Tuesday 18 October 2016

Ontario Auto Insurance Rates Are Heading Back Up

FSCO's latest quarterly rate approval numbers have been released and the news is not good for consumers. Half the savings as a result of statutory accident benefit cuts that became effective on June 1 are already gone.

 FSCO approved 25 private passenger automobile insurance rate filings during the third quarter of 2016. These 25 insurers represent 63.56% of the market based on premium volume. Approved rates increased on average by 1.5% when applied across the total market. This wipes out almost half of the modest 3.07% reduction in approved rate filings in the first quarter of 2016. Depending on rate filings in the last quarter, we could see a net increase in rates for the 2016 calendar year.

 The government has abandoned the the 15% rate reduction promise made in August 2016. However, if you aggregate all the rate changes since the 2013 announcement, the total rate reduction is 8.34% when applied across the total market.

 Product reforms have proven to be an ineffective tool for controlling auto insurance premiums in Ontario. As long as transactional costs within the system remain high, Ontario drivers will continue to pay high rates. A new delivery system is needed to bring Ontario's costs in line with other jurisdictions. For a discussion on how to address the systemic problems in Ontario, see my article entitled Ontario's 25-Year No-Fault Journey.

Early LAT Decisions Suggest Reforms May Be Working

Effective April 1, 2016, the Licence Appeal Tribunal began accepting applications to the new Automobile Accident Benefits Service (AABS) system with an aim to quickly resolve disagreements between individuals and insurance companies about statutory accident benefits.  The guiding principles created for new Tribunal were originally developed by Justice Douglas Cunningham and myself in a report released in 2014

 Over the past few month, there have been a handful of decisions from the Tribunal. I decided to review nine decisions to determine whether there were some early trends.

There seven written hearings and two oral hearings. The two oral hearings were conducted by teleconference. This is consistent with the direction provided in the Cunningham report that the majority of hearings should be conducted through written submissions.

Many FSCO decisions dealt with procedural issues rather than benefit entitlement. Often, hearings were held to listen to preliminary issues. Although the sample size is small, it appears only three decision did not deal directly with benefit entitlement. One dealt with a claimant failing to attend insurer examinations, Another dealt with whether a claimant had the ability to elect to receive either the non-earner benefit or income replacement. The last one involved a claimant trying to claim the cost of preparing an application on an issue that was resolved prior to the case conference. These decisions may suggests that the LAT process may also be bogged down with procedural issues. This is not what Cunningham had envisioned.

The average time between the hearing date and the release of a decision was 51.5 days. This is a significant improvement compared to FSCO timelines but we need to remember it's still early. Let's see how this trends in the future. The decisions themselves have been very short. Somewhere between five to ten pages.  

I did not review the quality of the decisions made by Tribunal adjudicators. I leave that for the users to determine. However, so far, the first few decisions have lived up to the reforms objective of a more expeditious process.