Car insurance step into the election ring

by Vernon Clement Jones 08 May 2014

Auto insurance premiums are once again taking centre stage for the Ontario elections, with the Opposition charging the Liberals are now focused on protecting the industry and not the 15 per cent chop consumer were promised.

“When the Liberals needed to save their own seats last year, they promised to reduce auto insurance rates by 15%,” reads an NDP statement, released this week. “But once the threat of an election passed, they went to helping out insurance companies, and leaving drivers waiting. After moving at light-speed to help well-connected insurance companies save billions,

Ontario drivers are still waiting to see the savings.”

The argument is one the Liberals have actively moved to counter, suggesting NDP leader Andrea Horwath’s credibility on auto insurance rates has been publicly called into question by one of her own candidates.

They point to a statement from one of the Opposition MPPs applauding his own auto premium reduction.

Still the insurance industry is already bracing for more heated debate on what it's doing to bring about a 15% chop to auto premiums – targets many have suggested won’t be met without passage of Bill 171.

The Fighting Fraud and Reducing Automobile Insurance Rates bill is integral to meeting an August 2015 deadline, said the IBAO in a press release Monday.

Voters are listening to all sides of the debate, although the NDP is alleging some of those Ontarians are now grappling with premium hikes and not reductions – 15% of otherwise.

How we cut our car insurance bill by 30 per cent: Mayers

Promised car insurance cuts are on hold because of the Ontario election. That doesn’t mean you can’t find ways to save on your annual bill.

By: Adam Mayers Personal Finance Editor, Published on Sun May 11 2014

A year after the Ontario Liberals were prodded by the NDP to give us a 15 per cent cut in provincial car insurance rates, we’ve seen a 6 per cent average reduction with the promise of more to come.

But will it ever happen? It all depends on who wins the provincial election.

For a GTA driver, anything that cuts the cost of car insurance is good news. We pay the highest rates in Canada, with an average cost per car of $1,500 a year.

But rather than wait for a politician to make good on a promise, you can always help yourself.

We’ve reduced our car insurance bill by $806 in the past six months. The annual bill for two cars has come down from $2,702 to $1,901, a 30 per cent saving.

We did it by removing unneeded coverage and our circumstances may not be that different from many families with kids in college or university, or where one spouse has recently retired. It all came down to being aware things had changed and doing a little research.

Our cars are insured with TD Meloche Monnex and when the policy was renewed in November, I made an annual call. How could we reduce the cost? The agent couldn’t find anything at first, but when we went over the policy line by line, it came up that my wife was no longer driving a short distance to work every day. That saved $102.

This winter while doing research for an article on car insurance, an industry contact suggested removing both adult children as occasional drivers — something others had suggested was a bad idea since our son is a student.

Occasional drivers aren’t the primary driver, but use the car a lot — typically students and young adults who live at home. If you remove the designation, they can still use the car in the same way you can lend your car to a neighbour. They just can’t live at home.

If an occasional driver has an accident, the penalty goes on their record not yours, says Pete Karageorgos at the Insurance Bureau of Canada. If they are not an occasional driver, the claim goes on your record and affects your rates.

It gets tricky with students. Even if they are away for eight months, they technically still live with you. If you take them off the policy and something happens during the summer, the insurance company probably won’t pay.

We had been led to believe that was why we should keep our son on the policy. He is 21, and a third year student at the University of Toronto. He shares a house in the city and this summer is again working out West between May and August.

Our 23-year-old daughter moved out last fall when she landed a job in downtown Toronto. She has her own apartment.

All this was explained to a TD Meloche Monnex customer service rep. He said it was a bad idea to take Ben off the policy, because if he was in an accident, TD Meloche Monnex might not pay.

The annual saving by only taking my daughter off the policy was about $75. How come?

 “It’s a simple question with a complex answer,” admits Rob Bull, manager of TD Insurance’s client service centre in Toronto.

Statistically, young males are a higher risk than young females and it didn’t matter that our son has a clean record. Each insurance company calculates the risk differently based on where the young person lives, the company’s claims experience and the type of car being driven.

“Students are a grey area,” Bull said. “If your son doesn’t live at home, you can remove him. (In case of an accident) you could be asked to prove it, but it would be easy to establish. If he’s a student returning home for the summer, we wouldn’t advise it.”

We took both kids off the policy, and if Ben ends up living at home again, we’ll put him back on.

Here are some lessons:

Always ask for a better deal . Your insurer’s best interest is to have you pay more, not look for savings. So go over the policy line by line if you have to. If you don’t use a broker, remember the call centre rep doesn’t know anything about you and what might have changed in a year.

