Ontario government promises auto rate review

The Ontario government announced Thursday it plans to “review how auto insurance rates are regulated” and confirmed the government will still run the Motor Vehicle Accident Claims Fund.

A review of rate regulation will be done “jointly with the Financial Services Regulatory Authority of Ontario,” the government said in its 2018 Ontario Economic Outlook and Fiscal Review.

Rates are regulated by the Financial Services Commission of Ontario. Before changing rates, a carrier must first submit its proposed rate changes – along with supporting actuarial data – to FSCO for approval.

The current system is getting some pushback from the industry. For example, Heartland Farm Mutual CEO Louis Durocher told Canadian Underwriter earlier that carriers should not have to wait for FSCO’s approval before changing their rates.

The Economic Outlook does not go so far as to call for a file-and-use system for auto insurance rates.

The Financial Services Regulatory Authority – established in 2017 – will at some point take over auto insurance regulation from FSCO.  In its budget document for 2018-19 – released this past March – the government said it is “committed” to having FSRA up and running by April, 2019. At the time the Liberal party formed the government. The Liberals were replaced by the Progressive Conservatives in the election this past June.

The creation of FSRA was one of 37 recommendations made in the Review of the Mandates of the Financial Services Commission of Ontario (FSCO), Financial Services Tribunal (FST) and the Deposit Insurance Corporation of Ontario (DICO), a report released in 2015 by a panel of three. That panel included George Cooke, former CEO of The Dominion of Canada General Insurance Company.

In the report, the panel recommended that the MVACF be transferred to the Facility Association because debt collection and claims administration are not core responsibilities of a financial regulator.

In its economic outlook released Thursday, the government suggested it intends to table legislation moving the MVACF from FSCO to the Ministry of Government and Consumer Services – not to industry, as recommended by the 2015 panel.

MVACF is intended to provide compensation for motor vehicle accident victims who either have no recourse to auto insurance or who are involved in accidents with uninsured or unidentified drivers.

Two years ago, the province took responsibility for arbitrating accident benefits disputes away from FSCO. Now claimants can take disputes to the Licence Appeal Tribunal for arbitration.

With the new economic statement, the Ontario government “has established policy objectives to modernize insurance, to improve affordability, to reduce the regulatory burden, and to foster innovation,” Aviva Canada president and CEO Colm Holmes stated in a release Thursday. “Aviva fully supports all these principles.”

Also reacting to the economic statement is the Insurance Bureau of Canada.

The government said that “recent innovations in the insurance sector require an equally innovative response from regulators,” IBC said.

The Ontario government said Thursday it “is committed to creating a regulatory framework that allows for a more modern auto insurance sector,” including electronic proof of auto insurance and “innovative insurance products, such as usage-based insurance technology.”

UBI refers to telematics technology that monitors vehicle behaviour – such as speed, hard braking, sudden acceleration, distance driven and the time of day the vehicle is being driven. FSCO allows carriers to use UBI to give discounts for low-risk driving behaviour but not to add surcharges for risky driving behaviour.

In addition to regulating auto insurance, FSRA will also regulate life and health insurance, mortgage brokers, pension plan administrators, credit unions and caisses populaires.