Canadian Underwriter

Echelon opposes proposed Facility Association changes (April 17, 2007)

April 17, 2007   by Canadian Underwriter

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Echelon is strongly opposed to the Ontario Facility Associations most recent proposal to redesign its residual market structures, according to a statement from the company.
The proposed changes would revamp the current Risk Sharing Pool (RSP) which was originally designed to provide partial and temporary relief to insurers who are adversely affected by take-all-comers regulations into a large and permanent dumping ground for under-priced, higher-risk business, Echelon CEO Doug McIntyre said in a statement.
Echelon notes lower-risk drivers will be expected to pay higher premiums to make up for the financial loss in the RSP. But one consequence of the proposal, the company adds, is that the new worst-of-the-worst rules for the Facility Association Residual Market (FARM) will force up to 90% of current business out of the FARM and potentially into the RSP, bypassing non-standard and grey-risk markets.
FAs proposal is being driven by the largest, multi-distribution channel insurers, who are using their dominance of the FA board and membership votes in an attempt to change the competitive landscape more to their liking, McIntyre said.
The changes are obviously unfair to lower-risk drivers and have the potential to distort and destabilize the market. There is no doubt that the largest insurers and their direct-writing subsidiaries will be advantaged over smaller standard and specialty insurers, particularly those distributing their products through the independent brokerage system.

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