Tuesday 29 January 2013

Anti-Fraud Regulations Come Into Effect June 1

The Ontario Government has made public the regulatory changes that will be made to help combat auto insurance fraud.  The changes were approved on January 21, 2013 and are scheduled to come into effect on June 1, 2013. 

Regulation 14/13 amends the Statutory Accident Benefits Schedule (SABS) - 34/10

The amendments to the SABS include:
  • a requirement for insurers to provide all reasons when denying medical and rehabilitation claims; 
  • providing FSCO with authority to stipulate additional information that insurers must provide in bi-monthly benefit statements to claimants; 
  • giving insurers authority to require claimant confirmation of receipt of goods and services that have been billed; and 
  • providing FSCO with authority to stipulate by Guideline the maximum payable by insurers for goods as well as services.
Interesting that the government chose to only amend section 38(8) which deals with requiring insurers to give reasons for denying medical and rehabilitation claims.  The same language exists in 12 other sections of the SABS (listed in a previous post) and those sections were not amended.  That would suggest there are now two standards for communicating denials to claimants.  As well the language change from “the medical and any other reasons why the insurer considers any goods, services, assessments and examinations, or the proposed costs of them, not to be reasonable or necessary” to “the medical reasons and all of the other reasons why the insurer considers any goods, services, assessments and examinations, or the proposed costs of them, not to be reasonable and necessary” does appear substantially different.

The Cost of Goods Guideline was issued by FSCO in January 2012.

FSCO also plans to issue a standard form prior the regulation coming into effect that insurers will be required to use for the purposes of the bi-monthly benefit statements to claimants.

Regulation 15/10 amends the Unfair or Deceptive Acts or Practices (UDAP) Regulation - 7/00.

The changes to the UDAP regulation include:
  • an offence to request, require or permit a claimant to sign an incomplete claim form and 
  • clarifying the exemption for lawyers and paralegals to ensure the regulation applies to lawyers and paralegals when not acting in a legal capacity.

Regulation 16/13 amends the Disputes Between Insurers (DBI) Regulation - 283/95.

The amendment to the DBI regulation allows for the insurer that receives the initial application for benefits to request one examination of the claimant under oath to assist in the determination of priority issues.

This amendment provides insurers with a second opportunity to request a claimant undergo an examination under oath.  The new DBI requirement is to assist an insurer to determine which insurer is liable to pay the claimant accident benefits.  The SABS provisions continues to assist an insurer to determine whether the claimant entitled to accident benefits.

Monday 28 January 2013

Insurance News - Monday, January 28, 2013

Here are the leading auto insurance headlines from ONTARIO AUTO INSURANCE TOPICS ON TWITTER for Monday, January 28, 2013:

FSCO Arbitrator Further Clarifies Meaning of 'Economic Loss'

In the recent case of Simser and Aviva (FSCO A11-004610, January 16, 2013), Arbitrator Lee examined the meaning of “economic loss” in s. 3(7)(e) of the SABS.

The insured provided a report from an economist regarding the definition of “economic loss”.  He argued that since it was not defined in the SABS it should be defined to include “opportunity cost”, as well as loss of time devoted to labour or leisure. The arbitrator indicated that if a broad interpretation of "economic loss" was accepted, it would negate the intent of introducing the amendment.  The outcome would be no change to the interpretation prior to September 1, 2010.

Aviva argued that economic loss should mean a financial or monetary loss. The arbitrator rejected the insured’s argument and accepted that of the insurer.  As a result, he concluded that no economic loss was sustained and as such the claimed benefits were rejected.

The insured had applied for attendant care and housekeeping benefits following his accident of November 10, 2010. None of the three providers provided supporting documentation to that would have demonstrated an actual loss. The only witness was vague and was unable to sufficiently support the claims. 

The significance of this decision is that it recognizes that the amendment made in September 1, 2010 was intended to narrow the interpretation of incurred expense. For an expense to have been incurred:

(1) the insured person has received the services;

(2) the insured person has paid or promised to pay or is otherwise legally obligated to pay the expense; and

(3) the person who provided the goods or services:
(i) did so in the course of the employment, occupation or profession in which he was ordinarily engaged, but for the accident; or
(ii) the person sustained an economic loss as a result of providing those goods or services to the insured person.
 In this particular case, part 3 of the definition was not met.

