FSRA publishes final proposal on unfair, deceptive acts in insurance

The Financial Services Regulatory Authority of Ontario (FSRA) has published its final proposed rule on unfair and deceptive practices in the insurance industry, the regulator said in a release on Tuesday.

The Unfair or Deceptive Acts or Practices (UDAP) rule defines outcomes that are unfair or harmful to consumers, and will replace current related regulation under the Insurance Act.

The proposal underwent two comment periods, and stakeholder feedback resulted in the use of outcomes-focused language and principles-based requirements to describe unfair or deceptive acts.

“Outcomes-focused language and principles-based requirements strengthen consumer protections, enhance competition in the insurance sector and permit FSRA to examine the particular circumstances to achieve desired regulatory outcomes,” the regulator said in comments accompanying the final proposal.

Further, “Outcomes-focused language is also intended to provide FSRA with sufficient regulatory discretion and clear legal tests to determine whether a UDAP has occurred based on a consideration of all material circumstances,” it said.

Unfair or deceptive acts can include inaction or omissions, the rule says, and may relate to such things as unfair discrimination (e.g., between customers of the same class and life expectation), unfair claims practices (e.g., unreasonable delays in claims settlements) and misrepresentation (e.g., about policy coverage), among other things.

(Unfair and deceptive acts related to car insurance are cited specifically in the rule.)

In addition to promoting fairness to insurance customers and enhancing transparency, the rule aims to remove barriers to innovation regarding customer incentives.

The rule clarifies that incentives and rebates must be transparently communicated, not legally prohibited or anti-competitive, and result in no decisions against consumers’ interests.

The UDAP rule has been submitted to Ontario’s finance minister for final approval and will take effect when amendments to the Insurance Act are proclaimed.

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