We've Been Down This Road Before

Once again, Ontario has announced another package of auto insurance reforms.

With a provincial election just months away, the Ontario government recently announced yet another plan to make auto insurance affordable for Ontario drivers. The plan is focused on addressing fraud and providing better access to care.

The announcement by Charles Sousa, Ontario’s minister of finance, along with attorney general Yasir Nasqvi, follows several months of consultation with a broad range of stakeholders regarding David Marshall’s report, Fair Benefits Fairly Delivered: A Review of the Auto Insurance System in Ontario, released in April 2017. Marshall’s report contained 35 recommendations to reform the auto insurance system.

I reviewed David Marshall’s report and the province’s subsequent announcement in December 2017 with interest. I spent more than 20 years of my professional life designing similar reform packages and have a good sense of how the Ontario system will respond to Marshall’s proposed reforms.

Although the government’s plan announced in December 2017 purports to flow from David Marshall’s report from last spring, only the creation of a new network of independent evaluation centres [IECs] originated from Marshall’s report. Programs of care and contingency fees, announced in December and mentioned in Marshall’s report, are work already underway by the government. Marshall, an advisor to Ontario’s finance minister on auto insurance and pensions, never dealt with fraud.

For me, Ontario’s plan is an admission that the Marshall report does not provide much in the way of workable solutions for the government. It would be a stretch to suggest that there will be savings derived from the proposed IECs. The system will not cease to be adversarial with the introduction of the IECs just as the Designated Assessment Centres (DACs) had no impact. Lawyers and insurers will continue to access their own medical opinions.

With an election on the horizon, there is little time for the government to implement their plan. What will happen to this plan following the election is unknown at this time. Other than providing more resources to combat fraud, there is little here to provide premium relief for consumers. Considering how long it takes to prosecute a fraud case, those savings are years away.

What’s in Ontario’s Plan

The government will be establishing a panel to guide the enactment of proposed reforms, which include:

·         Standard treatment plans (programs of care) for common collision injuries (soft tissue injuries) and changing the emphasis from cash payouts to ensuring appropriate care.

·         Reducing disputes by instituting independent examination centres.

·         Launching a Serious Fraud Office in spring 2018.

·         Directing the Financial Services Commission of Ontario (FSCO) to review territorial rating factors used by insurers.

·         Ensuring that lawyers’ contingency fees are fair, reasonable and more transparent.  

Programs of care

I initiated the Programs of Care project before I left FSCO in 2011 and agree with its introduction. Led by Dr. Pierre Côté, the work on developing programs of care was completed in three years. Long overdue, this aspect of the Marshall recommendations and subsequent government announcement has been in development for six years.

Programs of care were first developed by the Workplace Safety and Insurance Board (WSIB) to deal with low back pain. The initial whiplash associated disorder guidelines were created in 2003 based on the WSIB low back pain program of care. FSCO had undertaken to develop programs of care for a range of soft tissue injuries. An interim solution was the introduction of the minor injury definition and minor injury guideline in 2010. The expectation is that programs of care will simplify access to treatment and reduce disputes in the system. If that does occur, it will potentially reduce some of the transactional costs in the system.

Will statutory accident benefits (SABS) be simplified when the programs of care are introduced? Will the number of disputes drop? That did not occur with the introduction of the minor injury guideline. It can’t be assumed that programs of care will significantly change the landscape. The WSIB experience will not necessarily be duplicated in the Ontario auto insurance system because the structures of the two systems will continue to be fundamentally different.

The government would like to move away from cash settlements. Prior to the introduction of the Ontario Motorist Protection Plan (OMPP) in 1990, it was standard procedure to settle minor lawsuits. The introduction of the OMPP was intended to address the needs of accident victims with minor injuries so that they could access wage loss and rehabilitation without the need to sue. Cash settlements undermine the principles of no-fault.

In his 2014 report, Ontario Automobile Insurance Dispute Resolution System Review, Douglas Cunningham, now an arbitrator and a former associate chief justice of the Ontario Superior Court of Justice, acknowledged that cash settlements could be counter-productive. But he compromised in the end by recommending that settlements be prohibited in the first two years of a claim. A settlement prohibition is more feasible in a pure no-fault system such as the WSIB. However, Ontario’s auto insurance system provides access to tort. If there is a tort claim, the lawyers often push for a cash settlement with the first-party payer because the third-party payer is only responsible for damages in excess of the SABS.

