Insurance News - Wednesday, January 30, 2013

Here are the leading auto insurance headlines from ONTARIO AUTO INSURANCE TOPICS ON TWITTER for Wednesday, January 30, 2013:

• Fraud concerns linger over Illinois driver license law that issues licenses to illegal immigrants.
• Why are drivers with clean driving records not always charged lowest auto insurance rates?
• According to Moodys, the Global economy is still a headache, but P&C insurers positioned to weather headwinds.
• Check out my article in January 2013 issue of Canadian Underwriter on regulating the towing industry in Ontario.
• Less than 20% of fraudulent insurance claims are detected or denied. Seems like we could do better.

Anti-Fraud Regulations Come Into Effect June 1

The Ontario Government has made public the regulatory changes that will be made to help combat auto insurance fraud.  The changes were approved on January 21, 2013 and are scheduled to come into effect on June 1, 2013. 

Regulation 14/13 amends the Statutory Accident Benefits Schedule (SABS) - 34/10. 

The amendments to the SABS include:

• a requirement for insurers to provide all reasons when denying medical and rehabilitation claims; 
• providing FSCO with authority to stipulate additional information that insurers must provide in bi-monthly benefit statements to claimants; 
• giving insurers authority to require claimant confirmation of receipt of goods and services that have been billed; and 
• providing FSCO with authority to stipulate by Guideline the maximum payable by insurers for goods as well as services.

Interesting that the government chose to only amend section 38(8) which deals with requiring insurers to give reasons for denying medical and rehabilitation claims.  The same language exists in 12 other sections of the SABS (listed in a previous post) and those sections were not amended.  That would suggest there are now two standards for communicating denials to claimants.  As well the language change from “the medical and any other reasons why the insurer considers any goods, services, assessments and examinations, or the proposed costs of them, not to be reasonable or necessary” to “the medical reasons and all of the other reasons why the insurer considers any goods, services, assessments and examinations, or the proposed costs of them, not to be reasonable and necessary” does appear substantially different.

The Cost of Goods Guideline was issued by FSCO in January 2012.

FSCO also plans to issue a standard form prior the regulation coming into effect that insurers will be required to use for the purposes of the bi-monthly benefit statements to claimants.

Regulation 15/10 amends the Unfair or Deceptive Acts or Practices (UDAP) Regulation - 7/00.

The changes to the UDAP regulation include:

• an offence to request, require or permit a claimant to sign an incomplete claim form and 
• clarifying the exemption for lawyers and paralegals to ensure the regulation applies to lawyers and paralegals when not acting in a legal capacity.

Regulation 16/13 amends the Disputes Between Insurers (DBI) Regulation - 283/95.

The amendment to the DBI regulation allows for the insurer that receives the initial application for benefits to request one examination of the claimant under oath to assist in the determination of priority issues.

This amendment provides insurers with a second opportunity to request a claimant undergo an examination under oath.  The new DBI requirement is to assist an insurer to determine which insurer is liable to pay the claimant accident benefits.  The SABS provisions continues to assist an insurer to determine whether the claimant entitled to accident benefits.

Insurance News - Monday, January 28, 2013

Here are the leading auto insurance headlines from ONTARIO AUTO INSURANCE TOPICS ON TWITTER for Monday, January 28, 2013:

• Consumer Federation of America Report: Largest auto insurers often charge higher premiums to safe driver.
• Multitasking and Distracted Driving: You Are Not the Exception.
• Most brokers are not using basic social media platforms: Twitter, Facebook, Google search engine, blogs. 
• Liability Issues Create Potholes on the Road to Driverless Cars.

FSCO Arbitrator Further Clarifies Meaning of 'Economic Loss'

In the recent case of Simser and Aviva (FSCO A11-004610, January 16, 2013), Arbitrator Lee examined the meaning of “economic loss” in s. 3(7)(e) of the SABS.

The insured provided a report from an economist regarding the definition of “economic loss”.  He argued that since it was not defined in the SABS it should be defined to include “opportunity cost”, as well as loss of time devoted to labour or leisure. The arbitrator indicated that if a broad interpretation of "economic loss" was accepted, it would negate the intent of introducing the amendment.  The outcome would be no change to the interpretation prior to September 1, 2010.

Aviva argued that economic loss should mean a financial or monetary loss. The arbitrator rejected the insured’s argument and accepted that of the insurer.  As a result, he concluded that no economic loss was sustained and as such the claimed benefits were rejected.

The insured had applied for attendant care and housekeeping benefits following his accident of November 10, 2010. None of the three providers provided supporting documentation to that would have demonstrated an actual loss. The only witness was vague and was unable to sufficiently support the claims. 

The significance of this decision is that it recognizes that the amendment made in September 1, 2010 was intended to narrow the interpretation of incurred expense. For an expense to have been incurred:

(1) the insured person has received the services;

(2) the insured person has paid or promised to pay or is otherwise legally obligated to pay the expense; and

(3) the person who provided the goods or services:

(i) did so in the course of the employment, occupation or profession in which he was ordinarily engaged, but for the accident; or
(ii) the person sustained an economic loss as a result of providing those goods or services to the insured person.

 In this particular case, part 3 of the definition was not met.

Insurance News - Saturday, January, 26, 2013

Here are the leading auto insurance headlines from ONTARIO AUTO INSURANCE TOPICS ON TWITTER for Saturday, January 26, 2013:

• Thinking of starting a diet? A new study concludes that obese drivers are more likely than normal weight drivers to die in a car crash.
• A J.D. Power study indicates that auto insurance claims satisfaction climbs as payment times decrease.
• Telematics could change how personal insurance is sold. 
• State Farm Rapidly Expands its Usage-Based Insurance Program in the U.S.
• Haven't seen a car pile up like this one in a quite a while: Major Highway 401 crash near Newcastle involves up to 80 vehicles, some people critically injured.

Texting Also Distracts Pedestrians

A woman distracted by a text fell feet-first into a frozen canal in Birmingham — and the entire incident was caught on tape by one of England's many CCTV cameras.

Laura Safe, a newsreader for the Capital FM Breakfast Show, later joked about the tumble on Twitter, saying she "should really be called Laura UNsafe after the day I've had."

Lets hope Laura doesn't do this behind the wheel.

