Bill 59 revised

The legislative fine-tuning of Ontario’s auto insurance product under Bill 59, which carried through last month with the passing of Bill 90, was generally lauded by insurance, legal and medical professionals at a review seminar held by the Insurance Institute of Ontario (IIO).

However, property and casualty insurance commentators say that — while Bill 59 served the purpose of reducing rates and achieving balanced equity between the province’s industry and consumer interests — it also led to a cut-throat price war which could soon result in substantial price corrections coming through to the market.

Bill 59 was introduced by the Ontario government two years ago, replacing Bill 164 which had created an unstable insurance environment of rate hikes and rising consumer complaints. At the time it was noted that Bill 59 would be subject to changes after a two-year review period.

Commenting on the legislative tweaking of the insurance product, Rob Sampson, the Minister without Portfolio and head of Ontario’s privatization program (also responsible for Bill 59’s development), describes the legislation as being highly successful. “Since the bill came in, rates have gone down by 11%, insurers and brokers are fighting for business and the government has put more than half a billion in after-tax money back into the pockets of the consumer every year.”

Through various interest group discussions prior to the legislative revision, Sampson says no group indicated they wished to go back to the old product or start from scratch. One of the more significant changes to the legislation includes an amendment clause pertaining to the legal and rehabilitation treatment of children of 16 years and less under “catastrophic impairment”, he notes. The passing of the bill also served the launch of the Ontario government’s “shopping guide” detailing insurance rates and covers for consumer comparative purposes. It is intended that the survey will be updated annually and made available to consumers at a modest price.

George Cooke, president of The Dominion of Canada General Insurance Co. and chairman of the IIO’s Bill 59 committee, says Ontario’s auto product, including the latest revisions, is currently the best product anywhere in the world in terms of balance between compensation and cost.

However, he notes, while Bill 59 was intended to stabilize rates, there has not been much sign of this happening. “The street price of cover has dropped by 20% over the past two years, the bill was supposed to stabilize rates not cause significant declines.”

The legislatures and public should be mindful that the property and casualty insurance industry is only now emerging from a period of over-capitalization during which companies were more aggressive with rate cuts than they should have been, he observes. “The current product is under-priced and we will eventually see price increases coming through,” Cooke cautions.

Judy Maddocks, chair of the Insurance Institute of Canada (IIC), supports Cooke’s comments, saying that rate adequacy is critical to the future success of the auto product. “We have stripped everything out of the price and don’t want to take a rate war to the point of ugly loss corrections.”

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