Alberta weighs in on insurer renewal responsibilities

Insurers who terminate contracts with brokers — and then refuse to renew private passenger vehicle (PPV) insurance policies for existing Alberta customers who switch brokers to maintain their coverage — may be in violation of sections of the province’s Insurance Act.

A Jun. 30 bulletin from Alberta’s Superintendent of Insurance says ‘adverse contractual action provisions’ under the Act apply when a contract is terminated between an insurer and a broker.

Specifically, if an insurer refuses to renew a customer’s PPV insurance because it no longer does business with that customer’s broker, “this constitutes an adverse contractual action under section 555(1)(d) of the Act and is therefore contrary to section 555(3) of the Act,” the bulletin states.

In other words, if an insured wants to “renew their policy with their existing insurer through a different broker, the insurer must treat the policy as a renewal, and not as a new policy.” The requirement applies to all PPV policies in Alberta, whether or not the insured meets the province’s threshold of qualifying as ‘good driver’ under Ministerial Order 24/2024.

Related: Does Alberta’s auto insurance rate cap reward bad drivers?

The bulletin specifies two practices that run counter to Alberta’s insurance legislation in cases in which an insured requests a PPV insurance policy renewal with the same insurer via a different broker:

• If the insurer charges a premium that is greater than what the renewal premium would have been (including, if applicable, the ‘good driver’ rate protection), this constitutes premium overcharging contrary to section 602(1) of the Act.

• If the insurer offers more restrictive coverage than what would have been provided upon renewal, this constitutes an unfair act or practice contrary to section 509(1) of the Act.

Alberta’s insurance superintendent says the action was taken because of evidence some insurers were refusing to renew PPV coverage with different authorized brokers after terminating business contracts with a client’s existing broker.

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“Instead, they treat the insured as new business rather than as a renewal,” the bulletin says. “As a result, these insurers refuse to apply ‘good driver’ premium protections and/or offer coverage that is more restrictive than what would have been provided under a renewal.”

The purpose of the bulletin is “to ensure the application of appropriate premiums and to ensure consistent fair treatment for affected customers.”

Intended outcomes

The superintendent’s bulletin says it’s expected that an insured trying to renew a vehicle policy with the same insurer, but through a different broker, will be treated as a renewing customer. As such, any applicable premium protections will be honoured and the coverage options must be consistent with what’s available during a policy renewal.

“In other words, when an insured actively requests a renewal offer through a new broker, the insured must be offered, at a minimum, the premium and coverage they would have been offered had the renewal proceeded with their original broker,” the bulletin says.

“If there are insurer/broker system constraints that hamper the implementation of these expectations, the insurer must manually override them.”

The superintendent also acknowledges some insurer or broker systems can’t retain the same policy number when renewing a policy through a different broker. If that happens, it’s permissible to change the policy number.

The bulletin outlines a non-compliance administrative penalty of $25,000 for each incident in which the superintendent believes an insurer contravened specific sections of the Insurance Act – 509(1), 555(3) and 602(1). Alternatively, the bulletin notes that under section 780 of the Act, insurers that contravene sections those three sections are guilty of an offence and may be prosecuted. Insurers that are convicted are subject to fines of up to $200,000 under section 786 of the Act – and if contravention continues, each day or part of a day constitutes a separate offence.

Phil Porado

Phil, an award-winning journalist with over 30 years of experience in financial topics, has been managing editor of Canadian Underwriter for more than three years.