MAIN HEADING: Automobile Insurance Transparency and Accountability Expert Report - 2014 Annual Report

Final Release: November 7, 2014

KPMG
Insurance Industry Practice
Property & Casualty Actuarial Services

This document has been prepared by KPMG for the Government of Ontario (Government). KPMG neither warrants nor represents that the information contained in this document is accurate, complete, sufficient or appropriate for use by any person or entity other than the Government or for any purpose other than that set out in the Automobile Insurance Transparency and Accountability Expert Report – 2014 Annual Report. This document may not be relied upon by any person or entity other than the Government, and KPMG hereby expressly disclaims any and all responsibility or liability to any person or entity other than the Government in connection with their use of this document.

Hon. Charles Sousa
Minister of Finance
Frost Building South
7 Queen’s Park Crescent, 7th Floor
Toronto, Ontario
M7A 1Y7

November 7, 2014

Dear Minister Sousa,

It is our pleasure to submit our final report titled Automobile Insurance Transparency and Accountability Expert Report – 2014 Annual Report. This is the second of three reports that the Ministry of Finance engaged KPMG LLP to prepare as per the Auto Insurance Cost and Rate Reduction Strategy that was part of the 2013 Ontario Budget.

We look forward to working with the Ministry of Finance to prepare the 2015 Annual Report.

Sincerely,

kpmg stamp

Table of Contents

  • 11 Appendix E – Statutory Accident Benefits Schedule Summary
  • List of Tables

    • Table 1.1: Summary of Estimates of Claim Cost Trends and Reforms Impacts by Main Coverage
    • Table 4.1: Representative Stakeholders invited to participate in the 2014 Annual Report Survey
    • Table 5.1: Summary of Estimates of Claim Cost Trends and Reforms Impacts by Coverage
    • Table 5.2: Post-Reforms Approved Rate Changes for the Entire PPA Insurance Market
    • Table 5.3: Estimated Change in Claim Costs by Coverage (Interim Report Survey Results)
    • Table 5.4: Estimated Change in Claim Costs by Kind of Loss.
    • Table 5.5: Weighted Average Approved Rate Changes since the Reforms by Effective Year and Coverage
    • Table 11.1: Statutory Accident Benefits Schedule Summary

    List of Figures

    Glossary

    AB: Accident benefits coverage.
    AB-DB: Accident benefits death benefits coverage.
    AB-DI: Accident benefits disability income coverage.
    AB-F: Accident benefits funeral expenses coverage.
    AB-MR: Accident benefits medical and rehabilitation coverage.
    AB-Non DI: Accident benefits other than disability income coverage.
    AB-SUP: Accident benefits supplementary coverage.
    AIAC: Association of Independent Assessment Centres.
    AMA: American Medical Association.
    ASB: Actuarial Standards Board.
    ASP: Automobile statistical plan.
    CAE: Claims adjustment expense.
    CANATICS: Canadian National Insurance Crime Services.
    CARF: Commission on Accreditation of Rehabilitation Facilities.
    CAS: Casualty Actuarial Society.
    CIA: Canadian Institute of Actuaries.
    CIAA: Canadian Independent Adjusters’ Association.
    COL: Collision coverage.
    COM: Comprehensive coverage.
    DRSDispute Resolution System.
    FAIR: Fair Association of Victims of Accident Insurance Reform.
    FCAS: Fellow of the Casualty Actuarial Society.
    FCIA: Fellow of the Canadian Institute of Actuaries.
    FSCOFinancial Services Commission of Ontario.
    GISAGeneral Insurance Statistical Agency.
    Government: The Government of Ontario.
    GTA: Greater Toronto Area.
    HCAIHealth Claims for Auto Insurance System.
    HCDB: Ontario Health Claims Database.
    HST: Harmonized sales tax.
    IAIS: International Association of Insurance Supervisors.
    IBAO: Insurance Brokers Association of Ontario.
    IBC: Insurance Bureau of Canada.
    IME: Independent medical examination.
    ISO: International Organization for Standardization.
    MIG: Minor Injury Guideline.
    MOF: Ministry of Finance.
    MVAMotor vehicle accident.
    OFIT: Ontario Federation of Independent Towers.
    OHIP: Ontario Health Insurance Plan.
    OIAA: Ontario Insurance Adjusters Association.
    OPA: Ontario Psychological Association.
    ORA: Ontario Rehab Alliance.
    OSFI: Office of the Superintendent of Financial Institutions.
    OTLA: Ontario Trial Lawyers Association.
    PCT: Professional Credential Tracker.
    P&C: Property and casualty.
    PhysD: Physical damage coverage.
    PPAPrivate passenger automobile or personal lines automobile.
    PTAO: Provincial Towing Association of Ontario.
    RUTACRating and Underwriting Technical Advisory Committee at FSCO.
    SABS: Statutory Accident Benefits Schedule.
    SOP: Actuarial Standards of Practice.
    Strategy: The Auto Insurance Cost and Rate Reduction Strategy.
    The Council: Consumer’s Council of Canada.
    TPL: Third party liability coverage.
    TPL-BI: Third party liability bodily injury coverage.
    TPL-PD: Third party liability property damage coverage.
    TPL-DC: Third party liability direct compensation property damage coverage.
    UA: Uninsured automobile coverage.
    UM: Underinsured motorist coverage.

    1 Executive Summary


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    1.1 Purpose of the Report


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    In September 2010, the Government of Ontario (Government) introduced major reforms (Reforms) to the Ontario automobile insurance system with the intent to control insurance costs, increase choices available to consumers, and simplify processes in the automobile insurance system. Further to these Reforms, the Government initiated the Auto Insurance Cost and Rate Reduction Strategy (Strategy) as part of the 2013 Ontario Budget1 (2013 Budget).

    As part of the Strategy and with the goal to increase transparency and accountability, the Ministry of Finance (MOF) engaged KPMG LLP (KPMG) to prepare independent annual Automobile Insurance Transparency and Accountability Expert Reports (Annual Reports) in 2014 and 2015. In addition to the 2014 and 2015 Annual Reports, the MOF requested KPMG to prepare an interim report (Interim Report) to address some specific issues. The Interim Report was delivered to the MOF on April 14, 2014 and is available on the MOF’s website2. This report is the 2014 Annual Report.

    1.2 Scope of the Interim Report and Annual Reports


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    The Interim Report reviewed changes experienced in automobile insurance claim costs, rates, and premiums as a result of the Reforms and the Strategy, and discussed the action steps suggested by some of the insurers3 who provide private passenger automobile (PPA) insurance in Ontario. The Interim Report summarized quantitative and qualitative analyses that were designed to:

    • Address how PPA insurance claim costs and premiums were affected by the Reforms at the industry level;
    • Estimate the decrease in claim costs following the Reforms and provide an overview of how the decreases were distributed;
    • Determine whether any decreases in claim costs had resulted in decreases in automobile insurance rates as a result of the Reforms;
    • Comment on the effect that the uncertainty within the Ontario automobile insurance system has on the system at the industry level, particularly with regards to automobile insurance premiums;
    • Address how PPA insurance claim costs and premiums are affected by the Strategy at the industry level; and
    • Provide a progress report and suggested action steps.

    The Annual Reports are to review the impact of the Reforms and the Strategy on automobile insurance claim costs and rates, comment on the effectiveness of the auto insurance marketplace in providing affordable premiums to consumers, and where appropriate, make recommendations to the Government on further actions that may be considered by the Government and other stakeholders within the PPA insurance system to meet the Government’s claim costs and average automobile insurance rate reduction targets proposed in the 2013 Budget.

    Specifically, as agreed with the MOF, in the 2014 Annual Report we:

    • Update, based upon the most recent data available, the quantitative and qualitative analyses presented in the Interim Report to:
    • identify any decreases in PPA insurance claim costs since the Reforms; and
    • explore whether any of the identified decreases in PPA insurance claim costs have resulted in decreases in automobile insurance rates;
    • Provide consideration of recommendations for further possible actions that could be taken by the Government and other automobile insurance stakeholders to achieve the Government’s 15% average rate reduction target for Ontario PPA insurance by the end of August 2015; and
    • Consider ongoing Government initiatives and whether they will alleviate claim cost pressures within the Ontario PPA insurance system.

    We note that the Financial Services Commission of Ontario (FSCO) measured the rate reduction that has been achieved to date as a result of the Strategy. The results of this analysis were made public in a statement by the Ontario Minister of Finance4.

    1.3 Organization of the 2014 Annual Report


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    In addition to Appendices A through F, this report is organized in the following six parts:

    1.4 Complete 2014 Annual Report


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    This executive summary is an integral part of the complete 2014 Annual Report and should not be distributed separately from the entire report. The report contains critical information regarding distribution and use restrictions as well as a complete description of our approach. Appendices are included to document the findings presented in this report and to provide background. The appendices are an integral part of the 2014 Annual Report. Judgments about the conclusions drawn in this Executive Summary should be made only after considering the report in its entirety. Any use or reliance on the 2014 Annual Report by any third party is done at their own risk. KPMG will not be liable for the consequences of any third party acting upon or relying upon any information or conclusions contained in this report. We remain available to answer any questions that may arise regarding our report. We assume that the user(s) of this report will seek such explanation as to any matter in question.

    1.5 Approach


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    The following three steps were used to support the findings and recommendations presented in the 2014 Annual Report:

    • Analysis of the General Insurance Statistical Agency (GISA) data as at December 31, 20135 
    • Incorporation of the results and findings from the Interim Report, including the information collected through a survey process conducted in early 2014 involving major Ontario automobile insurers (Interim Report Survey); and
    • Summarization and analysis of the information collected through a survey directed at other stakeholders (e.g., non-insurer) of the Ontario automobile insurance system (2014 Annual Report Survey).

    1.6 Summary of the Interim Report


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    The 2014 Annual Report builds on the analysis and information presented in the Interim Report. The Interim Report was prepared using the following three approaches:

    • Analysis of property and casualty (P&C) insurers financial statements as at December 31, 2013;
    • Analysis of GISA data as at June 30, 20136; and
    • Summarization of information collected through the Interim Report Survey.

    In Appendix A, we summarize the findings presented in the Interim Report findings as well as the action steps that were suggested by insurers who participated in the Interim Report Survey.

    Due to the time constraints involved in producing the Interim Report, the Interim Report Survey was only distributed to executives from insurers providing PPA insurance in Ontario. Recognizing that other stakeholders of the Ontario automobile insurance system may have a different perspective than that presented by the insurers, it was noted in the Interim Report that the 2014 Annual Report would include consultation with additional stakeholders through a second survey process.

    The Interim Report also contains background information about the automobile insurance system. This information is not repeated in this report. Readers are referred to the following sections of the Interim Report for further information:

    • Section 1.6 Rates vs. Premiums;
    • Appendix B – Best Practices for Actuarial Involvement in the Rate Regulatory Review;
    • Appendix C – Primer on the P&C Insurance Industry; and
    • Appendix D – Actuary’s Role in the Insurance Industry.

    1.7 Independent Actuarial Analysis and Surveys


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    To assess how the Reforms affected PPA insurance claim costs and average rates at the industry level we perform an independent actuarial analysis and reviewed the responses that we received from both the Interim Report Survey and the 2014 Annual Report Survey.

    1.7.1 Quantitative Analysis of the Impact of the Reforms


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    Our independent actuarial analysis is presented in Appendix B of this report. As part of our independent actuarial analysis we analyzed the impact of the Reforms on claim costs and premiums. Based on our analysis we discuss estimated impact of the Reforms on claim cost level and claim cost trends, as well as examine changes in average premium and average rate.

    1.7.1.1 Impact of Reforms on Insurance Claim Costs

    Our analysis indicates that there is a strong inter-dependency between the estimated claim cost trends (both pre- and post-Reforms) and the impact of Reforms on claim cost levels. Consequently estimates of claim cost trends, pre- and post-Reforms, as well as the estimates of the impacts of Reforms on claim cost levels should be extracted from the same modelling approach, with the same underlying data and assumptions, and should be read and interpreted conjointly for a given coverage and sub-coverage. In other words, the impacts of Reforms on claim cost levels shown in the last column of Table 1.1 should not be used in combination with claim cost trends stemming from a different modelling approach or data source.

    Table 1.1 shows that:

    Table 1.1 : Summary of Estimates of Claim Cost Trends and Reforms Impacts by Main Coverage
    Coverage7 Trends Pre-2010 Reforms Trends Post-2010 Reforms Reforms Impacts on Claim Cost Levels8
    Total Third Party Liability and Underinsured Motorist 3.90% 4.00% 0%
    Total Accident Benefits and Uninsured Automobile 14.90% 0.70% -43.20%
    Total Compulsory Coverages 10.20% 2.70% -25.70%
    Collision -1.40% -1.40% 0%
    Comprehensive -3.20% -3.20% 0%
    Total Physical Damages -1.90% -1.90% 0%
    Total All Coverages 8.1%9 1.7%10 -21.6%11
    • The pre-Reforms cost trend was significant in that it was more than 10% per year for Total Compulsory Coverages.
    • The Reforms appear to have had a significant impact on claim cost trends; based on the first three years of data, the claim cost trend is estimated at 2.7% for Total Compulsory Coverages.

    Claim cost trends reflect two components: economic inflation and social influences. While economic inflation takes into account changes in the price of goods and services covered by insurance, social influences include changes in propensity to claim, court practices, and legal precedents. Based on our analysis, pre-Reforms, the claim cost for a policy with all the compulsory and physical damages coverages listed in Table 1.1 was expected to increase on average by 8.1% per year. The analysis also indicates that without the Reforms, the claim cost trend would likely have continued to increase at that same pace. In contrast, our analysis indicates that the claim cost for all coverages has been increasing on average by 1.7% per year post-Reforms. In comparison, the general inflation as measured by CPI reached 2.3%, 0.8% and 1.2% for 2011 through 2013 respectively. To date, the Reforms seem to have been successful in controlling the claim cost trends towards the general inflation level.

    Our analysis shows a claim cost reduction of just above 25% for total compulsory coverages and 21.6% for total coverages.

    At the outset, the Reforms were expected result in transfer of claims from accident benefits to third party liability bodily injury. Our analysis of post-Reforms experience does not show evidence of such a transfer. We note that there is still significant uncertainty in the current industry estimates of post-Reforms ultimate claim costs and trends, and that there may yet be a transfer of claims between accident benefits and third party liability bodily injury.

    1.7.1.2 Impact of Reforms on Insurance Premiums

    An expectation of the Reforms was that if claim cost levels reduced, then average automobile insurance premiums could also be reduced. Furthermore, if post-Reforms claim cost trends reduced, future annual premium increases would be lower than the level of pre-Reforms increases. However, in the pre-Reforms environment, average premiums did not increase enough to match the claim trends, leading to inadequate average premium at the time of implementation of the Reforms. The adoption of the Reforms improved rate adequacy (i.e., brought premiums more in line with claim costs), reduced the need for substantial rate increases to return premiums to profitability and appeared to have curbed claims cost trends. Given the lag between historical claim trends and rates, the recent decreases in automobile insurance costs have not yet been fully reflected in rates.

    Conceptually, in order for the insurer to maintain the same profitability level, average premium should increase proportionately to the claim trends – assuming that all other variables remain constant. Otherwise, if the year-over-year change in average premium is less than the claim trends, the renewed premium would become less profitable or could even become unprofitable (i.e., the premium would be less than expected claim costs and expenses). To return to rate adequacy, the year-over-year change in average premium would need to increase by more than the claim trends12; or other initiatives need to take place.

    Our analysis of premium and claim trends between 2003 and 2012 demonstrates that during this period premiums were becoming increasingly less adequate. We note that the overall level of average premium has not decreased post-Reforms. As noted above, one reason for this is that the average premiums were inadequate pre-Reforms (i.e., the pre-Reforms average premium did not increase enough to match the claim trends).

    Confirming the notion of pre-Reforms rate inadequacy, the industry was very unprofitable with loss ratios of 95% and 89% respectively for 2009 and 2010. These ratios are significantly higher than the target loss ratio of approximately 69%13 that is generally considered adequate for a reasonable return.

    Our analysis indicates that the Reforms have significantly contributed to reducing the claim cost levels and claim cost trends and, therefore, have also contributed to stabilizing premium rates in Ontario. Without the reduction in claim cost levels and claim cost trends, significant rate increases would have been needed in order to restore profitability. In addition, further annual rate increases would have been needed to cover the expected claim cost trends.

    1.7.2 Qualitative Analysis based on Summary of Surveys


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    We summarize the respondents’ comments from the Interim Report and the 2014 Annual Report surveys to capture and demonstrate the range of comments received from the respondents.

    1.7.2.1 Impact of the Reforms

    As a result of the Reforms, Ontario automobile insurance consumers were given a broader range of choices for insurance coverage. This increased the consumer’s responsibility to understand the automobile insurance product, and at the same time triggered a need for better consumer information to assist consumers with understanding the automobile insurance product and their decision making. Many consumers are not aware of the post-Reforms changes in coverage options, and many consumers may not have an understanding of the treatment required (and the related costs) to recover from injuries sustained in a motor vehicle accident. Consumers are often unaware of the level of coverage that they have purchased until they need access to the coverage.

    Issues, such as uncertainties surrounding the definitions of the (MIG) and catastrophic impairment, the unpredictably of outcomes from the dispute resolution system (DRS), and the complexity of the claim process, are leading claimants to increasingly retain and rely on legal counsel for all types of injuries. Moreover, stakeholders have indicated that delays attributable to the mediation14 and arbitration backlogs are resulting in delays in claimants accessing required healthcare services; this may lead to missed opportunities for early rehabilitation and increased costs in the longer term. In addition, the complexity of the claim process and delays in claim adjudication often result in additional medical examinations and assessments having to be performed.

    Due to the $2,000 limit on fees and expenses for to assessments or examinations, there has been a significant reduction in the fees paid to the professionals providing the assessments. Consequently, respondents to the Annual Report Survey observed that this has led to the use of less experienced providers, more limited assessments, and reports that do not necessarily follow best practices and professional standards. There was a concern expressed by some stakeholders that the use of less experienced providers has led to more disputes and increased costs to the system. Others noted that setting standards for third-party medical examinations may reduce friction, legal costs and dispute resolution cases.

    1.7.2.2 Anti-Fraud Recommendations

    More than half of the insurers who responded to the Interim Report survey, representing approximately 40% of the industry, reported being involved with industry anti-fraud initiatives. There is a general agreement among all PPA insurance system stakeholders that implementation of some of the Anti-Fraud Task Force recommendations has prevented costs and premiums from increasing to a level that would be unsustainable; and generally PPA insurance system stakeholders look forward to additional recommendations from the Anti-Fraud Task Force being implemented. During the Annual Report survey, healthcare providers viewed the pilot of the Professional Credential Tracker15 (PCT) tool as a valuable program. However, some Representative Stakeholders commented that certain recommendations are actually adding costs to the system. At the same time, they also acknowledge the value that these recommendations bring to the anti-fraud initiative.

    With respect to fraud as it relates to the towing industry, one comment received was that the Anti-Fraud Task Force recommendations do not take into consideration a key factor leading to fraud, which is the decreased presence of police at accident scenes with the introduction of self-reporting through Collision Reporting Centres. An effect of this change is that information related to the accident or access to potential witnesses may be lost, which may lead to an increase in opportunistic and premeditated fraud.

    1.7.2.3 Dispute Resolution System (DRS)

    Due to the timing of the Interim Report Survey, insurers were not able to comment on the “2014 Ontario Automobile Dispute Resolution System Review Final Report”16(DRS Report). The Representative Stakeholders provided comments, and some noted that the current DRS is inefficient and costly, which is increasing costs and premiums. These stakeholders also provided comments on some of the recommendations from the DRS Report.

    • Recommendation 1 from the DRS Report there is a concern that FSCO arbitrators’ knowledge and experience may be lost with the transfer of the DRS to the Public Sector Administrative Tribunal17;
    • Recommendation 9 from the DRS Report: the removal of the right to sue poses a serious concern for both the plaintiff and defence bar, where many believe that this effectively eliminates the ability to rely on case law for interpretation issues Some stakeholders suggested that this may increase disputes as neither plaintiff nor defence counsel will have case law to rely upon;
    • Recommendation 17 from the DRS Report: for claims that include future medical and rehabilitation benefits, a delay of two years before settlement may make it more difficult to come to a resolution of the issues;
    • Recommendation 25 from the DRS Report: 
    • the requirement that arbitration hearings for cases under $10,000 be conducted as paper reviews could lead to overuse and even fraud, as claimants could simply split up related claims to ensure that each split up portion of the claims would fall under the $10,000 maximum for paper reviews;
    • some stakeholders mentioned that they are not in favour of restricting the length of medical assessment reports; and
    • there was a suggestion that a triage process be developed to review the disputes and identify claims of higher priority (e.g., those for which the specific treatment is time sensitive) that should be expedited through the DRS.

    1.7.2.4 Impact of the Strategy

    While most insurers agree that the Government’s current Strategy will reduce claim costs, a majority of the insurers are concerned with the mismatch in timing between the eventual decrease in claim costs and the targeted18 overall 15% average reduction in automobile insurance rates by August 2015. There is also concern among the insurers that the Reforms were intended to reduce claim costs and stabilize rates, and that the Reforms were not necessarily meant to reduce rates. The insurers indicated that, to reduce rates, the Strategy would have to reduce claim costs further. Insurers believe that reduction in overall claim costs and expenses cannot come from anti-fraud initiatives alone and that there needs to be an emphasis on reducing the administrative costs such as disbursements during dispute resolution or tort claims, assessments, and forms completion.

    A few stakeholders commented that the Government’s rate reduction target of 15% is likely not to be met by the target date next year, and that the Government might want to consider extending the target date. There were stakeholders who suggested that the Government should also not begin any new initiatives, as a number of significant cost reduction initiatives are already underway (e.g., anti-fraud, changes to DRS) and the impacts have not yet been fully realized or understood.

    1.7.2.5 Issues and Uncertainty in the PPA Insurance System

    The cross section of stakeholders responding to the two surveys conducted during 2014 generally identified similar issues and uncertainties in the PPA insurance system. However, it is not surprising that the various stakeholders sometimes tend to look at the issues and uncertainties from different perspectives. Stakeholders identified the following uncertainties in the PPA insurance system:

    • Potential erosion of the existing catastrophic impairment definition;
    • Definition of minor injuries that would fall under the MIG;
    • Limitation period and discoverability of bodily injury claims and transfer of some claim costs from accident benefits to bodily injury;
    • Definition of what constitutes “economic loss”;
    • Changes to DRS processes;
    • Use of FSCO benchmarks in rate reviews; and
    • Eligibility for automobile insurance insureds to claim optional benefits regardless of whether the options were purchased.

    1.7.2.6 Competitiveness of the Ontario PPA Insurance Market

    There are opposing views on whether the Ontario PPA insurance market is sufficiently competitive. Some respondents do not believe that the PPA insurance system is competitive and efficient in providing affordable premiums. Others believe that the entire system should be reviewed for opportunities to increase efficiency and reduce costs overall.

    1.8 Observations and Recommendations


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    Consistent with the objectives of this report, the recommendations focus on potential further actions that could benefit the overall Ontario automobile insurance system. There is a broad consensus among the responding stakeholders that the Ontario PPA insurance system needs reform, that a number of positive steps towards reform have been taken, and that there is more to be done. Related to this, the responding stakeholders have a strong desire to participate in improving the PPA insurance system in Ontario.

    We want to thank all of the organizations who responded to the surveys for their participation. The breadth of comments received are a good reminder that different stakeholders define a well-functioning PPA insurance system differently given their respective priorities and interests, and the Government has a difficult task of trying to balance these often competing views.

    1.8.1 General Observations and Recommendations


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    These recommendations are directed at areas that would benefit the overall Ontario automobile insurance system rather than address the concerns specific to some stakeholders. We believe that actions taken by the Government and/or other stakeholders based on these recommendations, coupled with the Government initiatives that are underway, could result in a more efficient PPA insurance system – one that is more transparent, with less uncertainty, and easier to understand.

    1.8.1.1 Consumer Representation

    As discussed in Section 4.3.2, we were not able to identify an independent organization that would represent the concerns of the broader group of consumers (i.e., both those who make an insurance claim and those who never make a claim). We also heard that significant deficiencies still exist in the education of consumers regarding Ontario automobile insurance. We suggest that consideration be given to establishing an independent organization whose mandate would be to represent all consumers in Ontario who purchase PPA insurance. Such an organization would be charged with balancing the views and needs of all consumers, and could provide a voice to all Ontario automobile insurance consumers. Some of the potential benefits of such an organization include:

    • Providing consumers with tools to better understand the PPA insurance product;
    • Representing consumers in any discussions pertaining to potential changes to Ontario’s PPA insurance system; and
    • Guiding automobile insurance consumers injured in motor vehicle accidents (MVAs) through the claim process.

    1.8.1.2 Develop a Deeper Understanding of the Impact of the Reforms and Strategy

    Many significant cost reduction initiatives have been planned and/or implemented (e.g., anti-fraud, changes to DRS) and the resulting impact of these initiatives has not yet been fully realized or understood. There was a general expectation that these initiatives may result in further cost reduction; and that given the lag between implementation and effect, these initiatives should be allowed to mature, without the Government proposing and or implementing additional broad measures.

    We believe that additional initiatives would be required in order to support the target average rate reduction of 15% by August 2015. Any additional initiatives should target specific issues (rather than broad product reform) to minimize potential ripple effects that may result in unintended consequences. Attempts should also be made to continually understand the cost and benefit of initiatives that have been and to be implemented. The Government needs to strike a balance between the need for additional initiatives and maintaining stability in the system.

    1.8.1.3 Health Claims for Auto Insurance System

    A few of the stakeholders suggested that data from the Health Claims for Auto Insurance System (HCAI) should be considered if the Government would like to gain a deeper understanding of the full impact of the Reforms and Strategy. However, it is important to note that several factors19 limit the quality and usefulness of the data. As such, it would be worthwhile to continue to improve the quality and quantity of the data reported through HCAI. If data from HCAI is to be relied on to inform decision making, it should be subject to vigorous validation testing and quality control. When data collected through HCAI becomes sufficiently robust, the Government may then explore performing more detailed analyses of the Reforms and Strategy based on the data. The expectation is that this could assist with developing a deeper understanding of healthcare related costs in the system.

    1.8.1.4 Sharing and Monitoring Information from the PPA Insurance System

    Enhanced sharing and monitoring of information would include improved efficiency as well as enhanced transparency and accountability. Efficiency improvements could be achieved by sharing information amongst the various stakeholders (i.e., the sharing of information may result in less divergence in views across stakeholder groups and enhance competition in the insurance system).

    We think that there are merits to the view that additional sharing and monitoring of information would be of value to the PPA insurance system. Information can be shared in a number of ways, including through independent reports such as this. We note that another advantage of enhanced sharing and monitoring of information from the PPA insurance system would be to allow for early detection of issues that may lead to a disruption in the stability of the automobile insurance system. Additional information could also lead to reducing the level of uncertainty in the system.

