FSCO Releases Standard Benefit Statement Form

Another anti-fraud measure is being introduced by FSCO effective September 1, 2014.  

Recommendation #17 of the Anti-Fraud Task Force recommended that insurers itemize the list of invoices they have received when they provide a benefit statement to a claimant every two months.  Ontario Regulation 14/13 amended the SABS to include a number of changes recommended by the Task Force including providing the Superintendent with authority to issue a standard form that insurers must use when issuing bi-monthly benefit statements.

The Superintendent has now released the Standard Benefit Statement form that insurers must use. 

Insurers have eight months to perform the necessary system and operational changes in order to begin producing Statements beginning September 1, 2014. 

 

 Subsection 64 (2) of the SABS authorizes delivery of Statements by multiple methods, e.g., by ordinary mail, or by email if the claimant has agreed to delivery by email.

 

The new form can  be found here.

Insurance News - Tuesday, December 31, 2013

Here are the leading auto insurance headlines from ONTARIO AUTO INSURANCE TOPICS ON TWITTER for Tuesday, December 31, 2013:

• The NAIC reports that New Jersey had the highest auto insurance rates in 2011 with average premium of $1,302.  FSCO reports that the average premium in Ontario in 2012 was $1,551.
• OSFI releases new draft Minimum Capital Test guideline for property and casualty insurers.
• Manitoba Public Insurance says its fraud investigations saved ratepayers $8 million last year.
• Michigan becomes the 4th state to approve self-driving car research on public roads after California, Nevada and Florida. 
• New Hampshire increases speed limit on interstate highway to 70 mph.

Happy Holidays!

A happy and safe holidays to all my followers and their families.

Insurance News - Monday, December 23, 2013

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

• The Ontario government is consulting with representatives from the towing, municipal, insurance, policing, legal, leasing and financing sectors to look at options for towing industry oversight. 
• The Ontario government has announced that it has now taken action to address 18 of the 38 recommendations made by Ontario's Auto Insurance Anti-Fraud Task Force.
• This is why the 2000 Honda Civic SiR two-door gets stolen more often than any other vehicle in Canada.
• The New York Department of Financial Services has approved a telematics program that allows policyholders to install a free device in their cars that prevents teens from texting or calling while driving.
• Robots, self-driving cars—what's Google doing?

Ontario Auto Insurance Three-Year Review

Section 289 of the Insurance Act requires the Superintendent of the Financial Services Commission of Ontario (FSCO) to undertake every three years a review of Part VI of the Insurance Act (Automobile Insurance) and related regulations. In 2013, the government consolidated existing statutory auto insurance reviews and increased the frequency of a major review to every three years to better respond to the rapidly evolving auto insurance landscape in Ontario. FSCO is initiating a review of the auto insurance system to meet this requirement. 

Consumers and stakeholders are invited to provide comments and suggestions on how to ensure a stable, sustainable and competitive auto insurance system, including:

• reducing claim costs
• decreasing regulatory, product and administrative complexity for industry, service providers and consumers  
• promoting greater consumer choice and protection
• increasing transparency in communications between insurers, service providers, policyholders and claimants
• improving the availability of auto insurance for individuals and businesses
• basing treatment of motor vehicle accident injuries on scientific and medical evidence, and
• considering approaches used in other jurisdictions
   

The deadline for submissions is March 31, 2014.

Government Releases Regulations Governing the Licensing of Health Care Clinics

The Ontario Government filed new regulations as part of the process to eventually license health care clinics and assessment centres operating in the auto insurance sector.  The regulations cover a public registry of licenced facilities (Regulation 350/13), licensing of providers (Regulation 348/13) and requirements of the principle representative of each licensed facility (Regulation 349/13).  The report recommending a licensing system was made by the Automobile Insurance Anti-Fraud Task Force in 2012.

