No. A-02/05
Property & Casualty
– Auto
Risk Classification and Underwriting Criteria, Non-Payment Terminations, and Fee Filing Guideline
To the attention of all insurance companies licensed
to transact automobile insurance in Ontario
With this Bulletin, the Financial Services Commission of Ontario (FSCO) is highlighting two
regulation changes recently passed by the Ontario government concerning risk classification and underwriting criteria and non-payment terminations. Also, a simplified fee filing guideline is being released.
Risk Classification and Underwriting Criteria Restrictions
Ontario Regulation 664 has been amended to add certain financial information and other "lifestyle" factors to the existing list of underwriting and risk classification criteria that are expressly prohibited. The regulation changes are effective upon filing of the regulation.
The amended regulation specifies that:
(a) in deciding whether to issue, renew or terminate any contract, or to provide or continue any coverage or endorsement, an insurer shall not consider a person’s:
- employment history,
- credit card possession,
- credit history,
- credit rating,
- bankruptcy or history of bankruptcy,
- residence history,
- home ownership,
- gross or net worth,
- indebtedness, and
- late or dishonoured premium payments that did not result in termination of an auto policy.
(b) except as otherwise expressly permitted, no element of a risk classification system shall use any of the following factors:
- level of income,
- employment history,
- occupation, profession or employment circumstances, unless a contract is for a commercial or public vehicle or a vehicle used in the course of carrying on a business, trade or profession,
- credit card possession,
- credit history,
- credit rating,
- bankruptcy or history of bankruptcy,
- residence history,
- home ownership,
- gross or net worth,
- indebtedness, and
- late or dishonoured premium payments that did not result in termination of an auto policy.
Non Payment Terminations
Regulation 777/93 has been amended to include requirements with which an insurer must comply before terminating an insured’s auto insurance contract due to non-payment of premium. An insurer cannot terminate the contract if the insurer receives the outstanding payment, plus any applicable administration fee, before the end of the notice period (no less than 30 days if the insurer gives notice by registered mail and no less than 10 days if the notice is given by personal delivery). If the amount is not paid by the time and in the manner specified in the regulation, then the contract is deemed to
be terminated at the end of the notice period.
If, in a given policy term, an insured has received two notices of non-payment but has paid the amount owing in time to avoid termination, then on the third non-payment notice, the insurer may proceed to cancel the policy whether or not the insured person tenders the late payment. The third notice acts as a termination notice and the policy terminates no earlier than the 15th day after the notice is given by registered mail, or no earlier than the fifth day after the notice is given by personal delivery.
This amendment applies to all contracts entered into or renewed on or after June 1, 2005.
Policy Forms Changes
Amended policy forms will be issued shortly to reflect these Regulation amendments, and will be effective for contracts entered into or renewed on or after June 1, 2005.
Copies of Regulation Changes
These Regulations were filed as O. Reg 45/05 and O. Reg 46/05 on February 18, 2005 and was published in the March 5, 2005 edition of The Ontario Gazette. They can be downloaded from the Ontario e-laws website at: www.e-laws.gov.on.ca.
Fees Filing Guideline
Fees charged by insurers must be filed and approved in accordance with the Insurance Act. A filing guideline for the approval of fees is attached to this Bulletin.
Contact
Should you have any inquiries regarding this Bulletin, please contact your rate analyst in the Auto Insurance Services Branch at FSCO.
Bryan P. Davies
Chief Executive Officer and
Superintendent of Financial Services
March 9, 2005
Attachments:
Financial Services Commission of Ontario