Ontario’s 2013 Budget: Driver’s Will Save On Auto-Insurance Premiums in Future

Update: see previous posts – May 1, 2013 Ontario: Driver’s Should Save $225 Every Year Based On May 2, 2013 Budget, April 30, 2013 Ontario Auto Insurance: Accident victim Wins Challenge to Ontario’s $3,500 Minor Injury Cap, March 2, 2013 Ontario: If Auto-Insurance Premiums Are Not Lowered, Ontarians May Face Spring Election, February 5, 2013 Ontario: Time to Reduce Auto-Insurance Premiums for All Ontario Drivers, August 29, 2010 Auto Insurance Companies Whine about Medical Costs, August 22, 2010 Auto Insurance Rules Change September 1, 2010 (Ontario), November 13, 2009 Home Insurance Skyrockets in Ontario, November 5, 2009 Liberals Take Care of Ontario’s Auto Insurance Companies, October 5, 2009 Ontario Liberals Support Auto Insurance Profits, July 19, 2009 Insurance Rates Skyrocket in Ontario, June 11, 2009 Insurance Companies exercise discrimination due to “perceived genetic risks”., May 18, 2009 Ontario Auto Insurance – Reducing Accident Benefits from 100 to 25 Thousand Dollars.

 Nathan Denette / THE CANADIAN PRESS Ontario Premier Kathkleen Wynne and MPs applaud as Finance Minister Charles Sousa tables the 2013 provincial budget at Queen's Park.

   Ontario Premier Kathkleen Wynne and MPs applaud as Finance Minister Charles Sousa tables the 2013 provincial budget at Queen’s Park. Nathan Denette/The Canadian Press

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Helping Ontario Drivers save Money is the title which the Ontario Provincial Liberal government has given to their effort to reduce auto-insurance for Ontarian drivers in the 2013 Provincial Budget handed down today at 4:00 p.m and then tabled.

Finance Minister Charles Sousa said he anticipates that the measures will reduce the average annual premium per vehicle by $225 for all drivers.  Ontario driver’s pay the highest amount of auto-insurance premiums in Canada (average of $1,231.00 annually in 2009), while those in Quebec (with public auto-insurance administered by the Province) pay the lowest in premiums (average of $642.00 annually in 2009)

It appears that the Liberal government in Ontario has succumbed to the demand of the NDP, who told Premier Wynn that they could not support a budget, if it didn’t contain a 15% reduction for drivers in Ontario who must have the mandatory auto-insurance from private carriers to drive on Ontario’s highways & roads.

After the budget was released, NDP Leader Andrea Horwath wasn’t entirely onside because of the vague timeline and whether the savings are achievable. But given the reality of Ontarians and the recent polls, Horwath has no choice but to support this budget, keeping the minority government Liberals in power until the fall of 2014.

This is the material that the Provincial Liberal government placed on their website, concerning the reduction of auto-insurance rates:

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.

The opposition is not confident that the Liberals will ensure that  Ontarians receive a 15% reduction in their auto-insurance rates in the very near future.
The opposition is not confident that the Liberals will ensure that Ontarians receive a 15% reduction in their auto-insurance rates in the very near future, despite the 2013 budget delivered today.

Action Plan to Reduce Rates by 15 Per Cent on Average

To achieve the premium reduction, the government will introduce legislative amendments that would, if passed:

  • Legislate a premium reduction of 15 per cent on average within a period of time to be prescribed by regulation
  • Require insurers to offer lower premiums for consumers with safe driving records
  • Give the Financial Services Commission of Ontario (FSCO) the authority to license and oversee business practices of health clinics and practitioners who invoice auto insurers
  • Provide the Superintendent of Financial Services with the authority to require insurers to file for rates
  • Make the Superintendent’s Guidelines binding — incorporated by reference in the Statutory Accident Benefits Schedule
  • Expand and modernize the Superintendent’s investigation and enforcement authority, particularly in the area of fraud prevention
  • Consolidate statutory automobile insurance reviews.

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:

  • Transforming the current auto insurance dispute resolution system by appointing an expert to review the system and propose legislative amendments in the fall of 2013
  • Basing auto insurance benefits on medical evidence, including directing the regulator to provide an interim report this year on the progress of the Minor Injury Treatment Protocol project
  • Investigating additional new measures to reward safe driving and reduce costs and premiums.

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.

The Need for Auto Insurance Reform

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.

Accident Benefits Claims Costs Increased More Quickly than Physical Damage Claims Costs from 2006 to 2010

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.

Accident Benefits Claims Costs Increased from 2006 to 2010

Within Ontario, accident benefits claims costs grew especially quickly in the Greater Toronto Area (GTA) between 2006 and 2010:

  • Of the $2.4 billion increase, $2 billion occurred in the GTA
  • In 2010, accident benefits claims costs per vehicle in the GTA were more than four times higher than in rural Ontario (Source: Ontario Automobile Insurance Anti-Fraud Task Force — December 2011 Interim Report)
Accident Benefits Claims Costs Increased in the GTA from 2006 to 2010

Auto Insurance Reforms Reduce Costs

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.

Auto Insurance Rates Have Started to Fall

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:

  • 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
  • Requiring claimants to confirm attendance at health clinics
  • Making providers subject to sanctions for overcharging insurers for goods and services and banning them from asking consumers to sign blank claims forms.

Ontario Insurance Rates Have Risen by Less than Inflation

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.

Auto Insurance Rates Held Below Inflation Since 2003

To see this aspect of the 2013, press the following link: DOWNLOAD PDF

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