Public Registry

The public register of licensed and former licensed service provider’s licence to be maintained must contain the following information about each licensee and former licensee:

1. The name in which the service.
2. The licence number.
3. The licensee’s mailing address in Ontario.
4. The date on which the licence was issued.
5. Whether the licence is in good standing or is suspended.
6. Any conditions that apply to the licence.
7. Any periods of time during which the licence was suspended.
8. Any periods of time during which the licence was revoked.
9. The name of the licensee’s principal representative.
10. The address of every facility, branch or location in Ontario of the licensee.

Eligibility criteria for facilities

A service provider’s licence may be issued to an applicant if all of the following requirements relating to the applicant’s business systems and practices and the management of its operations are satisfied:

1. The applicant has a mailing address in Ontario that is not a post office box.
2. The applicant has an email address.
3. The application includes the particulars of the individual to be designated as the service provider’s principal representative.
4. The principal representative has provided an attestation on the applicant’s behalf relating to the applicant and the application and relating to the applicant’s compliance with the Act.
5. The application includes the particulars of each facility, branch or location in Ontario that the applicant operates or intends to operate.
6. The applicant must agree to bill insurance companies through HCAI.

Unsuitable Applicants


In determining whether an applicant is not suitable to hold a service provider’s licence, the Superintendent is required to have regard to the following circumstances:

1. Based on past conduct of the applicant, there are reasonable grounds for the belief that the applicant will not carry out in accordance with the law or with integrity and honesty the completion or submission to an insurer, reports, forms, plans, invoices or other documentation or information authorized under the SABS.
 2. Whether, having regard to the past conduct of any of the following persons, there are reasonable grounds for the belief that the applicant’s business systems and practices and the management of its operations will not be carried on in accordance with the law or with integrity and honesty:

• The applicant. 
• If the applicant is a corporation, a director, officer or shareholder of the corporation. 
• If the applicant is a partnership, a partner of the partnership. 
• If the applicant is a sole proprietorship, the sole proprietor. 
• The person to be designated as the applicant’s principal representative. 
• An employee, agent or contractor of the applicant. 

3. Based on past conduct, there are reasonable grounds for the belief that the applicant’s business systems and practices and the management of its operations will not be carried on in accordance with the law or with integrity and honesty.
 4. Whether anyone associated with the business is engaged in a business or undertaking that would jeopardize the applicant’s integrity and honesty in relation to the applicant’s business.
5. Whether anyone associated with the business has made a false statement or has provided false or deceptive information to the Superintendent, with respect to the application for a licence, or in response to a request for information by the Superintendent.


Eligibility criteria for principal representatives

An individual who satisfies the following criteria is eligible to be designated by a licensed service provider as its principal representative:

1. The individual has the following status in relation to the licensee:

• If the licensee is a corporation, he or she is a director or officer of the corporation. 
• If the licensee is a partnership, other than a limited partnership, he or she is a partner. 
• If the licensee is a limited partnership, he or she is a general partner or a director or officer of a corporation that is a general partner. 
• If the licensee is a sole proprietorship, he or she is the sole proprietor. 
• If the licensee is not a corporation, a partnership or a sole proprietorship, he or she is responsible for the day-to-day control and management of the licensee. 

 2. The individual has the authority to make decisions on behalf of the licensee with respect to matters related to the licence and matters related to the licensee’s compliance with the Act and to communicate with the Superintendent about those matters.
3. The individual has the authority to exercise the powers and perform the duties described above.


Powers and duties of principal representatives

1. Take reasonable steps to ensure that the licensee complies with the Act.
2. Take reasonable steps to ensure that the licensee’s business systems and practices and the management of the licensee’s operations are carried on in accordance with the law and with integrity and honesty.
3. Ensure that the licensee takes reasonable steps to deal with any contravention of the Act.
4. Make recommendations to the licensee regarding changes in its business systems and practices and the management of its operations, as necessary, to ensure that these standards are achieved.
5. Take reasonable steps to ensure that a system of supervision is in place to ensure that these standards are achieved.
6. Provide such attestations on the licensee’s behalf relating to the licensee and relating to its compliance with the Act, as may be required by the Superintendent and within the time required by the Superintendent.

