Current environment within the auto insurance sector is best described as uncertain. The 2010 reforms changed the playing field but no one knows by how much. Over the past 2 years industry data shows that accident benefit costs have dropped significantly but premiums have not followed suit. Why not?
The 2010 reforms reduced the level of mandatory benefits that consumers much purchase. As many people predicted almost all consumers chose the minimum coverages merely to avoid further rate increases. However, a recent court decision (Zefferino v. Meloche Monnex Insurance) creates uncertainty even with regards to the impact of lower coverages. The courts have signalled that if consumers were not properly informed of their options then insurers may be on the hook for the optional benefits.
This is not a problem that the government can fix. Insurers need to be satisfied that they or their agents or brokers are properly informing policyholders about the optional benefits? They need to be certain that they will be able to defend a claim by a policyholder that they were not properly informed about optional benefits.
To its credit, the government has continued examine auto insurance system and work on longer term reforms following the Five Year Review. An expert panel was appointed in 2010 to review the SABS definition of catastrophic impairment. However, the Superintendent's report on the expert panel's work has had minimal stakeholder support. It appears that there has been no attempt to reach a compromise position to get more buy in from stakeholders and so that we can move forward on this issue.
In 2011, the Auto Insurance Anti-Fraud Task Force was appointed by the government to measure the impact of fraud in Ontario and recommend changes that would reduce the incidence of fraud. The Task Force has now completed their work and we are awaiting the release of their final report. In their status report released in their summer the Task Force indicated that some changes are already taken place such as changes to HCAI and better training for police regarding fraud identification.
Some of the more significant measures will require legislative and regulatory amendments. It's up to the government to move forward on these recommendations if consumers are to see premium relief. I also can't see why the insurance industry cannot set up an agency similar to the U.S. National Insurance Crime Bureau in Canada and duplicate some of its work. It does not appear to require any legislation. Not all the solutions can come from the government.
One of the more significant reforms introduced in 2010 is the SABS definition of minor injuries
along with the $3,500 cap on rehabilitation and assessment costs. This definition and cap should have brought about a significant reduction in premiums in Ontario. However, a set of circumstance has failed to save consumers any money. Most stakeholders have expressed some uncertainty as to whether the current interpretation of the SABS definition will withstand challenges within the dispute resolution system. It is over 2 years since the reforms were implemented yet no disputes have made their way to arbitration at FSCO as a result of the ongoing backlog of cases in the dispute resolution system.
There are no quick fixes to address the chronic high caseloads at FSCO. However, FSCO could have facilitated more certainty in the system and lower premiums had it fast-tracked a number of cases through their system. Nine million drivers are waiting to see whether the reforms have actually reduced costs in the system. In addition, had these cases revealed flaws in definition (meaning a different interpretation than intended by the government) those issues could have already been addressed through regulatory amendments.