Thursday 31 May 2012

Standing Committee on General Government Auto Insurance Hearings - Day 1

The following are summaries of presentations made on Monday, May 28, 2012.

Auto Insurance Anti-Fraud Task Force
Fred Gorbet - Chair of the Steering Committee,

In his presentation Mr. Gorbet laid out the structure of the task force, described the highlights of the interim report that was released last December and provided a brief update on our timetable for completion of the mandate that they have been given.

There is a working group on prevention, detection, intervention and enforcement, there is a working group on regulatory practices and there is a working group on consumer engagement and education. Each of these working groups is chaired by a senior public servant and has representatives from stakeholder groups as well as from government departments. In choosing the membership of the working groups, they adopted a working principle that says if you’re going to be at the table in a working group, you or your organization should have some accountability for being able to implement whatever recommendations the task force might make. There are no representatives of other groups that have interests but don’t have accountability. These other groups, have been invited to make presentations to the working groups or to the task force.

The Task Force tried to see what we could say about fraud. There is an estimate that has been around for some time about the cost of fraud in Ontario, auto insurance. The number that has been around for almost 20 years, $1.3 billion. They tried to figure out where that number came from; they could not.

They examined accident benefit costs from 2006 to 2010 using 2006 as the base and considered that rates that one might expect to be logically related to these kinds of drivers of costs. The answer they got was that there was an unexplained gap between what they estimated accident benefit costs probably should have been and what they actually were; a gap that amounted in the province of Ontario to about $300 per registered motor vehicle. In the greater Toronto area, the GTA, we did the same analysis and that gap amounted to about $700 per registered motor vehicle in the greater Toronto area.

Through an RFP process, the Task Force has engaged Ernst and Young to work with us and to work with the Insurance Bureau of Canada which had also engaged KPMG to try to do a quantitative estimate of the three different elements of fraud. That work is ongoing. It is nearing completion.

They also engaged Deloitte to do a jurisdictional scan, to do a report on what other jurisdictions that have similar types of auto systems and are experiencing fraud problems are doing in the areas of our three working groups to deal with those problems.

The Task Force is looking at other possible gaps in the regulatory system:
  1. they are looking at the towing industry and whether there should be greater regulation or oversight of the towing industry;
  2. they are looking at whether FSCO’s authorities with regard to the auto insurance business as a business are clear enough and broad enough;
  3. they are considering recommending that FSCO be designated as the regulator of clinics with respect to the integrity of the business processes;
  4. they are also looking at recommending that companies be required to disclose some of their practices in regards contracting independent medical examination providers and preferred providers.

It has been suggested to the Task Force that they recommend the establishment of a dedicated task force with prosecutors and law enforcement, to pursue criminal investigations. It exists in other jurisdictions but in the Task Force's judgment it would be really tough to try to transpose that kind of model into the Ontario justice system.

Then finally, their interim report sets out the need for a broad education and engagement strategy for consumers.

The Task Force has also formed a working group looking at HCAI. They are pursuing two different initiatives. HCAI is to actually send out regular statements to insurance companies of everything that has been billed to that insurance company by every biller. So it’s like a credit card statement. Secondly, they are working with the colleges to build a feature into the system that will allow health care practitioners through their college to actually access information about which billing facility is using that particular health care practitioner’s identity.


Financial Services Commission of Ontario
Philip Howell. Superintendent of Financial Services and CEO
Tom Golfetto, Executive Director, Auto Insurance Division

Auto insurance is mandatory in Ontario and has been since 1980. It is privately delivered in a competitive market. There are over 100 licensed companies in the province. These companies compete for the business of nine million Ontario drivers who drive 6.6 million vehicles.

In Ontario, the auto insurance system is a closed-loop system. In simplest terms, this means that the costs of the insurance system are recovered through premiums charged to drivers. These premiums fund the cost of claims, including the cost of treatment provided to those injured in accidents.

Historically, the reforms of the Ontario system have largely been motivated by the need to stabilize rising costs and premiums. The auto insurance system is complex, and there have been several reforms over the past 30-odd years. With each set of changes to the system, there was some initial success in stabilizing costs and premiums, followed by another cycle of rising costs.

The reforms announced by the Ontario government in 2009 and implemented in 2010 have addressed rising costs, many of which stem from abuse.

FSCO has assigned the responsibility for providing regulatory services that protect the public interest and promote public confidence in auto insurance. The FSCO act and the Insurance Act provide the legislative framework for this responsibility.

Insurers and actuaries examine patterns in past claims to estimate future costs. Their goal is to determine what rates to charge a consumer for the policy period to cover claims costs and operating expenses and to make a profit after taking into account investment income. Based on their actual experience, companies may need to revise their assumptions on prospective costs and future premiums. Insurers must submit proposed changes to their rates to FSCO for approval. FSCO reviews rate filings, analyzing the data supporting the insurer’s actuarial assumptions, to ensure that the proposed rate changes are adequate to maintain the financial solvency of insurers without being excessive.

