Friday 12 April 2019

Ontario Government Takes a Different Approach to Auto Insurance Reforms

The 2019 Ontario Budget is out and there's some positive news for auto insurance consumers.

Finally, a government in Ontario takes a slightly different approach to repairing a damaged auto insurance product. For too long, the focus has been largely on no-fault accident benefits and ignoring virtually every other aspect of the product. The result has been a complex system that has not kept up with our changing society.

Here is what the 2019 Ontario Budget has to say about auto insurance:

1. Lowering Costs and Fighting Fraud

Fighting fraud is a common theme for every government. The current government is looking for FSRA to overhaul the licensing system for service providers to reduce regulatory burden and fraud, including treatment fees. I'm not impressed with the existing licensing system. When I worked on it in the early part of the decade, I had intended on it to truly focus on identifying fraudulent operators. It would have only licensed the largest billing facilities. Instead, the government just designed a broad licensing system. Hopefully, someone will look back at the original intent. Streamlining the system will also reduce costs.

 The government has indicated that they would like to see contingency fee agreements become more transparent and review the effectiveness of contingency fees. Sounds like a good idea.

The government has also signalled a desire to establish a Serious Fraud Office. This is an idea that has been bounced around for years now. My view is that it is the insurance industry that has to take the lead on fraud as is the case with other industries.

The government also is pushing the idea of more e-commerce. That would mean more electronic communications when purchasing insurance and making claims. The Budget specifically mentions electronic proof of insurance, something I advocated for 6 years ago.

2. Increasing Accessibility and Affordability

This is a common theme when a government talks about auto insurance. How to achieve it is the trick. The Budget leaves the door open to basing rates on credit scoring and preferred provider for vehicle repairs and health care services. I don't see credit scores and providing more accessibility or affordability. It will have the opposite affect on low income families. Insurers will gladly swap territorial rating for credit score rating.

The government is also planning to simplify insurance forms, policies and other insurance documents. I'm all for that!

3. Adopting the Driver Car Plan

This is the most intriguing part of the Budget announcement for me. It talks about a Driver Care Card, which would streamline access to care. I have no idea what this would look like. It does relate to the long awaited programs of care.

I initiated the Programs of Care project before I left FSCO in 2011 and agree with its introduction. Led by Dr. Pierre Côté, the work on developing programs of care was completed in three years. Long overdue, this aspect of the Marshall recommendations and subsequent government announcement has been in development for six years.

 Programs of care were first developed by the Workplace Safety and Insurance Board (WSIB) to deal with low back pain. The initial whiplash associated disorder guidelines were created in 2003 based on the WSIB low back pain program of care. FSCO had undertaken to develop programs of care for a range of soft tissue injuries. An interim solution was the introduction of the minor injury definition and minor injury guideline in 2010. The expectation is that programs of care will simplify access to treatment and reduce disputes in the system. If that does occur, it will potentially reduce some of the transactional costs in the system.

Finally, the no-fault accident benefits cap on medical, rehabilitation and attendant care benefits for those catastrophically injured will be restored to $2 million. The cap was reduced to $1 million in 2016 by the previous government and was one of the worst changes they made. I'm for controlling costs for those with minor injuries but those with the most serious injuries need to be properly covered.

 4. Increasing Competition

Increasing competition really means breaking the existing mold where everyone has the same type of auto insurance product. Driving behaviour, usage and technology have all changed. The product needs to reflect that. So I agree, lets see some innovative products. As long as the regulator ensures consumers are adequately protected.

Again, the government is looking to FSRA to achieve these changes. What can we expect to see? Things like pay-as-you-go insurance. Great for people who don't drive much. Perhaps more telematics. A simplified rate approval process. Streamlining the SABS, something I've been advocating for, for years. Higher limits for small claims court.

This is an ambitious agenda and a break from previous reform initiatives. Can't wait to see how this plays out.

Sunday 20 January 2019

What's Happening With B.C. Auto Insurance?

Some of my Ontario readers might be wondering what is happening in B.C. and their auto insurance reforms.

When the NDP government was formed, they inherited quite a mess. Auti insuracne costs were rising rapidly and rates increases had not kept up. The previous government had also drained the public insurer, the Insurance Corporation of British Columbia (ICBC) of surplus funds from previous years. As a result, the ICBC was running losses in excess of $1 billion.

The average premium in B.C. is now about $200 more than those in Ontario. Yes, it's hard to believe that there could be a mess worse than Ontario. The ICBC has been unfairly painted the villain. The private insurance industry is trying to use B.C. as an example of how government-run insurance doesn't work. That's just not true. In this case, competition could not possibly resolve the province's insurance problems.

British Columbia is the only jurisdiction that still has a full tort system. In other words, their system is much like Ontario's back in the 1980s with growing settlements and high legal costs.. The ICBC and B.C. government have determined that tort access needs to be restricted.