Independent Examination Centres (IECs)

The government continues to support Marshall’s recommendation that a network of IECs be created to provide neutral assessments of auto collision injuries. Fortunately, the government has backed away from locating IECs in public hospitals.

However, IECs are a bad idea. It sounds like a great concept, but it’s been tried before and failed. I had the policy lead when the former DACs were introduced in 1994. The language we used back then was identical to what appeared in the recent government plan. IECs reflect Marshall’s lack of institutional memory and understanding of the auto insurance industry.

I learned a few things through the DAC experience. When you are conducting over 100,000 assessments each year, you need a lot of physicians and other allied health professionals. That means you will have to rely on the same professionals who provided assessments to legal representatives and insurers. No matter what measures you take through standard guidelines and protocols, fee schedules, accreditation, no one will consider these assessors to suddenly become neutral. The criticisms directed at the current assessors will follow them when they join IECs.

IECs will require substantive oversight just like the DACs did. This will not only require a government bureaucracy to support IECs, but will likely increase administrative requirements for the assessment providers. Currently, the average insurer examination costs under $1,400 based on HCAI data. The last DAC fee schedule (dated February 2004) contained much higher fees: assessing treatment, $2,000; assessing disability, $3,900; assessing attendant care needs, $2,600; and no cap on catastrophic impairment assessments. I predict assessment costs will rise under the IECs. 

Marshall uses New Jersey’s dispute resolution mechanism as an example of where a neutral medical review is successfully being used. Marshall has misinterpreted the New Jersey system. I spoke to officials from New Jersey on behalf of Justice Cunningham as part of his review of the auto insurance dispute resolutions system. The New Jersey medical reviews are peer reviews; they do not involve an examination of the claimant. They are not automatically conducted — one of the parties needs to request a review. The claimant and insurer still conduct their own medical assessments, upon which the neutral medical reviewer comments. As well, the arbitrator does not always follow the opinion of the medical reviewer. As is the case in New Jersey, establishing IECs will not eliminate the need for provider- and insurer-initiated assessments.

Despite the insurance industry’s strong support of the creation of IECs, I do not believe insurers will be willing to give up insurer exams. They are an important component in any private disability system. Instead, IECs have the potential to add another layer of assessments and costs, similar to the experience with the DACs.

Serious Fraud Office

For the third time in the past five years, the government has announced their intent to create a Fraud Office to deal with auto insurance fraud. Fraud was not mentioned by Marshall but raised by stakeholders during consultations. It would be nice if it happens this time.

Territorial Rating

This aspect of the plan has me puzzled. Directing the regulator to look at territorial rating can only go two ways: 1) the status quo, or 2) adjusting some rates up and others down. Ultimately, the review will not reduce rates overall and I sense the government knows this. Reducing rates in the GTA will only increase rates in other regions of the province.

Contingency Fees

The Law Society of Upper Canada has been working on new rules for lawyers regarding contingency fees for more than a year. They’ve asked the government to approve new regulations to provide the legal regulator with the ability to enforce the new rules. This overlaps with a recommendation made by David Marshall and was included in the government auto insurance plan. Cracking down on contingency fee abuses will put more money in the pockets of claimants but will not reduce auto insurance rates.

Ontario Auto Rates Steady In 2016 But Only After Benefit Cuts

FSCO's latest quarterly rate approval numbers have been released and at least rates are holding steady for now. However, considering the statutory accident benefit cuts that became effective on June 1, 2016, consumers are getting less coverage but paying about the same money.

 FSCO approved 10 private passenger automobile insurance rate filings during the fourth quarter of 2016. These 10 insurers represent 24.17% of the market based on premium volume. Approved rates decreased on average by 0.14% when applied across the total market. Overall, approved rates decreased on average by 1.38% when applied across the total market for the 2016 calendar year.

 The high cost of auto insurance creates a strong disincentive to purchase coverage that was taken away by product reforms. This is the case even when coverage can be purchased for about the same cost as a tank of gas. Sitting on my desk is my own auto insurance renewal. The cost of buying $1 miillion in medical/rehabilitation/attendant care coverage is $50 for on my two vehicles. I also purchased an additional $1 million in catastrophic coverage for just $19.

