Insurance News - Tuesday, September 27, 2016

Here are the leading auto insurance headlines from ONTARIO AUTO INSURANCE TOPICS ON TWITTER for Tuesday, September 27, 2016:

• Motorist in Tesla self-driving vehicle is killed when it smashes into a tree at 100 mph in Holland - but the company insist he had not switched on auto-pilot function.
• Insurance premiums could drop 40 percent by 2050 due to automated vehicles.
• Self-driving cars operated by ride-sharing service Uber hit the public roads in Pittsburgh, as the company launches a pilot program that will pick up actual passengers.
• New Brunswick auto insurance claims have grown $70 million over 3 years and may lead to some large rate hikes.
• Lyft's president says 'majority' of rides will be in self-driving cars by 2021 and car ownership will end by 2025. Overly optimistic?

THE ROAD AHEAD Is Available

My book, THE ROAD AHEAD, is now available to purchase. Paperback and Kindle versions are available at Amazon.ca and Amazon.com.

A Kobo version is also available at Chapters.ca and Kobobooks.com.

Paperback copies are also available at Ben McNally Books at 366 Bay Street, Toronto.

“Politics has never been this much fun!”

Rick Tompkins, a suburban Toronto insurance broker, never considered a career in politics until a good friend, who happens to be the leader of the Conservative party, asks him to run for office. He accepts the offer, with the understanding that he would probably not win, but can use the opportunity to gain some visibility for himself and his business. Jerry Switzer, a veteran party worker, is sent in to guide Rick through a campaign in a riding that hasn’t elected a Conservative in years. Rick fumbles his way through the election campaign and manages a surprise win but at the expense of saddling his party with an impossible commitment. What makes matters worse, Rick is anything but politically correct. He offends everyone in his path and stumbles from one political scandal to another. Still, Rick has one saving asset: a political party machine that is able to spin scandals to its advantage.

Insurance News - Thursday, September 15, 2016

Here are the leading auto insurance headlines from ONTARIO AUTO INSURANCE TOPICS ON TWITTER for Thursday, September 15, 2016:

• Uber and Lyft have each been in the news recently for their investments in and work with automaker partners in developing self-driving technology. So, what about the drivers?
• Michigan may soon become the first state to allow self-driving cars on the road without a human driver sitting behind the steering wheel.
• The Ontario Provincial Police recently suggested that so far this year, it has investigated 38 road deaths in which a distracted driver was involved.
• What Amazon can teach auto insurance carriers about online retailing and enhancing the consumer experience.
• Vastly different story lines among Canada’s four public auto insurers.
• Self-driving Google cars will soon know when the police are approaching and to pull over to the side of the road.

THE ROAD AHEAD Has Arrived...

Contact me directly if you are interested in my book launch party on September 21st.

Insurance News - Friday, August 26, 2016

Here are the leading auto insurance headlines from ONTARIO AUTO INSURANCE TOPICS ON TWITTER for Friday, August 26, 2016:

• The Tesla autopilot crash has picked up a lot of attention. U.S. driver interest in self-driving cars dips slightly after Tesla crash.
• Auto insurer might sue Tesla over autopilot-related crash.
• Drivers still liable in accidents, even in near driverless cars, says Canadian law firm Borden Ladner Gervais.
• Telematics is the Betamax of insurance, the real seismic event in the industry will be the autonomous car.
• A Missouri man credited his self-driving Tesla for taking him to the hospital when he suffered a pulmonary embolism behind the wheel.

THE ROAD AHEAD Book Release

Will The New Ontario Fleet Definition Work?

As I reported previously, the Ontario government amended the fleet definition in Regulation 664 in early July.  The amended definition reads as follows:

“fleet” means a group of not fewer than five automobiles that meets the following requirements:

1. At least five of the automobiles in the group are commercial vehicles, public vehicles or vehicles used for business purposes.

