Ontario budget proposes changes to rate-filing process, regulation to reach 15% reduction target

Ontario’s Liberal government released its 2013 budget Thursday, outlining potential changes to the rate filing process, the return-on-equity benchmark for insurers and measures aimed at addressing fraud, all part of the larger target of a 15% average reduction in auto insurance premiums.

Earlier in the week, the government announced it would introduce legislation and amendments aimed at making the 15% average reduction for Ontario drivers, using a figure that the provincial NDP said the government would need to meet to have its budget supported and avoid an election.

Thursday’s budget included more details on how the government plans to meet that target, with Finance Minister Charles Sousa calling high costs in the auto insurance system “a drag on our economy.”

The timeline for premium cut is still unclear, with the budget document citing that the change will be made “within a period of time to be prescribed by regulation,” which would be set out in the government’s future legislation.

In a press conference, Sousa said that the timeline is dependent upon how quickly the budget measures are passed, but that changes would begin within a year.

If the government’s legislation is passed, insurers would be required to offer lower premiums to drivers with safe driving records, but the budget didn’t include specifics on how much lower the premiums would need to be, or when insurers would have to make their changes.

Budget measures would “give FSCO some teeth”: Sousa

If passed, the government’s plan would also see the Superintendent of Financial Institutions having the authority to call on insurers to file their rates, rather than having to wait for insurers to come forward to propose changes to their rates.

The government also said its legislation would “call on” the Financial Services Commission of Ontario (FSCO) to reduce the return-on-equity (ROE) benchmark used for rate filings, which currently stands at 12%. The government has not yet said how much lower the benchmark should be or the timeline for the change.

New “expert” reports on costs, dispute resolution system

Citing the goal of increasing accountability and transparency, the budget calls for “a new independent annual report by outside experts” to examine the impact previous reforms have had on costs and premiums. The report would also look at industry costs and premiums and would need to include recommendations for further steps needed to meet the 15% average reduction target. It isn’t clear yet when the report would be expected.

The government’s plan would also see FSCO consolidating its statutory auto insurance reviews. Currently, FSCO conducts a two-year review of the Statutory Accident Benefits Schedule (SABS), a three-year review of the rates and classifications system and a five-year review of the auto insurance system generally. The change outlined in the budget would see FSCO providing one consolidated review, although the period for the reviews to be conducted hasn’t yet been outlined.

In terms of dispute resolution (the mediation and arbitration backlog), the government said it plans to appoint an “expert” to review the system and propose amendments this fall, although it wasn’t specific about who that expert would be.

The government’s plan would also call on the regulator to provide an interim report this year on the progress of the Minor Injury Treatment Protocol project.

Regulation coming for health clinics?

Unsurprisingly, the budget document also included anti-fraud provisions, including expanding the Superintendent’s “investigation and enforcement authority” over fraud prevention, a recommendation made in the Auto Insurance Anti-Fraud Task Force’s final report last November.

If passed, the government’s legislation would allow FSCO to regulate health clinics and other practitioners that invoice auto insurers, also a recommendation originally laid out in the task force’s report.

“Further study” will be conducted for cat impairment, towing industry changes

The budget did not include specifics on amending the catastrophic impairment definition in the SABS, or a plan to potentially regulate the towing industry, both controversial aspects of Ontario’s auto insurance system. Rather, the government said it will “conduct further study and consultation” on those issues and other potential cost-reducing initiatives.

The Auto Insurance Anti-Fraud Task Force’s report did call for more regulation of the towing industry, and the issue was touched on during recent hearings on auto insurance held by the Standing Committee on General Government, which includes members of provincial parliament from all parties.