Product reforms have created an environment where consumers are inadequately covered for more serious injuries. Rather than make coverage for minor injuries optional, consumers are allowed to opt out of purchasing adequate coverage for more serious injuries. That would be analogous to making physical damage coverage mandatory with no deductible for minor collisions but not covering total loss claims.

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.

It's Time For The Insurance Industry To Be Serious About Optional SABS

This week I was speaking to my insurance agent who preparing my renewals. I was asking her about how the optional benefits have been impacted by the regulatory changes that became effective on June 1st. During the conversation it came out that she only had two clients with optional benefits - me, and my daughter and son-in-law. That's it!

Insurance consumers in this province aren't that risk averse. They are foolish and misinformed. As the government continues to whittle away at mandatory accident benefits, consumers maintain the belief that the basic level of coverage is adequate. Who's fault is that? Who is responsible for ensuring consumers are properly informed? The insurance companies, brokers and agents.

When I walk into Best Buy, just about any purchase comes with an aggressive pitch for extended warranty. The sales reps will try to convince how little it costs to purchase that extra protection. They sell a lot of them. People have no problems dropping $100 on an extended warranty for a dishwasher but can't get their head around spending that on one million dollars of additional health care protection. I paid just $98 for that over the past year. Just two tanks of gas.

People aren't happy about the price of auto insurance so they try to keep coverage down to save money. It's the responsibility of the insurance industry to make sure that they at least understand what they are getting for the money.

Catch Me At Bookapalooza on November 19th

On Saturday I will be signing copies of THE ROAD AHEAD at Bookapalooza in Whitby. It’s a great event with books and crafts for sale, panel discussions, giveaways and a silent auction.  There will also be a draw for free signed copy of my novel, which will make a nice gift with the holidays coming up.

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.

Insurance News - Monday, October 17, 2016

Here are the leading auto insurance headlines from ONTARIO AUTO INSURANCE TOPICS ON TWITTER for Monday, October 17, 2016:

• Passengers in Uber's Pittsburgh self-driving cars are asked to waive the right to sue for injury or death.
• Uber is rushing to get self-driving cars on the road. Their business model is at risk if don't keep up.
• Will you need auto insurance to drive a self-driving car? Will you even need a drivers license?
• California has loosened the rules and will allow test of autonomous cars with no driver behind the wheel.
• Why Uber has to be first to market with self-driving cars.
• As Baby Boomers age, health issues can make it unsafe or physically impossible to drive, but that won't matter if we all have robotic chauffeurs.

Photos From THE ROAD AHEAD Book Launch

More photos can be found at www.williehandler.com

Insurance News - Tuesday, September 27, 2016

Here are the leading auto insurance headlines from ONTARIO AUTO INSURANCE TOPICS ON TWITTER for Tuesday, September 27, 2016:

• Motorist in Tesla self-driving vehicle is killed when it smashes into a tree at 100 mph in Holland - but the company insist he had not switched on auto-pilot function.
• Insurance premiums could drop 40 percent by 2050 due to automated vehicles.
• Self-driving cars operated by ride-sharing service Uber hit the public roads in Pittsburgh, as the company launches a pilot program that will pick up actual passengers.
• New Brunswick auto insurance claims have grown $70 million over 3 years and may lead to some large rate hikes.
• Lyft's president says 'majority' of rides will be in self-driving cars by 2021 and car ownership will end by 2025. Overly optimistic?

THE ROAD AHEAD Is Available

My book, THE ROAD AHEAD, is now available to purchase. Paperback and Kindle versions are available at Amazon.ca and Amazon.com.

A Kobo version is also available at Chapters.ca and Kobobooks.com.

Paperback copies are also available at Ben McNally Books at 366 Bay Street, Toronto.

“Politics has never been this much fun!”

Rick Tompkins, a suburban Toronto insurance broker, never considered a career in politics until a good friend, who happens to be the leader of the Conservative party, asks him to run for office. He accepts the offer, with the understanding that he would probably not win, but can use the opportunity to gain some visibility for himself and his business. Jerry Switzer, a veteran party worker, is sent in to guide Rick through a campaign in a riding that hasn’t elected a Conservative in years. Rick fumbles his way through the election campaign and manages a surprise win but at the expense of saddling his party with an impossible commitment. What makes matters worse, Rick is anything but politically correct. He offends everyone in his path and stumbles from one political scandal to another. Still, Rick has one saving asset: a political party machine that is able to spin scandals to its advantage.

