Government Restrictions On Insurance Company Underwriting For Auto Insurance

On June 1, 2005 the Financial Service Commission Of Ontario (FSCO) regulated that insurance companies can NOT terminate your auto insurance policy based on your credit history.

The additional checks which the government has restricted insurance companies from doing can be viewed by clicking on the link below:

Risk Classification and Underwriting Criteria, Non-Payment

Terminations, and Fee Filing Guideline

One of the best ways to reduce the cost of any insurance policy is to search around for a better rate. While switching companies to save money is desirable, what happens if your policy is cancelled unwillingly?

Who’s Canceling or Non-renewing YOU?

If your auto insurance policy is being cancelled or non-renewed, you should find out if it was done by your "broker" or your "insurance company". Often times, a cancelled policy is a result of the broker’s action, and not the company itself. This could lead to a lot of confusion when consumers try to change company but realized that it was in fact not cancelled.

If the cancellation is initiated by your broker, it means that you are still insured by your insurance company, and all you need to do is find another broker that represents your insurance company. To do that, simply call your insurance company and ask them for the name of one of their brokers closest to where you live. Your insurance broker does not need a reason to non-renew you. The reason may simply be that they no longer do business with your insurance company and needs to place you with another insurance company.

If you are being cancelled by your insurance company you will receive a letter by registered mail outlining the reason why. All insurance companies must file their conditions for cancellation with the government and the government must approve them, otherwise they cannot cancel your policy.

This applies to auto insurance only, as home insurance is different. Companies do not need a reason to not cover you anymore, and may use your credit history as a cause.

Reasons for company cancelled policy

If you are paying monthly, your previous insurance company may access your account for one last payment or partial payment. Failure to make that payment will result in your policy being labeled "cancelled for non-payment of premium", which will affect your insurance rate with the new company.

Your insurance company can cancel your policy for misrepresentation, like not telling the truth, or for any violation of the "statutory conditions". These conditions are clearly outlined in your policy. Here’s a copy of the insurance policy.  Some cancellation conditions include NOT notifying your insurance company about:

- new drivers in your household

- change in the use of your vehicle or the distance you commute to work

- driving or allowing your car to be used for racing

- driving or allowing your car to be driven while the driver is impaired

Companies’ individual reasons

Companies can also cancel for reasons that are not explicitly stated in your policy. All insurance companies have their own rules, which have been approved by the provincial government. Below are some examples of what these may be:

Your driving record can trigger a cancellation or non-renewal for the following:

- two at fault accidents in six years

- one at fault accident and two or more tickets

- three tickets (combination of minor and major)

- a driving-related Criminal Code conviction

- a "major" ticket, such as passing a school bus when not allowed to do so

- a combination of an accident, ticket, or cancellation of policy in the last 3 years for a non-payment of premium

- two "minor" tickets where the driver has been licenced less than four years

Here are some other examples, not related to ticketing:

- driving your car out of province for over 30 days

- your car being driven by an excluded or unlicenced driver

- if a driver has been convicted of insurance fraud

- making a false statement in a claim

Which Conditions Can Cancel Me?

Ask your agent or broker which conditions your insurance company can use to cancel you. If you get cancelled, you will be driven to a high risk insurance company, and your rate may skyrocket.  If your policy has been in force for less than 60 days, the insurance company can only cancel your policy if the reason has been filed with the provincial government. After 60 days, they can cancel you for non-payment, not notifying them of a change of risk, giving false information, or not giving all information required.

How will I find out?

As mentioned before, the insurance company must cancel you by hand-delivering a note giving you five days cancellation notice. It may also mail you a notice of cancellation, giving you 15 days notice. The 15 days start on the day after the notice has been received by the post office which delivers your mail. Even if the letter doesn’t get to you, their responsibility ends at the step of sending the mail to your last known address.

It’s important to ask the company if you are ever unsure about the impact of any event on your policy. As always, if you are unsatisfied with your current policy, don’t hesitate to look around at /car-insurance-quotes/