Ontario Government Tightens Up SABS

The Ontario Government filed amendments to the SABS to tighten up a number of provisions to clarify the policy intent.  The amendments are likely part of its Rate Reduction Strategy in that it provides the insurance industry with more cost certainty with regards to these provisions.  The amending regulation is Regulation 347/13 and comes into force on February 1, 2014.

1. Minor Injuries

The Government has clarified that a claimant who seeks an exemption to the $3,500 minor injury cap because of a pre-existing condition must provide medical documentation that precedes the accident date.

2. Attendant Care Benefits

The Government has made a clarification in cases where the attendant care benefit is based on the economic loss of the person who provides attendant care services to a claimant.  In these cases the amount of the benefit cannot exceed the actual income loss of that person.  This amendment reverses the impact of Henry v. Gore Mutual.

3. Weekly Benefit Election

The Government has made the election under section 35 final.  A claimant who qualifies for more than one of the income replacement, caregiver or non-earner benefits must choose one.  The claimant will no longer be able to elect to receive another benefit at a later date.

Insurance News - Tuesday, December 17, 2013

Here are the leading auto insurance headlines from ONTARIO AUTO INSURANCE TOPICS ON TWITTER for Tuesday, December 17, 2013:

• Auto insurance profits to be rolled back in Nova Scotia as rate of return deemed too high by review board.
• Pennsylvania auto insurance bill would introduce collision coverage with no deductible.  State law currently requires a minimum deductible of $100.
• California has released draft regulations on licensing companies wanting to test self-driving cars.  Though not sure how Google has been legally able to log 500,000 miles on their self-driving cars. 
• In addition, Michigan will soon become the 4th U.S. state to allow and regulate the testing of self-driving cars.
• A Dutch bus company is testing technology that monitors whether a driver is becoming drowsy.

Ontario Auditor General's Update Report on Auto Insurance Regulatory Oversight

The Auditor General of Ontario's 2011 Annual Report reported on FSCO's oversight of the auto insurance system.  The report made 7 recommendations covering SABS costs, fraud, the rate approval process, the dispute resolution system, performance measures, MVAC's unfunded liabilities and health care assessments.  It is the practice of the Auditor General to do a follow up two years after an audit.  The follow up report has now been released.

The Auditor General reports that FSCO has made progress in addressing most of her recommendations, with significant progress made on several.  Although average injury claim costs had declined significantly since 2010, at the time of the follow up average automobile insurance premiums had not. In addition, discussions held to date had not resulted in any increase to the amount recovered from auto insurers for health system costs incurred to care for people injured in motor vehicle accidents. The status of the actions taken is summarized following each recommendation.

Recommendation 1:

FSCO should:

• implement regular interim reviews of the SABS to monitor trends such as unexpected escalating claims costs and premiums between the legislated five-year reviews, in order to take appropriate action earlier, if warranted;
• monitor ongoing compliance with the MIG, expedite the work develop evidence-based treatment protocols for minor injuries, and identify and address any lack of clarity in its definitions of injuries;
• implement its plans as soon as possible to obtain assurance that insurance companies are judiciously administering accident claims in a fair and timely manner; and 
• examine cost-containment strategies and benefit levels in other provinces to determine which could be applied in Ontario to control this province’s relatively high claims costs and premium.

Status

On August 16, 2013, the government proclaimed legislative changes to consolidate multiple auto insurance reviews, including the former five-year review of auto insurance, the three-year review of risk-classification regulations and the two-year review of the SABS. The new consolidated review of the auto insurance system will be initiated at least once every three years, beginning in 2013. 

In July 2012, FSCO retained the consulting services of medical and scientific experts who have been working to develop an evidence-based treatment protocol for the most common injuries from motor vehicle accidents. This is a two-year project. The consultants provide regular updates to the Superintendent and, as directed in the 2013 Budget, FSCO will provide an interim report this year on the progress of the project. The interim MIG will be assessed upon completion of the consultants’ report and will be addressed as part of a future comprehensive statutory reviews.

In summer 2011, FSCO introduced a new annual requirement that each insurance company provide it with a statement from its chief executive officer attesting that it had controls, procedures and processes in place to ensure compliance with legislative requirements for the payment and handling of claims.