2. The automobiles in the group are,

i. under common ownership or management, and any automobiles in the group that are subject to a lease agreement for a period in excess of 30 days are leased to the same insured person, or

ii. available for hire through a common online-enabled application or system for the pre-arrangement of transportation, and insured under a contract of automobile insurance in which the automobile owner or lessee, as the case may be, has coverage as an insured named in the contract

From my perspective, this is not an ideal resolution. However, it does fill in the insurance gap that has existed since Uber began providing its services in Toronto in 2012. One of the most important elements in the fleet definition has always been the requirement that there be common management. Common management is an element that is required in order for a group of vehicles to be considered a fleet, if they are not commonly owned or where they are owned by a leasing company. It refers to the fact that the owner or manager has a measure of control over the vehicles. A fleet is typically a discrete risk exposure whose experience and characteristics can be monitored and rated, and is affected by the actions of the owner or manager. The vehicles in a fleet are not individually rated as this is inconsistent with a key principle in fleet rating to establish a rate specific to the experience of the fleet. Usually, the manager of a fleet will implement rigorous risk management programs to monitor and improve experience and rating.

None of these circumstance remotely exist when it comes to Uber drivers and their vehicles. They are network of drivers connected to customers through an app provided by Uber. Their is no common ownership or management. It suggest that once an Uber driver turns on the app on his phone, he or she becomes part of a fleet. That decision isn't even made by Uber.

Is this such a bad thing? It could be if it leads to further erosion of the fleet definition. The regulator has for years denied fleet policies because they failed to meet the test of common ownership or management. Will they be able to continue to push back against synthetic fleets? It would have been better, if the government had created a provision in the Insurance Act to deal specifically with transportation network companies. I expect it will take some time to determine whether the government and the insurance industry will regret the newly amended fleet definition.

Insurance News - Sunday, July 31, 2016

Here are the leading auto insurance headlines from ONTARIO AUTO INSURANCE TOPICS ON TWITTER for Sunday, July 31, 2016:

• Tesla and Google are taking different approaches to developing self-driving cars.
• Uber drivers in Ontario are now automotically insured,
• Auto insurance rates still rising, despite province's pledge to lower them.
• Uber plans to collect street-view photos in Mexico to further lays the groundwork for a fleet of autonomous vehicles.
• Canada tops the list of wealthy countries in the percentage of road fatalities related to alcohol impairment.
• Customers sour on insurers' UBI discount model.

Insurance News - Friday, July 22, 2016

Here are the leading auto insurance headlines from ONTARIO AUTO INSURANCE TOPICS ON TWITTER for Friday, July 22, 2016:

• A prominent Toronto lawyer who pursued a frivolous action on behalf of a client was found personally liable Tuesday for the legal costs.
• What will your car have to do for the police to pull you over when you’re in an autonomous car?
• In the U.S., being on the lower end of the wage scale can mean paying much more for auto insurance, even for good drivers.
• As self-driving cars change transportation, how will infrastructure adapt?
• Details on the first self-driving car death involving Tesla S using autopilot.
• Ontario’s program to allow testing of self-driving cars on public roads has not received any applications since it launched January 1,

Ontario Auto Insurance Rates Remain Chronically High

FSCO's latest quarterly rate approval numbers have been released and suggest that consumers will see very few savings the statutory accident benefit cuts that became effective on June 1.

FSCO approved 14 private passenger automobile insurance rate filings during the second quarter of 2016. These 14 insurers represent 30.06% of the market based on premium volume. Approved rates increased on average by 0.33% when applied across the total market. This follows the modest 3.07% reduction in approved rate filings in the first quarter of 2016.

The end of lower rate filing approvals indicate that the any savings derived from the recent reform package are small. A portion of the savings could be wiped out before the end of the calendar year if companies continue to file for increases. The government has abandoned the the 15% rate reduction promise made in August 2016. However, if you aggregate all the rate changes since the 2013 announcement, the total rate reduction is 9.84% when applied across the total market.

Product reforms have proven to be an ineffective tool for controling auto insurance premiums in Ontario. As long as transactional costs within the system remain high, Ontario drivers will continue to pay high rates. A new delivery system is needed to bring Ontario's costs in line with other jurisdictions. For a discussion on how to address the systemic problems in Ontario, see my article entitled Ontario's 25-Year No-Fault Journey.

New Ontario Towing and Storage Regulations Are Now In Effect

New regulations are now in effect if you repair, tow or store vehicles in Ontario. The new regulations under the Repair and Storage Liens Act took effect on July 1, 2016. Further regulations will come into force starting January 1, 2017.