    1.8.1.5 Initiatives that May Reduce Claim Frequency

    We suggest that there may be opportunities in the Ontario PPA insurance system to consider initiatives that may reduce the frequency of claims. One suggestion that could be considered would be for the Government to lead initiatives aimed at reducing the frequency of MVA in Ontario. Other jurisdictions in Canada have been very successful in developing important public awareness campaigns aimed at changing driver behaviors to reduce the number of fatal accidents.

    Many insurers are currently considering taking advantage of newer technologies that are expected to have a favorable impact on road safety and could contribute to reducing the frequency of MVAs. For example, the use of telematics not only rewards safer drivers, it is also thought to contribute to changing driver behaviour with the potential to reduce the overall accident frequency. The Government could contribute to this initiative by continuing to foster an environment where the rate regulator demonstrates openness to such programs20, in particular those that would include a component dedicated to improving drivers’ behaviour and that would, as a result, be expected to have a favorable impact on the overall claim frequency.

    1.8.1.6 Other General Observations and Recommendations

    The following is a list of potential actions to be considered by the Government and stakeholders:

    • Publish the annual change in the average automobile insurance premium paid by drivers who have not had any accidents in the past year;
    • Increase the transparency of investigation and inspection reports performed by Ontario’s public health units and health regulatory colleges21;
    • Develop industry wide standards of practice for claim adjustment and settlement, and develop mechanism for determine adherence to these standards;
    • Develop mechanisms to assess the impact of legal fees on costs to improve transparency;
    • Encourage the use of new technology and technology improvements to reduce the costs in the PPA insurance system;
    • Monitor the availability of qualified medical examiners; and
    • Remain knowledgeable of the evolving opinions of stakeholders in the PPA insurance system.

    1.8.2 Specific Recommendations


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    We present specific recommendations that are aimed at reducing uncertainty and costs.

    1.8.2.1 FSCO Benchmarks

    FSCO publishes benchmark assumptions such as loss trends and Reforms loss cost adjustment factors. Actuaries in Canada who prepare insurers’ rate filings follow the Standards of Practice promulgated by the Actuarial Standards Board. In our discussions with insurers for the Interim Report, many of them noted that they were instructed to provide indications using the FSCO benchmark factors as part of their rate filings. Many insurers’ actuaries have expressed the need to access the more detailed documentation and working papers underlying FSCO benchmark factors. In the spirit of the Standards of Practice, the exchange of information would allow insurers’ actuaries to review and better understand FSCO’s approach and assumptions and thus gain greater comfort in FSCO benchmark factors22.

    We recommend that FSCO continue to work with representative actuaries to determine which underlying aspects of the benchmark factors23 can and should be shared with actuaries. Increased understanding between FSCO and representative actuaries may increase transparency and reduce uncertainty in the future. A reduction in uncertainty will aid in reducing PPA insurance rates.

    1.8.2.2 FSCO Processes

    We understand that the Rating and Underwriting Technical Advisory Committee (RUTAC), comprised of company representatives and actuaries, provides input to FSCO on its processes and proposed rate filing guidelines. We would encourage FSCO to continue to involve RUTAC early in any process that requires input and feedback. We would also encourage FSCO to provide an additional level of transparency and accountability by publishing on its website the role and membership composition of RUTAC. Continued and increased interaction with RUTAC by FSCO may help reduce uncertainty and provide stability to automobile insurance rates.

    1.8.2.3 Recommendations for Cost Savings and Reducing Uncertainty based on Stakeholder Suggestions

    We received numerous suggestions from stakeholders through the two surveys conducted during 2014. We present recommendations from survey respondents for actions to be considered by the Government and/or stakeholders in the Ontario PPA insurance system.

    1.8.2.3.1 Medical Examinations

    Government and/or stakeholders may consider continuing to set delivery standards and enact oversight requirements for third party medical examinations with a view to reducing friction, legal costs and backlog in the DRS. Another recommendation would be to conduct further study on the use of peer reviews of medical assessments to aid in dispute resolution.

    1.8.2.3.2 Expand Use of HCAI Data and Implement Professional Credential Tracker

    Several stakeholders suggested that HCAI data may help insurers increase the efficiency of their claim settlement process by providing insurers with additional data to analyze. Healthcare providers who have had a chance to use the Professional Credential Tracker praise the tools for giving healthcare providers a means of combating fraud committed in their names.

    1.8.2.3.3 Legal Fees

    Based on the responses to the 2014 Annual Report Survey, legal fees may be contributing substantially to costs in the system. Recommendations with respect to legal fees included implementing a cap on lawyers’ contingency fees and providing for an independent consumer representative to assist consumers with the claims settlement process such that consumers may not need to hire lawyers to assist them with the process24.

    1.8.2.3.4 Administration of Medical Benefits

    Smaller insurers may not have the same volume of medical benefits claims as large insurers to give their claim adjusters a similar level of experience. In order to apply more consistent claims settlement processes, smaller insurers might consider retaining external administrators of medical benefits who have the necessary scale. Alternatively, the group of small P&C insurers could work through the Insurance Bureau of Canada (IBC) to form a medical benefits administrator, similar to the way the Facility Association enables the industry to deal with high-risk drivers.

    1.8.2.3.5 Further Study on Additional Tier of Limits Greater than $50,000

    Some stakeholders mentioned that a limit of $50,000 for claimants found to be seriously injured but not catastrophically impaired is sometimes insufficient to treat injuries. These stakeholders are concerned that if the injury is not sufficiently treated when the $50,000 limit is reached, the injury may worsen and a catastrophic claim could be triggered at a later date. Research and analysis should be conducted on the merits of adding another defined tier of injury with a limit greater than $50,000. Further study could assess whether an additional tier would benefit claimants who require extensive therapies and expert treatments while reducing overall costs to the system by reducing the number of catastrophic claims and the need for legal counsel.

    1.9 Preview of 2015 Annual Report


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    The purpose of the 2015 Annual Report will be to continue to provide both quantitative and qualitative analysis of the Strategy. The following approaches may be used:

    • Review the progress of initiatives implemented under the Strategy, such as Bill 15, Fighting Fraud and Reducing Automobile Insurance Rates Act, 2014 as to whether they alleviate cost pressures within the automobile insurance system;
    • Report on the progress related to the Government’s two-year average rate reduction target of 15%;
    • Update the quantitative analysis of GISA data with data as of December 31, 2014; and
    • Assess the effectiveness of the auto insurance marketplace in providing affordable premiums to consumers, particularly from the point of view of market competitiveness.

    We do not anticipate conducting large-scale survey of stakeholders in the insurance system, but we may contact individual stakeholders for clarifications.

    The 2015 Annual Report was originally scheduled to be released in August 2015. To provide for an opportunity to reflect data and input as of August 2015, as discussed with the Government, we expect to deliver the 2015 Annual Report during the Fall of 2015.

    2 Introduction

    In September 2010, the Government introduced Reforms to the Ontario automobile insurance system with the intent to control insurance costs, increase choices available to consumers, and simplify processes in the automobile insurance system. Further to these Reforms, the Government initiated the Strategy as part of the 2013 Budget. As part of the Strategy, and with the goal to increase transparency and accountability, the MOF engaged KPMG to produce three independent reports: the Interim Report, the 2014 Annual Report, and the 2015 Annual Report. The Interim Report was delivered to the MOF on April 14, 2014 and is available on the MOF’s website25. This report is the 2014 Annual Report.

    2.1 Distribution and Use


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    We understand that the 2014 Annual Report will be a publicly available document. We consent to such distribution on the condition that the Government will distribute this report in its entirety including all text and supporting appendices rather than any excerpts.

    Any use or reliance on the 2014 Annual Report by any third party is done at their own risk. KPMG will not be liable for the consequences of any third party acting upon or relying upon any information or conclusions contained in this report. The appendices attached in support of our findings are an integral part of the 2014 Annual Report. Judgments about the conclusions drawn in this report should be made only after considering the 2014 Annual Report in its entirety. In the event that the 2014 Annual Report is made available in different languages (e.g., French) or in a different format than Adobe portable document format (PDF), if there are any discrepancies in those versions compared to the PDF version, the PDF version in English shall prevail.

    2.2 Confidentiality and Conflict of Interest


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    As with all our client engagements, we approach the 2014 Annual Report with strict confidentiality.

    KPMG has a dedicated insurance practice, comprising audit, tax and advisory professionals. We also have a substantial Actuarial Practice. Through our experience providing services to the insurance sector, as well as our involvement with other organizations related to the automobile insurance sector, we have developed extensive knowledge about the Ontario’s automobile insurance system. Based on this background we bring a broad objective approach to this report, and are well positioned to provide the services required by the Ministry.

    All KPMG team members are subject to strict rules governing professional conduct as set out by KPMG’s internal policies. Furthermore, all Fellows and Associates of the Canadian Institute of Actuaries (CIA) and the Casualty Actuarial Society (CAS) are subject to the Rules of Professional Conduct of these organizations, as are members of the Chartered Professional Accountants of Ontario (CPA Ontario), who are subject to similar rules of professional conduct concerning independence and conflicts of interest. The maintenance of strict client confidentiality is a cornerstone of the codes of conduct of KPMG, as well as of those of the CIA, the CAS and CPA Ontario. In accordance with the above-mentioned codes of conduct, we are free of any conflict of interest in producing the 2014 Annual Report for the Ministry.

    3 Statement of the Issue

    3.1 Background


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    Chapter IV of the 2013 Budget states the following:

    From 2006 to 2010, Ontario experienced a substantial increase in claim costs due to fraud in the system and overutilization of benefits. The significant increase in costs was primarily caused by increases in accident benefits claim costs (for example, exams and assessments, attendant care and housekeeping). While claim costs for repairs to physical damage to vehicles remained stable, claim costs for certain benefits more than doubled.
    ...
    In September 2010, the government introduced major reforms to Ontario's auto insurance system to address the substantial increase in claim costs. The September 2010 reforms controlled costs, increased consumer choice and simplified processes in the auto insurance system. As a result of the reforms and ongoing government action, costs have been reduced and rates have stabilized, and are now starting to decline26.

    The Government initiated the Strategy as part of the 2013 Budget. The key elements of the Strategy pertain to anti-fraud measures, an average PPA insurance rate reduction target of 15%27, licensing of healthcare providers in the automobile insurance system, transformation of the automobile insurance Dispute Resolution System (DRS), and creation of “a transparency and accountability mechanism in the form of an independent annual report by outside experts on the impact of auto insurance reforms introduced to date on both costs and premiums28.” The 2013 Budget also called upon insurers to offer lower rates for consumers with safe driving records.

    As noted above, one of the key components of the Government’s Strategy involves a reduction target for the average Ontario PPA insurance rate. As the total premium paid by policyholders is dependent on many variables29, which can change from one policy period to the next, it is important to recognize that a reduction in PPA insurance rates is not analogous to a reduction in automobile insurance premiums30.

    3.2 Purpose and Scope of 2014 Annual Report


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    In order to promote transparency and accountability, the MOF engaged KPMG to review the Ontario automobile insurance industry costs as well as changes to automobile insurance premiums paid by Ontario drivers and to make recommendations on further actions that may be considered in order to meet the Government's average automobile insurance rate reduction targets proposed in the 2013 Budget. In addition to the 2014 and 2015 Annual Reports, the MOF requested KPMG to prepare an Interim Report in advance of the 2014 Annual Report to address certain specific issues. As agreed with the MOF, the 2014 Annual Report summarizes quantitative and qualitative analyses that were designed to:

    • Update, based upon the most recent data available, the quantitative and qualitative analyses presented in the Interim Report to:
    • identify any decreases in PPA insurance claim costs since the Reforms; and
    • explore whether any of the identified decreases in PPA insurance claim costs have resulted in decreases in automobile insurance rates;
    • Provide consideration of recommendations for further possible actions that could be taken by the Government and other automobile insurance stakeholders to achieve the Government’s 15% average rate reduction target for Ontario PPA insurance by the end of August 2015; and
    • Consider ongoing Government initiatives and whether they will alleviate claim cost pressures within the Ontario PPA insurance system.

    We note that the Financial Services Commission of Ontario (FSCO) measured the average rate reduction achieved as a result of the Strategy between August 2013 and August 201431. The Minister of Finance noted on October 16, 2014 that Ontario drivers have seen a six percent reduction in insurance rates. From discussions with MOF, we understand that the average rate change for Ontario PPA for the period between August 16, 2013 and August 15, 2014 is a decrease of 6.03%.

    We understand that many organizations have already shared their specific concerns with the Government through different channels such as the recent reports on the Ontario automobile insurance system. These reports include, but are not limited to, the “Final Report of the Ontario Automobile Insurance Anti-Fraud Task Force Steering Committee”32(Anti-Fraud Report), the “2014 Ontario Automobile Dispute Resolution System Review Final Report”33(DRS Report), and the “Towing and Storage Advisory Group – Report and Recommendations to the Ministry of Consumer Services”34 (Towing Report). The Information and recommendations presented in these reports and through other channels are not the repeated in the 2014 Annual Report.

    4 Approach

    The following three steps were used to support the findings and recommendations presented in the 2014 Annual Report:

    • Analysis of the GISA data as of December 31, 201335;
    • Incorporation of the results and findings from the Interim Report, including the information collected through the Interim Report Survey; and
    • Summarization and analysis of the information collected through the 2014 Annual Report Survey.

    4.1 Analysis of GISA Data


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    GISA36 is a statistical agency that collects P&C insurance statistics on behalf of insurance regulators across Canada. In general, the data collected by GISA is used by actuaries for purposes such as ratemaking and estimation of policy liabilities of insurance products. All P&C insurers underwriting automobile insurance policies in Ontario are required to provide prescribed data to the Automobile Statistical Plan37 (ASP). The prescribed data includes exposures (i.e., number of vehicles insured in a given period), premium written, incurred claims and paid claims. Claim data is generally summarized on an accident year basis, which is one of the most common aggregation methods used by actuaries.

    For the Interim Report, the latest available GISA data was as of June 30, 2013. For the 2014 Annual Report, updated GISA data as of December 31, 2013 was available. As discussed in the Interim Report, we perform a more extensive analysis of the GISA data in the 2014 Annual Report (i.e., we perform an actuarial analysis of the estimated ultimate claim costs based on a number actuarial methods instead of relying solely on the incurred claim development method).

    Appendix B contains our independent actuarial analysis.

    4.2 Interim Report


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    4.2.1 P&C Insurers Financial Statements


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    As part of the Interim Report, we reviewed the December 31, 2013 annual statutory financial returns that are filed with Canadian insurance regulators such as the Office of the Superintendent of Financial Institutions38 (OSFI) and FSCO. The most recent statutory financial returns are as of June 30, 2014. However, the quarterly returns do not contain sufficient information to review Ontario PPA specifically. As such we do not include an analysis of the June 30, 2014 statutory financial returns in the 2014 Annual Report.

    4.2.2 Findings from Interim Report and Information Collected through Interim Report Survey


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    The 2014 Annual Report builds on the analysis and information presented in the Interim Report, including the results of the Interim Report Survey. As noted in the Interim Report, due to the time constraints involved in producing the Interim Report, the Interim Report Survey was only distributed to executives from insurers providing PPA insurance in Ontario. Recognizing that other stakeholders of the Ontario automobile insurance system may have a different perspective than that presented by the insurers, it was noted in the Interim Report that the 2014 Annual Report would include consultation with additional stakeholders through a second survey process.

    In Appendix A, we summarize the findings presented in the Interim Report findings as well as the action steps that were suggested by insurers who participated in the Interim Report Survey.

    4.3 2014 Annual Report Survey and Interviews


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    To meet the mandate of the Interim Report, we developed the Interim Report Survey as a method to collect certain qualitative and quantitative information from representatives of Ontario automobile insurers and the automobile insurance residual markets39(i.e., Ontario Risk Sharing Pool and Ontario Facility Association). These respondents were offered the opportunity to respond to the survey in writing and/or to meet with us. The survey was sent out in early January 2014, with the responses being returned to us by late February 2014.

    For the 2014 Annual Report Survey, we sought to hear from other stakeholders in the Ontario PPA insurance system who would represent different parties and interests. For this purpose, a list of representative stakeholders was identified, in consultation with the MOF, and these organizations were invited to participate in the Annual Report Survey (the Representative Stakeholders).

    To ensure consistency in the types of information collected, the questions in the 2014 Annual Report Survey were designed to be similar to the questions included in the Interim Report Survey. Appendix C contains a copy of the 2014 Annual Report Survey.

    The 2014 Annual Report Survey was sent to Representative Stakeholders in early July 2014, with the last response being received in early October 2014. Respondents were offered the opportunity to respond to the survey in writing and/or to meet with us (either in person or on the phone) to discuss their responses to the survey. Similar to the Interim Report Survey, respondents could elect to remain anonymous (i.e., not be named in this report). However, all respondents to the 2014 Annual Report Survey indicated that they do not require anonymity.

    Appendix D documents the aggregated results of the 2014 Annual Report Survey and interviews, without any analysis or conclusions by KPMG. This appendix is included to capture and demonstrate the range of comments received from the respondents.

    We note that comments received from the respondents often reference the most recent Statutory Accident Benefits Schedule (SABS)40, which became effective on September 1, 2010. To assist readers in getting a better understanding of these comments, Appendix E provides a summary of the SABS.

    4.3.1 Representative Stakeholders


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    Table 4.1 shows the complete listing of Representative Stakeholders who received an invitation to participate in the 2014 Annual Report Survey.

    Table 4.1 : Representative Stakeholders invited to participate in the 2014 Annual Report Survey
    Stakeholder Responded
    1.    The Advocates' Society
    2.    Association of Independent Assessment Centres
    3.    Consumer Representative from the Auto Insurance Anti-Fraud Task Force[41]
    4.    Canadian Independent Adjusters' Association
    5.    Canadian Institute of Actuaries  
    6.    Coalition of Health Professional Associations in Ontario Automobile Insurance Services
    7.    Consumers' Association of Canada  
    8.    Consumers Council of Canada  
    9.    County & District Law Presidents' Association  
    10.  Fair Association of Victims for Accident Insurance Reform
    11.  FSCO  
    12.  General Insurance OmbudService  
    13.  Insurance Brokers Association of Ontario
    14.  OSFI  
    15.  Ontario Association of Chiefs of Police  
    16.  Ontario Bar Association  
    17.  Ontario Federation of Independent Towers
    18.  Ontario Insurance Adjusters Association
    19.  Ontario Psychological Association
    20.  Ontario Rehab Alliance
    21.  Ontario Trial Lawyers Association
    22.  Provincial Towing Association (Ontario) Inc.

    Thirteen organizations out of the twenty-two surveyed provided responses, either in the form of a written response and/or through interviews. Table 4.1 identifies these respondents with a checkmark. FSCO responded that, as the regulator, it did not believe it was appropriate to respond to the survey as a stakeholder. FSCO did meet with KPMG to provide clarity on issues identified in the Interim Report.

    While the Consumers Council of Canada (the Council) did not respond to the 2014 Annual Report Survey, we had a discussion with one of their representatives about the lack of broad consumer representation (see Section 4.3.2).

    4.3.2 Lack of Consumer Representation


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    As can be observed from the list of Representative Stakeholders who chose to respond to the 2014 Annual Report Survey (see Table 4.1), none of the respondents could be seen to represent broader consumer concerns with respect to Ontario automobile insurance (i.e., the concerns of consumers who have not been involved in motor vehicle accidents and as a result, have not made a claim against their automobile insurance coverage). As a result, information collected through the 2014 Annual Report Survey does not include input that directly relates to the point of view of this broader group of Ontario automobile insurance consumers. In our efforts to identify a consumer representative, we consulted with some of the Representative Stakeholders and with the MOF; however, none of these entities were able to identify such a representative.

    In explaining why the Council decided not to submit a response to the 2014 Annual Report Survey, a representative of the Council noted that automobile insurance is a complex product, and given this complexity the Council does not have sufficient resources to devote to the topic. The representative of the Council also commented that the scarcity of resources available to represent consumers fairly is not limited to automobile insurance. We were directed to a report titled “Consumer Groups’ Capacity to Assess Potential Consumer Impacts of Policy Proposals”42 prepared by the Council (Council’s Report). The executive summary of this report states:

    Consumer organizations must be seen to be and actually be capable of participating in the specific impact analysis relevant to the impact assessment of the policy or regulatory change being addressed, including application of pertinent methodology; being capable of accessing the necessary expertise when not in-house; and being capable of consulting consumers on an impact issue in a professional manner.

    The representative noted that the Council does not have the resources to comment on the topic of automobile insurance while fulfilling the statement above.

    5 Summary Of Independent Actuarial Analysis And Surveys

    The objective of this section is to review how the PPA insurance claim costs and average rates were affected by the Reforms at the industry level. Section 5.1 summarizes our independent actuarial (quantitative) analysis of the impact of the Reforms. Section 5.2 summarizes the responses received for the Interim Report Survey and the 2014 Annual Report Survey, including responses with respect to ongoing Government initiatives and whether they have or will alleviate claim cost pressures within the automobile insurance system.

    5.1 Quantitative Analysis of the Impact of the Reforms

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    The objective of this section is to review how PPA insurance claim costs and premiums were affected by the Reforms at the Ontario PPA insurance industry level. First, we summarize the results of our Independent Actuarial Analysis presented in Appendix B. Then, we provide a summary of the quantitative analyses received from respondents to the Interim Report Survey and 2014 Annual Report Survey.

    5.1.1 Independent Actuarial Analysis

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    As part of our Independent Actuarial Analysis, we analyzed the impact of the Reforms on claim costs. Section 5.1.1.1 discusses estimated impact of the Reforms on claim cost levels and on claim cost trends. Additionally, Section 5.1.1.2 examines changes in the average automobile insurance premium and the average automobile insurance rate.

    5.1.1.1 Impact of Reforms on Insurance Claim Costs

    One of the objectives of the Reforms was to address the increasingly high level of auto insurance claim costs. In order to assess the impact of the Reforms on insurance claim costs, for each Ontario automobile insurance coverage and sub-coverage, we estimated the pre- and post-Reforms claim cost trends as well as the impacts of the Reforms on claim cost levels (Reforms Impacts). Our analysis was based on the industry claim experience, as of December 31, 2013, taken from the General Insurance Statistical Agency (GISA) exhibits related to All-Industry Ontario Automobile Insurance Private Passenger (excluding Farmers) Class of Business (PPA GISA Exhibits)43. We note that any estimates or analysis of claim cost trends and Reforms Impacts are highly dependent on the dataset, as well as the modeling approach, length of data history, and assumptions. In particular, the available GISA dataset is not broken down by insurer and therefore does not allow us to take into account changes in claim handling procedures or case reserve adequacy level during the relevant period44. In addition, the GISA dataset relied on for this analysis is not broken down by territory and does not allow us to take into account differences between urban and rural territories – even though it is generally expected that the Reforms affected claim costs differently depending on the territory. It is also important to note that the estimates presented in the 2014 Annual Report are only based on three years of data following the Reforms.

    Table 5.1 summarizes our best estimate of the impact of Reforms on claim cost trends and claim cost levels based on the analysis and the methodologies described in Appendix B. As discussed in Appendix B, we conducted the trend analysis separately for each of the coverages and sub-coverages identified.

    Our analysis indicates that there is a strong inter-dependency between the estimated claim cost trends (both pre- and post-Reforms) and the impact of Reforms on claim cost levels. Consequently estimates of claim cost trends, pre- and post-Reforms, as well as the estimates of Reforms Impacts should be extracted from the same modelling approach, with the same underlying data and assumptions, and should be read and interpreted conjointly for a given coverage and sub-coverage. In other words, Reforms Impacts on claim cost levels shown in the last column of Table 5.1 should not be used in combination with claim cost trends stemming from a different modelling approach or data source.

    Table 5.1 : Summary of Estimates of Claim Cost Trends and Reforms Impacts by Coverage
    Coverage Trends Pre-2010 Reforms Trends Post-2010 Reforms Reforms Impacts on Claim Cost Levels45
    Third Party Liability (TPL) – Bodily Injury (BI) 5.30% 5.30% 0%
    TPL-Property Damage (PD) 1.40% 1.40% 0%
    TPL-Direct Compensation Property Damage (DC) 0.80% 0.80% 0%
    Underinsured Motorist (UM) 4.00% 4.00% 0%
    Total TPL+UM 3.90% 4.00% 0%
    Accident Benefits (AB) – Medical and Rehabilitation (MR) 17.00% 0.70% -48.10%
    AB-Disability Income (DI) 7.60% -0.20% -27.40%
    AB-Funeral Expenses (F) -6.20% -6.20% 0%
    AB-Death Benefits (DB) -8.40% -2.70% 0%
    AB-Supplementary (SUP) 0.00% 0.00% 0%
    Uninsured Automobile (UA) 4.40% 4.40% 0%
    Total AB+UA 14.90% 0.70% -43.20%
    Total Compulsory Coverages 10.20% 2.70% -25.70%
    Collision (COL) -1.40% -1.40% 0%
    Comprehensive (COM) -3.20% -3.20% 0%
    Total Physical Damages (PhysD) -1.90% -1.90% 0%
    Total All Coverages 8.1%46 1.7%47 -21.6%48
    5.1.1.1.1 Impact on Claim Cost Trends

    Table 5.1 shows that:

    —The pre-Reforms cost trend was significant in that it was more than 10% per year for Total Compulsory Coverages.

    —The Reforms appear to have had a significant impact on claim cost trends; based on the first three years of data, the claim cost trend post-Reforms is estimated at 2.7% for Total Compulsory Coverages.

    Claim cost trends reflect two components: economic inflation and social influences. While economic inflation takes into account changes in the price of goods and services covered by insurance, social influences include changes in propensity to claim, court practices, and legal precedents. Based on our analysis, pre-Reforms, the claim cost for a policy with all the compulsory and PhysD coverages listed in Table 5.1 (Total All Coverages) was expected to increase on average by 8.1% per year. The main drivers underlying this expected increase in claim costs were AB-MR and AB-DI with 17.0% and 7.6% annual trend respectively. The analysis also indicates that without the Reforms, the claim costs would likely have continued to increase at that same pace. In contrast, our analysis indicates that, on an all-coverages combined basis, the claim cost has been increasing on average by 1.7% per year post-Reforms. In comparison, the general inflation, as measured by CPI, reached 2.3%, 0.8% and 1.2% for 2011 through 2013 respectively. To date, the Reforms seem to have been successful in controlling the claim cost trends and bringing these trends closer to the general inflation level.

