Shanoff: Overhaul of auto insurance long overdue in Ontario

By Alan Shanoff, Toronto Sun

Friday, February 15

Ontario’s NDP is clamouring for a 15% rate reduction in car insurance premiums, citing lower payouts by insurers since the gutting of no fault accident benefits in 2010. They cite figures showing accident benefit payments falling by almost $2 billion and the cost of insuring a vehicle falling 22% since the “reforms” came into effect, yet premiums have increased.

The Insurance Bureau of Canada, the same people who contributed $25,000 to the leadership campaign of now Liberal Party leader and Premier Kathleen Wynne, object claiming the NDP’s figures are misleading and refer to the fraud problem facing the industry. Wynne objects to a forced premium cut, claiming premiums will fall once fraud is curtailed. Of course, the insurance industry has been complaining about an estimated $1.3 billion of fraud — now it’s estimated at anywhere from $768 million to $1.56 billion — each year for as long as I can remember so odds of a premium decrease flowing from a reduction in fraud seem remote.

I wouldn’t mind a premium cut. Who wouldn’t? But in all of this political wrangling we lose sight of the reality that car insurance is failing many accident victims. Too often car insurance isn’t providing the coverage promised.

Do I have the numbers to back this up?

Only the insurance industry knows the true extent of its practices. But I have court cases, arbitration decisions, submissions made at public hearings on auto insurance held last year by Ontario’s Standing Committee on Finance and Economic Affairs, and enough anecdotal reports from victims to know the system needs fixing.

I also have the word of many personal injury lawyers whose clients have suffered as a result of the current Byzantine system. One of the province’s leading PI lawyers, Darcy Merkur, says the current accident benefit dispute process “makes no sense.” Adjusters have been given the power to make medical determinations. Seriously injured accident victims, who require significant medical rehabilitation services, are stymied by reports prepared by so-called independent medical examiners. Many of these examiners, Merkur says, specialize in insurer independent medical examinations rather than in actually treating patients. Too often these medical reports are sloppy and contain errors, aside from the obvious conflict of interest of having being prepared by physicians who derive a substantial portion of their income from insurance companies.

Maryland Circuit Court Judge Thomas P. Smith states the following about independent medical examinations: “Of all the oxymorons in the world, an Independent Medical Examination occupies first place by thousands of leagues. There is nothing independent about the process; it is hardly undertaken for any medical purpose and all too often resembles an inquisition rather than an examination.”

Contesting the findings of these independent medical reports is expensive and time consuming. The backlog for mediation and arbitration at Financial Services Commission of Ontario can exceed two years. In the meantime accident victims may be shunted off to numerous insurance assessments with vital rehabilitation treatment delayed. Is that how the system is supposed to work? That’s not the bargain we entered into some 23 years ago when the government curtailed the right of most accident victims to sue for tort damages and forced car owners to buy no fault accident benefits coverage.

I don’t expect the insurance industry to modify its practices. It benefits from deny and delay tactics. As law professor Jay Feinman points out in his book Delay, Deny, Defend: Why Insurance Companies Don’t Pay Claims and What You Can Do About It: “an insurance company’s greatest expense is what it pays out in claims. If it pays out less in claims, it keeps more in profits.” Even delaying the payment of claims is a lucrative business practice as “the company keeps the premiums paid longer and gets to invest those premiums and keep the investment earnings.”

More than a decrease in premiums, we need an overhaul of the system to ensure fair treatment for accident victims. Pity, no one in power appears to care.


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