Legislation puts sustainability of Ontario auto product at risk: Top 5 insurer

The major problems of the Ontario auto insurance product won’t be solved by changing the territorial rating system, a major insurer warns.

Two private member’s bills recently tabled at Queen’s Park “have the potential to challenge the sustainability of the product and create subsidization of urban areas by rural areas,” Co-operators General Insurance Company said in a recent securities filing.

Bill 42, tabled Oct. 15 by backbench Progressive Conservative MPP Parm Gill, would prohibit insurers from using “factors primarily related to the postal code or telephone area code” to set auto insurance rates.

That bill “is a great way to combat rate discrimination in our auto insurance system,” Finance Minister Vic Fedeli said Oct. 25 during Question Period. Fedeli did not go so far as to say he is actually going to vote in favour of Bill 42. Private member’s bills are often defeated.

But using territory is “a significant predictor of geographical risk and risk in general,” The Co-operators said in its management discussion and analysis of its financial results for the third quarter, released Oct. 25. “Reducing rates for certain territories does not address the core problem of rising claims and auto insurance fraud.”

The Co-operators ranks fifth among Ontario P&C insurers in 2017 by direct premiums written, according to the Canadian Underwriter Statistical Guide.

The Progressive Conservatives were elected to power in the election this past June, replacing the Liberals, who had ruled since 2003. The PC victory “results in uncertainty around the level to which the elements of the previous government’s Fair Auto Insurance Plan will proceed and around the implementation plans for the previous recommendations made by David Marshall, Ontario’s advisor on auto insurance,” The Co-operators said in its MD&A.

The Fair Auto Insurance Plan was announced in 2017 by then-Liberal Finance Minister Charles Sousa. That plan called for independent medical examination centres for disputed accident benefits claims and standard treatment plans for common collision injuries such as sprains, strains and whiplash. The intent was to bring two of Marshall’s 35 recommendations to reality. In his 2017 report, Fair Benefits Fairly Delivered, Marshall said one of the failures in Ontario’s accident benefits system is that too much money is spent on lawyers and competing medical opinions and not enough of that money goes towards treating people who get injured in vehicle accidents.

A second private member’s bill also takes aim at territorial ratings. Bill 44 was tabled Oct. 16 by the opposition New Democratic Party’s auto insurance critic, Brampton East MPP Gurratan Singh. Bill 44 proposes to make the greater Toronto area one single territory for the purpose of setting auto insurance rates.

A motorist’s insurance rate should be based on their driving record and not on where they live, Singh said earlier in the legislature.

“There is no good reason good drivers in the Jane and Finch neighbourhood should pay double what other drivers in the GTA pay,” Tom Rakocevic, NDP MPP for the Toronto riding of Humber River-Black Creek (which includes some high-density residential neighbourhoods near the intersection of Jane Street and Finch Avenue), said Oct. 25 during Question Period.