    It is not simple to determine emerging claim cost trends within the volatility in claim costs. After two successive years of declining claim costs post-Reforms, claim costs for TPL-BI, AB-MR and AB-DI increased by 16.5%, 13.8% and 16.0% respectively between 2012 and 2013. Approximately 7% of the increases may be due to the harsh winter in 2013, as observed by the change in estimated TPL-DC frequency in Appendix B, Exhibit A, Section III, Page 7a. These recent claim cost movements also stress the importance of continuous monitoring of claim cost trends and Reforms Impacts. More importantly, it points to the necessity of determining and thoroughly documenting the estimates of pre- and post-Reforms trends as well as the Reforms Impacts that are specific for each insurer’s circumstances.

    5.1.1.1.2 Impact on Claim Cost Levels

    The first two columns of Table 5.1 compare the claim cost trends pre-Reforms and post-Reforms. The third column shows the results of our analysis pertaining to the impacts of the Reforms on claim cost levels. As can be observed from the table, the reduction in average claim cost level is estimated at just above 25% for Total Compulsory Coverages and at 21.6% for Total All Coverages. The coverages contributing the most to the claim cost level reduction were AB-MR and AB-DI with -48.1% and -27.4% impact respectively.

    The observed change in claim costs can be further decomposed into two elements: the change in frequency and the change in severity. As shown in Appendix B, Exhibit A, page 6 of both Segment VII and Segment IV, the historical data includes a noticeable temporary surge in claim frequency between mid-2009 and the end of 2010) (i.e., pre-Reforms). In the quantitative analysis performed for the 2014 Annual Report, to avoid overestimating the impact of the Reforms, the estimates of the impact on claim cost levels were adjusted to exclude the effect of the temporary claim surge49 and the following self-correction50. It is important to note that as a result of this adjustment, there is an increased level of uncertainty associated with the above estimates.

    5.1.1.1.3 Impact on Bodily Injury

    At the outset, the Reforms were expected to significantly increase the TPL-BI claim cost level due to an expected transfer of claims from AB to TPL-BI. Our analysis of post-Reforms experience does not show evidence of such a transfer. However, we note that there is still significant uncertainty in the current estimates of post-Reforms TPL ultimate claim costs and trends from an all-industry perspective, and that there may yet be a transfer of claims from AB to TPL.

    5.1.1.1.4 Volatility of Estimates

    It is important to understand that the above estimates represent our best estimates based on the selected multivariate regression model and available data. Appendix B, Sections 3.3 through 3.5 present a description of our detailed analysis as well as alternative models and results based on the same dataset.

    5.1.1.2 Impact of Reforms on Insurance Premiums

    An expectation of the Reforms was that if claim cost levels reduced, then average automobile insurance premiums could also be reduced. Furthermore, if post-Reforms claim cost trends reduced, future annual premium increases would be lower than the level of pre-Reforms increases. However, in the pre-Reforms environment, average premiums did not increase enough to match the claim trends, leading to inadequate average premium at the time of implementation of the Reforms. The adoption of the Reforms improved rate adequacy (i.e., brought premiums more in line with claim costs), reduced the need for substantial rate increases to return premiums to profitability and appeared to have curbed claims cost trends.

    Given the lag between historical claim trends and rates, the recent decreases in automobile insurance costs have not yet been fully reflected in rates. Section 5.1.1.2.1 compares the changes in average written premium and claim cost trends from 2003 through 2012, while Section 5.1.1.2.2 breaks out the effects of rate drifts and rate changes on average written premiums. Section 5.1.1.2.3 summarizes the average rate changes as approved by FSCO. The changes in average written premium were used rather than the changes in premium to exclude the effect of changes in number of insured vehicles in the industry.

    5.1.1.2.1 Changes in Average Written Premium v. Claim Trends

    Conceptually, in order for the insurer to maintain the same profitability level, average premium should increase proportionately to the claim trends – assuming that all other variables remain constant. Otherwise, if the year-over-year change in average premium is less than the claim trends, the renewed premium would become less profitable or could even become unprofitable (i.e., the premium would be less than expected claim costs and expenses). To return to rate adequacy, the year-over-year change in average premium would need to increase by more than the claim trends51; or other initiatives would need to take place.

    Figure 5.1 compares the actual year-over-year changes in the average written premium to the claim trends between 2003 and 201252 , and demonstrates that during this period premiums were becoming increasingly less adequate. With reference to Section 5.1.1.1, the red line represents the estimated annual claim cost trends: 8.1% pre-Reforms and 1.7% post-Reforms. The blue line, which for most of the period is below the red line, represents average premium change. Post-Reforms the average written premium increased 3.4% and 1.1% in 2010 and 2011 respectively, and decreased by 0.4% in 2012. The overall level of average premium has not decreased post-Reforms. As noted above, one reason for this is that the average premiums were inadequate pre-Reforms (i.e., the pre-Reforms average premium did not increase enough to match the claim trends).

    Confirming the notion of Pre-Reforms rate inadequacy, the industry was very unprofitable with loss ratios of 95% and 89% respectively for 2009 and 2010. These ratios are significantly higher than the target loss ratio of approximately 69%53 that is generally considered adequate for a reasonable return.

    While the overall level of average premium has not decreased post-Reforms, the Reforms have still had a favourable impact on premiums. As discussed in Section 5.1.1.1, our analysis indicates that the Reforms have had a significant impact on claim cost levels: a reduction in claim cost levels means that the premium rate increases needed to return premiums to profitable levels are significantly reduced. In addition, given that claim cost trend was also significantly reduced, it is reasonable to expect greater rate stability in the future and lower annual rate increases.

    Figure 5.1: Comparison of Average Written Premium Changes v. Claim Cost Trends for All Coverages Combined

    Figure 5.1: Comparison of Average Written Premium Changes v. Claim Cost Trends for All Coverages Combined
    5.1.1.2.2 Rate Drifts and Rate Changes

    There are many factors affecting the average premium paid by Ontario drivers. Consumers’ choices (combined drift) related to the replacement of vehicles, as well as changes in selected policy limits and deductibles54 affect the premium paid by insureds on the effective date of the changes. The actual rate change filed, approved and implemented by insurers is the other major component influencing the premium at renewal.

    Figure 5.2 breaks out the average premium change into two components: the drift and the average rate change by isolating the impact of the drift from the above average premium change. We determined the amount of the average rate change by estimating the combined drift and deducting it from the average premium change.

    Figure 5.2: Components of Average Premium Changes for All Coverages Combined

    Figure 5.2: Components of Average Premium Changes for All Coverages Combined

    In 2010, the combined drift was 2.0%, which means that consumers’ choices increased the average premium by 2%. Similarly the combined drift amounted to 0.3% and 0.6% for 2011 and 2012 respectively. The component shown as the blue bars represents mainly the average rate change implemented by the insurance industry. The rate changes were 1.4%, 0.9% and -1.0% for 2010 through 2012 respectively.

    The aggregation of the combined drift and the rate change gives the change in average premium. For example in 2012, the average premium decreased by 0.4%. During the same period, changes in insured vehicles, selected policy limits and deductibles contributed to an estimated increase of 0.6%, such that the estimated average rate level decrease was 1.0%.

    5.1.1.2.3 Progress Related to the Average Rate Reduction Target of 15%

    Table 5.2 summarizes FSCO post-Reforms approved rate changes for the entire PPA insurance market, by year approved.

    Table 5.2 : Post-Reforms Approved Rate Changes for the Entire PPA Insurance Market
    Year Approved 2010 2011 2012 2013 2014 Cumulative 2010-2014
    Rate Change 0.70% 4.90% -0.30% -4.70% -0.90% (-0.4%)

    Based on the FSCO data as of the 3rd quarter of 2014, the post-Reforms cumulative approved rate changes55 for the entire PPA insurance market is a decrease of 0.4% from rate filings received by FSCO between the 2nd quarter of 2010 and the 3rd quarter of 2014. Since the announcement of the Strategy in 2013, the approved rate changes for the entire PPA insurance market represent a decrease of 5.5%.

    In accordance with Regulation 237/1356 , FSCO measured the progress to-date related to the average rate reduction of 15%. The Minister of Finance noted on October 16, 2014 that Ontario drivers have seen a six percent reduction in insurance rates between August 2013 and August 201457.

    Our analysis indicates that the Reforms have significantly contributed to reducing the claim cost levels and claim cost trends and, therefore, have also contributed to containing average rate changes in Ontario. Without the reduction in claim cost levels and claim cost trends, significant rate increases would have been needed in order to restore profitability. In addition, further annual rate increases would have been needed to cover the expected claim cost trends.

    To support the Strategy of reducing the average rate by 15%, the Government has adopted or is in the process of adopting a range of additional initiatives such as the implementation of Anti-Fraud measures, licensing of healthcare providers in the automobile insurance system, and transformation of the automobile insurance DRS. Based on the information obtained through the 2014 Annual Report Survey and the Interim Report survey, it is generally not expected that the combination of these actions would support a reduction of 15% in rates. Additional initiatives would be required in order to sustain the target average rate reduction.

    5.1.2 Interim Report Survey and 2014 Annual Report Survey

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    We asked stakeholders to provide quantitative analyses of the impact of the Reforms. In the Interim Report Survey insurers were asked to quantify the impact of the Reforms on insurance claim costs and rates. In the 2014 Annual Report Survey, stakeholders were asked to quantify the impact of the Reforms on their members.

    5.1.2. 1 Impact of the Reforms on Insurance Claim Costs

    In the Interim Report Survey, we asked insurers to quantify the impact of the Reforms on claim costs by coverage and by kind of loss, as well as the shifts in claim costs between coverages.

    Table 5.3 summarizes the estimated impact of the Reforms by coverages and sub-coverages. Some insurers chose to report the impact for AB on a combined basis only (i.e., these insurers did not estimate the impact on AB-DI separately from AB-other than disability income (AB-Non DI)). On average, for those insurers who responded, the estimated impact is a decrease of about 51% on AB-DI claim costs, a decrease of about 39% on AB-Non DI claim costs, and a decrease of about 46% on the claim costs for AB in total.

    Table 5.3: Estimated Change in Claim Costs by Coverage (Interim Report Survey Results)
    Coverage Percentage of Industry Represented Weighted Average Estimated Change in Claim Costs FSCO Benchmark Change in Claim Costs
     
    201358 201459
    TPL-BI 64% 20% 5% 0%
    TPL-PD 49% -1% n/a n/a
    AB-DI 29% -51% -40% -33%
    AB-Non DI 29% -39% -55% -49%
    AB 40% -46% -52% -46%
    PhysD 32% 0% n/a n/a

    Table 5.4 summarizes the estimated change in claim costs by kind of loss. This table is based upon the results of the Interim Report Survey, and we note that the information included in this table was provided by insurers representing about 27% of the industry. Furthermore, many of the insurers who attempted to estimate the impact of the Reforms by kind of loss noted that their estimates were based on immature data.

    Some insurers noted that the impact of the Reforms on AB catastrophic claims offsets the benefits achieved through reduced claim costs. In particular, insurers noted that claim costs for medical, rehabilitation, and attendant care are trending upward due to non-catastrophic claims that are becoming catastrophic claims as a result of a weakened catastrophic threshold. A weakened catastrophic threshold also has the effect of deteriorating existing catastrophic claims.

    Table 5.4 : Estimated Change in Claim Costs by Kind of Loss
    Kind of Loss Estimated Change in Claim Costs
    Medical (50%) to (57%)
    Rehabilitation (10%) to (31%)
    Cost of exams (38%) to (67%)
    Attendant Care (10%) to (41%)
    Housekeeping60 (80%) to (92%)

    Approximately half of the insurers who responded to this question, representing about 38% of the industry, reported that they observed shifts in claim costs from AB to TPL-BI; however, they noted that the amount shifted could not be quantified. Insurers who did not yet observe any shifts responded with the caveat that it is too early after the Reforms to conclude that there are no shifts in claim costs between coverages. These insurers expect that at some point a shift in claim costs between coverages will occur. In general, insurers indicated that the frequency of AB claims is decreasing while that of BI claims is increasing.

    5.1.2.2 Impact of the Reforms on Insurance Rates

    We asked insurers to comment on post-Reforms rate changes implemented at the coverage level and on how the uncertainties in the Ontario PPA insurance market are reflected in their premiums.

    The majority of the insurers surveyed provided their approved rate changes by coverage since the Reforms. Table 5.5 summarizes the post-Reforms weighted average approved rate changes by coverage for the surveyed insurers, representing approximately 77% of the industry.

    Table 5.5: Weighted Average Approved Rate Changes since the Reforms by Effective Year and Coverage
    Coverage 2010 2011 2012 2013 2014
    TPL-BI 16.50% 4.80% 2.10% 5.30% 1.90%
    TPL-PD 1.40% -2.50% -1.20% -1.40% -3.00%
    AB -8.40% 8.10% 0.60% -2.60% -8.30%
    PhysD -1.60% -3.30% -2.70% -1.90% -4.60%

    For comparison purpose, we refer readers back to Table 5.2 which summarizes FSCO post-Reforms approved rate changes for the entire PPA insurance market, by year approved.

    More than half of the respondents, representing approximately 42% of the industry, attempted to specifically quantify the uncertainties in the Ontario PPA insurance market. However, most of the insurers who attempted to do so cautioned that the issue is complex and that the uncertainty cannot be reliably quantified.

    5.1.2.3 Impact of the Reforms on the Representative Stakeholders' Members

    We asked Representative Stakeholders if they have analysed the impact of the 2010 auto insurance reforms on their members, and if so, if they could provide the results of such quantification. The agreed scope of our report includes considering whether ongoing Government initiatives will alleviate claim cost pressures within the automobile insurance system.

    None of the Representative Stakeholders provided a quantitative analysis of the impact of the Reforms on their members. However, the results of the 2014 Annual Report Survey indicate that many stakeholders are concerned about the impact of the Reforms on claimants.

    5.2 Qualitative Analysis based on Summary of Surveys

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    This section documents the aggregated results of the two surveys and the series of interviews conducted during 2014 with insurers and Representative Stakeholders, without any analysis or conclusions drawn by KPMG. The focus of this section is to capture and demonstrate the range of comments received from the respondents.

    We have identified some comments from respondents to the two surveys where we would like to follow-up for more context and analysis. As appropriate, we will follow-up as part of our approach to the 2015 Annual Report.

    We summarize the respondents’ comments from the Interim Report and the 2014 Annual Report surveys in the following categories:

    • Impact of the Reforms;
    • Anti-Fraud Recommendations;
    • Dispute Resolution System (DRS);
    • Impact of the Strategy;
    • Issues and Uncertainty; and
    • Competitiveness of the Ontario PPA Insurance Market.

    5.2.1 Impact of the Reforms

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    Respondents to the Interim Report Survey and the 2014 Annual Report Survey provided a range of qualitative examples of how the Reforms have impacted various aspects of the PPA insurance system in Ontario. From our discussion with insurers and Representative Stakeholders, we understand that many of them have shared their concerns with the Government through different channels. We also note that many of the concerns raised by survey respondents have also been cited in recent reports on the Ontario automobile insurance system. These reports include, but are not limited to, the Anti-Fraud Report, the DRS Report, and the Towing Report. The Information and recommendations presented in these reports and through other channels are not the repeated in the 2014 Annual Report.

    Based on the comments received from the Representative Stakeholders and insurers, it would appear that the Reforms had an impact on many aspects of the Ontario automobile insurance system. However, in keeping with the agreed scope of our report, we limit the discussion in this section to the qualitative impacts of the Reforms that relate to automobile insurance claim costs and premiums and/or rates61.

    We observe that respondents to the surveys have in some instances noted issues which the Government has attempted to address post-Reforms through proposed or implemented additional measures since the Reforms.

    5.2.1.1 Impact on General Consumers

    Through the Reforms, the benefits available from the mandatory automobile insurance coverages were reduced. At the same time, a wider range of optional automobile insurance coverage choices were introduced. As a result, because of the Reforms, Ontario automobile insurance consumers were given the increased responsibility to understand the mandatory insurance coverage and to determine which and what level of optional benefit coverages to purchase, if any.

    This increased responsibility triggers a need for better consumer information to assist consumers with understanding the automobile insurance product and their decision making. However, numerous respondents suggested that many consumers are not aware of the post-Reforms changes in coverage options. Furthermore, respondents believe that many consumers may not have an understanding of the treatment required (and the related costs) to recover from injuries sustained in a MVA; therefore, even those consumers who are aware that optional benefits are available are not knowledgeable enough to decide whether the mandatory automobile insurance coverage is sufficient in the event of an accident or to decide on the appropriate level of optional coverage.

    A few respondents to the 2014 Annual Report Survey suggested that significant deficiencies still exist in consumer education, and that these deficiencies have resulted in errors and omissions claims or lawsuits being brought by claimants against insurers and brokers for not adequately informing consumers of the available options. These respondents noted that consumers are often unaware of the level of coverage that they have purchased until they need access to the coverage as a result of being injured in an MVA. Some respondents also suggested that the responsibility to educate consumers about the available options should not rest solely with insurers and brokers.

    5.2.1.2 Impact on Claimants

    Some Representative Stakeholders noted impacts from the Reforms on claimants treated under the MIG (Section 10.1.1.2), who are seriously injured (Section 10.1.1.3), or who are catastrophically impaired (Section 10.1.1.4). A number of the comments that we received noted that issues such as the uncertainties surrounding the definitions of the MIG and catastrophic impairment, the unpredictability of outcomes from the DRS, and the complexity of the claim process, are leading claimants to increasingly retain and rely on legal counsel62 for all types of injuries. Moreover, stakeholders have indicated that delays attributable to the mediation63 and arbitration backlogs are resulting in delays in claimants accessing required healthcare services; this according to some of the respondents, may lead to missed opportunities for early rehabilitation and increased costs in the longer term. In addition, the complexity of the claim process and delays in claim adjudication often result in additional medical examinations and assessments having to be performed.

    The Reforms brought a change in the determination of claimants with catastrophic impairment, which effectively precludes a psychologist or any healthcare provider other than a physician from conducting the assessment unless the impairment is a brain impairment only. The Ontario Psychological Association (OPA) suggests that transaction costs could be reduced by reinstating psychologists as professionals who can conduct assessments and examinations to certify applications for catastrophic impairment due to mental health disorders.

    5.2.1.3 Impact on Medical Assessments, Examinations, and Rehabilitation

    A few stakeholders noted that due to the $2,000 limit on fees and expenses for assessments or examinations, there has been a significant reduction in the fees paid to the professionals providing the assessments. Consequently, respondents to the Annual Report Survey observed that this has led to the use of less experienced providers, more limited assessments, and reports that do not necessarily follow best practices and professional standards. There was a concern expressed by some stakeholders that the use of less experienced providers has led to more disputes and increased costs to the system. Others noted that setting standards for third-party medical examinations may reduce friction, legal costs and dispute resolution cases.

    A few respondents noted that the new licensing fees64 and transaction fees related to the PPA insurance system charged to healthcare providers are creating a disincentive for those who are sole practitioners or who practise in a small clinic to participate in the automobile insurance system. Some feel that costs to address fraud are being shifted to healthcare providers.

    5.2.1.4 Other Qualitative Impacts

    Some stakeholders suggested that two changes from the Reforms, specifically – the removal of funding for both “rebuttal assessments” and for facilitating communication between insurer examination reviewers and treatment plan providers — have contributed to the delays in the claim assessment process and have increased disputes between claimants and insurers. This may be adding friction to the PPA insurance system and thus increasing overall costs.

    A number of respondent also suggested that claim costs may be better understood through a detailed analysis of data available through the HCAI.

    5.2.2 Anti-Fraud Recommendations

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    The Representative Stakeholders and insurers generally seem to be aware that all participants in the Ontario automobile insurance system have a role in combating auto insurance fraud. More than half of the insurers who responded to the Interim Report Survey, representing approximately 40% of the industry, reported being involved with industry anti-fraud initiatives such as the Canadian National Insurance Crime Services (CANATICS).65

    All Stakeholders generally agree that implementation of some of the Anti-Fraud Task Force recommendations has prevented costs and premiums from increasing to a level that would be unsustainable; and generally PPA insurance system stakeholders look forward to additional Anti-Fraud Task Force recommendations being implemented.

    During the Annual Report survey, healthcare providers viewed the pilot of the Professional Credential Tracker66 tool as a valuable program. However, some Representative Stakeholders commented that certain recommendations, such as the requirement for detailed statement of benefits paid, and the licensing of both the towing industry and healthcare clinics are actually adding costs to the system. At the same time, these stakeholders also acknowledge the value that these recommendations bring to the anti-fraud initiative.

    With respect to fraud as it relates to the towing industry, one comment received was that the Anti-Fraud Task Force recommendations do not take into consideration a key factor leading to fraud, which is the decreased presence of police at accident scenes with the introduction of self-reporting through Collision Reporting Centres. An effect of this change is that information related to the accident or access to potential witnesses may be lost, which may lead to an increase in opportunistic and premeditated fraud.

    5.2.3 Dispute Resolution System (DRS)

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    The final DRS Report was issued after the insurers had submitted their responses to the Interim Report Survey. As such the insurers did not have many comments related to the report. Insurers indicated that they were eager to know which recommendations will be implemented. The timing of implementation was also of interest to the insurers. Some insurers commented that, until such time that the recommendations from the DRS Report are implemented, delays inherent in the current model and arbitration decisions that are seemingly at odds with the legislative intent will continue to bring uncertainty to the Ontario PPA insurance market.

    The Representative Stakeholders provided comments on the DRS and the recommendations in the DRS Report. Some noted that the current DRS is inefficient and costly, which is increasing costs and premiums. As discussed earlier, stakeholders suggested that delays in the rehabilitation assessment process can often result in patients subsequently developing more chronic and/or secondary health issues related to the injuries sustained in the MVA. This renders the original treatment proposal invalid and increases costs to the PPA insurance system. There was a question as to whether the elimination of the mediation backlog has led to a more timely mechanism to address disputes regarding treatment plans and whether any corresponding changes have been observed in the insurers’ patterns of responses to treatment plans. A few would welcome the opportunity to obtain and review data67 regarding the outcomes of disputes regarding treatment plans – such as human and economic costs associated with untreated injuries, including the cost of pain, risk of re-injury, and chronicity of conditions.

    5.2.3.1 Qualitative Assessment of DRS Report

    Appendix A68 of Justice Cunningham’s Report lists twenty-eight recommendations for transforming the DRS. As part of their response to the 2014 Annual Report Survey, the Representative Stakeholders provided comments on some of these 28 recommendations. Their comments are summarized in this section:

    • Recommendation 1 from the DRS Report: there is a concern that FSCO arbitrators’ knowledge and experience may be lost with the transfer of the DRS to the Public Sector Administrative Tribunal69;
    • Recommendation 9 from the DRS Report: the removal of the right to sue poses a serious concern for both the plaintiff and defence bar, where many believe that this effectively eliminates the ability to rely on case law for interpretation. Some stakeholders suggested that this may increase disputes as neither plaintiff nor defence counsel will have case law to rely upon;
    • Recommendation 17 from the DRS Report: for claims that include future medical and rehabilitation benefits, a delay of two years before settlement may make it more difficult to come to a resolution of the issues;
    • Recommendation 25 from the DRS Report: 
      • the requirement that arbitration hearings for cases under $10,000 be conducted as paper reviews could lead to overuse and even fraud, as claimants could simply split up related claims to ensure that each split up portion of the claims would fall under the $10,000 maximum for paper reviews;
      • some stakeholders mentioned that they are not in favour of restricting the length of medical assessment reports; and
      • there was a suggestion that a triage process be developed to review the disputes and identify claims of higher priority (e.g., those for which the specific treatment is time sensitive) that should be expedited through the DRS.

    5.2.4 Impact of the Strategy

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    5.2.4.1 On Insurers

    While most insurers agree that the Government’s current Strategy will reduce claim costs, a majority of the respondents are concerned with the mismatch in timing between the eventual decrease in claim costs and the targeted70 overall 15% average reduction in automobile insurance rates by August 2015. Respondents suggested that it takes time for cost containment measures to flow through the entire system and that until there is clarity in the proposed changes, the claim costs savings are difficult to quantify. There is also concern among the insurers that the Reforms were intended to reduce claim costs and stabilize rates, and that the Reforms were not necessarily meant to reduce rates. The insurers indicated that, to reduce rates, the Strategy would have to reduce claim costs further.

    Responding insurers also reported that, although the Government driven fraud-related initiatives facilitate the ability of insurers to identify, investigate, and prosecute fraud, the costs to perform these tasks are borne by the insurers. As such, the insurers responding to the survey believed that a reduction in overall claim costs and expenses cannot come from anti-fraud initiatives alone. Insurers believe that there needs to be an emphasis on reducing the administrative costs such as disbursements during dispute resolution or tort claims, assessments, and forms completion.

    Insurers cautioned that without a follow-through by the Government on timely and concurrent claim cost reductions, a lack of capacity and availability in the insurance market may result due to inadequate rates as a result of the targeted 15% average rate reduction.

    5.2.4.2 On Representative Stakeholders

    We asked the Representative Stakeholders whether they have taken or planned to take steps to reduce costs for the Ontario automobile insurance systems. We also asked if there are any issues preventing them from reducing costs, as well as potential actions that may help reduce costs.

    We have been advised by respondents that many service providers to the PPA insurance system have implemented cost effective and more efficient processes. Others service providers plan on participating in discussions71 regarding actions that will be implemented as part of the Strategy. Stakeholders are also developing standards and guidelines72 for their members to adhere to.

    Healthcare professionals noted that some of the administrative burdens, such as licensing of all healthcare practitioners, are not supporting cost reduction.

    A few stakeholders commented that the Government’s rate reduction target of 15% is likely not to be met by the target date next year, and that the Government might want to consider extending the target date. There were stakeholders who suggested that the Government should also not begin any new initiatives, as a number of significant cost reduction initiatives are already underway (e.g., anti-fraud, changes to DRS) and the impacts have not yet been fully realized or understood.

    The Representative Stakeholders were eager to offer suggestions for reducing costs in the system. Sections 10.4.4 and 10.4.5 contain many suggestions that are not repeated in detail here.

    5.2.5 Issues and Uncertainty in the PPA Insurance System

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    The cross section of stakeholders responding to the two surveys conducted during 2014 generally identified similar issues and uncertainties in the PPA insurance system. However, it is not surprising that the various stakeholders sometimes tend to look at the issues and uncertainties from different perspectives.

    Stakeholders identified the following uncertainties in the PPA insurance system:

    • Potential erosion of the existing catastrophic impairment definition;
    • Definition of minor injuries that would fall under the MIG;
    • Limitation period and discoverability of TPL-BI claims and transfer of some claim costs from AB to TPL-BI;
    • Definition of what constitutes “economic loss”;
    • Changes to DRS processes;
    • Use of FSCO benchmarks in rate reviews; and
    • Eligibility for automobile insurance insureds to claim optional benefits regardless of whether the options were purchased.