Companies must file their underwriting rules with FSCO. These are the rules that insurance companies use to determine the risks that they may not accept. Regulations under the Insurance Act define the criteria that cannot be used to deny auto insurance coverage; for example, not-at-fault claims. Specifically, underwriting rules may not be subjective, be arbitrary, be contrary to public policy or bear little relationship to the risk.

Premiums vary based on the individual consumer’s risk characteristics. The mechanism for determining rates is an insurance risk classification system. Risk classification systems set out the factors that an insurer will use when setting the price they charge for auto insurance. They group risks with similar characteristics and expected claims costs.

As noted in the Auditor General’s 2011 report, in 2010 the average injury claim in Ontario was about $56,000. This was almost five times more than the injury claim in most other provinces and contributed to much higher premiums for Ontario drivers compared to those paid by drivers in other provinces. Accident benefits costs, the primary driver behind these increases, skyrocketed by 118%.

The most dramatic increase in costs occurred in the GTA, where less than half of all accidents involving injuries occurred. The cost increases and, consequently, premium increases in the years prior to the 2010 reform stem from the over utilization of accident benefits. Key factors contributing to the over utilization included some private health care practitioners providing services in the auto insurance system without due regard to outcome-based treatment results for injured parties, participants who use the system to their financial advantage, inadequate claims management processes by companies and outright fraud.

Currently, there are over 8,000 health care clinics treating those injured in motor vehicle accidents in Ontario. There are close to 29,000 health care providers authorized to treat those injured in accidents in Ontario; over 15,000 of these are members of regulated health care professions. However, the latest Ministry of Transportation data shows only about 62,500 people injured, the vast majority of whom suffer only minor issues such as soft tissue injuries and recover quickly.

Insurers bear some responsibility for over utilization in the system, particularly when it comes to claims management. To deal with the volume of claims they were receiving before the reforms, some insurers would simply approve requests for assessments without verifying whether they were necessary. . Legal and paralegal representatives also stepped up their activity; evidence is provided by the dramatic increase in claims being disputed in the dispute resolution process at FSCO. In 2006, FSCO received just over 13,000 requests for mediation. In 2010, we received over double that number.

Since the September 2010 reforms, the government had introduced several new measures. The 2011-12 Ontario budgets contained announcements about auto insurance. This focus appears to be motivated by a desire to avoid a repeat of past cycles, where rapidly rising costs and premiums followed a period of rate stability. Several of these measures reflect an outcome-based approach to treatment for those injured in accidents—an approach that is based on current medical science. Current medical science recognizes the risks of over treatment to successful patient outcomes for soft tissue injuries.

An expert medical panel was formed in 2010 to review the definition of catastrophic impairment. The expert panel delivered its reports in 2011 and these were posted on our website and followed by extensive consultations. Following those consultations, I submitted a report to the Minister of Finance with recommendations. The 2012 Ontario budget indicated that this report would be made public and also announced that the government would move forward to propose regulatory amendments to the definition of catastrophic impairment.

In response to a question about Bill 45, it was pointed out that the total amount of money raised would stay the same. The amount paid by individuals would vary dramatically, depending on where you live. The rates for drivers in Toronto would drop significantly. The rates for people in other parts of the province would rise dramatically.

Coalition of Regulated Health Professional in Auto Insurance Reforms
Moez Rajwani, Ontario Chiropractic Association
Karen Rucas, Society of Occupational Therapists
Jennifer Holstein, Physiotherapy Association
Faith Kaplan, Ontario Psychological Association

For over 10 years, the Coalition has worked with government and other stakeholders on numerous changes to the auto insurance system. Auto insurance in Ontario has been subject to numerous regulatory overhauls in the past 10 year, all with the intent of stabilizing or lowering premiums paid by Ontarians. The most recent round of reforms, which was implemented in September 2010, addressed many issues that were seen to be affecting costs in the sector.

The changes in 2010 made a significant impact on available medical rehabilitation benefits in particular. Funds available to those who are catastrophically impaired have not changed, however, those related to non-catastrophic were cut significantly. Basically med rehab benefits were cut in half to $50,000, with the cost of any assessments now included in that cap. However, the majority of patients will now only be able to access approximately $3,500 in benefits, if their injury is considered to be minor under the definition in the statutory acts and benefits schedule.

While the majority of people will likely get better under this framework, there’s no exemption for those people that require additional treatment once the minor injury guideline treatment and the total cap of $3,500 has been reached. It should be noted here that the $3,500 is a relatively arbitrary fee. It’s not something that was come up based on sort of that the treatment framework itself is based on scientific evidence but not the amount. So we may have gone from a program that is a little too narrow in its scope with the pre-approved framework to one that might be a little too broad.

Discretion for insurers was also introduced to limit the insurer need to seek an insurance examination for every dispute, even those where it would be reasonable to deny out of hand, so for instance, something really ridiculous or somebody resubmitting a treatment plan over and over and over again. However, providers are finding that insurers are using this discretion to deny what could be reasonable treatment without the opportunity for a patient to get a second opinion.