In addition, new regulations came into force on January 1, 2013, that provided FSCO with the power to impose administrative fines on insurers for not complying with legislative and approval requirements.

As a result of changes to the SABS in September 2010, the auto insurance industry reports that Ontario’s average injury claim cost has decreased more than 50%, from about $56,000 in 2010 to $27,000 in 2012. The difference between Ontario’s average injury claim costs and those paid by other provinces has narrowed, although Ontario’s costs now stand at approximately three times higher than those of other provinces. However, lower accident benefit claim costs have not yet resulted in corresponding lower average premiums paid in Ontario, where the average premium was $1,551 in 2012, or 8% higher than in 2010, and still the highest in the country.

In August 2013, the government introduced a number of initiatives as part of a strategy to reduce average auto insurance rates by a target of 15%.

Recommendation 2:

To reduce fraud in Ontario’s auto insurance industry FSCO should:

•  help identify potential measures to combat fraud, including those recommended by the IBC and those in effect in other jurisdictions, assess their applicability and relevance to Ontario, and, when appropriate, provide advice and assistance to the government for their timely implementation; and
• ensure development as soon as possible of an overall anti-fraud strategy that spells out the roles and responsibilities of all stakeholder.

Status

In 2011, the government appointed the Ontario Auto Insurance Anti-Fraud Task Force to determine the scope and nature of automobile insurance fraud and make recommendations about ways to reduce it. As part of the Task Force, the Ministry of Finance retained consultants to provide research about how other jurisdictions combat fraud, analysis of the potential range of fraud in Ontario’s auto insurance system and advice on the regulation of health care facilities (provided by Willie Handler).

The Task Force made 38 recommendations that form an integrated anti-fraud strategy focused on prevention, detection, investigation and enforcement, along with enhanced and clearer regulatory roles and responsibilities.

New regulations came into force on June 1, 2013, which, among other things:

• require insurers to provide claimants with all the reasons for which a medical or rehabilitation claim was denied; 
• require insurers to itemize expenses in a bi-monthly statement to claimants of medical- rehabilitation benefits paid out on a claimant’s behalf;
• increase the role of claimants in preventing fraud by requiring them to confirm their receipt of treatment, goods or other services; and 
• make third-party service providers subject to sanctions for overcharging insurers for goods and services, and prohibiting them from asking consumers to sign blank claim forms.

In February 2011, to help streamline the claims-handling process, FSCO made usage of the HCAI system mandatory.

Recommendation 3:

To ensure premiums are fair and consistent, FSCO should:

• update and document its policies and procedures for making rate decisions and for properly assessing rate changes in light of actual financial solvency concerns of insurance companies; 
• review what constitutes a reasonable profit margin for insurance companies when approving rate changes, and periodically revise its current assessment to reflect significant changes; and 
• establish processes for verifying or obtaining assurance that insurers actually charge only the authorized rate.

Status

FSCO updated its policies and procedures for processing and approving rate applications effective May 2012. Rate decisions were based on a defined range that was acceptable when a proposed rate differed from the FSCO actuarial service’s assessments. Staff were required to get written approval from the Superintendent when a proposed rate decision is greater than the acceptable range.

In October 2012, FSCO retained a consultant to review the reasonable profit margin rate that had been established for auto insurance rate filings, including a financial assessment and consultation with the auto insurance industry.  In the final report, the consultant recommended that FSCO should consider moving to either a five-year or 10-year rolling average for a return-on-equity benchmark rate.  In August 2013, FSCO decided that an eight-year rolling average for a return-on-equity benchmark rate would be used going forward.  According to FSCO, the new methodology generated an 11%return-on-equity benchmark for 2013.  In addition, FSCO adopted another benchmark that assesses the insurer’s premium-to-equity ratio that is consistent with federal solvency and capital requirements. FSCO also has begun a review of the feasibility of moving to a return-on-premium approach, which it expects may be relatively more simple and transparent than the return-on-equity benchmark.