Friday 25 January 2013

Texting Also Distracts Pedestrians

A woman distracted by a text fell feet-first into a frozen canal in Birmingham — and the entire incident was caught on tape by one of England's many CCTV cameras.

Laura Safe, a newsreader for the Capital FM Breakfast Show, later joked about the tumble on Twitter, saying she "should really be called Laura UNsafe after the day I've had."

Lets hope Laura doesn't do this behind the wheel.


Wednesday 23 January 2013

Insurance News - Wednesday, January 23, 2013

Here are the leading auto insurance headlines from ONTARIO AUTO INSURANCE TOPICS ON TWITTER for Wednesday, January 23, 2013:

What Impact The Proposed Anti-Fraud Regulatory Amendments Have?

As previously mentioned the Ontario government plans to introduce new regulatory amendments as part of its anti-fraud initiative.  These amendments are just some of the recommendations made by the Anti-Fraud Task Force.  Here is a brief description of those proposed amendments and how they will impact on the auto insurance system. 

Requiring insurers to provide claimants all reasons for denying a claim

Currently subsections 36(4)(b), 36(7)(b), 37(4), 37(6)(c), 38(8), 38(14)(a), 38(14)(b), 42(3), 42(13)(b), 43(2), 44(5)(a), 45(3)(b) and 45(5)(b) of the SABS require insurers to provide claimants with "medical and any other reasons" for denying a claim for accident benefits.  These subsections were amended in September 2010 to specifically provide a full explanation to claimant for denials.  The Anti-Fraud Task Force heard from stakeholders that adjuster were not providing an a proper explanation and often just indicated that the claim was "not reasonable and necessary."  It will be interesting to see what language the government comes up with to motivate adjusters to change their behaviour.  There is also an enforcement aspect that will be needed to have an impact.

Giving claimants the right to receive a bi-monthly, detailed statement of benefits paid out on their behalf

In September 2010, the new SABS introduced by the government included section 50 which requires insurers to provide a bi-monthly benefit statement to claimants indicating the amount paid by the insurer on behalf of the claimants for medical, rehabilitation and attendant care benefits as well as the amount spent on insurer examinations.  The statement also required to inform the claimant the amount of benefits still remaining.  The experience has been that insurers have been providing these statements but with no more detail than required under the SABS.  The statements do not breakdown payments by provider or service.  Consequently, consumers are unable to determine whether the payments made on their behalf are legitimate.  The government plans to amend section 50 to require the insurer to provide more detail.  The amount of detail is not known publicly at this time.
 
Increasing the role of claimants in fraud prevention

This involves adding two new provisions to the SABS.  The first would require claimants to confirm attendance at treatment facilities. The second would require facilities to provide a copy of invoices for goods and services billed to insurers. These proposed provisions expand on an amendment made to the SABS in June 2011.  Section 46.2 was added to the SABS to require facilities to provide an insurer with information to support any invoice for goods and services billed to that insurer.  These amendments would require facilities to copy claimants on invoices and for claimants to confirm that they received those goods and services.


Making providers subject to sanctions for overcharging insurers for goods and services and banning them from asking consumers to sign blank claim forms

The government press release is rather sketchy but the Ontario government Regulatory Register is more specific on the proposed changes. First there would be an amendment to Reg. 283/95 to provide insurers with the ability to examine a claimant under oath, where this is necessary to determine which insurer should be responsible for coverage. This would be in addition to the right for an examination under oath that now exists under section 33 of the SABS. The SABS requirement is limited to matters related to entitlement to benefits.  The SABS provision is an anti-fraud measure but currently insurers sometimes use it to determine liability and therefore no longer have access to an examination under oath to determine entitlement.  A new provision in Reg. 283/95 will resolve that problem.