There is a gap between the $50,000 that’s available to a serious injury and that of a catastrophic injury, which is $1 million. Some patients run out of the $50,000 before they’re able to go through the application process of $1 million, which can happen at the two-year mark.

There was an introduction of a $2,000 cap on assessments. Again, FSCO mentioned that there was a rising cost in assessments and we acknowledge that and we realize that that is a concern. For certain remote areas outside of the GTA that require services, the $2,000 can be cumbersome because of travel costs. Some of the more complex assessments required for complex patients can also be a concern.

When you’re looking at the area of licensing, the Coalition want to remind everybody that there are regulatory colleges that exist that already licence us. We understand that sometimes they are not using their full authority in the business practice area, but before you start looking at full licensing in the auto sector we recommend that you look at the regulatory bodies and ensure that the systems that you already have in place are maximized before you go to the licensing area. In issues of non-regulated health professionals, the Coalition is supportive of a licensing system and we would support any measures that the government put forward.


Allstate Insurance
Tony Irwin, Manager, External Affairs and Consumer Relations
Saskia Matheson, Director, Risk Management for Auto and Property


Allstate Canada Group includes Allstate Insurance Co. of Canada, Pembridge Insurance Co. and Pafco Insurance Co. and employs over 600 people at our Canadian head office in Markham. Allstate Insurance Co. has 415 exclusive agents in 53 offices across Ontario with $498 million gross earned premium in 2011. Pembridge and Pafco are broker channel companies. Pembridge operates in the standard market, while Pafco is an alternative market for high-risk drivers. We work with 169 broker partners in 467 locations across Ontario with $189 gross earned premium in 2011.

There are four themes that have evolved, and they seem to remain true through all of those years of no-fault.

The first is the basic truth — that the more generous the system of benefits, the more tempting the fraud becomes. There’s bee a lot of discussion about fraud, and there are certainly differing estimates of the amount of that fraud. Those estimates range—from some studies that were done in Quebec in the late 1990s that put those amounts at around 10% of claim amounts and between 10% and 20% of claims dollars all the way to some US studies that put that number as high, at 40%.

In the same way that generosity of benefits leads to a temptation to fraud perpetrators, it also leads to the danger of administrative cost. The more dollars that are at stake, the more important each side sees the controls and the administrative completion of the forms and the checkpoints, and while these are absolutely crucial to ensure the fairness of the system, they also add cost. So it is truly important that we collaborate in streamlining that process and taking out as much administrative cost from the system as we can.

Allstate believes it is critical that all interested parties—the government, the industry—come together to make the product better.

In response to a question on territorial rating, it was noted that the rules that are in place for territory from FSCO, they have fairly complete and extensive rules about the number of territories that we can have—a word contiguity that none of us who work in insurance used to know until FSCO came on to the scene. But perhaps most importantly, there are rules to stop companies from creating territories out of a piece of street here and a bit of information over there. They must actually be a territory that you can look at on the map and draw a line around. They must have sufficient people in them to be statistically valid.

Insurance Bureau of Canada
Ralph Palumbo, VP Ontario
Barbara Suzenko-Laurie, VP of Policy
Pete Karageorgos, Manager of Consumer and Industry Relations


Auto insurance rates in Ontario are too high. The average private passenger auto annual premium in Ontario, as of April 2012, was $1,534. That compares with $1,051 in Alberta, $989 in Newfoundland, and in the 800s in other maritime provinces. While four years ago Ontario premiums were on average 25% higher than the next highest province—that’s Alberta—today, the average Ontario premium is now more than 45% higher than Alberta and almost twice as high as premiums in the maritime provinces.

How did Ontario’s insurance rates get so high? This is what we know: Ontarians are not the worst drivers in Canada. In fact, Ontario has the safest roads in North America. Cars are now better equipped for protecting passengers. There are 12% fewer serious accidents requiring hospital admission. So if the roads are better, cars are safer and accidents are less severe, what is driving up insurance costs?

Between 2008 and 2010, the industry lost a total of $2.96 billion on auto. In 2010 alone, the figure was $1.76 billion. I can say without any equivocation that during this period, when premiums were rising significantly, insurance profits were not a factor.

So what’s driving up the costs? You’ve heard it over and over again today. It’s claims, claims costs. If the problem was factors that insurers use to classify risk, like the sue of territory or, for that matter, any other factor, then we would see premium increases in other private sector insurance markets, like Alberta. But we don’t. Something very unique is happening in this province.

While the September 2010 reforms were a needed first step in reducing pressure on the no-fault injury costs, claims costs were still out of control. Why is that? Well, you’ve heard that there’s in excess of 30,000 unresolved claims cases awaiting dispute resolution at FISCO, and these have undetermined costs. Depending on how those cases are decided, it could very well re-ignite the accident benefits cost spiral.

