The Insurance Bureau of Canada is using the Ontario government’s invitation for proposals to cut regulations as an opportunity to lobby for technological advances in insurer-client relationships. IBC suggests the changes do not create additional risk for consumers. The insurance bar, while acknowledging the necessity to move with the times, is counselling caution in areas where privacy and security are at stake.
“There are opportunities to use technology in Ontario in terms of adjusting practice,” says Pete Karageorgos, director of consumer and industry relations for Ontario at IBC. “People are using smartphones to pay bills and buy coffee. We are looking at new ways to leverage technology that is used in day-to-day life.”
The Ontario government’s Red Tape Challenge is part of the Business Growth Initiative. According to provincial news releases, it aims to reshape Ontario’s economy to reflect “rapid changes in technology and globalization” and to “leverage Ontario’s highly skilled workforce to compete through innovation.”
IBC participated in the consultation period this past winter for the financial services sector, and a final report will be available on July 31.
David Derfel of Derfel Injury Law in Toronto has no concern about the exchange of information by electronic means.
“That’s the nature of commerce today,” he says. “It’s becoming paperless and cloudless. We live in a digital world.”
The Red Tape Challenge is soliciting suggestions on how to improve regulations in six specific sectors in order to save businesses time and money and to better protect consumers, employees and the environment. The resulting action plans will then be combined into a government-wide plan to address red tape for each sector.
“The insurance industry would like to be more in line with current practices, especially with respect to technology,” says Karageorgos. “Insurance is very heavily regulated, especially in Ontario. By allowing more freedom we can meet consumers’ needs and increase competition and consumer satisfaction.”
The IBC submission contains seven recommendations, which it says the government can implement without creating additional risk for consumers. Proposals include electronic communication, digital service of applications, forms and termination notices and electronic proof of insurance, as well as smartphone apps, usage-based insurance pricing and customer loyalty programs.
The first recommendation asks for an amendment to the Insurance Act to state explicitly that all insurance transactions can be completed electronically if the consumer consents. The second asks FSCO to amend its forms to include data collection and consents so that consumers can enter into contracts and deliver and/or receive information electronically.
Elisabeth van Rensburg is an associate at Will Davidson LLP, a dual practice representing insurers and insured parties, based in Oakville, Ont. “In my experience, a lot of insurers have already started moving towards digital communication, as much as they are permitted,” she says. “Most of my communications with adjusters is done via email.”
In relation to contracts and notices of termination, she is not so sanguine.
“As someone representing insureds, I’m concerned if they are not getting proper notice,” says van Rensburg.
“Email would need different rules to ensure there’s no dispute when the document is received. There will be issues arising if, say, the insurer has an outdated email address or the customer did not check their email or there is an issue with Internet connection. It doesn’t save money or cut costs if it leads to an increase in litigation and disputes.”
Van Rensburg says she thinks the industry wants to modernize, but it’s facing hurdles.
“Other businesses are going that way and other jurisdictions as well. But when purporting to deal with terminations, applications for insurance and disputes between insurers, service is usually required to be by registered mail or in person,” she says. “This requirement reflects the seriousness and importance of communications between insurers and the insured.”
Derfel is not so concerned with technological change in the industry, as long as proper procedures are in place.
“Registered mail is a fairly antiquated means of serving documents and people don’t necessarily get them. If I’m going to contact someone directly, contacting them electronically is a very expeditious way of doing it.”
Derfel does propose some safeguards if the change is made. “If insurance companies are going to serve their customers electronically, they need a mechanism to confirm receipt.”
When it comes to cancellation of policies, Derfel remains “old school.”
“It is crucial to be properly served,” he says. “The insurance industry needs to go above and beyond.”
Another recommendation in the IBC submission that causes the insurance bar some concern is the proposal to use apps to purchase insurance online.
“One problem with online [communications] is whether people are being fully informed of all the coverages,” states Derfel. “They may not read the fine print or be fully aware of what’s available. There need to be measures to ensure they really know what they’re getting and what they might be giving up.”
Derfel stresses that “insurance is a very, very important thing.”
“People are trying to protect their home, their life or their family,” he says.
“God forbid something happens and they find out they clicked on the wrong thing or didn’t answer questions properly.”
Derfel prefers that people call their broker and have all the options explained.
“Live human interaction has its advantages,” he says. “An individual will want to answer questions properly and the broker will want the person to be fully informed.”
Van Rensburg says some insurers in the United States have very sophisticated online tools.
“They can do everything to get a quote or pay a premium or report a loss. It involves sharing very sensitive personal information,” she says.
“Clients might find it easier to deal with, but I’d be telling them that they need to be very in tune to privacy concerns and what information they are making available.”
There are also security concerns over the recommendation that e-signatures be allowed.
“I’m not comfortable as far as e-signatures go,” says Derfel.
“In my practice, every signature is in person.”
Van Rensburg cautions that with e-signatures it can be hard to validate who signed a document, and it can be hard for an insured person to prove he or she did not sign it.
“If there is a dispute, there needs to be a presumption that it’s not their signature,” she says.
One recommendation that is met enthusiastically by both lawyers is the proposal for FSCO to allow the use of electronic proof of auto insurance.
“That would be welcomed by my clients,” predicts van Rensburg. “I don’t see that as risky, and if you’ve lost your proof of insurance or you’re not in your own vehicle and need to present it, that would be welcome.”
Derfel goes further and calls the idea “absolutely wonderful.”
“Electronic proof of insurance is a great idea,” he says.
“Our phones are becoming our wallets. It will stop those awkward times when you’re charged with failure to produce proof of insurance even though you have insurance. What’s the one thing nobody leaves home without? Their phone.”
Other recommendations involve changing regulations to allow usage-based pricing models — where a usage system in the car records driving habits — regulations to allow loyalty programs and the encouragement of risk-mitigation strategies.
The IBC would also like the ability to make marginal changes in prices, rather than engage with the full price approval process every time.
“Insurance is sold by private corporations, but it exists for the public good,” stresses Derfel. “If the government implements these changes, it must be for the public interest. It can be done carefully so long as the public is looked after, not taken advantage of.”