Tuesday 30 April 2013

Minister Charles Sousa Announces Auto Insurance Premium Roll-Back

Today Ontario Finance Minister Charles Sousa announced that the government intends to introduce legislation that if passed with lower average annual premiums by 15% or $225 per vehicle for safe drivers.

It appears that FSCO will be authorized by legislation to compel insurers to refile rates to achieve the 15% average roll-back.  Although not mentioned, I expect FSCO will be able to make exceptions where a full roll-back could create solvency issues for an insurer.
 
The Minister said there should be an immediate impact but did not say exactly when drivers would see the savings. Based on past roll-backs, it may not be until a driver renews their insurance.

The Minister appeared to link rate roll-backs with fraud prevention initiatives and road safety improvements. FSCO will be provided with expanded powers to investigate fraud and enforce compliance.

FSCO will also be authorized to license and oversea health clinics and practitioners that invoice auto insurers. When asked about regulating the towing industry, the Minister was non-committal.

Finally, the Insurance Act is to be amended to make Superintendent's Guidelines, incorporated by reference in the SABS, to be binding. This proposed amendment appears to specifically address a view expressed by the arbitrator in the Scarlett and Belair decision.

Insurance News - Tuesday, April 30, 2013

Here are the leading auto insurance headlines from ONTARIO AUTO INSURANCE TOPICS ON TWITTER for Tuesday, April 30, 2013:

Thursday 25 April 2013

Insurance News - Thursday, April 25, 2013

Here are the leading auto insurance headlines from ONTARIO AUTO INSURANCE TOPICS ON TWITTER for Thursday, April 25, 2013:

Implementing a 15% Reduction In Auto Insurance Premiums


The NDP put forward their motion on March 27th calling upon the government “to direct FSCO (the Financial Services Commission of Ontario) to gradually reduce average, industry-wide, private passenger auto insurance premiums by 15%.”  Just what Ms. Wynne subsequently agreed to do is still a bit vague, and although the motion is non-binding, it does seem certain that some form of autom insurance premium roll-back will be enforced, either legislatively or through FSCO policy over the coming months.  

We will find out more next week when the Budget is delivered by Finance Minister Charles Sousa.  There is a possibility that the Liberals fudge a little bit and commit to something less, perhaps only a 10% roll-back with a softer commitment for a further 5%. How might a roll-back be implemented?
  1. The government could introduce legislation requiring all insurers to re-file their rates with FSCO with a 15% reduction within a specific timeframe.  However, this would require some escape clause for the regulator so that a company doesn't become insolvent.
  2. The government could introduce legislation requiring all insurers to re-file their rates with FSCO again within a specific timeframe.  The Minister would then direct the Superintendent, perhaps through a policy statement, to reduce rates by 15% (similar to Bill 5 process in 2003).  Again, some insolvency protection would likely be included.
  3. A gradual reduction in rates as the government identifies savings in the system (introducing new catastrophic impairment definition, implementing Automobile Insurance Anti-Fraud Task Force recommendations, reforming the dispute resolution system, tort reforms).

Wednesday 24 April 2013

Standing Committee on General Government - April 17, 2013 - Automobile insurance review

I've provided some highlight of the first day of hearings last week on auto insurance by the Standing Committee on General Government.  Full transcripts are available here.

Collision Industry Information Assistance
John Norris

  • Repair shops who become preferred providers of insurance companies are expected to provide labour cost discounts and purchase parts from suppliers selected by insurers and who pay the insurer a fee. Local suppliers are often not used which delays repairs.
  • Shops often have no choice but to become preferred providers because of the volume of business that comes from insurance companies.
  • Companies that rent repair estimating systems to shop sell the data collected to insurers who use it to identify policyholders who have not reported accidents.  The policyholder is rebilled to reflect a higher risk.
  • Cash settlements for physical damage claims are not always used to repair vehicles which means unsafe vehicles are on the road.
  • Supports self-regulation of the towing industry.
  • Repair shops can also identify fraudulent claims if there was an entity to which they could be reported.


FAIR, the Association of Victims for Accident Insurance Reform
Rhona DesRoches
Tammy Kirkwood
Greg Smith

  • Believe that dishonest or corrupt vendors of auto insurer medico-legal assessments or IMEs ought to suffer the same fate as dishonest treatment providers.
  • Do not see any difference between opportunistic fraud in the form of falsely inflating the value of a claim by exaggerating injuries and impairments, and the opportunism of falsely deflating the value of a claim by dishonestly trivializing and minimizing serious injuries.
  • Propose a three-strikes rule, where if an IME provider has three negative comments about the quality of their reports from arbitrators or judges, they would be denied the ability to continue to provide reports.

