We asked two industry observers—a lawyer writing his doctoral thesis on auto insurance reform, and an adjuster—to weigh in on the state of Ontario’s auto insurance.

John Campisi – BIO
Mr. Campisi holds a B.A., M.A., LL.B., LL.M. and is a Ph.D. candidate. He practices as a personal injury lawyer with Carranza, Barristers and Solicitors. He submission to FSCO was based on his doctoral thesis that examined insurance reform between the years of 1990 to 2008.

Anonymous Adjuster – REASON
Due to their position in the industry, adjusters are directly and uniquely impacted by the current (and possible future) auto insurance system in Ontario. As a result, many want to speak out on the issues surrounding the five-year FSCO review, but are afraid of the ramifications. We offered adjusters a chance to speak up, candidly, on the important issues affecting Ontario’s auto insurance product. This is what we heard.

QUESTION:
When, and if, changes are made to provincial auto insurance legislation who will this, primarily, impact?

Anonymous Adjuster: All people who pay auto insurance premiums are impacted. The insurance industry requires regulation to ensure there is consistency in claims handling and costs between all insurance companies. The provincial government continues to be called upon by taxpayers to reduce insurance costs. Therefore, the onus is on the provincial government to ensure costs are controlled and the appropriate caps are in place.

John Campisi: Ultimately, the provincial government has the ability to create an efficient and sufficient method of motor vehicle accident compensation. Whether the current Liberal Government will act to address the current deficiencies in the compensation system remains to be seen.

Since auto insurance in Ontario is run through private companies, not a public auto insurance plan, the burden of the removal of limitations on claims will fall on insurers and insured persons. However, how this burden is distributed among those two sectors will depend on the balance struck in provincial auto insurance regulation.

QUESTION:
Will provincial governments opt to revamp auto insurance regulations, as opposed to taking their chances on court decisions or industry initiatives?

Campisi: Since the limits in each province are different, and auto insurance is not a high priority at the moment, and the removal of caps will require overall revamping of the tort/no-fault balance, the Ontario government will likely not be proactive in changing auto insurance regulations in a substantive way.

Adjuster: The provincial governments will not take the chance on large premium increases. They will reinforce and up hold the caps. Large premium increases would be suicidal for the government during the current economic environment.

• Global Auto Sales
• History of Claim Reporting: A Success Story
• Prevent Auto Theft
• Claims Cost Decrease; Claims Frequency Increase
• Brief History of Auto Reform in Ontario
• Virtual Roundtable: Auto Reform In Ontario
• Consumer Deserve a Better Auto Insurance System
• Guiding Principles in Auto Reform
• Risk Managers Weigh in on Reform
• Access to Justice Through Auto Insurance Reform
• Cap Costs in Ontario
• Auto Reform: Impact on Self-Employee

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QUESTION:
How can insurers prepare for a possible legislative changes?

Campisi: How they would likely prepare is to begin lobbying the provincial government to reduce accident benefits to compensate for larger tort payouts; and to fight the removal of the caps, and they will hope to achieve both. They will propose changes to auto insurance regulation to readjust the balance between no-fault and tort, and the changes they propose will be to their benefit. Insured people and those representing them need to start thinking about the appropriate balance – many believe that it is already too skewed toward insurer profit, and must prepare the argument resisting a reduction in compensation. Again, the appropriate balance must be struck between compensating victims and ensuring that the system remains viable. Another balance must be struck between tort and no-fault compensation.

Adjuster: Insurers will have to staff up with more adjusters, invest in better training in order to give their adjusters more authority and decision making power. The insurers will have to localize their adjusters again so the adjuster can be close to the claimant, the legal community and the service providers. By being local, the adjuster will understand the environment of the claim and control the costs. This is the only way the insurers would be able to deal with the huge exposure of a non-capped world.

QUESTION:
If there is a premium increase, how will this affect clients and the industry?

