May 2, 2013
The government is proposing an auto insurance cost- and rate-reduction strategy that would reduce premiums by 15 per cent on average for Ontario drivers.
The strategy would also intensify the government’s existing work to address the critical issues in the system, and increase accountability and transparency to help ensure that cost savings will result in lower premiums for Ontario drivers.
If implemented, the strategy would build on the success of the government’s 2010 reforms and a series of fraud prevention regulatory amendments in January 2013. It is essential that further action be taken to ensure that reductions to premiums can continue from these reforms. A number of critical issues are leading to cost uncertainties for insurers, and are preventing significant premium reductions for Ontario’s over nine million drivers.
The government is taking strong action on these issues.
To achieve the premium reduction, the government will introduce legislative amendments that would, if passed:
To increase accountability and transparency, a new independent annual report by outside experts will look at the impact of reforms introduced to date on both costs and premiums. The report will review industry costs and changes to premiums, and recommend further actions that may be required to meet the government’s reduction targets.
The government will intensify its existing cost- and rate-reduction strategy by:
The government will call on FSCO to reduce the return-on-equity benchmark used in rate filings.
The government will also conduct further study and consultation on other initiatives to reduce costs, including provincial oversight of towing and amending the definition of catastrophic impairment in the Statutory Accident Benefits Schedule.
From 2006 to 2010, Ontario experienced a substantial increase in claims costs because of fraud in the system and overuse of benefits. The significant increase in costs was primarily caused by increases in accident benefits claims costs (for example, exams and assessments, attendant care and housekeeping).
While claims costs for repairs to physical damage to vehicles remained stable, claims costs for certain benefits more than doubled.
Due to the generosity of Ontario’s auto insurance system, accident benefits claims costs in 2006 were already much higher than in other provinces with similar private auto insurance systems, such as Alberta, New Brunswick, Nova Scotia, and Newfoundland and Labrador. From 2006 to 2010, these costs in Ontario went up even higher, increasing by 91 per cent.
Within Ontario, accident benefits claims costs grew especially quickly in the Greater Toronto Area (GTA) between 2006 and 2010:
In September 2010, the government introduced major reforms to Ontario’s auto insurance system to address the substantial increase in claims costs. These reforms controlled costs, increased consumer choice and simplified processes in the system. As a result of the reforms and ongoing government action, costs have been reduced and rates have stabilized and have now started to decline.
The government built on the success of the September 2010 reforms by announcing an Auto Insurance Anti-Fraud Task Force in the 2011 Ontario Budget. The Task Force received more than 50 presentations and submissions from interested parties, including the insurance industry, health care providers and consumer groups, and submitted three reports to the government over the course of its work. The Task Force’s final report in late 2012 contained 38 recommendations in the areas of fraud prevention, detection, enforcement and regulatory roles.
In January 2013, the government took early action and approved regulatory amendments to address some of the reforms proposed in the final report of the Auto Insurance Anti-Fraud Task Force and build on earlier actions taken to combat fraud and protect consumers.
Effective June 1, 2013, these amendments will help prevent auto insurance fraud and protect consumers by:
From 2004 to 2012, auto insurance rates in Ontario increased slower than the rate of inflation. From 1995 to 2003, the consumer price index increased by 18.3 per cent, while auto insurance rates increased by 44.9 per cent. From 2004 to 2012, the consumer price index increased by 18.1 per cent, while auto insurance rates increased by 11.4 per cent.
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Susie Heath, Minister’s Office, 416-325-3645
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