Thursday, 25 April 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).
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