While property and casualty (P&C) insurance in both the United States and Canada share many similarities, there are also notable differences stemming from regulatory frameworks, market dynamics and cultural factors. Read on for key distinctions between P&C insurance in the U.S. and Canada.
1. Regulatory Environment
United States:
P&C insurance is regulated at both the federal and state levels. Each state has its own insurance department that oversees insurer solvency and market conduct, and has varying degrees of oversight in ruling on requests for rate increases for coverage. State insurance regulators are members of the National Association of Insurance Commissioners (NAIC), which assists in serving the public interest by setting standards and regulatory best practices, acts as a forum to exchange information and provides education to consumers, industry and other government stakeholders.
Canada:
P&C insurance is regulated primarily at the provincial level, with each province having its own regulatory body overseeing insurers, brokers and agents. There is also federal oversight for certain aspects of insurance, particularly in areas such as financial stability and consumer protection.
2. Auto Insurance
United States:
Auto insurance is mandatory in 48 of the 50 states with liability coverage being the primary requirement. Driving without insurance is legal in Virginia and New Hampshire, however there are liability requirements that drivers must follow. Such as Virginia’s uninsured motor vehicle fee, or New Hampshire’s motor vehicle financial responsibility requirements.
Minimum coverage limits and regulations governing auto insurance also differs from state to state. For example, neither Florida or New Jersey require bodily injury liability.
Canada:
Auto insurance is also mandatory in all Canadian provinces. However, the structure varies significantly across provinces. For example, in Alberta, Ontario, Nova Scotia, New Brunswick, Newfoundland, Northwest Territories, Nunavut, Prince Edward Island and Nunavut, auto insurance is purchased through private insurers. Alternatively, British Columbia, Manitoba and Saskatchewan have government-run systems that provide mandatory minimum coverages and optional coverages can be purchased from private insurers. Québec is unique in that bodily injury coverage is sold through the government insurer, “la Société de l’assurance automobile du Québec” (SAAQ), while property damage coverage is sold through private insurers.
3. No-Fault Insurance
United States:
No-fault car insurance is also known as personal injury protection (PIP), is a requirement for drivers in 12 states and is optional in several others. Under this type of insurance, drivers file claims with their own insurance company, regardless of which driver was responsible for the accident, and it is designed to cover medical expenses for the driver and passengers. Depending on the insurer and the state, it may also include lost wages, burial and funeral expenses and more. In most cases, this coverage does not cover property damage or other parties’ medical expenses.
The injured driver or passenger(s) may choose to sue the other driver in court, however standards will apply (i.e. expenses exceeding a monetary threshold or injuries must meet a certain degree of severity).
Canada:
Most Canadian provinces also have some form of no-fault insurance system, in which drivers file claims through their own insurance company, regardless of who caused the collision. The Statutory Accident Benefits Schedule (SABS) is a mandatory coverage in most provinces that provides compensation for the driver, passenger or a pedestrian or cyclist who suffers an injury as a result of a car accident, regardless of who was at fault.
Several provinces have a coverage typically referred to as Direct Compensation — Property Damage (DCPD) as part of their no-fault systems. Under this coverage, insurance companies will compensate their insured directly for property damage claims, but only to the degree to which they are not at fault. Optional coverages exist that may cover the “at-fault” portion of the damages. So, if a driver has purchased this coverage, they can make a claim under that section of the policy for the portion to which they were at-fault.
In most Canadian provinces, the right to sue others for injuries sustained in an accident is significantly restricted. Much like in the U.S., litigation is only allowed when medical expenses have exceeded a monetary threshold, or injuries surpass a level of severity.
The provinces that have DCPD have essentially removed the right to sue for property damage. Litigation is only allowed if an accident occurs and the negligent party is insured in another province that does not have a DCPD agreement (or insured in another country).
4. Market Structure
United States:
The U.S. insurance market is highly competitive with a large number of national and regional insurers offering a wide range of products and services. There is also a significant presence of mutual insurance companies and specialty insurers catering to niche markets.
Canada:
Canada's insurance market is relatively concentrated with a few large insurers dominating the industry. While there is still competition among insurers, market concentration may impact pricing and product offerings in certain lines of business.
5. Legal System
United States:
The U.S. has a common law legal system, which may result in higher litigation costs and larger settlements compared to Canada's legal system.
Canada:
Canada's legal system is also based on common law, with the exception of the province of Québec, which uses a civil-law system, but there are some differences in procedural rules and liability standards compared to the U.S. These differences may influence claims handling practices and the cost of litigation for insurers.
How Does Applied Handle the Differences on Either Side of the Border?
Applied Systems ensures that its products comply with the regulatory framework’s governing insurance in both the U.S and Canada. This includes adapting features related to reporting, compliance documentation and solvency requirements to align with the distinct regulations in each country.
Recognizing Canada's bilingual population, Applied integrates bilingual capabilities into its Canadian products, accommodating both English and French. This ensures that Canadian users can access and utilize the software in their language of choice, facilitating efficient communication and operations.
Through its tailored products, comprehensive regulatory knowledge and astute cultural awareness, Applied Systems is empowering insurance professionals to succeed in their specific markets, irrespective of their geographic location.
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Christie Smith, implementation specialist, held a few roles at OTIP Insurance Brokers in Ontario, Canada, before beginning her current position of implementation specialist in January 2023. She spent several years managing interface services such as eDocs & Messages, and download & suspense. As an Epic admin, she enjoys the behind-the-scenes system work of all things Epic!