Standing Committee on General Government - April 15, 2013 - Automobile insurance review

I've provided some highlight of the first day of hearings last week on auto insurance by the Standing Committee on General Government.  Full transcripts are available here.

Financial Services Commission of Ontario

Philip Howell

Tom Golfetto

• With respect to the mediation backlog, all files will be assigned to a mediator by year-end which will eliminate the backlog
• The average accident benefit claim costs are higher in Ontario because maximum benefit levels for comparable accident benefit coverages in other provinces are less generous or unavailable.
• There’s absolutely no question that there is some rate reduction room in the system. It varies quite a lot by company.
• If every company had to cut rates by 15% next year without any corresponding reduction in costs, there would be many companies that would be effectively put out of business or would at least have to go to their investors and ask for a significant infusion of capital in order to remain in business.
• Clarified that the 2010 reforms produced $2 billion in reduced claims cost but not $2 billion in additional profits.

Insurance Bureau of Canada

Ralph Palumbo

Barb Taylor

Joe Cheng

Neil Parkinson

Pete Karageorgos

• Two actuarial reports commissioned by the IBC show that the proposed 15% premium reduction would basically exceed any profits the industry had made and put the industry in a loss situation.
• Claim costs were lower fully by $1.6 billion just on a straightforward calendar-year-to-calendar-year basis between full year 2010 to 2012.
• Underwriting losses were substantially reduced, but not eliminated, to $655 million in 2012 and when you allocate investment income to it, the industry has achieved a small and positive return for 2012: about 3.3%. Effectively, it was break even in 2011 according to KPMG.
• GISA data cannot be used to measure profitability.
• There is an explanation for the difference in claims costs from 2011 and 2012.  JSCP indicates and increase of $300 million and KPMG indicates of drop of $198 million.  JSCP’s calculation is principally driven off premiums and KPMG is driven off capital and claims reserves. So there is a difference in investment income; there are some other differences in allocation and estimates.

 

Independent Brokers Association of Ontario

Rick Orr

Randy Carroll

• Concerned that a 15% rate reduction would make the industry unprofitable and impact on availability similar to what was going on prior to 2010.  Drivers would be forced into the Facility Association.
• Rates have not been coming down because of uncertainty in the market due to lack of progress around changes to the definition of catastrophic impairment and the mediation backlog.  Uncertainty has now increased because of the proposed 15% rate reduction.
• There is a growing risk if the insurance companies continue to buy brokerages and remove the independents from the market.

Ontario Trial Lawyers Association

Andrew Murray

John Karapita

• Should consider using profits to provide better protection to accident victims. The minor injury cap should be increased from $3,500 but if the money in the system is used to reducing premiums then it won’t happen.
• Dispute resolution can be sped up if you improve the ability to fail those mediations where it’s clearly obvious that the dispute is so large or the gap is so wide that it’s not amenable to a mediated resolution.
• Should consider hiring some of the outsourced mediators if they’re working well, to clear through the backlog, and then, having tackled the backlog, keep them on to stay ahead of the wave.
• Provide greater flexibility for those cases where the mediation is not well suited to actually resolving the file with a lump-sum settlement.

Canadian Automobile Association

Elliott Silverstein

Matthew Turack

• From an auto insurance perspective, regulation of the towing industry will not only help further the industry’s image; it will help prevent the tow truck industry from being used by other industries where fraud is already prevalent. Through regulation, the industry would also include a code of conduct, safety standards, training and proper oversight, not to mention consumer protection as well.
• CAA has conducted a pilot of a telematics product and surveyed its participants with an overwhelmingly positive response. The results showed that of those surveyed, 43% would consider enrolling in a telematics-driven product if they received a discount on their auto insurance. Also important to highlight is that 11% of those surveyed would enrol in a telematics program without any incentives or discounts whatsoever.
• We have seen an impact since the reforms in 2010 on the accident benefits side of the business, as well, we’ve also seen a shift, and continue to reserve as such, to the bodily injury side, from accident benefits claims to bodily injury claims.
• If we took a 15% rate reduction in a one-year period of time, it would put us into a negative underwriting profit position and it would mean that we would have very small, if any, returns from the insurance company.

Ontario Rehab Alliance

Laurie Davis

Patricia Howell

Nick Gurevich

Justine Hamilton

• The quantum of benefits seems to be too low. At $3,500, our current system offers the lowest level of protection in Canada to about 80% of all victims who, since the 2010 reforms, are deemed to have sustained a minor injury.
• Would like to see a licensing process for health care facilities that focuses on owns the business that provides the service, because the providers are largely regulated.
• Would like a person to be designated as a clinical director within a practice, and that has to be a regulated provider.
• The $2,000 assessment cap creates a situation where low cost assessments are overcompensated and complex assessments are undercompensated.
• Concerned that when the Task Force recommendations get implemented, additional barriers to access treatment are created because the early recommendations that have been implemented seem to be headed in that direction.