Response to Ontario’s Auto Insurance Five-Year Review
By Terri Goveia | May 18
Faster, simpler and cheaper. That’s the Financial Services Commission of Ontario’s (FSCO) vision of how the auto insurance system should operate, according to its latest five-year review.
The commission’s Report on the Five Year Review of Automobile Insurance—released Friday April 3, 2009—is aimed at tightening aspects of the system that are cumbersome and costly. Many of its 39 recommendations are meant to demystify the accident benefits system, put measures in place to curb benefits abuse, and improve accountability. The report notes that the industry’s recent “declining profitability, significantly lower earnings and loss costs increases will accelerate in the absence of structural changes to stabilize costs.”
The report is “consumer friendly,” notes Randy Carroll, CEO of the Insurance Brokers Association of Ontario (IBAO). Several recommendations address confusion surrounding the existing accident benefits system and the Statutory Accident Benefits Schedule (SABS), which “has created an unnecessary paper burden for claimants, adjusters and other participants,” the report states. Others focus on speeding up the claims process, such as putting specific timeframes on assessment request reviews, and tightening the training requirements for those who making medical assessments.
However, the bulk of the recommendations zero in on costs, cutting in some places—they suggest capping assessment costs, lowering the cap for non-catastrophic medical and rehab benefits to $25,000 and making some benefits optional—and raising them in others, such as the suggested increase in maximum income replacement benefit to $500 per week.
The report also puts special emphasis on serious injuries, calling for a clearer definition of “catastrophic impairment” and better training for claims workers to handle serious injuries.
Industry stakeholders are still processing the lengthy report. “We’re in the middle of a full review,” Dorianne Sauvé, CEO of the Ontario Physiotherapy Association and co-chair of the Coalition of Regulated Healthcare Professionals in Auto Insurance, says of the report. “We have to determine its impact on timely access to needed health services by claimants.”
Specific recommendations—like amendments to the OAP1—pleased the IBAO’s Carroll. “We had concerned ourselves with OAP1 and vehicles over 4,500 kg and collateral benefits and all those were addressed,” he says. “It’s going to be interesting to see what’s achievable and what’s not … if it can accomplish what it sets out to and achieve affordability and availability, then that’s a good thing.” Carroll says the association will discuss the report further at its upcoming board meeting later this month.
“FSCO diagnoses the problem correctly,” Don Forgeron, vice president, Ontario, at the Insurance Bureau of Canada (IBC) told CI today. “We accept their diagnosis, but have some concerns at the outset with the prescription they provide.” Forgeron says the bureau is focused on keeping the auto product affordable. “ We are vigilant when it comes to not considering changes that will add costs to the product.”
FSCO officials would not comment on the review. “The report has been provided to the Minister [of Finance] and it would be premature to discuss its contents,” says Rowena McDougall, the commission’s senior manager of public affairs.
Reaction to the Review
Irene Bianchi, vice-president, Claims and Corporate services RSA:
“The report is disappointing in that it continues to call for further study and is vague with respect to timelines and implementation dates. Any potential benefit that consumers would achieve through cost reductions in SABS are offset by the FSCO recommendations that expand tort rights and will cause considerable cost reaction in the insurance marketplace.”
George Cooke, president and CEO, The Dominion:
“The Review notes the underlying and building cost pressure in the existing auto product, while also recognizing the product’s complexity and its associated regulatory burden… Although the Review is obviously about much more than cost containment, it is not clear what are the driving objectives, or in what context the many recommendations should be considered.”
Richard Halpern, partner, Thomson Rogers LLP:
“Some of the current limitations affecting an injured person's right to compensation have been recognized as unfair and better access to the courts has been urged by FSCO. A two-stage process for addressing problems with the verbal threshold and deductibles is being promoted.”
“First, FSCO asks the government to consider three important tort changes:
- evocation of the regulation defining the verbal threshold;
- reduction of the current deductibles on non-pecuniary general damages; and
- elimination of the deductibles in fatality cases.
Second, with respect to the suggestion that the verbal threshold be eliminated entirely, FSCO suggests a closed claim study to allow a more informed decision about the verbal threshold.”
“Undoubtedly FSCO has been impressed by comments made by former associate chief justice Coulter Osborne, where he questions whether the verbal threshold has any real impact on screening out minor claims that are not already eliminated by the deductibles. This redundancy of deductibles and the verbal threshold comes with considerable cost.”
“It is apparent that FSCO has carefully considered stakeholder submissions and has accepted the call from consumers for better access to justice. This Review [and its] recommendation[s] represent a crucial step toward reforming auto insurance to better meet the needs of consumers. Although work is needed on some of the particulars, this Report should be seen as a roadmap to a comprehensive package of reforms to auto insurance, with improved access to justice an essential component.”
Rob Pellegrini, CGA, Williams & Partners Forensic Accountants Inc.:
“We are pleased to see that FSCO recommends a forms consultant to be contracted to assist it in revising forms to simplify the application process. We encourage FSCO to consider changes to the OCF-1 and OCF-2 forms that will define Gross Income for self-employed claimants as “Revenue less expenses, but before tax deductions” and indicate what information claimants need to provide to adjust their claims (income tax return, financial statements etc.)… We welcome Recommendation #30 for the harmonizing of auto insurance and workplace insurance systems. Hopefully this will also improve the ability to address situations where an insured may be deemed to have “coverage” under WSIA and therefore not entitled to the SABS. We encourage the two systems to work together to make these determinations in a more efficient manner.”
“It is encouraging in Recommendation #34 to see FSCO looking at options to enable insurers to effectively enforce the provisions of the SABS and the Insurance Act that require deductions of all collateral sources of income benefits to prevent double recovery. This includes examining the language of the SABS and how to address lump sum payments by disability carriers.”
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