Secondly, the number of catastrophic injury claims is rising faster than other claims. From 2004 to 2010, the number of all no-fault injury claims rose 28%, whereas the number of large claims has more than doubled.

Third, bodily injury claims costs are increasing rapidly. The latest figures show that the frequency of these claims has been rising, as has the average claims cost, and when you consider that the BI claims represent more than $2 billion in costs each year, it’s very concerning that the volume and average costs of these types of claims appear to be rising so rapidly.

Fourth, there is a persistence of fraud in the auto insurance system.

In response to a question about the impact on Bill 45 the IBC noted that all that Bill 45 would do is shift costs. Based on industry data the greater Toronto area as of 2010 has a $706-million deficit. So basically, drivers in this region have paid $600 million less into the system than what they’ve taken out. They’ve taken out more and that cost is what’s being spread out and proposed to be spread out beyond the GTA area. To address those cost issues and to recover that cost to ensure that you have the dollars to pay for claims, it’s going to require a spreading. Currently, we have territories that are used to determine those rates. When you eliminate that and create larger areas—for example, in the greater Toronto area right now if you take that alone as a CMA, you’re going to see rates increase on average about $300 to $400. That’s what this bill is going to force insurers to do, is look beyond that. In an area such as northern Ontario as we’ve said, those drivers there are going to be forced to pay for claims costs in southern Ontario.

Ontario Spinal Cord Injury Solutions Alliance
Dr. Cathy Craven
Mr. Rick Waters
Mr. Peter Athanasopoulos


Ontario Spinal Cord Injury Solutions Alliance is a network of key stakeholders related to patients with spinal cord injury. It’s comprised of 70 member organizations that includes clinicians, researchers, service providers, patients and their families, as well as research and health care funders. Our real reason for being here today was to respond to the proposed definition of catastrophic impairment.

One of the things proposed by the expert panel is the adoption of international standards for neurologic classification of spinal cord injury. So we do want to strongly endorse the panel’s recommendation related to that.

However, there are two recommendations that we had some concerns about. The first was that the patient or person must have attended an in-patient rehab facility. As you know, in our complex health care environment there are lots of other reasons why patients don’t end up in tertiary academic spinal cord injury rehab centres that relate to their level or complexity of care.

The other issue relates to point 4 in the definition which is—I believe that the panel was trying to make sure that patients who had very mild impairment, so those people who basically—if we call them “ASIA impairment scale D,” those are people who have had good motor recovery and have started to return to walking. We often have patients who return to walking, but, for instance, if they have a central cord syndrome, they can return to walking, they’re able to void spontaneously, but they have no hand function, so when they get to the toilet, they can’t undo their own pants. It’s sort of an interesting challenge for people. There’s also people who have problems with temperature and blood pressure regulation, with erectile dysfunction, respiratory function that isn’t really addressed in the definition, and the autonomic standards which are in your package, pick up on those and it is something that is also an impairment skill.

The other two issues we wanted to comment on are, is it important that the definition of “catastrophic impairment” also looks at the health complications and the difficulties of aging with health complications over a person’s lifetime. So it’s not only their impairment at day zero when they have their assessment of, do they meet the insurance threshold or not, but also what other health complications they’re likely to experience over their lifetime.

The other issue is, we thought it was important that the legislation specify who has the appropriate credentials to do the international standards for neurologic classification of spinal cord injury.

The two thresholds that are available are $100,000 and $1 million. There’s a lot of spinal cord care that is above $100,000. So the catastrophic issue for me, as a clinician who is trying to serve patients, is about the thresholds. But designating people in a timely way and allowing the system to move forward is much more helpful rather than these—many people are sitting in limbo and it’s becoming a financial hardship for them and their families to manage these people in the hope that there will be a settlement.


ProCare Health Group
Saeid Sarrafian, Owner


I’m in support of preventing the fraud, my submission is that regulating the rehabilitation facilities in Ontario will be a very big help, because as a health care practitioner, we are accountable to our regulatory bodies or colleges, but businessmen don’t have any regulation, and they can open any facility at any time, anywhere, under a corporation and hire physiotherapists or chiropractors or other practitioners to see patients. And since these people are not regulated, they can commit fraud put regulated health practitioners such as me into very unfair competition.

I would like to see rehabilitation facilities and assessment centres in Ontario be regulated, and by regulation, I mean only a regulated health care provider in Ontario can own and operate this facility.

If I want to complain about a chiropractor to the College of Chiropractors of Ontario my letter of complaint has to have my name and my name will be disclosed as they do not take any complaint anonymously.

On the other side, by reducing the cost to $3,500, I can see that big damage has gone to the patients, because I see a lot of clients in the clinic, and the amount of $3,500, the way it has been designed as blocks of treatment over a period of 12 weeks, won’t help the majority of clients, and the dispute is always between the patient and the insurance companies, and that’s why there are 30,000 cases now in FSCO waiting for decisions.

