Insurance industry wants “nimbler, forward-looking regulator” that doesn’t set auto rates: IBC

FSCO resources 'overburdened' with rate regulation

The insurance industry expects to see a ‘nimbler, more forward-looking and principles-based regulator’ that is not as involved in approving auto insurance rates, according to the Insurance Bureau of Canada (IBC).

Speaking at a panel discussion entitled “From FSCO to FSRA: The Future of Regulation in Ontario”, hosted by the Insurance Institute in Toronto on Thursday, Barb Taylor, director, policy Ontario at the IBC, said the industry is hoping for change in specifically auto insurance rate regulation by the new Financial Services Regulatory Authority (FSRA).

An IBC research panel, she said, that made several recommendations to the committee reviewing the FSCO’s mandate, noted “that the current process of reviewing and approving rate changes was the most frequently cited source of dissatisfaction”.

“The current [rate review] process is quite detailed, time-consuming and costly, and in the long run, consumers end up paying… The FSCO’s own resources have become overburdened with rate regulation, taking away from its ability to do other important activities,” Taylor said.

The IBC suggested “moving to a system like file-and-use, or alternatively government can do an assessment of the rate regulation system”, she said.

The current system of rate regulation is also “out of line with how regulators work in other parts of the world”, she added.

The Europe and the United Kingdom, for example, does not regulate rates, said panelist Karin Ots, Aviva Canada’s senior vice-president, regulatory and government relations. “They allow open market competition, and it serves consumers well. At Aviva, we have a department whose sole function it is to watch the rates and prices set by competitors and adjust these on a daily basis,” Ots said. “That’s maybe difficult for insurers to handle, but it’s beneficial to the consumer.”

Ots said rate regulation “continues to occupy a tremendous amount of FSCO time and resources”. “In other parts of the world, it’s very different. It seems to me, a little bit bizarre, that a regulator, who doesn’t sell a policy, has no customers, has limited interaction with customers and doesn’t handle claims, is so heavily involved in the prices that we set.”

Ots said the FSRA can learn from regulators in other parts of the world, where they are “nimbler, more forward-looking”.

“We hope to see a more proactive, more forward-looking, more principles-based and risk-based regulator,” Ots said. “We’d like to see a broader mandate, that is focused on consumer interest and protection, but also more focus on fraud, competition, innovation, and a regulator controlling the auto insurance marketplace as a whole, as opposed to just dealing with insurers. We’d also like to see the regulator have rule-making authority to make changes much more quickly and nimbly than currently, and we’d like to see auto insurance insulated from political influence.”

Ots insisted that it is not a “competence issue” at the FSCO, but a mandate issue.

While some of the IBC panels’ suggestions were adopted in the mandate review, Taylor said “we won’t see, unfortunately, an immediate change to rate regulation”. “However, this is a very critical concern for our industry, so we hope to see it as a priority. Decisions will have to be made. Our industry has the most interaction with the FSCO, and we simply need a more effective system,” Taylor said.

It’s unlikely, however, that the FSRA will be implemented anytime soon, said Leah Myers, assistant deputy minister, Ontario Ministry of Finance.

“The next key step will be to appoint an independent board, which will be a critical partner with the ministry in operationalizing the new regulator,” she said. The specifics of FSRA’s mandates, structures and authorities, including for example the rule-making authorities that are so critical, will still need to be defined. “This is a big task, and will take time.”

A TC Media site,
Business Solutions

TC Media

Transcontinental Media G.P
1110 René-Lévesque Bldv W.
Montréal, QC H3B 4X9
(514) 392-9000