Ontario to reduce mandatory auto accident benefits, update catastrophic impairment definition

The Ontario government does not plan to mandate further cuts in private passenger auto premiums, but the ruling Liberals do plan to change the Insurance Act to reduce the total mandatory coverage, in the standard auto policy, for medical and rehabilitation benefits and to change the definition of catastrophic impairment.

Finance Minister Charles Sousa released Thursday the budget for the 2015-16 fiscal year, announcing the government will “change the standard benefit level” under the province’s mandatory auto coverage, to $65,000 and to “include attendant care services under this benefit limit.”

Since 2010, Ontario’s standard auto policy has provided for $50,000 for medical and rehab benefits and $36,000 for attendant care. Those amounts are half the mandatory coverage required prior to 2010.

In Thursday’s budget documents, the government announced that for catastrophic injuries, the mandatory coverage of $1 million will in the future include attendant care and medical and rehabilitation benefits. Currently, claimants with catastrophic injuries have $1 million in attendant care benefits and $1 million in medical and rehab benefits.

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“Ontario is certainly one of the highest cost jurisdictions in North America for auto insurance claims,” Sousa said in a press conference before he tabled the budget. “In fact, we are the only province that provides catastrophic coverage, which is expensive so we are going to continue doing that. We are modifying it somewhat.”

The government “will amend Insurance Act to update the catastrophic impairment definition consistent with more up to date medical information and knowledge,” the Liberals say in their budget document, adding they will “continue to ensure, where possible, that insurance coverages reflect the most relevant scientific and medical knowledge on identifying and treating injuries from automobile accidents.

In August, 2013, the province passed the Ontario Automobile Insurance Rate Stabilization Act (AIRSA), establishing an “industry-wide target reduction,” by 15% over two years, of the average private passenger auto premium. Since then, Ontario insurers have been required to “propose rates and a risk classification system that contribute adequately to the achievement of” that 15% target.

“We have now reduced them by over 7%,” Sousa said Thursday. “We are halfway there.”

Sousa made his remarks in a press conference near Queen’s Park, where reporters were given copies of the budget in the morning and locked up until he started his speech in the legislature. Sousa told reporters the measures announced in the budget are “part of our strategy to reduce rates to get to the 15%.”

Another measure announced Thursday is a plan to mandate discounts for winter tires, but he did not say what that discount would be.

“We are looking for the insurance companies to give at least 15% discounts right across and that’s the goal we are trying to achieve,” Sousa (pictured right) said in reply to a reporter asking what the mandated winter tire discount would be. “Winter tires will help supplement that as will the telematics boxes if they wish to proceed with that.”

The announcements got no praise from opposition leaders who addressed reporters.

Vic Fedeli, the Progressive Conservative finance critic, alluded to the fact that in 2013, the Liberals – who then had a minority government – promised to mandate a 15% auto rate reduction in return for the NDP voting in favour of the 2013-14 budget. Had neither the NDP nor the PCs supported the 2013-14 budget, the minority government would have fallen.

The NDP “were bought off essentially,” Fedeli said during his press conference Thursday before Sousa tabled the budget. “There was no business plan. There was no go-forward plan so you start off with a bad premise like that and it’s no surprise that, come August, we won’t see insurance rates reduced 15%.”

NDP leader Andrea Horwath suggested consumers will not benefit from the Liberals’ efforts to cut claims costs.

“If you are talking to the insurance industry, they are going to try to paint it in a way that looks like they are really struggling,” she told reporters in the media lockup. “I don’t think anybody in this room believes that for a minute and I certainly don’t.”

She did acknowledge that some individual insurers lose money on Ontario auto.

“Is there the odd insurance company that doesn’t do a good business? Absolutely, that happens in every type of business that we have,” Horwath said during the press conference. “Some are good at what they do and some are not. But overall, as a whole, Ontarians are paying far too much for their insurance.”

In 2010 – in addition to reducing mandatory coverage for medical, rehab and attendant care coverage – the Ontario government also reduced mandatory income replacement coverage and introduced a $3,500 cap for injuries that fall under the minor injury guideline. The Insurance Bureau of Canada reported earlier the industry lost $1.7 billion on Ontario auto in 2010.

“In 2010 the government made changes to the policies around insurance and all that did, instead of creating an opportunity for reductions, is it created an opportunity for insurance companies to pocket more money,” Horwath told reporters Thursday. “The government talks about anti-fraud measures, they talk about winter tires and they talk about all of these other initiatives and the issue that we have is that no matter what initiative the Liberals tend to put in place, the first people to get their fingers into that savings opportunity is the insurance industry. It never trickles down to the drivers, yet that’s the theory as to why these changes are being made.”