Always shop around: Make it a habit to compare quotes at renewal. Over the years, we’ve insured with Co-operators, Dominion, Aviva and now TD. The Internet makes this easy with websites like and Kanetix . You’ll be surprised how much rates vary.

Call centre reps aren’t experts . They have a manual and training that may be hit or miss. If you’re not happy push your case up the line until you are.

Reach Investing & Personal Finance editor Adam Mayers at [email protected]

Committee Transcripts: Standing Committee on General Government – 2014-Apr-30 – Bill 171, Fighting Fraud and Reducing Automobile Insurance Rates Act, 2014

We need insurance reform The sorry state of Ontario’s auto insurance should be a major election issue



There’s no shortage of issues for Ontario’s June 12 election: Out of control hydro prices, the sad state of the economy, pension reform, transit funding and, of course, all the Liberal scandals.

Once again, the issue of auto insurance reform is likely to be left at the curb with no party championing those injured in auto accidents.

It’s a pity as the state of Ontario’s auto insurance cries out for reforms to protect accident victims.

1. Since the reforms of 2010, approximately 80% of all accident victims have been slotted into a new minor injury category in which they are limited to a maximum of $3,500 (and in many cases, $2,200) in medical/rehabilitation benefits.

According to the Ontario Rehab Alliance, an association representing over 4,000 health care professionals, the minor injury category was designed to cover those with simple, uncomplicated whiplash-type injuries, but insurance company adjusters are placing many with joint dislocations and tears to tendons and ligaments into this category, resulting in denials of treatment.

2. Medical/rehabilitation benefits for serious, non-catastrophic injuries were reduced by over 50% in 2010, from $100,000 plus assessment costs to $50,000, including assessment costs.

3. No-fault income replacement benefits were set at $400 per week in 1996. There’s been no adjustment for inflation since. While policyholders can purchase optional coverage, few do. Even if optional coverage (up to $1,000 per week) is purchased, income replacement is capped at 70% of gross income.

4. Attendant care benefits for serious, non-catastrophic injuries were cut in half ($72,000 to $36,000) in 2010. Worse, as of Feb.1, 2014, attendant care payments to family members who provide care have been capped by the amount of income lost by the family member, regardless of the hours incurred.

5. Even with reduced benefits, denial rates and delays in treatment are at unacceptably high levels, meaning accident victims are not receiving the benefits for which they have paid.

6. According to data analyzed by the Ontario Trial Lawyers Association, insurance companies now spend about 50 cents on experts’ fees to assess accident victims for every dollar they spend on treatment. When we look at the approximately 50% of victims who are assessed, we find that insurers pay more for experts to assess than they do for treatment for these victims.

7. Redundant laws are in place to insulate or reduce exposure for insurance companies from negligence lawsuits arising out of auto insurance accidents.

8. In 2012, the latest year for which figures are available, Ontario’s car insurers collected $3.78 billion in accident benefits premiums but paid out only $1.67 billion in claims and adjustment expenses.

These numbers come from the General Insurance Statistical Agency, the non-profit agency that tracks information on behalf of provincial insurance regulators. That means insurers have a gross profit margin of 56% on accident benefits coverage, not including the investment income earned on prepaid premiums. That’s not surprising since they are paying out a maximum of $3,500 in accident benefits for most injured in auto accidents.

We know what the Liberal party has in mind for auto insurance. They passed the 2010 cuts and introduced regulations to cut attendant care benefits to family members earlier this year. They introduced Bill 171, which would eliminate the right to pursue accident benefits claims in the courts, eliminate the right to pursue punitive damages in an accident benefits claim, provide an incentive for insurance companies to delay settlements and payments to those injured in motor vehicle accidents, and remove the right of arbitrators to penalize insurers who act unreasonably in withholding or delaying benefits.

We don’t know what Conservative leader Tim Hudak or NDP leader Andrea Horwath might do on auto insurance reform if elected.

One thing is certain. The current system can’t get much worse for accident victims.

Victims need timely, adequate accident benefits even more than they need premium cuts. 

Law Times- Focus: Red flags raised over insurer financial data

Monday, 05 May 2014, Written By Judy van Rhijn

In response to complaints that insurance industry financial details are impossible to pin down, the Ministry of Finance commissioned a report on transparency and accountability in the sector but perhaps surprisingly chose the accountants for the Insurance Bureau of Canada to prepare it.

The interim report has disappointed those hoping for clarification of the financial effect of the 2010 reforms by merely reporting insurer-provided information without verification.

On April 14, the interim report became the first of three reports from financial consulting firm KPMG LLP as part of the auto insurance cost- and rate-reduction strategy. It will deliver the annual reports in August of each year of the strategy.

