Ontario Government Takes a Different Approach to Auto Insurance Reforms

The 2019 Ontario Budget is out and there's some positive news for auto insurance consumers.

Finally, a government in Ontario takes a slightly different approach to repairing a damaged auto insurance product. For too long, the focus has been largely on no-fault accident benefits and ignoring virtually every other aspect of the product. The result has been a complex system that has not kept up with our changing society.

Here is what the 2019 Ontario Budget has to say about auto insurance:

1. Lowering Costs and Fighting Fraud

Fighting fraud is a common theme for every government. The current government is looking for FSRA to overhaul the licensing system for service providers to reduce regulatory burden and fraud, including treatment fees. I'm not impressed with the existing licensing system. When I worked on it in the early part of the decade, I had intended on it to truly focus on identifying fraudulent operators. It would have only licensed the largest billing facilities. Instead, the government just designed a broad licensing system. Hopefully, someone will look back at the original intent. Streamlining the system will also reduce costs.

 The government has indicated that they would like to see contingency fee agreements become more transparent and review the effectiveness of contingency fees. Sounds like a good idea.

The government has also signalled a desire to establish a Serious Fraud Office. This is an idea that has been bounced around for years now. My view is that it is the insurance industry that has to take the lead on fraud as is the case with other industries.

The government also is pushing the idea of more e-commerce. That would mean more electronic communications when purchasing insurance and making claims. The Budget specifically mentions electronic proof of insurance, something I advocated for 6 years ago.

2. Increasing Accessibility and Affordability

This is a common theme when a government talks about auto insurance. How to achieve it is the trick. The Budget leaves the door open to basing rates on credit scoring and preferred provider for vehicle repairs and health care services. I don't see credit scores and providing more accessibility or affordability. It will have the opposite affect on low income families. Insurers will gladly swap territorial rating for credit score rating.

The government is also planning to simplify insurance forms, policies and other insurance documents. I'm all for that!

3. Adopting the Driver Car Plan

This is the most intriguing part of the Budget announcement for me. It talks about a Driver Care Card, which would streamline access to care. I have no idea what this would look like. It does relate to the long awaited 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.

Finally, the no-fault accident benefits cap on medical, rehabilitation and attendant care benefits for those catastrophically injured will be restored to $2 million. The cap was reduced to $1 million in 2016 by the previous government and was one of the worst changes they made. I'm for controlling costs for those with minor injuries but those with the most serious injuries need to be properly covered.

 4. Increasing Competition

Increasing competition really means breaking the existing mold where everyone has the same type of auto insurance product. Driving behaviour, usage and technology have all changed. The product needs to reflect that. So I agree, lets see some innovative products. As long as the regulator ensures consumers are adequately protected.

Again, the government is looking to FSRA to achieve these changes. What can we expect to see? Things like pay-as-you-go insurance. Great for people who don't drive much. Perhaps more telematics. A simplified rate approval process. Streamlining the SABS, something I've been advocating for, for years. Higher limits for small claims court.

This is an ambitious agenda and a break from previous reform initiatives. Can't wait to see how this plays out.

What's Happening With B.C. Auto Insurance?

Some of my Ontario readers might be wondering what is happening in B.C. and their auto insurance reforms.

When the NDP government was formed, they inherited quite a mess. Auti insuracne costs were rising rapidly and rates increases had not kept up. The previous government had also drained the public insurer, the Insurance Corporation of British Columbia (ICBC) of surplus funds from previous years. As a result, the ICBC was running losses in excess of $1 billion.

The average premium in B.C. is now about $200 more than those in Ontario. Yes, it's hard to believe that there could be a mess worse than Ontario. The ICBC has been unfairly painted the villain. The private insurance industry is trying to use B.C. as an example of how government-run insurance doesn't work. That's just not true. In this case, competition could not possibly resolve the province's insurance problems.

British Columbia is the only jurisdiction that still has a full tort system. In other words, their system is much like Ontario's back in the 1980s with growing settlements and high legal costs.. The ICBC and B.C. government have determined that tort access needs to be restricted.

Beginning April 1 of this year, there will be a minor injury cap of $5,500 for pain and suffering awards in B.C., similar to what a number of other Canadian jurisdiction have done. At the same time, no-fault accident benefit coverage will be expanded. B.C. is also updating how it calculates rates by providing discounts to safe drivers and penalizing those who cause accidents. A change that is long overdue.

The ICBC expects to save about $1 billion dollars from these reforms. It will interesting to see if their no-fault model will work. If it doesn't, the next step may be to eliminate tort altogether and design a pure-no-fault system.

Ontario Governnment Ready to Make Auto Insurance Changes

It's been a long time since I last posted on this blog, but to be honest not much has happened with respect to Ontario Auto Insurance.

Last spring I wrote about the factors that were actually driving up the cost of auto insurance i.e., distracted driving, vehicle repairs and fraud. That hasn't changed. None of this was mentioned in David Marshall's report.

Last spring the Liberals were punished by voters for litany of reasons, which I'm not going to reiterate. The Conservatives took power and quickly made it clear that they were not going to proceed with Marshall's recommendations. Auto insurance was not part of their election platform and they had no position.

I thought it was pointless to speculate on what they would do. I was bound to be wrong, so I haven't posted anything on this blog. Today the government has finally taken some baby steps towards developing their auto insurance policy. They released a very short survey for consumers and stakeholders and announced a review of Ontario's rate regulation system.

Consistent with their election platform, the government's initiative's are being labeled as "for the people." Hopefully, that will be the case as changes begin to roll out. There will be stakeholders who will want to use the consultation to frustrate the government's desire to help consumers.

The survey itself is very short and will be collecting feedback until February 15, 2019. There are essentially two questions. How do you feel about the auto insurance product we have and how easy is it to shop for auto insurance? Clearly these are not questions directed at industry stakeholders.

The announcement also signalled a desire to move Ontario's auto insurance forward on initiatives like electronic proof of insurance and other insurance documents, more e-commerce and eliminating territorial rating. Many of these items could have been changed long ago. Sometimes I wonder if it takes a Google or Amazon to enter the marketplace to facilitate change? I hope not.

I've stated this in the past but it's worth repeating. I hope that the government doesn't decide to tinker with the accident benefit schedule again. It never delivers savings for consumers and only benefits certain stakeholder groups. Tackling distracted driving and fraud can create rate relief for consumers. Cutting benefits does not help consumers.