MADD Canada criticizes Ontario auto insurance law on 15% rate reduction

The Ontario government “needs to reassess its approach” to auto insurance because the mandated 15% reduction in premiums “will award the biggest cost savings to bad drivers, including impaired drivers,” according to MADD Canada.

Last August, the Ontario Ministry of Finance announced it is giving the Superintendent of Financial Services the authority to require insurers to re-file rates, with 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 Ontario law now requires that auto insurers, when filing an application with the Financial Services Commission of Ontario (FSCO), “to propose rates and a risk classification system that contribute adequately to the achievement of” the 15% target.

But when that reduction is applied, “there is no distinction between good drivers and bad or high-risk drivers,” MADD Canada claimed in a press release Dec. 3.

“Rewarding good drivers with lower insurance rates is a great idea, but an across-the-board reduction means the biggest benefit, in terms of dollars saved, is going to the dangerous and unsafe drivers, including impaired drivers,” MADD Canada chief executive officer Andrew Murie stated in the release.

MADD contended that increased insurance rates “are part of the consequences of impaired driving, or other serious traffic convictions,” and higher rates would add “a certain deterrent value and makes people think twice about doing it again.”

MADD’s release was the subject of debate this week during Question Period at Queen’s Park.

“This morning, Mothers Against Drunk Driving issued a press release drawing attention to your irresponsible policy,” said Jeff Yurek, the Progressive Conservative party’s critic for auto insurance reform. “They rightfully say that the biggest benefits in terms of dollars will go to the most dangerous drivers on the roads.”

Yurek, who represents the riding of Elgin-Middlesex-London, asked Finance Minister Charles Sousa about non-standard auto rates.

“With your 15% auto insurance reduction effort, all of the province’s non-standard auto insurance companies have been called in by FSCO and directed to reduce their rates,” Yurek claimed in the legislature Dec. 3.

“Of course, non-standard companies insure the worst drivers on the road. They insure people with poor driving records, multiple speeding tickets and, worst of all, those with drunk-driving offences. Are you pleased with rewarding Ontario’s worst drivers?”

Sousa countered that non-standard auto policyholders “represent about 1.5% to 3% of the market, and they are not the ones that we’re targeting.”

However Sousa did not explicitly deny Yurek’s contention that non-standard auto insurers are also being directed to reduce rates. It was not clear from Sousa’s response whether non-standard auto carriers will instead be allowed to price drivers with convictions, such as operation-while-impaired, according to risk.

“They’re not the ones who are going to benefit from these initiatives, because they are the worst drivers,” Sousa said. “There’s going to always have to be an insurer of last resort to accommodate them, but they’re not benefiting from this. The ones who are going to benefit are safe drivers, the ones who institute a number of initiatives to bring down their rates. We are going to work with them and the other nine million drivers to bring those rates down for consumers.”

The Ministry of Finance announced Aug. 23 it will expect a report in January 2014 from the Financial Services Commission of Ontario (FSCO) to show an approved rate reduction of 3% to 5%.

Ontario auto insurers must submit proposed rate changes – along with supporting actuarial data – to FSCO for approval. FSCO and its actuaries then review the data and insurers’ assumptions regarding claims costs, expenses and investment income to ensure that the proposed rates are not excessive but are also not going to impair a company’s long-term solvency.

Before the ruling Liberals tabled their budget last spring, the New Democratic Party called on Premier Kathleen Wynne to direct FSCO to gradually reduce average, industry-wide private passenger auto premiums by 15%. The NDP went on to support the Liberal budget, ensuring the minority government survived a confidence vote.

In exchange for support from the NDP, the Liberals changed the regulations to require insurers to re-file rates, with the aim of reducing premiums by 8% August 2014 and by 15% over two years.

The Progressive Conservatives have said that if their party is elected to power it would adopt a “file and use” system that would eliminate government reviews of rates and would require auto insurer CEOs to personally sign off on any rate filing or discount offering. The PCs also say they would, if elected, establish a special unit in the Crown Attorney’s office to investigate auto insurance fraud.