The government will also amend Reg. 7/00 to expand business practices that would be considered an unfair or deceptive acts or practice. In the future it will include when providers charge insurers much more for goods or services than the ordinary retail price.  This provision is currently covered by a Superintendent's Guideline.  A further amendment will ban the practice of having claimants sign blank claim forms.  

Lastly the government has signalled that it will also amend Reg. 7/00 to clarify the exemption for lawyers and paralegals in the unfair or deceptive acts or practices regulation applies to lawyers and paralegals only when they are acting in a legal capacity.  This means that lawyers will continue to be regulated by the Law Society of Upper Canada when they act in a legal capacity.  However, if a lawyer is an owner of a clinic and not acting in a legal capacity, then any business practice that is in contravention of the Insurance Act would be subject to regulatory action by FSCO.


Thursday 17 January 2013

Documentary On Texting While Driving

Ontario Ministry of Finance Has Provided Notice On Intent To Introduce Anti-Fraud Regulations Recommended by Task Force

The Ontario government Regulatory Registry has posted a notice that the Ministry of Finance intends to move forward on some of the recommendations made by the Automobile Insurance Anti-Fraud Task Force. 

The Task Force's final report contains 40 recommendations, some of which can be introduced by amending existing regulations. The regulations that are being considered for amendment are:

Amendments to Ontario Regulation 34/10 (Statutory Accident Benefits Schedule - Effective September 1, 2010)
Ontario Regulation 283/95 (Disputes Between Insurers) 
Ontario Regulation 7/00 (Unfair or Deceptive Acts or Practices)

The amendments are based on the following recommendations from the Task Force Steering Committee's Final Report:

Recommendation 4(c):  Amend the SABS to make it clear that insurers are required to provide claimants with a full explanation when refusing to pay for treatment, assessment or other benefits.

Recommendation 17
:  Amend the SABS to:
- require claimants to confirm attendance at treatment facilities and receipt of goods and services billed to insurers; and
- require insurers to itemize the list of invoices they have received when they provide a benefit statement to a claimant every two months.

Recommendation 18: Amend Reg. 283/95 to provide insurers with the ability to examine a claimant under oath, where this is necessary to determine which insurer should be responsible for coverage, without prejudice to the right for an examination under oath that now exists under the SABS.

Recommendation 28:
  Amend Reg. 7/00 to include as an unfair or deceptive acts or practice:
- charging insurers much more for goods or services than the ordinary retail price; and
- requesting a claimant to sign a blank form.

Recommendation 36:  Amend Reg. 7/00 to clarify the exemption for lawyers and paralegals in the unfair or deceptive acts or practices regulation applies to lawyers and paralegals only when they are acting in a legal capacity.

Ontario's Regulatory Registry provides information on new proposed regulatory initiatives that could affect Ontario businesses and recently approved regulations that affect business.

Regulations are approved by the provincial Cabinet.  Once a regulation is approved, a plain language summary of the regulation is posted on the Registry website, with a link to the regulation posted on the Government of Ontario's e-Laws website.
 

Caution Against Insurer Examination Physician Upheld By Appeals Board

The Health Professions Appeal and Review Board has confirmed the decision of the Inquiries, Complaints and Reports Committee of the College of Physicians and Surgeons of Ontario (CPSO) to issue a caution to an occupational medicine physician regarding her inadequate and inaccurate report.

The physician has not been named as it is the policy of the health regulatory Colleges to only named disciplined regulated health professionals not those cautioned.   In fact, I could not find an anonymized report of doctors who have been cautioned on the CPSO website.  However, as reported yesterday, the Ministry of Health intends to change that policy and increase transparency by allowing the Colleges to name professionals who have been cautioned.

In this particular case, the an auto insurance claimant was injured in a motor vehicle collision on November 1, 2010. The insurer, State Farm, sent the claimant to the occupational medicine physician (Dr. K.I.) for an insurer examination under s. 42 of the SABS. The assessment was a paper review to determine whether the claimant required further psychological assessment as a result of the accident.