Another issue is, a lot of assessments are done by the insurance companies and a lot of them are not justified. A lot of them are a waste of money and they are just designed in order to deny claims.


Ontario Psychological Association
Dr. Ronald Kaplan
Dr. Faith Kaplan
Dr. Amber Smith
Dr. Brian Levitt


Auto insurance policy must balance maintaining a viable system, affordable premiums and providing benefits to injured accident victims for timely treatment. Multiple measures brought in in September 2010 appear to be controlling costs, reflected in statements regarding increased profits of insurance companies. Achieving cost control is important, but we must consider some of the consequences and determine if some adjustments may be necessary.

Auto accidents are the biggest cause of civilian brain injuries and post-traumatic stress, and the only way to measure impairments in thinking, feeling and behaviour after a traumatic brain injury is through proper neuropsychological assessment.

Depression is the number one reason for disability, and psychological treatment for depression, especially the kind experienced after an accident, is at least as effective as anti-depressants, in some cases more effective, and costs less than medication in the long run. But our patients, when they can’t access this care, are not the ones who will be vocal about the barriers they’re facing.

The application and approval process has become more adversarial. In our data, denials of treatment plans have nearly doubled but the second-opinion reviewers are approving nearly two thirds of those after the insurer denial. All that does is generate extra costs and delays and barriers for the people who need the care that was proposed in the first place.

In addition, insurers don’t always obtain an appropriate IE; sometimes they get other health professionals who don’t understand psychology assessment and treatment or the requirements of the SABS.

We also have the misapplication of the minor injury definition and minor injury guideline. We have a preponderance of cases, unfortunately, that are referred to us with clear concussions and clear post-traumatic stress that have been restricted to the MIG, the minor injury guideline.

The reduced $50,000 benefit is insufficient funding for seriously injured accident victims who may not be CAT and who haven’t yet been determined to be CAT. Accident victims with multiple physical injuries, brain injuries and psychological disorders may require intensive treatment, home modifications etc., and $50,000 doesn’t cut it.

A further restriction occurs by only allowing physicians to complete catastrophic impairment applications, the OCF-19s, except when there is only a brain injury, and patients with mental behavioural impairments are restricted because they’re unable to have their application completed by psychologists with appropriate expertise in diagnose and rating.

You may hear a number of things about combining physical and mental behavioural impairments with respect to catastrophic. One thing that I want to mention with respect to that is that valid and reliable mental and behavioural ratings can be determined. I have several published articles addressing this that we’ll include in our written submission.


Brown and Korte
Harry Brown, Senior Partner

I was here in January 1988 for Bill 2. I don’t think any of you know what that was, but Bill 2 was the start of the Ontario Insurance Commission; it was the start of FSCO, the Financial Services Commission of Ontario. From there, it took a year, with the hearings on no-fault legislation and other related matters and so forth. I’ve done about 100 cases at FSCO, and I do a lot of the insurance work.

The problem is, though—it’s my submission to you—that there is insufficient proactive regulation of the auto insurance product.

The current regulation hasn't solved the problems in the system. There are issues with the MIG and catastrophic impairment. You’ve got the problems of regulation of not just the fraud issue; you’ve got the regulation of the health care providers.

But the signs of the system breaking were there for four or five years before. You can see in 2004, rates were going up dramatically for assessment costs. But the signs of the system breaking were there for four or five years before. You can see in 2004, rates were going up dramatically for assessment costs.

In 2004, we did a study for RBC that showed that on average you were getting six or seven treatment plans for, say, a $1,500 whiplash. In 2009, you’re getting 60 applications for treatment. You’re getting 60 applications for assessments, and by August 31, 2010, the cost of assessment was more than the cost of treatment.

The 42.1, the rebuttals, that’s one of the major reasons why at 30,000 FSCO mediation stalled. I went to Willie Handler, really the policy guru for FSCO, in 2009 before he issued his white paper on March 30, 2009, and said the rebuttals had to come out.

What I’m saying is there has to be a proactive approach to the auto issue, because these problems are still here. They’re going to fester. I’m not saying which policy should be enacted. That’s for you people to figure out. What I’m saying is there has to be an annual review of the product to put it in balance on a yearly basis.

Psychology Of Fraud: Why Good People Do Bad Things

From a National Public Radio broadcast by Chana Joffe-Walt and Alix Spiegel

Enron, Worldcom, Bernie Madoff, the subprime mortgage crisis.

Over the past decade or so, news stories about unethical behavior have been a regular feature on TV, a long, discouraging parade of misdeeds marching across our screens. And in the face of these scandals, psychologists and economists have been slowly reworking how they think about the cause of unethical behavior.

In general, when we think about bad behavior, we think about it being tied to character: Bad people do bad things. But that model, researchers say, is profoundly inadequate.

What causes unethical behavior? — has been getting a fair amount of attention from researchers recently, particularly those interested in how our brains process information when we make decisions.

