Thursday 30 May 2013

Insurance News - Thursday, May 30, 2013

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

Wednesday 29 May 2013

Electronic Proof



One would think that the standard auto insurance card seems like a throwback in this increasingly paperless age, but that it is not the case in Canada.

Despite smartphones, tablets and other technological gadgets now being part of everyday life, providing proof of auto insurance coverage is like a nostalgic trip back to the days of our parents or grandparents. In Canada, insurance companies and brokerages mail, fax and e-mail copies of the standard pink insurance slips to policyholders upon renewal or policy changes. 

In March 2013, Industrial Alliance Insurance and Financial Services provides its group health customers in Quebec with the option of an electronic version of their plastic insurance card. However, there is currently no movement to do the same for auto insurance policyholders.

In Ontario, the Compulsory Automobile Insurance Act (CAIA) states that drivers must “have in the motor vehicle at all times, (a) an insurance card for the motor vehicle; or (b) an insurance card evidencing that the operator is insured under a contract of automobile insurance, and the operator shall surrender the insurance card for reasonable inspection upon the demand of a police officer.”

Despite confirming existence of a card, fake or invalid insurance cards can be easily acquired. Obviously, an invalid card is going to look legitimate if an unscrupulous driver cancels the policy immediately after getting the card.
 
The Uninsured Vehicle Project, an initiative led by Ontario’s Ministry of Transportation, provides an electronic means of determining whether or not a vehicle carries mandatory insurance coverage when licence plates are being renewed by checking with the insurance industry’s online database. The wrinkle is that police officers do not have access to the database and accept as valid any insurance card that appears to not have expired.

CHANGING TIMES
In Ontario, the five-year review report of the superintendent of financial services at the Financial Services Commission of Ontario (FSCO) raised the issue of electronic commerce back in 2009. The superintendent noted he had received feedback from insurers that they would like to see legislation and regulations updated so that transactions regarding applications, policies, endorsements and renewals could be conducted electronically. 

The submission of the Canadian Association of Direct Response Insurers stated, “Of concern also is the requirement to provide a paper copy of the liability card. Companies should be able to provide the liability card along with all the other documentation in electronic form if the customer approves.”

The regulator indicated its primary concern regarding electronic commerce is the production of fraudulent liability cards. However, FSCO also acknowledged that fraudulent paper insurance cards currently exist and technological solutions may exist to address these concerns.

Based on the submissions received, FSCO noted it appeared that not all industry stakeholders were aware that Ontario’s Electronic Commerce Act, 2000 already enables auto insurers and others doing business in the province to implement electronic document delivery and electronic counterparts to traditional written documents and written signatures, provided certain functional equivalency rules are followed.

The five-year review signalled to the insurance industry that electronic documents, including the insurance card, was acceptable under existing Ontario law yet no insurer has introduced electronic proof on insurance over the past four years.

Steve Whitelaw, senior vice president of business solutions at The Dominion of Canada General Insurance Company, says that guidance is required from regulators in all jurisdictions with respect to security and auditability requirements. In addition, there are other logistical issues that need to be addressed by The Dominion that are relevant to its distribution of insurance through brokers, Whitelaw reports.

The capability to issue electronic policy documentation, including liability slips, is on The Dominion’s roadmap. “There are competing priorities,” he says, pointing out that “this topic does not appear to be a priority for consumers, and from our perspective, The Dominion’s focus remains on the replacement of our legacy systems.”

Ontario law is silent about whether or not an electronic version of the insurance slip counts as valid proof of insurance, but it is uncertain if police officers would accept an electronic version.

Consider such an incident: a driver in a recent minor accident could not locate his pink insurance slip. He contacted his broker from the scene of the accident who e-mailed him his pink slip as a PDF file. The police officer responding to the accident informed the driver that he bought himself one hour to produce a paper copy.

Bob Percy, deputy chief of the Halton Regional Police Service, says he sees an electronic insurance card being accepted by police “as long as there was comprehensive awareness of the process, and assurances that the material could in no way, shape or form be manipulated to create false, but legitimate-looking insurance slips.”

But how many people would be comfortable handing their personal devices to an officer who requires the information to complete the accident report?

Percy suggested the ideal approach would be to have an insurance database that officers could access, similar to the Canadian Police Information Centre (CPIC) database. This concept would be an up-to-date information repository that confirms insurance particulars with no reliance on the driver.

SERVICE ADJUSTMENT
Last year, J.D. Power and Associations issued results of a survey of the insurance industry in the United States, entitled, 2012 U.S. Auto Insurance Study Management Discussion.

