Monday 20 October 2014

Ontario's Rate Reduction Strategy Likely To Fall Short

This week FSCO released rate filings approved for third quarter of 2014.  Nine insurers, representing 26.65% of the market based on premium volume, had rates approved in the third quarter of 2014. Approved rates decreased on average by 0.11% when applied across the total market.

In the backdrop is the Ontario government's commitment to reduce rates in the province by 15% before August 15, 2015.  The chart below breaks down the quarterly rate approval changes following the announcement of the rate reduction strategy last year. The third quarter of 2013 has been included although many of the rate approvals for that quarter may have been filed well before the strategy was announced. 

Quarter
Rate Change
2013 – 3Q
-0.68%
2013 – 4Q
-3.98%
2014 – 1Q
-1.01%
2014 – 2Q
+0.22%
2014 – 3Q
-0.11%

The accumulative rate reductions approved by FSCO during this period have been under 6%. With just 10 months remaining, the government is considerably short of its target with no real strategy to bring down rates another 9-10%.

Bill 15, the Fighting Fraud and Reducing Automobile Insurance Rates Act, 2014 will likely be passed by the legislature within the next 10 months.  The Bill contains provisions to transform Ontario's auto insurance dispute resolution system into a more robust system. Other provisions would regulate the towing and vehicle storage industries through measures that tackle questionable practices. The bill would amend provisions in the Repair and Storage Liens Act and give the province authority to change the current 60-day period that a vehicle can be stored after an accident, accruing charges, without notice to the owner. The government has also served notice through the Regulatory Register that it will reduce the rate of interest on overdue SABS payments.

However, all of these initiatives as well as the proposed legislation to regulate the towing industry and the expected introduction of a new minor injury protocol could not possible bring down rates a further 9% in less that a year. 

Wednesday 15 October 2014

Update On Fraud

It has been nearly two years since Ontario's Auto Insurance Anti-Fraud Task Force delivered its final report to the Liberal government. The task force's final report was the result of a 16-month review and contained 38 recommendations dealing with fraud prevention, fraud detection, investigation and enforcement, as well as regulatory responsibilities.

 Following the release of task force report, it seems as if every auto insurance announcement released by the Ontario government has mentioned fraud. This is a strong indication that the government is very aware of the impact of fraud. To its credit, the government and the industry began implementing task force recommendations as soon as the report hit the streets. Despite all the work undertaken to implement the task force recommendations there still remain recommended action that are outstanding.

 MORE POWER TO FSCO

 The Financial Services Commission of Ontario (FSCO) and the insurance industry have created educational material in different media that instruct consumers at critical moments - such as when they learn to drive, select an insurer, collide with another vehicle or make an insurance claim - on how to avoid, detect and report improper activity. Insurance Bureau of Canada (IBC) and FSCO are active on social media, providing consumers with valuable tips and information.

It is now easier to report suspected fraud. Both IBC and FSCO operate fraud hotlines that consumers can use to provide anonymous tips of suspicious activity.

The government amended Ontario's Insurance Act in 2013 to enhance FSCO's powers. The Superintendent is now able to investigate anyone who was previously in the business of insurance; licensed service providers; or anyone else the superintendent considers may be engaged in unfair or deceptive acts or practices. This would include examining records, books and other information held by a licensed service provider.

 A number of regulatory changes also became effective in 2013 specifically to combat fraud. The government has amended the Statutory Accident Benefits Schedule (SABS) so that claimants play a more active role in helping to detect and prevent fraud. As well, the list of unfair or deceptive acts or practices has been expanded.

Insurers now have the ability to examine a claimant under oath, where this is necessary to determine which insurer should be responsible for coverage, without prejudice to the right for an examination under oath with respect to questionable claims.

Finally, the government has broadened the terms of reference for the required review by the superintendent of Part VI of the Insurance Act to reflect the additional powers and responsibilities assigned to FSCO. In addition, the amended Insurance Act provision now requires the review to be conducted at least every three years.

