IBAO’s stance on electronic termination of coverage
November 24, 2020 by Greg Meckbach
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Insurers should be allowed to terminate auto policies electronically if consumers consent, the Insurance Brokers Association of Ontario’s CEO says.
In its budget document released Nov. 5, the Ontario government said the next phase of its previously-announced “blueprint” for auto insurance changes is to “focus” on several reforms.
One of those proposed reforms is “increasing competition and innovation in the auto insurance sector by modernizing outdated, burdensome requirements. This includes permitting insurers to electronically terminate policy contracts, with consumer consent, to enable fully digital insurers to operate in Ontario.”
This proposed reform is about the evolution of business, and not just in the insurance industry, IBAO CEO Colin Simpson said in a recent interview.
“The government would like to ensure that if consumers would like to have that choice, that they will permit the insurance companies to cancel electronically. This, to be honest, only makes sense in today’s digital age. I am sure digital brokers will take up with that. The key is with consumer consent,” Simpson told Canadian Underwriter.
“There are always going to be consumers who are not going to like that, who want the physical paper notice, which is what we would definitely support, and brokers in general will support what consumers want.”
iStock.com/Pheelings Media
One of Ontario’s auto insurance statutory conditions stipulates that carriers wanting to terminate a policy (for reasons such as non-payment of premiums) must give the client notice in writing, by registered mail or personal delivery of a paper notice.
Ontario Regulation 777/93 section 11.1 states: Subject to section 12 of the Compulsory Automobile Insurance Act and sections 237 and 238 of the Insurance Act, the insurer may, by registered mail or personal delivery, give to the insured a notice of termination of the contract.
The regulation then delves into detail on how much notice is required for non-payment of premium, how much notice is required for other reasons and what the notice must state.
If the government were to allow electronic notice, it would need to have a process for consumers to consent, Simpson suggested. “If the consumer prefers electronic communication, we have to be in a position to service them that way. One of the challenges of the industry is trying to get there.”
IBAO is leading a Going Paperless project. The association is working with brokers, carriers and vendors across Canada, as well as the Centre for the Study of Insurance Operations, noted Simpson.
One aim of the project is to look at what processes can be made available digitally, said Simpson.
Feature image via iStock.com/izusek
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This is a terrible idea.
A statutory notice of cancellation is not the same as other communications. The point of requiring notice by registered mail is to make sure the notice of cancellation is received by the insured. Emails can be easily missed and it cannot easily be proven the message was recieved.
Electronic notice of cancellation is only in the interests of the insurer and broker, it is not in the interests of the consumer. This will be especially problematic if the consent for cancellation notice was included as part of the general consent for electronic communications.
Essentially a single-user framework would be required, likely including two-factor authentication alongside a requirement to receive correspondence.
Folks can dodge registered mail just as easily as they can omit annual or quarterly check-ins through an app, web portal, or other system which could be prompted across all existing channels.
Just as we wouldn’t write a policy for someone that says that they don’t have a phone number we are at a point where participation is no longer optional – we can achieve compulsory email/web participation.