The creation of a new regulatory for the insurance industry in Ontario has been mooted, but can this new body help to lower auto insurance premiums in the province, or will it merely add to the feeling of over regulation in Canada’s most populated region.
The Ontario Ministry of Finance recommend a new regulatory body that will work as “integrated regulator of financial services with distinct market conduct, pensions and prudential regulatory functions; operating independently of each other, but in a coordinated and consistent manner.”
The ministry suggested the creation of “Financial Services Regulatory Authority” during a review of the mandates carried out by the Financial Services Commission of Ontario. The FSCO is limited by the Ontario Public Service the review found, while a study of 45 organizations showed that new regulatory approaches may be needed.
The review discusses whether the FSCO is fulfilling its current mandates sufficiently, and whether the agency still plays a significant role in regulating the Ontario auto insurance industry and other financial institutions. After reviewing whether the FSCO will need new regulations or to revamp its current structure, the OMF concluded that new regulatory measures are necessary.
“Throughout our consultation process we heard similar messages,” the authors wrote. “Many feel that there are material shortcomings in the mandates, regulatory approach, operational resources, tools and capacity.”
“We observe the perception that the Ontario regulatory regime is not as effective as it could or should be,” the report said. “These agencies should have the mandate and authority to work closely with the financial services sector and with ‘sister’ agencies in other provinces to encourage the development of a vibrant and safe financial sector and to better ensure that consumers have a consistently high level of service and protection, without burdening market participants with undue regulatory costs or complexity.”
Other recommendations include:
• That the FST should be separated from, and operationally and financially independent of, the proposed Financial Services Regulatory Authority (FSRA);
• In order to remain relevant and flexible, the mandate of the agency should include a commitment to encourage innovation and transparency within the regulated sectors;
• The FSRA should be given authority over, and responsibility for, the oversight of any self-regulatory body operating within the financial services sector in Ontario (not otherwise overseen by another statutory body);
• The government should give “serious consideration” to transferring responsibility for oversight of all relevant participants in the Ontario financial sector, such as payday lenders and loan brokers, consumer credit reporting agencies, debt and credit counsellors, and guarantee and warranty insurers to FSRA from the Ministry of Government and Consumer Services;
• Regulatory oversight of the Cooperatives sector should be transferred from FSCO to an agency or entity other than the FSRA;
• The administration and funding of the Motor Vehicle Accident Claims Fund should be transferred from FSCO to the industry operated facility association; and
• Consideration should be given to an expanded mandate for FSRA to include the establishment and oversight of a fraud compensation fund.
The Insurance Bureau of Canada said that it welcomes the findings by the Ontario Ministry of Finance and said that the auto insurance industry in the province has been in need of an overhaul at a regulatory level. However, consumers may be worried that yet another regulation oriented body is being put in place, but very little will actually be done to help lower insurance premiums and deal with rife insurance fraud.
A major factor for Ontario’s high auto insurance costs is attributed to over regulation that has been described as stifling while getting very little done. While the OMF’s recommendation for the FSCO to adopt new regulatory measures may just add more rules, if the result of the review is a streamlining of methods and solving issues, then the new regulations could help.