Insurance News – Monday, September 15, 2014

Here are the leading auto insurance headlines from ONTARIO AUTO INSURANCE TOPICS ON TWITTER for Monday, September 15, 2014:

  • Uber and Lyft have been waging an aggressive fight to avoid taking full responsibility for making sure drivers have the right kinds of insurance.
  • Google’s driverless cars could be disruptive to Uber’s current business mode by moving away from car ownership.
  • What will self-driving cars mean for your auto insurance?
  • Driverless cars move closer to reality as Audi and Cadillac plan to bring driverless features to their cars in 2016.
  • California regulators putting the brakes on carpooling services offered by rideshare firms such as Lyft, Uber and Sidecar.

Insurance News – Wednesday, December 30, 2015

Here are the leading auto insurance headlines from ONTARIO AUTO INSURANCE TOPICS ON TWITTER for Wednesday, December 30, 2015:

  • City of Toronto won’t block Uber’s new $5 commuter service but it is doing a legal review.
  • Another legal battle for Uber as the Seattle city council votes to treat Uber drivers as employees by giving them collective-bargaining rights.
  • California sets rules for self-driving cars; must have steering wheel and licensed driver behind the wheel. Google is not happy.
  • Google plans to make its self-driving cars unit, which will offer rides for hire to compete with Uber, a stand-alone business under the Alphabet Inc. corporate umbrella in 2016,
  • The self-driving car, that cutting-edge creation that’s supposed to lead to a world without accidents, is achieving the exact opposite right now.  Because driverless cars obey the laws, humans don’t so much.
  • Google and Ford are about to announce they are forming a partnership to build self-driving cars.
  • Wawanesa Insurance is asking policy holders if they are driving for Uber. And cancelling policies if the answer is yes.

Will The New Ontario Fleet Definition Work?

As I reported previously, the Ontario government amended the fleet definition in Regulation 664 in early July.  The amended definition reads as follows:

“fleet” means a group of not fewer than five automobiles that meets the following requirements:
1. At least five of the automobiles in the group are commercial vehicles, public vehicles or vehicles used for business purposes.
2. The automobiles in the group are,
i. under common ownership or management, and any automobiles in the group that are subject to a lease agreement for a period in excess of 30 days are leased to the same insured person, or
ii. available for hire through a common online-enabled application or system for the pre-arrangement of transportation, and insured under a contract of automobile insurance in which the automobile owner or lessee, as the case may be, has coverage as an insured named in the contract

From my perspective, this is not an ideal resolution. However, it does fill in the insurance gap that has existed since Uber began providing its services in Toronto in 2012. One of the most important elements in the fleet definition has always been the requirement that there be common management. Common management is an element that is required in order for a group of vehicles to be considered a fleet, if they are not commonly owned or where they are owned by a leasing company. It refers to the fact that the owner or manager has a measure of control over the vehicles. A fleet is typically a discrete risk exposure whose experience and characteristics can be monitored and rated, and is affected by the actions of the owner or manager. The vehicles in a fleet are not individually rated as this is inconsistent with a key principle in fleet rating to establish a rate specific to the experience of the fleet. Usually, the manager of a fleet will implement rigorous risk management programs to monitor and improve experience and rating.

None of these circumstance remotely exist when it comes to Uber drivers and their vehicles. They are network of drivers connected to customers through an app provided by Uber. Their is no common ownership or management. It suggest that once an Uber driver turns on the app on his phone, he or she becomes part of a fleet. That decision isn’t even made by Uber.

Is this such a bad thing? It could be if it leads to further erosion of the fleet definition. The regulator has for years denied fleet policies because they failed to meet the test of common ownership or management. Will they be able to continue to push back against synthetic fleets? It would have been better, if the government had created a provision in the Insurance Act to deal specifically with transportation network companies. I expect it will take some time to determine whether the government and the insurance industry will regret the newly amended fleet definition.

