Superintendent's Report on the Definition of Catastrophic Impairment in the SABS

The Minister of Finance has now released the Superintendent's Report on the Definition of Catastrophic Impairment in the Statutory Accident Benefits Schedule. The Superintendent's report recommends changes to the SABS definition that reflect the two reports submitted by the Catastrophic Impairment Expert Panel as well as consultations conducted last year by FSCO.

The recommended changes if implemented would update the catastrophic impairment definition to reflect current scientific knowledge. The chart below describes the current test and the proposed test for each impairment group covered by the definition as well as the evidence used by the Expert Panel to support the recommended changes.

In addition to changes to the definition, the Superintendent recommends the payment of interim benefits to some claimants awaiting catastrophic impairment designation and automatic designation to other claimants. Only some of the Expert Panel's recommendations regarding the qualifications of catastrophic impairment assessors has been accepted by the Superintendent.

The most contentious recommendation deals with the combining of physical and psychiatric impairments. The Superintendent agrees with the recommendation originally made by the Expert Panel that these impairments not be combined which reverses the direction provided in the 2004 court case, Desbiens v. Mordini. The Superintendent also recommended that the catastrophic impairment definition not allow pain to be quantified as a separate impairment which would exclude chronic pain and fibromyalgia as catastrophic impairments.

Impairment	Current Test	Proposed Test	Evidence
paraplegia and tetraplegia (quadriplegia)	none	American Spinal Injury Association classification of spinal cord injuries	standard in medical practices literature suggests classification system is valid and reliable
amputations	none	none	clinical and scientific judgment of Expert Panel members
burn and crush injuries to limbs	not covered in SABS	Spinal Cord Independence Measure	clinical and scientific judgment of Expert Panel members The scientific evidence supports the validity and reliability of the SCIM
blindness	none	Legal blindness
traumatic brain injuries in adults	Glasgow Coma Scale Glasgow Outcome Scale	Extended Glasgow Outcome Scale	strong psychometric properties and reliable when used with a structured interview and standard scoring algorithm
other physical impairments	whole body impairment rating using American Medical Association’s Guides to the Evaluation of Permanent Impairment, 4th Edition	whole body impairment rating using American Medical Association’s Guides to the Evaluation of Permanent Impairment, 4th Edition, Chapters 3-13	very little scientific literature supporting use for determining catastrophic impairment but Expert Panel found no alternative rating system
psychiatric impairments	class of mental or behavioural disorder using American Medical Association’s Guides to the Evaluation of Permanent Impairment, 4th Edition, Chapter 14	Global Assessment of Functioning Scale	literature suggests scale has adequate reliability and validity
combining physical and non-physical impairments	none but the courts have assigning whole body impairment scores to impairments under Chapter 14 of AMA Guides to allow combining with scores under Chapters 3-13	no combining	no scientific literature to support combining physical and non-physical impairment ratings The physical and mental/behavioural impairement rating chapters were not developed to be combined
traumatic brain injuries in children	none	King’s Outcome Scale for Children Head Injury	little scientific evidence to support so Expert Panel recommended a study be conducted

Insurance News - Monday, June 11, 2012

Assault Victim May Qualifies for SABS Because of Psychological Trauma

The plaintiff was physically assaulted by several unidentified assailants while parked at a gas station sorting his money. He escaped by putting his car in gear and driving away. He believed he may have run over one of his assailants in the course of fleeing. He claimed he sustained psychological and physical injuries as a result of the incident.

This case is revolves on the meaning of subsection 2(1) of the SABS, which defines an "accident" as “an incident in which the use or operation of an automobile directly causes an impairment”. The motion judge granted a declaration that the plaintiff was involved in an “accident” within the meaning of the SABS. The insurer appealed.

The Court of Appeal allowed the appeal with respect to the physical injuries, holding that the physical assault did not constitute an “accident”. The Court held that a trial was required to determine whether the psychological injuries were caused by the ordinary use of a motor vehicle.

