Financial Services Commission of Ontario
Philip Howell. Superintendent of Financial Services and CEO
Tom Golfetto, Executive Director, Auto Insurance Division
Auto insurance is mandatory in Ontario and has been since 1980. It is privately delivered in a competitive market. There are over 100 licensed companies in the province. These companies compete for the business of nine million Ontario drivers who drive 6.6 million vehicles.
According to Ministry of Transportation data, the number of people injured in accidents each year has been falling. In 2009, the latest year for which data is available, only about 62,500 of Ontario’s nine million drivers were injured in accidents. Of these, almost 60,000 suffered injuries that were categorized as only minimal or minor by the MTO definition.
In Ontario, the auto insurance system is a closed-loop system. In simplest terms, this means that the costs of the insurance system are recovered through premiums charged to drivers. These premiums fund the cost of claims, including the cost of treatment provided to those injured in accidents.
Historically, the reforms of the Ontario system have largely been motivated by the need to stabilize rising costs and premiums. The auto insurance system is complex, and there have been several reforms over the past 30-odd years. With each set of changes to the system, there was some initial success in stabilizing costs and premiums, followed by another cycle of rising costs.
The reforms announced by the Ontario government in 2009 and implemented in 2010 have addressed rising costs, many of which stem from abuse.
While the number of personal injury collisions decreased from 2006 to 2009, the number of injury claims made during the same period increased. In addition, between 2006 and 2010, claims costs in Ontario increased by $3 billion. During this period, the cost of an average claim increased by 43%. Accident benefits costs, the primary driver behind these increases, skyrocketed by 118%. Between 2006 and 2010, examination and assessment costs increased by 228%. Without the 2010 reforms, the cost of assessing those injured in accidents likely would have surpassed the cost of treating them in 2011.
The Ontario government appointed an Auto Insurance Anti-Fraud Task Force in 2011 to assess the extent and nature of the fraud in the province’s auto insurance system and to recommend actions to reduce it. The Task Force's December 2011 interim report concluded that fraud in Ontario’s auto insurance system, though it cannot be precisely quantified, is extensive, increasing and having a substantial impact on premiums.
The overutilization of accident benefits through misuse, abuse and apparent fraud was the primary driver behind increases in claims costs and premium increases. Currently, close to 30,000 health care providers are authorized to treat those injured in accidents in Ontario, and over 17,000 of these are members of regulated health care professions. These health care providers service accident victims at over 8,600 health care clinics in Ontario. Insurers also may have contributed to overutilization in the system through inadequate claims management processes. To deal with the volume of claims they were receiving before reforms, some insurers were likely inappropriately approving requests for assessments in medical treatment.
More evidence of overutilization can be seen in the dramatic increases in cases in the dispute resolution process at FSCO. In 2006 we received just over 13,000 requests for mediation; in 2011 we received almost triple that number.
The government implemented a number of longer-term initiatives to follow the September 2010 reforms and underpin achieving greater rate stability going forward. These initiatives focused on the accident benefits system and were based on the presumption that using scientific, outcome-based approaches was the best way to determine appropriate benefits for accident victims. The government direction to FSCO to have medical experts develop a new, medical, evidence-based minor injury treatment protocol. After an open, competitive RFP process, FSCO awarded a contract for this project last week, and work on the project will begin shortly. The government also directed FSCO to consult with medical experts on the definition of catastrophic impairment as set out in the statutory accident benefits schedule. I have submitted my report, the Superintendent’s Report on the Definition of Catastrophic Impairment, to the Minister of Finance. That report was publicly released by the ministry last month and recommends adopting refinements to the definition based on the medical and scientific evidence identified by the expert panel.
FSCO has assigned the responsibility for providing regulatory services that protect the public interest and promote public confidence in auto insurance. The FSCO act and the Insurance Act provide the legislative framework for this responsibility.
Insurers and actuaries examine patterns in past claims to estimate future costs. Their goal is to determine what rates to charge a consumer for the policy period to cover claims costs and operating expenses and to make a profit after taking into account investment income. Based on their actual experience, companies may need to revise their assumptions on prospective costs and future premiums. Insurers must submit proposed changes to their rates to FSCO for approval. FSCO reviews rate filings, analyzing the data supporting the insurer’s actuarial assumptions, to ensure that the proposed rate changes are adequate to maintain the financial solvency of insurers without being excessive.