Insurance News - Wednesday, April 24, 2013

Here are the leading auto insurance headlines from ONTARIO AUTO INSURANCE TOPICS ON TWITTER for Wednesday, April 24, 2013:

Tuesday 23 April 2013

Standing Committee on General Government - April 15, 2013 - Automobile insurance review

I've provided some highlight of the first day of hearings last week on auto insurance by the Standing Committee on General Government.  Full transcripts are available here.



Financial Services Commission of Ontario
Philip Howell
Tom Golfetto

  • With respect to the mediation backlog, all files will be assigned to a mediator by year-end which will eliminate the backlog
  • The average accident benefit claim costs are higher in Ontario because maximum benefit levels for comparable accident benefit coverages in other provinces are less generous or unavailable.
  • There’s absolutely no question that there is some rate reduction room in the system. It varies quite a lot by company.
  • If every company had to cut rates by 15% next year without any corresponding reduction in costs, there would be many companies that would be effectively put out of business or would at least have to go to their investors and ask for a significant infusion of capital in order to remain in business.
  • Clarified that the 2010 reforms produced $2 billion in reduced claims cost but not $2 billion in additional profits.

Insurance Bureau of Canada
Ralph Palumbo
Barb Taylor
Joe Cheng
Neil Parkinson
Pete Karageorgos

  • Two actuarial reports commissioned by the IBC show that the proposed 15% premium reduction would basically exceed any profits the industry had made and put the industry in a loss situation.
  • Claim costs were lower fully by $1.6 billion just on a straightforward calendar-year-to-calendar-year basis between full year 2010 to 2012.
  • Underwriting losses were substantially reduced, but not eliminated, to $655 million in 2012 and when you allocate investment income to it, the industry has achieved a small and positive return for 2012: about 3.3%. Effectively, it was break even in 2011 according to KPMG.
  • GISA data cannot be used to measure profitability.
  • There is an explanation for the difference in claims costs from 2011 and 2012.  JSCP indicates and increase of $300 million and KPMG indicates of drop of $198 million.  JSCP’s calculation is principally driven off premiums and KPMG is driven off capital and claims reserves. So there is a difference in investment income; there are some other differences in allocation and estimates.
 
Independent Brokers Association of Ontario
Rick Orr
Randy Carroll

  • Concerned that a 15% rate reduction would make the industry unprofitable and impact on availability similar to what was going on prior to 2010.  Drivers would be forced into the Facility Association.
  • Rates have not been coming down because of uncertainty in the market due to lack of progress around changes to the definition of catastrophic impairment and the mediation backlog.  Uncertainty has now increased because of the proposed 15% rate reduction.
  • There is a growing risk if the insurance companies continue to buy brokerages and remove the independents from the market.


Ontario Trial Lawyers Association
Andrew Murray
John Karapita

  • Should consider using profits to provide better protection to accident victims. The minor injury cap should be increased from $3,500 but if the money in the system is used to reducing premiums then it won’t happen.
  • Dispute resolution can be sped up if you improve the ability to fail those mediations where it’s clearly obvious that the dispute is so large or the gap is so wide that it’s not amenable to a mediated resolution.
  • Should consider hiring some of the outsourced mediators if they’re working well, to clear through the backlog, and then, having tackled the backlog, keep them on to stay ahead of the wave.
  • Provide greater flexibility for those cases where the mediation is not well suited to actually resolving the file with a lump-sum settlement.


Canadian Automobile Association
Elliott Silverstein
Matthew Turack

  • From an auto insurance perspective, regulation of the towing industry will not only help further the industry’s image; it will help prevent the tow truck industry from being used by other industries where fraud is already prevalent. Through regulation, the industry would also include a code of conduct, safety standards, training and proper oversight, not to mention consumer protection as well.
  • CAA has conducted a pilot of a telematics product and surveyed its participants with an overwhelmingly positive response. The results showed that of those surveyed, 43% would consider enrolling in a telematics-driven product if they received a discount on their auto insurance. Also important to highlight is that 11% of those surveyed would enrol in a telematics program without any incentives or discounts whatsoever.
  • We have seen an impact since the reforms in 2010 on the accident benefits side of the business, as well, we’ve also seen a shift, and continue to reserve as such, to the bodily injury side, from accident benefits claims to bodily injury claims.
  • If we took a 15% rate reduction in a one-year period of time, it would put us into a negative underwriting profit position and it would mean that we would have very small, if any, returns from the insurance company.