The claimant complained to the CPSO that the physician failed to provide an accurate opinion of her claim for psychological services to her insurer.  The CPSO's Inquiries, Complaints and Reports Committee determined that occupational medicine physicians do perform psychological impact assessments and that the Dr. K.I. had the qualifications required to make a determination as to whether the claimant was eligible for a psychological assessment.  Dr. K.I. showed that she was trained in psychiatry and psychiatric/psychological issues and that assessments are a regular part of her practice.

However, the Committee noted that Dr. K.I.’s report contained inaccuracies with respect to the details of what happened at the time of the collision. The report omitted the fact that the police were called, the car was damaged to the extent that it had to be towed away and was written off, which the Committee wrote, “speaks to the extent of the motor vehicle accident”.    Further, the Committee found that the physician failed to address important information that supported a claim for psychological services such the fact that the claimant's family physician felt that a referral for psychological services was indicated and a number of psychological test results.

While the primary focus of the complaint to the Appeals Board was whether a psychologist rather than a physician should have conducted the assessment, the Board did not find the complaint limited to this issue.

The Board also reviewed the concern that Dr. K.I. had “failed to provide an accurate opinion of [the claimant’s] claim for psychological services to the insurer." The Board considered that the accuracy of the opinion to be the central issue and the appropriate expertise was an example of the concern.

The Board agreed with the Committee that the report was both inaccurate and inadequate and failed to comply with the College policy, “Third Party Reports,” which notes that when providing a third party report physicians must "take reasonable steps to ensure that they have obtained and reviewed all available clinical notes, records and opinions relating to the patient or examinee that could impact the findings of the report ...” Moreover, the policy also states that physicians “should ensure to the best of their abilities that the information contained in the third party report is accurate.”

So what can we learn from this case?
  1. Physicians can be used to evaluate requests for psychological services if they have appropriate training and experience.
  2. IE providers need to consider all available clinical notes, records and opinions relating to the claimant.  If they have not, the report can be challenged and the provider could be subject to sanction from their College. 
  3. The lack of transparency in these cases does not adequately protect consumers and insurers from inadequate assessors.
  4. There is a need to implement the Automobile Insurance Anti-Fraud Task Force recommendation regarding the development of professional standards, guidelines and best practices to improve the quality of independent medical assessments. 

Sunday 13 January 2013

Privacy Commissioner Supports Use Of Credit Scores, But Has Concerns About Transparency

The use of credit scores has been banned in Ontario personal auto but continues to polarize the industry, politicians and consumers.  As a result there is considerable interest in a recent Report of Findings released by the Office of the Privacy Commissioner of Canada.

The complainants are husband and wife, and were joint applicants on a property insurance policy with an Ontario insurer.  In 2009, they were surprised when their insurance renewal premium had increased considerably over the previous year’s premium. The company had been their insurer for six years and the complainants were claims free. When the complainants looked into the matter, they learned that the company had requested and received from a credit reporting agency access to their personal credit information. In their view, the company had done so without justification and without their knowledge and consent. They were also concerned about other purposes to which the company would use this information.

The insurer's position was that it had obtained express consent from the couple and its other customers for the collection of credit information at the time they apply for insurance. In the company’s view, the complainants consented when they signed their original application.  The company uses the standard Centre for Studies in Insurance Operations (“CSIO”) application form, which includes the following consent provision:
The Applicants agree that reports containing personal, credit, factual record, premium payment or claims history information may be sought or exchanged in connection with this application for insurance or renewal, extension, variation or cancellation thereof.
 In addition, the company also pointed to its website privacy statement which advises individuals that the company may collect their personal information from third parties for the purpose of administering insurance policies, as well as for other purposes.  Since 2003, the company has sent to all its Ontario policyholders a two-page notice on its policy on the collection and use of personal information at the time of their first policy renewal.  It includes an explanation that it may use the statistical score (an underwriting tool that rank-orders risk for underwriting and predicts the likelihood of delinquency over 12 months) from the consumer's credit file as one of many rating factors to determine eligibility for personal property insurance and premiums.

