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FSCO bulletin outlines underwriting restrictions


March 9, 2005   by Canadian Underwriter


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A bulletin from the Financial Services Commission of Ontario (FSCO) outlines the provincial insurance regulators new rules on underwriting. The new regulations passed by the Ontario government restrict underwriting criteria and non-payment terminations.
Regulation 664 has been amended to eliminate the use credit history and credit ratings in determining whether to offer or renew coverage, and in classifying a risk. Other financial information which cannot be used include: employment history, credit card possession, bankruptcy, residence history, home ownership, gross/net worth, or indebtedness. Also, late or dishonored premium payments which did not result in termination of an auto policy cannot be considered.
A policy can factor in employment circumstances when it is for a commercial or public vehicle, or a vehicle used in the course of carrying on a business, trade or profession.
With respect to termination of a policy due to non-payment of premium, the amended regulations require insurers to give at least 30 days notice before termination, with termination disallowed if payment is made within the notice period. If two notices are given within the policy period, the insurer can terminate the policy on third notice whether or not the payment is made within the notice period.
The regulations were filed on February 18, and are effective for contracts made or renewed from June 1 onwards.