Is FSRA planning to license aggregators?

Ontario’s insurance regulator has confirmed it is considering whether or not aggregators need to be licensed.

Since August, when Ontario’s financial services regulator issued a report outlining concerns about auto insurers’ compliance with take-all-comers requirements, Canada’s P&C insurance industry has been waiting for the other shoe to drop.

While the Financial Services Regulatory Authority of Ontario (FSRA) report didn’t expressly say new regulations are coming, it did point to “systemic non-compliance” by major auto insurers operating in Ontario. That non-compliance, FSRA said, led to negative impacts for consumers – including higher premiums for those deemed high risk, and a practice of steering riskier consumers to other insurers.

FSRA’s report called insurers’ reliance on quote aggregation intermediaries ‘problematic.’ It noted intermediaries aren’t regulated and may work against take-all-comers rules by filtering out clients that insurers might view as less desirable.

Does that mean Ontario will develop regulations for insurance intermediaries like quote aggregation sites?

When asked, FSRA spokesperson Alex Kvaskov told CU, “aggregators are not currently licensed nor regulated by FSRA. However, FSRA has the ability to require any person, including aggregators, to be licensed if they conduct regulated insurance activities – such as acting on behalf of insurers to solicit, provide quotes, or offer insurance in Ontario.

“We are currently reviewing whether aggregators require licenses to conduct their business and if they should be otherwise regulated.”

More recently, the topic of licensing aggregators was taken up last week by panellists discussing regulatory issues at the National Insurance Conference of Canada in Montreal.

Experts weigh in

Discussing impacts of technological innovations on the P&C insurance business, commenters noted regulators have been examining rules initially drafted for the ‘paper world,’ to determine how they should be updated for a digital marketplace.

In light of that, one panellist said, FSRA is looking into whether licensing or regulating aggregators was necessary. “This question about some of the newer participants in the insurance supply chain – if you license them – that’s now on the table,” said Koker Christensen, a partner and co-leader of financial services at Fasken in Toronto.

Updating rules for digital markets also requires exploring the impacts of AI.

Panellists said the federal government’s Bill C 27, Canada’s first artificial intelligence legislation, will create obligations for people who are operating and producing AI. Plus, legislation around automated decision-making is in the works at both the federal level and in Quebec.

“Canadian provincial regulators have been focused principally on treating customers fairly over the last five years,” said Stuart Carruthers, a partner at Stikeman Elliott. “So, all these digital initiatives are new territory; and how do you treat customers fairly in these new contexts and what does that mean in an AI context?

“I think part of it for companies – brokers – will be trying to better understand what the regulator’s expectations are. A lot of this exists in kind of a gray area and what the regulator’s expectations are, what the enforcement risk or enforcement profile is, and the likelihood of enforcement action around new initiatives, innovative initiatives,” he added. “They don’t really fit very well into the existing framework.”

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