Actuarial Notes

Fair Benefits Fairly Delivered: A Review of the Auto Insurance System in Ontario

By David Marshall · Ontario Ministry of Finance · 2017

Study guide: Exam 6C

The final report, dated April 11, 2017, of David Marshall's review of Ontario's automobile insurance system. Appointed by Order in Council in February 2016 as Special Adviser to the Minister of Finance, he was asked to recommend improvements to the system and further initiatives to reduce claims costs and uncertainty, focusing on the efficiency and effectiveness of claims management: coverage options, comparable systems, common traffic injuries, medical examinations and assessments, legal costs, dispute prevention, and engagement and education.

On the syllabus

  • Exam 6C — objective A1; pp. 8–12.

Introduction

  • Objectives and scope of the study
  • Conduct of work

Executive Summary

  • Ontario auto insurance is mandatory and comes in two parts: a no-fault accident benefits part and recourse to sue an at-fault driver (the tort or bodily injury part); it is delivered through private insurers.
  • The opportunity gap: the average 2015 premium of $1,458 per vehicle is 24% above Alberta's, double Quebec's and almost 55% above the Canadian average excluding Ontario; a premium near the Canadian average of about $930 would save drivers about $4 billion a year.
  • The value gap: no one is actively managing medical care for accident victims, who take longer to recover and report permanent impairments from simple soft tissue injuries.
  • The structure is flawed: Ontario has devised a guaranteed safety net for accident victims and outsourced it to insurance companies without giving them the authority to decide how to deliver it.
  • The results are not good: about one third of benefit costs, some $1.4 billion a year, is paid for competing expert opinions, lawyers' fees and insurers' costs to defend claims instead of treatment.
  • Benefits are, on the whole, fair but not fairly delivered; the solution lies neither in reducing benefits nor, purely on cost, in moving to public delivery.
  • A five-part plan: an arm's-length regulator with a skills-based board; a substantially changed system for catastrophically injured persons, who need lifetime care; care not cash, with programs of care and hospital-based independent examination centres; transparent contingency fees; and more open competition on price and service.

Auto Insurance in Ontario

  • Background/context
  • History of auto insurance reforms

Where We Are Now – The Opportunity Gap and The Value Gap

  • The system is expensive
  • Is it delivering value?
  • The structural problem
  • Auto insurance as a guaranteed safety net for accident victims

The Results

  • Cross-jurisdictional comparisons
  • Total premiums
  • Premium mix accident benefits vs. third party liability
  • Public vs. private distribution systems
  • Claims appear to be unusually expensive, are taking too long to resolve, and too many accident victims are suffering a permanent serious impairment from what began as soft tissue injuries
  • There are too many claims going into dispute – even mediation attempts fail at least 40 per cent of the time
  • Accident victims are suffering large losses
  • Medical exams and assessments
  • System is focused on cash not care

What is Needed – A Sound Regulatory Regime with Fair Benefits Fairly Delivered

A Better Future – Should Ontario Move to a Government-Run Auto Insurance System?

A Better Future – Fair Benefits

  • Benefits today
  • Catastrophically injured persons

A Better Future – Benefits Fairly Delivered

  • Programs of care
  • Independent examination centre (IEC)
  • Provide care not cash
  • Legal representation, advertising and contingency fees

Dispute Resolution

  • Internal appeal process
  • Gatekeeper function
  • Expert witnesses

Bringing Simplicity and Responsiveness to the System

  • Consumer choice – leave it to the marketplace…
  • Providing enhanced education to consumers
  • Ensuring good faith
  • Improvements to the tort system
  • Innovation and price regulation

Role of the Regulator

Role of Insurance Companies

Appendix I

  • Auto sector groups consulted

Appendix II

  • Catastrophic impairment – Ontario Regulation 34/10: Statutory Accident Benefits Schedule – Effective September 1, 2010

Appendix III

  • Examination claims experience (private passenger vehicles) by accident year

Appendix IV

  • Income Replacement Benefits – Ontario Regulation 34/10: Statutory Accident Benefits Schedule – Effective September 1, 2010

Appendix V

  • General Insurance Statistical Agency – Private passenger vehicles accident benefits claims for medical and rehabilitation – 2013

Appendix VI

  • Information supplied by the Financial Services Commission of Ontario

Endnotes

Related readings

  • Alberta Auto Reform — reviews this report in its §IV A

Sources