 The following new rules come into effect on July 1, 2016:

• If a vehicle being stored is subject to a lien and is received from someone other than its owner or a person having the owner's authority, then the storer must give notice to the owner and other interested parties of the lien in writing (e.g. secured parties who have registered their interest, such as lease and finance companies). 
• For vehicles registered in Ontario, the notice period is reduced from 60 days to 15 days after the day after the vehicle is received. If notice is not provided within 15 days, a storer's lien is limited to the unpaid amount owing for that period. The 60-day notice period remains unchanged for out-of-province vehicles. 
• If no amount has been agreed upon for repair and storage costs, fair value may be determined by a court. There is a new list of discretionary factors a judge will be required to consider (such as fixed costs, variable costs, direct costs, indirect costs, profit and any other relevant factors).

Ontario Regulation 427/15 can be found here.

Ontario Changes Fleet Definition To Accommodate Ride-Sharing

This week, the Ontario amended Regulation 664 to expand the definition of a fleet to accommodate ride-sharing services. The change opens the door for insurers to offer policies to drivers of vehicles for hire using an online app such as Uber.

The regulation amendment expands the fleet definition to include vehicles available for hire through a common online-enabled application or system for  pre-arranged transportation. The vehicle owner or lessee is to be a named insured under an auto insurance contract. The regulation change will make it easier for Ontario businesses to insure a group of privately owned vehicles under one insurance policy as a “fleet” when they are available for hire using an online app.

FSCO has already approved a fleet policy proposed by Intact Insurance Company. The Intact policy provides blanket fleet coverage under a standard automobile owner’s policy (OAP 1) for private passenger automobiles used in the transportation of paying passengers who utilize Uber. The Intact fleet policy only provides coverage when the driver is logged onto the Uber online app. In other situations, coverage under the personal owner’s policy for the automobile is applicable.

FSCO has also approved the use of an electronic insurance card for use in connection with ride-sharing. The electronic insurance card will permit ride-sharing drivers, who are covered under the Intact policy the option, to provide evidence of insurance electronically using an online-enabled app (e.g., to law enforcement officials).

Insurance News - Thursday, June 30, 2016

Here are the leading auto insurance headlines from ONTARIO AUTO INSURANCE TOPICS ON TWITTER for Thursday, June 30, 2016:

• The Ontario government is being urged to make a $65 million investment in the development of driverless car technology to help the province’s auto industry compete on a global scale.
• Ten different strategies shaping the transition to the self-driving car.
• Global sales of autonomous vehicles will reach nearly 21 million vehicles by 2035, a substantial increase from previous estimates.
• The US-based National Highway Traffic Safety Administration will implement federal regulations, but will have no say when it comes to the regulations made by the individual states.
• The self-driving car generation gap: older people see driving as representing personal freedom younger people do not.
• Study asks people if self-driving cars should make moral choices.

FSCO Mandate Review Recommends Changes to Auto Insurance Regulation

The Ontario government should establish a new organization that would perform the functions currently performed by the Financial Services Commission of Ontario (FSCO) and the Deposit Insurance Corporation of Ontario (DICO), an expert advisory panel said in a report released Monday.

The panel recommends that a new Financial Services Regulatory Authority (FSRA) be established, and it should exercise both prudential and market conduct functions.  The panel – comprised of George Cooke, James Daw and Lawrence Ritchie – made its recommendation to create FSRA in an interim report released in November, 2015. The final report, dated March 31, was made public Monday and contains 44 recommendations.

The mandate review was partly made necessary with the transfer of responsibility for operating an auto insurance dispute resolution system from FSCO to Ministry of the Attorney General’s Licence Appeal Tribunal on April 1, 2016.

Governance

The report suggests that FSRA should consolidate functions, but it should have separate divisions for the regulation of market conduct; prudential oversight; and pension administration. These divisions of the regulator should operate in a coordinated manner, but each division should be insulated from the routine regulatory activities, pressures and resource demands of other divisions.

FSRA should be a self-funded corporation without share capital, operationally independent of government, yet accountable to the Legislature through the Minister of Finance. The FSRA should be outside of the Ontario Public Service and be empowered to hire its personnel from outside of the Ontario Public Service’s collective agreements, compensation restraints, and other hiring restraints to support its ability to recruit professionals and industry expertise as it deems necessary.