Insurance News - Thursday, January 24, 2013

Here are the leading auto insurance headlines from ONTARIO AUTO INSURANCE TOPICS ON TWITTER for Thursday, January 24, 2013:

• Kanetix study shows Ontario auto insurance rates for Q4 2012 were 3.3% lower compared to Q4 2011 (FSCO indicates a 0.26% decline).
• 36 percent of New York City no-fault auto insurance claims in 2010 had some element of fraud.
• Missouri man has 2 vehicles stolen on same day - in case you're wondering only 1 had the keys in the ignition. 
• IBC study shows insurers are key contributors to Ontario's economic success.
• Low interest rates put upward pressure on P&C insurance premiums and solvency risk according to Standard & Poor.

Insurance News - Wednesday, January 23, 2013

Here are the leading auto insurance headlines from ONTARIO AUTO INSURANCE TOPICS ON TWITTER for Wednesday, January 23, 2013:

• The 2010 Ontario auto reforms has produced a shift from statutory accident benefits to tort.
• A recent FSCO arbitration decision only reinforces it's time to replace the Glasgow Coma Scale when determining catastrophic impairment.
• Bizarre auto accident: Woman killed by runaway truck at a car wash.
• National Insurance Crime Bureau (NICB) has released a report that examines the impact that organized crime groups have on insurance fraud.
• Ontario's projected 2012-13 deficit falls by $3 billion to $11.9 billion due to higher than expected revenues and lower expenses. Minister Duncan indicates corporate taxes up over $1 billion and there will $1.2 billion saved because of lower interest payments on debt and reduced banked sick days for teachers.

What Impact The Proposed Anti-Fraud Regulatory Amendments Have?

As previously mentioned the Ontario government plans to introduce new regulatory amendments as part of its anti-fraud initiative.  These amendments are just some of the recommendations made by the Anti-Fraud Task Force.  Here is a brief description of those proposed amendments and how they will impact on the auto insurance system. 

Requiring insurers to provide claimants all reasons for denying a claim

Currently subsections 36(4)(b), 36(7)(b), 37(4), 37(6)(c), 38(8), 38(14)(a), 38(14)(b), 42(3), 42(13)(b), 43(2), 44(5)(a), 45(3)(b) and 45(5)(b) of the SABS require insurers to provide claimants with "medical and any other reasons" for denying a claim for accident benefits.  These subsections were amended in September 2010 to specifically provide a full explanation to claimant for denials.  The Anti-Fraud Task Force heard from stakeholders that adjuster were not providing an a proper explanation and often just indicated that the claim was "not reasonable and necessary."  It will be interesting to see what language the government comes up with to motivate adjusters to change their behaviour.  There is also an enforcement aspect that will be needed to have an impact.

Giving claimants the right to receive a bi-monthly, detailed statement of benefits paid out on their behalf

In September 2010, the new SABS introduced by the government included section 50 which requires insurers to provide a bi-monthly benefit statement to claimants indicating the amount paid by the insurer on behalf of the claimants for medical, rehabilitation and attendant care benefits as well as the amount spent on insurer examinations.  The statement also required to inform the claimant the amount of benefits still remaining.  The experience has been that insurers have been providing these statements but with no more detail than required under the SABS.  The statements do not breakdown payments by provider or service.  Consequently, consumers are unable to determine whether the payments made on their behalf are legitimate.  The government plans to amend section 50 to require the insurer to provide more detail.  The amount of detail is not known publicly at this time.
 
Increasing the role of claimants in fraud prevention

This involves adding two new provisions to the SABS.  The first would require claimants to confirm attendance at treatment facilities. The second would require facilities to provide a copy of invoices for goods and services billed to insurers. These proposed provisions expand on an amendment made to the SABS in June 2011.  Section 46.2 was added to the SABS to require facilities to provide an insurer with information to support any invoice for goods and services billed to that insurer.  These amendments would require facilities to copy claimants on invoices and for claimants to confirm that they received those goods and services.


Making providers subject to sanctions for overcharging insurers for goods and services and banning them from asking consumers to sign blank claim forms

The government press release is rather sketchy but the Ontario government Regulatory Register is more specific on the proposed changes. First there would be an amendment to Reg. 283/95 to provide insurers with the ability to examine a claimant under oath, where this is necessary to determine which insurer should be responsible for coverage. This would be in addition to the right for an examination under oath that now exists under section 33 of the SABS. The SABS requirement is limited to matters related to entitlement to benefits.  The SABS provision is an anti-fraud measure but currently insurers sometimes use it to determine liability and therefore no longer have access to an examination under oath to determine entitlement.  A new provision in Reg. 283/95 will resolve that problem.

The government will also amend Reg. 7/00 to expand business practices that would be considered an unfair or deceptive acts or practice. In the future it will include when providers charge insurers much more for goods or services than the ordinary retail price.  This provision is currently covered by a Superintendent's Guideline.  A further amendment will ban the practice of having claimants sign blank claim forms.  

Lastly the government has signalled that it will also amend Reg. 7/00 to clarify the exemption for lawyers and paralegals in the unfair or deceptive acts or practices regulation applies to lawyers and paralegals only when they are acting in a legal capacity.  This means that lawyers will continue to be regulated by the Law Society of Upper Canada when they act in a legal capacity.  However, if a lawyer is an owner of a clinic and not acting in a legal capacity, then any business practice that is in contravention of the Insurance Act would be subject to regulatory action by FSCO.

Insurance News - Tuesday, January 22, 2013

Here are the leading auto insurance headlines from ONTARIO AUTO INSURANCE TOPICS ON TWITTER for Tuesday, January 22, 2013:

• Man acquitted of careless driving after coughing caused driver to close his eyes and kill pedestrian.
• Ontario Ministry of Finance announces that new auto insurance anti-fraud regulatory amendments are to be introduced.
• Man assaulted in his car denied accident benefits by Ontario appeal court because injuries not connected to use or operation of vehicle.
• Catastrophic impairment cases continue to vex insurer.
• Accident benefit dispute process makes no sense.
• Forbes lists the 10 cheapest and most expensive 2013 cars to insure.
• iPhone has an app that lets you report a car accident.
• Survey finds 75 percent of claims systems should be upgraded or replaced within five years.
• Toronto Star endorses Sandra Pupatello as Liberals' best chance to hold on to power.