Ontario Rehab Alliance
Laurie Davis
Patricia Howell
Nick Gurevich
Justine Hamilton

  • The quantum of benefits seems to be too low. At $3,500, our current system offers the lowest level of protection in Canada to about 80% of all victims who, since the 2010 reforms, are deemed to have sustained a minor injury.
  • Would like to see a licensing process for health care facilities that focuses on owns the business that provides the service, because the providers are largely regulated.
  • Would like a person to be designated as a clinical director within a practice, and that has to be a regulated provider.
  • The $2,000 assessment cap creates a situation where low cost assessments are overcompensated and complex assessments are undercompensated.
  • Concerned that when the Task Force recommendations get implemented, additional barriers to access treatment are created because the early recommendations that have been implemented seem to be headed in that direction.

Monday 22 April 2013

Thursday 18 April 2013

Insurance News - Thursday, April 18, 2013

Here are the leading auto insurance headlines from ONTARIO AUTO INSURANCE TOPICS ON TWITTER for Thursday, April 18, 2013: 

Tuesday 9 April 2013

Insurance News - Tuesday, April 9, 2013

Here are the leading auto insurance headlines from ONTARIO AUTO INSURANCE TOPICS ON TWITTER for Tuesday, April 9, 2013:

Monday 8 April 2013

FSCO Releases A Draft Statement Of Priorities For 2013

Section 11 of the FSCO Act requires FSCO to deliver to the Minister of Finance and publish in The Ontario Gazette by June 30th of each year, a statement setting out the proposed priorities of the Commission for the fiscal year in connection with the administration of this Act and all other Acts that confer powers on or assign duties to the Commission or the Superintendent.


FSCO has released a draft Statement of Priorities for 2013 and invites stakeholders to submit comments on the proposed priorities and initiatives by June 2, 2013. The draft is loaded with auto insurance initiatives which reflects the high level of activity on this file by the government over the past few years.  Here is a summary of the auto insurance initiatives:


Design and implement an information technology Enterprise Development Program
  • FSCO will develop a web-based information technology system offering integrated services to stakeholders by giving them one-window access for all of their dealings with FSCO.
Respond to the recommendations of the Auto Insurance Anti-Fraud Task Force
  • FSCO is addressing several recommendations. It is working with stakeholders to develop a consumer engagement and education strategy, developing an anti-fraud hotline, and will continue to work with the Ministry of Finance to implement recommendations from the Task Force, as directed by the government.
Respond to Auditor General’s 2011 Value-for- Money follow-up audit
  • The 2012 Ontario Budget included two initiatives that address the auditor’s recommendations.
  • In 2013, FSCO will begin the next five-year review of the auto insurance system which will include a review of cost containment strategies and benefit levels in other provinces.
  • FSCO considers several factors, including ROE, in reviewing the reasonableness of auto insurance rates filed by insurers.
  • FSCO is expanding its auto insurance attestation.
 Enhance auto insurance information and analysis
  • FSCO will conduct a closed claims study on third-party liability bodily injury claims in Ontario.
  • FSCO will review the data available through the Health Claims for Auto Insurance (HCAI) system.
Review and implement requirements for usage based auto insurance
  • FSCO is examining key regulatory issues and working with the auto insurance sector to ensure consumers are fairly treated when implementing voluntary usage-based auto insurance rating programs.
Work with Ministry of Finance on statutory and system reviews
  • FSCO will lead a mandated five-year review of the auto insurance system and a three-year review of the auto insurance risk classification and rate determination regulations.

Develop Minor Injury Treatment Protocol
  • FSCO has retained medical and scientific experts to develop an evidence-based Minor Injury Treatment Protocol.
 Work with the Ministry of Finance to develop and implement changes to the definition of Catastrophic Impairment

Work with the Ministry of Finance to complete a review of insurance company solvency regulation leading to recommendations for changes to the Insurance Act

Develop proposals to modernize disciplinary hearings for insurance agents and adjusters
  • FSCO will consult on proposals to create a model that aligns with the modern disciplinary, licensing, and enforcement processes and standards used in the other sectors FSCO regulates.
Implement fraud awareness stakeholder engagement strategy
  • FSCO will expand its fraud awareness social media outreach across all its regulated sectors.
  • FSCO will partner with law enforcement, the Ministry of Finance, the Ministry of Consumer Services, and industry associations in joint fraud awareness activities.
Work with other auto insurance rate regulators on common rate filing issues and requirements