FSRA should have a skills-based Board of Directors appointed by the Lieutenant Governor in Council. The Board would oversee FSRA’s operations and the Board should have the authority to appoint a Chief Executive Officer (CEO). The Board Chair should report directly to the Minister of Finance.

FSRA’s Board should be given authority to make rules that would be enforceable pursuant to the statute, having a similar authority as Cabinet Regulations.

Auto Insurance Rate Regulation

The panel did not make any recommendations with respect to the prior approval of auto insurance. However, it did recommend that FSRA’s Board should be obliged and empowered to decide how auto insurance rates are to be regulated and make use of its rule-making authority to scope out a rate approval process.

The view of the panel is that when it comes to the regulation of automobile insurance rates, FSCO is not ultimately protecting the public interest or enhancing confidence in the sector.


Motor Vehicle Accident Claims Fund

The panel recommends that responsibility for operating the Motor Vehicle Accident Claims Fund (MVACF) be transferred to the Facility Association (FA), a non-profit organization funded by automobile insurers in the provinces and territories that operate private insurance systems. This responsibility would fit well with the FA’s original purpose, which is to act as the ‘insurer of last resort’ for high-risk drivers. The FA already operates uninsured motorist funds similar to the MVACF in the Atlantic Provinces.

Fraud Prevention

The panel indicated that the new mandate should require FSRA to utilize its statutory authorities to adequately, firmly and consistently discourage fraudulent activities or behaviours that mislead or harm consumers and pension plan beneficiaries.

FSRA should be directed to identify and seek to eliminate gaps in protection for consumers who might be defrauded by licensed sales agents, brokers and corporations. FSRA should also  have the authority to establish a fraud compensation fund such as exists in Quebec if or where enhancements to mandatory insurance coverage would not fully close current gaps.

There is no word from the government on implementing the panel's recommendations.

Insurance News - Saturday, June 18, 2016

Here are the leading auto insurance headlines from ONTARIO AUTO INSURANCE TOPICS ON TWITTER for Saturday, June 18, 2016:

• A recent FSCO survey revealed that 90% Ontarians do not know much about their auto insurance coverage.
• New York legislators want to make self-driving cars accessible, but must first fix a 1971 law that requires at least one hand on steering wheel.
• Three threats to incumbent car companies are converging into a tidal wave of disruption.
• Almost half of marijuana-smoking Canadian drivers say that they can safely operate a vehicle while stoned.
• How data analytics will change the insurance sector as never before.

Insurance News - Wednesday, June 8, 2016

Here are the leading auto insurance headlines from ONTARIO AUTO INSURANCE TOPICS ON TWITTER for Wednesday, June 8, 2016:

• Ontario consumers satisfied with auto insurance despite government failures to reduce rates according to a J.D. Power survey.
• A CCIR paper confirms that no legislative changes are needed to introduce electronic pink slips.  See my recent post on electronic insurance cards.
• Florida officials are calling for a $125,000 study to consider dropping state’s system of no-fault Personal Injury Protection auto insurance.
• Google has registered a patent for a glue would stick pedestrian to a self-driving car after a collision in order to reduce injuries.
• Will the convenience and accessibility provided by self-driving cars increase auto usage, and congestion?
• With reduced SABs coverage, brokers who fail to offer their customers sound advice run the risk of an E&O lawsuit.

Insurance News - Monday, May 30, 2016

Here are the leading auto insurance headlines from ONTARIO AUTO INSURANCE TOPICS ON TWITTER for Monday, May 30, 2016:

• Auto insurance is a sore spot for many Canadians. Many believe they are paying too much for premiums while receiving too little in return. Although customer satisfaction is improving.
• It's almost June 1 and mandatory accident benefit coverage in Ontario will be shrinking.
• Speakers at the U.S. National Highway Traffic Safety Administration's first forum on the topic offered mixed opinions about whether the arrival of self-driving cars should be slowed or sped up.
• GM and Lyft will be using Chevy Bolts as autonomous taxis in selected U.S. cities in 2017.
• An Ontario woman blindly followed her car's GPS straight into Lake Huron. Self-driving cars got to be better than this.
• The owner of a Tesla Model S says that his semi-autonomous car crashed into the back of a trailer while he thought it was parked. Tesla Motors isn't so sure that's what happened.