Insurance News - Friday, January 18, 2012

Here are the leading auto insurance headlines from ONTARIO AUTO INSURANCE TOPICS ON TWITTER for Friday, January 18, 2013:

• Will auto insurance vanish? Maybe not but there's an interesting debate going on.
• Toyota settles first wrongful death suit amid hundreds involving sudden, unintended acceleration problem.
• Supreme Court allows seizure of drunk driver's truck in Quebec after five convictions, opens door for more seizure.
• SABS Attendant Care Benefit: More Clarification on the Meaning of “Economic Loss”, does include opportunity cost.
• My old colleagues have been busy - FSCO lays 84 charges against 2 Toronto rehabilitation clinics and 4 invidivuals for auto fraud.

Documentary On Texting While Driving

Ontario Ministry of Finance Has Provided Notice On Intent To Introduce Anti-Fraud Regulations Recommended by Task Force

The Ontario government Regulatory Registry has posted a notice that the Ministry of Finance intends to move forward on some of the recommendations made by the Automobile Insurance Anti-Fraud Task Force. 

The Task Force's final report contains 40 recommendations, some of which can be introduced by amending existing regulations. The regulations that are being considered for amendment are:

Amendments to Ontario Regulation 34/10 (Statutory Accident Benefits Schedule - Effective September 1, 2010)
Ontario Regulation 283/95 (Disputes Between Insurers) 
Ontario Regulation 7/00 (Unfair or Deceptive Acts or Practices)

The amendments are based on the following recommendations from the Task Force Steering Committee's Final Report:

Recommendation 4(c):  Amend the SABS to make it clear that insurers are required to provide claimants with a full explanation when refusing to pay for treatment, assessment or other benefits.

Recommendation 17:  Amend the SABS to:
- require claimants to confirm attendance at treatment facilities and receipt of goods and services billed to insurers; and
- require insurers to itemize the list of invoices they have received when they provide a benefit statement to a claimant every two months.

Recommendation 18: Amend Reg. 283/95 to provide insurers with 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 that now exists under the SABS.

Recommendation 28:  Amend Reg. 7/00 to include as an unfair or deceptive acts or practice:
- charging insurers much more for goods or services than the ordinary retail price; and
- requesting a claimant to sign a blank form.

Recommendation 36:  Amend Reg. 7/00 to clarify the exemption for lawyers and paralegals in the unfair or deceptive acts or practices regulation applies to lawyers and paralegals only when they are acting in a legal capacity.

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.
 

Caution Against Insurer Examination Physician Upheld By Appeals Board

The Health Professions Appeal and Review Board has confirmed the decision of the Inquiries, Complaints and Reports Committee of the College of Physicians and Surgeons of Ontario (CPSO) to issue a caution to an occupational medicine physician regarding her inadequate and inaccurate report.

The physician has not been named as it is the policy of the health regulatory Colleges to only named disciplined regulated health professionals not those cautioned.   In fact, I could not find an anonymized report of doctors who have been cautioned on the CPSO website.  However, as reported yesterday, the Ministry of Health intends to change that policy and increase transparency by allowing the Colleges to name professionals who have been cautioned.

In this particular case, the an auto insurance claimant was injured in a motor vehicle collision on November 1, 2010. The insurer, State Farm, sent the claimant to the occupational medicine physician (Dr. K.I.) for an insurer examination under s. 42 of the SABS. The assessment was a paper review to determine whether the claimant required further psychological assessment as a result of the accident.

The claimant complained to the CPSO that the physician failed to provide an accurate opinion of her claim for psychological services to her insurer.  The CPSO's Inquiries, Complaints and Reports Committee determined that occupational medicine physicians do perform psychological impact assessments and that the Dr. K.I. had the qualifications required to make a determination as to whether the claimant was eligible for a psychological assessment.  Dr. K.I. showed that she was trained in psychiatry and psychiatric/psychological issues and that assessments are a regular part of her practice.

However, the Committee noted that Dr. K.I.’s report contained inaccuracies with respect to the details of what happened at the time of the collision. The report omitted the fact that the police were called, the car was damaged to the extent that it had to be towed away and was written off, which the Committee wrote, “speaks to the extent of the motor vehicle accident”.    Further, the Committee found that the physician failed to address important information that supported a claim for psychological services such the fact that the claimant's family physician felt that a referral for psychological services was indicated and a number of psychological test results.

While the primary focus of the complaint to the Appeals Board was whether a psychologist rather than a physician should have conducted the assessment, the Board did not find the complaint limited to this issue.

The Board also reviewed the concern that Dr. K.I. had “failed to provide an accurate opinion of [the claimant’s] claim for psychological services to the insurer." The Board considered that the accuracy of the opinion to be the central issue and the appropriate expertise was an example of the concern.

The Board agreed with the Committee that the report was both inaccurate and inadequate and failed to comply with the College policy, “Third Party Reports,” which notes that when providing a third party report physicians must "take reasonable steps to ensure that they have obtained and reviewed all available clinical notes, records and opinions relating to the patient or examinee that could impact the findings of the report ...” Moreover, the policy also states that physicians “should ensure to the best of their abilities that the information contained in the third party report is accurate.”

So what can we learn from this case?

1. Physicians can be used to evaluate requests for psychological services if they have appropriate training and experience.
2. IE providers need to consider all available clinical notes, records and opinions relating to the claimant.  If they have not, the report can be challenged and the provider could be subject to sanction from their College. 
3. The lack of transparency in these cases does not adequately protect consumers and insurers from inadequate assessors.
4. There is a need to implement the Automobile Insurance Anti-Fraud Task Force recommendation regarding the development of professional standards, guidelines and best practices to improve the quality of independent medical assessments. 

Insurance News - Wednesday, January 16, 2013

Here are the leading auto insurance headlines from ONTARIO AUTO INSURANCE TOPICS ON TWITTER for Wednesday, January 16, 2013:

• Ontario Divisional Court supports insurer request for section 42 assessment under the SABS, providing defence against trial by ambush.
• Insurance adjusters get no respect: Daniel Day-Lewis backs out of film about insurance claims adjuster after just 5 hours researching role.  Says Day-Lewis: " I don’t know how these people do it."
• Want to compare auto insurance rates on your smartphone? There's an app for that.
• Andrea Horwath says the NDP open to working with Liberals, not ruling out coalition.
• Hard to know whether to laugh or cry: Six people claimed they were hurt on a Philadelphia bus, but video (below) shows that only one of them was on the bus and that man wasn't even hurt.