With respect to the psychological injuries, the Court held that running someone over could be considered a normal incident of the risk created by the use or operation of a vehicle.

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Louisiana Cracks Down on Uninsured Drivers

A new law has passed in Louisiana, giving the state’s law enforcement expanded authority over vehicles that may not be insured.The legislation, House Bill 1053, was signed into law this week by Governor Bobby Jindal. State officials believe the new law will help law enforcement ensure that drivers are protected while taking to the state’s roadways.

According to the new auto insurance law, officers will now be able to tow vehicles if drivers cannot show proof of insurance coverage on their first offense. State officials suggests that more than 850,000 vehicles are currently uninsured in Louisiana, many of which are likely to have been targeted by citation in the past but were allowed to stay on the road due to faulty laws.

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Top 7 Most Dangerous Cars in America

The Insurance Institute for Highway Safety recently performed crash tests and rated the cars in four separate categories. 24/7 Wall St. analyzed the ratings and ranked the seven most dangerous cars in the country.

1. Dodge Ram 1500
2. Chevrolet Colorado Crew Cab
3. Mazda CX-7
4. Mazda CX-9
5. Nissan Pathfinder
6. Jeep Wrangler
7. Suzuki SX4

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Update on Auto Insurance Private Member's Bills

Reducing Automobile Insurance Premiums by Eliminating Fraud Act, 2012 (Bill 41)

Bill 41 was introduced by Mississauga-Brampton South MPP Amrit Mangat to protect people who report insurance fraud. The bill is also intended to ensure that insurance investigators have the proper tools to investigate fraud.

Bill 41 was introduced on March 7, 2012 and passed second reading on March 22, 2012 a which time it was sent to the Standing Committee on Good Government for review.


Insurance Amendment Act (Elements in Classifying Risks for Automobile Insurance), 2012 (Bill 43)

Bill 43 was introduced by York West MPP Mario Sergio and deals with allowable elements of a risk classification system.

Bill 43 was introduced on March 7, 2012 and has not proceeded yet to second reading debate.


Insurance Amendment Act (Risk Classification Systems for Automobile Insurance), 2012 (Bill 45)

Bill 45 was introduced by Bramalea-Gore-Malton MPP Jagmeet Singh and also deals allowable elements of a risk classification system and would prohibit auto insurers from using a person’s home address or postal code and any element prescribed by regulation in classifying such risks.

Bill 45 was introduced on March 7, 2012 and was defeated on second reading on June 2, 2012.


New Drivers' Insurance Rate Reduction Act , 2012 (Bill 71)

Bill 71 was also introduced by York West MPP Mario Sergio and is intended to lower rates for new drivers by crediting new drivers with additional years of driving experience.

Bill 71 was introduced on April 23, 2012 and passed second reading on April 26, 2012 a which time it was sent to the Standing Committee on Good Government for review.

Standing Committee on General Government Auto Insurance Hearings - Day 2

The following are presentations made on May 30, 2012


City of Brampton
Elaine Moore, Regional Councillor
John Sanderson, Regional Councillor

Why should where you live be the primary determinant of your insurance rates? Brampton has many residents who travel outside of Brampton for employment or school, hence their vehicles spend more time outside of Brampton but their insurance rates are based on their home address.

Conversely; Brampton’s business community, including the corporation of the city of Brampton, has employees with addresses in Guelph, Georgetown, Erin, Orangeville. Their vehicles probably spend more time in Brampton than in their home community, yet these good folks enjoy a cheaper insurance rate. This just simply is not fair or right.

In the areas that Councillor Sanderson and myself represent in Brampton, there are five insurance brokers—all have been located within half a kilometre of each other in the downtown, and they’ve been there for decades. So we have a particular concern for the sustainability of the generational relationships that they have built over these many years. We’ve had many conversations with our local brokers, and they are losing clients for as little as $100 a year in savings. They have had clients return because at the expiry date of their policies their rates have returned or surpassed what they would have paid, had they remained with their broker. Call this what you want, but I call it “bait and switch,” and it’s happening every day. It’s unfair, and it’s wrong. Controls need to be put in place to prevent this practice.

