Cease and Desist Order Against Zurich Insurance Company

REGARDING the Insurance Act, R.S.O.1990, c.I.8, as amended (the "Act"), in particular, section441, and the Automobile Insurance Rate Stabilization Act, 2003, S.O.2003, c.9, as amended (the "AIRSA"), in particular, sections11 and12

AND REGARDING Zurich Insurance Company

CEASE AND DESIST ORDER

The Superintendent of Financial Services (the "Superintendent") is of the opinion that the Zurich Insurance Company ("Zurich") committed unfair or deceptive acts or practices by writing non-fleet insurance business at fleet rates, by using unauthorized policy endorsements, and by not implementing an approved automobile insurance rate filing.

TAKE NOTICE THAT pursuant to section 441(2) of the Act and section 11(1) of the AIRSA, and with the consent of Zurich, the Superintendent orders that Zurich:

A. Reimburse all current and former affected policyholders in Ontario who were overcharged ("eligible policyholders") by a date and in a manner acceptable to the Superintendent. The plan for reimbursement shall include the following features:

(i) eligible policyholders shall be refunded the amount that was paid in excess of the approved rate plus interest of 5% calculated annually from the date of the payment for the policy to the date the refund is issued;

(ii) reimbursement shall be by means of a cheque and/or credit to the eligible policyholder’s account.  A letter in a form approved by the Superintendent shall be sent to the eligible policyholder to explain why the policyholder received the refund;

(iii) Zurich will provide confirmation to the Superintendent within 30days that it began to issue refund amounts to eligible policyholders on or before December 31, 2007, including the requirements set out in ¶(iv) below.  Refunds are to be issued by August 1, 2008;

(iv) in any case where the address of an eligible policyholder is unavailable or a cheque sent to an eligible policyholder is returned, Zurich will contact the policyholder’s broker to determine whether a valid address can be obtained, or attempt to locate a new address from publicly available sources.  If a valid address can be obtained, the refund cheque will be sent to that address by August 1, 2008;

(v) the amount, if any, representing the value of cheques that, as of January31, 2009, have been sent and remain uncashed, or have been determined to be undeliverable, will be donated to charity;

(vi) Zurich shall maintain a database in and/or through which all accounting of funds in connection with this Order shall be administered, including full reconciliations of refunds payable, refunds paid, refunds outstanding (as applicable), and the amounts representing refund cheques that remain uncashed or are determined to be undeliverable in connection with this Order.

B. Zurich waives its right to request reconsideration of this Order under section 11(2) of the AIRSA.

C. Zurich shall not seek to recover amounts from current and former policyholders who were undercharged. 

D. On or before January 31, 2009, Zurich shall provide the Superintendent with a written report providing details of its compliance with the reimbursement plan in this Order, including a full reconciliation of the refunds payable, the refunds paid, and the amounts that remain uncashed or are determined to be undeliverable.  The report shall also address any other information relevant to compliance with the reimbursement plan.

E. The Chief Agent and the Chief Financial Officer of Zurich, on behalf of Zurich, shall provide on or before May 1, 2008, written confirmation to the Superintendent that they are  satisfied that Zurich’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 writing non-fleet insurance business at fleet rates, using unauthorized policy endorsements,  and not implementing an approved automobile insurance rate filing, have been appropriately addressed.  The confirmation shall also include a description of any revisions or amendments that are made as a result of this review, together with copies of the revised or amended internal control procedures.

AND TAKE NOTICE THAT section 447(2) of the Act and section 12(1) of the AIRSA provide that any person who fails to comply with any order made under section 441(2) of the Act or section 11(1) of the AIRSA respectively, is guilty of an offence.

AND TAKE NOTICE THAT section 447(4) of the Act and section 12(3) of the AIRSA provide that a person who is guilty of an offence under section 447(2) of the Act or section 12(2) of the AIRSA respectively, 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.

AND TAKE NOTICE THAT section 447(4) of the Act and section 12(2) of the AIRSA provide that every director, officer and chief agent who caused, authorized, permitted or participated in an insurer committing an offence, or who fails to take reasonable care to prevent a corporation from committing an offence under the Act or the AIRSA respectively, is also guilty of an offence.

DATED at Toronto, Ontario, March 18, 2008

 

Robert E. Christie

Superintendent of Financial Services

TO:

Zurich Insurance Company

Attention:
Alister Campbell, Chief Agent & Chief Executive Officer