FSRA opens door for new coverage

Jan. 20, 2020 — INSURERS IN Ontario can now offer products for subscription-based automobile services, the province’s regulator has announced.

Subscription-based auto companies offer an alternative to leasing or buying a car. Customers pay a recurring fee for access to one or more vehicles on a flexible timeline. Some services offer insurance and maintenance as part of the fee.

“In many cases, these products and proposals require pricing and risk classification systems similar to those employed with traditional automobile fleets because it is impractical, or administratively cumbersome, to price the automobile insurance policies on an individual basis,” the Financial Services Regulatory Authority of Ontario said.

“Moreover, the structure of many automobile subscription programs is similar to a fleet with the exception that the automobiles are not commercial vehicles or used for business purposes within the meaning of Ontario Regulation 664 under the Insurance Act.”

FSRA said the new approach is being rolled out on a test and learn basis, which means  stakeholders will have the opportunity to submit feedback that could shape a future version. The consultation period will end March 31.

Insurers who want to offer this type of coverage must submit an application to FSRA and explain how the proposed product meets the guidelines laid out by the regulator.

The product must fall within the scope of the guidance, be offered by an insurer authorized to underwrite auto insurance in Ontario, requires approvals and an exemption from making a major rate filing under the Insurance Act, and the insurer and its partners must have agreed on a program and approach.

“We think this is positive because the regulator is providing guidance to the industry on how to bring new types of products to the market and when the regulator does that it sends a positive message to the industry to see what coverage can be offered for this unique risk,” said Ryan Stein, the Insurance Bureau of Canada’s executive director, auto policy and innovation.

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