Companies must file their underwriting rules with FSCO. These are the rules that insurance companies use to determine the risks that they may not accept. Regulations under the Insurance Act define the criteria that cannot be used to deny auto insurance coverage; for example, not-at-fault claims. Specifically, underwriting rules may not be subjective, be arbitrary, be contrary to public policy or bear little relationship to the risk.
Premiums vary based on the individual consumer’s risk characteristics. The mechanism for determining rates is an insurance risk classification system. Risk classification systems set out the factors that an insurer will use when setting the price they charge for auto insurance. They group risks with similar characteristics and expected claims costs.
FSCO also monitors compliance with the Insurance Act, and it takes enforcement action against those who violate it. We regularly conduct audits of insurers to ensure their compliance with regulatory obligations. We also review complaints about individuals and companies that may have engaged in unfair, deceptive or illegal practices under the Insurance Act.
After reviewing these complaints, FSCO may decide that some matters need to be investigated. Following an investigation, if FSCO deems non-compliance with the Insurance Act and its regulations has occurred, it can lay charges under the Provincial Offences Act or take regulatory enforcement actions such as issuing a cease-and-desist order.
I’d like to note that FSCO does not have the power to review or investigate criminal matters, including fraud. Criminal offences must be pursued by the police. FSCO does, however, work co-operatively with law enforcement agencies and provide police with assistance in their investigation of certain criminal matters.
Dr. Harold Becker
I have particular qualifications in catastrophic impairment as I was responsible for chairing an advisory panel that wrote the catastrophic impairment assessment guidelines for designated assessment centres, or DACs, in Ontario in 2001. I also served on the advisory panel that wrote the previous report on the redefinition of catastrophic impairment to the minister, released in 2001. This panel was composed of a physician—me—a psychologist, a neuropsychologist, a pediatrician, a plaintiff lawyer, a defence lawyer, two insurer representatives, two ministry representatives, and three FSCO representatives
I have great difficulty with the expert panel in this sequence because (1) the majority of the panel “experts” were not experts, in fact, in catastrophic impairment; (2) the panel was too small for the methodology chosen; and (3) the reported consensus model, involving six out of eight votes, contributed further to the lack of validity of the panel’s recommendations.
The FSCO expert panel of 2011 consisted of three academic epidemiologists, an academic public health expert, a pediatrician, a psychologist and two physiatrists—these are specialists in physical and rehabilitation medicine. While I highly regard the scientific contribution of epidemiologists to society and to medicine, I do not understand their central role in this panel to tackle the definition of catastrophic impairment, a medico-legal issue, not a fundamentally scientific one.
The expert panel used what is referred to as a modified Delphi method for reaching consensus on their various recommendations. The Delphi methodology states that choosing appropriate members of a panel is the most important step in the entire consensus process because it directly relates to the quality of the results generated. While the Delphi methodology suggests that as few as 10 to 15 panel members can be used, provided there is homogeneity in their backgrounds, much as in the original expert panel of 2001 that I was on, experts recommend that up to 50 members be used when there is a disparate degree of knowledge, experience and training among the members, as was seen in this panel. This panel of diverse participants had only eight members, rendering their consensus of questionable validity.
The expert panel indicated that only a very restricted set of three psychiatric diagnoses could be considered in determining whether a claimant meets the catastrophic definition. In restricting qualifying psychiatric diagnoses to major depressive disorder, post-traumatic stress disorder, or psychotic disorder, the panel discriminated against Ontarians receiving accident benefits on the basis of a mental disability.
While the expert panel’s decision to use the global assessment of functioning, or GAF, score as a tool for rating catastrophic psychiatric impairment is a reasonable one, they set the threshold for catastrophic impairment unreasonably high.
The expert panel’s requirements of institutionalization of claimants suffering mental and behavioural impairment is far too high a threshold and would leave many legitimately impaired claimants suffering mental illness with limited funding.
The failure to acknowledge the coexistence of traumatic brain injury and associated psychiatric impairment, and the expert panel’s corresponding prohibition on allowing separate rating of these two distinct impairments, is seriously flawed and demonstrates a serious bias against both brain-injured claimants and claimants who develop associated psychiatric reactions resultant from traumatic brain injury.