Insurance News – Monday July 14, 2014

Here are the leading auto insurance headlines from ONTARIO AUTO INSURANCE TOPICS ON TWITTER for Monday, July 14, 2014:

  • Why Ontario pay the highest car insurance rates in Canada – crowded roads, fraud, private delivery, take your pick.
  • An alarming proportion of Ontario teenagers admit that they have texted while behind the wheel of a vehicle, says a survey of Grade 7 to 12 students in the province conducted for the Centre for Addiction and Mental Health.
  • Editorial: Steps should be taken to curb dangerous texting by teen drivers.
  • Premier Wynne says Ontario will bring back bill to toughen penalties for distracted driving.
  • Will insurance companies be the greatest contributors to the success of self-driving cars?
  • The tipping point for telematics is going from an installed device in the insured’s vehicle to a downloaded app on their phone.

Insurance News – Monday, February 29, 2016

Here are the leading auto insurance headlines from ONTARIO AUTO INSURANCE TOPICS ON TWITTER for Monday, February 29, 2016:

  • Bramalea-Gore-Malton MPP Jagmeet Singh wants industry profits used to drive down auto insurance rates.
  • The U.S. National Highway Transportation and Safety Administration told Google that the artificial intelligence system that controls its self-driving car can be considered a driver under federal law.
  • Uber has agreed to pay $28.5 million to about 25 million passengers to settle two San Francisco class actions over the way it advertises its services.
  • Google is killing off the car-insurance comparison tool that it rolled out last year.
  • Uber’s popularity is prompting Canadian insurance companies to introduce coverage for drivers carrying paying passengers in their personal vehicles.

Insurance News – Tuesday, September 27, 2016

Here are the leading auto insurance headlines from ONTARIO AUTO INSURANCE TOPICS ON TWITTER for Tuesday, September 27, 2016:

  • Motorist in Tesla self-driving vehicle is killed when it smashes into a tree at 100 mph in Holland – but the company insist he had not switched on auto-pilot function.
  • Insurance premiums could drop 40 percent by 2050 due to automated vehicles.
  • Self-driving cars operated by ride-sharing service Uber hit the public roads in Pittsburgh, as the company launches a pilot program that will pick up actual passengers.
  • New Brunswick auto insurance claims have grown $70 million over 3 years and may lead to some large rate hikes.
  • Lyft’s president says ‘majority’ of rides will be in self-driving cars by 2021 and car ownership will end by 2025. Overly optimistic?

Insurance News – Friday, October 17, 2014

Here are the leading auto insurance headlines from ONTARIO AUTO INSURANCE TOPICS ON TWITTER for Friday, October 17, 2014:

  • Studies show voice activated smartphones, dashboard infotainment systems can distract drivers.
  • No surprise here that OPP statistics indicate that speeding and distracted drivers are the leading causes for road fatalities.
  • An interesting article on how connectivity is enabling a new paradigm for auto mobility.
  • Volvos will soon have a 360 degree accident avoidance systems in its cars that will plot ‘escape routes’ to avoid crashes.
  • A Wall Street Journal article on how driverless cars with change retirement.
  • The Ontario government is behind on its rate reduction commitment but still insists it will deliver.

Ontario Auto Insurance Rates Are Heading Back Up

FSCO’s latest quarterly rate approval numbers have been released and the news is not good for consumers. Half the savings as a result of statutory accident benefit cuts that became effective on June 1 are already gone.

 FSCO approved 25 private passenger automobile insurance rate filings during the third quarter of 2016. These 25 insurers represent 63.56% of the market based on premium volume. Approved rates increased on average by 1.5% when applied across the total market. This wipes out almost half of the modest 3.07% reduction in approved rate filings in the first quarter of 2016. Depending on rate filings in the last quarter, we could see a net increase in rates for the 2016 calendar year.

 The government has abandoned the the 15% rate reduction promise made in August 2016. However, if you aggregate all the rate changes since the 2013 announcement, the total rate reduction is 8.34% when applied across the total market.

 Product reforms have proven to be an ineffective tool for controlling auto insurance premiums in Ontario. As long as transactional costs within the system remain high, Ontario drivers will continue to pay high rates. A new delivery system is needed to bring Ontario’s costs in line with other jurisdictions. For a discussion on how to address the systemic problems in Ontario, see my article entitled Ontario’s 25-Year No-Fault Journey.

