Reform of Ontario s Auto Insurance System. Willie Handler, Willie Handler and Associates

Transcription

1 Reform of Ontario s Auto Insurance System Willie Handler, Willie Handler and Associates

2 Context Govtpolicy regarding auto insurance has always been focused on price Minority Liberal govtforced by NDP to reduce rates by 15% Following 2014 election Liberals reaffirm rate reduction commitment To date rates have only dropped 7% 2015 Budget is intended to meet the rate reduction commitment 2

3 How Did We Get Here? In 1980s Ontario experienced liability insurance crisis following McErlean v Sarel appeal decision In 1988 Justice Coulter Osborne recommends retaining combined no-fault benefits and tort, but expanding nofault benefits Faced with rate inadequacy the Ontario govtintroduced no-fault on June 22, 1990 The OMPP not only addressed rate inadequacy but created a social safety net The NDP won the 1990 election on a platform of public auto insurance 3

4 How Did We Get Here? The NDP abandoned its plan for a public auto insurance scheme in favourof a complex set of reforms (Bill 164) DAC system Loss of Earning Capacity Benefit Indexed benefits That system lasted less than 3 years with the passage of Bill 59, Ontario s 3rd no-fault system within a decade Bill 59 restored some balance that existed under the OMPP, but retained complex accident benefits, complicated entitlement rules, and the overburdened and protracted DR system 4

5 How Did We Get Here? Further reforms rolled out from 2003 through 2010 Capped health care provider fees treatment guidelines increased deductible for court awards for pain and suffering additional checks and balances with the elimination of the DAC system In 2010, standard accident benefits were scaled back, optional benefits were expanded and a minor injury definition and treatment cap were introduced Since 2010, there have been 31 new or amending auto insurance regulations 5

6 What s Wrong With The System? The government has tinkered with the product in response to Adverse court decisions Growth of the rehab sector Higher insurer denials have expanded the use of lawyers Consumer protection provisions Fraud As a result we have a costly and complex system with a large number of disputes and high transaction costs Over the past 25 years private insurers have been asked to provide the public with a social safety net 6

7 2015 Budget Reform Package Mandatory medical/rehab and attendant care coverage has again been lowered from a combined coverage of $86,000 to $65,000 For cat injuries, the combined coverage has been lowered from $1 million to $2 million Medical/rehab benefits will only be able to be claims for 5 years instead of 10 SABS ss.5 (h) and 16 (l) entitlement test to be changed from "reasonable and necessary" to "essential Non-earner benefit to be available for only 2 years Cat impairment definition to be revised based largely on the 2010 Superintendent Report Adjust the tort deductibles and thresholds for inflation going back to

8 What s Wrong With the Announced Changes Changes intended to address a short term political objective Penalize the most vulnerable individuals Adds additional complexity (ie, essential goods and services, new cat definition) which will increase disputes and transaction costs Cut accident benefits do not disappear, some drift over to tort where there are no controls The social safety net is being dismantled and some costs will drift over to public programs The system will slowly returning to tort as more accident victims will run out of no-fault benefits 8

9 What Changes Would Help The system needs to be redesigned based on the following principles: Everyone will benefit from a simple and easily understood system Accident victims need easy access to adequate benefits You cannot design a no-fault system to address every eventuality so let the tort system deal long-term and complex needs Accident victims who need help with their no-fault claims should have access to inexpensive representatives Design a simple and inexpensive dispute resolution system A single payer for accident benefit coverage will be able to take advantage of economies of scale 9