    We asked the stakeholders to provide issues that they believe may be contributing to uncertainty. The following list demonstrates inherent characteristics in the PPA insurance system that stakeholders believe increase the system’s uncertainties:

    • High benefit limit creating incentive to pursue claims;
    • Complex insurance product leads to disputes in interpretations;
    • Abuse and fraud higher in the Greater Toronto Area (GTA) than other areas;
    • Shortage of post-Reforms arbitration or mediation decision;
    • Rate filing system that leads to unpredictable outcome;
    • Loss of medical experts due to costs and regulatory burden;
    • Trend of lower quality medical assessment facilities using unqualified assessors;
    • Inconsistent insurers’ interpretation of regulations; and
    • Constantly changing automobile insurance regulation.

    5.2.6 Competitiveness of the Ontario PPA Insurance Market

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    We asked respondents to comment on whether the auto insurance marketplace in Ontario is sufficiently competitive and efficient in providing affordable premiums to consumers.

    There are opposing views on whether the Ontario PPA insurance market is sufficiently competitive. Some respondents do not believe that the PPA insurance system is competitive and efficient in providing affordable premiums. Others believe that the entire system should be reviewed for opportunities to increase efficiency and reduce costs overall.

    Insurers and brokers generally believe that the PPA insurance system is a competitive market.

    We observe that there are various tools for consumers to compare insurance rates, such as FSCO’s interactive tool to understanding rates73 or Kanetix74. FSCO also illustrated a gauge of the level of competitiveness in the PPA insurance system by reviewing the number of companies that represent 80% of the market. Based on FSCO’s analysis, as performed on 2011 data and presented in their 2011-2012 annual report75 , 24 insurers represented 80% of the market. This is one of the highest number of insurers, second only to the number of insurers that provide property insurance. FSCO’s analysis concludes that the market is generally competitive.

    We note that other factors that may address the competitiveness of the PPA insurance system may include a comparison of the market share of insurers over time, the ease of entering and exiting the insurance system, and the underwriting return achieved on the PPA insurance product over time.

    6 Observations and Recommendations

    One of the objectives of this report is to provide recommendations for further potential actions that could be considered by the Government and other stakeholders within the PPA insurance system to help the Government achieve its 15% average rate reduction target for PPA insurance by the end of August 2015. The observations and recommendations presented in this section have been informed by our actuarial analysis, both survey processes and our understanding of the Ontario PPA insurance system. As part of our observations, we also point out that certain issues may require additional information, analysis or consideration before making recommendations for potential further actions. Consistent with the objectives of this report, the recommendations focus on potential further actions that could benefit the overall Ontario automobile insurance system.

    Through the Interim Report Survey and the 2014 Annual Report Survey processes, we had the opportunity to hear from a number of organizations, representing the interests of a wide range of stakeholders in the Ontario PPA insurance system. However, as discussed in Section 4.3.2, none of the respondents to the surveys represent broader consumer concerns with respect to Ontario automobile insurance (i.e., the concerns of consumers who have not been involved in MVAs and as a result, have not made a claim against their automobile insurance coverage).

    Based on the feedback gathered through both survey processes, as well as related discussions with some of the stakeholders, there is a broad consensus among the responding stakeholders that the Ontario PPA insurance system needs reform, that a number of positive steps towards reform have been taken, and that there is more to be done. Related to this, the responding stakeholders have a strong desire to participate in improving the PPA insurance system in Ontario.

    As one of the stakeholders alluded to, the general idea of insurance is not complex; however, when the insurance system is considered as a whole, the interactions between the different components are multifaceted and it becomes difficult for any of the stakeholder groups to claim that they understand the intricate workings of the entire insurance system. Given this complexity and the number of stakeholders involved, there are many different perspectives on how to improve the Ontario PPA insurance system, and what the underlying objectives of any potential actions should be. Section 5 and Appendix D of the 2014 Annual Report summarize some of these differing perspectives.

    As part of the research conducted for both the Interim Report and the 2014 Annual Report, issues were identified or suggestions for improvements were received that may not be linked directly to the Government’s 15% average automobile insurance rate reduction target. For example, a number of stakeholders commented on the impact of the Reforms on claimants, or wondered about whether the reduction in claim costs has resulted in increased costs elsewhere in the system.

    We want to thank all of the organizations who responded to the surveys for their participation. While the recommendations presented in this section of the 2014 Annual Report may not directly incorporate all of the comments and recommendations received, the breadth of input is a good reminder that different stakeholders define a well-functioning PPA insurance system differently given their respective priorities and interests. The Government has a difficult task of trying to balance these often competing views.

    6.1 General Observations and Recommendations

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    This section includes general recommendations and observations based on our understanding of the Ontario PPA insurance system, our independent actuarial analysis, and discussions with stakeholders through the two survey processes. These recommendations are directed at areas that would benefit the overall Ontario automobile insurance system rather than address the concerns specific to some stakeholders. More specific recommendations are addressed later in this section. We believe that actions taken by the Government and/or other stakeholders based on these recommendations, coupled with the Government initiatives that are underway, could result in a more efficient PPA insurance system – one that is more transparent, with less uncertainty, and easier to understand.

    6.1.1 Consumer Representation

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    Many of the respondents to the 2014 Annual Report Survey spoke on behalf of Ontario automobile insurance claimants who have been injured in MVAs. However, a great majority of Ontario PPA insurance consumers are not injured76in an MVA in a given year. As discussed in Section 4.3.2, we were not able to identify an independent organization that would represent the concerns of the broader group of consumers (i.e. both those who make an insurance claim and those who never make a claim).

    We also heard from stakeholders that significant deficiencies still exist in the education of consumers regarding Ontario automobile insurance.

    Given the above, we would suggest that consideration be given to establishing an independent organization whose mandate would be to represent all consumers in Ontario who purchase PPA insurance. Such an organization would be charged with balancing the views and needs of all consumers, and could provide a voice to all Ontario automobile insurance consumers. Some of the potential benefits of such an organization include:

    1. Providing consumers with tools to better understand the PPA insurance product .
    2. The Reforms introduced coverage flexibility and choice to consumers. However, the average consumer does not have a sufficient understanding of the costs of the treatments that may be required to recover from serious or catastrophic injuries sustained from an MVA. By providing tools that could enhance consumers’ understanding of the insurance product, consumers would be empowered to make informed decisions on the appropriate level of coverage (mandatory and optional) to purchase. In addition, consumers should have a better understanding of the relationship between premiums and the coverage received. Such knowledge would assist with building trust between consumers and insurers (as well as other insurance intermediaries such as insurance brokers and agents).
    3. Representing consumers in any discussions pertaining to potential changes to Ontario’s PPA insurance system.
    4. In order to represent consumers, the organization would need to understand both the need for and the effect of initiatives such as the Reforms and the Strategy on all Ontario automobile insurance consumers. One of the criticisms voiced by some of the respondents regarding the Government's 15% average automobile insurance rate reduction target is that it is not clear how the 15% target was derived. Another comment received was that there appears to be a regional difference in the need for a reduction in automobile insurance rates. An organization representing all automobile insurance consumers should have an informed understanding of how automobile insurance premiums are changing for consumers in different territories within Ontario.
    5. Guiding automobile insurance consumers injured in MVAs through the claim process.
    6. An organization that focuses on representing all Ontario automobile insurance consumers would provide an independent resource that could also be valuable for claimants in ensuring that they can focus on recovery rather than navigating and understanding the claim process. For example, if a consumer representative was able to assist claimants through the claims process, consumers may not need to turn to legal counsel as frequently for such assistance, particularly with respect to more minor claims. The cost and benefit analysis of providing this type of service would need to be assessed along with the mandate and resources of a consumer representative.

    6.1.2 Develop a Deeper Understanding of the Impact of the Reforms and Strategy

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    One of the objectives of the Interim Report and the 2014 Annual Report was to quantitatively address how PPA insurance claim costs and premiums were affected by the Reforms and the Strategy at the industry level. Our analyses in both the Interim Report and the 2014 Annual Report indicate that the Reforms have significantly contributed to reducing both the claim cost levels and the claim cost trends, and have contributed to stabilizing automobile insurance premiums in Ontario. Furthermore, our analyses indicate that without this positive impact on claim costs, automobile insurance consumers in Ontario would have continued to experience premium increases.

    With reference back to Section 5.1, the data from GISA demonstrates that claim costs, especially those related to AB, have decreased since 2010 when the Reforms came into effect. The GISA data also demonstrates that automobile insurance premiums have remained stable for the AB coverage since the Reforms, while total premiums paid for PPA insurance in Ontario have increased marginally in recent years and have started to exhibit trends of decrease. As premiums are generally set based on historical claims data (historical and expected trends, plus consideration of the level of uncertainty), a decrease in the claim costs will not immediately result in a decrease in premiums (i.e. the claims decrease will need to be reflected in the historical data first). Moreover, as explained in Section 1.6.1 of the Interim Report, there is a delay between the implementation of rate changes and when the changes would be reflected in premiums earned.

    As discussed in Section 5.1.1.2.3, the Government’s initial target of achieving an average automobile insurance rate reduction of 8% by August 2014 has not been met. Some stakeholders commented that the average Ontario automobile insurance rates will likely not be reduced by 15% as targeted for by August 2015. We also note that in its 2013-2014 Annual Report, OSFI commented that “the legislated target of 15% rate reductions in Ontario by August 2015 (with 8% reductions to be realized by August 2014) may negatively impact Ontario personal auto insurance underwriting profitability if the additional claims-related measures introduced in the 2013 Ontario budget are delayed in implementation.”77

    We note that post-Reforms, many significant cost reduction initiatives have been planned and/or implemented (e.g., anti-fraud, changes to DRS) and the resulting impact of these initiatives has not yet been fully realized or understood. There was a general expectation that these initiatives may result in further cost reduction; and that given the lag between implementation and effect, these initiatives should be allowed to mature, without the Government proposing and or implementing additional broad measures.

    We note that there is currently insufficient data to understand the full impact of the Reforms and Strategy, and that it is important to analyze and understand the full impact of the Reforms and Strategy (including looking at any impacts outside of the Ontario PPA insurance system and the impact on claimants) before implementing additional measures. Too many broad changes would make it difficult to analyze and understand the impact of the Reforms and the Strategy.

    Expected projected claim costs are generally more reliable when the market environment has been stable. In such a stable environment, competition tends to increase resulting in lower premium rates. While continuous improvements or some re-alignments may be desirable to fix some problematic situations that may emerge, the Government should also recognize the importance of maintaining a stable environment.

    Recent actions by the Government suggests that it is focused on reducing uncertainty with initiatives that target specific issues of the PPA insurance system. As discussed in Section 5.1.1.2.3, we believe that additional initiatives would be required in order to support the target average rate reduction of 15% by August 2015. Any additional initiatives should continue to target specific issues rather than broad product reform until the effects of the Reforms and Strategy have had an opportunity to work through the system, in order to allow a more fulsome understanding. This will minimize potential ripple effects that may result in unintended consequences. Attempts should also be made to continually understand the cost and benefit of initiatives that have, and will, be implemented. The Government needs to strike a balance between the need for additional initiatives and maintaining stability in the system.

    6.1.3 Health Claims for Auto Insurance System

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    To prepare our quantitative analyses in both the Interim Report and the 2014 Annual Report, we relied on data from P&C insurers’ financial statements as well as data from GISA. Both of these datasets contain aggregated premium, exposure, and claim data at industry-level, and provide a sufficient level of detail for a user to gain an understanding of the performance of the industry in general. However, the detail is not at a level that is sufficiently granular for a user to be able to estimate and monitor some of the changes from the Reforms and Strategy. For example, it is not possible to estimate the proportion of expenses spent on AB claims based solely on GISA data.

    This is a reason behind the suggestion offered by a few of the stakeholders that data from the HCAI should be considered if the Government would like to gain a deeper understanding of the full impact of the Reforms and Strategy. In the responses to the two surveys conducted during 2014, a few stakeholders quoted figures from the Ontario Health Claims Database (HCDB) Standard Reports. These reports are based on analysis of data from HCAI. Figures from the HCDB Standards Reports provide useful information to better understand medical and rehabilitation costs in Ontario’s automobile insurance system. However, it is important to note that several factors78 limit the quality and usefulness of the data.

    As such, it would be worthwhile to continue to improve the quality and quantity of the data reported through HCAI. If data from HCAI is to be relied on to inform decision making, it should be subject to vigorous validation testing and quality control. When data collected through HCAI becomes sufficiently robust, the Government may then explore performing more detailed analyses of the Reforms and Strategy based on the data. The expectation is that this could assist with developing a deeper understanding of healthcare related costs in the system.

    6.1.4 Sharing and Monitoring Information from the PPA Insurance System

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    As discussed in the beginning of this Section, the Ontario PPA insurance system is complex and the system stakeholders often have differing perspectives on how to improve the Ontario PPA insurance system, particularly when it comes to defining the objectives of any proposed changes. As discussed in Sections 6.1.2 and 6.1.3, many stakeholders commented that they would welcome more information about the PPA insurance system. For these stakeholders, the benefits of enhanced sharing and monitoring of information would include improved efficiency as well as enhanced transparency and accountability for a range of stakeholders. In their view, efficiency improvements could be achieved by sharing information amongst the various stakeholders (i.e., the sharing of information may result in less divergence in views across stakeholder groups and enhance competition in the insurance system).

    We think that there are merits to the view that additional sharing and monitoring of information would be of value to the PPA insurance system. Information can be shared in a number of ways, including through independent reports such as this. With reference to the discussion later in this report, the type of data to be shared is also important, such as access to HCAI data or the information underlying the FSCO benchmarks.

    We note that another advantage of enhanced sharing and monitoring of information from the PPA insurance system would be to allow for early detection of issues that may lead to a disruption in the stability of the automobile insurance system. Additional information could also lead to reducing the level of uncertainty in the system.

    6.1.5 Initiatives that May Reduce Claim Frequency

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    Many of the initiatives that are part the Reforms and Strategy have been focused on reducing the severity of claims. We suggest that there may be opportunities for stakeholders in the Ontario PPA insurance system to consider initiatives that may reduce the frequency of claims.

    One suggestion that could be considered in this regard would be for the Government to lead initiatives aimed at reducing the frequency of MVA in Ontario. Other jurisdictions in Canada have been very successful in developing important public awareness campaigns aimed at changing driver behaviors to reduce the number of fatal accidents. For example, in Québec, there is some evidence that such campaigns have also contributed to reducing the frequency of less severe types of MVAs. It may be worthwhile for the Government to consult with various stakeholders to gather insights and discuss various approaches that could be used.

    In addition to public awareness campaigns, many insurers are currently considering taking advantage of newer technologies that are expected to have a favorable impact on road safety and could contribute to reducing the frequency of MVAs. For example, the use of telematics, or usage-based insurance, not only rewards safer drivers, it is also thought to contribute to changing driver behaviour with the potential to reduce the overall accident frequency. The Government could contribute to this initiative by continuing to foster an environment where the rate regulator demonstrates openness to such programs79, in particular those that would include a component dedicated to improving drivers’ behaviour and that would, as a result, be expected to have a favorable impact on the overall claim frequency.

    6.1.6 Other General Observations and Recommendations

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    The following is a list of potential actions to be considered by the Government and stakeholders:

    • Publish the annual change in the average automobile insurance premium paid by drivers who have not had any accidents in the past year as a way to potentially encourage consumers to shop around for better automobile insurance rates. This is perhaps a role that could be performed by the consumer representative discussed in Section 6.1.1;
    • Increase the transparency of investigation and inspection reports performed by Ontario’s public health units and health regulatory colleges80;
    • Develop industry wide standards of practice for claim adjustment and settlement, and develop mechanisms for assessing adherence to these standards, perhaps through risk-based reviews by the regulator as part of an assessment of market conduct practices;
    • Develop mechanisms to assess the impact of legal fees on costs to improve transparency. The impact of these fees are not as well understood as the fees from other stakeholders in the automobile insurance system (i.e., healthcare provider costs are regulated by FSCO and the total annual costs are reported through HCAI). As a way to increase transparency regarding legal costs, FSCO, or another government body, could be authorized to collect information on case-specific fee arrangements, disbursement and referral arrangement from lawyers and paralegals representing claimants of automobile insurance tort and SABS claims. It would then be possible to consider publishing an annual report on the information collected;
    • Encourage the use of new technology and technology improvements to reduce costs in the PPA insurance system. For example, there is an increasing number of technological innovations, such as collision avoidance systems, that are aimed at reducing or eliminating MVAs. In addition, insurers could also leverage technology to increasingly be able to manage and analyze large amounts of data in order to identify fraud, assist with pricing, and gain efficiency in the claims adjustment and settlement processes;
    • Monitor the availability of qualified medical examiners; and
    • Remain knowledgeable of the evolving opinions of stakeholders in the PPA insurance system.

    6.2 Specific Recommendations

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    The recommendations discussed in Section 6.1 are directed at potentially benefitting the overall Ontario automobile insurance system. Section 6.2 presents more specific recommendations aimed at reducing uncertainty and costs.

    6.2.1 FSCO Benchmarks

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    FSCO regularly publishes Technical Notes for Automobile Insurance Rate and Risk Classification Filings (Technical Notes). The most recent note was published in October 201481. In the Technical Notes, FSCO often includes benchmark assumptions such as loss trends and Reforms loss cost adjustment factors. These benchmark assumptions are produced internally by FSCO based on FSCO’s actuarial analysis of industry data. It should be noted that FSCO has access to industry data that is at a level of detail that is not available to insurers and other industry participants (for example, the data from individual insurers). As such, because the data underlying the actuarial analyses is different, the benchmark assumptions produced by FSCO can be different than those derived by actuaries who rely on the overall industry data as published by GISA, without access to the details available to the FSCO actuaries. Regarding the benchmark Reforms loss cost adjustment factors, FSCO states in its Technical Notes that “FSCO’s benchmark factors are intended to apply to all insurers, on average. Due to the differences in risk distribution amongst insurers, the FSCO benchmark factors may be too high for some insurers, and too low for others.”

    Actuaries in Canada who prepare insurers’ rate filings follow the Standards of Practice promulgated by the Actuarial Standards Board. The Standards of Practice instruct actuaries to “review the other actuary’s working papers.”82 Furthermore, paragraph 1610.07 of the Standards of Practice notes that in the case where actuaries are using and taking responsibility of another person’s work:

    As long as doing so does not constitute unauthorized practice of another person’s profession, the actuary may use and take responsibility for another person’s work, given confidence that such actions are justified as a result of
    early and periodic communication with the other person,
    confidence in the other person’s qualifications, competence, integrity, and objectivity,
    the other person’s awareness of how the actuary intends to use the other person’s work,
    communication to the other person of any information known to the actuary that may affect the other person’s work, and vice versa, and
    study of any report by the other person and discussion of it with the other person, especially of any reservation in the report.

    Paragraph 1610.08 states that “failing such confidence, the actuary would not take responsibility for the other person’s work.”

    In our discussions with insurers for the Interim Report, many of them noted that they were instructed to provide indications using the FSCO benchmark factors as part of their rate filings. Many insurers’ actuaries have expressed the need to access the more detailed documentation and working papers underlying FSCO benchmark factors. In the spirit of the Standards of Practice, the exchange of information would allow insurers’ actuaries to review and better understand FSCO’s approach and assumptions and thus gain greater comfort in FSCO benchmark factors83.

    We recommend that FSCO continue to work with representative actuaries to determine which underlying aspects of the benchmark factors84 can and should be shared with actuaries. Increased understanding between FSCO and representative actuaries may increase transparency and reduce uncertainty in the future. A reduction in uncertainty will aid in reducing PPA insurance rates.

    6.2.2 FSCO Processes

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    The International Association of Insurance Supervisors (IAIS) publishes Insurance Core Principles, Standards, Guidance and Assessment Methodology (ICPs)85, which “provide a globally accepted framework for the supervision of the insurance sector.” The most recent ICPs contain 26 core principles, each dealing with a different aspect of insurance supervision. The ICPs state that “the supervisor must recognise that transparency and accountability in all its functions contribute to its legitimacy and credibility. A critical element of transparency is for the supervisor to provide the opportunity for meaningful public consultation on the development of supervisory policies, and in the establishment of new and amended rules and regulations. To further ensure the proper functioning of the insurance sector and promote transparency and accountability, the supervisor should establish clear timelines for public consultation and action, where appropriate.”

    We understand that the Rating and Underwriting Technical Advisory Committee (RUTAC), comprised of company representatives and actuaries, provides input to FSCO on its processes and proposed rate filing guidelines. An internet search of RUTAC revealed that FSCO has periodically consulted the committee on matters that pertain to changes to filing guidelines. We would encourage FSCO to continue to involve RUTAC early in any process that requires input and feedback. We would also encourage FSCO to provide an additional level of transparency and accountability by publishing on its website the role and membership composition of RUTAC. Continued and increased interaction with RUTAC by FSCO may help reduce uncertainty and provide stability to automobile insurance rates.

    6.2.3 Recommendations for Cost Savings and Reducing Uncertainty based on Stakeholder Suggestions

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    We received numerous suggestions from stakeholders through the two surveys conducted during 2014. In this Section we present recommendations from survey respondents for actions to be considered by the Government and/or stakeholders in the Ontario PPA insurance system.

    6.2.3.1 Medical Examinations

    Government and/or stakeholders may consider continuing to set delivery standards and enact oversight requirements for third party medical examinations with a view to reducing friction, legal costs and backlog in the DRS. Another recommendation would be to conduct further study on the use of peer reviews of medical assessment to aid in dispute resolution.

    6.2.3.2 Expand Use of HCAI Data and Implement Professional Credential Tracke

    Several stakeholders suggested that HCAI data may help insurers increase the efficiency of their claim settlement process by providing insurers with additional data to analyze. The rationale is that with the additional data, insurers may have a better understanding of certain claim metrics, such as the average cost of examinations. Some stakeholders believe that with this additional understanding insurers may be able to achieve some efficiencies and additional savings on settling claims. Healthcare providers who have had a chance to use the PCT praise the tools for giving healthcare providers a means of combating fraud committed in their names. We understand that there are instances where the use of the PCT resulted in the prosecution of fraudulent activities.

    6.2.3.3 Legal Fees

    Related to the discussion presented in Section 6.1.4 of the 2014 Annual Report, stakeholders mentioned actions that could potentially reduce the impact of legal fees on claim costs and throughout the system. Based on the responses to the 2014 Annual Report Survey, legal fees may be contributing substantially to costs in the system. Recommendations with respect to legal fees included implementing a cap on lawyers’ contingency fees (the Insurance Brokers Association of Ontario (IBAO) cited the example of contingency fees as high as 40% of a claimant’s award and noted that in New Brunswick contingency fees are capped at 25%) and providing for an independent consumer representative to assist consumers with the claims settlement process such that consumers may not need to hire lawyers to assist them with the process86.

    6.2.3.4 Administration of Medical Benefits

    Most large insurers have sufficient volume of claims and a correspondingly large claims team such that this team has a wide variety of experience in adjudicating medical benefits claims and can develop consistent claims practices. Smaller insurers may not have the same volume of medical benefits claims to give their claim adjusters a similar level of experience. In order to apply more consistent claims adjudication processes, smaller insurers might consider retaining external administrators of medical benefits who have the necessary scale.

    Alternatively, the group of small P&C insurers could work through the IBC to form a medical benefits administrator, similar to the way the Facility Association enables the industry to deal with high-risk drivers.

    6.2.3.5 Further Study on Additional Tier of Limits Greater than $50,000

    Some stakeholders mentioned that a limit of $50,000 for claimants found to be seriously injured but not catastrophically impaired is sometimes insufficient to treat injuries. These stakeholders are concerned that if the injury is not sufficiently treated when the $50,000 limit is reached, the injury may worsen and a catastrophic claim could be triggered at a later date. Such situations could result in unnecessary costs. Research and analysis should be conducted on the merits of adding another defined tier of injury with a limit greater than $50,000. This tier would fall between the current non-catastrophic and catastrophic definitions/limits. Intuitively this additional layer may appear to add cost to the system. However, if the additional tier of benefits reduces the number of catastrophic claims, the overall cost to the system may be reduced. Further study could assess whether an additional tier would benefit claimants who require extensive therapies and expert treatments while reducing overall costs to the system by reducing the number of catastrophic claims and the need for legal counsel.

    6.3 Preview of 2015 Annual Report

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    The purpose of the 2015 Annual Report will be to continue to provide both quantitative and qualitative analysis of the Strategy. The following approaches may be used:

    • Review the progress of initiatives implemented under the Strategy, such as Bill 15, Fighting Fraud and Reducing Automobile Insurance Rates Act, 2014 as to whether they alleviate cost pressure within the automobile insurance system;
    • Report on the progress related to the Government’s two-year average rate reduction target of 15%;
    • Update the quantitative analysis of GISA data with data as of December 31, 2014; and
    • Assess the effectiveness of the auto insurance marketplace in providing affordable premiums to consumers, particularly from the point of view of market competitiveness.

    We do not anticipate conducting large-scale survey of stakeholders in the insurance system, but we may contact individual stakeholders for clarifications.
    The 2015 Annual Report was originally scheduled to be released in August 2015. To provide for an opportunity to reflect data and input as of August 2015, as discussed with the Government, we expect to deliver the 2015 Annual Report during the Fall of 2015.

    7 Appendix A – Summary of Interim Report

    The Interim Report was prepared using the following three approaches:

    • Analysis of P&C insurers financial statements as at December 31, 2013;
    • Analysis of GISA data as at June 30, 2013 87; and
    • Summarization of information collected through the Interim Report Survey.

    In this Appendix we summarize the Interim Report findings with respect to changes in claim costs and premiums, uncertainty in the Ontario PPA insurance system, as well as action steps that were suggested by insurers who participated in the Interim Report Survey.
    The Interim Report also contains background information about the automobile insurance system. This information is not repeated in this report. Instead, readers are referred to the following sections of the Interim Report 88 for further information:

    • Section 1.6 Rates vs. Premiums;
    • Appendix B – Best Practices for Actuarial Involvement in the Rate Regulatory Review;
    • Appendix C – Primer on the P&C Insurance Industry; and
    • Appendix D – Actuary’s Role in the Insurance Industry.

    Due to the time constraints involved in producing the Interim Report, the Interim Report Survey was only sent to executives from insurers providing PPA insurance in Ontario. Recognizing that other stakeholders in the Ontario PPA insurance system may have a different perspective than that presented by insurers, it was noted in the Interim Report that the 2014 Annual Report would include consultation with additional stakeholders through a second survey process.

    7.1.1 Change in Claim Costs and Premiums

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    Insurers who participated in the Interim Report Survey estimated that the Reforms increased the bodily injury portion of third party liability coverage (i.e., TPL-BI) claim costs by approximately 20%. Conversely, according to the insurers, the Reforms decreased AB claim costs by about 46%.

    As noted in the Interim Report, based on a review of insurers’ financial statements and GISA data, it appears that the total earned premium for Ontario PPA increased annually by approximately 4%, 7%, 6.5%, 4%, and 1.6% from 2008 through 2013. Specifically, AB earned premium increased by about 9% and 5% in 2011 and 2012 respectively. The trend reversed between 2012 and 2013, with AB earned premium decreasing by approximately 1%. As such, it was also noted that the increases observed in the overall PPA earned premium over the post-Reforms period of 2011 and 2012 could be explained in part by the increases in PPA AB premium.

