Introduction of The Insurance Act
Well, it’s been a long time coming. But as of January 1, 2020, Saskatchewan’s insurance sector will be officially governed by new legislation: The Insurance Act.
Originally passed by policymakers in 2015, the ‘new Act’ has had more than its share of false starts. Those of you who attended the most recent IBAS AGM may recall implementation was hard set for this past January. In November, however, IBAS — along with several other organizations — requested an additional delay to allow for the finalization of still-outstanding regulatory amendments, and to provide those affected by the Act, including brokers, sufficient time to review the changes and take any actions necessary to maintain compliance. As a result of those appeals, enactment was delayed by a full year.
Since then, IBAS has been working closely alongside the Financial & Consumer Affairs Authority (FCAA) as well as the staff at the General Insurance Council of Saskatchewan (GICS) to clarify the rules and help ensure a smooth transition. To help communicate the key changes, IBAS prepared a high-level overview, which ran in the May 2019 issue of SaskBroker Magazine. Click here to read the article.
Taxation of Insurance Products
No industry is likely to celebrate new taxes; but, where there is a public financial necessity, it is important they are implemented with complete consumer transparency.
There are two ways the Province may choose to collect tax on property and casualty (P&C) insurance: Through PST applied to premiums — the exemption for which was removed in 2017 — or through the longstanding Insurance Premiums Tax. Few are aware the latter already exists, adding up to 4% onto coverages, as it is built into the cost of the premium and is not visible to the consumer.
While IBAS remains concerned about the eroding affordability of insurance and its impact on coverage decisions, brokers commend the government for upholding the principle of transparency in the face of public pressure, repealing the PST exemption as opposed to adjusting upward the Insurance Premiums Tax.
Going forward, IBAS is prepared to work alongside policymakers in a proactive manner to analyze and better understand the impact that varying levels of taxation have on consumer insurance decisions, and the subsequent personal, business, and public exposure to risk.
Appropriate Activities of Motor Licence Issuers
It has long been IBAS’s position that the line between issuing and licensed insurance advice must be drawn and clearly defined. IBAS believes:
- It is essential that issuers have the ability to recommend customers talk to licensed brokers;
- Unlicensed issuers should not be allowed to recommend any particular coverage; and
- Licensed and under the oversight of the General Insurance Council of Saskatchewan (GICS), brokerages should be able to establish brokerage-wide policies and recommendations for clients, and their staff should be able to communicate those policies — by handing out brochures, displaying signage, or verbally directing customers to printed or electronic materials that clearly outline the brokerage position.
After months of discussion, in June 2018, GICS and IBAS mutually agreed upon a set of examples to help clarify what activities and statements are permitted by issuers, outlined in this chart.
Third-Party Auto Liability
Only half of Saskatchewan drivers carry third-party liability insurance beyond the $200,000 minimum that comes standard with basic plates. This is simply not enough to properly protect drivers — especially in accidents caused by themselves and their vehicles — and could leave them liable for out-of-pocket expenses to cover damage to property, physical injury or death to another person, or a victim’s loss or lost potential of income. By comparison: In B.C. and Manitoba, two other provinces with public auto insurance frameworks, more than nine in 10 drivers have liability protection of $1 million or more.
To help address this significant consumer and public risk, IBAS convened a 16-member Extended Auto Advisory Committee, which also included participation from SGI, as well as Saskatchewan Mutual Insurance and My Mutual Insurance — two other provincial carriers offering extended auto insurance. The result of this committee was a report outlining six recommendations, and five additional sub-recommendations, unanimously approved by both committee members and the IBAS Board of Directors.
IBAS strongly believes that these recommendations form an effective and reasonable pathway to ensure more Saskatchewan drivers are sufficiently insured, while maintaining the fundamental structures that make the province’s auto insurance framework so unique and strong. Click here to learn more or read the report.
Overland Flood Risk
Over the past several years, insurance providers have taken significant steps to improve the accessibility and affordability of overland flood coverage. There are also more tools available than ever before that property owners can leverage to mitigate their exposure to flood risk. These advancements have created the necessary conditions for Saskatchewan to begin to phase down its reliance on the government-administered Provincial Disaster Assistance Program (PDAP), and transfer more risk onto the private insurance market.
This, however, cannot be done in isolation, and will require extensive collaboration between the private sector and all three levels of government. First, stakeholders must properly define affordability and maintain provisions to protect those at highest risk. Second, there must be new mechanisms in place to control future development on high-risk land — or to shift the appropriate responsibility onto the permitting process. Third, these efforts must be integrated seamlessly into the Province’s water management strategy, with incentives for undertaking risk mitigation measures. And, finally, we must all do more to improve consumer education.
SGI Investment Powers
In April 2018, SGI CANADA announced it had converted a previous loan to acquire a $3 million, 15% equity stake in Alberta-based, tech-focused brokerage Nuera Insurance Inc. As a Crown corporation, this investment required special, one-off government approval. Since then, however, SGI CANADA has sought the introduction of new guidelines to allow for a permanent expansion of its powers to invest in the insurance marketplace.
Few sectors of the economy are changing at a pace similar in speed or magnitude to that of insurance. Consolidation has accelerated throughout the value chain, the buying experience is now increasingly digital, and the adoption of ‘smart’ new technologies like artificial intelligence is becoming a requisite for company survival.
For these reasons, IBAS believes it is imperative that SGI CANADA has access to the levers needed to keep pace with other Canadian insurers. This includes investing in out-of-province brokerages and other businesses that enhance SGI CANADA’s long-term competitiveness as an insurer partner and contribute to its profitability. Specifically, IBAS supports acquisitions made by SGI CANADA:
- Whereby SGI CANADA is not the largest equity partner;
- Whereby SGI CANADA holds a minority position only;
- That promote the independence of the broker channel;
- That are not in direct competition with Saskatchewan-based brokerages;
- That are in the best interest of insurance consumers;
- That are in the best interest of Saskatchewan taxpayers and businesses;
- That follow industry-accepted best practices for valuation; and
- That are disclosed to the public in a timely and transparent manner.
Just as these changes are necessary to protect the ongoing competitiveness of SGI CANADA; however, it is our concurrent position that SGI CANADA should be subject to the same rules as other insurers to foster a level playing field. IBAS’s support for expanded investment powers is conditional on this basic consumer and broker protection.
SGI Legislative Compliance
Recently, in an amendment to the SGI Act that passed along with The Insurance Act (hereinafter, the ‘Act’), SGI CANADA was exempted from compliance with the Act except as specified in regulations to the SGI Act.
IBAS shares the insurance industry’s belief that SGI CANADA’s operations must fully comply with the Act, other than those sections relating to financial and corporate oversight (generally, Part II and Part III). SGI CANADA’s policyholders and brokers in Saskatchewan should have:
- The same protection as its customers in other provinces, where SGI CANADA complies with very similar Act provisions;
- The same protection other insurers must give in areas of market conduct and fair practices;
- Policy provisions and statutory conditions identical to the minimums established in the Act for other insurers;
- Access to complaints resolution services provided by insurance industry mediators and regulating bodies; and
- Assurance that those selling its products are licensed and qualified.
We understand that SGI CANADA, for the most part, agrees with these concepts. IBAS, though, remains concerned about any exception to the basic consumer protections of the Act, as well as the general concept that an insurer may choose which portions of the Act it wishes to comply with.