BCFSA bans use of ‘best terms pricing’

Feb. 14, 2022 — THE B.C. Financial Services Authority said it is banning the use of ‘best terms pricing’ in insurance contracts. 

It issued a statement that outlined measures designed to afford flexibility to insurers and brokers to head off any problems with the availability of coverage for condominiums or other properties. 

B.C. becomes the first jurisdiction in Canada to act formally in line with the Canadian Council of Insurance Regulators’ finding in December that with BTP, “outcomes . . . do not support the fair treatment of customers.” BTP is a method of pricing a subscription insurance policy, where there are multiple insurers covering varying portions of a particular risk — and provincial law requires condominiums to be 100% insured. The insurers are paid uniformly based on the highest rate offered, regardless of the risk allocation.  

The regulator negotiated with brokers and insurance companies to end the practice for condominium coverages in December 2020.  

Last week the regulator extended the ban to all commercial property insurance policies effective Jan. 1, 2023.  A BCFSA official said the practice was banned for condos because it was inflating premiums.  “After identifying that the practice also existed in other property insurance markets, we have taken the steps necessary to ensure the practice is eliminated altogether in B.C.,” she said. 

The BCFSA made exceptions for the following premium pricing practices: 

  • A reference to the weighted average of the premiums bid by other non-affiliated insurers on the same subscription policy;  
  • A reference to the premium bid by the lead insurer on the same subscription policy, and
  • Independent revision or change of a bid or quotation for an insurance policy, during the negotiation or construction of a subscription policy, provided that any such revised or changed bid or quotation is independently determined by the insurers and does not use BTP or similar practices to establish the premium. 

“We’re pretty happy with the way that the BCFSA approached it,” Chuck Byrne, executive director of the Insurance Brokers Association of B.C., told Thompson’s

“They were fair and thoughtful and open to consultation and this is I think a fair and thoughtful approach to a thorny problem.” 

He conceded that the use of BTP was not always “a topic of conversation” with strata (condo) councils, but said this was not usually an effort to hide a higher premium. “It was more of a mad rush to make sure that everybody had the coverage they had to have.” 

As for other commercial policies, Mr. Byrne said “it really is a non-issue in that class.”  

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