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  Some of the provisions were repealed in subsequent years.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.

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