Since 2012, FSCO has required that the chief executive officer of an auto insurance company annually attest in writing that it provided auto insurance in Ontario in accordance with approved rates, risk classification systems and underwriting rules.

FSCO implemented a new annual requirement for insurance companies to attest that they had independent audit processes in place to confirm that approved rates were charged by the insurer.

Recommendation 4:

To ensure that FSCO meets its mandate to provide fair, timely, accessible, and cost-effective processes for resolving disputes over statutory accident benefits, it should:

• improve its information-gathering to help explain why almost half of all injury claimants seek mediation, as well as how disputes are resolved, and to identify possible systemic problems with its SABS benefits policies that can be changed or clarified to help prevent disputes; and 
• establish an action plan and timetable for reducing its current and growing backlog to a point where it can provide mediation services in a timely manner in accordance with legislation and established service standards.

Status

The government announced in its 2012 and 2013 Budgets that a review of the auto insurance dispute resolution system would take place.  FSCO also completed an internal examination on closed mediation cases and the corresponding insurers’ claims files to gather information on the reasons for the high number of claimants who were seeking mediation and how these disputes were resolved.

In August 2013, the government announced the appointment of an expert to undertake the review and make recommendations on transforming the current system. An interim report was due in fall 2013 and a final report by the end of February 2014 (Willie Handler is providing support to the review).

To address FSCO’s growing backlog of mediation cases, Treasury Board approved in December 2011 FSCO’s request for an additional $38.2 million over three years to hire a private dispute resolution service provider to supplement FSCO’s own staff.  With this contract help, and with new software that has made mediation scheduling more efficient, all mediation files had been assigned as of August 19, 2013, and the backlog had been eliminated.

Recommendation 5:

In order to provide the public, consumers, stakeholders, and insurers with meaningful information on its auto insurance oversight and regulatory activities, FSCO should report timely information on its performance, including outcome-based measures and targets that more appropriately represent its key regulatory activities and results.

Status

During the 2012/13 fiscal year, FSCO finalized its corporate Performance Management Framework that details for each of its divisions, including auto insurance, a set of performance measures and targets that link to its long-term goals and strategic priorities.  The Performance Management Framework was posted on FSCO’s website.

In addition, in June 2012, FSCO posted on its website new standards for its turnaround time for approving insurers’ filings for private passenger auto insurance rates and risk classification changes. The performance results for 2012/13 were posted on the FSCO website in June 2013.

Recommendation 6:

To ensure that the MVACF is sustainable over the long term and able to meet its future financial obligations, FSCO should establish a strategy and timetable for eliminating the Fund’s growing unfunded liability over a reasonable time period and seek government approval to implement this plan.

Status

No changes had been made to address the unfunded liability of the Fund, but FSCO continues to formally monitor the status of the Fund, and ongoing Ontario automobile insurance reforms have had a positive impact on the Fund’s unfunded liability. Any changes to funding would require amendments to regulations and to the existing MVACF fee on issue or renewal of an Ontario driver’s licence, which are the responsibilities of the Ministry of Finance and the Ministry of Transportation

Recommendation 7:

In view of the fact that it has been five years since the last review of the assessment of health system costs owed by the auto insurance sector despite the significant increase in health care costs related to automobile accidents over the same period, FSCO should work with the Ministry of Finance, the Ministry of Health and Long-Term Care, and the insurance industry to review the adequacy of the current assessment amount.

Status

The Ministry of Finance is undertaking to review the current assessment amount, as noted in the Minister’s August 24, 2013, policy statement.

The Auditor General's 2013 audit update on FSCO can be found here.

Insurance News - Monday, December 9, 2013

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

• CISRO and CCIR have created a website Canadian Insurance Regulators Disciplinary Actions database of regulatory decisions issued by insurance regulators members.
• The UK wants to become a world centre for the development of driverless cars and to do so it will conduct a review next year to ensure that the legislative and regulatory framework is in place for such vehicles to be incorporated on Britain's roads.
• An analysis of the U.S. personal auto insurance market indicates that low investment yields have led to higher rates.
• MADD suggests that bad drivers may receive the biggest savings under Ontario's Insurance Reduction Plan.
• There has been a significant increase pedestrian deaths on Toronto roads.