A WORK IN PROGRESS

Although there has been considerable progress made in developing tools and mechanisms to combat fraud, there are still outstanding task force recommendations. The previous government's minority status and the recent election have contributed to delays in implementing a number of recommendations. Now that the Liberals have returned to power with a majority, it is expected that adoption of the remaining task force recommendations will accelerate.

A positive sign was the introduction of Bill 15, Fighting Fraud and Reducing Automobile Insurance Rates Act, 2014 shortly after the spring election.

Should Bill 15 be passed by the legislature - and there is no reason to believe it will not be - it will implement a number of outstanding task force recommendations.

Included are provisions to transform Ontario's auto insurance dispute resolution system into a more robust system. Responsibility would be transferred to the Licence Appeal Tribunal under the Minister of the Attorney General.

Other provisions would regulate the towing and vehicle storage industries through measures that tackle questionable practices. The bill would amend provisions in the Repair and Storage Liens Act and give the province authority to change the current 60-day period that a vehicle can be stored after an accident, accruing charges, without notice to the owner.

In 2013, the insurance industry established CANATICS, or Canadian National Insurance Crime Services, a not-for-profit organization focused on using state-of-the-art analytical tools to identify potentially suspicious claims in insurance industry pooled data, to facilitate further investigation by individual insurers. CANATICS recently added a 10th insurer as a member and now has access to data from 75% of the market based on direct written premiums in Ontario. CANATICS is expected to begin operations in 2015.

Health Claims for Auto Insurance (HCAI) has developed the Professional Credential Tracker to assist regulated health professionals in preventing their identities from being misused by health care facilities. HCAI continues to look at additional anti-fraud tools.

FSCO is well on its way to licensing health clinics that treat and assess auto insurance claimants and to sanction clinics that are not following FSCO's business-practice standards. FSCO has a wide range of sanctions at its disposal, including the ability to limit or curtail a facility's access to HCAI. The licensing system is expected to be operational in December 2014.

There are a number of other ongoing initiatives identified by the task force that the insurance industry is eager to see completed. FSCO continues to lead the work on developing treatment protocols for minor injuries that are based on scientific evidence. Meanwhile, the Ministry of Transportation is still working on its Electronic Collision System project.

MORE WORK TO BE DONE

Although it is anticipated that Bill 15 will pass, there are still a number of legislative and regulatory changes recommended by the task force that the government has not acted on. There still has been no legislation introduced to protect individuals who report suspected fraud from reprisals and retribution. The government has also not amended the regulation to permit insurers to collect a cancellation fee from claimants who fail to attend a medical examination without a good reason, and to suspend income replacement benefits when there is compelling evidence the claimant has submitted a fraudulent claim for medical or rehabilitation accident benefits.

There were also a number of recommendations that dealt with information sharing that have yet to be developed. There is a need for protocols for active information sharing about suspicious cases among the investigative divisions of FSCO, the Workplace Safety and Insurance Board, the Law Society of Upper Canada and the Ontario Health Insurance Plan. In addition, protocols are needed to permit FSCO investigators to exchange information with investigators from relevant federal entities (such as the Canada Revenue Agency). The insurance industry is still waiting for these regulatory bodies and agencies to begin work out these issues.

The task force report contained several recommendations directed at introducing greater transparency with respect to independent assessments that have not been implemented. This includes requiring insurers to disclose publicly how they choose and assess the performance of independent medical examiners they refer consumers to see. Health regulatory colleges are also expected to work together to develop professional standards, guidelines and best practices to improve the quality of independent assessments of auto insurance claimants conducted by their members.

The fight against fraud is far from over but progress has been made. Under prevention, consumer awareness has been enhanced and a new licensing system for service providers will soon be operational. The industry will be in a better position to detect fraud when CANATICS is fully operational next year. FSCO's powers have been expanded to allow for more effective fraud investigation and enforcement. All this would not have been possible without the co-operation of government, the insurance industry, police services and service providers.

