Blog Layout

Ontario auto insurance: How much worse can things get for victims?

May 23, 2014

Ontario auto insurance: How much worse can things get for victims?


Changes in 2010 created windfall profits for insurers by slashing coverage for the vast majority.


We need to restore fairness and impose a moratorium on further reductions in coverage!


In September 2010, the Ontario government introduced sweeping changes to auto insurance in response to pressure from the insurance industry to contain injury costs despite the industry’s long-standing failure to address systemic fraud in the system.


The MIG: Minor Injury Guideline for victims


The main feature of the so-called reforms was the MIG – the Minor Injury Guideline. What did it mean? Coverage for the vast majority of policyholders was slashed from $100,000 for medical and rehabilitation treatment to the paltry level of $3,500 maximum for medical and rehab needs following an accident. The MIG currently captures up to 75 per cent of all accident victims in Ontario, often without regard for the seriousness of the injuries involved. OTLA members report that many clients in the MIG typically exhaust their maximum benefit of $3,500 very quickly, leaving them without access to needed treatment. Clients are often forced in the Minor Injury category despite having injuries that could not reasonably be considered as “minor” e.g. serious fractures and brain injuries.


The MIG: Major Income Generator for insurance companies


It’s really no surprise what happens when premiums are increased and insurance payments are dramatically reduced for most injured accidents victims. In fact, the “good news” for insurance companies started to become apparent almost immediately. Here’s what one insurance CEO quipped, perhaps a bit too candidly, mere months after the changes:


“We are starting to see the benefits of the 2010 auto reforms in Ontario, which is combining with our recent focus on proactive broker management and underwriting discipline to generate stronger results.”


The early trend that this CEO was talking about here materialized and, by the end of 2012, total auto insurance claims were down more than 20 per cent or a reduction of $4 billion. The tally for auto insurers was more than $3 billion in profits in the first two years following the 2010 changes. Early indications for 2013 indicate that auto insurance companies in Ontario continue to enjoy strong results to this day. It should come as little surprise to anyone that insurance companies are doing extremely well under this model: then again, you can’t lose when you’re charging more and paying out a lot less.


Ontario, now the worst coverage in the country


As a result of the September 2010 changes, Ontario emerged as the only jurisdiction in the country with a special category of insurance for so-called “minor” injuries. And, significantly, Ontario has the lowest level of compensation for this category of injury. Even the insurance industry’s own data supports this contention with average claims payouts down dramatically from previous levels and more claimants than ever being captured by the MIG.


But how much worse can things get for victims?


Once again, columnist Alan Shanoff has documented the steady slide in coverage over the past few years in Ontario. Read his comments here. He ends his article this way:


“One thing is certain. The current system can’t get much worse for accident victims. Victims need timely, adequate accident benefits even more than they need premium cuts.”


Help make things better for victims!


As a candidate, here’s how you can help ensure that the system doesn’t get any worse for victims:


Demand that your party impose a moratorium on further auto insurance coverage reductions

It’s time for our politicians to stop worrying about how to allow insurance companies to make more money, and start concerning themselves with how to restore fairness in our automobile insurance system.

a woman is sitting at a table counting money .

Ontarians Have Overpaid for Their Auto Insurance by over 3 Billion Dollars

May 11, 2015
We are paying something for nothing. The mandatory accident benefits policy in Ontario provides minimal coverage for the vast number of people injured in car accidents . Presently, over 90% of victims are restricted to payment of a maximum of $3,500.00. They are forced by law to pay hundreds if not thousands of dollar PER YEAR for this coverage. Ask yourself. Would you voluntarily pay $1,000.00 per year of $3,500.00 worth of life insurance? Of course not. But the Government of Ontario forces you to pay for this very poor product. It’s time to speak to your Member of Provincial Parliament. See the full facts here. http://truthaboutinsurance.ca/drs-lazar-prisman-report/