Saturday 6 April 2013

Scarlett and Belair: The First MIG Arbitration Decision



Stakeholders and interest groups in the auto insurance sector have been anxiously waiting for over 2 years for a ruling on what types of impairments fall within and outside the SABS definition of “minor injury.”  That finally happened with week when FSCO posted a recent arbitration decision on a preliminary issue in Scarlett and Belair

Lenworth Scarlett was injured in a motor vehicle accident several weeks after the 2010 reforms became effective in September of that year.  Shortly after the accident Mr. Scarlett submitted a disability certificate that described his injuries as various sprains and strains to joints and ligaments of the lumbar spine as well as headaches and acute stress reaction.  The disability certificate describes an injury that falls under the minor injury definition.

Subsequently, a dentist reported that Mr. Scarlett also suffered from temporal mandibular joint (TMJ) syndrome.  Later there were additional diagnoses of chronic pain and psychological impairments.  Belair stuck to the original diagnosis and insisted that Mr. Scarlett’s injuries were subject to the Minor Injury Guideline (MIG) and the $3,500 cap on treatment and assessment expenses set out in the SABS. 

The arbitrator agreed with the claimant that his injuries were not minor and not subject to the $3,500 cap.  Some of his rationale will likely make some people unhappy.

The arbitrator noted that the SABS provided the Superintendent with authority to issue the MIG since it is incorporated by reference.  However, he determined that it was a non-binding interpretive aid.  As a result, he challenged the use of “compelling evidence” in determining whether a pre-existing condition would bring a claimant out of the MIG and not subject to the $3,500 cap.  However, this language has been pulled from the SABS in subsection 18(2) and was not created by the Superintendent.  In addition, it wasn't clear why there was pages of analysis regarding the use of compelling evidence since the test only relates to pre-existing conditions and none were discussed in the decision.

The arbitrator also suggests that without "clear legislative direction that would override" existing rules on the burden of proof, the onus is on the insurance carrier "to prove any exception to or limitation of coverage" based on a balance of probabilities.  So it is up to the insurer to prove that the claimant falls under the MIG and not the other way around.

The outcome of this case was something I have been predicting and has been a topic of some of my past presentations and articles.  I have always said that there will be claims which begin as soft tissue injuries and become more complex over time.  Specifically, in cases such as this one where chronic pain and psychological impairments develop.  These cases should be treated initially in the MIG but may eventually fall outside as other problems manifest themselves.

The arbitrator is correct that a “cookie cutter” approach to adjudicating these cases is problematic.  Not all soft tissue injuries follow the same pattern or resolve themselves in the same period of time. That was reflected in the 234-page report of the Neck Pain Task Force in 2008 and published in the Spine journal.

The problem with the existing MIG is that it only covers the acute phase of an injury and does not consider a possible chronic phase.  The SABS does not specifically address it either but it also does not prohibit someone who is initially diagnosed with a minor injury subsequently being diagnosed with additional impairments at a later date. 

FSCO currently is overseeing a project to conduct research on the treatment of minor injuries and hopefully some of these gaps will be addressed by the project team lead by Dr. Pierre Côté.

Finally, many of the assessments conducted by the insurer were paper reviews and it appears the arbitrator did not give them much weight.   This claim occurred shortly after the 2010 reforms became effective and the insurer may have had a large volume of claims to refer for a third party medical assessment as part of the process of trying to determine what injuries fell under the minor injury definition.  To accomodate the volume of assessments needed the insurer may have requested a large number of paper reviews.

Tuesday 2 April 2013

Insurance News - Tuesday, April 2, 2013

Here are the leading auto insurance headlines from ONTARIO AUTO INSURANCE TOPICS ON TWITTER for Tuesday, April 2, 2013:

Peter Kormos: 1952 - 2013

I had a lot of respect for Peter Kormos although he was extremely frustrating to work with,  He was truly a maverick and uncompromising who at times was a thorn in the side of his own party.  He was a socialist, populist and a excellent advocate for his many causes and beliefs - one of which was a government-run auto insurance in Ontario.

I enjoyed listening to him debate in the legislature and he had some colourful quotes which he used to describe the insurance sector.  Here are some that I remember.

"Insurance companies have the proverbial short arms and deep pockets."

"The fact is that the insurance industry is an untameable beast, an uncageable monster, an unleashable mad dog."

"The governmnt has been so deep in the back pockets of the auto insurance industry that they're spitting out lint."