Thursday 2 October 2014

Ontario Ministry of Finance Has Provided Notice On Intent To Introduce New Rules For Service Providers

The Ministry of Finance is proposing to amend O. Reg. 7/00  to make it an unfair or deceptive act or practice (UDAP) for a person who provides or offers to provide goods or services for the benefit of a person who claims statutory accident benefits to communicate any false, misleading or deceptive information regarding their business or billing practices, services provided, or any other matter related to licensing.

 This UDAP is intended to apply to both licensed and unlicensed service providers. An unlicensed service provider may not advertise that they are a licensed provider. A licensed provider that has had their licence suspended or revoked may not continue to advertise that they are licensed. This amendment would ensure that consumers can identify licence holders and avoid confusion about what licence holder status means. This will also discourage inaccurate claims about what a licence signifies.

 In addition, the Ministry is proposing regulatory amendment to allow the Superintendent to apply variable administrative monetary penalties (AMP) to deal with significant contraventions of the regulations that can involve or potentially lead to improper billing practices. The service provider would have the opportunity for a hearing before the Financial Services Tribunal on the proposed AMP.

The Ministry is also proposing to amend O. Reg. 90/14 (Service Providers – Standards for Business Systems and Practices) to introduce a duty to report accurately to the Superintendent of Financial Services, in the periodic return established under section 288.4(5) of the Insurance Act, all information necessary to calculate any applicable fees established pursuant to section 121.1 of the Insurance Act.

The Ministry is proposing to amend O. Reg. 89/14 (Service Providers – Listed Expenses) to prohibit licensed service providers from invoicing claimants directly - they will receive direct payment from insurers. The proposed amendment will allow licensed service providers to seek payment for outstanding accounts directly from claimants in prescribed situations (where a full and final settlement has been reached and signed between the insurer and the insured person that includes these amounts).

Finally the Ministry is also proposing to amend O, Reg. 34/10 (SABS) to require claimants who go to unlicensed service providers to obtain specified billing information from their service provider and submit this information to their insurer when seeking reimbursement.

The SABS would also be amended to require insurers to provide HCAI the billing information when they reimburse a claimant for a "listed expense". These amendments will ensure the continuity of robust and more complete data collection by HCAI. It will avoid possible loss of data that may otherwise occur when claimants are invoiced directly by service providers who are not licensed to be paid directly through the central processing agency.

The Ontario government's Regulatory Registry is inviting stakeholders and interested parties to provide comments on these proposed regulations (that have yet to be made public). The deadline for comments is November 6, 2014.

 Ontario's Regulatory Registry provides information on new proposed regulatory initiatives that could affect Ontario businesses and recently approved regulations that affect business. Regulations are approved by the provincial Cabinet.

 Once a regulation is approved, a plain language summary of the regulation is posted on the Registry website, with a link to the regulation posted on the Government of Ontario's e-Laws website.

Insurance News - Thursday, October 2, 2014

Here are the leading auto insurance headlines from ONTARIO AUTO INSURANCE TOPICS ON TWITTER for Thursday, October 2, 2014:

Wednesday 1 October 2014

Ontario Ministry of Finance Has Provided Notice On Intent To Change The Interest Rate On Disputed SABS Claims

The Ministry of Finance is proposing to amend the SABS (O. Reg. 34/10) so that when there is a dispute in respect of an insured person's entitlement to, or amount of statutory accident benefits, interest on overdue SABS payments is calculated at the prejudgment interest rate described in the Courts of Justice Act that is used for past pecuniary loss, and is payable from the date on which a mediation proceeding is commenced and ends on the date a settlement is reached or a decision is issued that finally disposes of the dispute.

 The Ontario government's Regulatory Registry is inviting stakeholders and interested parties to provide comments on these proposed regulations (that have yet to be made public). The deadline for comments is November 6, 2014.

 Ontario's Regulatory Registry provides information on new proposed regulatory initiatives that could affect Ontario businesses and recently approved regulations that affect business. Regulations are approved by the provincial Cabinet.

 Once a regulation is approved, a plain language summary of the regulation is posted on the Registry website, with a link to the regulation posted on the Government of Ontario's e-Laws website.