Beginning April 1 of this year, there will be a minor injury cap of $5,500 for pain and suffering awards in B.C., similar to what a number of other Canadian jurisdiction have done. At the same time, no-fault accident benefit coverage will be expanded. B.C. is also updating how it calculates rates by providing discounts to safe drivers and penalizing those who cause accidents. A change that is long overdue.

The ICBC expects to save about $1 billion dollars from these reforms. It will interesting to see if their no-fault model will work. If it doesn't, the next step may be to eliminate tort altogether and design a pure-no-fault system.

Wednesday 9 January 2019

Ontario Governnment Ready to Make Auto Insurance Changes

It's been a long time since I last posted on this blog, but to be honest not much has happened with respect to Ontario Auto Insurance.

Last spring I wrote about the factors that were actually driving up the cost of auto insurance i.e., distracted driving, vehicle repairs and fraud. That hasn't changed. None of this was mentioned in David Marshall's report.

Last spring the Liberals were punished by voters for litany of reasons, which I'm not going to reiterate. The Conservatives took power and quickly made it clear that they were not going to proceed with Marshall's recommendations. Auto insurance was not part of their election platform and they had no position.

I thought it was pointless to speculate on what they would do. I was bound to be wrong, so I haven't posted anything on this blog. Today the government has finally taken some baby steps towards developing their auto insurance policy. They released a very short survey for consumers and stakeholders and announced a review of Ontario's rate regulation system.

Consistent with their election platform, the government's initiative's are being labeled as "for the people." Hopefully, that will be the case as changes begin to roll out. There will be stakeholders who will want to use the consultation to frustrate the government's desire to help consumers.

The survey itself is very short and will be collecting feedback until February 15, 2019. There are essentially two questions. How do you feel about the auto insurance product we have and how easy is it to shop for auto insurance? Clearly these are not questions directed at industry stakeholders.

The announcement also signalled a desire to move Ontario's auto insurance forward on initiatives like electronic proof of insurance and other insurance documents, more e-commerce and eliminating territorial rating. Many of these items could have been changed long ago. Sometimes I wonder if it takes a Google or Amazon to enter the marketplace to facilitate change? I hope not.

I've stated this in the past but it's worth repeating. I hope that the government doesn't decide to tinker with the accident benefit schedule again. It never delivers savings for consumers and only benefits certain stakeholder groups. Tackling distracted driving and fraud can create rate relief for consumers. Cutting benefits does not help consumers.

Monday 19 March 2018

What's Driving Up Ontario Auto Insurance Rates?

Since becoming Premier, Kathleen Wynne focus on the auto insurance file has been to bring down rates. The government originally set a rate reduction target of 15%. After several years, the target was quietly abandoned. The government has done a lot of tinkering with the system without providing much rate relief to Ontario drivers.

During the past four years, the government has slashed mandatory coverage, transferred responsibility for disputes to the Licensing Appeal Tribunal and introduced further restriction on accessing the courts.

Major Ontario Coverages

Much of the reforms has focused on accident benefits coverage. However, accident benefits are only one of three major coverages. The others are third party liability and physical damages.

Industry data shows that physical damage claims are driving up the cost of auto insurance in Ontario. However, the government's focus has been largely on accident benefits.
The chart below shows that between 2012 and 2016, claim costs rose 28.1%. While accident benefit costs rose 27.1% during that period, collision claims costs rose 49.9% and direct compensation claims costs 56.8%.


Increase 2012-16
Total claim expenses
Total AB expenses
Bodily injury claim expenses
DC claim expenses
Collision claim expenses
Comprehensive claim expenses

Why Are Physical Damage Claims Costs Going Up

A number of large insurers have recently announced that they plan to file for auto insurance rate increases in Ontario including Intact, Aviva and RSA Canada.

Intact indicates that new technologies and more expensive car parts have increased the cost to repair cars. Aviva blames escalating repair costs, distracted driving and fraud for rising claim costs. RSA Canada also blames the cost of auto repairs.

Distracted driving is causing an increase in the number of auto accident after years of falling accident frequency rates. Increased frequency rates also put upward pressure on third party liability and accident benefit costs. This explains why the reforms undertaken in Ontario over the past few years has had little impact on premiums.

The recently announced Ontario auto insurance action plan is not likely to significantly reduce rising auto insurance claims costs.

Possible Action

·         The government and industry need to direct more resources to preventing and prosecuting fraud.
·         A recent Aviva investigation reveals fraudulent activity continues to exist in the towing and repair of damaged vehicles. More comprehensive regulation of the towing and auto repair sectors is needed.
·         To address distracted driving, the penalties need to be as severe as those for drunk driving. The government could introduce administrative penalties for distracted driving. Introduce a requirement that would see cellular telephones blocked while a car is in motion.

Monday 22 January 2018

We've Been Down This Road Before

Once again, Ontario has announced another package of auto insurance reforms.

With a provincial election just months away, the Ontario government recently announced yet another plan to make auto insurance affordable for Ontario drivers. The plan is focused on addressing fraud and providing better access to care.

