Ontario’s Auto-Insurance Problem

Ontario Chamber of Commerce calls on the Province to implement changes to auto insurance system

Last Friday, Richard Koroscil, Interim President and CEO of the Ontario Chamber of Commerce issued the following statement, on the Ontario government’s consultations on the Ontario’s auto insurance system.

“Today, the provincial government wraps up a series of consultations on the future of Ontario’s auto insurance system. The consultation stems from an April report commissioned by the Ontario Ministry of Finance that offered a damning indictment of Ontario’s auto insurance system.

“Written by David Marshall, the former head of the Worker Safety Insurance Board (WSIB), the report, Fair Benefits, Fairly Delivered, describes Ontario’s auto insurance system as ‘one of the least effective’ and most expensive in Canada. That’s the bad news.

“The good news is that Mr. Marshall’s report provides a path forward that, if implemented, should lead to lower premiums for Ontario drivers without any reduction in the current level of accident benefits. Marshall says Ontario drivers on average pay $1,458 for auto insurance, while the average for the rest of Canada is just $930. This $500+ spread suggests there is something about Ontario’s auto insurance system that is incredibly off the mark.

“According to Marshall, despite having the safest roads and a total injury rate that declined 44 per cent since 2002, Ontario saw its accident benefit and bodily injury costs increase by 26 per cent in the same time period. The question is why?

“Marshall’s answer: high transaction costs plague the system. Each year about one third of benefit costs, some $1.4 billion, is being paid for competing expert opinions, lawyers’ fees, and insurer costs to defend claims – instead of going to treatment of injured parties. As he recommends, claimants would be better served, and system costs reduced, if health assessments were conducted by an independent expert whose decision was binding. Both the province of Alberta and the WSIB have a process by which an injured person is referred to an independent expert. Marshall recommends that a similar model should be adopted for Ontario’s auto insurance system.

“Marshall concludes that Ontario’s complex, adversarial system focuses on cash benefits, creating the kind of incentives for stakeholders that fail to put the injured person’s best interests first. As a result, Marshall says there is a value gap because, “no one in the system is actively managing medical care for accident victims? they are taking longer to recover and many report that they have developed permanent impairments from simple soft tissue injuries.”

“The inefficiencies in Ontario’s auto insurance system place Ontarians and Ontario businesses – particularly those in the transportation sector – at a competitive disadvantage. High auto insurance rates, whether commercial or personal, represent a rising input cost for our members. Years of changes to the private passenger auto insurance system by governments of all stripes have done little to halt the steady increases in premiums.

“We are increasingly worried that future increases in auto insurance premiums, whether commercial or personal, will be compounded by other rising costs faced by our members, including but not limited to upcoming changes to Ontario’s employment and labour laws.

“Lower costs lead to lower premiums. David Marshall’s recommendations to lower costs in the auto insurance system will narrow the gap between what Ontarians pay in auto premiums relative to their peers elsewhere.

“That is why the Ontario Government needs to move quickly on the proposed changes within Marshall’s report, with particular emphasis on those recommendations that will make auto insurance more affordable in the short term for Ontario drivers.