Ontario's auto insurance system came under the microscope in the provincial auditor's annual report for 2011, and the result has been the politicization of the province's 2010 auto insurance reforms.
At the heart of the discussion is the auditor's observation that "Ontario drivers generally pay much higher premiums than other Canadian drivers do," a consequence, the auditor adds, of the fact that in Ontario "the average injury claim in Ontario of about $56,000 [is] five times more than the average claim in other provinces."
The auditor's report goes on to note the concerns about auto insurance fraud expressed by both the insurance industry and the Financial Services Commission of Ontario (FSCO). "[Insurance] estimates peg the value of auto insurance fraud in Ontario at between 10% and 15% of the value of 2010 premiums, or as much as $1.3 billion," the auditor notes. "Unlike many other provinces and American states, Ontario does not have significant measures in place to combat fraud. The government and FSCO are awaiting the recommendations of a government-appointed anti-fraud task force expected in fall 2012."
And herein the auditor's report has been refracted through the lens of politics.
Leader of the Opposition Tim Hudak immediately took to the Twitter airwaves, with @timhudak stating: "Fraud causing auto insurance rates to soar says AG & McGuinty govt doing nothing to stop it."
For its part, Insurance Bureau of Canada (IBC) issued a press release saying the auditor merely acknowledged what the industry and the government have known for years: fraud has contributed to the escalation of claims costs, which in turn have resulted in increased premiums.
According to 2011 Q3 data from the Office of the Superintendent of Financial Institutions (OSFI), Canadian federally regulated insurers have seen their loss ratios - claims costs divided by premiums - significantly improve since Ontario's auto insurance reforms were implemented in September 2010. Even so, recent claims ratios indicate federally regulated foreign insurers are still losing money on the auto product.
A year ago, around the time the reforms were implemented, insurers paid out between $1.25 and $2.20 in accident benefits claims for each $1 of premium they collected under the auto personal accident category, OSFI numbers indicate.
IBC noted Ontario's auditor pointed to the "alarming" example of a 150% increase in claims costs in Ontario when the number of injury claims only increased 30% in the same time period (2005-10).
"Is it reasonable that accidents are down while claims have increased?" IBC Ontario vice president Ralph Palumbo said in a press release. "It just doesn't add up. Too many people are using the auto insurance system as a profit-making opportunity.
"There is a sophisticated network of service providers who use the auto insurance system for their own self-interest. This problem is especially acute in the Greater Toronto Area."
FSCO responded to the auditor general, saying it is already addressing the issue of auto fraud.
"FSCO shares the auditor general's concerns about fraudulent auto insurance claims," the auditor general report notes. "The Ministry of Finance's Auto Insurance Anti-Fraud Task Force will identify measures to combat fraud.
"FSCO supports and is working with the Task Force's steering committee and working groups. FSCO will implement any changes in regulatory responsibilities arising from the Task Force's recommendations."