Insurance News - Thursday, September 15, 2016

Here are the leading auto insurance headlines from ONTARIO AUTO INSURANCE TOPICS ON TWITTER for Thursday, September 15, 2016:

• Uber and Lyft have each been in the news recently for their investments in and work with automaker partners in developing self-driving technology. So, what about the drivers?
• Michigan may soon become the first state to allow self-driving cars on the road without a human driver sitting behind the steering wheel.
• The Ontario Provincial Police recently suggested that so far this year, it has investigated 38 road deaths in which a distracted driver was involved.
• What Amazon can teach auto insurance carriers about online retailing and enhancing the consumer experience.
• Vastly different story lines among Canada’s four public auto insurers.
• Self-driving Google cars will soon know when the police are approaching and to pull over to the side of the road.

THE ROAD AHEAD Has Arrived...

Contact me directly if you are interested in my book launch party on September 21st.

Insurance News - Friday, August 26, 2016

Here are the leading auto insurance headlines from ONTARIO AUTO INSURANCE TOPICS ON TWITTER for Friday, August 26, 2016:

• The Tesla autopilot crash has picked up a lot of attention. U.S. driver interest in self-driving cars dips slightly after Tesla crash.
• Auto insurer might sue Tesla over autopilot-related crash.
• Drivers still liable in accidents, even in near driverless cars, says Canadian law firm Borden Ladner Gervais.
• Telematics is the Betamax of insurance, the real seismic event in the industry will be the autonomous car.
• A Missouri man credited his self-driving Tesla for taking him to the hospital when he suffered a pulmonary embolism behind the wheel.

THE ROAD AHEAD Book Release

Will The New Ontario Fleet Definition Work?

As I reported previously, the Ontario government amended the fleet definition in Regulation 664 in early July.  The amended definition reads as follows:

“fleet” means a group of not fewer than five automobiles that meets the following requirements:

1. At least five of the automobiles in the group are commercial vehicles, public vehicles or vehicles used for business purposes.

2. The automobiles in the group are,

i. under common ownership or management, and any automobiles in the group that are subject to a lease agreement for a period in excess of 30 days are leased to the same insured person, or

ii. available for hire through a common online-enabled application or system for the pre-arrangement of transportation, and insured under a contract of automobile insurance in which the automobile owner or lessee, as the case may be, has coverage as an insured named in the contract

From my perspective, this is not an ideal resolution. However, it does fill in the insurance gap that has existed since Uber began providing its services in Toronto in 2012. One of the most important elements in the fleet definition has always been the requirement that there be common management. Common management is an element that is required in order for a group of vehicles to be considered a fleet, if they are not commonly owned or where they are owned by a leasing company. It refers to the fact that the owner or manager has a measure of control over the vehicles. A fleet is typically a discrete risk exposure whose experience and characteristics can be monitored and rated, and is affected by the actions of the owner or manager. The vehicles in a fleet are not individually rated as this is inconsistent with a key principle in fleet rating to establish a rate specific to the experience of the fleet. Usually, the manager of a fleet will implement rigorous risk management programs to monitor and improve experience and rating.

None of these circumstance remotely exist when it comes to Uber drivers and their vehicles. They are network of drivers connected to customers through an app provided by Uber. Their is no common ownership or management. It suggest that once an Uber driver turns on the app on his phone, he or she becomes part of a fleet. That decision isn't even made by Uber.

Is this such a bad thing? It could be if it leads to further erosion of the fleet definition. The regulator has for years denied fleet policies because they failed to meet the test of common ownership or management. Will they be able to continue to push back against synthetic fleets? It would have been better, if the government had created a provision in the Insurance Act to deal specifically with transportation network companies. I expect it will take some time to determine whether the government and the insurance industry will regret the newly amended fleet definition.