    The Interim Report also noted that the uncertainty in the system post-Reforms could be one of the reasons that the overall rate level did not decrease post-Reforms. In addition, the following were mentioned as some of the reasons contributing to increased AB premium post-Reforms:

    • Increase in the number of insured vehicles at approximately 1.5% per annum;
    • Deeply inadequate rates pre-Reforms that resulted in rate increases being implemented in 2010 and 2011; and
    • Rate increases that were implemented pre-Reforms (i.e., prior to September 1, 2010) being earned up to August 31, 2012.

    The Interim Report also mentioned that, as a review of financial statement and GISA data indicates that the rates underlying the premiums charged pre-Reforms were deeply inadequate, the 2011 rate indications might have been expected to result in significant rate increases if the Reforms had not taken place.

    7.1.2 Uncertainty in the Ontario PPA Insurance System

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    The insurers responding to the Interim Report Survey identified a list of uncertainties in the Ontario PPA Insurance System that make it challenging for them to estimate past and future claim costs. These include:

    • The erosion of the catastrophic impairment definition through case law as well as the lack of clarity on how the catastrophic impairment definition will be addressed by the Government;
    • The pressure for claimants to move outside of the minor injury limits, and the uncertain impact of arbitration decisions on the MIG;
    • The mediation and arbitration backlog, and the unpredictable outcome from the dispute resolution process;
    • Transfer of claim costs between AB and TPL-BI and the slow emergence of TPL-BI claims;
    • Delays in the rate reviews89 performed by FSCO and the application of FSCO benchmarks in rate reviews90;
    • The possible entitlement to optional benefits even in circumstances when endorsements are not purchased pre-accident; and
    • Due to greater use of professional services, possible erosion of Regulation 347/13 effective February 1, 2014, which amended the attendant care coverage.

    It is the insurers’ view that reducing uncertainties is critical to ensure the long-term sustainability of the PPA insurance system in Ontario.

    7.1.3 Recommendations and Observations

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    Through the Interim Report Survey, the insurance companies provided recommended actions steps geared towards reducing costs in the Ontario PPA insurance system. These suggestions were summarized in the Interim Report.

    In addition, it was observed during the preparation of the Interim Report that the Government is aware of its role and the need to do more to reduce rates for consumers. It was also noted that the insurance industry realizes it can have an impact on cost reduction. In addition, the Interim Report observed that other stakeholders, in addition to the insurers and government, also have a role to play in the management of costs.
    We did not make any recommendations on further actions that could help achieve the rate reduction targets set by the Government. As explained in the Interim Report, it was felt that it was premature to provide these recommendations before seeking the input of a broader group of stakeholders, who could provide a range of different perspectives, through an expanded survey process.

    8 Appendix B – Independent Actuarial Analysis

    Click here for Appendix B.

    9 Appendix C – Survey

    1. In September 2010, the Government of Ontario introduced major reforms to the Ontario automobile insurance system with the intent to control insurance costs, increase choices available to consumers, and simplify processes in the automobile insurance system. How have you or your members been affected by the auto insurance reforms that were introduced in September 2010? Would it be possible to provide a qualitative assessment?
    2. Have you analysed the impact of the 2010 auto insurance reforms on your members? If so, would you be prepared to discuss your findings? Would it be possible to provide the results of such quantification?

    In November 2012, the Automobile Insurance Anti-Fraud Task Force issued its final report about costs of fraud and recommendations. Its recommendations involved multiple stakeholders such as the Government, the Financial Services Commission of Ontario, insurers, health regulatory colleges, Law Society of Upper Canada, Workplace Safety and Insurance Board, Ontario Health Insurance Plan and Canada Revenue Agency. The 38 recommendations are classified under four headers:

    • Prevention;
    • Detection;
    • Investigation and Enforcement; and
    • Regulatory Roles and Responsibilities.
    1. Have the recommendations made by the Anti-Fraud Task Force in November 2012 and the actions that the Government and industry have taken since then affected you or your members? Would it be possible to provide a qualitative assessment?
    2. Have you quantified the impact of these anti-fraud measures on your members? If so, would you be prepared to discuss your findings? Would it be possible to provide the results of such quantification?
    3. Have you or your members implemented a program to combat auto insurance fraud? If so could you please provide a short description of the program?

    In February 2014, Justice Douglas Cunningham released his final report and “recommendations regarding systemic causes of and solutions to the mediation backlog, potential changes to current structure, delivery model and process, the addition of a dispute prevention process for the system and other issues related to the viability of the DRS”. The 28 recommendations are centered on seven principles with respect to dispute resolution system (i.e., timeliness, proportionality, accessibility, predictability, streamlining, costs and culture).

    1. How have you or your members been affected by the Ontario automobile Dispute Resolution System? Would it be possible to provide a qualitative assessment?
    2. Have you analysed the impact of the Ontario automobile Dispute Resolution System on your members? If so, would you be prepared to discuss your findings? Would it be possible to provide the results of such quantification?
    3. How will you or your members be affected by the recommendations in Justice Cunningham report? Would it be possible to provide a qualitative assessment?
    4. As part of the 2013 Ontario Budget, Government initiated the Auto Insurance Cost and Rate Reduction Strategy. The key elements of the Strategy pertain to anti-fraud measures, an average automobile insurance rate reduction target of 15%, licensing of health care providers in the automobile insurance system, transformation of the automobile insurance Dispute Resolution System and creation of a transparency and accountability mechanism in the form of an independent annual report by outside experts on the impact of auto insurance reforms introduced to date on both costs and premiums”. What steps have you or your members already taken to reduce costs that would affect the automobile insurance product?
    5. What are you or your members planning to do by mid-2015 to reduce costs that would affect the automobile insurance product?
    6. Could you identify any issues that would prevent you or your members from reducing costs that would affect the automobile insurance product?
    7. Are there any further actions that the Government can implement to help you or your members to reduce costs that would affect the automobile insurance product?
    8. Are there any further actions that the other stakeholders can implement to help you or your members to reduce costs that would affect the automobile insurance product?

    Miscellanea:

    1. What uncertainties in the Ontario automobile insurance system are affecting you or your members?
    2. What issues do you or your members see as contributing to the uncertainty in the Ontario automobile insurance system?
    3. Have you analysed the impact of the uncertainties in the Ontario automobile insurance system on your members? If so, would you be prepared to discuss your findings? Would it be possible to provide the results of such quantification?
    4. Do you have any insight as to how these issues may be mitigated? Could you identify any action steps that could be taken to alleviate the uncertainty in the Ontario automobile insurance system?
    5. Do you believe that the auto insurance marketplace in Ontario is sufficiently competitive and efficient in providing affordable premiums to consumers?
    6. Have you or your members been affected by the following recent appeal decisions:
      • Scarlett v. Belair?
      • Pastore v. Aviva?
      • Henry v. Gore Mutual?

    If so, would you be able to provide a quantitative or qualitative assessment of how you or your members have been affected?

    1. Do you have any other comments?
    2. Does your organization wish to remain anonymous in the 2014 Report as described in our cover letter?

    10 Appendix D – Summary of 2014 Annual Report Survey

    Section 4 discusses the approach followed in collecting qualitative and quantitative information from a representative sample of stakeholders in the Ontario automobile insurance system. The Interim Report Survey was directed exclusively at insurers who provide PPA insurance in Ontario and the automobile insurance residual markets (Ontario Risk Sharing Pool and Ontario Facility Association). As described in the Interim Report and decided in consultation with the MOF, the 2014 Annual Report Survey gathered information from other stakeholders (i.e., insurers and the insurance residual markets were not asked to participate in the second survey).

    We distributed the survey, along with an offer to participate in an interview, to twenty-two stakeholders 91. Table 4.1 presented in Section 4.3 shows the complete listing of Representative Stakeholders who were invited to participate in the survey. Appendix C includes a copy of the 2014 Annual Report Survey sent to the Representative Stakeholders.

    Thirteen organizations provided information either by submitting a written response or by meeting with us (in person or by telephone) to discuss their views on the effect of the Reforms and the Strategy on the Ontario PPA insurance claim costs and rates. Some of the responses received address topics broader than the focus of this report and do not specifically address PPA insurance claim costs and rates. As many of these responses contain suggestions on how to improve the PPA insurance system in general, we summarize these comments in this appendix. However, these recommendations are generally not carried forward to the recommendations in Section 6 on potential further actions to be taken by the Government and other stakeholders to achieve a 15% average rate reduction target for PPA in 2015.

    The following organizations responded to the 2014 Annual Report Survey. Where available, we include a link to each organization’s website:

    1. The Advocates’ Society (www.advocates.ca)
    2. Association of Independent Assessment Centres (AIAC) (www.assessmentcentres.ca)
    3. Consumer Representative from the Auto Insurance Anti-Fraud Task Force 92 (Anti-Fraud Task Force Consumer Representative)
    4. Canadian Independent Adjusters’ Association (CIAA) (www.ciaa-adjusters.ca)
    5. Coalition of Health Professional Associations in Ontario Automobile Insurance Services (Coalition)
    6. Fair Association of Victims for Accident Insurance Reform (FAIR) (www.fairassociation.ca)
    7. Insurance Brokers Association of Ontario (IBAO) (www.ibao.org)
    8. Ontario Federation of Independent Towers (OFIT) (www.ofit.ca)
    9. Ontario Insurance Adjusters Association (OIAA) (www.oiaa.com)
    10. Ontario Psychological Association (OPA) (www.psych.on.ca)
    11. Ontario Rehab Alliance (ORA) (www.ontariorehaballiance.com)
    12. Ontario Trial Lawyers Association (OTLA) (www.otla.com)
    13. Provincial Towing Association (Ontario) Inc. (PTAO) (www.ptao.org)

    We would like thank all of these organizations for taking the time to respond to the 2014 Annual Report Survey.

    Similar to the Interim Report Survey, respondents who participated in the 2014 Annual Report Survey could elect to remain anonymous (i.e., not be named in this report). However, all respondents to the 2014 Annual Report Survey indicated that they do not require anonymity.

    This appendix documents the aggregated results of the survey and the interviews without any analysis or conclusions by KPMG. The goal is to capture and demonstrate the range of comments received from the respondents. For ease of reference we tie the summarized responses back to the survey questions. We have identified some comments from respondents to the two surveys where we would like to follow-up for more context and analysis. As appropriate, we will follow-up as part of our approach to the 2015 Annual Report.

    We note that comments received from the respondents often reference the most recent SABS93 , which became effective on September 1, 2010. To assist readers in getting a better understanding of these comments, Appendix E provides a summary of the SABS.

    10.1 Impact of the Reforms

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    Similar to the Interim Report, we assess the impact of the Reforms to date from several different perspectives. Appendix B contains an actuarial analysis that summarizes the changes observed over time in some of the key statistics derived based on GISA data. This appendix presents the views, gathered through the survey process, from Representative Stakeholders.

    10.1.1 Qualitative Impact of the Reforms

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    Question 1 of the 2014 Annual Report Survey asked respondents to provide a qualitative assessment of how each of their organizations and/or members of their organizations have been affected by the Reforms. We summarize the comments received under the following headings:

    • Impact on General Consumers;
    • Impact on Claimants Treated under the Minor Injury Guideline (MIG);
    • Impact on Claimants who are Seriously Injured but not Catastrophically Impaired;
    • Impact on Claimants who are Catastrophically Impaired;
    • Impact of $2,000 Cap on Fees for Assessments and Examinations;
    • Impact on Independent Medical Examiners;
    • Impact on Healthcare Practitioners; and
    • Other Qualitative Impacts.

    10.1.1.1 Impact on General Consumers

    In Ontario, the law requires all drivers to be protected against financial loss through insurance. The basic principle of insurance is that the premiums paid by the many are used to pay for the claims of the few. A majority of drivers are not involved in MVAs in a particular year. As a result, most drivers do not make claims against their automobile insurance coverage. For these drivers, a significant impact of the Reforms has been an increased responsibility to understand the mandatory insurance coverage and to determine which and what level of optional benefits coverages to purchase94, if any.

    This increased responsibility triggers a need for better consumer information. However, numerous respondents suggested that many consumers are not aware of the post-Reforms changes in coverage options. Furthermore, respondents believe that most consumers do not have an understanding of the treatment required (and the related costs) to recover from injuries sustained in an MVA; therefore, even those consumers who are aware that optional benefits are available are not knowledgeable enough to decide whether the mandatory automobile insurance coverage is sufficient in the event of an accident or to decide on the appropriate level of optional coverage.

    Although IBAO noted that brokers have been integral in educating consumers about the post-Reforms optional coverages, other respondents suggested that significant deficiencies still exist in consumer education, and that these deficiencies have resulted in errors and omissions claims or lawsuits being brought by claimants against insurers and brokers for not adequately informing consumers of the available options. These respondents noted that consumers are often unaware of the level of coverage that they have purchased until they need access to the coverage as a result of being injured in an MVA. Some respondents suggested that the responsibility to educate consumers about the available options should not rest solely with insurers and brokers.

    IBAO suggested that the Reforms accomplished their goal of stabilizing rates and preventing premiums from increasing further. Other respondents, such as the Anti-Fraud Task Force Consumer Representative, were disappointed that “consumers have yet to benefit from rate reductions.”

    10.1.1.2 Impact on Claimants Treated under the Minor Injury Guideline (MIG)

    The Reforms introduced the MIG95. In the opinion of some respondents, the MIG provides for adequate funding for the treatment of some minor injuries. However, many respondents noted that in their view the $3,500 limit is inadequate for injuries that become chronic or resistant to short-term treatment. Respondents also noted $3,500 is often not sufficient to provide for the necessary treatment to claimants with long term injuries that technically fall within the MIG96. A knock-on effect is that as a result of not receiving the necessary treatment, some of these claimants are unable to return to gainful employment. According to a few respondents, even in circumstances where insurers agree that a claimant requires more treatment in order to return to employment, insurers often will not pay more than the $3,500 mandated under the MIG.

    Some respondents stated that claimants find claim forms complicated to fill out; and that the recent changes to legislation have made it even more difficult. OTLA stated that the scope of injuries covered by the MIG needs to be refined. Otherwise there is an increased reliance on legal advice even for minor injuries.

    OPA noted that the MIG introduced a fundamental shift in the model of adjudicating accident benefits, and that, as a result of the Reforms, claimants with brain injuries and mental health disorders97 face additional delays and barriers in their ability to access treatment due to the MIG. OPA observed that for claimants whose physical injuries fall under the MIG, psychological assessment and treatment are typically denied. OPA and the Coalition further commented that when claimants who require psychological treatment have their claim denied, they give up seeking psychological services, which often leads to prolonged disorders and further reduction in function.

    In responding to survey questions related to their organization’s qualitative assessment of the impact of the Reforms, OPA suggested several strategies that they feel would improve access to services for claimants with mental health disorders:

    • Acknowledge that mental health disorders are not “minor injuries”;
    • Improve education98 regarding the nature of mental health disorders, with the aim of reducing discrimination and reconsidering the continued narrow focus on severity of physical injury as a proxy for mental injury;
    • Create standards for proper adjudication, including consideration of the relevant evidence-based guidelines regarding assessment and treatment of mental health disorders when making decisions; and
    • Require insurers’ examiners to have appropriate training and expertise; to utilize professional peer reviewers whenever appropriate; and to use psychologists to comprehensively assess a diagnosis of mental health disorders and comment on reasonable and necessary treatment, as well as the resultant disability.

    10.1.1.3 Impact on Claimants who are Seriously Injured but not Catastrophically Impaired

    With the Reforms, the standard limit on the mandatory medical and rehabilitation benefits coverage for non-catastrophic injuries was reduced from $100,000 to $50,000. Several respondents noted that this reduction in benefits, along with the elimination of housekeeping expenses and caregiver benefits in non-catastrophic cases, have reduced AB claim costs in general, and also reduced the number of fraudulent claims. However, some respondents also indicated that the reduced limit of $50,000 on medical and rehabilitation benefits is resulting in a shortage of funds for claimants who are seriously injured, but non-catastrophically impaired. They argue that claimants do not have adequate coverage for medical expenses and treatment before their rehabilitation is complete. As such, many claimants do not receive the treatment and medical assistance that they require.

    In addition, a number of respondents suggested that some claimants whose injuries are originally deemed non-catastrophic are later reassessed and ultimately classified as catastrophically impaired. However, the timing of this reassessment may result in coverage for costs that are in excess of the $50,000 benefits limit being temporarily denied by the insurer. According to respondents, this situation can lead to barriers in accessing the required health services, missed opportunities for rehabilitation and increased long-term costs.

    OPA noted that the reduction in mandatory medical and rehabilitation benefits coverage for non-catastrophic injuries from $100,000 to $50,000 is actually even greater than the perceived reduction of $50,000. This is due to the fact that medical assessments and examination costs are now included in the medical and rehabilitation benefits limit. Prior to the Reforms, medical assessment and examination costs were paid in addition to the $100,000 limit on medical and rehabilitation benefits for non-catastrophic impairments.

    10.1.1.4 Impact on Claimants who are Catastrophically Impaired

    According to Ontario Regulation 34/10 Statutory Accident Benefit Schedule – Effective September 1, 2010 (SABS), “an assessment or examination in connection with a determination of catastrophic impairment shall be conducted only by a physician but the physician may be assisted by other regulated health professionals as he or she may reasonably require.” However, if the impairment is a brain impairment only, then the assessment or examination may be conducted by a neuropsychologist.

    The Coalition is concerned with this change, which effectively precludes a psychologist or any other healthcare provider from conducting the assessment unless the impairment is a brain impairment only. This was noted as becoming a barrier to catastrophic applications for patients with mental health disorders. OPA adds that psychologists are fully equipped to conduct assessments and provide a diagnosis of a mental health disorder. OPA further suggests that transaction costs could be reduced by reinstating psychologists as professionals who can conduct assessments and examinations to certify applications for catastrophic impairment due to mental health disorders.

    10.1.1.5 Impact of $2,000 Cap on Fees for Assessments and Examinations

    Section 25 (5) (a) of the SABS establishes a maximum amount (cap) of $2,000 that insurers are liable to pay health professionals for conducting any one assessment or examination (including all associated costs, such as the cost of preparing a report). Respondents noted that the majority of healthcare assessments can be conducted within the $2,000 cap. However, some of the respondents pointed out that the cap limits the supply of qualified experienced assessors for some claimants, such as those in rural areas where significant expenses are required to reimburse for the travel cost of physicians; or for more rigorous and extensive assessments that require specialized expertise, such as those assessments performed on children.

    Moreover, it was noted by AIAC that “many qualified catastrophic assessors will not complete these assessments because the time they require for extensive documentation review and prolonged assessment procedures (mandated by the AMA [American Medical Association] Guides and thus the SABS), is not appropriately compensated within the $2,000 limit.” It is AIAC’s opinion that exceptions to the $2,000 cap are necessary to ensure an adequate supply of health professionals qualified to perform these services. Similarly, as a result of the introduction of this $2,000 cap, ORA commented that many experienced practitioners find it uneconomical to offer their services to the insurance system. Consequently, the OPA noted that this has led to the use of less experienced providers, and more limited assessments and reports, which do not necessarily follow best practices and professional standards. Some respondents noted that the use of less experienced providers has led to more disputes and increased costs to the system.

    A few respondents also commented that a reasonable benchmark for the total cost of assessments is not known and needs to be established. Finally, OPA noted that there are instances where the capping guideline99 is misapplied by insurers, leading to delays in a claimant’s ability to have access to appropriate assessments and treatment.

    10.1.1.6 Impact on Independent Medical Examiners

    In their response to our survey, AIAC noted that their member companies are accredited and certified by either the Commission on Accreditation of Rehabilitation Facilities (CARF) and/or the International Organization for Standardization (ISO). AIAC also stated that their members’ expertise includes many years spent developing assessment protocols and report formats with the goals of ensuring accountability in the system. Their members’ checks and balances for accountability are: a competitive marketplace; public exposure of their decisions; and regular insurer audits of their policies, procedures and assessment reports.

    AIAC observed that in order to remain profitable, less qualified or experienced professionals or practitioners are in some instances retained by assessment centres (who are not members of AIAC) to perform the assessments. This can lead to assessment reports that are of lower quality. Some of the respondents commented that setting delivery standards for third-party medical examinations may reduce friction, legal costs and dispute resolution cases.

    With the removal of mandatory insurer examinations, insurers now have a responsibility to provide medical reasons for denial of care. A few respondents commented that medical opinions or sufficient rationale are often not provided regarding denial of claims. These respondents viewed this is as a barrier to claimants’ access to care.

    In addition, respondents commented that these assessments are often performed on an arbitrary basis and are not always reviewed by peers. Respondents noted that peer reviewed assessments aid in dispute resolution. FAIR echoed this point and was concerned about the potential lack of independence between assessors and insurers. FAIR was also concerned about the quality of medical examinations.

    10.1.1.7 Impact on Healthcare Practitioners

    A few respondents anecdotally noted that healthcare practitioners have identified significant increases in the cost of providing care for patients injured in MVAs. These respondents noted that as a result, many practitioners are opting out of servicing these patients.

    Beginning on December 1, 2014, FSCO will require healthcare services providers (i.e., those who submit forms through HCAI) to be licensed before they can invoice and receive direct payment from automobile insurers for specific services performed in connection with the SABS. The licensing procedure includes a one-time application fee, followed by annual regulatory fees as well as transaction fees (calculated based on the number of statutory accident benefits claimants). For more information see FSCO website100.

    In connection with the new licensing requirements, the Advocates’ Society noted that the recurring fees (i.e., annual fees and transaction fees) charged to healthcare providers to provide services to MVA claimants may create a disincentive for sole practitioners or those who practise in a small clinic to participate in the system. The Advocates’ Society further commented that “under the current anti-fraud regime, licensing may be refused to a clinic on vague terms.” The Advocates’ Society’s opinion is that this may result in less access to treatment for claimants who reside in smaller or remote communities.

    10.1.1.8 Other Qualitative Impacts

    OFIT noted that many tow truck operators are in financial hardship. There are delays in the receipt of revenues by tow truck and vehicle storage operators due to the delays in claim settlements and the indefinite storage of vehicles while claims are being adjudicated.

    OPA suggested that two changes from the Reforms, specifically – the removal of the funding for both rebuttal assessments and for facilitating communication between insurer examination reviewers and treatment plan providers – have contributed to the delays in the claim assessment process and has increased disputes between claimants and insurer.

    10.1.2 Quantitative Impact of the Reforms

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    The second group of questions in the 2014 Annual Report Survey asked respondents to provide feedback regarding any quantitative analyses they performed related to the impact of the Reforms on their members. None of the respondents were able or willing to provide such a quantitative analysis.

    While the Coalition said that they had not performed their own quantitative analysis, they submitted the results of a survey completed by the Ontario Association of Social Workers in March 2014 as part of their responses. This survey was designed to measure how the Reforms affected social workers’ practice as well as their clients. The survey results included the following findings:

    • 67% of clients had reached the maximum of their medical/rehabilitation funding;
    • 17% of clients were able to access publicly funded social work services;
    • 9% of clients were able to access other publicly funded rehabilitation therapy101 services;
    • 61% of clients had exhausted non-catastrophic funding before social work goals were met; and
    • 56% of social workers were limiting the number of MVA clients in their case load due to the changes in medical/rehabilitation funding.

    ORA also advised that they did not know the quantitative impact of the Reforms on their members. They further commented that a more important question to be answered is the quantification of the impact of the Reforms on the claimants. While recognizing that they did not have a complete answer to this, ORA surveyed their membership to gauge the recovery of their patients. Highlights of this survey are:

    • Only 17% of the seriously injured but not catastrophically impaired MVA victims attain their rehabilitation goals with post-Reforms benefits compared with 57% of those injured prior to the Reforms.
    • Only 50% of seriously injured but not catastrophically impaired MVA victims are able to return to half of their pre-accident roles and levels of function with post-Reforms benefits compared to 85% of those injured prior to Reforms.
    • 26% of claimants who were treated under the MIG classification following the Reforms and received the initial $2,200 tranche, were later denied access to the balance of the $3,500 cap (i.e., the remaining $1,300) despite recommendations from their healthcare provider.102

    10.2 Anti-Fraud Recommendations

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    Questions 3 through 5 of the 2014 Annual Report Survey focused on the recommendations from the November 2012 Anti-Fraud Task Force report. These questions asked respondents to comment on how the recommendations have affected their organization and their members. The questions also sought information on whether any of the respondents have implemented programs to combat automobile insurance fraud. We summarized the comments received under the following headings:

    • Descriptions of Programs to Combat Automobile Insurance Fraud;
    • Impact on Automobile Insurance Claim Costs and Rates; and
    • Impact of Recommendations on Stakeholders.

    Descriptions of Programs to Combat Automobile Insurance Fraud

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    Some Representative Stakeholders who represent service providers to the PPA insurance system provided feedback on how their members are helping combat automobile insurance fraud.

    According to the Advocates’ Society, many of their members, “particularly those who represent the defence bar in personal injury matters, play a role in helping to eliminate fraud claims (such as those for staged accidents, conflicts of interest, etc.). However, the Society’s members are concerned that the lawyer’s role following the identification of a fraudulent claim remains unclear. For example, it is not clear to whom an allegation of fraud should be reported, and what next steps a lawyer should take once fraud has been detected.”

    With respect to programs to combat auto insurance fraud, the Coalition advised that:

    • They have not implemented a formal program. However, they continue to disseminate fraud related information prepared by insurers and FSCO for the health professional associations.
    • The Coalition’s member organizations regularly communicate to their members the importance of anti-fraud measures.
    • Many of the regulatory colleges have also instituted awareness campaigns around auto insurance fraud and the need for members to be aware of the potential for identity theft related to their registration numbers.103
    • Health professionals have participated in a pilot program of the Professional Credential Tracker (PCT)104 tool. The Coalition believes that this is a valuable program; however, they would like to see further development of the tool so as to enhance accountability.

