The Financial Services Regulatory Authority of Ontario (FSRA) has released and made effective new guidance for operational risk management in the rating and underwriting of automobile insurance.
“To help consumers receive just, reasonable and accurate auto insurance rates and fair treatment in the underwriting process, FSRA is releasing final guidance on operational risk management framework for auto insurance companies,” the regulator states. It adds that the guidance is being published in response to operational risk management and model governance gaps it has identified.
“FSRA is working hand-in-hand with the industry to help companies close gaps and better manage their operational risk while providing fair rates and treatment in the underwriting process for consumers,” adds Tim Bzowey, executive vice president of auto and insurance at FSRA.
The guidance outlines steps that insurance companies should be taking to manage operational risk, including risk identification, assessment, prioritization and mitigation and monitoring and reporting. “The information guidance is part of FSRA’s broader strategy to reform the regulation of rates and underwriting in Ontario’s auto insurance sector,” they write.
Consultation feedback provided between December 2021 and February 2022 helped the regulator to amend the guidance which became effective immediately upon release on September 20.
The guidance defines operational risk, outlines minimum foundational practices, discusses data governance, the management of operational risk management frameworks, and discusses the guidance’s application to other existing obligations including third party products and services and the protection of personal information.
The regulator writes that the information guidance does not immediately create new obligations but outlines the path forward to a future state in which operational risk management becomes an obligation. “FSRA’s planned second phase of operational risk management guidance will serve to facilitate greater insurer accountability.”