The announcement by Charles Sousa, Ontario’s minister of finance, along with attorney general Yasir Nasqvi, follows several months of consultation with a broad range of stakeholders regarding David Marshall’s report, Fair Benefits Fairly Delivered: A Review of the Auto Insurance System in Ontario, released in April 2017. Marshall’s report contained 35 recommendations to reform the auto insurance system.

I reviewed David Marshall’s report and the province’s subsequent announcement in December 2017 with interest. I spent more than 20 years of my professional life designing similar reform packages and have a good sense of how the Ontario system will respond to Marshall’s proposed reforms.

Although the government’s plan announced in December 2017 purports to flow from David Marshall’s report from last spring, only the creation of a new network of independent evaluation centres [IECs] originated from Marshall’s report. Programs of care and contingency fees, announced in December and mentioned in Marshall’s report, are work already underway by the government. Marshall, an advisor to Ontario’s finance minister on auto insurance and pensions, never dealt with fraud.

For me, Ontario’s plan is an admission that the Marshall report does not provide much in the way of workable solutions for the government. It would be a stretch to suggest that there will be savings derived from the proposed IECs. The system will not cease to be adversarial with the introduction of the IECs just as the Designated Assessment Centres (DACs) had no impact. Lawyers and insurers will continue to access their own medical opinions.

With an election on the horizon, there is little time for the government to implement their plan. What will happen to this plan following the election is unknown at this time. Other than providing more resources to combat fraud, there is little here to provide premium relief for consumers. Considering how long it takes to prosecute a fraud case, those savings are years away.

What’s in Ontario’s Plan

The government will be establishing a panel to guide the enactment of proposed reforms, which include:

·         Standard treatment plans (programs of care) for common collision injuries (soft tissue injuries) and changing the emphasis from cash payouts to ensuring appropriate care.
·         Reducing disputes by instituting independent examination centres.
·         Launching a Serious Fraud Office in spring 2018.
·         Directing the Financial Services Commission of Ontario (FSCO) to review territorial rating factors used by insurers.
·         Ensuring that lawyers’ contingency fees are fair, reasonable and more transparent.  

Programs of care
I initiated the Programs of Care project before I left FSCO in 2011 and agree with its introduction. Led by Dr. Pierre Côté, the work on developing programs of care was completed in three years. Long overdue, this aspect of the Marshall recommendations and subsequent government announcement has been in development for six years.

Programs of care were first developed by the Workplace Safety and Insurance Board (WSIB) to deal with low back pain. The initial whiplash associated disorder guidelines were created in 2003 based on the WSIB low back pain program of care. FSCO had undertaken to develop programs of care for a range of soft tissue injuries. An interim solution was the introduction of the minor injury definition and minor injury guideline in 2010. The expectation is that programs of care will simplify access to treatment and reduce disputes in the system. If that does occur, it will potentially reduce some of the transactional costs in the system.

Will statutory accident benefits (SABS) be simplified when the programs of care are introduced? Will the number of disputes drop? That did not occur with the introduction of the minor injury guideline. It can’t be assumed that programs of care will significantly change the landscape. The WSIB experience will not necessarily be duplicated in the Ontario auto insurance system because the structures of the two systems will continue to be fundamentally different.

The government would like to move away from cash settlements. Prior to the introduction of the Ontario Motorist Protection Plan (OMPP) in 1990, it was standard procedure to settle minor lawsuits. The introduction of the OMPP was intended to address the needs of accident victims with minor injuries so that they could access wage loss and rehabilitation without the need to sue. Cash settlements undermine the principles of no-fault.

In his 2014 report, Ontario Automobile Insurance Dispute Resolution System Review, Douglas Cunningham, now an arbitrator and a former associate chief justice of the Ontario Superior Court of Justice, acknowledged that cash settlements could be counter-productive. But he compromised in the end by recommending that settlements be prohibited in the first two years of a claim. A settlement prohibition is more feasible in a pure no-fault system such as the WSIB. However, Ontario’s auto insurance system provides access to tort. If there is a tort claim, the lawyers often push for a cash settlement with the first-party payer because the third-party payer is only responsible for damages in excess of the SABS.

Independent Examination Centres (IECs)
The government continues to support Marshall’s recommendation that a network of IECs be created to provide neutral assessments of auto collision injuries. Fortunately, the government has backed away from locating IECs in public hospitals.

However, IECs are a bad idea. It sounds like a great concept, but it’s been tried before and failed. I had the policy lead when the former DACs were introduced in 1994. The language we used back then was identical to what appeared in the recent government plan. IECs reflect Marshall’s lack of institutional memory and understanding of the auto insurance industry.

I learned a few things through the DAC experience. When you are conducting over 100,000 assessments each year, you need a lot of physicians and other allied health professionals. That means you will have to rely on the same professionals who provided assessments to legal representatives and insurers. No matter what measures you take through standard guidelines and protocols, fee schedules, accreditation, no one will consider these assessors to suddenly become neutral. The criticisms directed at the current assessors will follow them when they join IECs.