    Other respondent organizations reported that they also inform their members regarding anti-fraud measures. For example:

    • IBAO issued screening guidelines to help broker members identify fraudulent activities.
    • ORA promotes best business practices to their members. Recently, they published a “Licensing Implementation Kit” which includes “multiple tools and guidelines required to support licensing business operations requirements.”105

    10.2.2 Impact on Automobile Insurance Claim Costs and Rates

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    The Advocates’ Society noted that from the plaintiffs' perspective, the Anti-Fraud Task Force measures have had no direct impact, and that “at least indirectly, the measures attack benefits coverage. In addition, there have been very few actual prosecutions for fraud in the auto insurance industry in Ontario.” The Advocates’ Society commented that the difficulty in implementing the Anti-Fraud Task Force recommendations may arise out of the fact that FSCO does not have jurisdiction over many potential fraudsters (e.g. clinics, auto shops). Furthermore, the Advocates’ Society suggested that actions taken to combat fraud should involve criminal authorities for more effective implementation, and that the criteria for the licensing of clinics should be clearer so as to allow for a more effective mechanism to monitor fraud at the clinic level.106

    IBAO commented that the implementation of the Anti-Fraud Task Force’s recommendations has prevented costs and premiums from increasing to a level that is unsustainable. Consistent with this point, the OIAA stated that the current licensing of healthcare service providers and the proposed governance of towing and storage will help regulate these service providers and reduce instances of opportunistic fraud.107 OIAA noted that while there are a number of recommendations made by the Anti-Fraud Task Force that have yet to be implemented108, they believe that the recommendations should bring a more balanced system with enhanced consumer awareness and “less fraud”.

    The Coalition commented that from a healthcare perspective, the best way to manage fraud is to focus on best practices and evidence-based health care. Professional healthcare associations provide guidance and support to ensure that their members are highly skilled and provide the care which is most effective for the patient with a focus of returning each patient back to independence. Healthcare regulatory colleges have also been active in ensuring that those members providing services within the healthcare system who are providing inappropriate or unnecessary treatment are appropriately evaluated and reprimanded if found to be negligent. The focus of healthcare providers has been on providing access to care that is cost effective, goal-oriented and time-limited.

    10.2.3 Impact of Recommendations on Stakeholders

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    Various stakeholders provided input on the impact of the recommendations from the Anti-Fraud Task Force. Some of the changes that were made effective as of June 1, 2013 include109:

    • Requiring insurers to provide claimants with all reasons for denying a claim;
    • Giving claimants the right to receive a bi-monthly, detailed statement of benefits paid out on their behalf;
    • Increasing the role of claimants in fraud prevention by requiring them to confirm attendance at a health clinic; and
    • Making providers subject to sanctions for overcharging insurers for goods and services and banning them from asking consumers to sign blank claim forms.

    While stakeholders generally applauded the changes enacted so far, they had various comments related to the changes. On the requirement that insurers provide claimants with all reasons for denying a claim, several respondents mentioned that there are instances when insurers have denied claims without providing all the medical reasons for denying the claims.

    On the detailed statements that describe benefits paid out on claimants’ behalf, some stakeholders commented that their patients have not received any statements, or where statements are received, there is insufficient detail to understand the expenses.

    In the following two sections we highlight impact of the anti-fraud recommendations on healthcare service providers and two truck operators.

    10.2.3.1 Healthcare Service Providers

    While none of the three questions related the Anti-Fraud Task Force in 2014 Annual Report Survey specifically mentioned the licensing of healthcare service providers, many respondents commented on this recommendation that has already been implemented by FSCO with an effective date of December 1, 2014. The following summarize the views of AIAC, FAIR, the Coalition, ORA and OPA.

    AIAC does not believe that the service provider licensing model will provide the anticipated oversight and protection. They also believe that the licensing model will likely lead to increased costs while burdening small and medium enterprises, all with no impact on fraud reduction.

    FAIR observed that the level of service may be affected with licensing and additional fees being levied on healthcare service providers. Two examples of these potential changes mentioned by FAIR include a reduction of the services available in rural areas and a decrease of highly specialized treatment providers due to the fact that those professionals might not be willing to pay the licensing fees if they treat victims of MVAs only on an occasional basis.

    AIAC further noted that independent medical examination (IME) providers have worked with insurers to develop, implement and maintain standards for best practices, transparency and cost reduction. These include:

    • Assessment facility costs that are contained by insurers who run competitive processes before selecting vendors (e.g., through the use of detailed fee schedules);
    • Requirement by most insurers for IME companies to attest to ethical billing practices;
    • Monitoring by HCAI, which currently tracks and provides required data regarding all providers’ billing practices;
    • Requirement by insurers for IME companies to be accredited with various regulatory bodies; and
    • Conduct by insurers of regular direct audit of IME companies.

    AIAC advised that their members have long been advocating for higher standards of practice within their sector, and while they supports the general concept of licensing, they believe that standards of practice are more important and will have more of a positive impact within the automobile insurance sector as a whole.

    The Coalition believes in the importance of licensing for those service providers whose business practices are not already regulated by a health professional college. However, the Coalition questions the benefits of adding the costly burden of licensing for those service providers that are already regulated by a health professional college and incurring the related costs. They are also concerned that while the licensing system is intended to provide savings to the automobile insurance system as a whole through fraud reduction, the licensing system will also result in a shifting of some costs to the health professionals. As such, the main concern is that while healthcare professionals are being asked to absorb the additional costs triggered by the licensing process, there have been no increases in the professional fee guidelines over the last two years. This combination of increasing costs without allowing increases in professional service fees has had a significant financial impact on healthcare facilities, particularly for sole practitioners and smaller businesses.

    ORA also noted that the new process, requiring all healthcare professionals providing services in the automobile insurance sector to be licensed, has had a major impact on healthcare providers. They estimate that the total direct and indirect costs of the licensing process represent a 5% to 10% reduction to an already slim profit margin. Direct costs are those related to the licensing fees and indirect costs are those related to internal oversight and risk management.

    Although OPA is supportive of the licensing initiative and believes it will assist in eliminating fraudulent facilities from the system, they also believe that there should be exceptions as to who should be licensed. OPA also raised many of the concerns discussed above by the other respondents regarding the licensing program.

    10.2.3.2 Tow Truck Operators

    • Both OFIT and PTAO are concerned that the reputation of the towing industry as a whole has been damaged as a result of the fraudulent activities of a few. OFIT believes that the Anti-Fraud Task Force recommendations do not take into consideration a key factor leading to insurance fraud: the decreased presence of police officers at accident scenes following the introduction of self-reporting through Collision Reporting Centres. An effect of this change is that relevant information related to the accident and/or access to potential witnesses may have been lost as a result of this change. OFIT’s opinion is that a diminished police presence has led to an increase in opportunistic and premeditated fraud as well as a shift in costs “as money saved on police budgets is clearly paid by the public in higher insurance premiums.”

    10.3 Dispute Resolution System (DRS)

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    In February 2014, Justice Douglas Cunningham released a report titled “2014 Ontario Automobile Dispute Resolution System Review Final Report”110 (Justice Cunningham Report) including twenty-eight recommendations (Justice Cunningham’s Recommendations) for transforming the DRS. These recommendations were centered on seven principles – timeliness, proportionality, accessibility, predictability, streamlining, costs and culture. Questions 6 through 8 of the 2014 Annual Report Survey asked stakeholders to provide both qualitative and quantitative assessments of the current DRS, as well as a qualitative assessment of how Justice Cunningham’s Recommendations will affect their members. We summarize the comments received under the following headings:

    • Qualitative Assessment of Impact of the Current DRS;
    • Quantitative Assessment of Impact of the Current DRS; and
    • Qualitative Assessment of DRS Report.

    10.3.1 Qualitative Assessment of Impact of the Current DRS

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    Several stakeholders commented that with the mediation backlog having been successfully tackled, wait times for mediation are now much shorter. However, it appears that the backlog has shifted, as FSCO is now receiving an unprecedented number of arbitration applications. Furthermore, a number of respondents noted that the DRS is inefficient and costly, which is increasing costs and premiums.

    Members of the Coalition noted that delays in the DRS have resulted in patients not receiving treatment on time and/or delays in payments to their clinics. Delays in the rehabilitation assessment process can often result in patients subsequently developing more chronic-related issues and secondary-related health issues111. As a result, the original treatment proposal is often no longer applicable. To better understand the issue, OPA asked to see any data that would help assess whether the elimination of the mediation backlog has led to a more timely mechanism to address disputes regarding treatment plans and whether any corresponding changes have been observed in the insurers’ patterns of responses to treatment plans.

    OIAA commented that the mediation backlog had an impact on adjusters’ ability to effectively deal with claims in dispute due to the timeliness of when the mediations were conducted. To better manage the backlog, OIAA noted that insurers added resources to adjudicate claims at the peak of the backlog. With the backlog cleared, the additional resources have been redeployed, reduced, or terminated. As a result, OIAA noted that adjusters currently do not have the infrastructure to support the increasing number of cases in arbitration.

    OPA noted that the current DRS requires patients with mental health disorders to provide evidence from a physician. In non-automobile insurance matters the court and the parties involved determine the appropriate experts to rely on, and a physician is not necessarily required. OPA commented that psychologists are one of only two professions authorized to diagnose a mental health disorder. OPA’s opinion is that, in cases involving potential mental health disorders, the requirement to have a physician to adduce evidence adds a barrier to the patient’s treatment and unnecessary costs to the system.

    10.3.2 Quantitative Assessment of Impact of the Current DRS

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    The second group of questions related to the DRS in the 2014 Annual Report Survey asked respondents to provide feedback regarding any quantitative analyses they performed related to the impact of the DRS in its current form on their members. None of the respondents were able or willing to provide such a quantitative analysis citing as a reason the lack of available data to perform such a review. However, a number of respondents commented that they would welcome the opportunity to obtain and review the data regarding the outcomes of disputes regarding treatment plans – such as human and economic costs associated with untreated injuries, including the cost of pain, risk of re-injury, and chronicity of conditions.

    10.3.3 Qualitative Assessment of DRS Reportw

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    Appendix A112 of Justice Cunningham’s Report lists twenty-eight recommendations for transforming the DRS. As part of the 2014 Annual Report Survey, stakeholders were asked to comment on specific recommendations. Only recommendations that were commented on are discussed in this section.

    10.3.3.1 DRS Established as a Public Sector Administrative Tribunal (Recommendation 1)

    The Advocates’ Society noted that FSCO’s arbitrators have built up institutional knowledge and experience through the adjudication of thousands of claims reviewed under the current arbitration process. The Advocates’ Society is concerned that this knowledge and experience may be lost with the transfer of the dispute resolution process to a Public Sector Administrative Tribunal113.

    10.3.3.2 Eliminate Option of Initiating a Court Proceeding Instead of Arbitration (Recommendation 9)

    The Advocates’ Society noted that Bill 15, Fighting Fraud and Reducing Automobile Insurance Rates Act, 2014, “purports to remove the right to sue in court for accident benefits claims (proposed new Section 280).The removal of the right to sue poses a serious concern for both the plaintiff and defence bar.”

    OIAA commented that removing the right to proceed to litigation will effectively eliminate the ability to rely on case law for interpretation of issues pertaining to claims. OIAA suggested that this may increase disputes as neither plaintiff nor defence counsel will have case law to rely upon. In the opinion of OIAA, this recommendation is likely “going to further tax the system.”114

    10.3.3.3 Settlement of Future Medical and Rehabilitation Benefits Should be Prohibited until Two Years after the Date of Accident (Recommendation 17)

    For claims that include future medical and rehabilitation benefits, OIAA stated that Recommendation 17 may have a negative impact on any settlement discussions that occur prior to the end of the two-year period, as it will be that much more difficult to come to a resolution of the issues without the ability to settle the whole claim.

    10.3.3.4 Insurer Internal Review Process (Recommendations 19 – 21)

    OIAA suggested that Justin Cunningham’s Recommendations calling for insurers to implement a formal internal review process will ensure continuity in file handling and decision making. They feel that “this review will ultimately form the basis of their defence if the file proceeds to arbitration or upon review, it may be determined that the denied benefit should in fact be paid which will eliminate the dispute all together.”

    10.3.3.5 Arbitration Hearings Conducted as Paper Reviews for Cases under $10,000 (Recommendation 25)

    The Advocates’ Society is concerned that requiring arbitration hearings to be conducted as paper reviews for cases under $10,000 could lead to overuse and even fraud, as claimants could simply split up related claims to ensure that each split up portion of the claims would fall under the $10,000 maximum for paper reviews.

    While AIAC agrees with any process that will expedite the DRS, they suggested that it is contradictory to place more weight on the paper review process while at the same time restricting the length of reports and briefs. AIAC noted that restricting report length will have the following consequences:

    • Decreased quality in assessment standards;
    • Reports that do not include the rationalization of opinions;
    • Reports that have less value to the DRS; and
    • Reports that are less likely to resolve conflict because issues of objectivity, partisan views and biases (perceived or real) will be more easily declared.

    The Coalition commented that regulations have not been developed to enact Justice Cunningham’s Recommendation of a tiered process based on the amounts in dispute. Although the Coalition supports more timely and efficient access to dispute resolution, they are also concerned that the proposal may have the effect of limiting the insured person’s access to dispute resolution. OPA had similar concerns. The Coalition noted that “in consideration of dispute resolution, the severity of injury and focusing on acute needs and those with specialized needs such as children should be considered. It was suggested that a triage process be developed to review the disputes and identify claims that could be assigned a higher priority (e.g., those where the specific treatment is time sensitive) and that should be expedited through the DRS. This may require assistance of a regulated health professional.”

    ORA felt that a $10,000 threshold would limit access to in-person hearings only to catastrophic cases when many non-catastrophic cases include very severe injuries and needs, and these cases are sometimes eventually determined to be catastrophic.

    10.4 Impact of the Strategy

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    In questions 9 through 13 of the 2014 Annual Report Survey, we asked stakeholders to comment on the Strategy’s average automobile insurance rate reduction target of 15%. The comments received are summarized under the following headings:

    • Steps Taken to Reduce Costs;
    • Planned Steps to Reduce Costs;
    • Issues Preventing Stakeholders from Reducing Costs;
    • Potential Actions by the Government; and
    • Potential Actions by Other Stakeholders.

    10.4.1 Steps Taken to Reduce Costs

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    IBAO suggested that brokers help facilitate consumers to receive lower rates by shopping amongst many insurers.

    OPA noted that they continue to advocate early and appropriate psychological treatment to effectively reduce impairments, restore functionality, and reduce costs in the process. Psychologists have developed and updated their guidelines on evidence based assessment and treatment with the goal of providing assessments that are focused and treatments that are efficient yet effective. OPA also stated that psychologists are working with other healthcare providers to support the implementation of the health facility licensing system to assist in addressing any facilities engaged in fraudulent billing practices.

    10.4.2 Planned Steps to Reduce Costs

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    Healthcare providers who are members of the Coalition plan to continue to work with FSCO, insurers and the MOF to support anti-fraud initiatives. The licensing of healthcare service providers is a major initiative that will require the ongoing attention of the Coalition. A potential full scale implementation of the PCT may help reduce fraud and associated costs. The Coalition indicated that they plan to be actively involved in participating and providing feedback to the MIG recommendations to be released in the fall of 2014115.

    Some healthcare professional associations have developed guidelines related to clinical assessments and insurer examinations. The Coalition will encourage all professional associations to do the same.

    OFIT noted that tow truck operators plan to follow the recommendations of the Towing and Storage Advisory Groups, by applying to the College of Trades to recognize towing as a trade.116

    According to OPA, psychologists are developing guidelines for examinations requested by insurers with the expectation that the guidelines will increase confidence in the insurers’ assessments and examinations system and reduce disputes. As noted by OPA, disputes lead to delays and additional costs in the system. OPA is also updating their assessment and treatment guidelines to provide direction to both psychologists and insurers regarding the application of evidence-based assessment and treatment practices within the automobile insurance context.

    10.4.3 Issues Preventing Stakeholders from Reducing Costs

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    The Coalition commented that the administrative burden imposed on all healthcare professionals does not support cost reductions. In addition, inefficiencies in the PPA insurance system impact access to care, which sometimes leads to the prolonged duration of a claimant’s medical condition. This may increase costs if the claimant requires additional care.

    The Coalition further commented that some healthcare professionals have to travel to patients’ homes in order to assess and treat these patients, and that travel costs and the general cost of doing business have been increasing. They also explained that if costs continue to rise, there might come a time where it will be difficult for members to provide services at similar rates, and there may be an accessibility issue for MVA victims when some healthcare professionals may stop providing their services.

    OPA noted that for claimants who require treatment from psychologists, delays and stress resulting from denials of claims hamper the cost reduction initiative. OPA further added that psychological treatment is cost effective in that the treatment reduces impairment while restoring function, which reduces the utilization and costs of other healthcare services.

    10.4.4 Potential Actions by the Government

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    Healthcare professionals from various associations who participated in the 2014 Annual Report Survey provided the following recommendations for potential actions to be considered by the Government to reduce costs in the PPA insurance system:

    • Reduce barriers117 to appropriate and necessary access to services for injured victims with both physical and mental health disorders;
    • Acknowledge that mental health disorders do not fall under the MIG;
    • Note that the severity of physical injuries is not a proxy for the severity of mental injury;
    • Reinstate provisions to reflect expertise and competence of psychologists by allowing them to conduct assessments and examinations;
    • Limit the licensing fee requirements of healthcare providers to those who are not regulated by health regulatory colleges;
    • Reinstate psychologists as experts who can provide evidence in court for claims where serious impairment of mental or psychological functions occurred; and
    • Focus on restoring individuals to pre-accident levels of activity and not purely on treating pain-related issues.

    A few stakeholders commented that the Government’s average rate reduction target of 15% by August 2015 is unlikely to be met by the target date, and that the Government might want to consider extending the target date. Furthermore, there were stakeholders who suggested that the Government should not begin any new initiatives, as a number of significant cost reduction initiatives are already underway (e.g., anti-fraud recommendations, changes to DRS) and the impact of these initiatives has not yet been fully realized or understood.

    The IBAO offered a few additional recommendations for the Government to consider, including:

    • Implementing the catastrophic impairment definition recommended by the Superintendent’s Report on the Definition of Catastrophic Impairment in the Statutory Accident Benefits Schedule118 (Superintendent’s Report);
    • Implementing a cap on lawyers’ contingency fees. (IBAO cited an example of contingency fees as high as 40% of a claimant’s award and noted that in New Brunswick, lawyers’ contingency fees are capped at 25% of a claimant’s award);
    • As recommended by IBC, increasing transparency regarding legal costs by authorizing FSCO to collect information on case-specific fee arrangements, disbursements and referral arrangements from lawyers and paralegals representing claimants of the automobile insurance tort and SABS claims. It is recommended that FSCO consider publishing an annual report on the information obtained. (IBAO notes that lawyers and paralegals are the only PPA insurance participants without FSCO oversight over their pricing schemes);
    • As recommended by IBC, increasing transparency regarding legal fees by prescribing that a fee disclosure statement be presented by the lawyer to its client prior to entering into a contingency fee arrangement;
    • Removing the vanishing deductible on non-pecuniary awards for amounts under $100,000 except on awards pertaining to death. Currently, the $30,000 deductible ($15,000 on family awards) does not apply to awards that exceed $100,000. The concern is that the “vanishing deductible” may encourage claimants to inflate claim amounts in order to exceed the $100,000 threshold (e.g., removing the vanishing deductible would reduce incentive to inflate claim amounts); and
    • Prohibiting tort recovery for pecuniary damages in excess of legislated fee limits and thresholds119 for all claims other than those that are serious and permanent. The objective is to remove an incentive to dispute claims.

    Potential Actions by Other Stakeholders

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    With respect to actions that other stakeholders could take in order to reduce costs in the PPA insurance system, several stakeholders offered the following suggestions:

    • Review costs of towing and storage;120
    • License tow truck industry;121
    • Promote accident prevention and injury reduction;
    • Continue to utilize telematics to reduce premiums for safe drivers and encourage safe driving;
    • Improve insurers’ internal claims and adjudication processes;
    • Reduce the frequency of medical assessments;
    • Enact oversight of medical examinations to insure that information is reliable and relevant;
    • Require insurer’s examiners to have appropriate training and expertise and utilize professional peer reviewers where appropriate; and
    • Create standards for proper rehabilitation adjudication including consideration of relevant evidence-based guidelines regarding assessment and treatment of both physical and mental health disorders.

    In order to preserve his/her rights, within 120 days of an MVA, a claimant is required to send a letter to the other driver and that driver’s insurer stating the intention to commence an action for loss or damage for personal injury. Upon receipt of the letter, the other driver’s insurer opens a claim file and incurs transaction costs, even though in many cases a tort claim is never pursued. With a view of reducing insurer’s transaction costs, the Advocates’ Society suggested that this requirement be changed. The Advocates’ Society explained that while a claim made after a lengthy delay poses difficulties for an insurer’s investigation of the claim, there may be a middle ground whereby an insurer’s investigation is not hindered and unnecessary transaction costs are minimized. The Advocates’ Society did not propose what that middle ground might be.

    To minimize the need for mediation and arbitration, ORA suggested the following potential actions:

    • Reinstating mandatory IME for disputed denials prior to mediation;
    • Instituting pre-mediation discussions to clarify areas of dispute and foster early resolution; and
    • Involving all the parties directly affected in dispute resolution process.

    To reduce the cost of medical assessments, OTLA proposed the following:

    • Insurers’ assessments should not be permitted for issues that are subject to a paper review arbitration, such as whether a claimant fits under MIG or whether treatment plans should be carried out. OTLA believes that a paper review is sufficient under these circumstances and insurers’ assessments are not necessary.
    • Insurers’ assessments should not be permitted more than once every six months.
    • “Multi-disciplinary” assessments, where claimants are subject to multiple assessments within a short timeframe, should be eliminated.
    • Insurers should not be permitted to spend more than a specified maximum on assessments in a non-catastrophic claim. OTLA submits that there is no reason to spend more than 10 percent of the available benefit amount (i.e., $5,000) on all assessments.

    OTLA also suggested exploring methods of reducing payments on missed or cancelled appointments by claimants.

    OPA commented that in addition to providing a common database for some of the costs in the system, HCAI provides an opportunity for insurers to better understand claims-related expenses; this may increase the efficiency of insurers’ claim settlement and invoice review, and payment processes. The Coalition also noted that the data from HCAI is providing information with which to examine some of the costs in the system, and further commented that the HCDB standard reports, published every six months by the IBC, contains useful analysis of data from HCAI.

    With respect to issues related to the cost of towing and storage, OFIT and PTAO suggested that:

    • Towing must be standardized and effectively regulated so that only qualified towers are allowed to operate in Ontario122;
    • Implement an incident management system to manage towing needs. Such a system may manage towing requirements that arise from collisions that have occurred, or for instances where towing emergencies that arise from adverse weather or poor road conditions are expected to occur. This system would also manage a tow call allocation system, which promotes consistency in towing allocation and practices across the province;
    • Fair value of towing and storage services should consider the public value of emergency towing; and
    • Municipal licensing of tow truck should be discontinued. This would increase the operational range of tow truck operators, which may result in improved customer service.

    Lastly, some stakeholders had the following questions:

    • Why are insurers allowed to pay excessive commissions to brokers?
    • Why is it acceptable for insurers to spend the same amount (per claim) on denial of treatment (through insurers’ examinations) as they would actually spend on the treatment itself?

    10.5 Issues and Uncertainty as a Result of the Reforms and the Strategy

    Table of Contents

    Questions 14 through 17 of the 2014 Annual Report Survey asked respondents to identify issues and uncertainties arising from the Reforms and the Strategy, to provide any findings and analyses with respect to the impact of these issues and uncertainties, and to provide comments on how to alleviate or mitigate the uncertainties. We summarize the comments received to questions 14 through 17 under the following headings:

    • Areas of Uncertainties Identified by Representative Stakeholders;
    • Issues Contributing to Uncertainty; and
    • Suggested Action Steps to Alleviate or Mitigate Uncertainties.

    10.5.1 Areas of Uncertainties Identified by Representative Stakeholders

    Table of Contents

    In general, respondents are concerned with the lack of certainty around which aspects of the automobile insurance system will be subject to review and changes in order to achieve the Government’s 15% average rate reduction target for PPA automobile insurance by the end of August 2015.

    Respondents identified a number of uncertainties which make it challenging for them to navigate the PPA insurance system. We summarize these below under the following headings:

    • Catastrophic Impairment;
    • MIG;
    • Bodily Injury Claims;
    • Definition of Economic Loss; and
    • Income Replacement Benefits.

    10.5.1.1 Catastrophic Impairment

    Some respondents suggested that the categorization of what constitutes catastrophic impairment is uncertain, highly technical and currently open to too much interpretation. Case law around catastrophic impairment is unhelpful as it is too inconsistent to provide a clear definition of what constitutes catastrophic impairment.

    The Anti-Fraud Task Force Consumer Representative suggested that clarity in the definition of catastrophic impairment could reduce legal costs. He also mentioned that clarifying the definition could reduce the incidence of claimants attempting to receive catastrophic-level injury benefits by claiming both physical and psychological impairment.

    A member of CIAA123, as well as a few other stakeholders such as those representing healthcare providers, suggested that $50,000 is sometimes insufficient to treat serious injuries that are not categorized as catastrophic impairments. A concern is that if the injury is not sufficiently treated when the $50,000 limit is reached, the injury may worsen and a catastrophic claim could be triggered at a later date. Such situations could result in unnecessary costs. The member of the CIAA proposed to add another defined tier of injury with a higher limit than $50,000. This tier would fall between the current non-catastrophic and catastrophic definitions/limits, and would benefit claimants who require extensive therapies and expert treatments.

    10.5.1.2 MIG

    The Coalition noted that healthcare professional associations are concerned about the minor injury definition expanding from a focus on soft-tissue related injuries to including psychological/mental health disorders, brain injuries, and other injuries that do not fall within uncomplicated soft tissue injuries. According to the Coalition, although there is no evidence to support whether the $3,500 is a sufficient amount of funding, there continues to be no opportunity for those who end up with chronic musculoskeletal pain to have access to funding beyond the $3,500. The inclusion of HST within the limit has also impacted members that have to charge HST, resulting in further reduction in coverage.

    The member of CIAA who responded to the 2014 Annual Report Survey noted a “billing loophole” that has become “accepted practice”. In order to “stretch” their MIG limit of $3,500, he advises his clients to pay chiropractors directly for individual treatments (the cost of which are usually around $30 to $35 as some of the treatments take less than 15 minutes). The respondent explained that similar treatments, if billed as an insurance claim, may cost insurers much more than if the claimant paid out-of-pocket. In addition, the respondent proposed that the $3,500 limit be increased as he believes that this limit is not sufficient for some claimants.

    On the same topic, OTLA noted that a definition providing a more refined and narrowed scope of injuries covered under the MIG would benefit claimants by allowing them to obtain proper treatment for their injuries. This would also reduce the uncertainty faced by claimants and insurers, and reduce disputes between claimants and insurers.

    10.5.1.3 Bodily Injury Claims

    OIAA identified the limitation period and discoverability of bodily injury claims as sources of uncertainty. In this context, the recent ruling on the Gluchowski v. Lister 124case is of concern to OIAA. The ruling suggests that the two-year limitation period does not start from the time the plaintiff is aware of the injury; rather it runs from the time when the plaintiff was aware that they had sustained an injury that could result in a “threshold” claim125. OIAA fears that this could trigger additional bodily injury claims to be reported to automobile insurers.

