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Car Insurance Reforms Bad for Taxpayers

Original Article by Dary Merkur, August 12, 2017 (visit original post Here)

Anyone want to save $100 per year on automobile insurance?

What’s the catch you ask?

Well, you will get less insurance protection than you need.

Oh, and did I mention your taxes will go up significantly because people without adequate insurance protection will now tap into the public purse?

In other words, paying less for automobile insurance gets you less in insurance coverage and results in increased government spending (also known as higher taxes).

Wouldn’t you expect the Ontario government to quantify and evaluate the impacts of a reduced mandatory automobile insurance product before making massive reductions to mandatory automobile insurance coverage?

Not so. The Ontario government, through its June, 2016 automobile insurance reductions, adopted this “cutting corners” philosophy as its ill-conceived solution to reducing automobile insurance premiums.

Now, the Ontario government has gone a step further by considering additional automobile insurance “cost cutting” measures recommended by their advisor, David Marshall.

The recommendations by Marshall will be up for public consultation later this month.

Surely, no one will be surprised when the Ontario government announces more changes and claims victory on this issue just in time to sweep this issue under the rug before the next election.

Let me be the first to congratulate the Ontario government for reducing automobile insurance premiums by increasing taxes.

What’s next? Reducing hydro bills by increasing taxes, or has that already happened, too?

Actually, there is one even easier way to immediately reduce auto insurance premiums — enforcing a restriction on insurers’ true profit to reasonable profit expectations.

(See the comprehensive study conducted by York University Schulich School of Business Professors Fred Lazar and Eli Prisman outlining excessive profits by insurers).

Unfortunately, the Ontario government appears completely unwilling to challenge insurers’ profit reporting despite compelling reasons to do so.

Injured motorists have significant care needs.

If those needs are not covered by insurers then the costs are absorbed in large part by various government-funded agencies.

No consideration has been given by the Ontario government to the financial and practical impacts of the June, 2016 automobile insurance changes, nor to Marshall’s recommendations, on government agencies paid for by the taxpaying public.

For example, one of the June, 2016 changes was a major reduction in non-earner benefits paid to injured persons such as students, who have suffered a “complete inability to carry on a normal life”.

Obviously, these accident victims have been severely disabled in order to qualify for that benefit.

But the June, 2016 changes limit non-earner benefits to less than a total of $20,000 when previously non-earner benefits for an injured student could have been worth roughly $500,000.

Now, the injured student, who is severely disabled and permanently unable to work, ends up on Ontario Disability, which ends up covering the same $500,000 in benefits over his or her lifetime.

Another June, 2016 change that was mean-spirited and unnecessary was halving the benefits available to the most seriously injured persons in car accidents, referred to as “catastrophically impaired” persons within the legislation.

With significantly less benefits available, the catastrophically impaired accident victim’s care, housing, transportation and treatment needs are all absorbed by the taxpaying public through government assistance such as CCAC, subsidized housing, Wheeltrans, ODSP and increased reliance on OHIP (leading to longer wait times at hospitals and reduced access to physicians).

The care needs of car accident victims are real.

The goal of the automobile insurance system should be to provide a product that gives accident victims a legitimate chance to maximize their recovery and to live with dignity and independence, without having to feel like a drain on the public purse.

Reducing automobile insurance premiums by ignoring the costs transferred onto the public system is a shell game, much like the shell game associated with insurer profitability.

Have Your Say Today!

The ORA invites all FSCO licensed auto sector healthcare providers to share their experience. Click Here to complete the survey and have your say!

 

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.

Ontario Needs to be More Transparent About Auto Insurance Changes

Written by Ken Rubin, published by The Windsor Star on June 9th 2017. See the original post Here.

 

For two and a half years, Ontario’s Ministry of Finance and its rate regulator — the Financial Services Commission of Ontario — refused to release records of the Insurance Bureau of Canada’s efforts to influence and encourage government moves to reduce auto insurance coverage.

After denying my (Ken Rubin) requests under the province’s Freedom of Information and Protection of Privacy Act, the ministry made submissions to the Information and Privacy Commissioner of Ontario claiming that the IBC was one of its confidential “consultant policy advisers” retained as a kind of an “expert panel.” Therefore IBC lobbying records and even its 2012 pre-budget consultation submissions should be considered policy advice and not released, it argued. The ministry made this claim despite the fact that it is supposed to regulate the IBC’s members.

The ministry also claimed in a sworn affidavit that IBC records were cabinet confidences. Since influential IBC positions were discussed at numerous identified Ontario cabinet meetings, IBC records must be subject to cabinet confidence and not made public, it said.

In May 2016, as part of my appeal of the ministry’s decision not to release the information, I argued that widening the cabinet exemption to include the IBC — an independent third-party stakeholder — would set a dangerous, unwarranted precedent.

Had the Finance Ministry and its Financial Services Commission succeeded, lobbying groups’ submissions and meetings could have been hidden and freedom of information legislation severely compromised.

