Telematics could help reduce Ontario auto premiums, insurer president says

Political pressure to force insurance carriers to reduce auto premiums in Ontario is caused in part by public cynicism, but telematics may be part of the solution, suggests Bob Dempsey, president and chief operating officer of The Guarantee Company of North America.

“Telematics is the new buzz in the community,” Dempsey said during a presentation Wednesday at the Insurance Institute of Canada’s Toronto office. “Telematics is a coming thing for being able to rate and it might be part of the answer of this mandated 15% reduction that looks to be coming our way.”

Dempsey was referring to a pledge by the ruling minority Ontario Liberal government, in its 2013-14 budget released May 2, to aim to reduce the average consumer’s auto premium by 15%.

The timeline for the reduction would be “prescribed by regulation.” In March, the New Democratic Party tabled in the Legislature a motion that called for Premier Kathleen Wynne to direct the Financial Services Commission of Ontario (FSCO) to gradually reduce average, industry-wide private passenger auto premiums by 15%.

Background: Ontario budget proposes changes to rate-filing process, regulation to reach 15% reduction target

The sponsor of the motion, NDP consumer affairs critic Jagmeet Singh, claimed that the auto industry in Ontario “has enjoyed some of the highest profits in the history of Ontario,” that the reforms implemented in 2010 resulted in $2 billion in savings and that it was unacceptable for premiums to rise by 5%.

“We are up against the cynicism that is going to increase in Ontario due to this automobile insurance,” Dempsey said Wednesday. His presentation, titled “Innovating and Winning in a World of Change,” focused on industry factors that are changing and some that remain constant. One of those factors, he said, is cynicism.

“To the majority of people who buy insurance, they’re cynical about what they get for it, and that’s not going to change and I’m going to tell you right now in Ontario, the cynicism meter is going way up as the NDP make it a platform in their coming election — or hopefully an election so we can get rid of them. Pardon me if there are any NDP people here.”

He was referring to a threat by NDP leader Andrea Horvath to vote against the budget – which would defeat the government because Progressive Conservative Leader Tim Hudak has already said his party will not support the budget.

The PC party has said it would eliminate the province’s auto insurance rate reviews and would remove the requirement to send disputed claims to government mediators.

The PC party also says, if elected to power, it would establish a special unit in the Crown Attorney’s office to investigate fraud.

The Auto Insurance Anti-Fraud Task Force, which released its final report in November, 2012, recommended the early assignment and continuity of crown attorneys in large complex auto insurance fraud prosecutions. The task force also recommended the government develop protocols to permit FSCO investigators to exchange information with investigators from federal organizations, such as the Canada Revenue Agency.

Another of its 38 recommendations was for the Ontario government ask the federal government to “move quickly” to pass Bill C-12, which was first introduced in September 2011 but has yet to reach second reading.

The bill, if passed into law, would amend the federal Personal Information Protection and Electronic Documents Act so that, among other things, an organization would be allowed to disclose personal information about a person without their knowledge or consent if the disclosure was made “to prevent, detect or suppress fraud when it is reasonable to expect that the disclosure with the knowledge or consent of the individual would undermine the ability to prevent, detect or suppress the fraud.”

The goal of that proposed amendment would be to remove any “undue limitations” on the ability of insurers to pool claims information to combat fraud, the anti-fraud task force said in its report.

Dempsey said Wednesday it will require some “political will and backbone” for the government to implement all of the recommendations of the anti-fraud task force.

“I think every one (of the recommendations) that the anti-fraud task force came up with is doable,” he said. “Politically it may be an Achilles heel but for the survival of this industry, and for us to be able to deliver a product that answers to the honest policyholders, I think it is all doable.”

The anti-fraud task force also recommended that the province ensure that government-wide hiring constraints do not delay or prevent the FSCO from acquiring the necessary staff and expertise it requires to carry additional responsibilities recommended by the task force.

Those additional powers would include the power to investigate and sanction unfair or deceptive acts or practices and to regulate the business practices of health clinics that treat and assess auto insurance claimants.

“We have to attack .. the service givers that are over charging and creating fraudulent exposure, and we are ultimately paying,” Dempsey said Wednesday. “It’s an unfortunate circumstance and I don’t think the underwriting companies paid up until now enough attention on trying to circumvent the fraud and prosecuting it. I am going to give Aviva credit here because they seem to have taken a number of these fraudulent exposures to court … I think they have to be complimented for showing leadership in that area.”

As for using telematics to help reduce premiums, Dempsey suggested some people have some privacy concerns.

“Telematics has some real implications to it for personal information that I don’t think we’ve quite dealt with,” he said. “We all think that we can now put in telematic devices that are going to be able to tell you when you’re children are at the liquor store or when they’re too late getting home from their date.”