View more videos at: http://nbcphiladelphia.com.

Insurance News - Tuesday, January 15, 2013

Here are the leading auto insurance headlines from ONTARIO AUTO INSURANCE TOPICS ON TWITTER for Tuesday, January 15, 2013:

• Auto telematics allows insurers to know their clients better and therefore protect against auto insurance fraud.
• People who take everyday doses of painkillers have a 20-to-40-per-cent greater risk of crashing their cars, a Canadian study shows.
• CAA South Central Ontario calls on Toronto to focus on public safety and repair deteriorating Gardiner Expressway. 
• Young female drivers in U.K. saw premiums rise 22% after gender-based pricing ruling by European Court of Justice. 
• Good news for consumers and insurers, Ontario Ministry of Health increases transparency by giving Regulatory Health colleges go ahead to make cautions public.
• Results of weekend voting: Pupatello 504, Wynne 463, Kennedy 257, Takhar 244, Sousa 198, Hoskins 104, Independent 67. This is not leadership vote but selection of delegates committed to vote for particular candidate in 2 weeks and who join several hundred other eligible voters.

Privacy Commissioner Supports Use Of Credit Scores, But Has Concerns About Transparency

The use of credit scores has been banned in Ontario personal auto but continues to polarize the industry, politicians and consumers.  As a result there is considerable interest in a recent Report of Findings released by the Office of the Privacy Commissioner of Canada.

The complainants are husband and wife, and were joint applicants on a property insurance policy with an Ontario insurer.  In 2009, they were surprised when their insurance renewal premium had increased considerably over the previous year’s premium. The company had been their insurer for six years and the complainants were claims free. When the complainants looked into the matter, they learned that the company had requested and received from a credit reporting agency access to their personal credit information. In their view, the company had done so without justification and without their knowledge and consent. They were also concerned about other purposes to which the company would use this information.

The insurer's position was that it had obtained express consent from the couple and its other customers for the collection of credit information at the time they apply for insurance. In the company’s view, the complainants consented when they signed their original application.  The company uses the standard Centre for Studies in Insurance Operations (“CSIO”) application form, which includes the following consent provision:

The Applicants agree that reports containing personal, credit, factual record, premium payment or claims history information may be sought or exchanged in connection with this application for insurance or renewal, extension, variation or cancellation thereof.

 In addition, the company also pointed to its website privacy statement which advises individuals that the company may collect their personal information from third parties for the purpose of administering insurance policies, as well as for other purposes.  Since 2003, the company has sent to all its Ontario policyholders a two-page notice on its policy on the collection and use of personal information at the time of their first policy renewal.  It includes an explanation that it may use the statistical score (an underwriting tool that rank-orders risk for underwriting and predicts the likelihood of delinquency over 12 months) from the consumer's credit file as one of many rating factors to determine eligibility for personal property insurance and premiums.

 Research on the issue conducted by the Office of the Privacy Commissioner of Canada revealed the following:

• There are studies supporting the claim that credit-based insurance scoring information is a valid predictor of risk of a future loss.
•  Despite the finding of industry studies, not all insurance companies in Canada are using credit scores for risk assessment.
• Many Ontario consumers were not aware that their credit scores were being used to determine how much they pay for their home insurance premiums.

In the end the privacy commissioner did not object to the use of credit information for purposes of assessing insurance risk.  It was noted that section 8 of Ontario’s Consumer Reporting Act confirms that credit information may be disclosed for the purpose of underwriting insurance.  In addition, while the Ontario government has banned the use of credit information in auto insurance, it made a public policy decision to allow the disclosure of individuals’ credit information for purposes of assessing insurance risk for home insurance.

It was also acknowledged that  assessing risk is a fundamental component of the insurance business model. Therefore, underwriting tools are necessary to analyse and predict risk in order for insurance companies to be able to provide insurance products at the appropriate price.  It was also acknowledged that the statistical score is an aggregate number, which may be less intrusive than accessing an individual’s entire credit report.

However the privacy commissioner did express some concerns.  The privacy commissioner noted that there is no obvious link between credit information and insurance premiums. While the majority of risk assessment tools that insurance companies use have apparent links to the product being purchased by the consumer (claims history, for example), credit history does not. As well, how credit score is determined is closely guarded and most consumers have no way of knowing whether or how their credit information may factor into their insurance premiums. 

The privacy commissioner concluded that the company did obtained the complainants’ consent to use their credit information or the statistical score.  The language used in the consent provision on the insurance application form was found to be too general in nature. Further, it is not reasonable to expect a consumer to understand that their credit score will be used to determine the probability of them later filing an insurance claim.

Previously I had written on a report from a working group from the  Canadian Council of Insurance Regulators (CCIR) which failed to reach any conclusion on the issue, stating that it was a government issue and to reach any definitive solution would require work beyond its own scope. 

The two reports reinforce the use of credit scoring in rating home insurance policies as long as government does not introduce a prohibition similar to the one the exists in auto insurance.  However, insurers need to ensure the proper consent is obtained and that their policyholders understand how their credit information will be used.  Relying on standard industry forms and consent language may not comply with PIPEDA.

PIPEDA Report of Findings #2012-005

Insurance News - Friday, January 11, 2013

Here are the leading auto insurance headlines from ONTARIO AUTO INSURANCE TOPICS ON TWITTER for Friday, January 11, 2013:

• West Virgina University is getting a federal grant to study effect of US cellphone laws on driver safety and accident rates.
• A proposal to issue driver’s licenses to illegal immigrants has received committee approval in the Illinois House.
• Car manufacturers are copying smartphones by commissioning software application developers to create apps for future vehicles. 
• A response to  "doomsday predictions" about drops in auto insurance premium as a result of new technologies. 
• Privacy commissioner supports the collection and use of credit information for rating purposes but is concerned about transparency.

