Ontario’s ‘most encouraging statement about auto insurance’ in 35 years

The recent Ontario budget document is giving some insurers hope that the government will actually fix the province’s auto insurance system.

“Many people have said that the comprehensive package contained in the budget is frankly the most encouraging statement about auto insurance from a government in Ontario for 35 years,” Don Forgeron, CEO of the Insurance Bureau of Canada, said during IBC’s recent annual general meeting.

The government is calling its strategy “Blueprint for Putting Drivers First.”

That strategy, “if implemented, will actually fix the system,” Forgeron said.

The Progressive Conservatives were elected in June 2018, replacing the Liberals, who had ruled since 2003.

One major change in the works is the stand-up of the Financial Services Regulatory Authority, which is intended to replace the Financial Services Commission of Ontario. The legislation bringing in FSRA was tabled in 2016 by the Liberals.

The 2019-20 budget document proposes a plethora of reforms. Among them are a “care not cash” default clause. The aim is to have accident benefits pay for treatment, rather than a cash settlement or legal fees. But under the care not cash proposal, clients would have the option to be eligible to receive cash settlements.

In his budget, released Apr. 11, Finance Minister Vic Fedeli is promising increase the range of auto insurance coverage choices, which would let clients reduce their premiums. The government plans to consult with industry on what these changes will look like in practice.

“Consumers will get lower costs and a wider range of options and insurers will do business in a healthy, competitive market where they can innovate and improve their products,” Forgeron said Apr. 25 at IBC’s AGM.

“It is going to be a multi-year strategy,” Pete Karageorgos, IBC’s director of consumer and industry relations for Ontario, said Monday in an interview. “At the end stage, it will hopefully be an improved system. The government is being responsible by looking at this through a longer lens.”

Karageorgos contrasted the current government’s approach with a law passed in 2013 by the Liberals that unsuccessfully sought to reduce the industry-wide average premium by 15% over two years. In 2013, the Liberals had a minority government. The New Democratic Party asked for a mandated 15% rate reduction as a condition for supporting the 2013-14 budget and for not defeating the Liberals in a non-confidence motion. At the time, NDP politicians were claiming that the industry made an “extra $2 billion in profits” in 2011 versus 2010. That was technically correct, as the industry lost $1.7 billion on Ontario auto in 2010 and made a profit of about $200 million on premiums of about $10 billion in 2011.

“There was no plan, no thought given to it, no consultation,” Karageorgos said Monday of the 2013 Ontario Automobile Insurance Rate Stabilization Act. That law required insurers to show in their rate filings with FSCO how their proposed rates would contribute to industry-wide reduction by 15% over two years of the average private passenger auto rate.

By contrast, the April 11 budget document for 2019-20 shows the Progressive Conservatives “are going to take a measured and thoughtful approach,” said Karageorgos.

Changes made by the Liberals before 2018 included:

• The minor injury guideline, which puts a $3,500 ceiling on accident benefits for soft-tissue injuries like whiplash;
• A new definition of catastrophic impairment that took effect in 2016;
• Moving the auto insurance claim dispute resolution system from FSCO to the Ministry of the Attorney General’s licence appeal tribunal;
• Reducing the prejudgment interest rate for non-pecuniary loss for plaintiffs in auto personal injury lawsuits, from 5% a year to the Bank of Canada interest rate;
• Forcing tow and storage providers to publish their rates, accept credit card payments and provide itemized invoices before receiving payment; and
• Reducing from 60, the number of days that a vehicle can be stored after an accident without giving notice to the owner and other persons.