On January 25, 2023, Alberta’s Superintendent of Insurance (Superintendent) issued two bulletins that insurers authorized to conduct automobile insurance business in Alberta should be aware of. The bulletins provide clarity regarding private passenger vehicle insurance, including certain limitations with respect to changing underwriting rules and premium payment plan offerings. This article outlines the details and implications for insurers raised by these interpretation bulletins.
What is a private passenger vehicle?
The Automobile Insurance Premiums Regulation, promulgated pursuant to the Insurance Act (Alberta) (the Act), defines a private passenger vehicle, with some exceptions, as follows: a motor vehicle with a curb weight of 4500 kg or less that are used for pleasure, driving to or from work or school, or business purposes, including farming operations.
Premium Payment Plans for private passenger vehicle insurance
The Superintendent clarified that private passenger vehicle insurers are prohibited from denying an applicant or insured the option to pay their annual automobile insurance premium in 12 or fewer installments (Premium Payment Plan), except in any one of the following circumstances:
- The applicant or insured had two or more cancellations for non-payment of private passenger vehicle automobile insurance premiums in the past 36 months;
- The contract insures an automobile that is not considered a private passenger vehicle;
- The contract insures five or more vehicles under common ownership or management;
- The total annual premium payable does not exceed $300; or
- As of January 25, 2023, the insurer does not offer a Premium Payment Plan to any private passenger customer and requires all premiums to be paid up front in full.
The Superintendent is of the view that the refusal to provide payment installments is an unfair, coercive or deceptive act or practice under the Act. This bulletin responds to affordability concerns by alleviating the financial burden on an applicant or insured to come up with the full amount required for an annual automobile insurance premium at the outset of a policy. The Superintendent acknowledged that an uneven playing field is created when a Premium Payment Plan is offered to some customers and not others. Further, if the insurer charges a fee for the Premium Payment Plan, such insurer must also charge all customers the same reasonable fee.
Alberta private passenger vehicle insurers prohibited from changing underwriting rules pertaining to Section C coverage
Private passenger vehicle insurers are prohibited from changing their respective underwriting rules with respect to Section C (collision and comprehensive) coverage, in place as of January 25, 2023. Although additional insurance coverage, including collision and comprehensive coverage, is not a legal requirement in Alberta to operate a motor vehicle, this coverage is usually contractually required by lenders and lessors when a vehicle is leased or financed. This new prohibition was driven by concerns expressed by the general public regarding challenges encountered when private passenger vehicle insurers denied insureds (i) the option to maintain additional coverage when renewing their respective insurance policies, or (ii) the ability to obtain additional coverage when purchasing insurance coverage for a new vehicle. Accordingly, the prohibition against changing the underwriting rules for this type of coverage is in place from January 25, 2023 to December 31, 2023.
Next steps and potential consequences for private passenger vehicle insurers
Effective January 25, 2023, an insurers’ failure to comply with the above-noted rules may result in a contravention of the Act, the consequences of which could include the following: (i) payment of an administrative penalty of up to CA$25,000 for each contravention, or (ii) if convicted of an offence, the payment of a fine of up to CA$200,000 (and if the offence is one of a continuing nature, each day will constitute a separate offence subject to a fine of up to CA$200,000 under the Act). Insurers are not, however, required to file underwriting rules or any changes with the Superintendent, except when specifically requested by the Superintendent.