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Critics continue to question Ontario auto insurance

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By Jeff Sanford

Toronto, Ontario — November 9, 2015 — The recent report on Ontario auto insurance from the Ontario Trial Lawyers Association has been hotly debated. The report claimed Ontario auto insurers are benefiting from a cap on profitability that is far too high in the current interest rate environment. The report also points out that changes to accident injury claims are also benefitting Ontario insurers. At a time when Ontario insurance rates are far higher than any other province in the country, the report has generated no small amount of interest.

The more recent report came out of an older one written for the Ontario Auditor General. It was carried out by two York University business professors. Collision Repair magazine recently interviewed Dr. Fred Lazar, one of the authors of the report, for his take Check out “Big profits: York U prof says insurer ROE should be cut in half” for more on this. 

The report itself has drawn comment from a number of people in the industry, including John Norris, Executive Director of Collision Industry Information Assistance (CIIA).

“Frankly the 13.5 percent profit percentage allowance that insurers are guaranteed by the Ontario Financial Services Commission should and has been reviewed as being far too generous and well outside of normal profit percentage available for any other sector in Ontario,” said Norris in an interview with Collision Repair magazine. “Certainly, repair facilities are not guaranteed profits by government. It’s not what insurers make that irritates shops, it is how little of that money is provided to shops for compensation for repairs. Labour rates are artificially suppressed and the insurers have a dominance over the sector that is not healthy.”

As it is, the cap has now been brought down to 11 percent. But that level was set when interest rates were five or six percent; now that rates are effectively zero percent, it seems like the cap is likely way out of date.

“With increased costs for staff, training and new equipment as well as keeping up with the necessary changes to be technologically in line with new repair technologies, shops have little money to pay their normal bills because they are unable to charge reasonable prices for their work to an insurer,” said Norris.

One of the other changes in the auto insurance industry today has to do with the money paid to victims of auto accidents. As it is, first responders to an accident assess victims and determine with the injuries are catastrophic or not. This determines whether the person will receive immediate benefits. Currently, a method known as the Glasgow Coma Scale is used to determine whether or not injuries are catastrophic. But in the 2015 budget, the Ontario government decided to do away with that scale and will replace it with something called the Extended Glasgow Outcome Scale. What does this mean?

The London Free Press recently ran a story quoting a doctor in that city who believes that the new scale will result in fewer victims being classified with catastrophic injuries. This will save insurers money. But Dr. Keith Sequeira of London was quoted as saying that fewer victims will get support from insurers to pay for care at home. Victims will more likely stay in hospital longer at taxpayers’ expense.

“They will change the criteria and it will have a huge impact,” Sequeira was quoted as saying. “We will have insurers saying (patients) do not qualify, and they will have to wait in hospital. The transition from hospital to elsewhere will stall … even if the level of support they need is clear, they won’t have funding, they won’t be deemed catastrophic.”

Please click here to read the original report, “Returns on Equity for Automobile Insurance Companies in Ontario,” prepared by Drs. Fred Lazar and Eli Prisman.

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