If Brampton residents are hiring paralegals to extract from insurance companies what they believe the policyholder is entitled to, then the industry needs to address this within their operating budgets and stop sending the invoices extract from insurance companies what they believe the policy holder is entitled to, then the industry needs to address this within their operating budgets and stop sending the invoices to recover the costs from the Brampton residents. If some rehabilitation centres are a problem, then deal with the centres.


Insurance Brokers Association of Ontario
Randy Carroll, Executive Director
Bryan Yutman, Past President

The lnsurance Brokers Association of Ontario represents over 12,000 insurance brokers who assist over 5 million consumers across Ontario with their insurance needs. Our priority is to protect the interests of consumers, from the purchase of a policy right through to when they need an independent advocate at the time of claim.

On the issue of broker independence, we take a look at the motion establishing this committee’s study, and it makes reference to the role of brokers and their independence. This is a matter that is fundamental to the IBAO and to the value of the broker channel. One of the key advantages of the broker channel versus the direct writers or agents who represent only one company or market is that brokers are independent and shop the market on behalf of their customers to get the best combination of coverages and price for that consumer. This means that a broker compares coverages from more than one insurance company provider. Typically it’s four or five, but it can be as many as a dozen different markets.

Over the last decade, however, financial linkages between insurance companies and brokerages have begun to increase. These linkages tend to take the form of ownership stakes in some brokerages and/or loans. Of course, this raised flags about conflicts of interest and steerage of business to insurers who had a financial interest in a brokerage.

IBAO took this development very seriously and notably, in 2005, our regulator, the Registered Insurance Brokers of Ontario, or RIBO, took two important actions. First, it required that all brokers disclose any financial relationships to their customers, including their commission rates. Second, it conducted a detailed study on the matter to determine the extent of financial or business relationships with an insurance company and the existence of concentration or steering issues among those brokers.

With respect to the issue of auto insurance fraud and abuse, we want to turn to the specific issues again related to fraud and abuse in the auto insurance product. IBAO believes that this is the single most important thing that can be done to lower claims costs and thus, to lower insurance premiums and that is to tackle fraud and abuse in Ontario’s auto insurance system, particularly in the accident benefits area. IBAO will support constructive recommendations to combat fraud and abuse from all parties in this Legislature. We can’t tolerate the abuse of the auto insurance product any further, as it’s costing the customers we serve too much money, as Ontarians pay the highest auto premiums in Canada. However, we would like to caution against further tampering with the system in the wake of the 2010 auto reforms. Those reforms are only beginning to make themselves felt, and we believe they are working.

We are not here to defend the insurers, but we do believe that any aggressive tampering with the system will threaten market stability which is just starting to get a foothold post reform. Nevertheless, we do believe there are measures that can be taken to deal with unfair pricing practices in the property and casualty insurance market. The measure we are referring to is banning the use of credit scoring in personal property insurance. Almost immediately after the credit ban was introduced in auto insurance in 2010, insurers began to use credit far more aggressively to price people’s property insurance, once again subverting the ban on auto.


Ontario Trial Lawyers Association
John Karapita, Director of Public Affairs
Andrew Murray, President-Elect

The association represents more than 1,300 personal injury lawyers, law clerks and students from across Ontario.

The association, for many years, has suggested when looking at the auto insurance system to focus on the three P's: profits, which is a reasonable return on equity for the insurers; premiums, which of course is fair prices for consumers; and protection, which is fair and appropriate coverage.

If you think of the three Ps as a stool, you cut off one of those legs—any one of those legs—it’s unbalanced and it doesn’t work. In anything that you recommend or anything that gets done as a result of the good work of this committee, please be mindful of the three P's. I would, indeed, add a fourth P, changing it from a stool perhaps into a table, which is predictability.