The expert panel’s recommendations would throw seriously injured claimants suffering significant mental illness into the already overburdened, underserviced public sector of psychiatric services.
) The expert panel has no authority to overrule accepted judicial decisions, some at the level of Ontario’s highest court. The Ontario Court of Appeal recently recommended that psychological impairment should be combined with physical impairment when determining a true whole-person impairment rating. The expert panel concluded that there was no scientific evidence to do so and have essentially overruled the Ontario Court of Appeal.
Although the expert panel touted fundamental science as the cornerstone to its deliberations, there is utterly no scientific validity to many of their recommendations.
Sidney ChelskyI’m a consultant to the laundry, dry cleaning and hospitality industry. I’m outraged at the television ads that depict insurance brokers acting in the best interests of their clients. This, in fact, is not true.
On one occasion my agent suddenly sent me a renewal from another company with an increase of $600 for the year. When I questioned this increase, he said that his agency was no longer affiliated with Lombard and therefore placed it with a company he was affiliated with, and this was the best price he could get me.
I called the insurer, and they provided me with a list of other agents they were affiliated with, so I contacted one of them which promptly provided me with a policy from that same insurer at a further reduced rate. It definitely was not in my best interest to continue with the previous agent.
Again, after a number of years passed, the agency I was insured with sent me a renewal policy which was closer to the price I had previously paid. The policy was with another company. It was a combined auto and home coverage policy. However, on closer examination of the policy, it showed reduced coverage. For example, instead of $200,000 of contents coverage, it was reduced to $40,000.
Again, I searched out an insurance broker to provide me with a quote. After finding a company and a quote that I was satisfied with and paying with my credit card immediately for the policy, I later received the policy with an invoice for an additional amount of $130 for coverage, which was attributed to the fact that my wife had an accident seven years ago and they were charging me for this. I paid the additional amount, then received an additional invoice for a further $320. I phoned the broker and questioned this additional cost, and he later called back and said that it was because the car was registered to my numbered company. All this information was provided to the insurance broker at the time of the quote, and the numbered company information was also provided. I subsequently cancelled the policy and again searched for another insurance broker.
Panel of Clinical Experts Endorsed by the Alliance of Community Medical and Rehabilitation Providers
We are here to represent a panel that’s comprised of experts in the field of physical medicine, rehabilitation, neurology, psychiatry and neuropsychology; experienced clinicians from both the public and private sectors who work with those who are seriously injured in motor vehicle accidents every day; and a number of not-for-profit groups that support accident victims across Ontario, including the spinal cord and brain injury associations of Ontario.
In 2011, we prepared a detailed, evidence-based critique of the FSCO expert panel report on catastrophic definition. We had outlined very specific and practical revisions. A subgroup of our members met recently to review the recommendations of the superintendent’s final report. We were distressed to see that our recommendations were ignored, with only one notable exception around the removal of the in-patient rehabilitation requirement.
In our original submission, we questioned the reason for change. No data has been released to indicate that the estimated 1% of victims who are currently deemed catastrophic are accessing benefits inappropriately. We also question the composition of the methodology of the panel. Six out of eight members of the FSCO panel are academic researchers with no clinical experience working with auto insurance victims. Half of the panel had been consultants to the IBC, which has introduced a real potential for bias. In addition, it’s important to note that they used a modified Delphi method to develop consensus.
We also feel that the combination of mental and physical impairments should be allowed and that pain should be taken into consideration. Disability can result from the sum effect of physical pain, psychological and cognitive symptoms which can lead to an inability to manage at home, in the community and at work.
We also feel that existing measures should not be replaced until new ones are proven practical, reliable and valid. The FSCO panel and the superintendent acknowledge that further study is indicated for one key test to be used with children with brain injuries. In fact, the FSCO panel rewrote that test. That is no longer a valid or reliable assessment.
We also added in our original submission that many other tools also needed further study. For example, the GOSE, which is used with adults with brain injury, has very poor inter-rater reliability at the key moderate disability cut-off point. Further study is needed. The SCIM, which is an assessment for spinal cord, is a very valid and reliable tool, but only when administered in its entirety. The panel has recommended only use of one subtest. It is also noted that there is actually evidence to support ongoing use of the GCS, the Glasgow coma scale, which the FSCO panel did not appear to consider.