“As customer preferences and interaction behaviours continue to evolve, insurers must be prepared to adjust their service strategies to keep pace with those changing preferences,” the report notes. “All insurers face the reality that customer expectations are being reshaped by market forces beyond their control — whether through the emergence of devices, such as the iPhone or iPad and platforms such as Twitter or Facebook, or through changing servicing dynamics being introduced in other industries. Every insurer must recognize that adapting to the changing service — channel preferences is a decision of necessity that will need to be made in the not-too-distant future. Ultimately, it all comes down to customer choice — today that choice is rapidly expanding to include a variety of new self-service tools and interfaces.”

The Property Casualty Insurers Association of America (PCIAA) reports that 11 U.S. states — Alabama, Arizona, Arkansas, California, Idaho, Kentucky, Louisiana, Minnesota, Mississippi, Virginia and Wyoming — now have laws or regulations on the books that allow for electronic insurance cards to be used for both vehicle registration and when being pulled over by the police.

In Colorado, drivers can use the e-cards for registration, but will not for police traffic stops. However, the he state is considering legislation that would extent electronic proof to traffic stops as well.

PCIAA reports that the governors of Kansas and Indiana are expected to sign legislation in their states, while several other states — Florida, Georgia, Hawaii, Indiana, Iowa, Maine, Michigan, Missouri, Ohio, Oregon, Rhode Island, South Carolina, Texas, Utah, Washington and Wisconsin — have pending legislation on the matter.

For drivers in states that allow for electronic insurance cards, it would be wise to still have a paper copy handy when driving outside of home jurisdiction.

PRIVACY MATTERS
There are some valid concerns about e-cards. For example, what privacy rights, if any, are being handed over when someone — let alone a police officer — is allowed to look at a driver’s phone to view his or her insurance card? While some states have put limits on what can be viewed — Arizona, for example, specifies that showing an e-card does not imply consent to view other items on a wireless device — many have no such language.

It appears inevitable that electronic proof of insurance will come to Canada. The technology exists and both government regulators and police forces appear open to the change. It just seems that no insurer particularly wants to be the first to make the move.

Monday 27 May 2013

Insurance News - Monday, May 27, 2013

Here are the leading auto insurance headlines from ONTARIO AUTO INSURANCE TOPICS ON TWITTER for Monday, May 27, 2013:

Thursday 16 May 2013

Insurance News - Thursday, May 16, 2013

Here are the leading auto insurance headlines from ONTARIO AUTO INSURANCE TOPICS ON TWITTER for Thursday, May 16, 2013:

Friday 10 May 2013

Auto Insurance Sections of Budget Bill (Bill 65)

The first reading version of the Budget Bill (Bill 65) is now available online.  Approximately 50% of Bill 65 is related to auto insurance which clearly illustrates how politicized the auto insurance file has become.  The Bill, if passed by the legislature, would amend the Automobile Insurance Rate Stabilization Act, 2003, Financial Services Commission of Ontario Act, 1997 and the Insurance Act.

Amendments to the Automobile Insurance Rate Stabilization Act, 2003

The Automobile Insurance Rate Stabilization Act, 2003 (Bill 5) was passed in 2003 to temporarily freeze auto insurance rates for private passenger vehicles and to provide for the review and regulation of risk classification systems and automobile insurance rates for private passenger vehicles.  Some of the provisions were repealed in subsequent years.

A new provision would establishes an industry-wide target for the reduction of rates that insurers are permitted to charge for the private passenger vehicles.  The rate would be set 15%.   A regulation would be approved that sets out how to determine an industry-wide average rate reduction as well as the time frame for achieving the rate reduction. The regulation could allow for periodic reductions as opposed to a one-time reduction.

The Superintendent would be able to order an insurer to file new rates before a certain as well as order the insurer to begin using the new rates as of a specific date.  An insurer's rates would be presumed to be not "just and reasonable" if in the Superintendent's opinion they do not contribute to the 15% rate reduction target.  In addition, the Superintendent would be able to refuse a rate filing if the proposed risk classification system is not reasonably predictive of risk, the proposed rates would impair the insurer's solvency or the proposed rates are excessive in relation to the insurer's financial circumstances.

An order by the Superintendent is final and not subject to appeal.

Amendments to the Financial Services Commission of Ontario Act, 1997

The sectors regulated by FSCO would be expanded to include service providers licensed by FSCO.  A service provider's licence can be revoked if they have not paid an assessment required by the Act.

 Amendments to the Insurance Act

The amendments to the Insurance Act fall into 2 categories: those that related to the payment of statutory benefits and those that relate to the regulatory powers of the Superintendent.

A new category of accident benefits would be created called "listed expenses."  Listed expenses would include medical, rehabilitation and attendant care benefits under sections 15, 16 and 19 of the SABS as well as assessments and examinations under sections 25 and 44 of the SABS.

