November 26, 2003 by Canadian Underwriter
The new Ontario government under the Liberal Party has introduced the Automobile Insurance Rate Stabilization Act, which if passed, will freeze insurer’s auto rates at levels applied by companies at October 23 of this year. The rate freeze, which is effective for a 90 day period, will expire by January 23, 2004. At this point (or at least within 30 days thereafter based on the judgment of the Superintendent of Financial Institutions), auto insurers will be able to reapply for new rates (subject to approval by the Office of the Superintendent of Financial Institutions (OSFI)).
The legislation will mean that any rates applications currently being processed will be suspended over the duration of the rate freeze. Insurers would then have to resubmit such applications. Finance minister Greg Sorbara says the legislation is a sign of the new government’s intent to make good on its election promises. “We’re going to reduce out of control [auto insurance] costs and make sure those savings are passed on to consumers in the form of lower rates. This legislation is an important first step in our commitment to do what Ontario consumers want – lower auto insurance rates,” says Sorbara.
Sorbara also announced that parliamentary assistant, MPP Mike Colle, has begun meeting with various stakeholders to identify a means of reducing the cost of insurance over the longer term. The government is aiming for an average 10% reduction in auto insurance rates. This is in line with proposed changes to the auto insurance system which the previous Progressive Conservative (PC) provincial government had attempted to bring in before being ousted from office. The PC plan had called for a 10% reduction in the costs of auto insurance companies without providing any clear direction to how this would be achieved. Independent insurance brokers had feared that such a move could result in lower commission levels in an area of business which they state is currently uneconomical due to the overhead involved.
The new provincial government’s cost saving initiative also proposes a new system of “customized insurance plans” allowing policyholders to choose their insurance coverage to best meet individual needs. “We will continue to work toward a long-term solution to lower auto insurance rates, cut insurance costs and improve consumer protection,” Sorbara says.