Opinion: Ontario Captive to Industry Demands on Insurance Rates

Written by Ken Rubin, posted on The Hamilton Spectator June 12, 2017. See original post Here

The Ontario government hired expensive consultants to justify and monitor its auto insurance cost-cutting program. Their work relied heavily on the auto industry’s supplied data and input, freedom of information documents reveal. Ontario Finance made no secret that the industry lobby group, the Insurance Bureau of Canada, whose member companies supplied the data, was their best expert consultant in helping them set policies for car insurance rates and benefits. Here’s what those consultants spent and did.

Justifying major and minor injury caps

First up was consultant Dr. Pierre Cote, a medical administrator, who was hired twice by Ontario Finance. He began by chairing and directing a 2011 catastrophic impairment (CI) panel whose members he helped select. Sitting right on the panel were a Financial Services Commission (FSCO) and Finance Ministry senior official, with data from the insurers. The panel helped define and justify restricting and confining the amount of payments to be capped at $1 million for those having serious major auto injuries.

Cote’s second job in 2012, for $2.8 million, with his selected team making $4,765 per day, was to develop a minor injury (MI) protocol. The data his team put together was used to help determine what drivers would receive for minor injury claims capped at $3,500. The only observers listed for his review were Aviva, a top auto insurance company, and the Insurance Bureau of Canada (IBC).

Working up actuarial industry forecasts

The second consultants hired, despite Finance having its own staff actuarians, was the actuarial firm Oliver Wyman. They got a five-year (2012-17) $1,101,750 contract. Wyman relied on auto industry firms’ data without conducting independent audit and verification work. Ontario Finance refused to publicly release Wyman’s 10-year projections or their 2013-15 passenger auto insurance company reviews that included Aviva, Belair and Intact.

Defending the rate-setting process

In December 2013, Finance hired, at a cost of $194,544, the management firm KPMG for two years to reputedly monitor the government’s auto insurance rate setting and reduction program. They knew that KPMG had just completed work on auto rates for the industry. But Finance felt, records show, there was enough of an “ethical wall.”

KPMG’s two 2014 reports and one 2015 report, again done without independently verifying the data large insurance companies like Aviva and Intact supplied to it, concluded the government auto insurance reductions and rates were fair, and further reductions in coverage were needed. York University professors Fred Lazar and Eli Prisman saw KPMG’s work assignment as very subjective and their analysis as deficient in that it greatly underestimated the auto industry profitability.

KPMG was also the Ontario government’s chosen consultant back in 2011 advising it on tightening up worker compensation benefits, a report that the Ontario Network of Injured Workers Group (ONIWG) criticized.

The slash and burn operational expert

The fourth consultant, David Marshall, came from being Workplace and Insurance Board (WISB) president and CEO from 2010 to January 2016. Marshall earned $400,000 a year there and was paid an incentive bonus of $400,000 on top of his salary for lowering costs. According to the ONIWG, under Marshall, short- and long-term benefits and services were drastically cut back, many more claims were denied and there were fewer services, vocational retraining, and medical assistance available.

So when cabinet announced Marshall’s appointment in October 2015 at a $1,975 daily rate to bring auto insurance costs down further, this was warmly welcomed by the IBC president and by Intact Insurance, one of Ontario’s largest insurance companies.

Marshall’s work proceeded in total secrecy in the Minister of Finance’s office. His April 2017 report was quietly released, recommending the WSIB system of “neutral,” “fair” and fast settlements that IBC favoured and applauded. IBC praised his report for suggesting further clamping down on auto insurance claims and payouts and for recommending a new, even weaker regulator agency to replace FSCO.

Where to: Independent and fair auto insurance rate regulation

It’s time that Ontario stopped getting advice that helped make it more captive to industry demands. Instead, the next government needs to bring in a transparent arms-length system of independent analysis and review for better auto insurance coverage and rates.

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