Brokers who hear about New Jersey’s auto insurance system in 2003 may be able to relate: the state’s former insurance commissioner describes it as “expensive, vulnerable to abuse, excessively complex and overburdened with well-intended rules and regulations that didn’t help anyone” for a recent edition of The Globe and Mail.
Holly Bakke recently presented to an expert panel about the Financial Services Commission of Ontario (FSCO) and suggested that the organization undergo an “overhaul” driven by smarter regulations that provide consumers with a greater degree of choice.
“It worked because we put the consumer at the centre of everything we tried to accomplish,” she writes.
In particular, she asserts that the process of lowering auto insurance premiums should be quicker than six months, which will encourage insurance carriers to be more competitive in gaining new consumers.
While one veteran broker agrees that FSCO needs reformed, he wishes Bakke would outline a proposal or actionable strategies that will allow it to do so.
“I’m not sure if what she says can work or not,” said Paul Armstrong, partner, Paul C. Armstrong Insurance. “I think we have some internal problems that have to be addressed as a problem first.”
Armstrong stands by Bakke’s call to prioritize consumers, but says it’s a much more complicated and nuanced idea than she portrays.
“The complications that exist within our industry is that you have insurers trying to get bigger pieces of the pie through different methods of distribution, and that leaves a hole for brokers trying to get along and tell consumers we don’t have that company because we’re married to XYZ company,” he said. “I’ve been repeating the same thing for years: we have to fix the distribution system and not say no to a consumer.”
He feels that the government can encourage competition by mandating that all insurers have to accept applications submitted by a consumer or through a broker, “…but you have to fix the internal problems such as excessive payments for claims, complications for claims and fraud, and you can’t tell me that doesn’t exist in New Jersey.”
Armstrong says he will be open to considering Bakke’s specific ideas, but until then, her plan is merely broad and speculative.
“What she’s saying sounds very positive, but we have to know more before we can analyze whether it will work or not.”
