After consultations with the Canadian Trucking Alliance, commercial writers and brokers, the Facility Association (FA) announced measures to curb fraudulent insurance practices in the trucking industry.
FA announced a new ‘rating matrix’ aimed at restricting the carriers from misregistering commercial vehicles in an attempt to avoid market rates. Since 2019, there has been an increasing number of truck owners/operators who have been registering vehicles in one province and operating primarily in another to obtain a lower premium, says FA. The new matrix allows FA to apply a surcharge or a reduction based on the jurisdiction where the vehicle is mainly operating.
FA has received approval from several provinces to implement the new matrix and is optimistic the rating matrix will be approved in all jurisdictions it operates.
“For the past couple of years, we have seen a shift in the concentration of inter-urban trucks from Ontario to Alberta and the Atlantic provinces. It has become apparent that some of these operators are taking advantage of the system at the expense of local operators, and we needed to address this issue,” said Fadia Charbine, Vice President, Underwriting, Claims & Operations. “This behaviour is having a detrimental impact on honest, hard-working truck drivers playing by the rules and operating in their jurisdiction of registration and they’re ending up subsidizing the actions of a few bad actors. That’s why we are introducing a rating matrix to ensure adequate rating for the exposure(s) at hand.”
Here is how it will work:
All operators are required to provide information through various reports such as the International Fuel Tax Agreement (IFTA), which must be submitted at new business and renewal, and these reports will show where the vehicle is operating mainly. Effective October 1, 2022, if it is determined the vehicle is operating predominantly in a jurisdiction other than where it is registered, a surcharge will be applied to the policy, to bring the premium in line with the risk for that jurisdiction. The surcharge, which will range between 15% and 420%, depending on the jurisdiction, will apply to third party liability. Conversely, if the vehicle is operating in a jurisdiction of a lesser exposure than the jurisdiction of registration, a discount will be applied to the third-party liability coverage.
“If a vehicle is registered in one province, but mainly operating in another and there is a claim, the regulations where the claim occurred may take precedence. As a result, it degrades the overall loss experience on all trucks where the vehicle is registered and drives up premiums in that jurisdiction,” added Charbine.
FA began working with the Canadian Trucking Alliance, commercial writers and brokers to identify a series of measures and rules with the intent of curbing this practice, as well as curb the growth that FA was experiencing in this class of business. In 2021, FA introduced several new requirements for additional documentation for commercial vehicles including Fuel Tax Reports, National Safety Code (NSC) Profile information and U.S. Federal Motor Carrier Safety Administration (FMCSA) Reports.
These were the first steps FA took to help determine where a trucking risk is mainly operating, with the intent of reducing the underreporting of out-of-province and U.S. exposure, says FA.