Bill 45 2012

An Act to amend the Insurance Act with respect to risk classification systems for automobile insurance

Note: This Act amends the Insurance Act.  For the legislative history of the Act, see the Table of Consolidated Public Statutes – Detailed Legislative History at www.e-Laws.gov.on.ca.

Her Majesty, by and with the advice and consent of the Legislative Assembly of the Province of Ontario, enacts as follows:

   1.  (1)  Subsection 121 (1) of the Insurance Act is amended by adding the following paragraph:

15.0.0.1          prescribing information that must be provided in addition to the explanations required under subsections 230.1 (1) and (2) and prescribing the time period within which the information and explanations must be provided;

   (2)  Paragraphs 36, 36.1 and 36.2 of subsection 121 (1) of the Act are repealed and the following substituted:

  36.  prescribing rules relating to the manner in which the factors to be used in a proposed risk classification system may be used;

36.1 prescribing rules relating to the determination of the weight given to the factors used in a proposed risk classification system in accordance with subsection 410 (1.1);

36.2 prescribing the weight that may be given to the factor set out in subparagraph 1 iv of subsection 410 (1.1) for the purposes of subsection 410 (1.4);

36.3 providing for transitional matters relating to the implementation of subsection 410 (1.1);

36.4 prescribing elements of a risk classification system in addition to the element set out in subsection 410 (1.5) that insurers or a class of insurers are prohibited from using in classifying risks for a coverage or category of automobile insurance;

  37.  prescribing, for the purpose of section 413.1, maximum monetary amounts and percentages by which the rate for a class of risks in respect of a coverage or category of automobile insurance may increase or decrease as a result of the application of section 410 or a regulation made in respect of risk classification systems;

   2.  The Act is amended by adding the following section:

Information from insurer, new contract

   230.1  (1)  Before entering into a contract of automobile insurance with a person, an insurer shall, in plain language that is clear and concise, provide a written explanation to the person of the risk classification system it used to determine the rate and any other prescribed information.

Same, renewal of contract

   (2)  If the renewal of a contract of automobile insurance with a person includes a rate increase of 5 per cent or more and the increase is unrelated to a claim made to the insurer, the insurer shall, in plain language that is clear and concise, provide a written explanation to the person of the reason for the increase and any other prescribed information.

   3.  Section 410 of the Act is amended by adding the following subsections:

Requirements for risk classification system

   (1.1)  A proposed risk classification system for determining the rates for each coverage and category of automobile insurance shall meet the following criteria:

    1.  The elements of the proposed risk classification system must use the following factors in decreasing order of importance:

            i.  Subject to subsection (1.2), the driving safety record of an insured person.

           ii.  The number of kilometres that an insured person drives annually.

          iii.  The number of years of driving experience of an insured person.

          iv.  The population of the statistical area in which the driver's primary residence is located.

    2.  Subject to the regulations, the elements of the proposed risk classification system may use factors in addition to those set out in paragraph 1 but any additional factors shall, when taken together, be given no more weight than the factor set out in subparagraph 1 iv.

Driving safety record

   (1.2)  For the purposes subparagraph 1 i of subsection (1.1), only accidents in which the insured person was principally at fault, as determined in accordance with the regulations, may be considered in determining the person's driving safety record.

Statistical area

   (1.3)  For the purposes of subparagraph 1 iv of subsection (1.1), a statistical area is an area that is classified by Statistics Canada for its statistical area classification in its most recent census of Canada.

Same

   (1.4)  If a driver's primary residence is located in a statistical area with a population of less than 10,000, the weight given to the factor set out in subparagraph 1 iv of subsection (1.1) shall be the weight prescribed by the regulations.

Geographical region as prohibited element

   (1.5)  Insurers are prohibited from using a geographical region in which an insured person resides as an element in classifying risks for a coverage or category of automobile insurance.

   4.  Subsection 412 (6) of the Act is repealed and the following substituted:

Refusal to approve

   (6)  The Superintendent shall refuse to approve an application under section 410 if,

  (a)  the proposed risk classification system does not comply with section 410; or

  (b)  he or she considers that,

           (i)  the proposed risk classification system or rates are not just and reasonable in the circumstances,

          (ii)  the proposed risk classification system is not reasonably predictive of risk or does not distinguish fairly between risks, or

         (iii)  the proposed rates would impair the solvency of the applicant or are excessive in relation to the financial circumstances of the insurer.

   5.  (1)  Subsections 413.1 (1) and (2) of the Act are repealed and the following substituted:

Prescribed maximum increase and decrease in rate

   (1)  No insurer shall, as a result of the application of section 410 or a regulation made in respect of risk classification systems, increase or decrease the rate for a class of risks in respect of a coverage or category of automobile insurance by more than the maximum monetary amount or percentage prescribed under paragraph 37 of subsection 121 (1).

Application for phase-in of regulations

   (2)  If the application of section 410 or a regulation made in respect of risk classification systems would require an insurer to increase or decrease the rate for a class of risks in respect of a coverage or category of automobile insurance by more than the maximum monetary amount or percentage prescribed under paragraph 37 of subsection 121 (1), the insurer shall apply to the Superintendent for approval of a plan that will phase in the increase or decrease over a period specified in the application by exempting the insurer, in whole or in part, from the applicable provisions for the specified period.

   (2)  Clause 413.1 (5) (a) of the Act is repealed and the following substituted:

  (a)  the plan will permit the applicable provisions of this Act or the regulations to apply to the applicant without any exemption at the end of the period specified in the application;

Commencement

   6.  This Act comes into force on January 1, 2014.

Short title

   7.  The short title of this Act is the Insurance Amendment Act (Risk Classification Systems for Automobile Insurance), 2012.

 

EXPLANATORY NOTE

The Insurance Act currently requires an insurer to apply to the Superintendent of Financial Services for approval of the risk classification system it intends to use in determining the rates for each coverage and category of automobile insurance.  The Bill amends the Act to require that elements of a proposed risk classification system use the following mandatory factors in decreasing order of importance: 

    1.   The driving safety record of the insured person, but only in respect of accidents where the person was found to be principally at fault.

    2.   The number of kilometres driven annually by the insured person.

    3.   The insured person's years of driving experience.

    4.   The population of the statistical area in which the driver primarily resides.

If other factors are used, they cannot, when taken together, be given more weight than the fourth mandatory factor.  (see subsections 410 (1.1) to (1.4))

Insurers are prohibited from using a geographical region in which an insured person resides as an element in classifying risks. (see subsection 410 (1.5))  Other elements may continue to be prohibited under the regulations.  Insurers must provide written explanations and other prescribed information regarding rate determinations in specified circumstances. (see subsection 230.1 (1))  Regulation-making powers are also provided for transitional matters relating to the implementation of the new rules.