A recently released study commissioned by the Ontario Trial Lawyers Association (OTLA) paints a damning portrait of province’s auto insurance industry, calling it “fundamentally broken.” The study, authored by York University professors Fred Lazar and Eli Prisman, suggests that Ontario’s 9.4 million drivers overpaid their auto insurance policies by an estimated $840 million in 2013 and $700 million in 2014, for a two year total of $1.5 billion.
Credit: W. Robert Howell/Flickr
While the Insurance Bureau of Canada (IBC) has criticized the findings, saying the study failed to consider 25 per cent of Ontario’s auto insurers with negative returns on equity, the OTLA maintains Ontario’s drivers are being unfairly treated.
“These repeated ‘insurance reform initiatives’ have clearly only benefited insurance companies by generating record profits,” said OTLA President Maia Bent in a release. “Total industry wide profits in 2014 alone were 10.6 per cent – or nearly twice the levels considered reasonable. Ontario auto insurance companies pocket massive profit while accident victims get short-changed, and drivers continue to pay excessive rates.”
The Financial Services Commission of Ontario (FSCO) maintained a 12 per cent return on equity as the auto insurance industry’s profit benchmark from 1996 to 2013, after which it was lowered to 11 per cent. Lazar and Prisman’s study recommends 5.8 per cent as a more appropriate mark.
Compounding the issue is the fact that accident victims are receiving less money in benefits, creating a system where unreasonably high premiums are resulting in insufficient benefits. Since 2010, maximum benefits for catastrophic injury victim have been cut from $2 million to $1 million, while maximum benefits for serious, non-catastrophic injuries have been cut from $100,000 to $50,000. With deductibles recently increasing, accident victims are looking at steadily declining benefits. In response, the OTLA has called on the Ontario Auditor General to conduct an independent review of the auto insurance industry.
“We need a critical re-examination of auto insurance in Ontario and the auditor is well positioned to provide a truly independent review,” said Bent. “At a minimum, we need to advance the discussion about auto insurance beyond the simplistic idea that the only thing that matters is the price we pay.”
Bent and the OTLA are not alone in their calls for reform. In a September 2015 editorial piece, Toronto Sun columnist Alan Shanoff issued a scathing summary: “For the past five years,” he wrote, “the Ontario government has been taking steps to transfer money from victims of auto accidents to insurance companies.”
In 2013, at the behest of the provincial NDP, the Liberal government agreed to take action on the issue, promising a 15 per cent rate cut for Ontario drivers. As of October, that mark has not been met. Provincial Finance Minister Charles Souza maintains that the target is still manageable, saying in August that it would be reached “in a way that is fair, practical and ensures Ontarians continue to be protected by the most generous auto insurance system amongst comparable Canadian jurisdictions.”
The OTLA, though, is less concerned with rates, and more with ensuring accident victims receive appropriate compensation.
“Clearly Ontario’s auto insurance system is in deep trouble. Not only are drivers paying through the nose, but the policy is not worth the paper it’s written on,” Bent asserted. “Victims are being seriously hurt and it’s about to get even worse when further reductions are implemented. It is not an exaggeration to say that we are fast approaching a crisis for accident victims.”
