Every renewal period, your insurance company must determine if they are willing to renew your policy. While some people believe that renewal is completely up to them, that’s not the case. Insurance renewal is a two-way street, and both parties have equal say. If you’re happy with your insurance, having them decline to renew can be a shock. There are many reasons why your insurance renewal was denied. If it happens, knowing how to handle it will help you get a new insurer as quickly as possible.
Underwriting rules
Underwriting rules are the reasons an insurer can non-renew or decline to issue you an insurance policy, coverage or endorsement. When shopping for or renewing auto insurance, you should know the insurance company’s underwriting rules.
Possible reasons why your insurance renewal was denied
When you come up for renewal, your insurance company has a decision to make. If you’ve been a model client and there have been no major changes in the last year, they will almost certainly renew your policy. But, if there is new information or circumstances, then your insurance renewal may be denied. While underwriting rules differ from company to company, these are some of the more common rules:
1. Making too many claims
Making a significant number of claims in a short period of time puts your renewal at risk. Insurance companies try to balance risk with premiums. As such, when you make too many claims (despite them being necessary), it puts you on the path for denied insurance renewal. Many claims may also classify you as a high-risk driver.
2. Suspended driver’s license
Provinces and territories in Canada can suspend and revoke licenses for many reasons. If you are caught driving under the influence of drugs or alcohol, you’ve racked up too many tickets, or you’ve exceeded a certain number of demerit points, the provincial government may revoke your driver’s license. If this happens, your insurance company may cancel your auto insurance policy.
3. Failure to pay (Non-Payment)
Failing to pay for your insurance is a major issue. Even if you miss a payment by a day, your insurance company may decide to not renew your insurance. Failing to pay can also impact your insurance premiums with other insurers. Make sure that you pay on-time, or even in advance, to ensure that non-payment isn’t a reason your insurance company declines your renewal.
4. At-fault accidents
If you have been in one or more accidents where you are determined to be at-fault, your insurance company may decline your insurance renewal. At-fault accidents are a major reason why an insurer will typically walk away. They can also put you in the high-risk insurance category, a type of insurance that costs significantly more for riskier drivers.
Underwriting rules must be filed and approved by Financial Services Regulatory Authority of Ontario (FSRA). Once reviewed and approved, insurance companies may not use other rules to deny you coverage.
5. Change in situation
A change in situation, also known as a material change in risk, may cause an insurance provider to cancel your policy. For example, if you are diagnosed with a medical condition that makes it dangerous to drive, your insurer may be within its rights to cancel your policy.
6. Misrepresentation
Misrepresentation is another reason that an auto insurance company can cancel your policy. If you are not truthful when you apply for car insurance, and the company finds out, your policy can be voided. Some of the more common examples include:
- Failing to tell your insurer that you use your vehicle for both personal and commercial reasons (perhaps you are an Uber Eats driver on the side)
- Not listing the additional people in your family who will be driving the vehicle.
Non-disclosure or lies of omission also count as misrepresentation. If you didn’t tell the whole truth when you filled out your application or filed a claim with your insurance company, the insurer could cancel your policy.
7. Fraud
Committing auto insurance fraud is one reason an insurance provider could cancel your policy. Examples of insurance fraud are filing fraudulent claims or lying about how a loss occurred. To avoid having your insurer cancel your policy due to fraud, always be honest with your isure representative and insurance company.
Cancellation vs. Non-Renewal
There are a few key differences between cancellations and a non-renewal of your policy. While the outcome of each is the same, there are some differences : your existing insurance policy with that company will no longer be valid. Non-renewals occur at the end of the policy term, whereas cancellations can occur at any point during the policy term. Specifically, non-renewals are when a policy is due for renewal and the insurance company decides not to continue the policy after its expiration date. The reasons for non-renewal can be similar to cancellations, ranging from non-payment and fraud to misrepresentation on an application or a change in situation.
What to do if your insurance renewal is denied
If your current insurer denies your insurance renewal, the first thing you need to do is find out why. Having insight into the reasons why they reject you will help you address them. According to FSRA, if your insurance company refuses to sell or renew your insurance policy, the company must advise you in writing of which rule (or rules) it used to deny coverage. Knowing you had a late payment is much different than having made too many claims in a year. Once you know the reason, you can proceed to obtaining new insurance.
Please refer to the Compulsory Automobile Insurance Act, R.S.O. 1990, c. C.25 for details about reasons why your insurance renewal was denied.
Compliance with the Insurance Act
Underwriting rules that do not comply with the Insurance Act or the regulations, such as those contrary to public policy, are prohibited. These include rules which deny insurance to individuals based on such factors as:
- Credit history
- Physical or mental disability
- Where you live or the location of the vehicle
- Whether you are newly-licensed or a driver new to Canada
FSRA’s All-Comer’s Rule
The Insurance Companies Act is the primary legislation governing all federally-incorporated or registered insurance companies in Canada. The purpose of the rule is to ensure no motorist can be denied coverage, requiring all auto insurers in the province to include all classes of risk in their underwriting rules and pricing. These consumer protection features comprise Ontario’s “Take-All-Comers” rule.
A delay in providing a quote is effectively declining coverage, and can only be declined based on criteria listed in the insurer’s approved underwriting rules on file with FSRA.
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