Insurance overhaul


Experienced Ontario jurist reviewing dispute resolution system




It’s obvious Ontario’s auto insurance dispute resolution system is in need of an overhaul.

According to personal injury lawyer Darcy Merkur, “the cumbersome arbitration process makes it impossible to quickly and economically arbitrate any day-to-day treatment denials. There’s simply no way to arbitrate a treatment denial and get a timely result and, even if that was possible, the cost of arbitrating would greatly exceed the amount in dispute.”

With approximately 60,000 injuries attributed to motor vehicle accidents each year, how is it possible we generated an average of 30,606 mediation applications per year in the last three fiscal years?

On top of that there were 23,521 auto insurance related lawsuits filed in Ontario courts in 2012.

So it’s good to see the provincial government is trying to tackle the problem.

It has appointed an experienced jurist, the Hon. J. Douglas Cunningham, former Associate Chief Justice of the Ontario Superior Court of Justice, to conduct the review of Ontario’s auto insurance dispute resolution system.

Cunningham delivered his interim report last month. His final report is due in February.

The interim report states the obvious in that “it takes too long to resolve disputes.” Cunningham understands obtaining funding to pay for treatment has become a “challenge” while “(c)laimants’ lives can be put on hold for years waiting resolution of their claims.” He is clearly sympathetic to the plight of accident victims when he warns insurance companies that “(d)isputes and settlements need to be focused on getting claimants timely access to necessary treatment and assessments.” Cunningham blames both insurance companies and claimants’ lawyers for some of the delays.

Lawyers are often unable to commit to pre-arbitration sessions or hearing dates until “many months in the future” due to their busy schedules.

Some adjusters are inexperienced, have high caseloads and should do more to resolve disputes earlier.

Insurers act in a counter-productive manner when they attempt to close files with lump sum payments, rather than focus on timely access to treatment and assessments.

Cunningham has proposed a possible solution, establishing a process which would conclude within six months from start to finish.

As he describes it: “Cases would follow a different stream based on the benefits in dispute and the complexity of the issues involved. Ensuring access to timely and necessary treatment would be a first principle.” This would go a long way to improve the status quo but Cunningham must first examine why there are so many treatment/benefit denials.

Are claimants attempting to abuse the system by seeking unnecessary treatments or accessing benefits to which they are not entitled, or are insurers systemically denying treatment and benefits?

Andrew Murray, former president of the Ontario Trial Lawyers Association, believes the dispute resolution system “suffers from systemic abuse by insurers, which invoke a decidedly adversarial approach to the adjudication of accident benefits, best described as ‘deny, delay, deceive’.” Many insurer-appointed experts undertake so-called independent medical examinations and provide opinions used to deny claims. To what extent do these opinions serve to delay the just resolution of claims?

Wouldn’t fair, impartial assessments result in speedier resolution?

I have written many columns chronicling the unfair opinions of many of the insurers’ so-called experts.

Some are clearly unqualified or under qualified to provide the opinions they generate.

Some specialize in providing opinions to insurers rather than practicing medicine. That is, they earn a significant portion of their income peddling opinions to insurers.

“Experts” of this ilk cannot be expected to provide fair assessments.

Whether consciously or subconsciously, they provide the opinions desired by their paymasters.

FAIR (Fair Association of Victims for Accident Insurance Reform), a not-for-profit organization of motor vehicle accident victims who have struggled with Ontario’s existing auto insurance system, has a website that chronicles the activities of many of these insurance industry “experts”, who have made life miserable for accident claimants.

Fixing Ontario’s auto insurance dispute resolution system will require more than mere tinkering.

Cunningham’s interim report bodes well for some real solutions. 

N.B. drivers overpaid millions for insurance, say analysts

Insurance board begins hearings on whether premiums for automobile coverage should increase

By Robert Jones, CBC News Posted: Oct 07, 2013


New Brunswick drivers shouldn't pay a dime extra on their auto insurance to finance new automobile accident benefits in the province because they are already significantly overcharged by insurance companies, claim two experts hired by the province.