IECs will require substantive oversight just like the DACs did. This will not only require a government bureaucracy to support IECs, but will likely increase administrative requirements for the assessment providers. Currently, the average insurer examination costs under $1,400 based on HCAI data. The last DAC fee schedule (dated February 2004) contained much higher fees: assessing treatment, $2,000; assessing disability, $3,900; assessing attendant care needs, $2,600; and no cap on catastrophic impairment assessments. I predict assessment costs will rise under the IECs. 

Marshall uses New Jersey’s dispute resolution mechanism as an example of where a neutral medical review is successfully being used. Marshall has misinterpreted the New Jersey system. I spoke to officials from New Jersey on behalf of Justice Cunningham as part of his review of the auto insurance dispute resolutions system. The New Jersey medical reviews are peer reviews; they do not involve an examination of the claimant. They are not automatically conducted — one of the parties needs to request a review. The claimant and insurer still conduct their own medical assessments, upon which the neutral medical reviewer comments. As well, the arbitrator does not always follow the opinion of the medical reviewer. As is the case in New Jersey, establishing IECs will not eliminate the need for provider- and insurer-initiated assessments.

Despite the insurance industry’s strong support of the creation of IECs, I do not believe insurers will be willing to give up insurer exams. They are an important component in any private disability system. Instead, IECs have the potential to add another layer of assessments and costs, similar to the experience with the DACs.

Serious Fraud Office
For the third time in the past five years, the government has announced their intent to create a Fraud Office to deal with auto insurance fraud. Fraud was not mentioned by Marshall but raised by stakeholders during consultations. It would be nice if it happens this time.

Territorial Rating
This aspect of the plan has me puzzled. Directing the regulator to look at territorial rating can only go two ways: 1) the status quo, or 2) adjusting some rates up and others down. Ultimately, the review will not reduce rates overall and I sense the government knows this. Reducing rates in the GTA will only increase rates in other regions of the province.

Contingency Fees
The Law Society of Upper Canada has been working on new rules for lawyers regarding contingency fees for more than a year. They’ve asked the government to approve new regulations to provide the legal regulator with the ability to enforce the new rules. This overlaps with a recommendation made by David Marshall and was included in the government auto insurance plan. Cracking down on contingency fee abuses will put more money in the pockets of claimants but will not reduce auto insurance rates.

Tuesday 24 January 2017

Ontario Auto Rates Steady In 2016 But Only After Benefit Cuts

FSCO's latest quarterly rate approval numbers have been released and at least rates are holding steady for now. However, considering the statutory accident benefit cuts that became effective on June 1, 2016, consumers are getting less coverage but paying about the same money.

 FSCO approved 10 private passenger automobile insurance rate filings during the fourth quarter of 2016. These 10 insurers represent 24.17% of the market based on premium volume. Approved rates decreased on average by 0.14% when applied across the total market. Overall, approved rates decreased on average by 1.38% when applied across the total market for the 2016 calendar year.

 The high cost of auto insurance creates a strong disincentive to purchase coverage that was taken away by product reforms. This is the case even when coverage can be purchased for about the same cost as a tank of gas. Sitting on my desk is my own auto insurance renewal. The cost of buying $1 miillion in medical/rehabilitation/attendant care coverage is $50 for on my two vehicles. I also purchased an additional $1 million in catastrophic coverage for just $19.

Product reforms have created an environment where consumers are inadequately covered for more serious injuries. Rather than make coverage for minor injuries optional, consumers are allowed to opt out of purchasing adequate coverage for more serious injuries. That would be analogous to making physical damage coverage mandatory with no deductible for minor collisions but not covering total loss claims.

A new delivery system is needed to bring Ontario's costs in line with other jurisdictions. For a discussion on how to address the systemic problems in Ontario, see my article entitled Ontario's 25-Year No-Fault Journey.

Saturday 10 December 2016

It's Time For The Insurance Industry To Be Serious About Optional SABS

This week I was speaking to my insurance agent who preparing my renewals. I was asking her about how the optional benefits have been impacted by the regulatory changes that became effective on June 1st. During the conversation it came out that she only had two clients with optional benefits - me, and my daughter and son-in-law. That's it!

Insurance consumers in this province aren't that risk averse. They are foolish and misinformed. As the government continues to whittle away at mandatory accident benefits, consumers maintain the belief that the basic level of coverage is adequate. Who's fault is that? Who is responsible for ensuring consumers are properly informed? The insurance companies, brokers and agents.

When I walk into Best Buy, just about any purchase comes with an aggressive pitch for extended warranty. The sales reps will try to convince how little it costs to purchase that extra protection. They sell a lot of them. People have no problems dropping $100 on an extended warranty for a dishwasher but can't get their head around spending that on one million dollars of additional health care protection. I paid just $98 for that over the past year. Just two tanks of gas.

People aren't happy about the price of auto insurance so they try to keep coverage down to save money. It's the responsibility of the insurance industry to make sure that they at least understand what they are getting for the money.

