Cease and Desist Order Against State Farm Mutual Automobile Insurance

REGARDING the Insurance Act, R.S.O. 1990,
Chapter I.8, as amended, in particular section 441.

AND REGARDING State Farm Mutual Automobile Insurance Company.

CEASE AND DESIST ORDER

On December 8, 2005, the Superintendent of Financial Services ("Superintendent") issued a Notice of Proposed Cease and Desist Order as he was of the opinion that State Farm Mutual Automobile Insurance Company ("State Farm") committed an unfair or deceptive act or practice by charging rates for coverages or categories of automobile insurance that were not approved by the Superintendent.

On December 8, 2005, State Farm was served with a copy of the Notice of Proposed Cease and Desist Order. The Insurance Act ("the Act") provides that within 15 days after receiving the Notice, a person may request a hearing before the Financial Services Tribunal. In a letter dated December 8, 2005, State Farm waived its right to a hearing.

TAKE NOTICE THAT pursuant to section 441(7) of the Act, the Superintendent orders State Farm to:

(A) Reimburse all affected policyholders (both current and former policyholders) in a manner acceptable to the Superintendent. The plan for reimbursement shall include the following features:

(i) Affected policyholders shall be reimbursed the amount that was paid in excess of the approved rate, interest at a rate of 5% from the time of overpayment to the time of reimbursement and any refund required for overpayment of Ontario Sales Tax.

(ii) Reimbursement shall be by means cheque and/or credit to the policyholder’s account.

(iii) In any case where the address of a former policyholder is unavailable or a cheque sent to a policyholder remains uncashed after a specified date, the reimbursement amount shall be donated to charity.

(iv) At the conclusion of the reimbursement process, State Farm shall provide the Superintendent with a written report containing details of its compliance with the reimbursement plan.

(B) On or before February 28, 2006, State Farm shall:

(i) Provide written confirmation to the Superintendent that its Chief Agent and Senior Vice-President for Canada is satisfied that State Farm’s written internal control procedures with respect to its operating processes have been reviewed and amended so that the deficiencies that resulted in, or permitted, the charging of unapproved rates have been appropriately addressed.

(ii) Establish and implement written internal control procedures, acceptable to the Superintendent, which shall ensure that a senior company official, with appropriate authority, will be given the responsibility and adequate resources to oversee the receipt, investigation and response to inquiries, complaints and concerns made by agents or policyholders involving rates, classification and billing.

TAKE NOTICE THAT section 447(2) of the Act provides that any person who fails to comply with any order made under the Act is guilty of an offence and liable on a first conviction to a fine of not more than $100,000 and on each subsequent conviction to a fine of not more than $200,000.

AND FURTHER TAKE NOTICE THAT section 447(4) of the Act provides that every director, officer, and chief agent of a corporation who caused, authorized, permitted or participated in a corporation committing an offence, or who fails to take reasonable care to prevent a corporation from committing an offence, is also guilty of an offence and is liable on a first conviction to a fine of not more than $100,000 and on each subsequent conviction to a fine of not more than $200,000.

ISSUED AT the City of Toronto, December 9, 2005

 

______________________________________
Robert Christie
Chief Executive Officer and
Superintendent of Financial Services

TO:

Mr. Bob Cooke
State Farm Mutual Automobile Insurance Company.
Senior Vice-President and Chief Agent for Canada
100 Consilium Place, Suite 102
Scarborough ON M1H 3G