Canadian Underwriter

Insurers Warm Up to Ontario Auto Reforms

February 1, 2004   by Canadian Underwriter

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Insurers have come out in favor of Ontario’s new auto insurance reforms. The McGuinty Liberals had promised legislative reforms after freezing rates shortly after taking office in October. Although the latest product reforms mean the end of the rate freeze, auto insurers were also required to file new, lower rates by January 23.

Insurers say the latest round of auto reforms will help reduce claims costs, including capping fees charged by designated assessment centers (DACs) and tighter protocols on whiplash treatment programs. On the other hand, healthcare provider fees were increased for those who treat the most severely injured auto accident victims.

Among the specific changes is the reduction of income replacement benefits (IRBs) for whiplash-associated injuries to 12 weeks for “WAD I” (less serious) and 16 weeks for “WAD II” claimants. The standard collision deductible is now $500, with the option to buy a higher limit, while tow truck and storage fees have been capped at $300 (except in Northern Ontario).

“Insurers are committed to filing new rates to take into account today’s announcement,” says Mark Yakabuski, Ontario region vice president for the Insurance Bureau of Canada (IBC). “Any savings generated by these measures will be passed on to consumers.”

He adds that premium increases were directly related to rising claims costs related to healthcare and lawsuits. “Bringing these costs into line will help insurers give drivers a significant break in the months to come.”

Furthermore, Yakabuski notes that savings passed along to policyholders will vary based on driving record and other driver factors. According to guidance from the Financial Services Commission of Ontario (FSCO), insurers should be taking into account the following:

The increase of the pain and suffering deductible from $15,000 to $30,000, while it has been removed from pain and suffering awards over $100,000;

That CPP disability benefits will be deducted from IRBs;

The new, expanded definition of permanent serious impairment; and

Expansion of ability to sure for excess health care by those with serious or permanent injuries.

The Liberals have promised voters an average 10% reduction in auto premiums. If insurers have already applied for rate reductions, this will be taken into account, notes FSCO superintendent Bryan Davies. Now, the Liberals are looking at further reforms to the system to “protect and inform consumers” as well to further reduce rates.

“Our reforms must look to the long-term as well as the short-term,” Ontario Finance Minister Greg Sorbara observes. “We will continue to work towards additional steps that lower rates, cut insurance costs and increase consumer protection and education, within a competitive marketplace.” Among the reforms that could be taken is to alter or do away with the DAC system, which was part of the Liberal election platform last year. Some insurers have complained that the DAC system is costly and too lengthy a process, allowing claimants to receive benefits while waiting weeks to learn if their claims are legitimate.

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