Monday 14 November 2016

Catch Me At Bookapalooza on November 19th

On Saturday I will be signing copies of THE ROAD AHEAD at Bookapalooza in Whitby. It’s a great event with books and crafts for sale, panel discussions, giveaways and a silent auction.  There will also be a draw for free signed copy of my novel, which will make a nice gift with the holidays coming up.

Tuesday 18 October 2016

Ontario Auto Insurance Rates Are Heading Back Up

FSCO's latest quarterly rate approval numbers have been released and the news is not good for consumers. Half the savings as a result of statutory accident benefit cuts that became effective on June 1 are already gone.

 FSCO approved 25 private passenger automobile insurance rate filings during the third quarter of 2016. These 25 insurers represent 63.56% of the market based on premium volume. Approved rates increased on average by 1.5% when applied across the total market. This wipes out almost half of the modest 3.07% reduction in approved rate filings in the first quarter of 2016. Depending on rate filings in the last quarter, we could see a net increase in rates for the 2016 calendar year.

 The government has abandoned the the 15% rate reduction promise made in August 2016. However, if you aggregate all the rate changes since the 2013 announcement, the total rate reduction is 8.34% when applied across the total market.

 Product reforms have proven to be an ineffective tool for controlling auto insurance premiums in Ontario. As long as transactional costs within the system remain high, Ontario drivers will continue to pay high rates. A new delivery system is needed to bring Ontario's costs in line with other jurisdictions. For a discussion on how to address the systemic problems in Ontario, see my article entitled Ontario's 25-Year No-Fault Journey.

Early LAT Decisions Suggest Reforms May Be Working

Effective April 1, 2016, the Licence Appeal Tribunal began accepting applications to the new Automobile Accident Benefits Service (AABS) system with an aim to quickly resolve disagreements between individuals and insurance companies about statutory accident benefits.  The guiding principles created for new Tribunal were originally developed by Justice Douglas Cunningham and myself in a report released in 2014

 Over the past few month, there have been a handful of decisions from the Tribunal. I decided to review nine decisions to determine whether there were some early trends.

There seven written hearings and two oral hearings. The two oral hearings were conducted by teleconference. This is consistent with the direction provided in the Cunningham report that the majority of hearings should be conducted through written submissions.

Many FSCO decisions dealt with procedural issues rather than benefit entitlement. Often, hearings were held to listen to preliminary issues. Although the sample size is small, it appears only three decision did not deal directly with benefit entitlement. One dealt with a claimant failing to attend insurer examinations, Another dealt with whether a claimant had the ability to elect to receive either the non-earner benefit or income replacement. The last one involved a claimant trying to claim the cost of preparing an application on an issue that was resolved prior to the case conference. These decisions may suggests that the LAT process may also be bogged down with procedural issues. This is not what Cunningham had envisioned.

The average time between the hearing date and the release of a decision was 51.5 days. This is a significant improvement compared to FSCO timelines but we need to remember it's still early. Let's see how this trends in the future. The decisions themselves have been very short. Somewhere between five to ten pages.  

I did not review the quality of the decisions made by Tribunal adjudicators. I leave that for the users to determine. However, so far, the first few decisions have lived up to the reforms objective of a more expeditious process.

Thursday 22 September 2016


My book, TTheRoadAhead_FrontHE ROAD AHEAD, is now available to purchase. Paperback and Kindle versions are available at and
A Kobo version is also available at and
Paperback copies are also available at Ben McNally Books at 366 Bay Street, Toronto.

“Politics has never been this much fun!”
Rick Tompkins, a suburban Toronto insurance broker, never considered a career in politics until a good friend, who happens to be the leader of the Conservative party, asks him to run for office. He accepts the offer, with the understanding that he would probably not win, but can use the opportunity to gain some visibility for himself and his business. Jerry Switzer, a veteran party worker, is sent in to guide Rick through a campaign in a riding that hasn’t elected a Conservative in years. Rick fumbles his way through the election campaign and manages a surprise win but at the expense of saddling his party with an impossible commitment. What makes matters worse, Rick is anything but politically correct. He offends everyone in his path and stumbles from one political scandal to another. Still, Rick has one saving asset: a political party machine that is able to spin scandals to its advantage.

Sunday 21 August 2016

Will The New Ontario Fleet Definition Work?

As I reported previously, the Ontario government amended the fleet definition in Regulation 664 in early July.  The amended definition reads as follows:

“fleet” means a group of not fewer than five automobiles that meets the following requirements:
1. At least five of the automobiles in the group are commercial vehicles, public vehicles or vehicles used for business purposes.
2. The automobiles in the group are,
i. under common ownership or management, and any automobiles in the group that are subject to a lease agreement for a period in excess of 30 days are leased to the same insured person, or
ii. available for hire through a common online-enabled application or system for the pre-arrangement of transportation, and insured under a contract of automobile insurance in which the automobile owner or lessee, as the case may be, has coverage as an insured named in the contract

From my perspective, this is not an ideal resolution. However, it does fill in the insurance gap that has existed since Uber began providing its services in Toronto in 2012. One of the most important elements in the fleet definition has always been the requirement that there be common management. Common management is an element that is required in order for a group of vehicles to be considered a fleet, if they are not commonly owned or where they are owned by a leasing company. It refers to the fact that the owner or manager has a measure of control over the vehicles. A fleet is typically a discrete risk exposure whose experience and characteristics can be monitored and rated, and is affected by the actions of the owner or manager. The vehicles in a fleet are not individually rated as this is inconsistent with a key principle in fleet rating to establish a rate specific to the experience of the fleet. Usually, the manager of a fleet will implement rigorous risk management programs to monitor and improve experience and rating.

