How the time-out at Queen’s Park will affect the auto and property insurance industry

With the Ontario legislature prorogued, several measures that would affect the industry, including efforts to fight auto insurance fraud, will be delayed, according to officials with two industry associations.

On Monday night, Premier Dalton McGuinty announced he would be stepping down as Liberal leader and asked Lieutenant Governor David Onley to prorogue the legislature, which effectively means any bills not yet passed into law would have to be introduced again in the next session. McGuinty will stay on as premier until his party chooses a new leader.

“You have a lot of things that are in the works that have taken a lot of man hours that have been put on hold, and then need to get re-introduced,” said Randy Carroll, CEO of the Insurance Brokers Association of Ontario (IBAO) in an interview with Canadian Underwriter.

 Auto reforms on hold?

For example, he noted that the Steering Committee of the Ontario Auto Insurance Anti-Fraud Task Force has yet to submit its final report. That task force is looking into several areas, including regulation of health clinics and commercial providers of independent medical assessments, the towing industry, the possibility of expanding the authority of the Financial Services Commission of Ontario (FSCO), controls on the delivery of accident benefits and the possibility of protecting insurers from civil suits if they report suspicions of fraud to regulators or to police.

“If the (task force) report comes back, it’s my understanding that the report can be adopted, but if legislative changes are needed, those legislative changes will be put on hold until the House reconvenes,” Carroll said. “That one is problematic.”

Officials from the Insurance Bureau of Canada are hoping that changes recommended by the task force can still be implemented while the provincial Liberals replace McGuinty as leader. At press time no date for a leadership convention had been announced.

“We would be disappointed if we won’t see the continued momentum necessary for the reforms on the auto insurance system,” an IBC spokesperson wrote in an e-mail to Canadian Underwriter. “In 2010, the government made important changes to the auto insurance system, but further reforms are needed.”

For example, he wrote, the province had indicated it would introduce reforms in fraud prevention, the backlog in cases for arbitration and mediation at FSCO and in the definition of catastrophic.

“While some of the reforms could be handled through regulation it is now very unlikely that these reforms will be delivered at this time,” he wrote.

Three bills affecting the insurance industry died on the order paper.

Credit history as grounds for property risk assessment

Bill 108, which IBAO supports, was introduced by Mike Colle, Liberal MPP for the Toronto riding of Eglinton-Lawrence. If passed into law, that bill would prohibit insurers from using a person’s credit history or rating to either decline or assess risk for property insurance.

“There needs to be a level playing field both on the automotive and on the property side of the business,” Carroll said.  “The government made a good decision when they decided that credit was not a good variable to use when rating someone’s automobile insurance, and they need to make the same decisions when it comes to somebody’s property insurance.”

Whistleblower protection

Bill 41 was introduced by Liberal MPP Amrit Mangat, who represents the riding of Mississauga-Brampton South west of Toronto. It was intended offer protection to whistle blowers and to help ensure fraud allegations are investigated. The bill passed second reading March 22 and was referred to the Standing Committee on General Government. Had it been passed into law it would have prohibited retaliation against anyone who disclosed information about another person’s auto insurance claims to any of seven parties, including peace officers, inspectors appointed under the Independent Health Facilities Act, insurance firms or IBC.

Sprinklers for seniors

Another bill that passed second reading and went to committee was Bill 54, which would have amended the Ontario Fire Protection and Prevention Act to require the retrofitting of retirement homes with automatic sprinklers by 2018.

It was introduced by Paul Miller, NDP MPP for Hamilton-Stoney Creek, passed second reading on Sept. 20 and was referred to the Standing Committee on Justice Policy.

One former insurance broker who supported the bill was Teresa Armstrong, who is now the NDP MPP for London Fanshawe.

“I would think that when you have a building that has a lot of people in it, especially seniors with mobility issues, when there’s a fire, the risk that they are exposed to is so much higher that when you’d have a sprinkler system in there, the risk is mitigated so that there isn’t that type of liability that goes back to the insurance company,” Armstrong said in the legislature in September.

“Commercial buildings with sprinkler systems are going to have a different rate of insurance, compared to a commercial building that doesn’t have a sprinkler system. That certainly won’t offset the cost of implementing a sprinkler system, but it certainly will be a better loss ratio for an insurance company, which will then also perhaps roll back to those commercial institutions where they can have a little bit of a break.”