Insurance News - Sunday, July 31, 2016

Here are the leading auto insurance headlines from ONTARIO AUTO INSURANCE TOPICS ON TWITTER for Sunday, July 31, 2016:

• Tesla and Google are taking different approaches to developing self-driving cars.
• Uber drivers in Ontario are now automotically insured,
• Auto insurance rates still rising, despite province's pledge to lower them.
• Uber plans to collect street-view photos in Mexico to further lays the groundwork for a fleet of autonomous vehicles.
• Canada tops the list of wealthy countries in the percentage of road fatalities related to alcohol impairment.
• Customers sour on insurers' UBI discount model.

Insurance News - Friday, July 22, 2016

Here are the leading auto insurance headlines from ONTARIO AUTO INSURANCE TOPICS ON TWITTER for Friday, July 22, 2016:

• A prominent Toronto lawyer who pursued a frivolous action on behalf of a client was found personally liable Tuesday for the legal costs.
• What will your car have to do for the police to pull you over when you’re in an autonomous car?
• In the U.S., being on the lower end of the wage scale can mean paying much more for auto insurance, even for good drivers.
• As self-driving cars change transportation, how will infrastructure adapt?
• Details on the first self-driving car death involving Tesla S using autopilot.
• Ontario’s program to allow testing of self-driving cars on public roads has not received any applications since it launched January 1,

Ontario Auto Insurance Rates Remain Chronically High

FSCO's latest quarterly rate approval numbers have been released and suggest that consumers will see very few savings the statutory accident benefit cuts that became effective on June 1.

FSCO approved 14 private passenger automobile insurance rate filings during the second quarter of 2016. These 14 insurers represent 30.06% of the market based on premium volume. Approved rates increased on average by 0.33% when applied across the total market. This follows the modest 3.07% reduction in approved rate filings in the first quarter of 2016.

The end of lower rate filing approvals indicate that the any savings derived from the recent reform package are small. A portion of the savings could be wiped out before the end of the calendar year if companies continue to file for increases. 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 9.84% when applied across the total market.

Product reforms have proven to be an ineffective tool for controling 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.

New Ontario Towing and Storage Regulations Are Now In Effect

New regulations are now in effect if you repair, tow or store vehicles in Ontario. The new regulations under the Repair and Storage Liens Act took effect on July 1, 2016. Further regulations will come into force starting January 1, 2017.

 The following new rules come into effect on July 1, 2016:

• If a vehicle being stored is subject to a lien and is received from someone other than its owner or a person having the owner's authority, then the storer must give notice to the owner and other interested parties of the lien in writing (e.g. secured parties who have registered their interest, such as lease and finance companies). 
• For vehicles registered in Ontario, the notice period is reduced from 60 days to 15 days after the day after the vehicle is received. If notice is not provided within 15 days, a storer's lien is limited to the unpaid amount owing for that period. The 60-day notice period remains unchanged for out-of-province vehicles. 
• If no amount has been agreed upon for repair and storage costs, fair value may be determined by a court. There is a new list of discretionary factors a judge will be required to consider (such as fixed costs, variable costs, direct costs, indirect costs, profit and any other relevant factors).

Ontario Regulation 427/15 can be found here.

Ontario Changes Fleet Definition To Accommodate Ride-Sharing

This week, the Ontario amended Regulation 664 to expand the definition of a fleet to accommodate ride-sharing services. The change opens the door for insurers to offer policies to drivers of vehicles for hire using an online app such as Uber.

The regulation amendment expands the fleet definition to include vehicles available for hire through a common online-enabled application or system for  pre-arranged transportation. The vehicle owner or lessee is to be a named insured under an auto insurance contract. The regulation change will make it easier for Ontario businesses to insure a group of privately owned vehicles under one insurance policy as a “fleet” when they are available for hire using an online app.

FSCO has already approved a fleet policy proposed by Intact Insurance Company. The Intact policy provides blanket fleet coverage under a standard automobile owner’s policy (OAP 1) for private passenger automobiles used in the transportation of paying passengers who utilize Uber. The Intact fleet policy only provides coverage when the driver is logged onto the Uber online app. In other situations, coverage under the personal owner’s policy for the automobile is applicable.

FSCO has also approved the use of an electronic insurance card for use in connection with ride-sharing. The electronic insurance card will permit ride-sharing drivers, who are covered under the Intact policy the option, to provide evidence of insurance electronically using an online-enabled app (e.g., to law enforcement officials).