Alberta Superintendent of Insurance Releases Two Interpretation Bulletins Regarding Private Passenger Vehicles: What Motor Insurers Should Know [Boss Insurance]

Alberta Superintendent of Insurance Releases Two Interpretation Bulletins Regarding Private Passenger Vehicles: What Motor Insurers Should Know

On January 25, 2023, the Alberta Superintendent of Insurance (the Superintendent) issued two bulletins that insurers licensed to carry on auto insurance business in Alberta should be aware of. The bulletins provide clarifications on passenger vehicle insurance, including certain limitations on changing underwriting rules and offering premium payment plans. This article presents the details and implications for insurers raised by these interpretation bulletins.

What is a Private Touring Vehicle?

THE Regulation respecting automobile insurance premiumspromulgated under the Insurance Law (Alberta) (the Act), defines a private passenger vehicle, with certain exceptions, as follows: a motor vehicle with an unladen weight of 4,500 kg or less that is used for pleasure, to travel to work or school or for business purposes, including farms.

Premium payment plans for passenger vehicle insurance

The Superintendent clarified that private passenger vehicle insurers are prohibited from denying an applicant or insured the ability to pay their annual auto insurance premium in 12 installments or less (premium payment plan), except in one of the following circumstances:

  1. The claimant or the insured has had two or more cancellations for non-payment of passenger vehicle automobile insurance premiums in the last 36 months;
  2. The policy insures an automobile that is not considered a passenger vehicle;
  3. The policy insures five or more vehicles under common ownership or management;
  4. The total annual premium payable does not exceed $300; Or
  5. As of January 25, 2023, the insurer does not offer any premium payment plan to any private passenger customers and requires all premiums to be prepaid in full.

The Superintendent is of the opinion that the refusal to provide installment payments is an unfair, coercive or deceptive act or practice under the Act. This bulletin addresses affordability concerns by easing the financial burden of a claimant or insured who must provide the full amount required for an annual auto insurance premium at the start of a policy. The superintendent acknowledged that a level playing field is created when a premium payment plan is offered to some customers and not to others. In addition, if the insurer charges a fee for the premium payment plan, that insurer must also charge all customers the same reasonable fees.

Alberta Private Passenger Vehicle Insurers Prohibited From Amending Section C Coverage Underwriting Rules

Private passenger vehicle insurers are prohibited from changing their respective underwriting rules with respect to Section C (Collision and Property and Casualty), effective January 25, 2023. Although additional insurance coverage, including Collision and Property and Casualty, while not a legal requirement in Alberta to operate a motor vehicle, this coverage is generally required contractually by lenders and lessors when a vehicle is leased or financed. This new ban was prompted by concerns expressed by the general public about the difficulties encountered when private passenger vehicle insurers denied policyholders (i) the ability to maintain additional cover when renewing their respective insurance policies , or (ii) the ability to obtain additional coverage when purchasing insurance coverage for a new vehicle. Thus, the ban on modifying the subscription rules for this type of guarantee is in force from January 25, 2023 to December 31, 2023.

Next steps and potential consequences for passenger vehicle insurers

As of January 25, 2023, failure by insurers to comply with the above rules may result in a violation of the Act, the consequences of which could include the following: (i) payment of an administrative penalty of up to 25 CA$000 for each violation, or (ii) if convicted of a violation, payment of a fine of up to CA$200,000 (and if the violation is of a continuing nature, each day will constitute a separate offense punishable by a fine of up to CA$200,000 under the Act). Insurers are not, however, required to file underwriting rules or any amendments with the Superintendent, unless specifically requested by the Superintendent.