And what these these researchers have concluded is that most of us are capable of behaving in profoundly unethical ways. And not only are we capable of it — without realizing it, we do it all the time.

Over the past couple of decades, psychologists have documented many different ways that our minds fail to see what is directly in front of us. They've come up with a concept called "bounded ethicality": That's the notion that cognitively, our ability to behave ethically is seriously limited, because we don't always see the ethical big picture.

One small example: the way a decision is framed. "The way that a decision is presented to me," says Ann Tenbrunsel, a researcher at Notre Dame, "very much changes the way in which I view that decision, and then eventually, the decision it is that I reach."

Essentially, Tenbrunsel argues, certain cognitive frames make us blind to the fact that we are confronting an ethical problem at all.

Tenbrunsel told us about a recent experiment that illustrates the problem. She got together two groups of people and told one to think about a business decision. The other group was instructed to think about an ethical decision. Those asked to consider a business decision generated one mental checklist; those asked to think of an ethical decision generated a different mental checklist.

Tenbrunsel next had her subjects do an unrelated task to distract them. Then she presented them with an opportunity to cheat.

Those cognitively primed to think about business behaved radically different from those who were not — no matter who they were, or what their moral upbringing had been.

"If you're thinking about a business decision, you are significantly more likely to lie than if you were thinking from an ethical frame," Tenbrunsel says.

According to Tenbrunsel, the business frame cognitively activates one set of goals — to be competent, to be successful; the ethics frame triggers other goals. And once you're in, say, a business frame, you become really focused on meeting those goals, and other goals can completely fade from view.


Now if these psychologists and economists are right, if we are all capable of behaving profoundly unethically without realizing it, then our workplaces and regulations are poorly organized. They're not designed to take into account the cognitively flawed human beings that we are. They don't attempt to structure things around our weaknesses.

Some concrete proposals to do that are on the table. For example, we know that auditors develop relationships with clients after years of working together, and we know that those relationships can corrupt their audits without them even realizing it. So there is a proposal to force businesses to switch auditors every couple of years to address that problem.

Another suggestion: A sentence should be placed at the beginning of every business contract that explicitly says that lying on this contract is unethical and illegal, because that kind of statement would get people into the proper cognitive frame.

And there are other proposals, of course.

Or, we could just keep saying what we've always said — that right is right, and wrong is wrong, and people should know the difference.

Monday 28 May 2012

Insurance News - Monday, May 28, 2012

Quality of Website Can Make or Break Auto Insurance Sale

A good customer website experience can lead to increased sales and recommendations for auto insurers, but a poor website experience can drive consumers away, says a J.D. Power study.

The Westlake Village, Calif.-based information-services company released its 2012 Insurance Website Evaluation Study yesterday, which indicates that with 34 percent of auto-insurance consumers preferring to shop online, the website experience “impacts the likelihood to shop and recommend the insurer” to others.

According to the study, of consumers who said they were “delighted” with their website experience, 63 percent say they are more likely to shop with that insurer.

Conversely, of consumers who were disappointed with their experience, just 14 percent say they were likely to shop with the insurer.

read more...


Consumers Think Beyond Price; Not Interested in Online-Only Experience

Consumers do not want to do all their insurance shopping online, they care about more than just price, and good claims service is something consumers expect, rather than an extra bonus that will help a company’s retention rate, according to the findings of an Ernst & Young survey.

The survey polled 24,000 respondents across 23 countries. E&Y breaks down the results for the Americas respondents in a report, “Voice of the Customer: Time for Insurers to Rethink Their relationships.”

read more...

Rehabilitation Clinics, Owners and Directors Face 15 Charges Related to Submitting False Invoices

The Financial Services Commission of Ontario (FSCO) has charged five rehabilitation clinics and 10 individuals affiliated with these clinics with offences under Ontario’s Insurance Act.
The following clinics were charged with one count each of knowingly making false or misleading statements to an auto insurer to obtain payment for goods or services provided to an insured and engaging in an unfair or deceptive act or practice:
  • Professional Medexam Management Inc. (2414 Major MacKenzie Drive, Maple ON)
  • Assessment Direct Inc. (2888 Bathurst St., Toronto ON)
  • Century Diagnostics Inc. (37 Kodiak Crescent, Toronto ON)
  • Evident Diagnostics Inc. (160 East Beaver Creek, Richmond Hill ON)
  • Supermed Rehabilitation Centre Inc. (7777 Kipling Avenue, Woodbridge ON)
The following individuals, affiliated with a clinic as a director, were also charged with one count each of failing to take reasonable care to prevent the corporation from making false statements to an insurer and from engaging in an unfair or deceptive act or practice:
  • Mark Zinger
  • Yan Krivoruk
  • Alex Smolar
  • Paul Benchetrit
  • Pavlo Tsysar
  • Ivan Terziev
  • Vladimir Naidenov
  • Alla Pechenik
  • Eugene Gurevich
  • Valeri Znamenski
On May 24, 2012, these individuals and corporations were summonsed to appear in the Ontario Court of Justice.