When a change is made, the law of unintended consequences always occurs and you have uncertainty injected. You’ve tried to help something here and now nobody knows exactly what the rules are and it gets sent back to the courts for years and years and years trying to sort it out.

We’ve just gone through 15 years or more of uncertainty with respect to certain issues pertaining to catastrophic impairment. Not long ago, the court of appeal in Ontario, our highest court in this province, provided great clarity to a lot of those issues. If we were to now make some changes that have been suggested, it would essentially throw out 15 years of hard work in the trenches, coming to terms with what are the rules of engagement. I would really try to dissuade anyone from doing that because it would not help.

We should suspend the introduction of restrictions on the definition of catastrophic impairment. There had been a lot of talk of that back in the fall, following the release of an expert panel report. We said, instead, we must focus on eliminating the backlog for mandatory mediations at the Financial Services Commission of Ontario because it is one of the most significant impediments, on both sides, to having a resolution of disputes in the system.

The expert report led to the superintendent, apparently, making some recommendations directly to Minister Duncan. That’s referenced in the budget announcement from back in March. It’s been at least that long that the minister has had that report from Phil Howell, and it has never been released publicly, and we don’t know why. We’ve called for its release, and I would hope that this committee calls for its release.

There needs to be an analysis of the impact of the changes that were made in September 2010 to the accident benefit schedule. Because until we know how those changes have filtered their way down in the system, we don’t really know whether there is a need to make further changes. There needs to be better anti-fraud measures taken in the system.


Ontario Safety League
Brian Patterson, President

The Ontario Safety League has been the chief public safety advocate in the province of Ontario for almost 100 years.

The public perception with respect to automobile insurance and its impact on homes and individual participants in the system leads me to one very significant conclusion, and that is that the general education level of the public with respect to what they’re buying when they’re receiving their insurance and what they’re going to receive when, in fact, they have an issue is significantly—there’s a significant education deficit among the public on what they’re purchasing with respect to insurance.

I know from those who are involved in the investigation of insurance fraud that between 40 and 60 major files are opened every month in this province, involving people who have actively targeted the insurance industry. In my mind, those are the thieves who go through the back door of your house when you’re not at home and steal directly from you, and all of us are paying.

Our concern is that right now—I know it’s limited time, but the issue we have is that the most vulnerable citizens in this province are often those with post-traumatic crash. The two areas that I think you should spend some focus on are the GCS, the Glasgow coma scale.

The other area is, of course, traumatic brain injury. A lot has been done with regard to engineering in vehicles, but we still have traumatic brain injury that results directly from an automobile crash involving two automobiles. If you look to the changes that are currently proposed, the resources in some areas of the province are non-existent. It will limit the likelihood of a victim to be brought into the catastrophic category, and in some areas of the province, they’re non-existent. To get someone into a recognized neuro-trauma rehabilitation centre, there are only a limited number. They tend to be in southern Ontario and they are not available for access.

Without a dedicated fraud unit you’re not going to be able to proceed effectively. These are complicated cases. You want to have dedicated resources because, in fact, there are a number of areas, both administrative and criminal, involved in this.


Alliance of Community Medical and Rehabilitation Providers
Nick Gurevich
Patricia Howell

The Alliance is a collection of 90 member practices, health care providers in the province of Ontario. Many of them conduct work within the auto insurance sector. The vast majority treat injuries that are not minor in nature; they are serious injuries.

After the last set of changes, implemented in 2010, benefits have been slashed by over 70%, to a point where Ontario now has the second worst auto insurance health care coverage in Canada.

We’re in complete agreement with fighting fraud. What we are not in agreement with is the steps taken to address the symptoms rather than the root cause, resulting in an imposition of a collective punishment of all victims.

A word of caution: New measures intended to fight fraud must be precise and focused. There cannot be measures introduced that will have the effect of imposing new barriers to victims to access services or prevent health care providers from delivering them.

