New Path to Health

Fuelling up for political glory, provincial governments continue to truck ahead with amendments to auto insurance regulations by introducing rate freezes, rate control grids and accident forgiveness, to name a few of the “mistakes” which Bill Star, president of Kingsway Financial Services Inc., says government bodies are implementing. Although 2004 was a big year for the insurance industry, Star predicts that 2005 is not going to be so rewarding. In 2004, auto insurers were able to run high premium rates, a luxury that ceased when regulations forced companies to reduce their rates by 10%. Kingsway however, has maintained a strong stance, holding firm on pricing and maintaining current rates – even if this does mean “losing a little business”.

“Auto insurance in Ontario represents a third of all the property and casualty premiums in Canada,” Star observes, “so it’s a very important market. Because in 2004 most companies reduced their rates, the earned premium [growth] for 2005 is going to be much lower but the accident rate will continue to inflate. So, this year most companies won’t do nearly as well in auto, meaning that their overall [financial performance] will also not be as good.” The ensuing soft market caused by changes to regulations, he predicts, will result in companies loosing money by 2006.

So it holds true that one of the biggest challenges facing the auto insurance industry – specifically high-risk segments such as the motorcycle, trucking and taxi lines that Kingsway insures – are the strict regulations that do not allow companies to charge insureds rates that reflect potential claims incurred by specific segments of the population.

Although regulations have been a longstanding reality of the industry, Star says recent provincial amendments and proposals reflect a dangerous flux that could result in “more fatalities on the road and more danger for drivers”. Alberta’s rate grid regulation for example, means even if rates are higher, companies have to charge the price where a risk falls within this grid. As a result, the risks are placed in a pool which will pass millions of dollars in losses over to the industry and eventually, good drivers will have to pay for these loses in their premiums. Notably, Star says that, in New Brunswick, Nova Scotia and Newfoundland, governments are looking towards controlling rates and eliminating factors such as age, gender and marital status as rating criteria. “These have been very important rating factors for a number of years and there’s all kinds of evidence to show that it’s [rating criteria] is necessary to have, so they’re [the provincial governments] making very serious mistakes,” he adds. “These regulations are not helping people and it’s going to take a couple of years for accident claims to roll in before they find out the extent of their mistake.”

In this respect, Star is particularly concerned with the quality of bodily injury treatment available to claimants and the swelling costs of claims resulting from fraudulent as well as slow and inaccurate procedures.

CENTRAL CONTROL

Accident benefit (AB) and minor bodily injury (BI) claims, as well as the cost of litigation to defend against fraudulent claims, are the biggest areas for claims costs. Recent reforms to auto regulation reflect initiatives to cap the cost of personal injury awards. In Ontario, a block has also been placed on cash settlements, decreasing the flow of fraudulent and minor claims, regulating costs incurred by treatment clinics, many of which Star alleges have been abusing insurers by adding unnecessary costs into their treatments.

In Ontario, AB and BI claims costs recently began to decline due to the reforms introduced. However, insurers remain uncertain as to the long-term benefits of these cost-containment measures. Motivated in part by this skepticism, Star has become involved in the creation of Canada’s first comprehensive spine center. Enabling its May 2005 launch by fronting a $3 million donation, Kingsway was the vital benefactor for the Kingsway Financial Spine Centre – a Mississauga-based, 9,000 square foot, self referred ambulatory facility located in the Trillium Health Centre. The spine treatment center represents Trillium’s “signature” Neurosciences/Muskuloskeletal Health System, which is modeled on an interdisciplinary approach to care including diagnosis (like on-site MRIs), treatment, rehabilitation and surgery. This one-stop, holistic approach to spinal health will significantly reduce wait times, improve accessibility and provide better patient outcomes, Star believes.

Dr. Shutz, the neurosurgeon who developed the innovative design for the spine center, says after excessive weight periods, patients are often misdiagnosed due to fragmented, multi-location tests and treatments. Shutz believes the center will “help put them (patients) on the road to recovery faster” by pairing them with various specialized healthcare professionals. This unique care facility will, Star foresees, be a model for future hospitals in Canada, redefining how spine care is delivered.

“This project really interested me because we are the largest motorcycle insurer in Canada,” Star notes. “A lot of our claims are spine injuries and previously there wasn’t a good center in Canada to treat spine injuries. Trillium required money to help start this clinic and we thought it would be a worthwhile project for Kingsway.” Although a strong supporter of treatment available through the new clinic, Star says the company’s insureds will have the freedom to decide where they are treated.

FRAUD FACTOR

Statistically, a large majority of insurance claims are soft tissue injuries, which Star asserts are often not “real injuries” but are purported as such by unlicensed clinics.

Heading Kingsway’s aggressive tactics, Star has tackled potentially fraudulent claims by charging at the medical treatment clinics and the AB lawyers in full force whereas, other companies often relent and pay out claims for ease even when fraudulent activity is suspected.

In addition to hiring private investigators to weed out the “bad clinics” from the good, the Kingsway spine center will provide companies a place to send claimants where they are guaranteed to receive quality, medical-based treatment, Star stresses. This will in turn ensure the reduction in occurrence of fraudulent treatment costs that have been built into claims as well as speed up the treatment process, thereby ensuring that clients return to normal life as soon as possible.

The level of savings Star expects will be derived from operating the clinic for treatments over the short to the long-term will be considerable for the insurance industry as a whole as well as for OHIP. “The cost of treatment will be lower by providing the correct care and the costs associated with loss of income will be reduced since this center does not intend to prolong unnecessary care,” he adds.

Star alleges that many unlicensed clinics work with lawyers and deliberately extend treatment as long as possible, keeping people off work and thus increasing future court awards and personal monetary return. “This type of treatment center,” he asserts, “is a great opportunity for the insurance industry to refer people to make sure they are getting the proper diagnosis, and that’s where I think that the insurance industry can save a lot of money.”

In addition to reducing costs, Star believes it is important that the auto insurance industry becomes more proactive in the medical treatment arena. Such a move would garner good publicity in showing the public that insurers are giving back to the people, he says.

TREATMENT PARTNERSHIPS

In Canada, the partnership between an insurer and medical center to create a care clinic, like the one that paved the way for the Kingsway Financial Spine Institute, is a unique endeavor. It is an approach which Star advocates other insurers to take. However, Kingsway does not plan to expand its involvement into ot her clinics at this stage, he says. “We’ll wait and see how this goes. We don’t intend to sponsor further clinics elsewhere but we are encouraging other insurers to become involved with other hospitals and try to develop other centers using Trillium as a model.”

The spine institute does not represent a prolonged partnership with Kingsway. The insurer supplied the initial, start-up funding but from there, the center has been operating under the guidance of Trillium’s hospital board, completely independent of Kingsway.

“Kingsway will not provide ongoing financial support,” Star explains. “This clinic will operate in the same manner as any other hospital service where treatment will be paid by OHIP and other insured service providers.”

As for the future of the Kingsway “path to health” and drive to reduce claims costs through a more effective approach to bodily injury treatment, Star believes that upon sending their clients to the spinal center, some insurers will realize how much potential savings can be made. “I think other insurers will be interested in supporting hospitals in the future once they realize the savings they will attain by providing effective treatment services. There are opportunities to go into any of Canada’s major cities and set up a treatment center. I don’t want this to just be a Kingsway thing, I’d like to see it as an industry initiative.”