New Brunswick loosened restrictions on auto insurance accident claims on July 1, including tripling the amount people can claim for minor injuries following a collision, to $7,500.  The New Brunswick Insurance Board begins hearings Monday on what those changes will cost insurance companies and whether driver premiums in the province should be increased to pay for them.

But in a report commissioned by New Brunswick's Office of the Attorney General, actuaries Paula Elliot and Ted Zubulake with the Toronto firm Oliver Wyman estimate that although more generous accident benefits will add between $40 and $79 per car in costs to insurance companies, it is a fraction of what those companies already overcharge New Brunswick consumers for coverage.

“We estimate that average premiums currently charged in New Brunswick for private passenger automobiles to be higher than…the required average premium by approximately $152 to $174 per vehicle,”  Elliot and Zubulake write.

The two say that immediately prior to the July 1 changes, low accident claims in New Brunswick meant insurance companies could hit their profit targets in the province – an after tax return on equity of 12 per cent – by charging drivers an average premium of $635 per car.  Instead, this year companies have been charging, with the Insurance Board's approval, an average of $787 per car.  Spread over the province's 466,000 insured automobiles, it suggests provincial motorists have been paying $70.8 million too much for auto insurance this year.

It's the third time in the last four years Oliver Wyman has prepared a report for the province showing New Brunswick drivers have been consistently overcharged for auto insurance since industry-requested reforms were adopted by the former Lord government in 2003.  The company has documented several hundred million dollars in excess charges, but in an appearance before the legislature's Crown corporations committee on Friday, New Brunswick Insurance Board chair Paul D'Astou openly ridiculed Oliver Wyman's analysis and the idea there is any gap between what provincial drivers pay for insurance and what they should pay.

“The gap exists in the mind of one consultant,” said D'Astou, when asked about Oliver Wyman's claims by Moncton Liberal MLA Chris Collins.

“So should the province of New Brunswick stop hiring this consultant?,” asked Collins.

“Well that's for them to decide whatever they want to do with that consultant,” answered D'Astou.

Former New Brunswick Attorney General Kelly Lamrock noted Oliver Wyman has been hired by both Liberal and Conservative governments in New Brunswick and said D'Astou's criticism of the firm is unfounded.

“The fact that that analysis has survived partisan changeovers probably speaks volumes,” said Lamrock.

Industry must focus on cost management to fix Ontario auto system

Sharon Tennyson tells IBC Regulatory Affairs Symposium that there is hope for Ontario auto

Regan Reid on November 1, 2013

Tennyson gave the luncheon address, “Ontario auto—Great Expectations,” at the Insurance Bureau of Canada’s 2013 Regulatory Affairs Symposium in Toronto on October 31.

Read: Insurance industry faces “rising tide” of risks

Though she sees some positive industry developments, Tennyson began with the bad news about the Ontario insurance system.

“The hard truth is that auto insurance systems like Ontario’s—partial no-fault systems with generous first party benefits—are expensive systems. They’re expensive systems because they’re offering more benefits to consumers than other systems, whether they be tort systems or government-run systems,” she said. “So small changes around the edges of that system are not going to change that fundamental fact.”

One of the big issues plaguing the product, she said, is moral hazard.

See: Photos from the 2013 IBC Regulatory Affairs Symposium

“By moral hazard, I mean making benefits available tends to attract claims. This can happen either by extra risk taking, extra use of benefits, or in some cases, even outright fraud,” she explained.

To demonstrate this theory, she presented some startling statistics:

    Soft tissue injury claims are 42% more prevalent in US states that permit unlimited general damages awards

    Canadian drivers who choose replacement cost coverage for automobile theft losses are nine times more likely to report theft, but only when the policy is near the expiration date.

So how can the industry combat moral hazard?

Read: Premier Wynne addresses 15% rate cut at IBAO convention

“You need to think about the processes that govern how premiums are determined, how benefits are determined, how access to benefits and insurance are determined. Those things are important. Reforms so often focus on the product—let’s cap the amount of benefits, let’s cap the amount that you can claim for a small injury.”