Monday 21 May 2012

Insurance News - Monday, May 21, 2012

NY to Boot Crooked Doctors From No-Fault Insurance

Insurance regulators plan to start kicking crooked doctors out of New York's no-fault program next month, calling them linchpins in fake-accident scams that cost insurers and ultimately policyholders hundreds of millions of dollars.

Regulations are set to take effect June 12. The Department of Financial Services sent certified letters in March to 135 doctors, chiropractors, acupuncturists and physical therapists, demanding they explain suspect billing patterns and threatening to remove them from the program if they don't respond.

read more here...

Driver Qualifies for Benefits Despite Driving Vehicle Without Owner's Consent

A Financial Services Commission of Ontario (FSCO) arbitrator has ruled a 17-year-old driver who suffered serious injuries in an accident should receive non-earner benefits even though it is alleged he was driving a car without the owner’s consent.

The main issue in the arbitration of R.P. and Intact Insurance Company was whether or not the driver, who was not named because of his status as a minor, could “reasonably have known that he lacked consent to drive the 1998 Lincoln.”

R.P. had regularly driven the car, which was owned by a family with which he lived. R.P. was seriously injuried in the The vehicle owner's testimony was determined not be be reliable and that R.P. was not allowed to drive the car. That being the case, the arbitrator ruled it was reasonable for him to assume R.P. had consent on the night of the accident, April 11, 2009.

read decision here...

Wednesday 16 May 2012

Insurance News - Wednesday, May 16, 2012

Ontario Drivers Satisfied With Their Auto Insurance

Auto insurance isn’t everyone’s favourite monthly expense, but just how do Canadians feel about the subject? Canadian company InsurEye Inc. has completed an auto insurance consumer satisfaction survey to answer the question: “How do Canadians feel about auto insurance and which provinces have the most critical consumer perspective?”

The most critical attitude towards auto insurance is in British Columbia. The most positive attitude towards auto insurance was registered in Quebec, closely followed by Ontario and Saskatchewan.


The survey suggests that auto insurance stakeholders in Ontario may be exaggerating consumer unhappiness with the 2010 reforms. Consumers are positive about claims experience but negative about value for money despite the fact that rates have stabilized. The reforms have not produced much in the way of lower rates after two years of increases. Rates remain the highest in Canada.

read more...


Texas Turning Up the Heat on Fraudsters

The heat is getting turned up on fraudsters in Texas as the state’s Department of Insurance is backing the designation of a second county insurance fraud prosecutor and investigator with the aim of adding more in the future.

The Texas Department of Insurance (TDI) has agreed to pay for a new insurance fraud prosecutor and investigator at the Harris County District Attorney’s Office.

read more...

Allstate Files $6 Million Insurance Fraud Case

Allstate Insurance Company has filed its second insurance fraud lawsuit of 2012, seeking to recover $6 million against 4 New York area defendants. The Complaint names a physician, a medical professional corporation, a management company, and an unlicensed layperson who allegedly used his management company to control at least one medical professional corporation.


The Allstate action is similar to civil suits filed against Toronto health care facilities by a number of Ontario insurers.

read more...

Monday 14 May 2012

Interest on Overdue Amounts for Accidents Before September 1, 2010

An arbitration decision that should be of interest to all parties is Federico vs. State Farm. Mr. Federico's accident occurred prior to September 1, 2010 when reforms became effective in Ontario. One of the issues in dispute was the amount of interest to be paid to Mr. Federico on overdue benefit payments.

On September 1, 2010 the amount of interest paid was reduced from 2% per month compounded monthly to 1% per month compounded monthly.

The transition provisions in the new SABS (section 2 of Ontario Regulation 34/10) state that "Parts VIII and IX...apply with such modifications as necessary in respect of benefits provided under the Old Regulation with respect to accidents that occurred on or after November 1, 1996 and before September 1, 2010." The section dealing with overdue amounts is found in Part IX of new SABS.

An analogous amendment was made to the old SABS (section 3 of Ontario Regulation 403/96) stating that "Parts X, XI, XII, XIII and XV do not apply after August 31, 2010." The section dealing with overdue amounts is found in Part X of the old SABS.

On April 26, 2010, the Superintendent issued a bulletin (A-04/10) covering the transition to the new SABS. The bulletin stated that as of September 1, 2010, as a general rule the new SABS will govern claims processing relating to old accidents and the determination of amounts payable by insurers on account of expenses paid to establish benefit entitlements arising out of old accidents. One of the examples provided in the bulletin was that interest on amounts that become overdue on or after September 1, 2010, in respect to old accidents, will accrue at the new SABS rate of 1% per month compounded monthly.

The bulletin went on to provide some exceptions to the general rule and included interest on amounts that become overdue before September 1, 2010, in respect to old accidents, will accrue at the old SABS rate of 2% per month and be compounded monthly both before and after September 1, 2010. That means that an amount that is overdue prior to the reforms continues to accrue interest at the same rate. The rate for these overdue amounts does not change on September 1, 2010. However, the intent of the SABS was that new overdue payments (for example delayed payment for treatment provided after September 1, 2010) falls under the new SABS and the new interest rate.

