Empty promise on auto insurance

FIRST POSTED: SATURDAY, MARCH 30, 2013 06:39 PM EDT

You have to marvel at how Ontario’s auto insurance industry has provincial politicians wrapped around its little finger.

Every time the auto insurers blame a new villain for their high rates, politicians fall all over themselves to accommodate the industry. And yet rates continue to skyrocket.

So don’t expect the latest promise by Premier Kathleen Wynne, NDP Leader Andrea Horwath and the insurers to lower premiums by fighting fraud, to do any good.

Horwath’s original demand that rates be cut by 15% within a year as the price for her supporting the Liberal minority government, has now been downsized to gradually reducing rates, mainly in the GTA where they’re highest, in co-operation with the insurers. (Horwath insists this can be done in a year.)

But have we all forgotten how many times the auto insurers have done this dance, governments have jumped to attention, and yet rates kept climbing?

At one time, the insurers blamed high rates on high court costs, so the province responded with no-fault insurance, which limited the right of people to sue. Rates kept rising.

Then the industry claimed premiums were high because people were being forced to buy more insurance than they needed.

So the government let them offer policies with less coverage, meaning people had to pay more to retain the coverage they had before the cuts. Rates kept rising.

Ontario’s NDP government from 1990 to 1995 deep-sixed its signature election promise to introduce public auto insurance, at the behest of the auto industry. Rates kept rising.

In all, there have been six rounds of auto insurance reform since 1990. Rates kept rising.

Now the auto industry claims fraud is driving up rates — actually a perennial complaint — and so Wynne and Horwath are promising to reduce fraud.

What won’t be fixed, however, is the fraud auto insurers commit when they deny genuine accident victims the benefits they were promised in the polices they bought, as Sun legal affairs analyst Alan Shanoff has documented in numerous columns.

What won’t be fixed is the huge backlog of cases requiring mediation between accident victims and insurance companies, which the insurers use to delay paying out legitimate claims.

In his 2011 annual report, Auditor General Jim McCarter noted the province still doesn’t have an effective system for combatting fraud.

But he also found other factors contribute to high premiums, such as the province allowing insurers to increase them based on a “reasonable rate of return” of 12% on equity.

Problem is, that hasn’t been changed since 1996, when the long-term Canadian bond rate was 10%, compared to 2%-3% today.

If politicians want to get serious about fixing the system, the first thing they’re going to have to do is to stop listening to the auto insurers.

Based on past experience, don’t hold your breath.