Canadian Underwriter

Proposed rule would allow insurers to offer rebates and incentives to Ontarians

January 8, 2021   by Greg Meckbach

Print this page Share

Ontario’s insurance regulator is looking for feedback from the public on a proposal to relax the rules prohibiting unfair or deceptive acts, allowing insurers to offer rebates and incentives to consumers under certain circumstances.

“If you talk to insurance companies and look at the restrictions that you have under the current Unfair or Deceptive Acts or Practices (UDAP) Rule, it is very difficult for them to innovate in certain areas,” as Colin Simpson, CEO of the Insurance Brokers Association of Ontario, explained in an interview Thursday.

The Financial Services Regulatory Authority announced this past December it is proposing to replace Ontario Regulation 7/00 [which details the province’s current unfair and deceptive practices rule] with a principles-based approach to unfair or deceptive practices. A 90-day consultation period wraps up Mar. 18.

The proposed new rule, if implemented, would let insurers offer rebates and incentives to consumers under certain conditions. For example, under the new rule, insurers would not be allowed to offer rebates if they would lead to a client to “buy a product which would not, considering the options generally available in the marketplace, be recommended as a suitable insurance product by a reasonable person licensed to sell such an insurance product.”

As it stands, there is pretty much a blanket prohibition on incentives. “Any payment, allowance or gift which is offered as an inducement to any prospective client” is currently consider an unfair or deceptive practice under Ontario insurance law. Frazao

This, FSRA suggests, means home insurers cannot offer something like a free plumbing inspection to a client who buys insurance from them.

“Under the current rules, you would really be incentivizing someone to make a choice between product A or product B,” Simpson said in an interview. “What the current rules say is, ‘You can’t do that.’ You have to take product A or B on its own merits and advise the broker or direct writer, or whoever it is who sells the product or advises the clients, [that] they have to explain to the client what the comparable benefits are.”

But Simpson suggests that an insurer offering a free plumbing inspection is not doing the same thing as a broker or agent who offers something like a gift card for a retail shop as an incentive for the client to select a certain insurance product.

“If [an incentive] is directly linked to reducing the risk that is being written, or improving the probability that the home owner is less likely to get water damage, because they are going to give them an inspection on their plumbing and advise them on how to fix any particular issues they may have, then that clearly is a good thing from a consumer perspective,” said Simpson. “So why would it not be allowed if it is to the benefit of the consumer?”

FSRA published its proposed new UDAP rule in December. Stakeholders providing feedback are asked a series of questions, including whether any parts of the proposed new rules are too general or require further detail.

Under the proposed new rules, there would still be restrictions on incentives and rebates. For example, an insurer would not be allowed to offer an incentive “in a manner which involves unfair discrimination or contributes to an anti-competitive practice, including, but not limited to, tied selling or predatory pricing.”

The proposed changes are part of FSRA’s effort to take a more principles-based approach to insurance law. FSRA replaced the Financial Services Commission of Ontario (FSCO) as the province’s insurance regulator in 2019.

It will be interesting to see how exactly the regulator monitors new incentives and rebates, said Simpson.

Feature image via

Print this page Share

2 Comments » for Proposed rule would allow insurers to offer rebates and incentives to Ontarians
  1. In Alberta and BC, these rules were relaxed some time ago. It is a fair perspective to allow our industry to develop innovative ways to attract and retain clients. The old joke about a free toaster from the bank comes to mind………when I was a youngster I think we used that TD toaster for about 20 years!
    But on a serious note, in Alberta and BC one key aspect was missed in the redraft, which Ontario should make sure to get right. Compensating non-licensed entities who are third parties and not a party to the contract of insurance should continue to be excluded.
    For instance, splitting commissions with property managers or real estate agents or car dealers in exchange for access to their clients, and where the client has no idea of the compensation is wrong, it is a
    conflict of interest at best and a kickback at worst.


    Being retired from a 50-year fiduciary career I respect the fact that inducements have always been prohibited. I was told by my mentors that potential customers should never be induced by gimmicks. I sleep well at night knowing that business was transacted with utmost good faith.

    Common sense should prevail. While some controlled incentives may seem like a good thing to introduce, it should be foreseeable that some will eventually become gimmicks & they could become tough & costly to regulate.

    Historically, I’ve admired regulators who made good regulations to keep the good people doing good things. Much like a padlock…., it keeps the honest people honest. Don’t waiver, stay strong!

Have your say:

Your email address will not be published. Required fields are marked *