Insurance News - Wednesday, January 9, 2013

Here are the leading auto insurance headlines from ONTARIO AUTO INSURANCE TOPICS ON TWITTER for Wednesday, January 9, 2013:

• Toronto Police Chief Bill Blair calls for return to photo radar: road safety measure or cash grab?
• 2012 will be 4th consecutive year for billion-dollar, weather-related losses for Canadian P&C insurers.
• Director’s Delegate agrees FSCO’s Settlement Disclosuree Notices is deficient.
• Toronto Police marine unit finds two cars in Lake Ontario, at least one stolen. So how many more cars are down there?

Insurance News - Tuesday, January 8, 2013

Here are the leading auto insurance headlines from ONTARIO AUTO INSURANCE TOPICS ON TWITTER for Tuesday, January 8, 2013:

• Event data recorders, aka vehicle "black boxes," are at a tipping point for the technology.
• Court denies "trip and fall" claimant Statutory Accident Benefits after injury tripping over curb as the vehicle was not being operated or used it was parked.  
• Teen jailed after posting on Facebook: "Drivin drunk ... classic ;) but to whoever's vehicle i hit i am sorry. :P." People just love to share their lives on Facebook.   
•  Gerrard Kennedy says he would consider public auto insurance if he were to become premier.

Administrative Monetary Penalties Are Introduced In The Insurance Sector

In the 2012 Ontario Budget, the government announced that it would implement Administrative Monetary Penalties (AMPs) in the insurance sector. AMPs will allow the FSCO to address contraventions of the law more efficiently and promote compliance.  AMP’s are civil fines that a regulator, instead of a court, imposes on someone that has committed unlawful activity. Once they are implemented, AMP’s will encourage regulatory compliance within the insurance industry and provide FSCO with a quick enforcement tool that is flexible and targeted.

 The government introduced AMPs into the insurance sector by passing changes to the following Acts:

• Insurance Act
• Automobile Insurance Rate Stabilization Act, 2003
• Compulsory Automobile Insurance Act

These changes and new regulations (408/12, 409/12 and 410/12) came into force January 1, 2013.

AMPs can be imposed for contraventions of provisions of these Acts listed in the regulations that occur on or after January 1, 2013, as well as breaches of orders, undertakings and licence conditions.  The maximum penalty for an individual for a contravention of the Insurance Act and Compulsory Automobile Insurance Act is $50,000 and $100,000 for an organization or company.  The maximum penalty for a contravention of the Automobile Insurance Stability Rate Act, 2003 by an insurer is $200,000.

The contraventions to which an AMP can apply include listed Unfair or Deceptive Acts or Practices by any person or entity including insurers, agents, brokers, adjusters and those involved in the provision of goods or services to insurance claimants.

 

AMPs are not new to FSCO.  The Superintendent of FSCO already has the power to impose AMP’s on two types of financial services institutions – mortgage brokers and credit unions. AMP’s are also used by other regulators in Ontario and other jurisdictions.

The use of AMPs have been strongly supported by the insurance industry as a tool to finding fraud and was endorsed by the Ontario Automobile Anti-Fraud Task Force. 

Insurance News - Monday, January 7, 2013

Back from the holidays.  Here are the leading auto insurance headlines from ONTARIO AUTO INSURANCE TOPICS ON TWITTER for Monday, January 7 2013:

• Canadian Underwriter has an article on how car sharing is growing (there are 40,000 Ontario members) - now Avis/Budget plans on buying Zipcar for $500 million. 
• Consumers posting negative reviews could face legal problems, so much for free speech.
• How scary is this? A Florida man was arrested for allegedly using Play-Doh to fix damaged car.
• Forensic investigators reveal top words used by fraudsters in your company - beware of employees that use phrases like "nobody will find out" in emails.
• New auto insurance PIP regulations in effect in New Jersey after Superior Court denies medical group's stay request.

Happy New Year!

I'm away at the Jersey shore and won't be posting again until January 7th.  I will likely still be using my Twitter account.  Wishing everyone a happy and prosperous New Year and a some NHL hockey.

Willie

Insurance News - Thursday, December 27, 2012

Here are the leading auto insurance headlines from ONTARIO AUTO INSURANCE TOPICS ON TWITTER for Thursday, December 27 2012:

• New Alabama law and online insurance verification system targets uninsured drivers starting Jan 1.
• EU gender price ban raising insurance costs for women but not giving men corresponding lower rates.
• Progressive Insurance in the U.S. reports a 30% increase in single vehicle claims on New Year’s Day.
• Police across the country struggle as Twitter users reveal impaired driving checkstops.
• Progressive Insurance releases terms for usage-based insurance licensing program.

Insurance News - Thursday, December 20, 2012

Here are the leading auto insurance headlines from ONTARIO AUTO INSURANCE TOPICS ON TWITTER for Thursday, December 20 2012:

• Supreme Court won’t hear appeal of Deering sisters car crash case.
• Letter to the Editor: Independent medical examinations provide "necessary check and balance."
• Insurance companies among top GTA employers on CI Top Broker.
• Insurance safety group releases car ratings based on new crash test.
• Sudy shows that traffic accidents are the leading cause of high-severity workers’ comp injuries.
• A look at new US insurance laws taking effect in 2013.

CCIR Report On Credit Scoring Is Inconclusive

The Canadian Council of Insurance Regulators (CCIR) Credit Scoring Working Group released its Findings Report: Use of Credit Scores By Insurers in late November 2012.   Unfortunately, the report has little new to offer despite spending a considerable amount of time looking at the issue.

The working was established in 2009 to gather the facts surrounding credit‐based insurance scores and how they are used in today’s regulatory environment.  Public consultation was undertaken in 2011.  That process turned out to be a disappointment as only 15 submissions were received and all from either the insurance sector or credit bureaus.

No feedback was received from consumers. That is not surprising because insurance consumers are not really organized. There are consumer groups, such as the Consumers Association of Canada, but their scope of issues are so broad and their resources so stretched that it is unlikely that you would ever get them to respond to these types of consultation.  That is why organizations tend to rely on marketing research firms to reach out to consumers.

The report itself highlights what we already know about this issue, insurers and brokers are on different sides of the debate on the use of credit scores.  The report acknowledges the IBC Code of Conduct for Insurers’ Use of Credit Information. However, it notes that not all insurers are members of IBC and not even all IBC members have “signed on” to the Code, which makes it difficult to consider this code an industry standard.

