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Opinion: Ontario Captive to Industry Demands on Insurance Rates

Written by Ken Rubin, posted on The Hamilton Spectator June 12, 2017. See original post Here

The Ontario government hired expensive consultants to justify and monitor its auto insurance cost-cutting program. Their work relied heavily on the auto industry’s supplied data and input, freedom of information documents reveal. Ontario Finance made no secret that the industry lobby group, the Insurance Bureau of Canada, whose member companies supplied the data, was their best expert consultant in helping them set policies for car insurance rates and benefits. Here’s what those consultants spent and did.

Justifying major and minor injury caps

First up was consultant Dr. Pierre Cote, a medical administrator, who was hired twice by Ontario Finance. He began by chairing and directing a 2011 catastrophic impairment (CI) panel whose members he helped select. Sitting right on the panel were a Financial Services Commission (FSCO) and Finance Ministry senior official, with data from the insurers. The panel helped define and justify restricting and confining the amount of payments to be capped at $1 million for those having serious major auto injuries.

Cote’s second job in 2012, for $2.8 million, with his selected team making $4,765 per day, was to develop a minor injury (MI) protocol. The data his team put together was used to help determine what drivers would receive for minor injury claims capped at $3,500. The only observers listed for his review were Aviva, a top auto insurance company, and the Insurance Bureau of Canada (IBC).

Working up actuarial industry forecasts

The second consultants hired, despite Finance having its own staff actuarians, was the actuarial firm Oliver Wyman. They got a five-year (2012-17) $1,101,750 contract. Wyman relied on auto industry firms’ data without conducting independent audit and verification work. Ontario Finance refused to publicly release Wyman’s 10-year projections or their 2013-15 passenger auto insurance company reviews that included Aviva, Belair and Intact.

Defending the rate-setting process

In December 2013, Finance hired, at a cost of $194,544, the management firm KPMG for two years to reputedly monitor the government’s auto insurance rate setting and reduction program. They knew that KPMG had just completed work on auto rates for the industry. But Finance felt, records show, there was enough of an “ethical wall.”

KPMG’s two 2014 reports and one 2015 report, again done without independently verifying the data large insurance companies like Aviva and Intact supplied to it, concluded the government auto insurance reductions and rates were fair, and further reductions in coverage were needed. York University professors Fred Lazar and Eli Prisman saw KPMG’s work assignment as very subjective and their analysis as deficient in that it greatly underestimated the auto industry profitability.

KPMG was also the Ontario government’s chosen consultant back in 2011 advising it on tightening up worker compensation benefits, a report that the Ontario Network of Injured Workers Group (ONIWG) criticized.

The slash and burn operational expert

The fourth consultant, David Marshall, came from being Workplace and Insurance Board (WISB) president and CEO from 2010 to January 2016. Marshall earned $400,000 a year there and was paid an incentive bonus of $400,000 on top of his salary for lowering costs. According to the ONIWG, under Marshall, short- and long-term benefits and services were drastically cut back, many more claims were denied and there were fewer services, vocational retraining, and medical assistance available.

So when cabinet announced Marshall’s appointment in October 2015 at a $1,975 daily rate to bring auto insurance costs down further, this was warmly welcomed by the IBC president and by Intact Insurance, one of Ontario’s largest insurance companies.

Marshall’s work proceeded in total secrecy in the Minister of Finance’s office. His April 2017 report was quietly released, recommending the WSIB system of “neutral,” “fair” and fast settlements that IBC favoured and applauded. IBC praised his report for suggesting further clamping down on auto insurance claims and payouts and for recommending a new, even weaker regulator agency to replace FSCO.

Where to: Independent and fair auto insurance rate regulation

It’s time that Ontario stopped getting advice that helped make it more captive to industry demands. Instead, the next government needs to bring in a transparent arms-length system of independent analysis and review for better auto insurance coverage and rates.

Ontario Needs to be More Transparent About Auto Insurance Changes

Written by Ken Rubin, published by The Windsor Star on June 9th 2017. See the original post Here.

 

For two and a half years, Ontario’s Ministry of Finance and its rate regulator — the Financial Services Commission of Ontario — refused to release records of the Insurance Bureau of Canada’s efforts to influence and encourage government moves to reduce auto insurance coverage.

After denying my (Ken Rubin) requests under the province’s Freedom of Information and Protection of Privacy Act, the ministry made submissions to the Information and Privacy Commissioner of Ontario claiming that the IBC was one of its confidential “consultant policy advisers” retained as a kind of an “expert panel.” Therefore IBC lobbying records and even its 2012 pre-budget consultation submissions should be considered policy advice and not released, it argued. The ministry made this claim despite the fact that it is supposed to regulate the IBC’s members.

The ministry also claimed in a sworn affidavit that IBC records were cabinet confidences. Since influential IBC positions were discussed at numerous identified Ontario cabinet meetings, IBC records must be subject to cabinet confidence and not made public, it said.

In May 2016, as part of my appeal of the ministry’s decision not to release the information, I argued that widening the cabinet exemption to include the IBC — an independent third-party stakeholder — would set a dangerous, unwarranted precedent.

Had the Finance Ministry and its Financial Services Commission succeeded, lobbying groups’ submissions and meetings could have been hidden and freedom of information legislation severely compromised.

But thanks to the Information and Privacy Commissioner’s benchmark decisions in April, those outlandish claims were dismissed.

As a result, the records from 2012 to 2014 that I requested were released in May. They show the IBC pressing Finance Ministry and Financial Services Commission officials through frequent communications, meetings and briefings.

In November 2013, the IBC urged the government to remain firm on a $3,500 cap for minor injury claims it felt were “vulnerable to disputes,” documents show. The bureau offered ways to tighten the cap, so that mediation and medical claims would be confined and protected from “being tested, attacked, expanded and dissected by numerous challenges.”

The IBC insisted government officials keep it informed about the development of regulations and legislation, for which it conveniently supplied drafts for the government’s consideration. For example, in August 2014, the IBC asked which measures “are ready to be presented to Cabinet” and “which recommended reforms contained in IBC’s submission of July 4 have been reviewed and are ready for constructive discussions with a view of finalizing proposed regulatory and legislative language.”

The day before a February 2014 cabinet meeting, the IBC asked – given pre-election “political uncertainty”— to be put on the agenda to discuss the government holding firm to bringing in alternate dispute resolution reform, licensing of rehabilitation clinics and reviewing costly towing practices.

Due to the government’s subsequent cuts to basic auto insurance, Ontario consumers now have to pay extra premiums for better accident coverage. In a market dominated by several large insurance companies, Ontario’s more than 9.5 million car owners still pay high auto insurance fees despite successive governments promising lower premiums.

Ontario’s auto insurance regulation system is far from independent and transparent. Other North American jurisdictions, like California, set auto insurance rates with truly independent regulators in charge after open hearings where consumers can challenge proposed rates. Data submitted by stakeholders like the IBC is subject to public scrutiny and the process is more transparent. The rates set and premiums established are fairer and lower than those in Ontario.

It’s time to end the secretive industry-government relationship that keeps the Ontario public in the dark and auto insurance premium rates high, with shrinking coverage and low benefits.