Campisi: The industry would not be affected in a competitive sense, since premium increases would occur across the board and affect all companies. They would, however, use the potential for increased premiums to garner support for reduced benefits. Insured persons would obviously be stuck with increased costs of insurance, and reasonable premiums are important to all of them, while the adequacy of benefits is only important to those who end up injured. Insured people and those representing them need to start thinking about the appropriate balance, and the appropriate places to cut costs before cutting benefits or raising premiums to compensate for any potential removal of the threshold.

I really believe that further independent study is required and the public should be made aware of the compensation available to them in the event of a motor vehicle accident..

Adjuster: A large premium increase will result in negative outlook by the premium payer on the insurance industry and will no doubt bring insurance issues back into the political limelight. The insurers will be seen as rich companies finding ways to charge more money. Most clients/premium payers will not understand the reasons for the increase thus precipitating the need for increased public awareness and dialogue between the industry and the consumer. The insurers may have to spread their operation costs out, decentralize and put more money and resources in the hands of the people on the front lines. This will attract competent people to the adjusting positions and allow the insurers to put more authority and trust in these front line people.

QUESTION:
There are certain entities that are calling for a complete restructure of how claims cases are handled – including removing the burden of medical proof, and thereby eliminating over half the costs of a claim – is this a feasible option?

Campisi: There are many ways in which claims handling can be made more efficient and less costly, for example, by minimizing the number of medical assessors involved beyond the treating practitioners. The complete elimination of medical proof makes little sense, however, since entitlement is based on medical criteria.

Adjuster: This is not a feasible option. The most recent legislative changes in Ontario and the reduction in time limits, currently promote paying for services without allowing the insurer to evaluate or adjust the claim. We believe this has driven the cost of claims up. By removing the burden of medical proof, there may be a reduction in claim expenses, but there will be an enormous increase in claims numbers and payouts.

QUESTION:
How will any legislatives changes affect the way claims are handled?

Campisi: It is really impossible to say how a removal of the threshold/deductible would change claims handling, because such a change would inevitably be part of larger changes. It really depends on what legislative changes are introduced to Ontario.

Adjuster: The handling of claims is a people business and will always be a people business requiring face-to-face contact. Over the past decade insurers have made great efforts to streamline the claims process. They have done this by categorizing different claims of different dollar amounts and then setting rules for their adjusters to follow for each type of claim. This then allows insurers to centralize their operations and handle the majority of their claims from a distance over the phone with check sheets and many different upper level reviews and audits. By doing this, they have lost the personal face-to-face contact needed to properly adjust a claim and resolve the situation. The insurers have lost touch with the people and service levels have dropped for both the first party and third party claims. If the caps are removed, the insurers will have no choice but to localize adjusters and give them more decision-making authority to deal with the claimant from the beginning and reach a fair settlement with them when it is appropriate. They will no longer be able to rely on the caps to control the claim. The adjuster will have to investigate the claim and evaluate the claimant and then promptly resolve it when appropriate, before claim handling and defense costs get too high. This presents another problem, there are not enough adjusters!

QUESTION:
How long can the appeal process continue? Until then, will insurers use a wait and see approach, perhaps allowing claims to stockpile?

Campisi: There hasn’t been a decision in Ontario, and so regardless of how long the appeal process can continue (and that could be years), it is unlikely to affect claims in Ontario. There is no incentive at all for a stockpiling of claims, as the only options for insurers are the status quo or greater exposure by the removal of the threshold or an attack on the deductible. Therefore, they are not likely to be resisting settlement to await the outcome of these appeals or a potential Ontario case.

Adjuster: The insurance industry historically has been a reactive industry, often waiting until the situation arises and then dealing with it. Although insurers make attempts to settle claims they are often dictated by time limits, court decisions or the reality of large defense costs setting in. Insurers are aware that the longer claims are open there are costs involved to maintain the reserves of each claim. The costs are ultimately transferred to the person paying the premium. In both the short and long term the insurers will continue to deal with claims until they’re further directly affected by legislation or the courts.