In order to enhance consumer confidence in how insurance companies handle automobile accident benefit and bodily injury claims, FSCO has been working to ensure that insurance companies are treating claimants fairly by complying with the Statutory Accident Benefits Schedule (SABS), a regulation under the Insurance Act.  Historically, FSCO performed transactional audit reviews of randomly selected individual claims files to ensure automobile insurance companies were complying with SABS.  This transaction-based approach proved to be limited in scope and costly.

FSCO developed a risk-based market conduct assessment questionnaire focusing on the SABS.  The questionnaire examined the governance and internal controls that influence the way automobile insurance companies deal with claimants, customers and the public in general.

This new approach proved to be beneficial to:

• Insurance Claimants: This approach was designed to determine whether there was a system in place to ensure that there are reasonable and fair practices that govern the handling of claims in accordance with regulations and best practices.  In addition, it ensures that there are mechanisms within the companies to improve or change their systems and practices when problems arise.

• The Insurance Industry: Transaction-based audits were costly and time consuming for the insurance industry.  In addition, it focused on transactions that had already taken place.  The new approach allowed companies to reduce cost while ensuring that there were systems in place to handle SABS claims according to good corporate governance and insurance regulations.

• FSCO: It focused FSCO’s compliance efforts by directing regulatory resources to higher risk companies and the higher risk areas of their operations. 

FSCO tested the newly developed risk-based market conduct assessment questionnaire in 2005 and in 2006 used it to perform assessments of the automobile insurance companies’ compliance with SABS.  Information collected as a result of these assessments is retained by FSCO and protected under the Insurance Act and the FSCO Act and requests for this information are subject to the Freedom of Information and Protection of Privacy Act.

FSCO analyzed the companies’ responses to the questionnaire.  Based upon our assessment of each company’s risk of not complying with SABS regulation FSCO then visited the companies to verify their responses.  FSCO identified areas where companies’ procedures could be improved and required companies to make these changes.

The SABS risk-based market conduct review was completed in December 2006.  FSCO found that most automobile insurance companies have sufficient SABS related governance and internal controls.  The results cannot provide a guarantee that all companies would be complying with SABS at all times.  However, the results allowed FSCO to identify higher risk companies that may require further attention.  Overall, FSCO gained greater confidence that most companies representing the majority of the market share were complying with SABS. As noted, FSCO identified areas where some companies' procedures could be improved and required the companies to make these changes.

The success of the SABS risk-based market conduct review encourages FSCO to extend this risk-assessment technique to other areas.

• Statutory Accident Benefits Schedule (SABS) Risk-Based Market Conduct Assessment Report