Ontario regulations call for fair pricing among insurer affiliates and distribution channels

The Financial Services Commission of Ontario (FSCO) has amended its Unfair or Deceptive Acts or Practices (UDAP) regulation to ensure fair pricing among insurance company affiliates and their distribution channels.
The UADP now requires “affiliated insurers and their agents/brokers to provide a consumer with the lowest rate that is available having regard to all of the circumstances, including the means of distribution.”
According to FSCO’s bulletin: “Some insurer groups have two or more affiliated insurers that have been used to segment business, commonly into a ‘standard’ market and a ‘preferred’ market.
“The distinction between these insurers is not always clear in the insurers’ filed declination rules or risk classification systems.”
The new UDAP regulation will require all affiliated insurers and associated agents/brokers to provide a rate on renewal for all of the affiliates for which the consumer qualifies, taking into account all methods of distribution.
The new UDAP regulation “does not distinguish between group and non-group business,” FSCO’s bulletin says. “Group business and non-group business are not by themselves considered to be separate means of distribution.
“FSCO will not tolerate artificially created or subdivided distribution channels designed to circumvent the new UDAP Regulation.”
The complete bulletin is available at:
http://www.fsco.gov.on.ca/english/pubs/bulletins/autobulletins/2010/a-16_10.asp
The UDAP regulation was amended to ban the use of credit scoring for the purpose of underwriting auto insurance.
To this end, the UDAP contains a definition of credit scoring; prohibits insurers and their agents from requiring consumer consent to collect and use credit information to obtain a quote; and prohibits insurers from using credit information when they respond to requests for quotes or process applications.