Only months earlier, however, KPMG had done work for the Insurance Bureau of Canada to support its position that profitability is low despite the reforms of 2010. A year before that, KPMG had done work for the same organization to support a very large estimate of the cost of fraud to the insurance industry.

“How can you hire the IBC’s accountant and financial advisers to do a report that is supposed to be independent?” asks Adam Wagman of Howie Sacks & Henry LLP.

“Not only don’t they try to steer away from the apparent conflict, they dig right into it by repeating conclusions formed as part of doing work for them. How can that possibly be right?”

Nick Gurevich, president of the Alliance of Community Medical and Rehabilitation Providers, echoes that sentiment. “The selection of the consultant is unusual given how much work they have done in the past for the IBC. They are clearly a very capable global accounting firm with a stellar reputation, but there are plenty of comparable accounting and consulting firms that could have done it without such ties to the IBC.”

In response to the concerns, KPMG would only say it was the government that requested the report and it’s only obligation was to it.

Wagman suggests the province’s auditor general would be a truly independent party.

“I can’t imagine the auditor general coming out with an interim report that parrots the recommendations of one stakeholder. Whether or not I like what they would have to say, I would accept that they have done it independently.”

The report itself is highly technical and repeats insurer arguments as to why there’s uncertainty in the figures without making any attempt to independently ascertain what they are. “I read it until my brain began to bleed,” says Wagman.

“If the goal is transparency and accountability, then I ask: transparent and accountable to whom? I don’t think there’s anyone in government who would understand it either. The 10 actuaries in the province might understand what they’re talking about, but it reeks of bias and lack of objectivity.”

He continues: “The purpose, dating back to the budget, was to look at the financial and economic impact of the reforms. Is there one mention of profitability? To the extent that it does talk about return on equity, it refers back to the report last year about insurance performance. There are no actual dollar figures and they fail to mention that those findings came out in a report commissioned by the IBC.”

Gurevich suggests the report in general lacks objective verification. The information relied on comes from financial statements and survey results prepared by the insurance companies and the General Insurance Statistical Agency as well as certain financial and return assumptions provided by the Financial Services Commission of Ontario.

“All you see is a regurgitation of information provided by the insurance industry without KPMG going in and verifying it independently. Much of the report refers to estimates and what the figures could be or might be.”

Gurevich believes the lack of certainty was the catalyst for commissioning the report in the first place. “The entire point of this process is to assist the government and members of the opposition who feel they don’t have a good grasp on the financial state of the industry. What was needed was an objective third party to go in and verify and test the numbers to tell them what the actual numbers are given that the insurance industry has a vested interest to produce overly conservative figures to generate more cost-cutting measures. It is disappointing that the report didn’t do what it was supposed to do.”

Specifically, the insurer information points to an improvement in the calendar-year claim ratio of 18 per cent from 2010-11, 23 per cent from 2010-12, and approximately two per cent from 2012-13 with the 2013 claim ratio being 74 per cent. Despite this, KPMG concludes the industry is still not at the break-even point.

Wagman says the percentages tell the story rather than the conclusion. “See the loss ratios. They are dropping like a hot-air balloon. If you look at how the numbers have gone, it’s been very good for them. Nobody can say otherwise. To not even be at the break-even point, they must have mismanaged their book of business so badly it boggles the mind.”

The report also repeats insurer estimates of a decrease in accident benefits of 46 per cent that Gurevich says is highly suspicious. “We have seen a decrease close to 82 per cent in medical rehabilitation benefits, 77 per cent of attendant-care benefits, and almost 99 per cent of housekeeping and caregiver benefits. That insurers claim they are only seeing a 46-per-cent decrease is very suspect. The benefits are just not there, so it doesn’t make any sense.”

The interim report acknowledges that KPMG sought no other input apart from insurance industry players and declines to make recommendations until it has sought input from other stakeholders “who may have a different perspective to share with the government.”

Wagman says he almost laughed out loud at that point. “It’s almost tongue-in-cheek to say others may have a different perspective. They clearly know full well that others have a very different perspective.”

Wagman also feels that by repeating the insurers’ recommendations and then discussing them at length, the report gives credence to them. “If they needed to do more work to study the current financial viability of the industry, why list the recommendations of insurers? It’s a very shotgun approach.”

Gurevich suggests insurers have good reason to paint a very bleak picture of their financial position. “This data should be carefully scrubbed, verified, and tested and not just be a repetition of what the insurers say. The nine million drivers and 65,000 accident victims each year who will rely on the findings deserve much more than just taking the insurance industry’s word at face value.”