LAT Have Mercy

On April, 1, 2016, Ontario's Licence Appeal Tribunal's (LAT) Automobile Accident Benefits Service (AABS) was officially open for business. After 26 years, the Financial Services Commission of Ontario (FSCO)'s Dispute Resolution Group stopped accepted new applications. The transfer of responsibility has created considerable apprehension among its users. FSCO was flooded with new applications in the weeks leading up to April 1st. For many, it's a matter of 'better the devil you know.' What will this change mean for stakeholders? Will it really be different?

How did we get here?

The establishment of the AABS at LAT brings to a conclusion a process that began with the appointment of the Honourable J. Douglas Cunningham in August, 2013. Justice Cunningham was asked to review the auto insurance dispute resolution system. He was asked to make recommendations to the government to address a significant backlog, in disputed autoinsurance claims pending mediation and arbitration, that existed at the time - and to propose system improvements. His report - delivered in February 2014 - included 28 recommendations. As a result, Bill 15, the Fighting Fraud and Reducing Automobile Insurance Rates Act, 2014 included a provision transferring responsibility for resolving disputes over statutory accident benefits from FSCO to LAT. Regulation changes filed by the government on March 7, 2016 - which came into effect on April 1 - was the final step in implementing the new dispute resolution system.

What are the changes?

• The only dispute resolution process available to parties is an arbitration through LAT.
• Mandatory mediation is no longer part of the dispute resolution process.
• No court action can be commenced for statutory accident benefits disputes, even where there is a companion tort action.
• There is no right of appeal, other than a reconsideration option with the Executive Chair of the Safety, Licensing Appeals and Standards Tribunals of Ontario (SLATSTO) for exceptional circumstances and the Divisional Court on a question of law.
• A total of 22 new full-time and part-time LAT adjudicators have been appointed to date. Auto insurance stakeholders will be interacting with a largely unknown group of adjudicators as only three have had experience resolving disputes at FSCO.
• LAT is committed to resolving most (90%) disputes within six months.

What happens to FSCO?

Applications for mediation, neutral evaluation and arbitration have not been accepted since March 31, 2016. A mediation, arbitration, court proceeding, appeal, variation or revocation that was commenced before April 1, 2016 may be continued at FSCO after that date. If a mediation fails before April 1, 2016 , an application for arbitration can only be made to the LAT on or after April 1, 2016. Applications to the Director of Arbitrations - for appeals, variation or revocation - may only be made where the application for arbitration was received by FSCO before April 1, 2016.

How does LAT work?

Since there is no longer mandatory mediation, an applicant will be able to apply for arbitration following the denial or termination of statutory accident benefits. The applicant (an insured or insurer) files an Application for Arbitration with LAT. The other party files a response.

It is intended that all procedural issues, lack of production, or failures to attend insurer examinations are to be dealt with upfront by the Registrar. LAT may dismiss an application without a hearing if (1) the claim is an abuse of process, (2) the matter is outside the Tribunal's jurisdiction, (3) the statutory requirements for bringing the application have not been met, or (4) the party filing the application has abandoned the process. This is a significant departure from the FSCO process which included preliminary hearings. However, if LAT is reluctant to dismiss these applications, then the gatekeeper function, envisioned by Justice Cunningham, will not be put into practice.

The first step in the arbitration process is a case conference. This is the settlement meeting described in Justice Cunningham's report. It must take place within 45 days of the date LAT receives an application. The case conference is analogous to a FSCO pre-arbitration meeting except most will take place over the phone instead of in-person. Prior to the case conference, the parties are required to outline the documents to used at a hearing, any production issues, the preference for the type of hearing (written, video/telephone or in-person), a list of witnesses and details of the most recent settlement offer.

Should the dispute not be resolved at a case conference, then a hearing will take place within 60 days. The type of hearing will be decided by the adjudicator at the case conference. Decisions will be issued within 30 days for written hearings, within 45 days for video/telephone hearings and 60-90 days for in-person hearings.