Let’s admit that we made a mistake a couple of years ago when we cut the non-cat benefits so drastically. Let’s put those $100,000 plus assessment costs back in the system. The pediatric brain injured population have legitimate long-term needs and $50,000 is not nearly sufficient. It will run out in less than a year.

Let’s also admit that we made a mistake around when we revamped the IE system a couple of years ago. This is one of the root causes for the escalation in applications for mediation. Of course denial rates for treatment have skyrocketed. For your information, they’ve gone from 11% of treatment plans denied before the changes were introduced in 2010 to, now, 42% of treatment plans are denied.

The FSCO Catastrophic Impairment Expert Panel had some good suggestions. For example, they introduced the notion of interim catastrophic designation. So a way that someone could be qualified as catastrophic early on and then later reassessed if that’s appropriate. That was a great idea. However, there were many, many basic premises in the expert report that need to be revisited.


Baron Insurance Services
Barb Addie

I am an actuary and have been a fellow of both the Canadian Institute of Actuaries and the Casualty Actuarial Society since 1983. I began work in 1979 and have been actively involved in Ontario auto insurance since.

Return on equity went up slightly between 2010-2011 from 7.6% from 8.0%. What this does not tell you is that personal lines insurers have, over the last five years, had returns on equities sub 4%.

Ontario auto results: I’m sorry, from an actuarial point of view, it is just much too early. For the bodily injury claims, right now we know about 5% have been paid and 50% to 60% of the claims that will ultimately be paid are unreported. If the MIG holds, the reforms may well be more effective than the actuaries had originally estimated. The original estimate was 32% of claims. It may well be closer to 40%.

The next area I wanted to direct you to is return on investment. Iif you look at the yield for 3-to-5-year bonds it’s gone from a high of 11% in 1991 down to slightly less than 2% in 2011. For P&C insurers, this is a massive issue. Approximately 83% of their investments are in bonds, and a high percentage of those are in government bonds. Insurers take huge risks with underwriting insurance, and they tend to have conservative portfolios to offset the insurance risks they’re taking on.

From an economic perspective, the rate of return on equity that achieves the goals that FSCO has set apart is the cost of capital. If insurers are receiving their cost of capital, consumers will pay the lowest possible rates in the long run and investors will make their expected returns. If the ROE is too high, investors earn more and consumers pay more, however, in the medium term, the rates would decrease as the P and C insurers with their 80-plus competitors are very competitive. They will bring down the rates or else they will lose business. If the ROE is too low, consumers benefit in the short term, but in the longer term firms either leave the market in search of better returns or rates will have to increase. There’s no magic to it.

If the territories were removed, because there’s such a significant difference in what happens between territories, people who live in territories where it is underrated would find that they might have a supply problem. As an insurer, why should I knowingly put a risk on my book that is underrated? If I do that, I’m being unfair to my policyholders because I’m impairing my solvency, and I am being unfair to my shareholders because I’m impairing profitability. I cannot, in good conscience, put that risk on my book. What do I do? If I’m a broker company, I cancel all my brokers in those areas. I can’t take that. If I am a direct writer, I’m going to have to go to FSCO and say, “I will write in this area because I cannot put that badly an underpriced risk on my books.”

The whole concept of a rating structure is to match risk and rate. If I arbitrarily choose to take out a variable that I know to be very predictive, then I am not matching risk and rate. I am putting underpriced risk and overpriced risk in my book.


Dr. Milan Unarket, Physiatrist
Dr. J. Douglas Salmon, Neuropsychologist

One of the comments I wanted to make regarding the Catastrophic Impairment Expert Panel is on the GCS. The GCS, the level of how unconscious you are after a brain injury, although it has flaws, is very widely used and it’s done by paramedics, done by nursing; it’s done by and during the trauma centres, done even in in-patient rehabilitation. GCS is still not a bad predictor of injury severity. Basically, even though there are some better predictors of injury severity, it’s something that widely used and should probably still continue to be used to deem whether someone is catastrophic or not in brain impairment because it’s something that can be done quickly and easily, it’s accessible and it’s done very widely.