She gave the example of claims severity for sprains and strains in Massachusetts. She presented a graph that showed that the large majority of sprain and strain claims were under $1,000, but there was a spike in claims at $2,000.

“When Massachusetts changed its threshold to $2,000, you got claims attracted by the threshold because claims that meet the $2,000 threshold are eligible to also gain tort compensation, third-party compensation,” she explained.

Read: Industry urges Ontario to adopt Anti-Fraud Task Force recommendations

“Under the previous threshold, which was $750, you didn’t see this second peak [in claims] at $2,000. Guess what! You saw a second peak at $750. So you change the threshold, the peak in claims severity migrates out to meet the threshold: a clear example of moral hazard, but a big problem with thresholds.”

If claims costs are being driven up because of moral hazard and fraud, and if Ontario doesn’t want to completely scrap its system, Tennyson again stressed that the industry needs to focus on cost management—something she thinks regulators in Canada are starting to realize.

Read: Auto rate cuts are coming to Ontario, like it or not: IBAO CEO panel

“I think there’s a greater sense of realism, perhaps, on the part of regulators. For example, there’s concern amongst insurers about this 15% rate reduction. But as I read about it, the encouraging news is there’s not an intention to make it a 15% across the board rate roll back. Maybe that’s a small thing, but that’s an important small thing in terms of trying to adjust processes.”

She also praised the Anti-Fraud Task Force report as a step toward sustainable process reforms.

“If acted upon, it provides some great opportunities for making improvements in the performance of Ontario’s auto insurance system. Now it comes down to effective regulatory implementation.”

Industry urged to take control of auto issue

IT’S TIME for the industry to get ahead of the Ontario government plan to cut auto rates, the ceo of The Dominion told members of the Insurance Brokers Association of Ontario.


    “We are where we are,” Brigid Murphy said during the ceo panel at the IBAO annual convention late last month in Toronto.


    “One broker said to me this morning that we’ve handed the conversation to others. We are not controlling the dialogue.


    “We need to make a case for the value of the coverage that is provided,” Ms. Murphy said. “Consumers in Ontario look at what they are paying compared to other provinces and see they are paying too much but don’t see what they are getting for that.


    “The industry needs to take control of the issue.”


    Intact Insurance’s Jean-Francois Blais and others questioned the idea of such an ambitious rate reduction target.


    “We all agree we should try to reduce premiums, but when we look at the 15% (rate reduction target) and the Ontario market for the past two years — post reforms — the return on equity for the industry has been between 3% and 5%.”


    Economical Insurance ceo Karen Gavan agreed with her colleagues that without changes to the cost structure the 15% rate reduction isn’t reasonable.


    “When we go for rate filings we can’t increase rates unless we can prove that costs have deteriorated, yet we’re being asked to reduce rates on a promise.”


    She said all the work government has done over the last couple of years — the anti-fraud task force recommendation, the work on the cat definition — is all old.


    “And they haven’t implemented it. There is a problem there. So, it’s not reasonable to reduce rates by 15%.”


    The Guarantee ceo Alister Campbell said the challenge is that the industry is being asked for a certainty.


    “It’s not clear today what our costs are eight years out, which is what we are trying to price properly today,” he said.


    “We’re quite sure that the 15% is today not reasonable, but it’s entirely possible that we could work collaboratively with government to get to cost reductions in a product they designed.


    “We don’t know if that will happen as it’s a minority government and all of those premiums

    are flowing to stakeholders that are, as a result, wealthy, well-funded, and able to lobby effectively because of those premiums.”


    Former Aviva Canada ceo Maurice Tulloch, now heading the group’s new U.K. & Ireland operation, said the Ontario government needs to help insurers by completing the recommendations of the past few years.


    “There are six things that need to be done to reach the target,” he said.


    “We need to revise the cat definition. It’s still based on principles such as the Glasgow scale, which is 1970s science . . . The government commissioned a study two years ago and we haven’t moved that forward.”


