What FSRA found when it examined take-all-comers compliance

Ontario’s auto insurance regulator has used the phrase “systemic non-compliance” to describe how the province’s 12 largest auto insurance companies are approaching Ontario’s take-all-comers requirement.

According to a Financial Services Regulatory Authority of Ontario (FSRA) report, released Friday, market behaviour in the province’s auto insurance industry has led to several negative impacts on consumers:

• higher premium costs for consumers viewed as higher risk
• unfavourable discretion, whereby insures used unfiled underwriting rules to suspend an intermediary’s binding authority
• unfair competition, as riskier customers were steered to other insurers
• less choice
• wasted time.

Ontario’s take-all-comers requirement was described as a cornerstone principle to ensure consumers get the lowest available rate, FSRA CEO Mark White said when FSRA’s report was released.

“It is very hard for consumers, and it’s even hard for a regulator, to identify when insurance quotes for qualifying customers are withheld or delayed,” White said. “Our eventual success in rooting out this non-compliance required perseverance and the use of governance, controls and processes within the insurance companies themselves to self-identify and remediate these consumer harms.”

FSRA’s report identified “practices that made it more difficult for certain types of consumers to get auto insurance quotes.” These included Ontario customers who:

• experienced prior accident benefit claims, including passengers and pedestrians who weren’t at fault
• didn’t also buy property policies, such as homeowners’ insurance
• lived in certain municipalities
• had less than one year of insured driver history.

As part of a multi-year, fact-finding process that led to the report, the regulator said it met with CEOs and management teams from the largest 12 auto insurers in the province as part of a compliance review process. In some cases, executives indicated they weren’t aware of non-compliant business practices at their companies.

“There were also instances of insurers having an incorrect interpretation of how the take-all-comers requirement applied in certain circumstances,” FSRA’s report said. “For example, some insurers incorrectly interpreted the use of aggregators as lead generation (marketing) rather than quoting activity.”

The report noted the growing popularity of online auto insurance rate aggregators has been problematic. Consumers have come to view them as convenient tools to compare quotes. But these intermediaries aren’t regulated and can work against take-all-comers rules by filtering out clients that insurers might view as less desirable.

“While aggregators may give consumers the impression that they are able to do a side-by-side comparison of different insurance plans and hopefully have cost savings,” FSRA’s report said, “these sites also play a role in take-all-comers by allowing insurers to deny consumers coverage based on unfiled underwriting rules.”

Going forward, FSRA said compliance reviews will lead to actions ranging from education and remediation, in instances where non-compliance with take-all-comers was inadvertent, to regulatory intervention. Those interventions could include compliance orders, license revocations, monetary penalties, and provincial offence charges.

The regulator also said it will “include elements of take-all-comers supervision in all future auto insurers conduct examinations” for all auto insurers in the province, and conduct ‘secret shopper’ exercises.

FSRA also will be “assessing the relationship aggregators have with insurers and brokers, in consultation with other jurisdictions, to determine what supervisory framework would be best suited for aggregators.”

Feature image by iStock.com/Thanakorn Lappattaranan