One of the recommendations was that those who are admitted to an in-patient rehabilitation get an automatic catastrophic designation. That’s a good idea, but there are a lot of people who have brain injuries who just don’t get access to in-patient rehabilitation.

The change that was made in 2010 is that all the assessments that are done are also of that $50,000 medical and rehabilitation limit. It actually significantly impacts on someone’s treatment. So if you have $6,000 or $8,000 in assessments or $10,000 in assessments, that’s 20% of someone’s treatment. That’s 205% of $50,000. That significantly impacts. That further reduces the amount of money available.

I do have concerns about the expert panel recommendations, particularly with respect to the combination of physical and psychological impairments as well as changing the mental behavioural definition. Both of these will clearly, dramatically decrease the number eligible victims who will be eligible for catastrophic designation.

I also have concern with respect to the lack of clarity in the MIG relative to the inclusion of mood, anxiety and other mental health disorders with respect to what levels of severity are considered to be in or outside the MIG. Lack of interpretive definition, which will eventually come through case law—it’s still potentially many months to years away. And without this clarification, obviously both insurers as well as IE providers have a certain sense of confusion, lack of clarity and, as such, there will be many denials and lack of mental health services provision on that basis.

I also have concerns with respect to the insurer buy-up option. It’s understood that the buy-up has been very poorly undertaken by most consumers so far. That leaves folks greatly exposed. As well, within the buy-up, there’s no option to actually buy up relative to the MIG.

The removal of the DAC structure in 2006 basically removed the impartiality, the neutrality and the evidence-based assessment system. Other colleagues have already commented on the importance of and the stress and pressure on IE examiners relative to the relationship between an IE assessment centre and the IE. With a $2,000 cap, as well, there are significant, added cost-related pressures that have resulted in increased use of inexperienced new graduates and the like within the system.


Catastrophic Impairment Expert Panel
Dr. Pierre Côté, Chair

I am an associate professor of epidemiology at the Dalla Lana School of Public Health here at the University of Toronto and a scientist within the Division of Healthcare and Outcomes Research at the University Health Network.

The overarching goal of the panel’s work was to ensure that the individuals who are the most seriously injured in traffic collisions are assessed according to the best scientific and medical evidence. The expert panel included an independent multidisciplinary team of internationally renowned clinicians and scientists who are highly skilled in the evaluation of impairment and in scientific methodology.

With regards to the definition of catastrophic impairment, the expert panel was given two functions. First, to identify ambiguities and gaps in the current SABS definition of catastrophic impairment and to use emerging scientific knowledge and judgment to make recommendations for changes in the definition. In other words, the expert panel was asked to review the scientific evidence to modernize the definition which was initially developed in 1996 and to improve the accuracy of the determination of catastrophic impairments following traffic injuries.

All our recommendations were developed following an established methodology called the Delphi methodology which is a well-accepted scientific method to develop consensus statements in medicine. According to our methodology, consensus was reached when 75% of the panel, that is six out of eight members, agreed with the recommendation.

The expert panel proposed 10 main revisions to the current definition of catastrophic impairment. The panel reached consensus on all recommendations. The panel spent a great deal of time and energy to ensure that children with traumatic brain injury are assessed and managed according to state-of-the-art criteria and in a timely manner.

This may have been one of the most expensive crashes ever

The collision, involving a Bentley Azure (worth an estimated $400,000), a Mercedes S Class ($120,000), a Ferrari F430 ($230,000), an Aston Martin Rapide ($230,000) and a Porsche 911 ($130,000), occurred in front of Monaco's Place du Casino.

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.

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.

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...

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.

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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...

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.

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.

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.

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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.

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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.