insured to lapse, forfeit or surrender a policy
g. Any payment, allowance or gift, or any offer to pay, allow or give any money or thing of value as an inducement to any prospective insured to insure
h. Any charge for a premium allowance or fee other than as stipulated in a contract of insurance upon which a sales commission is payable to such person
i. Any conduct resulting in unreasonable delay to the fair adjustment and settlement of claims
j. Making the issuance of a policy conditional upon the purchase of another insurance policy
k. When rating a person or a vehicle as an insurance risk for the purpose of determining the premium payable for a policy, misclassifying the person or vehicle under the risk classification system used by the insurer
8. Remedies that are open to the Superintendent of Financial Services w/ respect to unfair or deceptive practices of insurers include:
a. Cease or refrain from doing any act or pursuing any course of conduct identified by the Superintendent
b. Cease engaging in the business of insurance or any aspect of the business of insurance specified by the Superintendent
c. Perform such acts as are necessary to remedy the situation
9. Registered Insurance Brokers Act regulates brokers under the Insurance Act.
10. Practices of brokers that constitute ‘misconduct’ include:
a. The use of methods of solicitation and advertising that are not compatible w/ the code of conduct
b. The use of any incomplete comparison of any policy w/ that of any other insurer for the purpose of inducing an insured to lapse, forfeit or surrender a policy
c. The sue of any payment, allowance or gift or any offer to pay allow or give any money or thing of value as an inducement to any prospective insured to insure
d. Directly or indirectly making an agreement as to the premium to be paid other than as set forth in the policy
e. Coercing a prospective buying through the influence of a professional or business relationship or otherwise to give a preference that would not otherwise be given on the effecting of an insurance contract
f. Holding oneself out or advertising in any other manner than the named in which the individual or the corporation or partnership of which the individual is the designated representative is registered
g. The use of any practice or conduct that results in unreasonable delay to the fair adjustment of claims
h. Failure to carry on business in a manner consistent w/ the code of conduct
i. The use of any referral fees to any person who is not a registered insurance broker
11. Brokers are required to carry their own insurance as a means of protecting consumers. It includes errors and omissions insurance w/ extended coverage for loss resulting from fraudulent acts or some other form of approved financial guarantee and fidelity insurance against losses arising form dishonesty of employees, directors, officers and shareholders.
12. With respect to reasons for which an insurer may refuse to accept auto business or to cancel or refuse to renew a policy, the Insurance Act gives the Superintendent the authority to:
a. Establish requirements that must be met b4 an insurer declines, terminates, or refuses to renew a policy
b. Prescribed grounds for which an insurer cannot decline, terminate, or refuse to renew a policy
c. The requirements cannot be:
i. Subjective
ii. Arbitrary
iii. Bear little or no relationship to the risk to be borne by the insurer
iv. Contrary to public policy
13. An insurer shall not declined to issue, terminate or refuse to renew a contract except on a ground set out in the list filed w/ the Financial Services Commission. All other grounds for non-acceptance would not be valid.
14. When an insurer does not wish to renew an auto policy they shall:
a. Give the insured not less than 30 days notice in writing
b. Give the broker 45 days notice in writing
15. A broker to whom an insurer has given notice shall give the insured not less than 30 days notice in writing of the insurer’s intention.
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