We also disagree with the benchmarks chosen by the panel, as they’re far too difficult to reach. For example, in the case of psychiatric impairments, why would the panel recommend that the cut-off on the GAF test be 40 when a GAF score of 41 to 50 is equivalent to a 55% rating, or marked impairment? In a case of spinal cord, what rationale is there for excluding someone with incomplete paraplegic who can only walk a short distance inside with a walker and will always need a wheelchair to function? Why would we consider excluding the adult whose brain injury is so severe that he can only work at a sheltered workshop? And certainly children who, at a year, still need attendant care for a good part of their day need long-term and intensive support.
The superintendent recommended in his report that he felt that all treatment plans must be signed by a doctor. It’s not realistic, as family doctors do not have the time or the training to oversee the complex rehabilitation needs of these most seriously injured individuals.
The superintendent also recommended that catastrophic assessments be done by doctors alone, without input from a multidisciplinary team. For the same reasons that family doctors should not be gatekeepers, this is highly problematic.
The superintendent recommended that interim catastrophic benefits should be limited to $50,000 and that this would have to cover both medical and rehab benefits, as well as the attendant care needs. A $50,000 cap is completely unreasonable as it will only last for months and will in no way bridge the years it can take to obtain a catastrophic determination.
In addition, the superintendent recommended that those admitted for in-patient, day patient or outpatient rehab should be deemed interim catastrophic. We agree that these individuals need access to early and more intensive supports. However, as there is no access to care in many areas of Ontario and there are no set standards across facilities or across the province for admission to what programs do exist, this criterion is unfair and discriminatory.
Richard Gauthier, Actuary
I’m the partner in charge of the P&C actuarial practice of PricewaterhouseCoopers. As a consultant, I’m the actuarial consultant to the New Brunswick Insurance Board since 2004.
I’m here to present a proposal on how to simplify the rate approval process in such a way as to increase efficiency, give a faster response to requests by the various insurers, permit FSCO to focus their resources on the more important classes of business, create a transparency of the decision-making process and recognize that rates need to be updated regularly.
If I look at the broad goal of automobile insurance, the broad goal of affordability, availability and fairness, there are roles for the government and there are roles for the insurance industry. The government sets up and defines the insurance contract and, consequently, determines the overall costs and affordability of the automobile product. The definitions in the contract basically dictate its overall cost.
On the other hand, the role of the industry is to distribute the cost of the product to the insured population according to each individual’s expected cost. It’s an actuarial principle that has been recognized as generally accepted actuarial practice by the Canadian Institute of Actuaries.
Each time you violate that principle of paying according to the expected costs, you have someone who pays too much for insurance and you have someone who doesn’t pay enough for insurance. It creates a disincentive for the person who is underpriced because it’s a disincentive for them to improve.
For the survival of a company, they must charge according to the expected costs of their insured. Therefore, the industry has a built-in incentive to price individuals appropriately according to their expected costs; no more, no less. We have competition in this province and in this country, in most places, and therefore there is a built-in process, a built-in safeguard, that everybody will pay according to their expected costs.
I suggest, for those recreational vehicles, ATVs, motorcycles—I also suggest commercial non-fleet. They do not look at commercial fleet, five or more vehicles, but I would put commercial non-fleet in that category—not that they’re not important, but they are specialized vehicles. I would suggest that FSCO adopt more oversight and not get too deep into details of approval of every single rating factor and so on. This will free up fiscal resources to better address the more sensitive area of private passenger vehicles. This is the area that impacts the most general population.
The determination of the overall rate level, we study the past, we study the trends and we combine the two to figure out what we think the losses are going to be next year and therefore how much money we’ll require next year.
Significant resources at the company and at FSCO are required to do that review. Currently, when an insurer sends a rate application to FSCO, it takes three to six months to get approval. You’ve got to put that three to six months in context. When you issue an insurance policy, it’s for 12 months. It is a little disquieting that it would take three to six months to get a rate approval for a product that’s 12 months. We suggest that by maybe having a lighter approach in some of the classes that I already mentioned, more resources at FSCO could focus on private passenger auto.