As well, since few regulators have authority (outside of automobile insurance) to reject underwriting criteria, the decisions on which, if any, actions to take on the use of credit scoring for underwriting rest with the policymakers in the various provincial and territorial governments.

So we are essentially in the same spot we were in 2009.

Insurance News - Tuesday, December 18, 2012

Here are the leading auto insurance headlines from ONTARIO AUTO INSURANCE TOPICS ON TWITTER for Tuesday, December 18, 2012:

• Windsor motorists corral driver who blew three times legal limit.
• Many Ontario drivers are not taking all the precautions they can to stay safe and keep calm on the roads in winter. 
• Progressive Conservatives want Ontario to be a 'right-to-work' province.
• Strategy Meets Action (SMA), an insurance strategic advisory firm, released its new research report, Usage-Based Insurance/Telematics: a Catalyst for Change.
• As of Jan. 1, 2013, driver's licences and photo cards will now be clearly labeled as to whether the cardholder is of age.
• Are GTA auto premiums set to fall? Co-operators have dropped rates, will anyone follow them?
• 9 suspects have been arrested. 41 charges laid. A significant impact in stopping staged collisions in York Region.

Update on Florida No-Fault Auto Insurance Reforms

Another jurisdiction to experience serious auto insurance fraud problems is Florida.  In March of this year HB 119 passed in the State Senate and House after some heavy duty lobbying by Gov. Rick Scott.

The new Florida personal injury protection (PIP) law was adopted in 1972 to make sure anyone injured in an auto accident would quickly get money to treat their injuries. The legislation provided that a driver’s insurance company pay up to $10,000 to cover medical bills and lost wages after an accident, no matter who is at fault.

PIP costs have risen by $1.4 billion since 2008, largely because of the runaway fraud that threatens the system, most notably in the metropolitan Miami and Tampa areas. Florida ranks first nationally in staged accidents.

 The legislation requires an accident victim to obtain treatment within 14 days in an ambulance or hospital, or from a physician, osteopathic physician, chiropractic physician, or dentist. The full $10,000 PIP medical benefit is available only if a physician, osteopathic physician, dentist, or a supervised physician’s assistant or advanced registered nurse practitioner determines that the insured has an “emergency medical condition.” Otherwise, the PIP medical benefit is limited to $2,500.

Follow-up services and care requires a referral from a physician, osteopath, chiropractor or dentist. Massage therapists and acupuncture was eliminated from eligibility for PIP benefits.

Another provision in the bill requires the Office of Insurance Regulation to hire an independent consultant by September to calculate the savings expected from the Act.

The bill includes a 10 percent rate reduction on PIP that’s not guaranteed. If insurers who offer PIP do not provide their customers a minimum 10 percent rate reduction by October 1, 2012, they must explain in detail why not. A second rate filing required on Jan. 1, 2013, proposes insurers have a 25 percent premium reduction for policyholders unless they can show why they’re unable to provide the cut.

Of the 44 rate filings that were approved by the state's Office of Insurance Regulation by mid-November, the average PIP savings has been 2.5 percent. That reflects about a fourth of the 141 filings from companies selling all types of car insurance, with the rest still under review.  As of December 13, 2012, there were 98 filings approved.

Florida regulators are optimistic that the state’s no-fault auto reforms are having a positive effect on the market and will eventually cut premiums for drivers. But for now they are telling the public that the recent law changes will likely only temper the size of insurers’ PIP rate requests as opposed to actually decreasing drivers’ premiums.

Regulators expect that the January 1, 2013 filings will represent a fuller picture of the influence of the reforms on the market.

Insurers have been reluctant to make deep cuts in their PIP rates because they want to see whether the law can withstand legal challenges. A group of health care providers filed suit in Leon County Circuit Court arguing the law is unconstitutional. The case centers on a decision by lawmakers to eliminate licensed massage therapists and acupuncturists from the list of approved PIP providers while setting a medical fee schedule based on Medicaid. In addition, the $2,500 benefit limit for non-emergency services will result substantially decrease chiropractor fees.  Those three categories of providers represented the three highest average medical fees per PIP patient.

 The first challenge of Florida’s reform to its personal injury protection system has failed with a denial of an injunction last week that would have stopped the law’s implementation.  This is just a short-term procedural victory and the case will now proceed to trial.

Insurance News - Friday, December 14, 2012

Here are the leading auto insurance headlines from ONTARIO AUTO INSURANCE TOPICS ON TWITTER for Friday, December 14, 2012:

• Starting this weekend, harsher penalities for drunk driving in Manitoba including requiring offenders to pay to install an ignition interlock device in their car.
• Why Ontario has a strong economic case for seceding from Canada.
• Ohio minimum car insurance to jump to $25,000 (from $7,500) under bill waiting governor's signature.
• Starting Dec. 21, insurance companies in the European Union won't be able to use gender as a factor when they calculate rates for auto insurance.

IBC Releases Annual List of the 10 Most Stolen Cars

The IBC's annual list of the most popular cars is out.  Except the list isn't gauging consumer popularity, it's with thieves.

This year's hot target is the 2000 two-door Honda Civic Sir.  Number two on the list is the 1999 two-door Honda Civic Sir.

The Civic replaces the 2009 Toyota Venza 4-door which was on the top of the IBC's list in 2011.

The list includes seven 4-wheel drive or all-wheel drive vehicles, including four Ford F350 trucks.  The IBC reports that many of these higher-end vehicles are targeted by organized crime for shipment overseas. There were 82,411 vehicles stolen in Canada during 2011.