Insurance News - Thursday, December 5, 2013

Here are the leading auto insurance headlines from ONTARIO AUTO INSURANCE TOPICS ON TWITTER for Thursday, December 5, 2013:

• An academic feels self-driving cars may not be such a big deal because it is hard or near impossible for the technology to detect pedestrians.
• Saskatchewan to introduce tougher impaired driving penalties including longer suspensions, vehicle impoundments and mandatory ignition interlock requirements.
• This is a very good update on no-fault auto insurance in the U.S.
• Volvo ramping up its efforts to put self-driving cars on the road with the first autonomous vehicles as early as 2014.  They will run a pilot with 100 self-driving Volvos on public roads.
• Ratio of auto insurance expenditure to income is down in the U.S. but does that mean insurance is affordable?

Scarlett and Belair MIG Decision Overturned in Appeal

In the well known Scarlett and Belair case, the claimant was injured in an accident on September 18, 2010. He took the position that he while he did suffer sprains and strains, he also suffered from pre-existing conditions and subsequent psychological disabilities that took him out of the Minor Injury Guideline. After the accident, he was diagnosed with temporal mandibular joint (TMJ) syndrome.  Later there were additional diagnoses of chronic pain and psychological impairments.

In a preliminary issue hearing, the arbitrator found that the MIG is informational and non-binding that was not altered by its incorporation in the SABS.  He also found that the insurer had the onus of proving that the claimant had sustained a minor and and was subject to the $3,500 minor injury limit. In coming to his conclusion, the arbitrator also relied upon a number of cases, his own arguments, and his own English/French translations – without providing the parties the opportunity to make submissions.

The arbitrator's decision caused considerable angst within the insurance industry and a concern that the introduction of a monetary cap for treating and assessing minor injuries would not hold - a significant change introduced by the government in September 2010. However, the Director’s Delegate has allowed the insurer’s appeal in the Scarlett and Belair decision and more importantly confirms that guidelines incorporated in the SABS are binding.  This is important to establish considering the MIG is not the only guideline incorporated in the SABS.

Some of the key points raised in the Director’s Delegate’s decision:

• The arbitrator failed to address why he found that the claimant’s chronic pain, depressive symptoms and TMJ disorder were separate and distinct from his soft tissue injuries and were not the sequelae thereof.
• The arbitrator never addressed the test in the SABS of whether the claimant’s impairment was “predominantly” a minor injury.  The SABS recognizes that a claimant may have mutiple injuries but that does not automatically bring he or she out of the minor injury category.
• The arbitrator erred in finding that the burden of proof lay on the insurer to show that the claimant was subject to the MIG. The burden of proof always rests on the insured of proving that he or she fits within a scope of coverage.
• The arbitrator was incorrect in implying that $50,000 in medical and rehabilitation expenses was some sort of default coverage.
• The arbitrator erred in finding that “compelling evidence” simply means “credible evidence”, finding that the word “compelling” means more than “credible”.  As well, the discussion of "credible evidence" was not relevant to this case.
• The arbitrator erred in finding that the MIG was not binding because it was only a Guideline. The Director’s Delegate found that the MIG is binding because it was issued pursuant to section 268.3 of the Insurance Act, the definition of “MIG in the SABS refers to section 268.3, and the MIG is then applied in section 18 of the SABS, thereby incorporating the MIG into the SABS by reference.
• The arbitrator should not have been conducting his own research and relying on cases and statutory provisions that he then raised on his own after the hearing, which did not provide the parties the opportunity to respond.

The Director's Delegate remitted the matter to a full hearing before a different arbitrator, on all issues as between the parties.  The new arbitrator may still find that the claimant's impairments fall outside the definition of "minor injury" in the SABS.  It may well be that because of the claimant's other impairments (TMJ syndrome and chronic pain), an arbitrator may find that the claimant's impairment was not predominantly a minor injury.  Should that be the case, hopefully the decision will be based on the policy intent of the 2010 reforms and the SABS.