Insurer urges principles-based regulation: ‘You don’t need to tell me exactly what I can do and what I cannot do’

The insurance industry needs principles-based regulation instead of a system with rules for every situation, an Allstate Canada official suggests.

“If you have a good system that creates boundaries and guiding principles, and you make sure that nobody violates that, you don’t need to tell me exactly what I can do and what I cannot do,” said Marcelo Regen, Allstate Canada’s chief customer officer and vice president of brand innovation.

“It’s impossible that a regulator can think about everything,” Regen said Tuesday at Future of Insurance Canada, citing the current COVID-19 pandemic as an example.

Regen’s panel was moderated by Bryan Falchuk, founder and managing partner of Boston-based Insurance Evolution Partners. Falchuk, the author of The Future of Insurance: From Disruption to Evolution, asked panelists what the industry can do when it is facing a rapid shift in customer demands while at the same time the industry may be bumping up against some regulatory constraints, be they real, imagined, or misunderstood.

“We need to continue to bring principles-based regulation to allow for innovation and to benefit the consumer,” Regen said during the panel, titled How your customer is changing and what you should do about it.

Regen’s response echoes comments made by Aviva Canada this past summer in a separate interview.

In Ontario, the Financial Services Regulatory Authority announced July 21 it is creating a Technical Advisory Committee for Auto Insurance Data and Analytics Strategy.

“For the auto industry to be more responsive to customer needs and market changes, it requires the regulators to take more of a principles-based approach to regulation and allow them to balance their public interest mandate with fostering innovation,” said Baiju Devani, Aviva Canada’s chief data officer and senior vice president of data science, this past July in reaction to FSRA’s new committee.

Before FSRA took over regulation in 2019, the province’s insurance sector was regulated by the Financial Services Commission of Ontario (FSCO). The 2016 legislation bringing in FSRA was applauded at the time by the industry because some insurance executives felt that FSRA would adapt to changing consumer needs and industry trends.

Since then, FSRA has brought in a file-and-use system for private passenger auto. This applies when an insurer does not ask for a rate increase of more than 5% on a particular book of business, and where no single customer gets an increase of more than 15%. If an auto filing meets the “standard filing” criteria, FSRA’s policy is to respond within 25 days. If a response is not received within the 25-day window, the filing is deemed approved.

Sometimes insurers do make mistakes, so regulation is inherently a good thing, said Monique Hesseling, managing director of insurance for Cloudera, during the at the Future of Insurance Canada panel on Nov. 3.

“Just because we are allowed to do something with data does not necessarily make it the right thing to do,” said Hesseling. “Data ethics is becoming an increasing bit part of that whole conversation. This sort of aligns with regulation in my mind.”

Future of Insurance Canada, hosted by Reuters Events, wraps up Wednesday.