Insurers’ audits of their brokers and agents must focus more on fair treatment of consumer [FTC] regulations, Canada’s insurance regulators say.
Insurers’ audits of their distribution partners in 2023 focussed too narrowly on the brokerages’ growth and financial numbers, the Canadian Council of Insurance Regulators (CCIR) found in its 2023 Statement on Market Conduct Public Report.
“In recent examinations of P&C [property and casualty] insurers, regulators found that insurer audits of intermediaries were focused primarily on financial and statistical accountabilities instead of FTC-related topics,” CCIR says in its report, released last week.
“Reviews and audits should include a focus on FTC and not simply on growth and profitability.”
CCIR reminded all insurers to conduct assessments of any practices delegated to intermediaries, allowing for the size, structure, and complexity of the brokerage operations. The regulator added insurers should expect to have their supervision practices — including the reviews and audits they conduct with the broker partners — to be reviewed during regulatory examinations.
“This is especially important in light of continuing agent growth,” CCIR said in its report.
CCIR’s report also notes examples of misalignment between what some insurers are saying they are doing about fair treatment of customers and what they are actually doing.
“CCIR has found misalignment between responses submitted on the ASMC [Annual Statement of Market Conduct] and practices observed during examinations of some insurers,” the CCIR’s report reads.
“For example, one recent examination found that an insurer reported it had a stand-alone FTC policy and a documented code that incorporates FTC principles, however, in practice was found to have only a code of ethics and no other documents that would have demonstrated a consumer-centric focus.”
Insurers should be prepared to prove what they are reporting in the ASMC accurately reflects their individual FTC practices, CCIR cautions.
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The report also contains data regarding consumer complaints.
Consumer complaints in 2023 focused mainly on claims handling, CCIR data show. There were 4,022 consumer complaints about claims handling in 2023, a 30% increase over the 3,084 such complaints in 2022. There were 2,968 claims complaints in 2021.
CCIR’s findings note many complaints relate to how long it takes to handle the claim.
“One specific point of note is when looking at the total number of claims closed or denied, collected data shows for large property insurers, 21.4% of all claims reported took over 180 days to be closed or denied, compared to the industry average of 9.7%,” the CCIR states in its report. “CCIR has noted in reviews that delays in claims handling continue to be a noted issue within the industry.”
On average, it takes auto insurers 148 days to send a final cheque to the insured after the claim is made. For property insurers, it takes an average of 157 days to issue the final payment.
“[It] should be emphasized these industry averages are not to be construed as benchmarks to be measured against,” says CCIR’s report. “Insurers are reminded to adhere to the expectation that customer claims should be handled in a timely and fair manner and to respect additional specific regulatory requirements on this matter, where applicable.”
Feature image courtesy of iStock.com/Chainarong Prasertthai