Ontario Budget a Disaster for Anyone Injured in or by a Motor Vehicle

May 11, 2015
The Ontario Trial Lawyers Association has prepared a series of blogs identifying current issues with the recent budget and how it impacts people injured by Motor vehicles. Please read the full blog here. http://otlablog.com/hidden-costs-of-the-provincial-budget/ Part One of a Three-Part Series on the 2015 Ontario Budget Last month, the Ontario Liberal government revealed its latest budget entitled “Building Ontario Up” but what it does to our auto insurance benefits is actually the opposite by significantly slashing benefits available to accident victims. This follows promises that tout more affordable insurance but do not disclose the true cost to those who find themselves in need of the coverage now, and those who will unfortunately need the protection in the future. The rationale of the Liberal government is that the reduced benefits will lower claim costs which will then be passed on to the consumer in the form of savings on premiums. A promise to reduce rates by 15% was made about two years ago but in reality, and by their own admission, has not been realized. It is estimated that since 2013 rates have decreased by only about 7%, and many of us still have not seen that reduction. On the other hand, the cuts to benefits will be effective immediately once the budget is passed. The reduced premiums come at the cost of a 50% slash to (or total elimination of) many benefits that were once part of mandatory insurance coverage prior to the 2010 reforms. The erosion of available benefits is disproportionate to any rate decrease and is unfair to consumers. According to the Liberal budget, “…costs in Ontario’s auto insurance system remain too high,” While a reduction in claim costs is welcomed by consumers and stakeholders alike, it can be achieved through other means. For example, as discussed on the OTLA blog following the release of Justice Cunningham’s review of the Dispute Resolution System late last year, insurers spent thousands of dollars on Independent Medical Assessments which account for roughly 25% of total health claims expenses. Despite this, the Liberal government made the choice to save costs by reducing available benefits rather than regulating insurer practices. The insurance industry has been crying poor through persistent lobbying (that also comes at a great cost), while profits have been on the rise since the initial cuts began in 2010. The latest benefit cuts will surely continue to boost these margins. Data released by the General Insurance Statistical Agency (GISA) suggests a dramatic reduction in Accident Benefit claims from $3.8 billion in 2009 to a low of $1.9 billion in 2012. While claims over the past year were projected to rise to $2.2 billion they are still down overall. This has allowed insurers to reap massive profits at the expense of those who need it most: accident victims. Profits remain high, payments to claimants remain low, and benefits are further restricted with trivial savings that may never end up in the consumer’s pocket. What additional cuts can we expect from this budget? The budget combines the medical and rehabilitation benefit which currently offers $50,000 of coverage and the attendant care benefit which currently offers $36,000 of coverage into one cumulative coverage limit of $65,000 – a reduction of more than $20,000. In the case of the catastrophically injured, attendant care and medical and rehabilitation benefits have been reduced from $2 million to a combined total of $1 million. This begs the question: is a 50% reduction in benefits worth a 7% reduction in premiums to some consumers in Ontario? The real kicker is that Ontario NDP leader Andrea Horwath – whose party propped up the Liberal minority in exchange for the 15% reduction to auto premiums – has publicly opposed the proposed changes stating, “…if you are talking to the insurance industry, they are going to try to paint it in a way that looks like they are really struggling. I don’t think anyone in this room believes that for a minute and I certainly don’t.” She went on further to say that “…in 2010 the (Liberal) government made changes to the policies around insurance and all that did, instead of creating an opportunity for reductions, is it created an opportunity for insurance companies to pocket more money.” So what has the Liberal government and the insurance industry offered the public in exchange for the slashing of benefits? A mandatory discount for winter tires. Think about that the next time you’re shopping for a set of Michelins. This blog post was contributed by Michael Giordano, Junior Partner and Monty Dhaliwal, Associate Lawyer of Sal Guzzo LL. B.
Insurer Financial Data

