Hard work ahead in cutting Ontario?s auto insurance premiums: Editorial

Ontario Premier Kathleen Wynne has to find her own way toward auto insurance savings that will create 15 per cent cuts to insurance premiums.

Published on Sun Mar 31 2013

It’s clear that Premier Kathleen Wynne is practising the politics of pragmatism. In order to stave off defeat of her government’s spring budget, Wynne is supporting the opposition NDP’s populist demand for a 15 per cent decrease in auto insurance rates. It’s a wise move.

Exactly how the Liberals will force these savings is anyone’s guess — and NDP Leader Andrea Horwath has threatened to vote down the budget if it doesn’t follow her demand for a straight cut in premiums. But Horwath is wrong to take such a rigid approach. After all, there’s more than one way to skin this fat cat.

The NDP wants Ontario’s insurance industry regulator to “gradually” cut the premiums that companies are allowed to charge, claiming the industry has been sitting on $2 billion in savings since the government limited claim payouts in 2010.

The Insurance Bureau of Canada doesn’t dispute that figure but it argues — quite vociferously — that the money can’t yet be considered actual savings. It’s still waiting for potentially costly decisions from a backlogged mediation/arbitration system, says spokesperson Ralph Palumbo.

For Wynne, the politics are just beginning. The NDP’s plan so far suggests across-the-board cuts to premiums, but the industry’s goals for lowered rates are more complex. It wants savings through a faster arbitration system; clearer definitions on “catastrophic” injuries so cases don’t end up in costly court battles; and government action on fraud prevention (such as regulating health clinics and tow truck drivers).

In order to avoid a snap election (and withstand the insurance bureau’s potent lobbying), Wynne must create common ground and so far, it’s not going well. Palumbo claims that NDP members have oversimplified the solution. “They don’t understand (the industry) and they haven’t made an attempt to understand it,” he says.

Clearly, though, the NDP has identified a ballot box issue that resonates strongly with voters — especially in the Greater Toronto region. The average annual premium in the Toronto area is roughly $2,000, compared to $1,142 in the Waterloo region or $1,093 in Peterborough. Province-wide, Ontario’s premiums are nearly 50 per cent higher than comparable auto insurance programs in Alberta and the Maritimes.

It’s not as if the Liberals have ignored the issue. In September 2010, in response to a dramatic rise in injury claims (and after several years of billion-dollar losses in the industry), the government capped minor injury payments at $3,500.

In 2011, injury claims fell by 11,925 (or 28 per cent) with an estimated savings of $1.6 billion or $842 a vehicle. Still, most insurance fraud problems have not been solved, despite recommendations from an anti-fraud task force.

Wynne could take immediate action by addressing abuses in two common sources of fraud: health-care clinics and tow truck drivers. The rest will involve diplomacy and an astute understanding of a complex industry. No one said it would be easy.