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Canada’s Competition Act negates dream of a single cost calculator: IBC


June 21, 2010   by Canadian Underwriter


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Canada’s Competition Act is the main reason why the Insurance Bureau of Canada (IBC) will have nothing to do with the idea of insurers requiring brokers to use a single cost calculator for the purpose of calculating the reconstruction costs of a home.
The idea of insurers governing the brokers’ use of a single calculator was raised several times during an insurance-to-value (ITV) panel discussion at the Insurance Brokers Association of B.C. (IBABC) 62nd Annual Conference and Trade Show on June 18.
During the question-and-answer session, one broker cited the consequences of three or four different cost calculators in B.C. “People are using the calculators for shopping,” he said.
For example, brokers could potentially use several different calculators to calculate the reconstruction cost of a home, and then submit the lowest reconstruction cost estimate to the insurer, in order to guarantee the lowest insurance quote for the consumer insuring the home.
Lindsay Olson, IBC’s vice president of B.C., Saskatchewan and Manitoba, said IBC’s best practices guide for ITV discourages a broker’s use of multiple cost calculators to shop for the least expensive insurance quote.
Upon hearing this, one audience member pressed Olson further on the point of whether insurers would go so far as to require brokers to use just a single cost calculator, thereby effectively abolishing the potential to comparison shop.
“The only way this [situation] is going to improve is if the insurance companies have the balls to say: ‘We’re not going to take multiple copies [i.e. calculations],” the broker said. “You have to pick one and stick with it.'”
Prior to the question, Olson said that when push comes to shove, the Competition Act would prevent insurers from enforcing a broker’s use of a single calculator.
“As for choosing a single tool…one of the things we [an IBC committee investigating such a possibility] bumped into [years ago] were issues around competition,” Olson said. “We have a thing in Canada called the Competition Bureau. There is this legislation called the Competition Act. And if we restrain competition by limiting the options that are available for choosing a specific supplier [against] another supplier, you are in contravention of the act. And there are some pretty severe penalties that go with that.
“So choosing between going to jail or not, we prudently decided we would not go there. That’s a non-starter.”


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