Insurance News – Wednesday, October 14, 2015

Here are the leading auto insurance headlines from ONTARIO AUTO INSURANCE TOPICS ON TWITTER for Wednesday, October 14, 2015:

  • Finance Minister Charles Sousa appoints David Marshall as auto insurance, pension advisor.  Are more reforms coming?
  • Can a self-driving car maneuver through a moral maze?
  • State Farm has plans to use biometrics to price auto insurance.
  • Volvo says it will take the full liability if one of its self-driving cars crashes.
  • Hands-free technology not keeping drivers hands-free.

Insurance News – Saturday, June 18, 2016

Here are the leading auto insurance headlines from ONTARIO AUTO INSURANCE TOPICS ON TWITTER for Saturday, June 18, 2016:

  • A recent FSCO survey revealed that 90% Ontarians do not know much about their auto insurance coverage.
  • New York legislators want to make self-driving cars accessible, but must first fix a 1971 law that requires at least one hand on steering wheel.
  • Three threats to incumbent car companies are converging into a tidal wave of disruption.
  • Almost half of marijuana-smoking Canadian drivers say that they can safely operate a vehicle while stoned.
  • How data analytics will change the insurance sector as never before.

Queen’s Park Update

A surprise majority for the Liberals in the recent election is expected to set a different tone in Queen’s Park after almost 3 years of minority government.  A minority government is all about survival, there is no long-term planning. The Liberals could not focus on deficit reduction, job creation, pensions or stabilizing the auto insurance product without the confidence of having the support of the Legislature.

Despite campaigning under an activist agenda, the Liberals are now signalling that they are serious about deficit reduction. Deb Matthews has been appointed President/Chair of Treasury Board/Management Board which traditionally has been a responsibility of the Ministry of Finance. Treasury Board is not well known outside of government but it is a powerful central agency that manages the fiscal plan of the government including all government spending and approving labour agreements.  A very powerful body.

Charles Sousa continues as Minister of Finance and appears to still be responsible for the auto insurance file.  His Deputy, Steve Orsini has been promoted to Secretary of Cabinet which is head of the Ontario Public Service.  His appointment is intended to also signal that the Liberals are serious about deficit reduction.  He replaces Peter Wallace also preceded Orsini as Deputy Minister of Finance.

There has been some restructuring in the Ministry of Finance.  The Insurance and Cooperatives Policy Unit (which includes auto insurance policy) and the Deposit Taking Institutions Unit of the Industrial and Financial Services Branch will be reconstituted as the Financial Institutions Policy Branch. They will continue to be led by Alvaro del Castillo. Tthe Financial Institutions Policy Branch will join the Securities Reform Division (SRD) reporting to Assistant Deputy Minister Frank Allen who replaces Pat Deutscher. To better reflect its broader mandate the SRD will be renamed the Financial Services Policy Division.

Next week, new MPPs will return to Queen’s Park to elect a new Speaker of the Legislature (July 2), hear a new Speech from the Throne (July 3), then debate a re-introduced provincial budget on July 14. It is expected that shortly after that the Legislature will recess for the summer.  That might mean that the reintroduction of industry supported bills such as Bills 171 and 189 might have to wait until the fall.

How Much Have Ontario No-Fault Accident Benefits Been Eroding?

The recently announced auto insurance reforms included in the 2015 Ontario Budget will again reduce accident benefits as part of the government’s efforts to reduce premiums in Ontario.  The government insists that benefits available are still generous.  I decided to compare the accident benefits available prior to the OMPP (Schedule C) under tort and the OMPP accident benefits with the new proposed limits announced in the Budget.  I used the Bank of Canada inflation calculator to convert past benefits into 2015 dollars.

The Schedule C accident benefits existed under the tort system prior to the introduction of no-fault.  Compensation was quite limited.  Income replacement benefits were available for 104 weeks, caregiver benefits for 12 weeks and medical benefits for 4 years.  The benefits aren’t quite analogous but when converted into 2015 dollars, it tells an interesting story. Keep in mind there was no second tier of benefits under Schedule C for catastrophic injuries.  Those not at-fault would need to start an action to access additional compensation.