    10.5.1.4 Definition of Economic Loss

    Several stakeholders noted that the definition of what constitutes “economic loss” continues to create uncertainty, both for insurers and claimants. This has the potential to lead to increased costs in the DRS.

    0.5.1.5 Income Replacement Benefits

    OTLA commented that the maximum amount available under the income replacement benefits has remained static at $400 per week since 1996. They suggested that this maximum level be increased to $600 per week, which would allow claimants and their families to “subsist at a time of crisis”. According to OTLA, such an increase would reduce the uncertainty that the claimants face and provide a better opportunity for claimants to recover and return to work. OTLA also noted that increasing the maximum income replacement benefits amount available would decrease potentially longer term costs to the system as claimants who are fairly compensated by income replacement benefits would be far less likely to initiate a tort claim. They believe that this would also reduce costs to the system.

    10.5.2 Issues Contributing to Uncertainty

    Table of Contents

    Stakeholders in the Ontario automobile insurance system are negatively affected by the rapid and unpredictable changes. This creates uncertainty. Furthermore, several stakeholders noted that the rate at which regulatory amendments are issued does not allow the Government and FSCO to understand the impacts of various aspects of the Reforms.

    We summarize the comments received regarding issues that the Representative Stakeholders see as contributing to uncertainty in the automobile insurance system under the following headings:

    • Consumer Representation;
    • Data Availability
    • Healthcare Related Issues; and
    • Other Issues.

    10.5.2.1 Consumer Representation

    A few stakeholders noted that there is uncertainty as to who represents the best interest of the general consumers. In particular, there were multiple comments that consumers are not sufficiently educated on the coverage that they may require. Nor are they able to understand claim forms easily. It was suggested that consumers need clear and concise definitions of what is and is not covered by their insurance policies.

    In addition, FAIR was concerned that there is uncertainty in the regulations governing the actions of insurers and that it does not appear to them that insurers are held accountable in the present system. FAIR also commented that they are uncertain if IME providers and treatment providers have sufficient oversight through the existing health regulatory colleges. To foster consumer representation FAIR suggested an open and transparent complaints system available to claimants126.

    10.5.2.2 Data Availability

    The Coalition commented that HCAI has significantly improved information that is available, but noted that there appears to be decisions that are made based on hypothetical numbers or numbers that are not broadly shared with all stakeholders in the industry. The Coalition suggested that data should be shared with all stakeholders and that future decisions in the automobile insurance system be made based on real data and not on any anecdotal evidence.

    OPA also commented that lack of data and shared information is the main contributor to uncertainty. They also echoed the Coalition’s comments regarding HCAI and further sharing of information between all relevant stakeholders.

    10.5.2.3 Healthcare Related Issues

    The following issues were identified by stakeholders as contributing to uncertainty in the automobile insurance system in relation to the delivery of healthcare to MVA victims:

    • Loss of valuable medical experts in the medical assessment industry. Respondents are worried about what they see as a trend created by the SABS’ $2,000 cap on fees for assessment and examinations as well as FSCO’s professional services fee guidelines;
    • Use of unqualified assessors by some lower quality IME facilities. Respondents are worried about this trend as they believe that it could result in treatment proposals that are not congruent with proposals from AIAC members; and
    • Changing regulations making it difficult for healthcare professionals to plan their practices. Respondents noted that it is difficult to achieve operational efficiencies and complete business planning beyond the short term as a result of the constant change.

    10.5.2.4 Other Issues

    Respondents identified many other issues as contributing to uncertainty in the automobile insurance system. These issues include:

    • Adjustment for post-accident income in non-earner benefits. Some respondent thought that non-earner benefits should be reduced by post-accident income. These respondents do not think that the current regime is clear on whether and/or how post-accident income should be treated in the case of non-earners benefits;
    • Variations in interpretation from one insurer to another. Some respondents observed a level of uncertainty regarding how insurers will respond to changes to, and interpretation of, regulations;
    • Frequent procedural amendments and changes. These change are created by arbitration decisions that are counter intuitive to the SABS;
    • FSCO’s regulatory approach to telematics127;
    • Savings offset by increases in costs other systems. Some cost savings in the PPA insurance system due to the Reforms may be offset by increased costs elsewhere (e.g. Ontario Health Insurance Plan (OHIP), other public services, and to claimants and their families); and
    • Financial resources of insurers. Due to their financial resources, insurers have a disproportionate voice in the PPA insurance system, and are able to exert more pressure on the Government than other stakeholders. This is viewed as a source of uncertainty as it is believed that insurers can persuade the Government to enact change in regulation.

    10.5.3 Suggested Action Steps to Alleviate or Mitigate Uncertainties

    Table of Contents

    Stakeholders suggested various action steps that are included in prior sections of this report. In general, stakeholders would push for changes to be made through the implementation of: anti-fraud recommendations, a new catastrophic definition, and the new DRS. Other comments received from the Representative Stakeholders include

    OFIT suggested that a lack of resources for consumers to understand the PPA insurance product increases the uncertainty that consumers have about the product. OFIT’s opinion was that better communication is required so that consumers know what to expect and feel confident that they will get it when needed.

    OPA suggested that data gathered through HCAI may help in understanding trends and reducing uncertainty. Data such as:

    • The number of assessment/treatment plan applications, denials, insurer examinations regarding medical and rehabilitation benefits and their outcomes;
    • The number of applications, approvals, insurer examinations and outcomes for disability and catastrophic determinations; and
    • The amounts paid for income replacement benefits.

    ORA suggested that FSCO’s mandatory Ontario auto insurance three-year review128 is too frequent and does not allow for stability in the PPA insurance system. Changing the time period to five years would allow stakeholders to design and gain efficiencies from new initiatives, systems, policies, and procedures, as well as allow legal precedents to emerge.

    The Anti-Fraud Task Force Consumer Representative suggested that the large number of small P&C insurers may benefit from Government action, where the small P&C insurers may be encouraged by the Government to retain a large-scale expert in the administration of medical benefits, such as a major life insurer that could operate for a number of insurers on a fee-for-service basis. Alternatively, Anti-Fraud Task Force Consumer Representative thought that small P&C insurers could work through the IBC to form a medical benefits administrator, similar to the way the Facility Association enables the industry to deal with high-risk drivers.

    10.6 Competitiveness of the Ontario PPA Insurance Market

    Table of Contents

    Question 18 of the 2014 Annual Report Survey asked respondents to comment on whether the auto insurance marketplace in Ontario is sufficiently competitive and efficient in providing affordable premiums to consumers. Many respondents commented on this topic.

    The following Representative Stakeholders believe that the PPA insurance system is not sufficiently competitive and or efficient in providing affordable premiums: the Anti-Fraud Task Force Consumer Representative, the Coalition, OPA, OIAA, and OFIT.

    The Anti-Fraud Task Force Consumer Representativecommented that there may be too many players involved in the Ontario PPA insurance system to ensure sufficient competence when dealing with such a complicated personal injury product. This respondent further noted that the cost of extended healthcare plans is also higher in Ontario than in other provinces, and suggested that the PPA insurance system will benefit from increased scale and develop greater competence as consolidation occurs.

    The Coalition believes that the PPA insurance system is not sufficiently competitive. In their view, there are ways to improve the competitiveness and efficiency of the system. They felt that the entire system should be reviewed from an efficiency perspective as they do not believe that reducing accident benefits any further is the solution to reducing cost in the system.

    Similarly, OFIT commented that they do not believe that the system is competitive enough.

    OPA echoed the Coalition’s view on competition. Anecdotal evidence was provided that many of the psychologists’ patients did not receive sufficient information from their brokers at the time of purchasing or renewing their insurance policies regarding the optional benefits that are available in the market. In addition, they mentioned anecdotal evidence that it was not clear if at the time of renewal brokers undertake a comparison of rates between insurers. OPA also questioned the commission structure available to brokers, and wondered if further consolidation of insurers will reduce competition.

    OIAA stated that insurance rates in Ontario are the highest in the country. In OIAA’s opinion, this is largely due to the higher incidence of fraud in Ontario. They further commented that if Ontario can reduce fraud and better align first party benefits with those benefits available in other provinces, then rates should become more affordable. However as of now, OIAA does not believe that the PPA insurance system is efficient in providing affordable premiums to consumers.

    The only Representative Stakeholder who responded that they view the Ontario PPA insurance system as sufficiently competitive is IBAO. However, their response to this question did not elaborate on this statement.

    Finally, ORA did not specifically comment on their view of the competitiveness of the PPA insurance system, but they noted that the Government should consider reviewing the pros and cons of all and any auto insurance products, public or private, that will provide the benefits that insured drivers need.

    10.7 Comments on Recent Appeal Decisions

    Table of Contents

    Question 19 of the 2014 Annual Report Survey asked respondents to comment on three recent appeal decisions:

    • Scarlett v. Belair;
    • Pastore v. Aviva; and
    • Henry v. Gore Mutual.

    10.7.1 Scarlett v. Belair129

    Table of Contents

    The Scarlett V. Belair 2013 FSCO appeal decision reversed a decision rendered in 2012 on an arbitration case. Under the FSCO appeal decision, the Director’s Delegate stated the following:

    • The MIG is binding as it is incorporated by reference within the SABS;
    • The burden of proof always remains with the insured (and not the insurer) for proving that the injuries are within the scope of coverage;
    • “Compelling evidence” mean more than simply credible evidence; and
    • To determine whether an insured is subject to the MIG, the relevant test is whether the impairment is predominantly a minor injury (i.e., if an insured suffers from a variety of impairments, all of the impairments are evaluated as a whole to determine if the combination is predominantly within the definition of minor injury or associated sequelae).

    With respect to the Scarlett v. Belair FSCO appeal decision, the Advocates’ Society commented that for insurers the decision confirms the benefits that are to be paid under the MIG injuries falling under the MIG. The Advocates’ Society also notes that for claimants, the decision appears to increase the frustration with inadequate recourse under the MIG.

    To the Coalition, the Scarlett v. Belair appeal decision is important to members who treat patients “within the minor injury realm, especially around mental health and behavioural disorders.” With respect to whether a mental-related disorder falls within the definition of minor injury, “the Coalition is of the opinion that while a psycho-social issue may be addressed within the Minor Injury Guideline, a diagnosis of a psychological disorder would exclude an individual from the minor injury definition.”

    10.7.2 Pastore v. Aviva130

    Table of Contents

    The Pastore v. Aviva Court of Appeal decision affirmed that a person must have a marked impairment in only one of the four areas of key functioning cited in the fourth edition of the AMA Guides in order to satisfy the catastrophic impairment criteria.
    The Coalition and OPA noted that insurers were concerned that the Ontario Court of Appeal decision in this matter would result in a significant increase in the number of catastrophic claims. In this regard, the Coalition thinks that there has been an increase of “a very small number of individuals found to have a catastrophic impairment due to a mental health disorder” as a result of this appeal decision while OPA’s perception is that the decision has not resulted in an increase. OPA further observed that in their view the definition of catastrophic impairment remains very stringent.

    10.7.3 Henry v. Gore Mutual131

    Table of Contents

    Regarding Henry v. Gore Mutual Insurance Company, the Court of Appeal upheld a decision of the lower Court that the benefits incurred for attendant care is not limited to the amount of the economic loss sustained by the caregiver. However, the case was superseded by legislative amendments under which, effective February 1, 2014, attendant care benefits are limited to the amount of economic loss if the attendant care provider is not acting in the normal course of his or her employment.132

    The Advocates’ Society commented on the effect of these legislative amendments. They observed that from the insurers’ perspective, Henry v. Gore “muddied the waters” with regard to the definition of incurred expenses, and that the legislative amendments were effective in reducing costs. The Advocates’ Society further noted that it is too early to know what the practical implications of the legislative amendments will be.

    OPA understands that the intention of the February 1, 2014 amendments was to address possible inappropriate practices, such as claims that family members received compensation for services not actually rendered. However, OPA suggested that “there may have been more targeted ways to address this concern.”

    In the view of the Coalition and OPA, the number of individuals who qualify for attendant care is very limited. These two stakeholders also noted that all attendant care services are subject to insurer approval. As such, they commented that insurers are in control of the terms of the attendant care services.

    10.8 Other


    Table of Contents

    The final question of the 2014 Annual Report Survey asked respondents if they had any other comments regarding the Reforms and the automobile insurance system in Ontario. Three respondents chose to provide additional comments.

    The Advocates’ Society stated that they would support an annual review of the automobile insurance system in Ontario. In their view, this would allow for more responsive changes to the system.

    The IBAO is concerned with potential availability issues. They mentioned that if the Government forces insurers to lower rates to levels that are not justified, they fear that insurers could exit certain segments of the automobile insurance market and cause greater hardship to customers in those segments133.

    ORA commented that they feel that “any additional slashes to AB’s are irresponsible and will bring into question the very reason for the existence of mandated insurance.” They also stated that “sufficient time must be given for fraud-fighting measures to take place even if the 15% reduction to premiums takes longer than two years to materialize.”

    11 Appendix E – Statutory Accident Benefits Schedule Summary


    Table of Contents
    Table 11.1 : Statutory Accident Benefits Schedule Summary
    Statutory Accident Benefits Schedule Summary 134 135
    Benefit Type SABs Section Minor Injury Guideline (MIG) Non-Catastrophic Impairment Catastrophic Impairment
       

    The impairment is predominately a minor injury – "means one or more of a sprain, strain, whiplash associated disorder, contusion, abrasion, laceration or subluxation and includes any clinically associate sequelae to such an injury"

    A pre-existing condition may prevent the claimant from being classified under the MIG**

    The impairment is not a minor injury, but you are not deemed to have a catastrophic impairment (defined in the next column)

    Catastrophic injuries are the most severe injuries

    Your impairment involves paraplegia or quadriplegia, loss of an arm or serious head injury, or a combination of impairments (physical and/or psychological) equal to a 55% whole person impairment or significant psychological impairment

    Determined by medical and legal professionals according to specific criteria

    Reports*
    Cost of Assessments, Examinations and Preparing Reports 18(5) All fees and expenses for conducting assessments, examinations and preparing reports are to be paid out of medical and rehabilitation limits (excluding insurer examinations and accounting reports for income replacement benefits) (these expenses were formerly paid by the insurer out of separate category of benefits with no monetary limit)
    Maximum Cost of Assessments and Examinations and Disallowing Future Care Reports 25(5) Absolute cap of $2,000 for fees and expenses associated with any assessment or examination, including the cost of preparing reports (and including insurer examinations), along with a prohibition on an insurer paying for a future care or similar plan (there was never a cap on assessment costs—the criteria for recovery was simply 'reasonable and necessary')
    In-home assessments and examinations 25(2) Not Available Available Available
    Recovery and Assistance*
    Medical and Rehabilitation Benefits* 15, 16, 18 & 20 $3,500 maximum (includes the cost of all treatments and assessments) —can be increased to $50,000 if there is compelling evidence that a pre-existing medical condition will prevent the insured person from achieving maximal recovery with access to only $3,500 Maximum of $50,000 available for 10 years or until the person is 25 years old** (includes the costs off treatments and assessments) (was a $100,000 maximum) Maximum of $1,000,000 available for life (includes the costs of all treatments and assessments)
    Qualified Case Manager Services 17 Not Available Not Available Available (paid out of med/rehab limit)
    Attendant Care Benefits 19, 20, 25(1)(4), 28 & 14.2 Not Available $3,000 per month maximum (total maximum of $36,000) for 2 years (as determined by OT or RN)***

    (was a total maximum of $72,000 and there was no restriction on who could complete a Form 1)

    $6,000 per month maximum (with a lifetime maximum of $1,000,000) (as determined by OT or RN)***
    (was no restriction on who could complete a Form 1)
    Transportation 3(1) Only for the portion of any distances over 50 kms Yes, Available for any distance travelled
    Housekeeping and Home Maintenance 23 Not Available (was available at $100 per week for 2 years) Maximum of $100 per week available for life
    Lost Educational Expenses 21 Up to $15,000 payable to those enrolled in school who are unable to continue with their program
    Visitor's Expenses   Certain expenses incurred by visiting family for 2 years (no financial limit for the first 2 years) Pays certain expenses incurred by visiting family (available for life)
    Damage to Clothing 24 Reimbursement for damage to clothing, medical and dental devices lost or damaged in the accident (no limit)
    Financial*
    Income Replacement Benefits **** 6 & 7

    Up to a maximum of $400 a week, commencing one week following the loss

    Eligible if were earning income before the accident and are unable to return to work

    Calculated by taking 70% of gross income for the first two years if you are unable to do your own job, thereafter if you are unable to do any job, until age 65 which decreases till death (was paid at 80% of net)

    Non-Earner Benefits **** 12

    $185 per week commencing 26 weeks post-accident if unable to carry on a normal life

    If in school at time of accident, increases to $320 per week after two years

    Caregiver Benefits **** 13 Not available* (was available if substantially unable to engage in caregiving activities at $250 per week for the first person in need plus $50 per week all other persons in need of care—was available after the 2 year anniversary only if the person suffered a complete inability to carry on a normal life)

    Available if the injury prevent you from providing care to a dependent person

    $250/week for the first person

    $50/week for all others

    Available for 2 years if not able to be a caregiver, thereafter if there is "a complete inability to carry on a normal life"

    Death Benefits & Funeral Expenses 26 & 27 $25,000 to spouse; $10,000 to a supported former spouse; $10,000 per dependent; $25,000 divided equally among dependents, if there is no spouse; $6,000 maximum for funeral expenses
    * Coverage may increase with optional benefits.
    **Effective February 1, 2014, a pre-existing condition must be documented by a health practitioner prior to the accident. Previously, a health practitioner could determine and provided evidence that they had a pre-existing medical condition preventing them from achieving maximal recovery post-accident.
    *** Effective February 1, 2014 attendant care benefits are limited to actual economic loss, if the attendant care provider is not acting in the normal course of his or her employment.
    **** Effective February 1, 2014 an election for income replacement, non-earner or caregiver benefits is final regardless of any change in circumstances, except if a claimant is subsequently determined to have sustained a catastrophic impairment.
    Italics writing refers to the pre September 1, 2010 SABS
    [134] This table is for informational purposes only. Please refer to the full SABS for precise information.
    [135] Source of table: Financial Services Commission of Ontario "New Regulations for Service Provider Licensing and Changes to Statutory Accident Benefits Schedule – Effective September 1, 2010" www.fsco.gov.on.ca/en/auto/autobulletins/2013/Pages/a-07-13.aspx accessed October 5, 2014; Thomson Rogers, "Statutory Accident Benefits Table Summary - Revised August 17, 2010"; www.thomsonrogers.com accessed October 4, 2014; Singer Kwinter, "A Guide to Ontario's Statutory Accident Benefits Schedule (SABS), Effective September 1, 2010", http://singerkwinter.com/ontario-accident-benefit-claims/ accessed October 5, 2014.

    Appendix F – Reference Sources

    Actuarial Standards Board, “Standards of Practice”, paragraph 1610.10. Accessed on October 17, 2014. http://www.cia-ica.ca/docs/default-source/standards/SG101514e.pdf
    CANATICS. Accessed on March 13, 2014. http://canatics.ca/
    Consumers Council of Canada, “Consumer Groups’ Capacity to Assess Potential Consumer Impacts of Policy Proposals”. Accessed on September 21, 2014. http://www.consumerscouncil.com/site/consumers_council_of_canada/assets/pdf/Consumer_Impacts.pdf
    Court of Appeal for Ontario,Henry v. Gore Mutual Insurance Company”, 2013 ONCA 480, 16 July 2013. Accessed October 6, 2014. http://www.canlii.org/en/on/onca/doc/2013/2013onca480/2013onca480.html
    Court of Appeal for Ontario, “Pastore v. Aviva Canada Inc.”, 2012 ONCA 642, 27 September 2012. Accessed October 5, 2014. http://www.canlii.org/en/on/onca/doc/2012/2012onca642/2012onca642.html
    FSCO, “Annual Report 2011-2012”. Accessed October 27, 2014. http://www.fsco.gov.on.ca/en/about/annual_reports/Documents/2011-2012-annual-report.pdf
    FSCO, “Apply Now for Your Licence”. Accessed November 7, 2014. http://fsco.gov.on.ca/en/service-providers/faqs/Pages/default.aspx
    FSCO, “Auto Quarterly Rate Approvals”, last modified July 15, 2014. Accessed October 10, 2014. http://www.fsco.gov.on.ca/en/auto/rates/Pages/default.aspx
    FSCO, “Cost of Assessments and Examinations Guideline, Superintendent’s Guideline No. 09/10”, November 2010. Accessed October 24, 2014. https://www.fsco.gov.on.ca/en/auto/autobulletins/2010/Documents/A-23_10-1.pdf
    FSCO, “Minor Injury Treatment Protocol – Activity Updates”. Accessed on October 25, 2014. https://www.fsco.gov.on.ca/en/auto/Pages/activity-update.aspx
    FSCO, “New Regulations for Service Provider Licensing and Changes to Statutory Accident Benefits Schedule – Effective September 1, 2010”. Accessed October 5, 2014. www.fsco.gov.on.ca/en/auto/autobulletins/2013/Pages/a-07-13.aspx
    FSCO, “Superintendent’s Report on the Definition of Catastrophic Impairment in the Statutory Accident Benefits Schedule,” December 15, 2011, accessed October 8, 2014. http://www.fin.gov.on.ca/en/autoinsurance/si-report.pdf
    FSCO, “Technical Notes for Automobile Insurance Rate and Risk Classification Filings”, August 2013, Exhibit 2, Page 2. Accessed on March 13, 2014. http://www.fsco.gov.on.ca/en/auto/filing-guidelines/Documents/Technical-Notes.pdf
    FSCO, “Technical Notes for Automobile Insurance Rate and Risk Classification Filings”, October 2014. Accessed on October 14, 2014. http://www.fsco.gov.on.ca/en/auto/filing-guidelines/documents/technical-notes.pdf
    FSCO, “Understanding Rates / An Interactive Tool.” Accessed October 27, 2014. http://www5.fsco.gov.on.ca/autorate/
    GISA, “Automobile Statistical Plan”. Accessed on September 21, 2014. www.gisa.ca/en/techman/documents/ASP_Manual_v2.4-En.pdf
    GISA. Accessed on September 21, 2014. www.gisa.ca/en/
    IAIS, “Insurance Core Principles, Standards, Guidance and Assessment Methodology”, October 19, 2013. Accessed October 17, 2014, http://www.iaisweb.org/view/element_href.cfm?src=1/20567.pdf
    Insurance Bureau of Canada, Facility Association, “Who is insured through Facility Association?” Accessed on March 13, 2014. http://ibc.ca/en/Car_Insurance/Introduction/Facility_Association.asp
    Justice Douglas Cunningham, “2014 Ontario Automobile Dispute Resolution System Review Final Report”, Accessed on September 25, 2014, www.fin.gov.on.ca/en/autoinsurance/drs-final-report.html#appA
    Justice Douglas Cunningham, “Ontario Automobile Insurance Dispute Resolution System Review Interim Report”, October 2013. Accessed November 7, 2014. http://www.fin.gov.on.ca/en/consultations/auto/request-for-submission-interim-report.html
    Kanetix. Accessed October 27, 2014. www.kanetix.ca
    KPMG LLP, “Province of Ontario Ministry of Finance Automobile Insurance Transparency and Accountability Expert Report – Interim Report”, final release April 14, 2014. Accessed on September 12, 2014, www.fin.gov.on.ca/en/autoinsurance/kpmg-expert-report.pdf
    KPMG LLP, “Towing and Storage Advisory Group - Report and Recommendations to the Ministry of Consumer Services”, March 12, 2014. Accessed October 4, 2013. www.ontariocanada.com/registry/view.do?postingId=15664
    Ontario Superior Court of Justice, “Gluchowski v. Lister”, 2014 ONSC 2190, April 29, 2014. Accessed October 20, 2014. https://www.canlii.org/en/on/onsc/doc/2014/2014onsc2190/2014onsc2190.html
    ORA, “Strengthening our members”. Accessed on October 4, 2014. www.ontariorehaballiance.com/page/strengthening-members/
    OSFI, “2013-2014 Annual Report”. Accessed October 12, 2014. http://www.osfi-bsif.gc.ca/Eng/Docs/ar-ra/1314/eng/p6-eng.html
    OSFI, “Canadian Property and Casualty Insurance Companies Returns and Instructions”, modified date: 2014-02-26. Accessed on September 21, 2014. www.osfi-bsif.gc.ca/Eng/fi-if/rtn-rlv/fr-rf/ic-sa/pc-sam/Pages/pc1.aspx
    Singer Kwinter, “A Guide to Ontario’s Statutory Accident Benefits Schedule (SABS), Effective September 1, 2010”. Accessed October 5, 2014. http://singerkwinter.com/ontario-accident-benefit-claims/
    The Government of Ontario, “Bill 15 – Fighting Fraud and Reducing Automobile Insurance Rates Act, 2014”. Accessed November 7, 2014. http://www.ontla.on.ca/web/bills/bills_detail.do?locale=en&Intranet=&BillID=3007
    The Government of Ontario, “Ontario Regulation 237/13 under the Automobile Insurance Rate Stabilization Act”, 2003. Accessed November 5, 2014, http://www.e-laws.gov.on.ca/html/source/regs/english/2013/elaws_src_regs_r13237_e.htm
    The Government of Ontario, “Ontario Regulation 34/10, Statutory Accident Benefits Schedule”, effective September 1, 2010. Accessed October 7, 2014. http://www.e-laws.gov.on.ca/html/regs/english/elaws_regs_100034_e.htm
    The Government of Ontario, Ministry of Consumer Services, “Towing and Storage Advisory Group – Report and Recommendations to the Ministry of Consumer Services”, March 12, 2014. Accessed on October 15, 2014, http://www.ontariocanada.com/registry/showAttachment.do?postingId=15664&attachmentId=23891
    The Government of Ontario, Ministry of Finance, “2013 Ontario Budget Chapter IV: Tax, Pension and Financial Services”, last modified May 2, 2013. Accessed on September 20, 2014, www.fin.gov.on.ca/en/budget/ontariobudgets/2013/ch4.html#ch4c
    The Government of Ontario, Ministry of Finance, “2014 Ontario Automobile Dispute Resolution System Review Final Report”, February 2014. Accessed on October 15, 2014, http://www.fin.gov.on.ca/en/autoinsurance/drs-final-report.html
    The Government of Ontario, Ministry of Finance, “Final Report of the Ontario Automobile Insurance Anti-Fraud Task Force Steering Committee”, October 16, 2012. Accessed on October 15, 2014, http://www.fin.gov.on.ca/en/autoinsurance/final-report.html
    The Government of Ontario, Ministry of Transportation, “Ontario Road Safety Annual Report 2011”. Accessed November 5, 2014. http://www.mto.gov.on.ca/english/safety/orsar/orsar11/ontario-road-safety-annual-report-2011.pdf
    Thomson Rogers, “Statutory Accident Benefits Table Summary - Revised August 17, 2010”. Accessed October 4, 2014. www.thomsonrogers.com
    Working Group chaired by the FSCO, “About the Professional Credential Tracker (PCT)”. Accessed on October 4, 2014. www.aboutpct.ca/About-PCT/index.shtml

    © 2014 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
    The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International.

