Where do you think the rates will go if companies remain unprofitable and possibly pull out of the Ontario auto insurance market? This could be a very real possibility. It has already happened on the east coast. The current Ontario auto insurance product is broken. It does not need another band aid effort to fix it, it needs a complete overhaul.
Currently bill 42 has been introduced by MPP, Mr. Parm Gill and passed it’s first reading in parliament on October 5, 2018. Mr Gill is from the Milton area and is proposing that the government no longer allow insurance companies to rate their auto product based on postal code and telephone area code. This is a bad idea. This would drive rates up for anyone not living in the greater Toronto area while lowering the rates for someone living in this area whom is at a much greater risk of being in an accident, have their vehicle stolen, or become a victim of insurance fraud. Insurance rates are a balancing act where consumers purchase protection for their own possible risk of a claim. What data has proven is that it is much more risky to drive in the GTA as opposed to a rural are in Ontario for example.
We do not need a change like this!
We need to look at the entire auto product. This includes the fraud that is running rampid in the business but also eliminating things like red tape and the ability for lawyers to drag things out costing the industry millions of dollars which never actually make its way back into the hands of the actual injured individual.
The previous government hired an independent consultant to take an in depth look at the industry and find its flaws. This is the 101 page “David Marshall Report”. It is a complete report stating how the current system and coverages work and a number of viable solutions that can improve the product, system operations, and ultimately give us a cheaper, more affordable product.
Did you know?
Fraud is a major issue when it comes to Ontario auto insurance.
In fact, it is estimated that fraud costs the industry between $800,000,000 and $1,600,000,000 each and every year. Criminals have become very organized and many staged accidents occur on a regular basis. They have tow truck companies, body shops, medical facilities and even legal professionals involved. Money needs to be spent to help curtail this type of situation.
We have the most generous accident benefits available.
This is the portion of the policy which would pay you in the event that you had any type of physical injury to you or any passenger in your vehicle. Our medical facilities and professionals are allowed to charge insurance companies more money per visit, examination, etc then you would ever pay if you were to enter their office on your own accord. Sometimes as much as 3 times their regular rate.
This does not make sense. We should have definitions of injuries and set payouts for each type of injury and treatment needed.
An example of our flaws here in Ontario.
A similar accident benefit needed across Canada and the difference in the payouts. In Ontario, the claim cost approx. $31,000.00. In Alberta, the pay out was $8,600.00. In Atlantic Canada, the pay out was $3,700.00, How does this make any sense? This is your money being wasted. These are just a few examples of what is wrong with our system. We need to urge our government (your local MPP) that we no longer want quick fixes that in the end have no impact on the ever rising auto rates in Ontario. We need a complete system overhaul. We need them to look at the David Marshal report and take action. (Even if it was the previous government that was responsible for it.)
Some recommendations coming out of the report are:
- The government needs to fix the structural flaw in the system by setting up an arm’s
length regulator with a skills based board. This is actually underway currently and will be known as FISRA (Financial Services Regulatory Authority in Ontario.) We need to
encourage the government to actually allow FISRA to go ahead and complete their tasks without red tape.
- Compensation for catastrophically injured persons needs to be substantially changed. Cash settlements are being drained currently by legal fees as opposed to the money getting to the injured individual for their care.
- The system needs to adopt a “care not cash” approach focusing on appropriate medical care not cash settlements. Investment in research diagnosis and treatment for mental stress and other neurological injuries are needed. This will help avoid disputes as to what care is appropriate. Legislation providing for care should be introduced as opposed to a cash payout. This would shift the focus to the patient rather than a settlement where a lawyer can make a large sum for their services.
- The current regime of heavy regulation and price control is poorly suited to adapt to the future. More open systems need to be explored allowing insurers to introduce new
consumer products and compete more freely on price and services. It is a misconception that insurance companies set the auto insurance rates. It is actually the responsibility of a regulatory agency tied to the Ministry of Finance. FSCO (The Financial Services of Ontario) Their objective is to share the cost of claims proportionately across accident
and claim patterns. Currently the system generally rates a higher risk with a higher premium. This why certain areas, age groups, vehicles, etc. in the province pay higher
rates for their auto insurance currently. This is the basis of risk-based pricing.
- There should be new investments in health care particularly for brain and mental injuries such as chronic pain. Access to early, appropriate health care should be made readily available. Disputes could be significantly reduced saving billions of dollars in the courts.
What can you do?
Contact your local MPP and urge them not to pass bill 42.
This is not a solution but disaster waiting to happen. Demand they take responsibility and change a broken system, not put yet another band aid on a system that has been failing for years. We need to ask them to support and work with FISRA as they establish themselves as a relevant authority.
- Speak with your broker. Here is a list of the Zehr Insurance Brokers.
- Visit the IBAO’s (Insurance Brokers Association of Ontario) website.
- Check out the David Marschall report Fair Benefits Fairly, which delivered a review of the Auto Insurance System in Ontario.