Red Flags Raised over Insurer Financial Data

May 6, 2014
The following article appears in the Law Times In response to complaints that insurance industry financial details are impossible to pin down, the Ministry of Finance commissioned a report on transparency and accountability in the sector but perhaps surprisingly chose the accountants for the Insurance Bureau of Canada to prepare it. On April 14, the interim report became the first of three reports from financial consulting firm KPMG LLP as part of the auto insurance cost- and rate-reduction strategy. It will deliver the annual reports in August of each year of the strategy. Only months earlier, however, KPMG had done work for the Insurance Bureau of Canada to support its position that profitability is low despite the reforms of 2010. A year before that, KPMG had done work for the same organization to support a very large estimate of the cost of fraud to the insurance industry. “How can you hire the IBC’s accountant and financial advisers to do a report that is supposed to be independent?” asks Adam Wagman of Howie Sacks & Henry LLP. “Not only don’t they try to steer away from the apparent conflict, they dig right into it by repeating conclusions formed as part of doing work for them. How can that possibly be right?” Nick Gurevich, president of the Alliance of Community Medical and Rehabilitation Providers, echoes that sentiment. “The selection of the consultant is unusual given how much work they have done in the past for the IBC. They are clearly a very capable global accounting firm with a stellar reputation, but there are plenty of comparable accounting and consulting firms that could have done it without such ties to the IBC.” In response to the concerns, KPMG would only say it was the government that requested the report and it’s only obligation was to it. Wagman suggests the province’s auditor general would be a truly independent party. “I can’t imagine the auditor general coming out with an interim report that parrots the recommendations of one stakeholder. Whether or not I like what they would have to say, I would accept that they have done it independently.” The report itself is highly technical and repeats insurer arguments as to why there’s uncertainty in the figures without making any attempt to independently ascertain what they are. “I read it until my brain began to bleed,” says Wagman. “If the goal is transparency and accountability, then I ask: transparent and accountable to whom? I don’t think there’s anyone in government who would understand it either. The 10 actuaries in the province might understand what they’re talking about, but it reeks of bias and lack of objectivity.” He continues: “The purpose, dating back to the budget, was to look at the financial and economic impact of the reforms. Is there one mention of profitability? To the extent that it does talk about return on equity, it refers back to the report last year about insurance performance. There are no actual dollar figures and they fail to mention that those findings came out in a report commissioned by the IBC.” Gurevich suggests the report in general lacks objective verification. The information relied on comes from financial statements and survey results prepared by the insurance companies and the General Insurance Statistical Agency as well as certain financial and return assumptions provided by the Financial Services Commission of Ontario. “All you see is a regurgitation of information provided by the insurance industry without KPMG going in and verifying it independently. Much of the report refers to estimates and what the figures could be or might be.” Gurevich believes the lack of certainty was the catalyst for commissioning the report in the first place. “The entire point of this process is to assist the government and members of the opposition who feel they don’t have a good grasp on the financial state of the industry. What was needed was an objective third party to go in and verify and test the numbers to tell them what the actual numbers are given that the insurance industry has a vested interest to produce overly conservative figures to generate more cost-cutting measures. It is disappointing that the report didn’t do what it was supposed to do.” Specifically, the insurer information points to an improvement in the calendar-year claim ratio of 18 per cent from 2010-11, 23 per cent from 2010-12, and approximately two per cent from 2012-13 with the 2013 claim ratio being 74 per cent. Despite this, KPMG concludes the industry is still not at the break-even point. Wagman says the percentages tell the story rather than the conclusion. “See the loss ratios. They are dropping like a hot-air balloon. If you look at how the numbers have gone, it’s been very good for them. Nobody can say otherwise. To not even be at the break-even point, they must have mismanaged their book of business so badly it boggles the mind.” The report also repeats insurer estimates of a decrease in accident benefits of 46 per cent that Gurevich says is highly suspicious. “We have seen a decrease close to 82 per cent in medical rehabilitation benefits, 77 per cent of attendant-care benefits, and almost 99 per cent of housekeeping and caregiver benefits. That insurers claim they are only seeing a 46-per-cent decrease is very suspect. The benefits are just not there, so it doesn’t make any sense.” The interim report acknowledges that KPMG sought no other input apart from insurance industry players and declines to make recommendations until it has sought input from other stakeholders “who may have a different perspective to share with the government.” Wagman says he almost laughed out loud at that point. “It’s almost tongue-in-cheek to say others may have a different perspective. They clearly know full well that others have a very different perspective.” Wagman also feels that by repeating the insurers’ recommendations and then discussing them at length, the report gives credence to them. “If they needed to do more work to study the current financial viability of the industry, why list the recommendations of insurers? It’s a very shotgun approach.” Gurevich suggests insurers have good reason to paint a very bleak picture of their financial position. “This data should be carefully scrubbed, verified, and tested and not just be a repetition of what the insurers say. The nine million drivers and 65,000 accident victims each year who will rely on the findings deserve much more than just taking the insurance industry’s word at face value.”
Share by: