For consumers, auto insurance in Ontario is once again headed for a crisis—for insurers, that crisis has already arrived. Growth in injury claim payouts has far outstripped growth in premiums. If nothing is done to address these cost pressures, there could be significant upward pressure on auto insurance premiums over the next two to three years.

Fortunately, the government of Ontario is in the midst of its first five-year review of automobile insurance as mandated by Bill 198. On April 3rd, 2009, the Financial Services Commission of Ontario (FSCO) released its report on the review. In it, FSCO clearly acknowledged the scope of the problem with Ontario auto insurance, and noted that structural changes to the system need to be made in order to stabilize costs.

Some of FSCO’s recommendations go a long way to controlling these costs, while others could have the opposite effect. Ultimately, the final word rests with the Minister of Finance, but industry folk know the writing is on the wall: Without profound structural change, auto insurance premiums will spike.  

The prospect of rising auto insurance premiums pleases no one, least of all Ontario consumers who are currently feeling the effects of a global economic recession. Add to this the fact that Ontario drivers already pay more for auto insurance than drivers in every other province—25% more on average, mainly due to the fact that Ontario has the most generous auto insurance benefits package in North America.    

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However, despite generous benefits and more involved treatment, there is no evidence that those injured in auto collisions in Ontario get any better than those injured elsewhere. Currently, the average no-fault injury claim in Ontario is close to $38,000. By contrast, comparable claims average $11,700 in New Brunswick and $3,000 in Alberta.

Clearly, something is out of sync in Ontario.

Soaring auto insurance claims costs in Ontario are nothing new. Every 18 to 24 months, we see the beginning of a new crisis as cost pressures re-emerge and escalate to the point where auto insurance affordability and availability become issues. This year’s auto insurance review will likely result in significant changes once again, making this the fifth time in 20 years the product has been reformed.  Previous efforts have not produced long-term stability and affordability. Many hope this year’s review will be different.

One of the keys to long-term success lies in harmonizing the level of available benefits with the actual need of the injured auto collision victim. Currently, the no-fault Accident Benefits scheme provides up to $100,000 worth of rehabilitation care and $72,000 in attendant care, available for all injury victims, no matter how minor their injuries. Regrettably, these figures are sometimes viewed as targets, rather than as limits, making the system vulnerable to overuse.

The fact remains that Ontario’s auto insurance system can be as generous as Ontarians want it to be—but that comes with a cost. Consumers deserve an affordable and stable insurance product that ensures accident victims get the care they need, while keeping premiums reasonable for all drivers. 

IBC’s recommendations to government achieve this balance, providing for a level of rehabilitation support that is competitive with the levels prescribed in other provinces. For the most seriously injured, the current limit of $1 million for medical rehabilitation services would remain unchanged. 

IBC has also recommended a simplification of the claims process, putting claimants back in control of the process and removing inefficiencies from the system. Currently, far too much of every premium dollar is spent on health assessment fees, and on legal and other service fees. IBC believes this money is better spent directly helping accident victims to recover from their injuries and return to their normal daily lives.

Ontario families are currently facing profound economic uncertainty. While the government of Ontario can’t solve all of the province’s economic woes, it can control the factors that determine how much its citizens will end up paying for auto insurance.  This year’s auto insurance review presents the government with a golden opportunity to return stability to the auto insurance system and give Ontario families a break when it comes to their auto insurance premiums. 

IBC’s recommendations to government outline, with specificity, how long-term affordability and stability in Ontario’s auto insurance system can be achieved. All that is required is meaningful action by government and an awareness to resist the temptation to opt for quick-fix, short-sighted solutions.  Anything less than meaningful reform and consumers are once again doomed to auto insurance market instability and volatility.                 
Don Forgeron, vice-president, Ontario, Insurance Bureau of Canada