None of these circumstance remotely exist when it comes to Uber drivers and their vehicles. They are network of drivers connected to customers through an app provided by Uber. Their is no common ownership or management. It suggest that once an Uber driver turns on the app on his phone, he or she becomes part of a fleet. That decision isn't even made by Uber.

Is this such a bad thing? It could be if it leads to further erosion of the fleet definition. The regulator has for years denied fleet policies because they failed to meet the test of common ownership or management. Will they be able to continue to push back against synthetic fleets? It would have been better, if the government had created a provision in the Insurance Act to deal specifically with transportation network companies. I expect it will take some time to determine whether the government and the insurance industry will regret the newly amended fleet definition.

Tuesday 19 July 2016

Ontario Auto Insurance Rates Remain Chronically High

FSCO's latest quarterly rate approval numbers have been released and suggest that consumers will see very few savings the statutory accident benefit cuts that became effective on June 1.

FSCO approved 14 private passenger automobile insurance rate filings during the second quarter of 2016. These 14 insurers represent 30.06% of the market based on premium volume. Approved rates increased on average by 0.33% when applied across the total market. This follows the modest 3.07% reduction in approved rate filings in the first quarter of 2016.

The end of lower rate filing approvals indicate that the any savings derived from the recent reform package are small. A portion of the savings could be wiped out before the end of the calendar year if companies continue to file for increases. The government has abandoned the the 15% rate reduction promise made in August 2016. However, if you aggregate all the rate changes since the 2013 announcement, the total rate reduction is 9.84% when applied across the total market.

Product reforms have proven to be an ineffective tool for controling auto insurance premiums in Ontario. As long as transactional costs within the system remain high, Ontario drivers will continue to pay high rates. A new delivery system is needed to bring Ontario's costs in line with other jurisdictions. For a discussion on how to address the systemic problems in Ontario, see my article entitled Ontario's 25-Year No-Fault Journey.

Friday 8 July 2016

New Ontario Towing and Storage Regulations Are Now In Effect

New regulations are now in effect if you repair, tow or store vehicles in Ontario. The new regulations under the Repair and Storage Liens Act took effect on July 1, 2016. Further regulations will come into force starting January 1, 2017.

 The following new rules come into effect on July 1, 2016:

  • If a vehicle being stored is subject to a lien and is received from someone other than its owner or a person having the owner's authority, then the storer must give notice to the owner and other interested parties of the lien in writing (e.g. secured parties who have registered their interest, such as lease and finance companies). 
  • For vehicles registered in Ontario, the notice period is reduced from 60 days to 15 days after the day after the vehicle is received. If notice is not provided within 15 days, a storer's lien is limited to the unpaid amount owing for that period. The 60-day notice period remains unchanged for out-of-province vehicles. 
  • If no amount has been agreed upon for repair and storage costs, fair value may be determined by a court. There is a new list of discretionary factors a judge will be required to consider (such as fixed costs, variable costs, direct costs, indirect costs, profit and any other relevant factors).
Ontario Regulation 427/15 can be found here.

Thursday 7 July 2016

Ontario Changes Fleet Definition To Accommodate Ride-Sharing

This week, the Ontario amended Regulation 664 to expand the definition of a fleet to accommodate ride-sharing services. The change opens the door for insurers to offer policies to drivers of vehicles for hire using an online app such as Uber.

The regulation amendment expands the fleet definition to include vehicles available for hire through a common online-enabled application or system for  pre-arranged transportation. The vehicle owner or lessee is to be a named insured under an auto insurance contract. The regulation change will make it easier for Ontario businesses to insure a group of privately owned vehicles under one insurance policy as a “fleet” when they are available for hire using an online app.

FSCO has already approved a fleet policy proposed by Intact Insurance Company. The Intact policy provides blanket fleet coverage under a standard automobile owner’s policy (OAP 1) for private passenger automobiles used in the transportation of paying passengers who utilize Uber. The Intact fleet policy only provides coverage when the driver is logged onto the Uber online app. In other situations, coverage under the personal owner’s policy for the automobile is applicable.

FSCO has also approved the use of an electronic insurance card for use in connection with ride-sharing. The electronic insurance card will permit ride-sharing drivers, who are covered under the Intact policy the option, to provide evidence of insurance electronically using an online-enabled app (e.g., to law enforcement officials).

