Ontario’s Fall Economic Statement Focuses on Auto Insurance Consumer Protection1 November 19, 2014 at 10:12 am by Willie Handler
The auto insurance focus of this year’s Ontario Economic Statement is consumer protection although not everyone is going to agree that these measures are strictly to protect consumers. The statement provides a summary of government activity that is ongoing.
The government claims it is taking steps to keep auto insurance affordable. As a result of the government’s Auto Insurance Cost and Rate Reduction Strategy, FSCO rate approvals fell by than six per cent on average from August 2013 to August 2014. Although it is not always clear what impact that will have on the paying public. However, the commitment was for an eight per cent reduction during that time period.
The government has taken action to address over half of the recommendations made by the Auto Insurance Anti‐Fraud Task Force, including key proposals to enhance the Financial Services Commission of Ontario’s (FSCO) investigation and enforcement authority and make it easier for individuals to report suspected auto insurance fraud.
Licensing of health service providers in the auto insurance system, a key Task Force proposal, will become fully effective on December 1, 2014.
The government is also committed to establishing a Serious Fraud Unit, whose initial mandate would include addressing auto insurance fraud. Establishing such a dedicated investigation and prosecution unit would be consistent with the Task Force’s conclusion that cases of suspected auto insurance fraud should be vigorously pursued and prosecuted where evidence warrants.
Bill 15, the Fighting Fraud and Reducing Automobile Insurance Rates Act, 2014, is working its way through the legislative process and has recently had second reading and undergone a very brief review by a legislative standing committee. If passed, Bill 15 would:
- Transfer Ontario’s auto insurance dispute resolution system to the Licence Appeal Tribunal and make significant changes to help injured drivers settle disputed claims faster;
- Regulate the towing and vehicle storage industries through measures that tackle questionable practices; and
- Give the government authority to change the current 60‐day period that a vehicle can be stored after an accident, accruing charges, without notice to the owner.
Rates are directly linked to claims costs. So in addition to reducing fraudulent activity and abuse, Bill 15 also will reduce costs in the system. That is where some of the controversy lies. The government plans to align prejudgment interest rates on pecuniary and non-pecuniary damages (pain and suffering) to what are typical rates in today’s market. That will reduce the rate to 1.3% (from 5%) on pecuniary damages.
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“Rates are directly related to claims costs” – so why aren’t Ontario’s insurers doing something about the costs that they are incurring with the rampant denials of claims in the system? It’s not cheap to deny claims and insurers are spending a disproportionate amount of money on legal representatives to deny claims that they know they will likely have to pay anyway down the road. Excessive medical assessments and the associated costs. Millions spent in obscene billings for cancelled appointments for assessments that end up in insurers preferred vendors pockets. Costs for surveillance of legitimate claimants. Overuse of our court systems. Victims are getting very little if any coverage so where are the dollars going?