Friday, 27 April 2012

Ontario Standing Committee to Review Auto Insurance

On April 16, 2012 the Standing Committee of General Government of the Ontario Legislature approved a motion presented by NDP MPP Rosario Marchese to conduct a review of the Ontario auto insurance system. The motion passed because the Liberal minority government also is a minority on standing committee because representation reflects the size of caucus in the Legislature.

As result of the motion the standing committee intends to initiate a fair and balanced study into a range of auto insurance industry practices and trends with the purpose of developing recommendations on how to make insurance rates more affordable, and that the committee report its findings to the House. The study shall include witnesses to be called upon to assist the committee and shall include, but not be limited to:
  • the current overall profitability of the property and casualty industry, with an analysis of current and future trends in both investment and underwriting income;
  • the profitability of auto insurance underwriting in Ontario and costs related to Ontario underwriting, with particular emphasis on profits in the post-September 30, 2010, era where the statutory accident benefits were amended;
  • assessing the adequacy of med-rehab treatment as per the capped minor injury guideline;
  • the relationship between insurance underwriters and their sales representatives and/or the role independent brokers of insurance play in the industry. This would include an in-depth look at the extent to which brokers that portray themselves as independent of insurers really are independent;
  • the impact of fraud in the insurance industry and how that impacts insurance rates;
  • assessment of the adequacy of the current definition of “catastrophic injury”;
  • ongoing and future trends in claims fraud as well as the impact of recent anti-fraud initiatives in combating such activity;
  • the appropriateness of the 12% return-on-equity rate and the approvals mechanisms related to the ROE rate;
  • reviewing the auto insurance dispute resolution system; and
  • reviewing risk assessment factors of drivers and the corresponding rates assigned to particular drivers, as well as the eligibility and classification factors that currently determine individual, corporate and fleet coverage.
So what does this all mean? Well many of the issues to be reviewed have in fact been previously announced as part of the Government's Budget or commitments made by FSCO in the proposed Statement of Priorities. For example the Government established a Auto Insurance Anti-Fraud Task Force last summer and will be making recommendations later this year. The Financial Services Commission of Ontario (FSCO) set up a medical panel to conduct a review of the definition of catastrophic impairment last year and the Government recently announced that it is planning to move ahead to amendment regulations to implement the panel's recommendations. Some of these initiatives including the review of the minor injury guideline and the 12% ROE rate are subject to FSCO Requests for Proposals and it is expected that the successful consultants will be announced shortly.

It is likely not helpful for the insurance industry or consumers to have parallel reviews taking place with two sets of recommendations. In fact many of the changes coming out of these reviews will not require legislation and likely never come before the Legislature. Cabinet has the authority to create and amend regulations specified in statute.

We have a minority government so it's not business as usual. Opposition parties are looking to flex their muscles and push their own agendas.

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