IBC anticipates more rate reductions from Ontario auto insurers

The average auto insurance premium in Ontario is 7% lower than it was nearly three years ago – when Ontario’s ruling Liberals pledged to cut auto rates by 15% over two years – and an Insurance Bureau of Canada official is expecting more reductions over the next quarter.

“Several insurers have already hit the government’s targetted 15% reduction,” said Barbara Taylor, IBC’s director of policy for Ontario, during a presentation Thursday at the annual P&C Crystal Ball Conference in Toronto.

In March, 2013, the New Democratic Party tabled a motion, in the Ontario Legislature, calling for the government to direct the Financial Services Commission of Ontario (FSCO) to gradually reduce the average, industry-wide private passenger auto premium by 15%.

Two months later, the ruling Liberals promised, in their 2013-14 budget,  to reduce premiums by 15% over two years. At the time, the Liberals had a minority government and the NDP supported the budget on the condition that the Liberals mandate a rate reduction.

In August, 2013, the law was changed to require “an industry-wide target reduction,” by 15%, of the “average of the authorized rates that may be charged by insurers” for private passenger auto, with a two-year target. So in their rate filings, insurers have been required “to propose rates and a risk classification system that contribute adequately to the achievement of” that 15% target.

“We expect to see more reductions in the next quarter” as insurers account for the “next set of reforms” to auto insurance that take effect June 1, Taylor suggested Thursday at the P&C Crystal Ball, organized by CW Group and held at the International Plaza Hotel.

She was alluding to several changes – originally announced in April, 2015 when Finance Minister Charles Sousa tabled the 2015-16 budget – that take effect for accidents occurring on or after June 1, 2016. The government had been defeated in 2014 after neither the NDP nor the Conservatives would support the 2014-15 budget, but the Liberals were returned to power with a majority and continued to push for reductions in auto premiums.

To help cut claims costs, the government announced more reforms in the 2015-16 budget document. One of those is a reduction in the coverage limits for non-catastrophic injuries. Currently the mandatory AB coverage limits are $50,000 for medical and rehabilitation benefits and $36,000 for attendant care. That is half the mandatory coverage before a set of reforms took effect in 2010. As of June 1, 2016, policyholders will be required to purchase coverage providing one $65,000 limit for medical, rehab and attendant care.

To cover catastrophic injuries under accident benefits, Ontario vehicle owners must buy $1 million in coverage for medical rehab and $1 million in attendant care. Effective June 1, the mandatory coverage will be one $1-million limit for both medical rehab and attendant care. The definition of catastrophic impairment will also change.

Taylor referred Thursday to previous measures the Ontario government has implemented in an effort to reduce auto claims costs. One of those is Bill 15, an omnibus bill passed into law in November, 2014.

Bill 15 will require the Attorney General’s Licence Appeal Tribunal to handle disputes over statutory accident benefits.

Currently, insurers and claimants can apply for mediation with FSCO. If after mediation there are still issues in dispute, claimants may either apply for arbitration with FSCO or launch a lawsuit.

“FSCO’s dispute resolution system was meant to be a low-cost quick alternative, but like many pieces of the Ontario auto story, something that started off with the best of intentions became fraught with abuse,” Taylor said Thursday. “There are currently 16,000 dispute cases in the system. When you take into account that there are only about 60,000 claims a year, that’s a huge number of cases in dispute.”

The Licence Appeal Tribunal currently resolves disputes involving liquor licences, motor vehicle dealers, real estate brokers, travel agencies, home builders, private colleges, day nurseries, private security guards, funeral directors, cemeteries, bailiffs and retirement homes, among others.

“The transfer of disputes from FSCO to the Licence Appeal Tribunal will ultimately be good for consumer but it’s a huge undertaking, and we expect that there will be many bumps along the road,” Taylor said. “It’s important that the tribunal manage these additional costs and complexities for consumers. We understand that the tribunal will be offering training sessions that will be held in March, so hopefully that will help our industry. It is important that the companies are kept adequately informed of this whole process.”

The change was not without controversy, because Bill 15 changes the Insurance Act to prohibit parties from bringing proceedings involving AB claims disputes into court, “other than an appeal from a decision of the Licence Appeal Tribunal or an application for judicial review.”

In 2015, personal injury lawyer Joseph Campisi filed a constitutional challenge, arguing the restriction on court proceedings “has a disproportionate impact on the physically and mentally disabled, due to the magnitude of entitlement of benefits and the potential magnitude of disputes that arise” in claims under SABS.

Campisi asked the Ontario Superior Court of Justice to declare that the restriction on court proceedings is “inconsistent” with Section 15 of the Charter of Rights and Freedoms, which guarantees Canadians “equal protection and equal benefit of the law” without discrimination based on factors including mental and physical disability.

Bill 15 also makes changes to laws on towing and storage of vehicles.

Currently, under the Repair and Storage Liens Act, companies storing vehicles “can hold a vehicle and accumulate storage charges for up to 60 days without giving any notice and then still claim a lien for the storage costs,” Liberal MPP Laura Albanese told the legislature in October 2014 during a debate on Bill 15.

As of July 1, 2016, the notice period will be reduced to 15 days for vehicles registered in Ontario.

Bill 15 also changes the Consumer Protection Act to require towing operators to give a customer “an itemized invoice, listing services provided, the cost for each service, and the total cost before demanding or receiving payment.”

Towing firms and storage providers will also be prohibited “from recommending repair and storage facilities, legal service providers or health care service providers unless a consumer or a person acting on their behalf specifically asks, or the provider offers to make a recommendation and the consumer (or authorized person) agrees.”

Towing operators will also be required to “disclose to a consumer whether the provider is getting a financial reward or incentive for providing a recommendation for towing a vehicle to a particular storage or repair shop.”