 Research on the issue conducted by the Office of the Privacy Commissioner of Canada revealed the following:
  • There are studies supporting the claim that credit-based insurance scoring information is a valid predictor of risk of a future loss.
  •  Despite the finding of industry studies, not all insurance companies in Canada are using credit scores for risk assessment.
  • Many Ontario consumers were not aware that their credit scores were being used to determine how much they pay for their home insurance premiums.
In the end the privacy commissioner did not object to the use of credit information for purposes of assessing insurance risk.  It was noted that section 8 of Ontario’s Consumer Reporting Act confirms that credit information may be disclosed for the purpose of underwriting insurance.  In addition, while the Ontario government has banned the use of credit information in auto insurance, it made a public policy decision to allow the disclosure of individuals’ credit information for purposes of assessing insurance risk for home insurance.

It was also acknowledged that  assessing risk is a fundamental component of the insurance business model. Therefore, underwriting tools are necessary to analyse and predict risk in order for insurance companies to be able to provide insurance products at the appropriate price.  It was also acknowledged that the statistical score is an aggregate number, which may be less intrusive than accessing an individual’s entire credit report.

However the privacy commissioner did express some concerns.  The privacy commissioner noted that there is no obvious link between credit information and insurance premiums. While the majority of risk assessment tools that insurance companies use have apparent links to the product being purchased by the consumer (claims history, for example), credit history does not. As well, how credit score is determined is closely guarded and most consumers have no way of knowing whether or how their credit information may factor into their insurance premiums. 

The privacy commissioner concluded that the company did obtained the complainants’ consent to use their credit information or the statistical score.  The language used in the consent provision on the insurance application form was found to be too general in nature. Further, it is not reasonable to expect a consumer to understand that their credit score will be used to determine the probability of them later filing an insurance claim.

Previously I had written on a report from a working group from the  Canadian Council of Insurance Regulators (CCIR) which failed to reach any conclusion on the issue, stating that it was a government issue and to reach any definitive solution would require work beyond its own scope. 

The two reports reinforce the use of credit scoring in rating home insurance policies as long as government does not introduce a prohibition similar to the one the exists in auto insurance.  However, insurers need to ensure the proper consent is obtained and that their policyholders understand how their credit information will be used.  Relying on standard industry forms and consent language may not comply with PIPEDA.

PIPEDA Report of Findings #2012-005

Tuesday 8 January 2013

Insurance News - Tuesday, January 8, 2013

Here are the leading auto insurance headlines from ONTARIO AUTO INSURANCE TOPICS ON TWITTER for Tuesday, January 8, 2013:

Administrative Monetary Penalties Are Introduced In The Insurance Sector

In the 2012 Ontario Budget, the government announced that it would implement Administrative Monetary Penalties (AMPs) in the insurance sector. AMPs will allow the FSCO to address contraventions of the law more efficiently and promote compliance.  AMP’s are civil fines that a regulator, instead of a court, imposes on someone that has committed unlawful activity. Once they are implemented, AMP’s will encourage regulatory compliance within the insurance industry and provide FSCO with a quick enforcement tool that is flexible and targeted.

 The government introduced AMPs into the insurance sector by passing changes to the following Acts:
These changes and new regulations (408/12, 409/12 and 410/12) came into force January 1, 2013.

AMPs can be imposed for contraventions of provisions of these Acts listed in the regulations that occur on or after January 1, 2013, as well as breaches of orders, undertakings and licence conditions.  The maximum penalty for an individual for a contravention of the Insurance Act and Compulsory Automobile Insurance Act is $50,000 and $100,000 for an organization or company.  The maximum penalty for a contravention of the Automobile Insurance Stability Rate Act, 2003 by an insurer is $200,000.

The contraventions to which an AMP can apply include listed Unfair or Deceptive Acts or Practices by any person or entity including insurers, agents, brokers, adjusters and those involved in the provision of goods or services to insurance claimants.
 
AMPs are not new to FSCO.  The Superintendent of FSCO already has the power to impose AMP’s on two types of financial services institutions – mortgage brokers and credit unions. AMP’s are also used by other regulators in Ontario and other jurisdictions.

The use of AMPs have been strongly supported by the insurance industry as a tool to finding fraud and was endorsed by the Ontario Automobile Anti-Fraud Task Force