The Financial Services Regulatory Authority of Ontario (FSRA) is releasing a second draft of its proposed Unfair or Deceptive Acts or Practices (UDAP) rule, launching a second round of consultation on the proposed rules to replace existing UDAP regulations.

Interested stakeholders are invited to make written submissions to FSRA about the revised rules by August 11, 2021.

Restrictions on consumer incentives

Based on feedback received in an initial public consultation on the proposed rule which concluded in March 2021 – FSRA received 27 submissions, 24 comments and 10 questions from interested members of the public including insurers, brokers, agents, lawyers, health care professionals, car rental operators and consumer advocates – FSRA has made a number of changes to the proposed rule. Among them, it will leave restrictions on consumer incentives in place for the life and health insurance sector, it has amended definitions to ensure that all relevant types of insurance contracts are clearly in scope, and has made corrections and improvements throughout for clarity.

“Stakeholders expressed general support for the new provision on incentives, although some raised concerns about relaxing the prohibition on incentives, including in relation to anti-competitive practices, potential consumer harm, adding complexity to the sector and possible conflicts with the Ontario Registered Insurance Brokers Act and associated regulations,” FSRA writes in its Notice of Changes and Request for Further Comment, Proposed Rule 2020-002, Unfair or Deceptive Acts or Practices document.

They add that some feedback recommended that incentives be prohibited in the case of life insurance companies, agents, and group insurance products. Incentives, as defined in the rule, include any payment, rebate, consideration, allowance, gift or thing of value being offered or provided, directly or indirectly, to an insured person applying for insurance. FSRA says it may explore a framework for removing the restrictions in future reviews of the proposed rule.

Unfair discrimination and claims practices

In addition to incentives, the proposed rule defines unfair or deceptive practices, contemplates non-compliance with the law, unfair discrimination and claims practices, fraudulent or abusive conduct, misinformation, prohibited conduct in auto insurance quotations, applications and renewals, and specifically states that circumstances in which the failure to offer the lowest rate available from an insurer or its affiliates to a person requesting a quote for automobile insurance, is a UDAP.

Overall, FSRA says the consultation and the new rule is aimed at making the supervision of insurance more transparent, dynamic and flexible. “It also focuses on the need for stronger consumer protections,” the regulator writes in a statement announcing the start of the second comment period.

The new proposed rule comes into force when unproclaimed amendments to the Insurance Act in Ontario brought forward in the Protecting the People of Ontario Act (Budget Measures), 2021 are proclaimed into force.