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Be
on guard over sudden premium hikes JAMES
DAW
But the husband, a former
auto insurance broker, knew something was not right. There was no way they should
be forced to switch to a costly specialist in sub-standard risks after
his wife's first accident in 23 years and one traffic ticket related to
the accident. So he complained to both
their broker and their insurer — a step that more drivers may have to take
these days. Consumers should be on guard
because brokers are coming under pressure to get rid of unprofitable clients.
In some cases, clients may still qualify for renewal under rules that their
insurer has filed with provincial regulators. Yet their broker may only
offer them a switch to a more expensive company. There
are steps a consumer can take to avoid being cancelled against the rules,
and to avoid insurers that have unduly harsh rules for treating unlucky
clients. First, though, why is now
a time to ask more questions? The answer is that insurers have seen their
profits plummet and they are putting subtle pressure on brokers to help
them get out of a financial mess. The cost of settling claims
has risen more than expected, while investment returns have fallen. Some insurers are cancelling
contracts with brokers who have an unprofitable block of clients. Others
are holding the threat of cancellation over the heads of brokers to get
them to slough off their unprofitable clients. This is unfair to the brokers,
but while there are laws to protect consumers in their relationship with
insurance companies, brokers' relations with insurance companies are
a matter of contract law. So the brokers may ask clients to go elsewhere,
even to another broker with the same insurer. Or they may send out an offer
to renew with another insurer at a much higher rate without explaining
why. Those consumers who do not
protest may be unjustifiably affected. Ann Bythell, They also should ask the
broker to supply a copy of the underwriting rules that the insurer filed
with the Financial Services Commission of Ontario. Each company will have
a lengthy list of rules that may differ from those of other insurers. So
it's also a good idea to investigate these rules before you switch insurers.
Your broker or agent should supply this information. You should ask what criteria
the company has that will result in an increase in premiums, a reduction
in coverage, a loss of coverage on short notice or the denial of a renewal.
Investigate how these rules vary among the companies you are considering. The
The couple in Bythell
points out that a consumer who is being denied a renewal for a breach of
the underwriting rules should receive written notice from the insurer.
"A broker cannot terminate an insurance policy," she said. "Insurers must follow their
own underwriting rules," Bythell added.
"They don't have discretion. This is to make sure the market is stable,
and the insurers do not discriminate from one person to another." If it's only the broker
trying to get you to move insurers, call the insurer and ask for the names
of other brokers in your area. Randy Carroll, director
of operations at the Independent Brokers Association of Ontario, says he
would be disappointed if an insurer refused to supply the names of other
brokers. Consumers
who cannot work things out with the insurer, or the insurer's internal
ombudsman, should write the Insurance Ombudsman, Financial Services Commission
of Ontario, James Daw,
CFP, appears Tuesday, Thursday and Saturday. He can be reached at Business,
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Failure
to disclose any required fact when applying for a new policy, or any misrepresentation
of facts in the past three years.