The table below shows that the Schedule C benefits are not that far off from the benefit levels announced in the Budget.  Not only are benefits being cut but inflation has also eroded them.

pre-OMPP pre-OMPP 2015 Budget
(1989 $) (2015 $)
IRB $140.00/week $240.24/week $400.00/week
caregivers $70.00/week $120.12/week N/A*
non-earners N/A N/A $185.00/week
medical/rehab $25,000.00 $42,900.82 $65,000.00
medical/rehab (cat) $25,000.00 $42,990.82 $1,000,000.00
attendant care N/A N/A N/A**
* caregiver benefit currently only available for catastrophic injuries
** attendant care included in medical/rehabilitation cap

The indexed OMPP numbers are also revealing.  The table below shows that the accident benefits proposed in the recent provincial budget are, in some cases, less generous than the OMPP accident benefits even before adjusting for inflation.  Even those with catastrophic injuries are likely better off under the OMPP even though there was no higher tier of accident benefits available.  The OMPP provided all claimants with up to $1 million in combined medical, rehabilitation and attendant care benefits.  In 2015 dollars that works out to approximately $1.6 million in benefits.

OMPP OMPP 2015 Budget
(1990 $) (2015 $)
IRB $600.00/week $977.81/week $400.00/week
caregivers $250.00/week $407.42/week N/A*
non-earners $185.00/week $301.49/week $185.00/week
medical/rehab $500,000.00 $814,838.71 $65,000.00
med/rehab (cat) $500,000.00 $814,838.71 $1,000,000.00
attendant care $500,000.00 $814,838.71 N/A**
* caregiver benefit currently only available for catastrophic injuries
** attendant care included in medical/rehabilitation cap

LAT Have Mercy

On April, 1, 2016, Ontario’s Licence Appeal Tribunal’s (LAT) Automobile Accident Benefits Service (AABS) was officially open for business. After 26 years, the Financial Services Commission of Ontario (FSCO)’s Dispute Resolution Group stopped accepted new applications. The transfer of responsibility has created considerable apprehension among its users. FSCO was flooded with new applications in the weeks leading up to April 1st. For many, it’s a matter of ‘better the devil you know.’ What will this change mean for stakeholders? Will it really be different?
How did we get here?
The establishment of the AABS at LAT brings to a conclusion a process that began with the appointment of the Honourable J. Douglas Cunningham in August, 2013. Justice Cunningham was asked to review the auto insurance dispute resolution system. He was asked to make recommendations to the government to address a significant backlog, in disputed autoinsurance claims pending mediation and arbitration, that existed at the time – and to propose system improvements. His report – delivered in February 2014 – included 28 recommendations. As a result, Bill 15, the Fighting Fraud and Reducing Automobile Insurance Rates Act, 2014 included a provision transferring responsibility for resolving disputes over statutory accident benefits from FSCO to LAT. Regulation changes filed by the government on March 7, 2016 – which came into effect on April 1 – was the final step in implementing the new dispute resolution system.
What are the changes?
  • The only dispute resolution process available to parties is an arbitration through LAT.
  • Mandatory mediation is no longer part of the dispute resolution process.
  • No court action can be commenced for statutory accident benefits disputes, even where there is a companion tort action.
  • There is no right of appeal, other than a reconsideration option with the Executive Chair of the Safety, Licensing Appeals and Standards Tribunals of Ontario (SLATSTO) for exceptional circumstances and the Divisional Court on a question of law.
  • A total of 22 new full-time and part-time LAT adjudicators have been appointed to date. Auto insurance stakeholders will be interacting with a largely unknown group of adjudicators as only three have had experience resolving disputes at FSCO.
  • LAT is committed to resolving most (90%) disputes within six months.