Ontario Ministry of Finance Has Provided Notice On Intent To Change The Interest Rate On Disputed SABS Claims

The Ministry of Finance is proposing to amend the SABS (O. Reg. 34/10) so that when there is a dispute in respect of an insured person’s entitlement to, or amount of statutory accident benefits, interest on overdue SABS payments is calculated at the prejudgment interest rate described in the Courts of Justice Act that is used for past pecuniary loss, and is payable from the date on which a mediation proceeding is commenced and ends on the date a settlement is reached or a decision is issued that finally disposes of the dispute.

 The Ontario government’s Regulatory Registry is inviting stakeholders and interested parties to provide comments on these proposed regulations (that have yet to be made public). The deadline for comments is November 6, 2014.

 Ontario’s Regulatory Registry provides information on new proposed regulatory initiatives that could affect Ontario businesses and recently approved regulations that affect business. Regulations are approved by the provincial Cabinet.

 Once a regulation is approved, a plain language summary of the regulation is posted on the Registry website, with a link to the regulation posted on the Government of Ontario’s e-Laws website.

We’ve Been Down This Road Before

Once again, Ontario has announced another package of auto insurance reforms.
With a provincial election just months away, the Ontario government recently announced yet another plan to make auto insurance affordable for Ontario drivers. The plan is focused on addressing fraud and providing better access to care.
The announcement by Charles Sousa, Ontario’s minister of finance, along with attorney general Yasir Nasqvi, follows several months of consultation with a broad range of stakeholders regarding David Marshall’s report, Fair Benefits Fairly Delivered: A Review of the Auto Insurance System in Ontario, released in April 2017. Marshall’s report contained 35 recommendations to reform the auto insurance system.
I reviewed David Marshall’s report and the province’s subsequent announcement in December 2017 with interest. I spent more than 20 years of my professional life designing similar reform packages and have a good sense of how the Ontario system will respond to Marshall’s proposed reforms.
Although the government’s plan announced in December 2017 purports to flow from David Marshall’s report from last spring, only the creation of a new network of independent evaluation centres [IECs] originated from Marshall’s report. Programs of care and contingency fees, announced in December and mentioned in Marshall’s report, are work already underway by the government. Marshall, an advisor to Ontario’s finance minister on auto insurance and pensions, never dealt with fraud.
For me, Ontario’s plan is an admission that the Marshall report does not provide much in the way of workable solutions for the government. It would be a stretch to suggest that there will be savings derived from the proposed IECs. The system will not cease to be adversarial with the introduction of the IECs just as the Designated Assessment Centres (DACs) had no impact. Lawyers and insurers will continue to access their own medical opinions.
With an election on the horizon, there is little time for the government to implement their plan. What will happen to this plan following the election is unknown at this time. Other than providing more resources to combat fraud, there is little here to provide premium relief for consumers. Considering how long it takes to prosecute a fraud case, those savings are years away.
What’s in Ontario’s Plan
The government will be establishing a panel to guide the enactment of proposed reforms, which include:
·         Standard treatment plans (programs of care) for common collision injuries (soft tissue injuries) and changing the emphasis from cash payouts to ensuring appropriate care.
·         Reducing disputes by instituting independent examination centres.
·         Launching a Serious Fraud Office in spring 2018.
·         Directing the Financial Services Commission of Ontario (FSCO) to review territorial rating factors used by insurers.
·         Ensuring that lawyers’ contingency fees are fair, reasonable and more transparent.  
Programs of care
I initiated the Programs of Care project before I left FSCO in 2011 and agree with its introduction. Led by Dr. Pierre Côté, the work on developing programs of care was completed in three years. Long overdue, this aspect of the Marshall recommendations and subsequent government announcement has been in development for six years.
Programs of care were first developed by the Workplace Safety and Insurance Board (WSIB) to deal with low back pain. The initial whiplash associated disorder guidelines were created in 2003 based on the WSIB low back pain program of care. FSCO had undertaken to develop programs of care for a range of soft tissue injuries. An interim solution was the introduction of the minor injury definition and minor injury guideline in 2010. The expectation is that programs of care will simplify access to treatment and reduce disputes in the system. If that does occur, it will potentially reduce some of the transactional costs in the system.