The top 10 most frequently stolen vehicles in Canada are:

1. 2000 HONDA CIVIC SiR 2DR
2. 1999 HONDA CIVIC SiR 2DR
3. 2006 CHEVROLET TRAILBLAZER SS 4DR 4WD
4. 2007 FORD F350 SD 4WD PU
5. 2005 CADILLAC ESCALADE 4DR AWD
6. 2006 FORD F350 SD 4WD PU
7. 2002 CADILLAC ESCALADE 4DR 4WD
8. 2005 FORD F350 SD 4WD PU
9. 2004 FORD F350 SD 4WD PU
10. 1999 ACURA INTEGRA 2DR

 source

Insurance News - Wednesday, December 12, 2012

Here are the leading auto insurance headlines from ONTARIO AUTO INSURANCE TOPICS ON TWITTER for Wednesday, December 12, 2012:

• FSCO has released an auto insurance bulletin -- 2013 Indexation Percentages under SABS.
• An Ontario court has held that an auto insurer and home insurer are obliged to defend in an action for personal injury because of the potential for concurrent liability. 
• An Ontario Court of Appeal decision finding the FSCO failed to mediate a number of accident claims within a 60-day time limit could mean up to $300 million in costs that insurance companies will pass on through premiums, a lawyer estimates.
• $1.4-billion in unpaid corporate taxes being written off in Ontario: Auditor-General.

Insurance News - Monday, December 10, 2012

Here are the leading auto insurance headlines from ONTARIO AUTO INSURANCE TOPICS ON TWITTER for Monday, December 10, 2012:

• An advocacy group representing auto accident victims is objecting to some of the recommendations in the recently released report of the Auto Insurance Anti-Fraud Task Force. 
• A California IT company is launching an auto insurance company selling policies based on distance driven for people who drive much.
• Businesses including insurers need to thinking about how they will be impacted by driverless cars.  Are you ready for the 21st century?

Appeals Court Confirms Mediations Are Deemed Failed If No Mediator Assigned After 60 Days

Last week a decision was released by the Court of Appeal for Ontario, Hurst v.Aviva Insurance Company (2012 ONCA 837), which upheld the lower court decision that Applications for Mediation received by FSCO that have not been mediated within 60 days are deemed failed.  The lower court ruled that in cases where mediation has been deemed to fail because of the timeline, a mediator's report is not required for an insured to commence litigation.

The decision involves a number of insureds who wanted to begin litigation without a mediator's report indicating that mediation has failed.  In each case their Applications for Mediation had been filed at FSCO and the 60-day limitation period had lapsed because of the siginificant backlog of mediation applications.

The insurers involved in the case argued in court that mediation had not failed because the 60-day limitation didn’t apply in these situations, in line with FSCO’s view. 

FSCO has always taken the position that the time limit does not start until an Application for Mediation had been marked as "complete".  This technicality has allowed a backlog of cases to build up.  Early this year the backlog was estimated to be approximately 36,000 although it has since likely dropped down to under 20,000.

A lower court judge dismissed those motions by the insurers, who appealed to the Court of Appeal and ultimately led to last week's decision.

FSCO's arbitrators have ruled similarly.  On February 10, 2012, in Leone and State Farm, a FSCO arbitrator ruled that mediation was deemed to have failed because it did not take place within 60 days of an application being filed and that the parties could not extend the time limit on consent once 60 days had expired.  On July 31, 2012, a decision​ was released by the director’s delegate that upheld the 60-day deemed failure.  

Section 281(2) of the Insurance Act prevents insureds from initiating any action against their insurer unless they first sought mediation at FSCO.  Section 280(4) requires the mediations to be conducted within the "prescribed time".  Section 280(7) states that mediations have failed when the mediator has given notice to the parties that the mediation will fail or when the prescribed or agreed time for mediation has expired and no settlement has been reached.  Section 10 of the Dispute Resolution Practice Code prescribes the time to be 60 days.

So what does this mean for insureds, insurers and FSCO?

Decisions regarding the 60-day limitations have been consistent - mediation is deemed to have failed once the timeline has expired. In addition, a mediator's report is not needed to move on to arbitration or litigation.  That means that thousands of backlogged mediation cases are deemed failed and free to file for arbitration or go to court.  The quickest route might be small claims court which is an option for many insureds with smaller claims.

FSCO has closed almost 8,000 mediation files as failed in the first nine months of 2012.  However, it appears that the files may all have been failed with the agreement of the parties.  The recent decision will likely make the number of failed mediations once again increase considerably. It may also require additional resources to handle the increase in arbitration files.  They has partially been addressed by the contract with ADR Chambers.  However, the limit of 500 files in the contract may not be sufficient.  The current wait times in arbitration are six to eight months and will likely worsen.  The alternative approach may not be any better.  A large number of cases going to the courts will flood that system too.

FSCO is informing parties who filed applications for mediation with FSCO more than 60 days ago should submit a form to FSCO indicating that they either jointly agree to extend the time for mediation or that either party wishes to receive a failed Report of Mediator. If FSCO does not receive this form from parties, by default, their applications will remain in queue for assignment to a mediator.

Applications for Arbitration that were filed without a Report of Mediator and have been held in abeyance, pending the Court of Appeal matters, will proceed to arbitration. Upon request, FSCO will issue Reports of Mediator for these cases.

As for insurers, the large number of files leaving the mediation system will likely increase their operating costs. Each application costs an insurer $3,000 and that does not include legal and preparation time in the event the application proceeds to a pre-hearing or hearing.

Is Self-Regulation Realistic, For The Ontario Towing Industry?

The recently released report of the Ontario Automobile Insurance Anti-Fraud Task Force recommends province-wide regulation of the towing industry, which has strong support from the insurance industry. The Task Force would like to see a province-wide licensing scheme administered by an Administrative Authority (AA).

 There have been a number of attempts to review and/or regulate the cost of towing and storage of vehicles in Ontario over the past decade, several of which I had some involvement. In 2003, the government attempted to introduce a $300 cap on towing and storage costs through a revision to the Ontario Automobile Policy (OAP 1) but that was abandoned out of concern that consumers would be responsible for any excess charges.

In 2004, the Ministry of Finance and the Financial Services Commission of Ontario (FSCO) formed a working group with representatives from the government, insurance industry, police forces and towing industry to address some of the abuse reported by consumers and insurers. There was no consensus coming out of the working group and it was eventually abandoned.

On June, 4, 2008, MPP David Zimmer introduced Bill 87 which would have provided for the self-regulation of the towing industry in Ontario. The bill never proceeded beyond second reading. David Zimmer reintroduced the bill at Bill 147 on December 10, 2010 but it also failed to proceed beyond second reading.