What happens to FSCO?
Applications for mediation, neutral evaluation and arbitration have not been accepted since March 31, 2016. A mediation, arbitration, court proceeding, appeal, variation or revocation that was commenced before April 1, 2016 may be continued at FSCO after that date. If a mediation fails before April 1, 2016 , an application for arbitration can only be made to the LAT on or after April 1, 2016. Applications to the Director of Arbitrations – for appeals, variation or revocation – may only be made where the application for arbitration was received by FSCO before April 1, 2016.
How does LAT work?
Since there is no longer mandatory mediation, an applicant will be able to apply for arbitration following the denial or termination of statutory accident benefits. The applicant (an insured or insurer) files an Application for Arbitration with LAT. The other party files a response.
It is intended that all procedural issues, lack of production, or failures to attend insurer examinations are to be dealt with upfront by the Registrar. LAT may dismiss an application without a hearing if (1) the claim is an abuse of process, (2) the matter is outside the Tribunal’s jurisdiction, (3) the statutory requirements for bringing the application have not been met, or (4) the party filing the application has abandoned the process. This is a significant departure from the FSCO process which included preliminary hearings. However, if LAT is reluctant to dismiss these applications, then the gatekeeper function, envisioned by Justice Cunningham, will not be put into practice.
The first step in the arbitration process is a case conference. This is the settlement meeting described in Justice Cunningham’s report. It must take place within 45 days of the date LAT receives an application. The case conference is analogous to a FSCO pre-arbitration meeting except most will take place over the phone instead of in-person. Prior to the case conference, the parties are required to outline the documents to used at a hearing, any production issues, the preference for the type of hearing (written, video/telephone or in-person), a list of witnesses and details of the most recent settlement offer.
Should the dispute not be resolved at a case conference, then a hearing will take place within 60 days. The type of hearing will be decided by the adjudicator at the case conference. Decisions will be issued within 30 days for written hearings, within 45 days for video/telephone hearings and 60-90 days for in-person hearings.
Lingering concerns
There is no LAT appeal process other than the possibility of a reconsideration by the Executive Chair of SLATSTO if there is a clear error that was made by the adjudicator. Appeals based on merit are not available. A party can apply for judicial review where there is a question of law.
Is this a significant departure from the FSCO process?
 The simple answer is yes. But how much different can only be determined over time. The forms and practice rules are simpler. In an attempt to create a different culture, very few FSCO arbitrators have been appointed to LAT. Some see this as a good thing while others are concerned. But it does add an element of uncertainty for an initial period. 
There are other elements of the new process to be concerned about. Justice Cunningham recommended the creation of statutory timelines and sanctions regarding settlement meetings (case conferences), arbitration hearings and the release of arbitration decisions. He felt that there need to be strict adherence to timelines and that creating statutory obligations was the most effective way of accomplishing this. However, no statutory timelines have been created and instead LAT will manage timeline requirements. This is essentially how things existed at FSCO. What will happen if the parties are not ready for a quick hearing? Will adjournments become common occurrences? Stakeholders will be waiting to see if the promised timelines will be met or erode over time.  
In response to criticism of FSCO practices in conducting mediations, Justice Cunningham recommended that settlement meetings (case conferences) be conducted in-person or by video conferencing. He rejected telephone meetings.  LAT will predominantly be conducting case conferences over the phone. Considering that FSCO pre-arbitration meetings are in-person, this is really a step backwards.
Justice Cunningham wanted hearings to follow three streams: paper reviews, expedited in-person hearings and full in-person hearings. He recommended criteria be adopted to determine which stream a case falls under. Those criteria have not been adopted. Instead, the LAT adjudicator will exercise his or her discretion to determine the format of a hearing. At FSCO, similar discretion existed but all hearings were in-person.  Although LAT has suggested that many hearing will be paper reviews, will stakeholders pressure adjudicators to provide more in-person hearings? 
A number of other recommendations by Justice Cunningham seemed to have been abandoned. The settlement of future medical and rehabilitation benefits were to have been prohibited until two years after the date of the accident. The SABS have not been amended and settlements will still be permitted one year after the date of the accident. In addition, every insurer was to establish an internal review process as the first step in the new dispute resolution process. It does not appear that all companies have established an internal review process.
A lot of time and effort has gone into creating the AABS at LAT to replace the dispute resolution process at FSCO. One of the problems identified by Justice Cunningham has been the culture surrounding the previous system.  LAT has made a considerable effort to create a new culture. However, the new adjudicators will be dealing with the same clientele and will need to interpret the same complex and frustrating statutory accident benefits. It will take some time to determine how much different the new system is.