This would be a simplified filing process and anything that falls within that category should be presumed to be approved unless the regulator sees something that is completely out of tune and says no to it. We would suggest that this simplified process should be relatively quick, from FSCO’s standpoint, for approval. After 30 days of having sent the simplified package to FSCO, we should be deemed approved and we move on.
A full filing, which would require, then, the submission of all information, including actuarial justification, would be required for anything that is not of a maintenance nature, and this package has to be signed by an actuary.
On October 2, 2004, I survived a two-car collision. The auto insurance carrier required an in-home assessment for a claim for statutory accident benefits. An occupational therapist/registered nurse conducted the assessment. The report generated was inaccurate and biased and the health professional used and abused my personal health information to discredit my injuries.
My request to have the report corrected by the member was denied. The insurance adjuster utilized the report to decrease and stop benefits, ordered me to attend a functional abilities assessment by an orthopaedic surgeon. Needless to say, the orthopaedic surgeon’s report followed the identical template of minimizing, trivializing and discrediting injuries.
I reported my concerns to the respective health colleges— the College of Occupational Therapists and the College of Nurses of Ontario.
COTO conducted a mediocre investigation and issued a lame reprimand to justify to the public that some action was taken, but it did not address my issues concerning the accuracy of the report, the member’s unprofessional conduct and the impact on the vulnerable public. COTO informed me in writing that these assessments are considered non-therapeutic.
CNO dismissed my complaint on the grounds that the member was not providing nursing services and was not acting in the capacity of an RN, although this member is currently registered and holds a current licence to practise and is utilizing her credentials to augment and enhance her credibility.A follow-up with the Office of the Information and Privacy Commissioner of Ontario concluded that this member was not acting as a health information custodian as defined under the act. Furthermore, these assessments are not conducted under the health professionals act for the purposes of providing care and are therefore deemed commercial assessments under the Insurance Act.
Please note that after all the experts paid by the insurance carrier declared me a malingerer and that my pain was subjective, a bone scan report revealed healing fractures to three of my ribs as a result of the impact from the airbag and fractures in my pelvis and symphysis as my knee went into the dashboard.
My experience clearly demonstrates that there are “trusted” health professionals, whom I prefer to call mercenaries, whose credentials and opinions are for sale.
If the government was serious about regulation of the industry and protection of the public, it would slap hefty fines on the insurance carriers, and the health colleges would discipline their members by enforcing their own standards, leading to revoked licences. However, conflict of interest is the grease that oils the wheels of the insurance giant and the financial sector of Ontario’s economy.
Speaking with One Voice
Dr. Sukhvinder Kalsi-Ryan
I am a physical therapist by training and I work in the public sector. I’m currently a post-doctoral fellow at the Toronto Western Hospital, where my area of expertise is in the development and implementation of outcome measures specific to traumatic and non-traumatic spinal cord injury.
I’ve come together, along with many other stakeholders, to join a group called Speaking with One Voice. We are essentially a group of organizations. We’ve come together to advocate for the rights of individuals who are seriously injured in car accidents. We are a multi-stakeholder group that is comprised of leading experts in the rehabilitation field, health care providers from both the public and private sectors, professional organizations, organizations that support accident victims, such as the provincial Acquired Brain Injury Network and the Ontario Brain Injury Association, the legal community, and victims from across Ontario who are deeply concerned about the pending changes to the definition of catastrophic impairment related to automobile insurance.
Our concerns are really about what the proposed changes to the catastrophic definition are. Firstly, the FSCO panel and superintendent recommend new assessment tools and new thresholds that would make it much more difficult to be deemed catastrophic. They will no longer allow designated assessors to combine both mental and physical impairments or consider chronic pain in the total-person impairment rating. This goes against the World Health Organization, the American medical guidelines protocol, best practices in care, and some recent decisions made by courts.
The superintendent has added a major barrier to access of benefits to those that are deemed catastrophic, as he suggests that only doctors should be able to sign insurance forms on an ongoing basis for therapy, equipment and support. One million people in Ontario do not have a family doctor. Those individuals will not be able to access any care.
It is our understanding that the insurance industry will continue to enjoy record profits. FSCO has recently reported that insurer accident benefit costs have plummeted by over half, from $764 to $300 per vehicle, since the minor injury guideline was introduced and the non-cat benefits were slashed back in September 2010. However, there has been no reduction in premiums.
