In the December 2021 RIBO newsletter, RIBO President, Hugh Fardy, discussed the FSRA guidance relating to the Take all Comers (TAC) Rule and brokers’ responsibility in writing Ontario auto insurance. The ability to demonstrate compliance with RIBO requirements and the TAC Rule is greatly enhanced by meaningful file documentation.
Brokers are reminded that any time you provide a quote for auto insurance:
- it must be based on an up-to-date understanding of the client’s needs,
- your recommendations must reflect an assessment of all auto markets available to you, and;
- you should be adequately documenting the recommendations to your client, as well as their instructions.
What does this mean for me as a broker?
1. Keep Written Records of the Quote Process
Brokers must obtain and provide a quote for all of their auto markets, and should maintain written records of the quoting process, including where a market refuses to provide a quote. While quoting, should an insurer refuse to quote or otherwise take steps to slow down the quote process, brokers must report these situations to both the consumer and RIBO.
A summary of the quotes obtained, as well as those provided to your client will be requested as part of any spot-check. Extra care should be taken to document the reasons why a client was not provided any quotes and which markets were reviewed with the client.
A quote log should contain a minimum of the following:
- Quote/Premium
- Insurance Market
- Broker Comments
2. Review your auto business when transferring portfolios
It is not unusual for a brokerage to move a portfolio of business from one insurance company to another. The client’s interest must always come first when a broker transfers a book of business to another insurer, especially when some of that portfolio is auto insurance business. This is true both under RIBO’s Code of Conduct and the Take All Comers Rule. A consumer must never be subject to a higher auto premium due an auto risk being remarketed to another insurer with the portfolio transfer.
Prior to the portfolio transfer, Brokers should review the portfolio and identify any auto-renewals that may be subject to additional rating and additional premiums because of the portfolio transfer. Some of these auto clients may have had an at fault loss in the last 5 years and under “accident forgiveness” with a 5- or 6-star rating, providing the policy renews with the same market. However, changing this auto renewal to the new market may result in this renewal reverting to a 0- or 1-star rating resulting in a massive premium increase. In these scenarios, brokers should consider referring that person to the expiring insurance company to find another local broker who still represents that market in order that the consumer can appoint a new broker and maintain their 5- or 6-star rating.
3. Review insurer agreement(s)
A brokerage should exercise caution whenever it enters into an agreement with an insurer to move a portfolio, and where that agreement has conditions relating to the auto insurance portion of the portfolio. Unacceptable conditions may include, for example, any necessity to refer to the insurer before binding specific auto accounts due to a rating territory or specific class of use, etc.
4. Understand your obligations
Should a brokerage enter into such an agreement with an insurer, it may be considered a violation of the Take All Comers Rule and the Insurance Act, and may also be considered an act of misconduct under the RIBO Code of Conduct and the Registered Insurance Brokers Act.
5. Ensure Compliance Procedures are updated
RIBO will be including a review of brokerages practices and procedures for compliance with the Take All Comers Rule as part of our spot check program. Brokerages should make certain that they have effective compliance procedures in place and a record of reporting to RIBO any encountered noncompliance of the Take All Comers Rule.
6. Incentives
Brokers should also be reminded that they are required at the time of the quote to disclose to consumers any incentives they are receiving. For example, the brokerage may be offered an incentive from the receiving insurer, such as a commission override or other forms of incentives, such as offering to enter brokers into draws, or contests for binding new business.