By CRM Staff
Ottawa, Ontario -- December 20, 2017 -- The way insurance is done in Canada could be changing soon. The Progressive Conservative Party proposes an end to the auto insurance industry's use of postal codes when determining rates, if they win the next election. The Conservative position differs from that of the insurance industry, which uses territory as one of several factors in assessing risk.
Insurers have told their industry association, the Insurance Bureau of Canada (IBC), that territory is actually a good predictor of risk, according to a report from Canadian Underwriter. Reducing rates for certain territories doesn’t address the core problem of rising claims and auto insurance fraud, the IBC told the publication in an interview.
“This is the type of conversation that has come up in the past and is likely to come up in the future, until such time as we are actually able to reform the regulatory environment to allow for innovation,” Pete Karageorgos, IBC’s Director of Consumer and Industry Relations for Ontario, told Canadian Underwriter. He noted the current rate filing procedure “handicaps insurers in their ability to respond in an innovative and quick manner, both adjusting rates upwards and downwards.”
In an email to the insurance-focused publication, PC finance critic Vic Fedeli wrote: “Geographic discrimination should be eliminated while not raising rates on other parts of the province. Drivers living in Brampton, Vaughan and Mississauga face the highest insurance rates in the province and in the country. In order to fix this, it will likely mean a different form of rating in order to accomplish this.”
Ontario auto insurers are required by law to submit proposed rates, along with supporting actuarial data, to FSCO for approval. FSCO then reviews the data and insurers’ assumptions regarding claims costs, expenses and investment income to ensure that proposed rates are not excessive and do not cause risk to the insurer’s solvency.
A return to power for the Progressive Conservatives would see them “direct” the FSCO “to stop accepting postal codes as a factor in setting insurance rates.”