Ontario government proposes changes to meet 15% auto insurance premium reduction

The Ontario Liberal government said Tuesday it will be introducing legislation that, if passed, would reduce auto insurance premiums by 15% on average, a figure first proposed by the NDP in the province.

The government, which is set to deliver its budget Thursday, needs the NDP’s support to avoid a spring election.

Along with several other proposals, provincial NDP leader Andrea Horwath and her party have been pushing for a 15% rate reduction in auto insurance.

Earlier this month, the Liberal government said it would support the NDP’s 15% idea, although it didn’t offer specifics around how and when the change would be implemented. 

The timeline for the reduction is still unclear, but the proposed changes announced Tuesday are based in part on recommendations from the Auto Insurance Anti-Fraud Task Force’s final report from November 2012. 

Under the government’s proposed strategy, the Financial Services Commission of Ontario (FSCO) would have the authority to license and oversee health clinics and other practitioners who invoice auto insurers, according to a government statement.

It would also give more power to the Superintendent of Financial Services, who would have the authority to require insurers to file new rates, the statement said. 

The legislation would also “expand and modernize the Superintendent’s investigation and enforcement authority, focusing on fraud prevention,” the release said. It would also make the Superintendent’s Guidelines, incorporated by reference in the Statutory Accident Benefits Schedule, binding, the government said. 

The proposed legislation would also require insurers to “offer lower premiums to consumers with safe driving records,” the government said, although its statement didn’t offer specifics for that proposal.

If the proposed changes were fully implemented, the government said overall premiums in Ontario would decrease by $1.5 billion a year and reduce the average annual premium per insured vehicle by $225. 

Responding to the government’s announcement of the proposed changes, the Insurance Bureau of Canada (IBC) said that the 15% plan would “only work if appropriate reforms consistent with the scope of reductions are in place.”

“We understand why the Finance Minister is concerned about auto insurance rates – so is the auto insurance industry,” Ralph Palumbo, IBC’s vice president for the Ontario region said in a statement.

“However, lower rates will not be sustainable if the system is still broken,” he said. “We caution the government that cutting rates, without first reforming the system, will threaten the ability of insurers to protect Ontario’s drivers.”

If rate cuts are made without other reforms in place, IBC said that last year’s “modest industry profit” could turn into a potential $1 billion loss for the companies that sell the auto product in Ontario.

IBC did note that the fraud-fighting measures in the government’s plan would be welcome by the industry, especially its proposal around the SABS, which it said would help FSCO arbitrators follow the “original intent of the 2010 reforms.”

In a statement, the Insurance Brokers Association of Ontario (IBAO) said the government’s measures that address recommendations from the Anti-Fraud Task Force report were encouraging, but that expectations may be too high.

“While the proposed reforms are welcome, we are very concerned that consumer expectations for a 15% reduction will be very high,” IBAO’s CEO Randy Carroll commented in the statement.  

“It’s important to underline that the reforms underlying the promised reductions will take time and must be done responsibly. This will require the combined effort of the government, the opposition and the industry. We do not want to set a false expectation for consumers.”

The challenge going forward will be getting legislation passed quickly, or else the potential benefits of the reforms will fizzle out, the IBAO said.