History of Administrative Authorities 

 The key to the Task Force’s recommendations on regulating the towing industry is the formation of an AA which would act as the regulator. Personally, I have some concerns with these recommendations.

Administrative Authorities are not new to Ontario. In 1976, the government established its first AA when Board of Funeral Services was established by the Funeral Services Act to regulate funeral services. As well, Tarion (formerly the Ontario New Home Warranty Program) was established by the Ontario New Home Warranties Plan Act to administer warranty coverage to new homebuyers.

In 1996, the Safety and Consumer Statutes Administration Act came into effect which allowed for the creation of a number of AAs. Between 1997 and 1999, the government delegated authority and responsibility for day-to-day regulatory administration to the following sectors in accordance with this Act:

• Motor Vehicle Dealers and Salespersons → OMVIC 
• Real Estate Salespersons and Brokers → RECO 
• Travel Retailers and Wholesalers → TICO 
• Electrical inspections and safety → ESA 
• Safety in 4 sectors: boilers & pressure vessels, amusement & elevating devices, hydrocarbon fuels, upholstered & stuffed articles → TSSA 

  In 2000, the VQA Ontario was designated as the not-for-profit corporation responsible for administering the Vintners Quality Alliance Act.

On May 1, 2010, the TSSA became a statutory corporation with enhanced accountability requirements upon the proclamation of the Technical Standards and Safety Statute Law Amendment Act, 2009.

 The Retirement Homes Act, 2010, established the Retirement Homes Regulatory Authority (RHRA) and sets out its role, responsibilities and powers with respect to care, safety standards and other requirements applying to licensed retirement homes in Ontario with oversight by the Ontario Senior’s Secretariat.

Key objectives of this model in the 1990s was to reduce government expenditures, deliver services more efficiently, avoid unnecessary regulatory burden, and harmonize regulatory regimes across jurisdictions in response to mounting trade pressures.
 

Administrative Authority	Type	Evolution
Technical Standards and Safety Authority (TSSA)	Public safety	Responsibility transferred in 1996 from the Technical Standards Division of the Ministry of Consumer and Commercial Relations
Electrical Safety Authority (ESA)	Public safety	Responsibility transferred in 1998 from the Electrical Inspection Division of Ontario Hydro
Ontario Motor Vehicle Industry Council (OMVIC)	Consumer protection	Responsibility transferred from the Ministry of Consumer and Commercial Relations
Real Estate Council of Ontario (RECO)	Consumer protection	Responsibility transferred from the Ministry of Consumer and Commercial Relations
Travel Industry Council of Ontario (TICO)	Consumer protection	Responsibility transferred from the Ministry of Consumer and Commercial Relations
Tarion Warranty Corporation	Consumer protection	Evolved from the New Home Warranty Program that was originally established in 1976
Board of Funeral Services (BOFS)	Consumer protection	Formed in 1976 but predecessor organization established in 1914
Vintners Quality Alliance Ontario (VQAO)	Consumer protection	Established by Ministry of Consumer and Commercial Relations in 2000

  Will the AA model work for the towing sector? 

The Ministry of Consumer Services has oversight responsibility for eight of the authorities currently in operation. With the exception of the VQA sector, the government regulated the other seven sectors directly. These sectors were selected for delegated responsibility because they were mature sectors which had demonstrated their ability to work in partnership with government, and had a track record for addressing and resolving consumer and public safety concerns. With exception to the VQA sector, there were pre-existing statutory standards in all of these sectors.

The first problem with a proposed Towing AA is that there is no existing provincial public authority is currently regulating the sector. There are only municipal authorities that issue business licences but they do not really regulate the industry. Therefore, there is no regulatory expertise or knowledge to transfer to the private sector.

In addition, the towing sector does not have the maturity or a track record in dealing with consumer complaints and public safety issues. Representatives from the towing sector (Provincial Towing Association (Ontario) and Ontario Recovery Group) met with the Task Force to express support for self-regulation but their enthusiasm will not make up for the lack of regulatory expertise.

The Task Force reported that participants repeatedly complained that towing operators are engaged in organized or premeditated auto insurance fraud. There were concerns expressed regarding road safety concerns, insufficiently trained employees, improper equipment, a lack of clarity around fees and the illegal referral fees. Industry representatives reported that they have been unable to deal with corruption in their industry and legitimate operators have become so frustrated that they have begun to leave the industry. This does not sound like an environment where you can create a self-regulatory body.

I’m not suggesting that an AA model for the towing sector can never happen. To its credit the Task Force points out that there is a need for capacity-building in the towing industry. I just think it would be irresponsible if it were to happen in the near future.

So where can we go from here? 

The current patchwork of municipal licensing systems is not protecting the public. The Task Force is correct that a province-wide regulatory framework needs to be established. I believe the first step to creating a Towing AA is to establish a regulatory authority within government to develop and enforce industry standards. If the government is contemplating creating a government-run regulatory system for treatment and assessment facilities then it should also consider creating one for towing operators. Only after a regulatory system has been established should consideration be given to transferring it to the private sector. This will provide the towing industry and its associations time to develop some experience in working with the government, working with consumers and establishing some credibility.

Ontario Automobile Insurance Anti-Fraud Task Force Releases Their Final Report

The Ministry of Finance has released the final report of the Ontario Automobile Insurance Anti-Fraud Task Force outlining 38 recommendations, many of them will expand the power of FSCO, the province’s insurance regulator.  

The report confirms that fraud is a substantial problem in Ontario despite the fact the Task Force was unable to accurately quantify how much it costs policyholders.  The report indicates that the public is aware that fraud is a problem but calls for educating consumers so they can better recognize and avoid fraudulent activity.  In addition the report calls for greater public disclosure on the part of insurers, provincial-wide licensing for the towing industry and licensing health care and independent assessment facilities.  My report to the Task Force on licensing heath care and independent assessment facilities was also released by the Ministry of Finance.

There is a considerable expansion in responsibility for FSCO proposed by the Task Force.  In recognition of the challenge that the implementing the recommendation will present FSCO, the Task Force is recommending that the governmentt should ensure that government-wide hiring constraints do not delay or prevent the FSCO from acquiring necessary resources to carry out an expanded mandate.

In addition, the Minister of Finance should, at an appropriate time, commission an independent review of how well FSCO is carrying out its new responsibilities.