So, essentially, we feel that the changes should not happen as yet. The recommended changes by FSCO should not be implemented at this point as these reflect the opinion of the insurance industry and are in direct opposition to the opinion of almost all stakeholder groups.
What we do recommend or what we are asking for is that the funding for those who sustain serious non-catastrophic injuries be restored as they were a casualty of the war on fraud in 2010 and are now left unprotected. This is preferable to introducing an interim category, which will only add more complexity to the system.
Debbie Thompson, independent insurance broker
Our association, the IBAO, often differs on certain policy matters with insurers, as brokers’ prime responsibility is to advocate and serve their customer, often given a different perspective from the companies themselves.
I believe that the single most important thing that could be done to lower claims costs and thus insurance premiums is to tackle fraud and abuse in Ontario’s auto insurance system, particularly in the accident benefit area.
The IBAO is a participant in the consumer engagement and education task force working group and it supports the work of the task force and its direction. The task force recommendations are scheduled to come out later this year and we want to urge the government to implement those recommendations as quickly as possible.
As mentioned, tackling fraud and abuse in auto insurance is probably the most important thing we can do to lower premiums. However, we would like to caution against any further tampering with the system in the wake of the 2010 auto reforms. We’re not here to defend insurers, but we do believe that any aggressive tampering with this system will threaten market stability, which is just getting a foothold post-reform.In 2005, the Ontario government banned the use of credit scoring in the rating of automobile insurance. However, shortly after, many carriers began to circumvent the ban by refusing to offer quotes to those who refused access to a consumer’s credit information. By refusing to offer quotes, carriers were naturally not writing business for anyone who refused access to credit information.
In January 2009, via a bulletin from the superintendent, carriers were asked to stop this practice. After a refusal to abide by this request, the use of credit was later defined as an unfair and deceptive act or practice as part of the 2010 auto reform package, a measure we wholeheartedly support.
Ironically, however, almost immediately after the credit ban was introduced in auto, insurers began to use credit more aggressively to price people’s property insurance, once again circumventing the ban on auto.
You see, many consumers buy their home and auto together to get the discounts that are available. By using credit on home policies, some insurers are able to significantly increase premiums, sometimes as much as 100%. By directly impacting the affordability of the home policies, insurers are able once again to successfully force the policyholder to go elsewhere. The problem is that soon there won’t be an elsewhere to turn.
MPP Colle introduced Bill 108, the Homeowners Insurance Credit Scoring Ban Act. Ontario lawmakers should follow these provinces and pass Mr. Colle’s bill. A ban can also be accomplished by amending the unfair and deceptive practice—regulation under the current authority in the Insurance Act. The ban on credit in auto is done this way.CarSharing Association
Auto insurance and affordability is certainly something that we’re very concerned with. Undeniably, from our experience, the best way to dramatically reduce your auto insurance costs for the consumer in Ontario is to simply not own a car. But you can still get access to one by sharing a car, so the insurance implications move to us. We represent 40,000 people in Ontario who share a car today.
Car ownership costs you thousands of dollars a year: payments, insurance, maintenance, depreciation, all of those items. Car sharing, in turn, costs a fairly modest amount because members pay only for the hours and the kilometres that they use our vehicles.
Academic studies in Canada and the US indicate that this type of car sharing removes eight to 10 privately owned cars from our streets. This reduces pollution, parking woes and gridlock.
The Financial Service Commission of Ontario and the Insurance Bureau of Canada are silent about car sharing. We don’t exist. Car sharing through an organization or supplier is not addressed in auto insurance regulations or legislation.
Our insurance providers do provide us with auto insurance to cover our named members. They were initially quite skeptical about this new service, and some of these concerns still exist today. Sometimes, our coverage is provided to us under the personal lines, sometimes it’s under the commercial lines—there’s no set way that it’s done.
There are concerns in our industry about accident benefits. Current legislation is essentially based on the 1950s and 1960s model of car ownership: The people who drive cars are either car owners or family members of car owners. This lack of direction or clarity in the regulations puts our insurance providers and the car sharing organizations liable when a car sharing member is walking, riding a bicycle or using public transit and involved in an auto collision.