But thanks to the Information and Privacy Commissioner’s benchmark decisions in April, those outlandish claims were dismissed.

As a result, the records from 2012 to 2014 that I requested were released in May. They show the IBC pressing Finance Ministry and Financial Services Commission officials through frequent communications, meetings and briefings.

In November 2013, the IBC urged the government to remain firm on a $3,500 cap for minor injury claims it felt were “vulnerable to disputes,” documents show. The bureau offered ways to tighten the cap, so that mediation and medical claims would be confined and protected from “being tested, attacked, expanded and dissected by numerous challenges.”

The IBC insisted government officials keep it informed about the development of regulations and legislation, for which it conveniently supplied drafts for the government’s consideration. For example, in August 2014, the IBC asked which measures “are ready to be presented to Cabinet” and “which recommended reforms contained in IBC’s submission of July 4 have been reviewed and are ready for constructive discussions with a view of finalizing proposed regulatory and legislative language.”

The day before a February 2014 cabinet meeting, the IBC asked – given pre-election “political uncertainty”— to be put on the agenda to discuss the government holding firm to bringing in alternate dispute resolution reform, licensing of rehabilitation clinics and reviewing costly towing practices.

Due to the government’s subsequent cuts to basic auto insurance, Ontario consumers now have to pay extra premiums for better accident coverage. In a market dominated by several large insurance companies, Ontario’s more than 9.5 million car owners still pay high auto insurance fees despite successive governments promising lower premiums.

Ontario’s auto insurance regulation system is far from independent and transparent. Other North American jurisdictions, like California, set auto insurance rates with truly independent regulators in charge after open hearings where consumers can challenge proposed rates. Data submitted by stakeholders like the IBC is subject to public scrutiny and the process is more transparent. The rates set and premiums established are fairer and lower than those in Ontario.

It’s time to end the secretive industry-government relationship that keeps the Ontario public in the dark and auto insurance premium rates high, with shrinking coverage and low benefits.

 

Budget Confirms No Cuts to Accident Benefits

There’s no really big news (as in new information) about auto insurance in today’s budget. And maybe that’s good news.

The government says that it is “committed to finding ways to lower auto insurance rates and improve health outcomes for victims of auto accidents without reducing benefits”; it’s good to see that in writing after years of benefit cuts.

The budget  references the Marshall report, highlighting recommendations re programs of care and the establishment of Independent Medical Examination Centres. However, the budget does make clear the report has yet to be consulted on in the coming months.

The budget also referenced the establishment of the Financial Services Regulatory Authority (FSRA), legislated in December 2016. The FRSA will be assuming responsibility for regulating auto insurance, and presumably providers. The budget says the FSRA Board should be in place this spring and will then begin to develop its mandate.

So chances are there may not be many developments that will concern us, other than consultation for a number of months.

I was amused to read maybe the only specific innovation made in the budget for auto insurance consumers: drivers will now be able to use their phones to show electronic/digital proof of insurance. It is the government’s expectation that insurers will pass along to consumers the savings they realize from not having to send these pink pages. Seriously?

ORA Gives Yellow Light to David Marshall’s Report

The Ontario Rehab Alliance commends Mr. Marshall for his thorough and thoughtful review of Ontario’s Auto Insurance: Fair Benefits, Fairly Delivered.

This report rightly focusses on the needs of injured persons and the importance of eliminating obstacles to timely access to treatment. The ORA urges consultation with stakeholders and cautious consideration by government on of how to bring about the suggested changes.

The ORA is particularly heartened by the recommendation that the current no-fault benefits should not be reduced and the report’s:

– emphasis on healthcare rather than settlement;

– recognition that insurer culture must to shift to one in which claimants can be given the benefit of the doubt

– acknowledgment that the focus should be on the non-minor, serious and catastrophically injured as these cases are often unique and cannot be addressed by common treatments.

We fully understand the emphasis on programs of care, evidence based practice and outcome-based treatment but caution that the ‘absence of evidence is not necessarily evidence of absence’. Compared to other aspects of healthcare such as pharmacy or surgery there is much less research into rehabilitation and fewer studies, often with very small and specific sample sizes. Consequently, clinicians in this field rely heavily on evolving best practice guidelines within their disciplines. Highly prescriptive and narrowly described programs of care must be adopted cautiously so that effective treatment is not compromised by a tool meant to facilitate it.

The ORA agrees with Mr. Marshall that there is much to learn from the experience of other sectors and settings, such as the WSIB. However, it must be kept in mind that the mandates of the insurance schemes are quite distinct: return-to-work is a much more straightforward and arguably more measurable outcome than the return-to-daily-life goal following an auto accident, of which employment is merely one component.

We support the call to simplify the legislation and regulations and provide consumer education as key components of a system with enhanced transparency, accessibility and accountability.

We appreciate the vision of the improved system that Mr. Marshall offers and we look forward to working with the government and other stakeholders to explore how best the bring this about.

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