April 16, 2015 by Canadian Underwriter
Referral fee and contingency fee arrangements from personal injury lawyers should be filed with the Superintendent of Insurance for review of the impact on auto premiums in Ontario, suggested Ralph Palumbo, vice president, Ontario, with the Insurance Bureau of Canada.
The suggestion, in an interview with Canadian Underwriter on Wednesday, came less than a week after the Ontario Trial Lawyers Association (OTLA) released a study it commissioned – titled Returns on Equity for Automobile Insurance Companies in Ontario – written by two professors at York University’s Toronto-based Schulich School of Business.
The study concluded that Ontario consumers “may have overpaid” $3 to $4 billion for auto insurance between 2001 and 2013, but the report excluded carriers with negative return on equity in Ontario auto.
“Everybody who is being regulated is being looked at, how can they contribute to lower costs, lower premiums,” Palumbo said, noted that contingency fees are usually in the 25 to 40% range. “We’re saying that personal injury lawyers have a responsibility as well. In terms of the auto system in particular, and fees, they aren’t regulated.”
In addition, “there should be an easy-to-understand contingency fee disclosure agreement,” as well as a cap on the contingency fee amount, similar to what’s done in British Columbia and New Brunswick, Palumbo said. “All we are saying is let’s be transparent,” he said, noting that there are still questions surrounding such things as whether referral fees are factored into a settlement. “Do the injured claimants even know they are paying that referral fee?” he asked.
The Ontario government has also taken action on lowering auto insurance premiums, Palumbo noted: through its 15% cost and rate reduction program, the government has already lowered auto insurance rates by about 6%.
On April 2, Ontario MPP Julia Munro read a petition in the provincial legislature that echoed the IBC’s concerns, calling for:
• legislation to cap the maximum rates that personal injury lawyers charge,
• a requirement that personal injury lawyers be required to submit to the Superintendent of Insurance information on fees, disbursements and referral arrangements;
• the Superintendent to publish an annual report on the information collected; and
• the Superintendent to develop a consumer-friendly fee disclosure statement to be used by personal injury lawyers.