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Cost of car Insurance in Ontario

Fraud and abuse still make the Ontario auto insurance system the worst in Canada

We take you now to a dark land where fraud is rife, corruption abounds and the government seems powerless. No, not some calcified dictatorship in Africa or South America. This is Ontario, home to Canada’s worst auto insurance system, a vast subculture of lawyers, health-care operators, inept regulators and gaming politicians who cannot or will not come to grips with a regulatory failure that costs motorists billions.

As the chief executive officer of one of the province’s automobile insurance firms put it, the numbers are staggering. Among Ontario’s 9.6 million motorists, there were 85, 000 accident and bodily injury insurance claimants in 2014. According to the industry’s official statistics agency, the average bodily injury claim came to $143, 630. By comparison, the average in Alberta is $12, 785. The average accident benefit payout was $31, 785 in Ontario, compared with $7, 895 in Nova Scotia and $3, 766 in Alberta.

Not surprisingly, these numbers — described as staggering by Karen Gavan, head of Economical Insurance of Waterloo — have left Ontario motorists carrying the cost. The average premium for auto insurance written in the province this year is $1, 425, by far the highest in Canada. That’s an improvement, taking account of inflation, from the peak in 2003, but the decline barely makes a dent in the door of a regime the province has been nominally trying to fix for more than a decade.

What’s wrong? In a letter last week to Ontario Finance Minister Charles Sousa, Gavan called on the province to end the “unfettered” abuse of claims “by participants within the accident benefits claims economy.” Consider this, she said:

There are currently 9, 615 profit-driven clinics and 31, 470 individual health care providers in Ontario registered with the Health Claims for Auto Insurance (HCAI) system, a centralized system that transmits information contained in the Statutory Accident Benefits Schedule (SABS) forms between insurers and health care providers. Given that there are approximately 85, 000 accident benefits and bodily injury claims annually in Ontario — the vast majority of which are minor sprains, strains and whiplash — this translates into 8.8 injured claimants per clinic per year, or only 2.7 claimants per individual health care provider throughout the province.

That Ontario’s auto insurance claims system is a car wreck is nothing new. As Gavan noted, there have been four major reforms of the system since 1990. Each reform produced a temporary decline in costs and abuse, but soon the rot set in anew and the old games returned.

The last reform was in 2010, but in 2012 the Ontario Automobile Insurance Anti-Fraud Task Force, headed by Fred Gorbet, former federal deputy finance minister, now CIT Chair in Financial Services at the Schulich School of Business, York University, reported the estimated annual cost of fraud in 2010 at somewhere between $768 million and $1.56 billion. Eliminating fraud would save each motorist $116 to $236 a year in premiums.


Most of this money appears to be going to what Gavan describes as “for-profit medical rehab clinics” that are essentially involuntarily funded through the insurance industry. “If this abuse were removed, it would not diminish one iota the quality of care Ontarians receive through their accident benefits.” Instead, insurance premiums would go down.

So far, not much of this information seems to have made it through to the government. The last provincial budget contained a cheap headline-grabber requirement that “all insurers offer a discount for the use of winter tires.” Many other changes were announced, most designed to “protect auto insurance consumers” but too few seem aimed at actually tackling fraud and abuse, despite the passage of recent legislation, the Fighting Fraud & Reducing Automobile Insurance Rates Act.

The auto insurance firms, the middlemen between the government and the fraudsters, are far from happy with efforts so far. Insurers also want reform of the mandate and operations of the Financial Services Commission of Ontario (FSCO), although a consultation paper issued by the government last month suggests the major reform of the regulator will not come fast or easy. FSCO has more than 500 employees and a $100 million budget to oversee thousands of financial corporations in various sectors.

Another cost driver is the role of ambulance-chasing lawyers who, the industry claims, are driving up premiums by extracting major benefits from insured motorists and pocketing large contingency fees. During 2013, contingency fees paid to lawyers on bodily insurance claims are estimated at between $400 million and $700 million, often up to 40 per cent of the claim settlement.

Some might argue that the insurance industry is using all this to hide its own problems and profits. Given that auto insurance in Ontario has been a no-fault mandated system since 1990, and its every nook and cranny is regulated, from rates of return to coverage, the blame for the fraud, abuse and costs belongs solely with a government that is good at snow-tire headlines but a failure in establishing a sound and efficient regime for the industry and motorists.

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