Tuesday 21 June 2016

FSCO Mandate Review Recommends Changes to Auto Insurance Regulation

The Ontario government should establish a new organization that would perform the functions currently performed by the Financial Services Commission of Ontario (FSCO) and the Deposit Insurance Corporation of Ontario (DICO), an expert advisory panel said in a report released Monday.

The panel recommends that a new Financial Services Regulatory Authority (FSRA) be established, and it should exercise both prudential and market conduct functions.  The panel – comprised of George Cooke, James Daw and Lawrence Ritchie – made its recommendation to create FSRA in an interim report released in November, 2015. The final report, dated March 31, was made public Monday and contains 44 recommendations.

The mandate review was partly made necessary with the transfer of responsibility for operating an auto insurance dispute resolution system from FSCO to Ministry of the Attorney General’s Licence Appeal Tribunal on April 1, 2016.


The report suggests that FSRA should consolidate functions, but it should have separate divisions for the regulation of market conduct; prudential oversight; and pension administration. These divisions of the regulator should operate in a coordinated manner, but each division should be insulated from the routine regulatory activities, pressures and resource demands of other divisions.

FSRA should be a self-funded corporation without share capital, operationally independent of government, yet accountable to the Legislature through the Minister of Finance. The FSRA should be outside of the Ontario Public Service and be empowered to hire its personnel from outside of the Ontario Public Service’s collective agreements, compensation restraints, and other hiring restraints to support its ability to recruit professionals and industry expertise as it deems necessary.

FSRA should have a skills-based Board of Directors appointed by the Lieutenant Governor in Council. The Board would oversee FSRA’s operations and the Board should have the authority to appoint a Chief Executive Officer (CEO). The Board Chair should report directly to the Minister of Finance.

FSRA’s Board should be given authority to make rules that would be enforceable pursuant to the statute, having a similar authority as Cabinet Regulations.

Auto Insurance Rate Regulation

The panel did not make any recommendations with respect to the prior approval of auto insurance. However, it did recommend that FSRA’s Board should be obliged and empowered to decide how auto insurance rates are to be regulated and make use of its rule-making authority to scope out a rate approval process.

The view of the panel is that when it comes to the regulation of automobile insurance rates, FSCO is not ultimately protecting the public interest or enhancing confidence in the sector.

Motor Vehicle Accident Claims Fund

The panel recommends that responsibility for operating the Motor Vehicle Accident Claims Fund (MVACF) be transferred to the Facility Association (FA), a non-profit organization funded by automobile insurers in the provinces and territories that operate private insurance systems. This responsibility would fit well with the FA’s original purpose, which is to act as the ‘insurer of last resort’ for high-risk drivers. The FA already operates uninsured motorist funds similar to the MVACF in the Atlantic Provinces.

Fraud Prevention

The panel indicated that the new mandate should require FSRA to utilize its statutory authorities to adequately, firmly and consistently discourage fraudulent activities or behaviours that mislead or harm consumers and pension plan beneficiaries.

FSRA should be directed to identify and seek to eliminate gaps in protection for consumers who might be defrauded by licensed sales agents, brokers and corporations. FSRA should also  have the authority to establish a fraud compensation fund such as exists in Quebec if or where enhancements to mandatory insurance coverage would not fully close current gaps.

There is no word from the government on implementing the panel's recommendations.

Thursday 26 May 2016

LAT Have Mercy

On April, 1, 2016, Ontario's Licence Appeal Tribunal's (LAT) Automobile Accident Benefits Service (AABS) was officially open for business. After 26 years, the Financial Services Commission of Ontario (FSCO)'s Dispute Resolution Group stopped accepted new applications. The transfer of responsibility has created considerable apprehension among its users. FSCO was flooded with new applications in the weeks leading up to April 1st. For many, it's a matter of 'better the devil you know.' What will this change mean for stakeholders? Will it really be different?

How did we get here?

The establishment of the AABS at LAT brings to a conclusion a process that began with the appointment of the Honourable J. Douglas Cunningham in August, 2013. Justice Cunningham was asked to review the auto insurance dispute resolution system. He was asked to make recommendations to the government to address a significant backlog, in disputed autoinsurance claims pending mediation and arbitration, that existed at the time - and to propose system improvements. His report - delivered in February 2014 - included 28 recommendations. As a result, Bill 15, the Fighting Fraud and Reducing Automobile Insurance Rates Act, 2014 included a provision transferring responsibility for resolving disputes over statutory accident benefits from FSCO to LAT. Regulation changes filed by the government on March 7, 2016 - which came into effect on April 1 - was the final step in implementing the new dispute resolution system.