    Other actions he outlined included:


    • Adjusting the interest rates on SABS, which he said are higher than those offered by any bank;


    • Stabilizing minor injury guideline reform;


    • Reducing treatment costs;


    • Reforming the arbitration regime, and


    • Replacing the Ontario bodily injury verbal threshold.

“You can get pretty close to the government’s target if these are taken care of,” he said.

Rating automobile insurance coverage

Alan Shanoff November 02, 2013

Premiums higher, payouts lower — insurers maximize profits

By Alan Shanoff ,Toronto Sun

The Ontario Trial Lawyers Association recently issued a report card on the “three Ps” of auto insurance: Profits, Protection and Premiums.


The Ontario Trial Lawyers Association recently issued a report card on the “three Ps” of auto insurance: Profits, protection and premiums.

The insurance industry should be proud of its A+ grade in profits, not so proud of its D mark for protection and C- for premiums, in the opinion of the trial lawyers.

The insurance industry A+ grade for profits is based on the OTLA’s report of insurance profits of $3 billion in 2011 and 2012, with continued high rates of profitability for 2013.

It estimates the insurers’ return on equity in the range of 16% to 20%. How is that possible? Premiums are higher and payouts are lower.

But don’t insurers deserve to achieve high rates of return now to compensate for their lost billions in the years prior to 2010? According to the OTLA, recently restated industry figures show the losses never occurred.

The industry showed a profit in the three years prior to 2010. But weren’t these huge losses used to justify the slashing of no-fault accident benefits in 2010? Yes, and that leads to the D grade in protection.

The OTLA estimates benefits have been reduced by 96.5%. That’s due in large part to the reduction of medical and rehabilitation benefits from a maximum of $100,000 to $3,500 for most accident victims.

The $100,000 limit for medical/rehabilitation expenses for non-minor injuries was reduced to $50,000.

Worse, these limits include the cost of medical reports and insurers often send accident victims to their preferred sources of so-called independent medical examinations in an attempt to delay and deny benefits.

Too many of the experts who conduct these independent exams earn substantial portions of their income from insurance companies and are beholden to them.

The insurance industry continues to push for “reform” of the definition of catastrophic impairment so as to reduce the coverage for those in most serious need of aid.

But, haven’t premiums dropped?

Sorry, the C- grade for premiums is based on an increase in premiums of 20% since 2009.

While rates are supposed to drop by 15% over the next two years, insurers continue to push for further “reforms” as a quid pro quo for premium cuts.

Some insurers started to reduce their rates last year. Why haven’t more? After all, every insurance company sells the same motor vehicle insurance policy.

In my view, the OTLA report card is missing two important subjects in which the insurance industry deserves an A+.

Those are public relations and delay and deny tactics.

The industry continues to do an excellent PR job convincing the public and politicians that fraud is the major issue facing the industry and that further reforms, meaning reductions in benefits, are necessary.

While fraud is a big problem, it shouldn’t be used to justify maltreatment of accident victims.

As part of the PR efforts of the insurance industry, its money continues to be shuffled to politicians.

Last year, the insurance industry’s lobby group gave $27,900 to the Liberal Party. So far this year they’ve given $20,950.

Those figures don’t include donations made by individual companies.

(The Insurance Bureau of Canada also gives money to the Progressive Conservative Party, $10,050 in 2012 and $18,960 so far this year. )

The industry also continues to do an excellent job in the delay and denial of claims.

Insurance companies deserve top marks in forcing victims to participate in the lengthy mediation/arbitration or mediation/litigation process.

Adjusters and insurer experts continue to do an excellent job denying claims and providing opinions to justify the denial of claims.

All in all, an excellent report card for insurers. But not so good for the public.  

Approved auto Insurance rate filings in Ontario down in 2013 Q3

DAILY NEWS Oct 30, 2013

Private passenger auto insurance rate filings in Ontario approved during the third quarter of 2013 declined on average by 0.68%, based on the entire market, notes a recent notice from the Financial Services Commission of Ontario (FSCO).