An insurer would not be able to make payment for listed expenses to a service provider unless the provider was licensed by FSCO.  An insurer would be able to reimburse a claimant.  Other exceptions may be set out in regulations. Licensed service providers would be required to comply with business standards which are to be set out in regulations and submit invoices directly to an insurer (or HCAI).  The classes of licences would also be set out in regulations.

The Superintendent would be authorized to issue a licence if he is satisfied that the service provider applying meets all the requirements for licensing.  The Superintendent can impose conditions on a licence and can revoke or suspend a licence for non-compliance.  A licence is not transferable.  Decisions of the Superintendent can be appealed to the Financial Services Tribunal.

A licensed service provider would have to designate a principal representative based on criteria set out in regulations and that person would have to carry out certain duties set out in regulations.

There is a new provision that clarifies that a guideline issued by the Superintendent would be binding if it is incorporated by reference into the SABS.

The three auto insurance statutory reviews (in sections 289, 289.1 and 417.1) would be combined into one review that must occur at least every three years.  The Minister would provide the report to the legislature.  The first review would take place in 2013.

The powers of the Superintendent would be expanded to investigate anyone who was previously in the business of insurance, licensed service providers or anyone else the Superintendent considers may be engaged in unfair or deceptive acts or practices.  This would include examining records, books and other information held by a licensed service provider.

Insurance News - Friday, May 10, 2013

Here are the leading auto insurance headlines from ONTARIO AUTO INSURANCE TOPICS ON TWITTER for Friday, May 10, 2013:

Thursday 2 May 2013

2013 Ontario Budget - Auto Insurance

The section on auto insurance in the Ontario Budget document is likely the longest I can remember.  Certainly the auto insurance file has been given a higher profile given rate relief is one of the demands coming from the NDP over the past few months.

To achieve the 15% premium reduction, the government will introduce legislative amendments that would, if passed:
  • Legislate a premium reduction of 15% on average within a period of time to be prescribed by regulation.  The Budget does not indicate whether that time period would be 1 year as demanded by the NDP.
  • Require insurers to offer lower premiums for consumers with safe driving records. This is an interesting twist.  If the average reduction is 15% and safe drivers are being targeted for the biggest reductions, does that mean they will see greater than 15% reductions?  Also it will be interesting to see how a "safe driving record" is defined.
  • Give the Financial Services Commission of Ontario (FSCO) the authority to license and oversee business practices of health clinics and practitioners who invoice auto insurers.  This is part of the implementation of recommendations made by the Auto Insurance Anti-Fraud Task Force.
  • Provide the Superintendent of Financial Services with the authority to require insurers to file for rates.  Bill 5 in 2003 removed from the Insurance Act, the authority for the Superintendent to require insurers to refile their rates.  That authority is finally being restored.
  • Make the Superintendent’s Guidelines binding — incorporated by reference in the Statutory Accident Benefits Schedule.  This is directly related to the recent Scarlett and Belair arbitration decision. It may soothe jittery insurance company nerves but is not likely needed. 
  • Expand and modernize the Superintendent’s investigation and enforcement authority, particularly in the area of fraud prevention.  This is also part of the implementation of recommendations made by the Auto Insurance Anti-Fraud Task Force.
  • Consolidate statutory auto insurance reviews. This recommendation was first made by the Superintendent in the 2009 Five-Year Review Report but has never been implemented. Currently, FSCO conducts a two-year review of the statutory accident benefits, a three-year review of the rates and classifications system and a five-year review of the auto insurance system  There are no cost savings related to this proposed legislative amendment.
There are some additional changes being proposed.  A new independent annual report by outside experts will look at the impact of reforms introduced to date on both costs and premiums. The report will review industry costs and changes to premiums, and recommend further actions that may be required to meet the government’s reduction targets.  This appears to overlap with the existing statutory auto insurance reviews so it will be interesting to see who will be involved in developing these annual reports and what they will contain.

Other government announcements include:
  • A review of the current auto insurance dispute resolution system by an expert and propose legislative amendments in the fall of 2013.  This initiative was included in the 2012 Budget.
  • Basing auto insurance benefits on medical evidence, including directing the regulator to provide an interim report this year on the progress of the Minor Injury Treatment Protocol project.
  • Investigating additional new measures to reward safe driving and reduce costs and premiums.
The government will call on FSCO to reduce the current 12% return-on-equity benchmark used in rate filings. Depending on the new benchmark selected, this could fund a significant portion of the 15% rate roll-back.

The government will also conduct further study and consultation on other initiatives to reduce costs, including provincial oversight of towing and amending the definition of catastrophic impairment in the Statutory Accident Benefits Schedule. There are both contentious issues to the government is only committing to further review and consultation.

Insurance News - Thursday, May 2, 2013

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