Trade Concession With Canada Puts All U.S. Drivers At Risk

The National Association of Insurance Commissioners’ (NAIC) review of a proposal to loosen the requirement on Canadian motor carriers reveals that the changes could leave U.S. citizens financially exposed in the event of a traffic incident.

“Under the U.S. Department of Transportation plan, states are unable to recognize a Canadian insurer’s ability to provide the same level of protections as those required under U.S. law,” said Roger Sevigny, NAIC President and New Hampshire Insurance Commissioner, in a letter to the Federal Motor Carrier Safety Administration (FMCSA). 

In June, as a trade concession, the FMCSA issued a proposed rule that Canadian trucks and buses entering the U.S. could present evidence of their Canadian insurance to show financial responsibility, circumventing insurance regulations in the U.S.

“It is particularly troubling that the proposed rule change bypasses the valuable consumer protections at the core of the U.S. insurance regulatory system,” said Arizona Insurance Director Christina Urias. “The minimum levels of financial responsibility vary greatly between Canada and the U.S., leaving American consumers insufficiently protected.”
Urias chairs an NAIC working group on cross-border insurance issues under the North American Free Trade Agreement (NAFTA).

The letter also states that the FMCSA plan lacks any ongoing prudential supervision that is necessary to ensure the ability of these Canadian insurers to pay U.S. claims when they are due. Canadian insurers should meet the same standards that we require of U.S. insurers.

To protect U.S. consumers from any unnecessary financial obligations, the NAIC recommends:

• Insurers of Canadian motor carriers operating in the U.S. submit quarterly financial filings for review by state regulators.
• State regulators receive immediate notification if a Canadian insurer of a cross border motor carrier encounters financial difficulty.
• Canadian insurers designate an agent in the U.S. that claimants in the states can contact for service of legal process.

State regulators acknowledged the FMCSA proposal is designed to promote trade, but maintains that this must be weighed against the greater cost to consumers when financial stability and claims processing is jeopardized.

Click HERE to view the full text of letter from Sevigny and Urias.

About the NAIC

Formed in 1871, the National Association of Insurance Commissioners (NAIC) is a voluntary organization of the chief insurance regulatory officials of the 50 states, the District of Columbia and five U.S. territories. The NAIC has three offices: Executive Office, Washington, D.C.; Central Office, Kansas City, Mo.; and Securities Valuation Office, New York City. The NAIC serves the needs of consumers and the industry, with an overriding objective of supporting state insurance regulators as they protect consumers and maintain the financial stability of the insurance marketplace. For more information, visit www.naic.org.