March 12, 2013 by Harmeet Singh, Online Editor
Allowing auto insurers to change their rates faster, without going through the current steps mandated under the Financial Services Commission of Ontario, would go a long way in fixing the province’s flawed system, the PC Party’s auto reform critic says.
“We’ve been looking at FSCO as a key problem in the system,” said Jeff Yurek, MPP for Elgin-Middlesex-London and the Ontario PC Party’s auto reform critic.
“(FSCO is) stepping too much into not being a regulator and involving themselves too much in the price setting process,” he explained. “There’s no innovation, and competitiveness is kind of stalled.”
Currently, FSCO’s analysts and actuaries determine if rate changes are reasonable. “The rate filing application includes a projection of what will be needed to meet future claims costs,” its website states.
“These projections are based on the company’s financial data, such as premiums, claim costs, and administrative expenses. The financial data must be clearly stated and accurate. Special attention is given to balancing rates with the company’s long-term ability to meet claims costs.”
Insurers are waiting up to a year to have approval to raise or lower their rates and that’s far too long, Yurek said. By the time a rate change proposal goes through FSCO, the market could have changed, he said. There is also a lot of cost involved with producing the documents to send to FSCO to get the approval, he added.
Implementing a file-and-use system could be more effective, Yurek said. If insurers could change rates more quickly, that could also address the Ontario New Democratic Party’s claims that the industry’s costs have decreased, but rates have remained the same, he noted.
NDP demand of 15% cut not a real solution
Yurek also said the Ontario NDP’s proposed 15% rate reduction isn’t a real solution to the problems that plague the industry. “If you go right ahead stripping rates without a plan and how to get there, you’re going to run the risk of ruining the product,” he said. “You need a proposal for auto insurance that’s going to fix the system and not put a Band-Aid over it.”
The PC Party will be coming out with its own ideas around auto insurance in the next few weeks, he said. If there is an election, auto insurance will most definitely be part of the party’s platform, as it was in 2011, he noted. At that time, the party’s “Changebook” document touched on addressing fraud in auto insurance, particularly organized crime.
“We’re going to take our time and come up with a plan that’s going to work for auto insurance in Ontario and not just going to jump on whatever sounds exciting to gather votes,” Yurek noted.
He also said he hopes the upcoming provincial budget will allow the Standing Committee on General Government to continue looking at auto insurance issues and release a final report, something it was set to do last year before the provincial parliament was prorogued.