    1The Government of Ontario, Ministry of Finance, “2013 Ontario Budget Chapter IV: Tax, Pension and Financial Services”, last modified May 2, 2013. Accessed on September 20, 2014, www.fin.gov.on.ca/en/budget/ontariobudgets/2013/ch4.html#ch4c.

    2KPMG LLP, “Province of Ontario Ministry of Finance Automobile Insurance Transparency and Accountability Expert Report – Interim Report”, final release April 14, 2014. Accessed on September 12, 2014, www.fin.gov.on.ca/en/autoinsurance/kpmg-expert-report.pdf.

    3In this report, the term “insurers” is defined as organizations that provide insurance coverage, such as a stock insurance organization or a mutual insurance organization, including both Canadian domiciled and branches of foreign organizations.

    4The Minister of Finance noted on October 16, 2014 that Ontario drivers have seen a six percent reduction in insurance rates.

    5GISA publishes exhibits presenting historical accident year loss development, reported at the end of successive six-month periods for the latest fifteen year. These exhibits are published twice a year. The year-end report, including data as of December 31 of the previous year, is usually published in June or July and the mid-year report, including data as of June 30 of the same year, is usually published in November or December. The data presented in the December 31, 2013 exhibits are the most recent data available.

    6The June 30, 2013 GISA data was the most recently available data at the time the Interim Report was prepared.

    7Trends and impacts of Reforms are shown by sub-coverage in Table 5.1.

    8See Appendix B, Exhibit A, Corresponding Segment, Page 6.

    9Weighted based on 2009 ultimate loss costs.

    10Weighted based on 2013 ultimate loss costs.

    11Weighted based on 2009 ultimate loss costs that have been trended by one year.

    12An alternative would be to reduce coverage to restore profitability.

    13We describe the permissible claim ratio of 69% in Appendix C, Section 10.1.3 of the Interim Report.

    14The mediation backlog was cleared by FSCO in August 2013.

    15The Professional Credential Tracker (PCT) “is the first phase of a pilot project to help Ontario regulated health professionals stay informed of which clinics or health facilities are using their information to submit auto insurance claims. This initiative is one of the recently-introduced measures recognized and endorsed by the Ontario Auto Insurance Anti-Fraud Task Force in their Interim Report. It is being investigated by a Working Group chaired by the Financial Services Commission of Ontario.” Accessed on October 4, 2014. www.aboutpct.ca/About-PCT/index.shtml.

    16Ministry of Finance, “2014 Ontario Automobile Dispute Resolution System Review Final Report”, February 2014. Accessed on October 15, 2014, http://www.fin.gov.on.ca/en/autoinsurance/drs-final-report.html.

    17Bill 15 – Fighting Fraud and Reducing Automobile Insurance Rates Act, 2014, which has received second reading, is proposing that the DRS be moved to the License Appeal Tribunal.

    18The Government has set a target of 15% average automobile insurance rate reduction between August 2013 and August 2015.

    19For example, HCAI data only includes costs from approved invoices and does not include disputed costs or reserves for costs that are expected to be incurred in the future.

    20We note that FSCO published a bulletin on usage-based automobile insurance pricing in Ontario. https://www.fsco.gov.on.ca/en/auto/autobulletins/2013/Pages/a-05-13.aspx. Accessed November 7, 2014.

    21We note that on October 5, 2014, the Ministry of Health announced changes that will enhance transparency of regulatory colleges.

    22It is MOF’s understanding that to promote greater transparency, where insurer’s proposed rates are not supported, FSCO began sharing actuarial reports and summaries to support FSCO’s rate decisions in the review of insurer PPA rate filings. These new processes were designed to enhance insurer understanding of FSCO’s analysis of rating filings and its decisions in the fall and winter of 2013-14; the processes have now been incorporated into FSCO rate filing procedures.

    23It is MOF’s understanding that FSCO has provided additional detailed information on how FSCO’s benchmark on Reforms savings and loss trends were estimated. This is included in FSCO’s Technical Notes as an Appendix. The Appendix also outlines that there are data issues for one large insurer that reported to GISA. Due to confidentiality reasons FSCO cannot release information that would identify specific insurers.

    24With an organization that walks claimants independently through the process, the need to seek legal counsel would be reserved only for the more serious cases.

    25KPMG LLP, “Province of Ontario Ministry of Finance Automobile Insurance Transparency and Accountability Expert Report – Interim Report”, final release April 14, 2014. Accessed on September 12, 2014, www.fin.gov.on.ca/en/autoinsurance/kpmg-expert-report.pdf.

    26The Government of Ontario, Ministry of Finance, “2013 Ontario Budget Chapter IV: Tax, Pension and Financial Services”, Section C, last modified May 2, 2013. Accessed on September 20, 2014, http://www.fin.gov.on.ca/en/budget/ontariobudgets/2013/ch4.html.

    27Throughout this report, any references to the Government’s targeted average automobile insurance rate reduction pertain to the Government’s average automobile insurance rate reduction target of 8% by August 2014 and 15% by August 2015.

    28The Government of Ontario, Ministry of Finance, “2013 Ontario Budget Chapter IV: Tax, Pension and Financial Services”, Section C, last modified May 2, 2013. Accessed on September 20, 2014, http://www.fin.gov.on.ca/en/budget/ontariobudgets/2013/ch4.html.

    29Some examples of variables include level of coverage purchased and type of vehicle insured.

    30For example, when a policyholder increases the level of coverage purchased (e.g., by increasing the limits of coverage, or lowering the deductibles), the premium charged to that policyholder will increase, even if rates remain stable. Other factors, such as a change in the vehicle insured, could also affect the premium even if rates remain stable.

    31 The measurement was conducted in accordance with Regulation 237/13 under The Automobile Insurance Rate Stabilization Act, 2003. Accessed November 5, 2014, http://www.e-laws.gov.on.ca/html/source/regs/english/2013/elaws_src_regs_r13237_e.htm.

    32Ministry of Finance, “Final Report of the Ontario Automobile Insurance Anti-Fraud Task Force Steering Committee”, October 16, 2012. Accessed on October 15, 2014, http://www.fin.gov.on.ca/en/autoinsurance/final-report.html.

    33Ministry of Finance, “2014 Ontario Automobile Dispute Resolution System Review Final Report”, February 2014. Accessed on October 15, 2014, http://www.fin.gov.on.ca/en/autoinsurance/drs-final-report.html.

    34Ministry of Consumer Services, “Towing and Storage Advisory Group – Report and Recommendations to the Ministry of Consumer Services”, March 12, 2014. Accessed on October 15, 2014, http://www.ontariocanada.com/registry/showAttachment.do?postingId=15664&attachmentId=23891.

    35 GISA publishes exhibits presenting historical accident year loss development, reported at the end of successive six-month periods for the latest fifteen year. These exhibits are published twice a year. The year-end report, including data as of December 31 of the previous year, is usually published in June or July and the mid-year report, including data as of June 30 of the same year, is usually published in November or December. The data presented in the December 31, 2013 exhibits are the most recent data available.

    36GISA. Accessed on September 21, 2014. www.gisa.ca/en/.

    37GISA, “Automobile Statistical Plan”. Accessed on September 21, 2014. www.gisa.ca/en/techman/documents/ASP_Manual_v2.4-En.pdf.

    38 OSFI, “Canadian Property and Casualty Insurance Companies Returns and Instructions”, modified date: 2014-02-26. Accessed on September 21, 2014.www.osfi-bsif.gc.ca/Eng/fi-if/rtn-rlv/fr-rf/ic-sa/pc-sam/Pages/pc1.aspx

    39 Insurance Bureau of Canada, Facility Association, “Who is insured through Facility Association?” Accessed on March 13, 2014. http://ibc.ca/en/Car_Insurance/Introduction/Facility_Association.asp.

    40Under Ontario’ Insurance Act, benefits provided under Ontario’s standard automobile insurance policy for insured individuals who are injured in a motor vehicle accident are defined by a regulation titled SABS, regardless of who is at fault. The latest revision to the SABS had an effective date of September 1, 2010. For more information refer to “Ontario Regulation 34/10, Statutory Accident Benefits Schedule”, effective September 1, 2010. Accessed October 7, 2014. http://www.e-laws.gov.on.ca/html/regs/english/elaws_regs_100034_e.htm.

    41The Auto Insurance Anti-Fraud Task Force ceased to exist upon submission of their final report in November of 2012.

    42The Council, “Consumer Groups’ Capacity to Assess Potential Consumer Impacts of Policy Proposals”. Accessed on September 21, 2014. http://www.consumerscouncil.com/site/consumers_council_of_canada/assets/pdf/Consumer_Impacts.pdf.

    43The dataset used is net of the same data exclusions stemming from GISA’s validation procedures (i.e., the GISA data that we used in this report is consistent with the data that GISA publishes externally.)

    44As discussed in GISA’s “2013 Automobile Exhibit Introduction and Actual Loss Ratio Exhibit – Ontario” published on July 11, 2014, the “uncertainty arises…in greater part due to a significant change in case reserving process of a major writer impacting the 2009-1 and subsequent diagonals. This change has had a material impact on the observed Private Passenger incurred claim amount factors for certain AB sub-coverage groups. As a result the Private Passenger incurred claim amount factors were calculated on an all-industry basis excluding this major writer and applied to the all-industry data (including this major writer) for certain AB sub-coverage groups.”

    45See Appendix B, Exhibit A, Corresponding Segment, Page 6.

    46Weighted based on 2009 ultimate loss costs.

    47Weighted based on 2013 ultimate loss costs.

    48Weighted based on 2009 ultimate loss costs that have been trended by one year.

    49As noted in the introduction to exhibit Auto0001-ON published by GISA in June 2014, “in certain sub-coverages there appears to be an acceleration of claims reported from accident periods immediately preceding the introduction of the new SABS (perhaps due to the reduction in amounts available for claims settlement processes under the new SABS).”

    50For pricing purpose, the use of adjusted Reforms Impact also entails further frequency adjustments to 2009H2, 2010H1 and 2010H2 experience to bring them to post-Reforms level.

    51An alternative would be to reduce coverage to restore profitability.

    52The data was not available to populate the table for 2013.

    53We describe the permissible claim ratio of 69% in Appendix C, Section 10.1.3 of the Interim Report.

    54The drift related to the replacement of vehicles is estimated using Canadian Loss Experience Automobile Rating (CLEAR) estimates, which is provided by IBC. The drifts related to the selection of policy limits and deductibles are estimated using Ontario PPA limit and deductible differentials, which is provided by IAO Actuarial Consulting Services Inc.

    55FSCO, “Auto Quarterly Rate Approvals”, last modified July 15, 2014. Accessed October 10, 2014. http://www.fsco.gov.on.ca/en/auto/rates/Pages/default.aspx.

    56Ontario Regulation 237/13 under Automobile Insurance Rate Stabilization Act, 2003. Accessed November 5, 2014, http://www.e-laws.gov.on.ca/html/source/regs/english/2013/elaws_src_regs_r13237_e.htm.

    57It is our understanding from the MOF that the average rate change for Ontario PPA for the period between August 16, 2013 and August 15, 2014 is a decrease of 6.03%.

    58FSCO, “Technical Notes for Automobile Insurance Rate and Risk Classification Filings”, August 2013, Exhibit 2, Page 2. Accessed on March 13, 2014. http://www.fsco.gov.on.ca/en/auto/filing-guidelines/Documents/Technical-Notes.pdf.

    59FSCO, “Technical Notes for Automobile Insurance Rate and Risk Classification Filings”, October 2014. Accessed on October 14, 2014. http://www.fsco.gov.on.ca/en/auto/filing-guidelines/documents/technical-notes.pdf.

    60Housekeeping is no longer a standard benefit.

    61We note that while an objective of the Strategy is an overall 15% average reduction in rates by August 2015, most of the respondents’ comments addressed premiums, not rates.

    62We understand that this has been an issue for a very long time and is not new as it is presented here. Justice Cunningham’s DRS review Interim Report (http://www.fin.gov.on.ca/en/consultations/auto/request-for-submission-interim-report.html, accessed November 7, 2014) stated that this was an issue pre-1990 before the introduction of the DRS.

    63The mediation backlog was cleared by FSCO in August 2013.

    64As per FSCO’s website, “as of December 1, 2014, service providers who submit OCF-21 forms through [HCAI] must be licensed with the [FSCO] to invoice and receive direct payment from automobile insurers for specific ‘listed expenses’ in connection with statutory accident benefits.” http://fsco.gov.on.ca/en/service-providers/faqs/Pages/default.aspx. Accessed November 7, 2014.

    65In 2013, Ontario’s automobile insurance market formed CANATICS. Accessed on March 13, 2014. http://canatics.ca/. This initiative is an industry response to the Anti-Fraud Task Force’s recommendation that insurers should move aggressively to establish an organization that would pool and analyse claims data in order to identify potential cases of organized or premeditated fraud. CANATICS is a not-for-profit organization that when operational by the end of 2014, will pool claims data and use sophisticated analytics to identify suspicious claims. The goal is that by identifying these claims early, a company will be able to focus its investigation resources and catch perpetrators of fraud before making any claim payments.

    66The Professional Credential Tracker (PCT) “is the first phase of a pilot project to help Ontario regulated health professionals stay informed of which clinics or health facilities are using their information to submit auto insurance claims. This initiative is one of the recently-introduced measures recognized and endorsed by the Ontario Auto Insurance Anti-Fraud Task Force in their Interim Report. It is being investigated by a Working Group chaired by the Financial Services Commission of Ontario.” Accessed on October 4, 2014. www.aboutpct.ca/About-PCT/index.shtml.

    67Such data is currently not available nor collected.

    68Justice Douglas Cunningham, “2014 Ontario Automobile Dispute Resolution System Review Final Report”, Accessed on September 25, 2014, www.fin.gov.on.ca/en/autoinsurance/drs-final-report.html#appA.

    69Bill 15 – Fighting Fraud and Reducing Automobile Insurance Rates Act, 2014, which has received second reading, is proposing that the DRS be moved to the License Appeal Tribunal.

    70The Government has set a target of 15% average automobile insurance rate reduction between August 2013 and August 2015.

    71For example, the Coalition indicated that they plan to be actively involved in participating and providing feedback to the MIG recommendations to be released in the fall of 2014.

    72For example, psychologists are developing guidelines for examinations requested by insurers with the expectation that the guidelines will increase confidence in the insurers’ assessments and examinations system and reduce disputes.

    73FSCO, “Understanding Rates / An Interactive Tool.” http://www5.fsco.gov.on.ca/autorate/. Accessed October 27, 2014.

    74 www.kanetix.ca. Accessed October 27, 2014.

    75FSCO, “Annual Report 2011-2012”. Page 74. http://www.fsco.gov.on.ca/en/about/annual_reports/Documents/2011-2012-annual-report.pdf. Accessed October 27, 2014.

    76As discussed in the Ontario Road Safety Annual Report, 2011, 66 out of every 10,000 licensed drivers were injured in 2011. There were 9.3 million licensed drivers in 2011. http://www.mto.gov.on.ca/english/safety/orsar/orsar11/ontario-road-safety-annual-report-2011.pdf. Accessed November 5, 2014.

    77OSFI, “2013-2014 Annual Report”, http://www.osfi-bsif.gc.ca/Eng/Docs/ar-ra/1314/eng/p6-eng.html, accessed October 12, 2014.

    78For example, HCAI data only includes costs from approved invoices and does not include disputed costs or reserves for costs that are expected to be incurred in the future.

    79We note that FSCO published a bulletin on usage-based automobile insurance pricing in Ontario. https://www.fsco.gov.on.ca/en/auto/autobulletins/2013/Pages/a-05-13.aspx. Accessed November 7, 2014.

    80We note that on October 5, 2014, the Ministry of Health announced changes that will enhance transparency of regulatory colleges.

    81FSCO, “Technical Notes for Automobile Insurance Rate and Risk Classification Filings”, October 2014. Accessed on October 14, 2014. http://www.fsco.gov.on.ca/en/auto/filing-guidelines/documents/technical-notes.pdf.

    82Actuarial Standards Board, “Standards of Practice”, paragraph 1610.10. Accessed on October 17, 2014. http://www.cia-ica.ca/docs/default-source/standards/SG101514e.pdf.

    83It is MOF’s understanding that to promote greater transparency, where insurer’s proposed rates are not supported, FSCO began sharing actuarial reports and summaries to support FSCO’s rate decisions in the review of insurer PPA rate filings. These new processes were designed to enhance insurer understanding of FSCO’s analysis of rating filings and its decisions in the fall and winter of 2013-14; the processes have now been incorporated into FSCO rate filing procedures.

    84It is MOF’s understanding that FSCO has provided additional detailed information on how FSCO’s benchmark on Reforms savings and loss trends were estimated. This is included in FSCO’s Technical Notes as an Appendix. The Appendix also outlines that there are data issues for one large insurer that reported to GISA. Due to confidentiality reasons FSCO cannot release information that would identify specific insurers.

    85IAIS, “Insurance Core Principles, Standards, Guidance and Assessment Methodology”, October 19, 2013. Accessed October 17, 2014, http://www.iaisweb.org/view/element_href.cfm?src=1/20567.pdf.

    86With an organization that walks claimants independently through the process, the need to seek legal counsel would be reserved only for the more serious cases.

    87The June 30, 2013 GISA data was the most recently available data at the time the Interim Report was prepared.

    88KPMG LLP, “Province of Ontario Ministry of Finance Automobile Insurance Transparency and Accountability Expert Report – Interim Report”, final release April 14, 2014. Accessed on September 12, 2014, www.fin.gov.on.ca/en/autoinsurance/kpmg-expert-report.pdf.

    89MOF indicated that it is their understanding that FSCO has specific service standards as part of their rate review process, and that many of the delays that occur are a result of incomplete data and information submitted by insurers to FSCO.

    90MOF indicated that it is their understanding that FSCO invites insurers to compare their experience to the benchmark and provide any supporting information for changes. Moreover, MOF indicated that they understand that there is an increased reliance by smaller insurers on the FSCO benchmarks in estimating costs and setting rates due to limited data and experience.

    91The twenty-two stakeholders were selected in consultation with the MOF to represent a variety of parties and interests.

    92The Auto Insurance Anti-Fraud Task Force ceased to exist upon submission of their final report in November 2012.

    93Under Ontario’s Insurance Act, benefits provided under Ontario’s standard automobile insurance policy for insured individuals who are injured in a motor vehicle accident are defined by a regulation titled SABS, regardless of who is at fault. The latest revision to the SABS had an effective date of September 1, 2010. For more information refer to “Ontario Regulation 34/10, Statutory Accident Benefits Schedule - effective September 1, 2010”. http://www.e-laws.gov.on.ca/html/regs/english/elaws_regs_100034_e.htm. Accessed October 7, 2014.

    94The Reforms reduced the benefits available from the mandatory automobile insurance coverages. At the same time, a wider range of optional automobile insurance coverages were introduced.

    95MIG is a temporary measure until the release of a minor injury treatment protocol. According to the Minor Injury Treatment Protocol – Activity Updates published on FSCO’s website, “the completion date for all deliverables has been extended to December 31, 2014.” https://www.fsco.gov.on.ca/en/auto/Pages/activity-update.aspx. Accessed on October 25, 2014.

    96According to the MIG published in February 2014 by FSCO, subject to exceptions related to pre-existing conditions (described in Section 4 of the MIG), “an injured person’s impairment comes within this Guideline if the impairment is predominantly a minor injury.”

    97We are not certain if this comment from OPA is referencing pre-existing conditions.

    98We are not certain if the education is targeted to a specific group or to the public in general.

    99FSCO, “Cost of Assessments and Examinations Guideline, Superintendent’s Guideline No. 09/10”, November 2010. https://www.fsco.gov.on.ca/en/auto/autobulletins/2010/Documents/A-23_10-1.pdf. Accessed October 24, 2014.

    100FSCO, “Apply now for a service provider licence”. https://www.fsco.gov.on.ca/en/service-providers/Pages/apply-now.aspx. Accessed October 24, 2014.

    101Examples of “other publicly funded rehabilitation therapy” were not included in the response.

    102ORA did not provide examples of reasons for this denial.

    103Specific examples of these awareness campaigns were not provided.

    104The PCT “is the first phase of a pilot project to help Ontario regulated health professionals stay informed of which clinics or health facilities are using their information to submit auto insurance claims. This initiative is one of the recently-introduced measures recognized and endorsed by the Ontario Auto Insurance Anti-Fraud Task Force in their Interim Report. It is being investigated by a Working Group chaired by the Financial Services Commission of Ontario.” www.aboutpct.ca/About-PCT/index.shtml. Accessed on October 4, 2014.

    105ORA, “Strengthening our members.” www.ontariorehaballiance.com/page/strengthening-members/. Accessed on October 4, 2014.

    106As explained earlier, we note that effective December 1, 2014 all health service providers who bill automobile insurers directly must be licenced by FSCO.

    107The Final Report of the Ontario Automobile Insurance Anti-Fraud Task Force Steering Committee, dated October 14, 2012 defines opportunistic fraud as: “an individual pads the value of his or her auto insurance claims by claiming for benefits or other goods and services that are unnecessary or unrelated to the collision that caused the claim.” Accessed on October 5, 2014. www.fin.gov.on.ca/en/autoinsurance/final-report.html.

    108The OIAA did not elaborate.

    109The Government of Ontario, Ministry of Finance, “2013 Ontario Budget Chapter IV: Tax, Pension and Financial Services”, last modified May 2, 2013. Accessed on September 23, 2014, www.fin.gov.on.ca/en/budget/ontariobudgets/2013/ch4.html#ch4c_5.

    110Justice Douglas Cunningham, “2014 Ontario Automobile Dispute Resolution System Review Final Report”. Accessed on September 25, 2014, www.fin.gov.on.ca/en/autoinsurance/drs-final-report.html.

    111The respondent did not elaborate on examples of chronic issues and secondary health issues that may arise due to delays in the rehabilitation assessment.

    112Justice Douglas Cunningham, “2014 Ontario Automobile Dispute Resolution System Review Final Report”, Accessed on September 25, 2014, www.fin.gov.on.ca/en/autoinsurance/drs-final-report.html#appA.

    113We understand from discussions with MOF that Bill 15 proposes that the DRS be moved to the License Appeal Tribunal.

    114OIAA did not further elaborate on this comment.

    115This is in reference to the “Minor Injury Treatment Protocol – Activity Updates” published on FSCO’s website, which states that “the completion date for all deliverables has been extended to December 31, 2014.” Accessed on October 25, 2014. https://www.fsco.gov.on.ca/en/auto/Pages/activity-update.aspx.

    116KPMG LLP on behalf of the Towing and Storage Advisory Group produced the report “Towing and Storage Advisory Group - Report and Recommendations to the Ministry of Consumer Services” dated March 12, 2014. One of the recommendations of the Towing Advisory Group was that an oversight model should set standards that must be met and adhered to by towers, operators and businesses. The Ontario College of Trades delivers education, qualifications, standards, registration, and compliance and enforcement functions for registered trades. Accessed October 4, 2013. www.ontariocanada.com/registry/view.do?postingId=15664.

    117This is in reference to the discussion in Section 10.1.1.4.

    118FSCO, “Superintendent’s Report on the Definition of Catastrophic Impairment in the Statutory Accident Benefits Schedule,” December 15, 2011, accessed October 8, 2014. http://www.fin.gov.on.ca/en/autoinsurance/si-report.pdf.

    119IBAO did not elaborate on the legislated fee limits and thresholds.

    120We understand that this will be addressed in Bill 15, Fighting Fraud and Reducing Automobile Insurance Rates Act, 2014.

    121PTAO believes that Bill 15 allows for the establishment of regulations and standards for the towing industry. However, they believe that there are still some areas of major concern which require their input to be effective.

    122PTAO believes that Bill 15 allows for the establishment of regulations and standards for the towing industry. However, they believe that there are still some areas of major concern which require their input to be effective.

    123The CIAA only received comments from one member with respect to the 2014 Annual Report Survey.

    124 Gluchowski v. Lister, 2014 ONSC 2190, April 29, 2014. https://www.canlii.org/en/on/onsc/doc/2014/2014onsc2190/2014onsc2190.html. Accessed October 20, 2014.

    125For a person to be held liable in an action for loss or damage due to bodily injury arising from an MVA, the injured person seeking to recover damages must meet the “threshold” as provided by section 266(1) of the Ontario Insurance Act.

    126We note that claimants can currently contact FSCO and their own insurer’s ombudsmen.

    127The respondent did not elaborate on this point.

    128Under section 289 of the Ontario Insurance Act, the Superintendent of FSCO is required to undertake a review of Part VI of the Insurance Act (Automobile Insurance) and the related regulations every three years.

    129 Scarlett v. Belair is an appeal decision order issued by FSCO Director’s Delegate ([2013] O.F.S.C.D. No. 42 (Dir. Del. Evans)) to an arbitration decision rendered in 2012. Information on this decision is available in FSCO’s database of arbitration and appeal decisions. Various personal injury law firms also provide summaries of the key elements of the decision on their websites.

    130 Pastore v. Aviva Canada Inc., 2012 ONCA 642, 27 September 2012, CanLii, http://www.canlii.org/en/on/onca/doc/2012/2012onca642/2012onca642.html. Accessed October 5, 2014. Various personal injury law firms also provide summaries of the key elements of the decision on their websites.

    131 Henry v. Gore Mutual Insurance Company, 2013 ONCA 480, 16 July 2013, http://www.canlii.org/en/on/onca/doc/2013/2013onca480/2013onca480.html, accessed October 6, 2014. Various personal injury law firms also provide summaries of the key elements of the decision on their websites.

    132FSCO, “New Regulations for Service Provider Licensing and Changes to Statutory Accident Benefits Schedule – Effective September 1, 2010”, www.fsco.gov.on.ca/en/auto/autobulletins/2013/Pages/a-07-13.aspx, accessed October 5, 2014

    133IBAO did not elaborate on which segments may be affected.

    134This table is for informational purposes only. Please refer to the full SABS for precise information.

    135Source of table: Financial Services Commission of Ontario “New Regulations for Service Provider Licensing and Changes to Statutory Accident Benefits Schedule – Effective September 1, 2010” www.fsco.gov.on.ca/en/auto/autobulletins/2013/Pages/a-07-13.aspx accessed October 5, 2014; Thomson Rogers, “Statutory Accident Benefits Table Summary - Revised August 17, 2010”; www.thomsonrogers.com accessed October 4, 2014; Singer Kwinter, “A Guide to Ontario’s Statutory Accident Benefits Schedule (SABS), Effective September 1, 2010”, http://singerkwinter.com/ontario-accident-benefit-claims/ accessed October 5, 2014.