The notice provides an overview of auto insurance rate filings approved by FSCO for the period ending September 30. The number of filings reviewed and the overall rate change for the Ontario market “may vary from quarter to quarter, based on updated information about claims costs, market conditions and other financial factors and the resulting impact that these factors have on the adequacy of an insurance company’s current rates.”

A chart of insurance rate filings approved for the July 1 to September 30, 2013 period lists 50 filings. The approved rate change for 43 of those is a reduction (ranging from -0.38 to -7.15), for two there is no change, and for five, there is an increase (ranging from 0.48 to 2.74).

The approved rate change for each insurance company is the average for that company, based on all the drivers it insures. The rate may change for an individual policyholder depending on several factors, such as the vehicle insured, where he or she lives and other risk factors, and choices made by the policyholder on coverages purchased and deductible or liability limits.

Most premium dollars collected by insurers go toward paying for claims for people injured in car accidents, FSCO reports in the notice. A graph – Claims Cost for a Typical Private Passenger Policy by Coverage – details the percentage of claims costs for accidents in 2012: third-party liability bodily injury, 39.5%; accident benefits, 26.9%; direct compensation and property damage, 15.1%; collision, 10.9%; comprehensive, 5.1%; uninsured auto, 1.7%; and family protection coverage, 0.8%.

“Consumers are urged to shop around for auto insurance. Ontario has a very competitive marketplace,” says the notice. “Prices for the same coverage vary based on each insurer’s claims experiences and the insurer’s rating system.”

The notice points out that the Ontario government’s 2013 budget included measures to reduce costs in the auto insurance system and, in August, the government enacted legislative and regulation changes.

Among the amendments were measures to address recommendations outlined in the Auto Insurance Anti-Fraud Task Force final report, released in November 2012, including the creation of a framework for FSCO to license health clinic business practices that provide services to auto insurance claimants.

“FSCO continues to work with government and stakeholders to make changes that will crack down on auto insurance fraud, benefit drivers by helping to lower premiums, increase road safety and ensure people hurt in auto accidents get the treatment they need to recover,” the notice adds.

FSCO dispute system needs an overhaul




 The next problem the Financial Services Commission of Ontario needs to address, after getting a handle on the backlog of mediations, is arbitration timelines for both getting a date for a hearing and waiting indefinitely to receive a decision afterwards, Toronto personal injury lawyer Darcy Merkur writes in Law Times.

“Most plaintiffs’ personal injury lawyers detest FSCO arbitrations and avoid them whenever possible,” Merkur, partner at Thomson Rogers, writes in the article, adding the arbitration process makes it impossible to quickly and economically arbitrate any day-to-day treatment denials. “There’s simply no way to arbitrate a treatment denial and get a timely result and, even if that was possible, the cost of arbitrating would greatly exceed the amount in dispute even after considering the modest FSCO cost contribution consequences.”

The unfortunate result, he writes, is that accident victims have to pick their battles with their accident benefit insurer rather than fighting every small dispute along the way. And as a result, “plaintiffs’ personal injury lawyers try to work around the day-to-day treatment denials by persuading adjusters on the merits of the request, investigating other options, and making a business case to the insurers about the cost of approving the recommended treatment as opposed to engaging in an expensive dispute process they won’t be successful in,” he writes.

Matters currently arbitrated at FSCO are the big ones, such as the catastrophic impairment designation and ongoing entitlement to weekly benefits, writes Merkur. And while getting an arbitration date can take a long time, he says, “what’s most frustrating is waiting several months for the decision itself.”

Merkur says the FSCO dispute system needs an overhaul that includes, “binding timelines, a simplified and expedient process for day-to-day disputes, and, most importantly, severe cost consequences for unsuccessful insurers that can afford to pay the penalties and can modify their behaviour in fear of them,” he writes.

The system must change to level the playing field between vulnerable accident victims and sophisticated insurers, he writes in the article.