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Rick Tompkins, a suburban Toronto insurance broker, never considered a career in politics until a good friend, who happens to be the leader of the Conservative party, asks him to run for office. He accepts the offer, with the understanding that he would probably not win, but can use the opportunity to gain some visibility for himself and his business. Jerry Switzer, a veteran party worker, is sent in to guide Rick through a campaign in a riding that hasn’t elected a Conservative in years. Rick fumbles his way through the election campaign and manages a surprise win but at the expense of saddling his party with an impossible commitment. What makes matters worse, Rick is anything but politically correct. He offends everyone in his path and stumbles from one political scandal to another. Still, Rick has one saving asset: a political party machine that is able to spin scandals to its advantage.

Ontario Auto Insurance Rates Remain Chronically High

FSCO’s latest quarterly rate approval numbers have been released and suggest that consumers will see very few savings the statutory accident benefit cuts that became effective on June 1.

FSCO approved 14 private passenger automobile insurance rate filings during the second quarter of 2016. These 14 insurers represent 30.06% of the market based on premium volume. Approved rates increased on average by 0.33% when applied across the total market. This follows the modest 3.07% reduction in approved rate filings in the first quarter of 2016.

The end of lower rate filing approvals indicate that the any savings derived from the recent reform package are small. A portion of the savings could be wiped out before the end of the calendar year if companies continue to file for increases. 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 9.84% when applied across the total market.

Product reforms have proven to be an ineffective tool for controling 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.

Insurance News – Saturday, February 28, 2015

Here are the leading auto insurance headlines from ONTARIO AUTO INSURANCE TOPICS ON TWITTER for Saturday, February 28, 2015:

  • The average auto insurance premium in Brampton is $2.393, the highest for Ontario cities, likely the highest in Canada.
  • Lower gas prices will likely lead to more kilometers driven, more accidents and higher auto insurance rates.
  • The U.K. is positioning itself to be the best jurisdictions for testing driverless cars with no geographic limits to test, no additional insurance requirements and no special licenses. Meanwhile Ontario has been taking over a year to decide what the rules should be.
  • Old case but it show you how sophisticated staged accident rings can be. Peel police officer convicted of producing fake accident reports.
  • It was only a matter of time, Geico is launching an insurance product for Uber and Lyft drivers in Virginia.
  • Technology companies such as Google and Apple are unlikely to become mass car manufacturers, even if they have the potential to disrupt an industry increasingly focused on software and automated driving.

Insurance News – Friday, July 22, 2016

Here are the leading auto insurance headlines from ONTARIO AUTO INSURANCE TOPICS ON TWITTER for Friday, July 22, 2016:

  • A prominent Toronto lawyer who pursued a frivolous action on behalf of a client was found personally liable Tuesday for the legal costs.
  • What will your car have to do for the police to pull you over when you’re in an autonomous car?
  • In the U.S., being on the lower end of the wage scale can mean paying much more for auto insurance, even for good drivers.
  • As self-driving cars change transportation, how will infrastructure adapt?
  • Details on the first self-driving car death involving Tesla S using autopilot.
  • Ontario’s program to allow testing of self-driving cars on public roads has not received any applications since it launched January 1,

Insurance News – Friday, April 29, 2016

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

  • The driverless car revolution is taking the world by storm, but Canada has been slow to join. Only one Canadian province, Ontario, has allowed autonomous cars to be tested on its roads.
  • Self-driving cars are at the mercy of crappy roads where it is common to see faded lane markers, missing signs and other side effects of our aging roadways.
  • It looks like Toronto will have separate rules for taxis and ride-sharing companies.
  • The next step in autonomous vehicles:  Toyota’s ‘guardian angel’ self-driving vehicles allows drivers to control vehicles until they mess up.  Then the vehicle takes control from the driver to prevent a crash.
  • There are rumours circulating that the Tesla 3, which will be available beginning March 2018, will be the first truly self-driving car.
  • Uber, who has largely introduced the ability to measure usage in miles not months, has led to the creation of new models.