Will statutory accident benefits (SABS) be simplified when the programs of care are introduced? Will the number of disputes drop? That did not occur with the introduction of the minor injury guideline. It can’t be assumed that programs of care will significantly change the landscape. The WSIB experience will not necessarily be duplicated in the Ontario auto insurance system because the structures of the two systems will continue to be fundamentally different.
The government would like to move away from cash settlements. Prior to the introduction of the Ontario Motorist Protection Plan (OMPP) in 1990, it was standard procedure to settle minor lawsuits. The introduction of the OMPP was intended to address the needs of accident victims with minor injuries so that they could access wage loss and rehabilitation without the need to sue. Cash settlements undermine the principles of no-fault.
In his 2014 report, Ontario Automobile Insurance Dispute Resolution System Review, Douglas Cunningham, now an arbitrator and a former associate chief justice of the Ontario Superior Court of Justice, acknowledged that cash settlements could be counter-productive. But he compromised in the end by recommending that settlements be prohibited in the first two years of a claim. A settlement prohibition is more feasible in a pure no-fault system such as the WSIB. However, Ontario’s auto insurance system provides access to tort. If there is a tort claim, the lawyers often push for a cash settlement with the first-party payer because the third-party payer is only responsible for damages in excess of the SABS.
Independent Examination Centres (IECs)
The government continues to support Marshall’s recommendation that a network of IECs be created to provide neutral assessments of auto collision injuries. Fortunately, the government has backed away from locating IECs in public hospitals.
However, IECs are a bad idea. It sounds like a great concept, but it’s been tried before and failed. I had the policy lead when the former DACs were introduced in 1994. The language we used back then was identical to what appeared in the recent government plan. IECs reflect Marshall’s lack of institutional memory and understanding of the auto insurance industry.
I learned a few things through the DAC experience. When you are conducting over 100,000 assessments each year, you need a lot of physicians and other allied health professionals. That means you will have to rely on the same professionals who provided assessments to legal representatives and insurers. No matter what measures you take through standard guidelines and protocols, fee schedules, accreditation, no one will consider these assessors to suddenly become neutral. The criticisms directed at the current assessors will follow them when they join IECs.
IECs will require substantive oversight just like the DACs did. This will not only require a government bureaucracy to support IECs, but will likely increase administrative requirements for the assessment providers. Currently, the average insurer examination costs under $1,400 based on HCAI data. The last DAC fee schedule (dated February 2004) contained much higher fees: assessing treatment, $2,000; assessing disability, $3,900; assessing attendant care needs, $2,600; and no cap on catastrophic impairment assessments. I predict assessment costs will rise under the IECs. 
Marshall uses New Jersey’s dispute resolution mechanism as an example of where a neutral medical review is successfully being used. Marshall has misinterpreted the New Jersey system. I spoke to officials from New Jersey on behalf of Justice Cunningham as part of his review of the auto insurance dispute resolutions system. The New Jersey medical reviews are peer reviews; they do not involve an examination of the claimant. They are not automatically conducted — one of the parties needs to request a review. The claimant and insurer still conduct their own medical assessments, upon which the neutral medical reviewer comments. As well, the arbitrator does not always follow the opinion of the medical reviewer. As is the case in New Jersey, establishing IECs will not eliminate the need for provider- and insurer-initiated assessments.
Despite the insurance industry’s strong support of the creation of IECs, I do not believe insurers will be willing to give up insurer exams. They are an important component in any private disability system. Instead, IECs have the potential to add another layer of assessments and costs, similar to the experience with the DACs.
Serious Fraud Office
For the third time in the past five years, the government has announced their intent to create a Fraud Office to deal with auto insurance fraud. Fraud was not mentioned by Marshall but raised by stakeholders during consultations. It would be nice if it happens this time.
Territorial Rating
This aspect of the plan has me puzzled. Directing the regulator to look at territorial rating can only go two ways: 1) the status quo, or 2) adjusting some rates up and others down. Ultimately, the review will not reduce rates overall and I sense the government knows this. Reducing rates in the GTA will only increase rates in other regions of the province.
Contingency Fees
The Law Society of Upper Canada has been working on new rules for lawyers regarding contingency fees for more than a year. They’ve asked the government to approve new regulations to provide the legal regulator with the ability to enforce the new rules. This overlaps with a recommendation made by David Marshall and was included in the government auto insurance plan. Cracking down on contingency fee abuses will put more money in the pockets of claimants but will not reduce auto insurance rates.