Lingering concerns

There is no LAT appeal process other than the possibility of a reconsideration by the Executive Chair of SLATSTO if there is a clear error that was made by the adjudicator. Appeals based on merit are not available. A party can apply for judicial review where there is a question of law.

Is this a significant departure from the FSCO process?

 The simple answer is yes. But how much different can only be determined over time. The forms and practice rules are simpler. In an attempt to create a different culture, very few FSCO arbitrators have been appointed to LAT. Some see this as a good thing while others are concerned. But it does add an element of uncertainty for an initial period. 

There are other elements of the new process to be concerned about. Justice Cunningham recommended the creation of statutory timelines and sanctions regarding settlement meetings (case conferences), arbitration hearings and the release of arbitration decisions. He felt that there need to be strict adherence to timelines and that creating statutory obligations was the most effective way of accomplishing this. However, no statutory timelines have been created and instead LAT will manage timeline requirements. This is essentially how things existed at FSCO. What will happen if the parties are not ready for a quick hearing? Will adjournments become common occurrences? Stakeholders will be waiting to see if the promised timelines will be met or erode over time.  

In response to criticism of FSCO practices in conducting mediations, Justice Cunningham recommended that settlement meetings (case conferences) be conducted in-person or by video conferencing. He rejected telephone meetings.  LAT will predominantly be conducting case conferences over the phone. Considering that FSCO pre-arbitration meetings are in-person, this is really a step backwards.

Justice Cunningham wanted hearings to follow three streams: paper reviews, expedited in-person hearings and full in-person hearings. He recommended criteria be adopted to determine which stream a case falls under. Those criteria have not been adopted. Instead, the LAT adjudicator will exercise his or her discretion to determine the format of a hearing. At FSCO, similar discretion existed but all hearings were in-person.  Although LAT has suggested that many hearing will be paper reviews, will stakeholders pressure adjudicators to provide more in-person hearings? 

A number of other recommendations by Justice Cunningham seemed to have been abandoned. The settlement of future medical and rehabilitation benefits were to have been prohibited until two years after the date of the accident. The SABS have not been amended and settlements will still be permitted one year after the date of the accident. In addition, every insurer was to establish an internal review process as the first step in the new dispute resolution process. It does not appear that all companies have established an internal review process.

Conclusion

A lot of time and effort has gone into creating the AABS at LAT to replace the dispute resolution process at FSCO. One of the problems identified by Justice Cunningham has been the culture surrounding the previous system.  LAT has made a considerable effort to create a new culture. However, the new adjudicators will be dealing with the same clientele and will need to interpret the same complex and frustrating statutory accident benefits. It will take some time to determine how much different the new system is.

Insurance News - Monday, May 16, 2016

Here are the leading auto insurance headlines from ONTARIO AUTO INSURANCE TOPICS ON TWITTER for Monday, May 16, 2016:

• Uber, Google and Ford form self-driving car coalition to urge government action on self-driving car tech.
• Regulatory change demands insurers show regulators using telematics data for claims management would help consumers.
• There is a lot of speculation around what the world will look like when there are self-driving cars on the road. For example, one in four drivers (the person behind the wheel) are expected to sleep while in self-driving car.
• An expert from the Canadian Automated Vehicles Centre of Excellence warns that there will be a lot of sex behind the wheel.
• Then there is the NATO security expert who warns that Islamic State technicians are working to produce driverless car bombs.

Insurance News - Saturday, May 14, 2016

Here are the leading auto insurance headlines from ONTARIO AUTO INSURANCE TOPICS ON TWITTER for Saturday, May 14, 2016:

• Is an outdated loyalty system the only thing keeping brokers from oblivion?
• Canadians can now rent their personal vehicle to others through a U.S. company that has just launched in this country. It's like AirBnB for car owners. But should you do it?
• A new ride-hailing app made exclusively for women will now launch in the U.S. nationwide this fall after being met with overwhelming demand from users.
• Auto insurance rates in Ontario have dropped about 10 per cent on average in the past few years, putting the Liberal government two-thirds of the way to a goal that passed eight months ago.
• Who's responsible when a self-driving car crashes? In short term it will be drivers but in long term it will likely be manufacturers.
• Classifying the different levels of vehicle autonomy. Most cars will not be at the top level for many years.