What are the changes?
  • The only dispute resolution process available to parties is an arbitration through LAT.
  • Mandatory mediation is no longer part of the dispute resolution process.
  • No court action can be commenced for statutory accident benefits disputes, even where there is a companion tort action.
  • There is no right of appeal, other than a reconsideration option with the Executive Chair of the Safety, Licensing Appeals and Standards Tribunals of Ontario (SLATSTO) for exceptional circumstances and the Divisional Court on a question of law.
  • A total of 22 new full-time and part-time LAT adjudicators have been appointed to date. Auto insurance stakeholders will be interacting with a largely unknown group of adjudicators as only three have had experience resolving disputes at FSCO.
  • LAT is committed to resolving most (90%) disputes within six months.

What happens to FSCO?

Applications for mediation, neutral evaluation and arbitration have not been accepted since March 31, 2016. A mediation, arbitration, court proceeding, appeal, variation or revocation that was commenced before April 1, 2016 may be continued at FSCO after that date. If a mediation fails before April 1, 2016 , an application for arbitration can only be made to the LAT on or after April 1, 2016. Applications to the Director of Arbitrations - for appeals, variation or revocation - may only be made where the application for arbitration was received by FSCO before April 1, 2016.

How does LAT work?

Since there is no longer mandatory mediation, an applicant will be able to apply for arbitration following the denial or termination of statutory accident benefits. The applicant (an insured or insurer) files an Application for Arbitration with LAT. The other party files a response.

It is intended that all procedural issues, lack of production, or failures to attend insurer examinations are to be dealt with upfront by the Registrar. LAT may dismiss an application without a hearing if (1) the claim is an abuse of process, (2) the matter is outside the Tribunal's jurisdiction, (3) the statutory requirements for bringing the application have not been met, or (4) the party filing the application has abandoned the process. This is a significant departure from the FSCO process which included preliminary hearings. However, if LAT is reluctant to dismiss these applications, then the gatekeeper function, envisioned by Justice Cunningham, will not be put into practice.

The first step in the arbitration process is a case conference. This is the settlement meeting described in Justice Cunningham's report. It must take place within 45 days of the date LAT receives an application. The case conference is analogous to a FSCO pre-arbitration meeting except most will take place over the phone instead of in-person. Prior to the case conference, the parties are required to outline the documents to used at a hearing, any production issues, the preference for the type of hearing (written, video/telephone or in-person), a list of witnesses and details of the most recent settlement offer.

Should the dispute not be resolved at a case conference, then a hearing will take place within 60 days. The type of hearing will be decided by the adjudicator at the case conference. Decisions will be issued within 30 days for written hearings, within 45 days for video/telephone hearings and 60-90 days for in-person hearings.

Lingering concerns

There is no LAT appeal process other than the possibility of a reconsideration by the Executive Chair of SLATSTO if there is a clear error that was made by the adjudicator. Appeals based on merit are not available. A party can apply for judicial review where there is a question of law.

Is this a significant departure from the FSCO process?

 The simple answer is yes. But how much different can only be determined over time. The forms and practice rules are simpler. In an attempt to create a different culture, very few FSCO arbitrators have been appointed to LAT. Some see this as a good thing while others are concerned. But it does add an element of uncertainty for an initial period. 

There are other elements of the new process to be concerned about. Justice Cunningham recommended the creation of statutory timelines and sanctions regarding settlement meetings (case conferences), arbitration hearings and the release of arbitration decisions. He felt that there need to be strict adherence to timelines and that creating statutory obligations was the most effective way of accomplishing this. However, no statutory timelines have been created and instead LAT will manage timeline requirements. This is essentially how things existed at FSCO. What will happen if the parties are not ready for a quick hearing? Will adjournments become common occurrences? Stakeholders will be waiting to see if the promised timelines will be met or erode over time.  

In response to criticism of FSCO practices in conducting mediations, Justice Cunningham recommended that settlement meetings (case conferences) be conducted in-person or by video conferencing. He rejected telephone meetings.  LAT will predominantly be conducting case conferences over the phone. Considering that FSCO pre-arbitration meetings are in-person, this is really a step backwards.

Justice Cunningham wanted hearings to follow three streams: paper reviews, expedited in-person hearings and full in-person hearings. He recommended criteria be adopted to determine which stream a case falls under. Those criteria have not been adopted. Instead, the LAT adjudicator will exercise his or her discretion to determine the format of a hearing. At FSCO, similar discretion existed but all hearings were in-person.  Although LAT has suggested that many hearing will be paper reviews, will stakeholders pressure adjudicators to provide more in-person hearings? 

A number of other recommendations by Justice Cunningham seemed to have been abandoned. The settlement of future medical and rehabilitation benefits were to have been prohibited until two years after the date of the accident. The SABS have not been amended and settlements will still be permitted one year after the date of the accident. In addition, every insurer was to establish an internal review process as the first step in the new dispute resolution process. It does not appear that all companies have established an internal review process.


A lot of time and effort has gone into creating the AABS at LAT to replace the dispute resolution process at FSCO. One of the problems identified by Justice Cunningham has been the culture surrounding the previous system.  LAT has made a considerable effort to create a new culture. However, the new adjudicators will be dealing with the same clientele and will need to interpret the same complex and frustrating statutory accident benefits. It will take some time to determine how much different the new system is.