By RICHARD J. BRENNAN
Special to SAF
Finance Minister Charles Sousa has said it will be another two years before Ontario motorists enjoy a promised phased-in 15 per cent auto premium reduction.
Sousa told a new conference that it can’t be done in any less time because of other things that have to occur first, like tackling fraud.
“We have targeted an 8 per cent reduction in the first year and a full 15 per cent within the second year. We believe there are cost savings in the system right now for immediate reductions,” Sousa said, noting that effective immediately insurance companies will be expected to phase in the reductions.
The insurance industry representing more than 100 companies quickly responded that it can’t be done in two years without further cuts to benefits, including payouts for catastrophic injuries.
The promised reduction — averaging $225 a year — was included in the minority Liberal government’s May budget in order to the get the New Democrats to let it pass. However, the NDP wanted it to be fully implemented in one year.
The issue of high auto insurance rates is an especially emotive one in the Peel Region — and Brampton — where rates are possibly the highest in Canada.
NDP transportation critic MPP Gilles Bisson said: “Drivers in Ontario deserve a break on their auto insurance premiums now, not in two years. The Liberals know that it’s perfectly reasonable to get drivers relief a lot faster. New Democrats have been clear since day one: drivers deserve relief now.”
The New Democrats insist the auto insurance industry can afford to do it now given that it was a given a $2 billion windfall in 2010 when the Liberal government dramatically trimmed accident benefits the insurance industry pays out.
Sousa said the strategy to reduce premiums includes providing the superintendent of Financial Services Commission of Ontario — the insurance regulator — with the authority to require that insurers file new rates beginning in January. He said independent experts will monitor how quickly the savings are being passed along to consumers.
“The industry… knows that we have got to do better,” he said, adding that the Liberal government has already, in some cases, reduced the return on equity for insurance companies.
Ontario motorists pay the highest premiums in Canada, especially the Greater Toronto Area, which is plagued with auto insurance fraud. The average motorist pays about $1,500 a year for car insurance.
Rates have been deemed to be even higher in the Peel Region.
“It’s time for all drivers to stop paying for those who take advantage of the system. Going forward we will continue to take further action (and) all additional necessary steps to ensure Ontarians are benefitting from the savings of our strategy,” Sousa said.
New anti-fraud measures came into effect June 1 in response to reforms recommended earlier by the Auto-fraud Task Force.
“The cost of claims in Ontario is literally 10 times more than any of the provinces. That’s the underlying problem that we have that we must address,” Sousa said, adding that some of the measures taken have reduced some rates already.
Sousa said the province will achieve the 15 per cent reduction by:
· Providing the superintendent of Financial Services the authority to require insurers to refile rates;
· Cracking down on fraud, including licensing health clinics that invoice auto insurance companies;
· Exploring other cost reduction initiatives, including provincial oversight of the towing industry and collision repair shops; and
· Requiring insurers to offer discounts to motorists with safe driving records.
Immediately after Sousa spoke to reporters, Ralph Palumbo, vice-president Ontario, Insurance Bureau of Canada, said such a reduction may require slashing the payouts for catastrophic injuries.
“We’re hoping that they (government) quickly introduce a new definition of catastrophic impairment. If you want to see some rate reductions, that’s the place to start to make sure that unnecessary costs related to catastrophic injuries are taken out so that money goes to people who really need it,” Palumbo said.
“We don’t believe what’s in the budget alone will get you to 15 per cent reduction in a responsible way.”
He argued that Ontario auto insurers had been registering a loss in the period 2008-2010, with claims payouts led by Brampton and the Peel Region also being very high as compared to claims filed for comparable events elsewhere.
It was only subsequently that the sector had again started making money for insurers, he further claimed.
Surprisingly, Sousa also said the government, in an effort to cut costs, would entertain changing the definition for catastrophic impairment but was not specific.
Toronto injury lawyer Sandra Zisckind jumped on the insurance industry for suggesting the people who are the “worst injured in society” should receive less so insurance companies can make more.
“I am concerned that the dialogue with the IBC and the government keeps coming back to the same thing: ‘How are we going to cut victims rights as opposed to how are we going to cut profit for the insurance companies,’” Zisckind told reporters, adding she also couldn’t understand why it would take two years to reduce the premiums.
“In 2010 they already cut rates down from $100,000 to $3,500. They (the companies) saved billions of dollars over the last two years.”
Sousa also noted that former judge J. Douglas Cunningham has been appointed to look into how the backlog in the insurance dispute resolution system can be streamlined. About a year ago there was a backlog of almost 30,000 applications.
— Torstar News Service
— With inputs from Sunil Rao/SAF