So it is not surprising that the arbitrator ruled that the interest rate that applied to overdue amounts in this claim was 2% for the periods before and after September 1, 2010. This was consistent with the direction provided by the Superintendent in his bulletin.

Tuesday 8 May 2012

How Should Insurers React to Parveen vs. Aviva / Fredric vs. Aviva?

FSCO released Preliminary Decisions in two cases Parveen vs. Aviva and Fredic vs. Aviva both dated March 30, 2012 in which an arbitrator determined that both insureds had rescinded a settlement with Aviva Canada thus allowing Ms. Parveen and Mr. Fredric to proceed to arbitration.

In this particular case the arbitrator had agreed with the insureds that Aviva had failed to comply with the requirements of the Settlement Regulation, and she was entitled to rescind the agreement after the two-day period, in accordance with ss. 9.1(5) of the Settlement Regulation. The arbitrator was of the opinion that the Settlement Disclosure Notice was did not comply with the Settlement Regulation.

These decisions are the cause of considerable frustration within the system. The Settlement Disclosure Notice has been in effect since September 2010 and prior to that a very similar notice form was being used for years. The form is approved by the Superintendent of Financial Services following considerable involvement by both Dispute Resolution and Legal staff at FSCO and insurers and counsel representing insureds and insurers. In light of this, the arbitrators decision makes no sense.

Still these cases are relatively unique. A Settlement Disclosure Notice was executed. Over a month later a Release was executed. Following which the insurer received a letter rescinding the settlement. Settlement funds were then forwarded, and then returned.

Since the decisions have come out FSCO has posted a notice on its website stating that it is the Superintendent’s position that the current version of the Settlement Disclosure Notice form complies with the Regulation.

So how should insurers proceed in light of the decisions and the Superintendent's position?

I'm not so sure that revising he form will provide much additional protection. The Settlement Disclosure Notice is adequate. There will always be a risk that an arbitrator will make a similar ruling in the future. Insurers need to ensure that insureds understand the Settlement Disclosure Notice and the settlement process. Insurers who are concerned that they may not be providing sufficient disclosure should consider providing information additional to improve claimant communication and enhance the settlement process.

It would be a good idea to execute Releases first or at the same time as the Settlement Disclosure Notice. A Release terminates an insurers obligation to pay accident benefits which can be argued is not accomplished by the Settlement Disclosure Notice.

Wednesday 2 May 2012

Insurance News - Wednesday, May 2, 2012

Why Fewer Car Thefts Doesn’t Mean Cheaper Car Insurance

Dramatic declines in car theft will not likely translate into cheaper car insurance, drivers may be sad to learn.

Diligent police work and new anti-theft devices have cut thefts by half, or about 9,800 cars per year in the Greater Toronto Area, for instance.

But when it comes to insurance, nearly a third of all car owners already pay nothing because they have no theft coverage, and those who do, pay very little for it.

The average premium for what’s called comprehensive coverage — for everything from theft to broken glass — was only $107 per car in Toronto, Peel and southern York regions in 2010, down from $134 in 2006.

read more...

Auto Insurance Rates Stabilizing


The average auto insurance premium in Ontario declined slightly last quarter – a sign that rates may finally be stabilizing after years of sky-high increases.

The Financial Services Commission of Ontario, the body that regulates auto insurance, said the average premium fell 0.18 per cent.

read more...

Ontario Sees Average Car Insurance Rates Go Down 3.6%

Ontario witnessed the largest reduction in car insurance rates among the three provinces considered in Kanetix Ltd.’s latest quarterly, year-over-year review.

Customers saw rates go down 3.6% compared with 2011 Q1, notes a statement from Kanetix, an online insurance marketplace. Suggesting an early positive trend fueled by Ontario’s auto reforms in 2010, the decrease is the first in more than a year.

read more...

FSCO's Settlement Disclosure Notice May Be Inadequate

A FSCO Arbitrator has ruled that the FSCO prescribed Settlement Disclosure Notice might be inadequate to effect settlement. In Parveen vs. Aviva, a preliminary issue was whether Ms. Parveen had rescinded her accident benefits settlement and was entitled to move to arbitration.

The Arbitrator found that important information in the Settlement Regulation was not conveyed by the text of the prescribed Settlement Disclosure Notice. Specifically, she noted that Paragraph 3 of subsection 9.1(3) of Ontario Regulation 664 sets out the information that must be included in the disclosure notice with respect to the right to rescind a settlement. It requires:

A statement that the insured person may, within two business days after the later of the day the insured person signs the disclosure notice and the day the insured person signs the release, rescind the settlement by delivering a written notice to the office of the insurer or its representative and returning any money received by the insured person as consideration for the settlement.

The arbitration decision is here.