Profile: Keeping the Pot Tasty

Rob Sampson, member of Ontario’s provincial parliament and current chair of the government caucus, has no shortage of guest presentation requests at insurance industry events. Heralded as a “hero” for driving the latest auto insurance product reform initiatives that culminated in Bill-198, Sampson has come to be regarded as a “friend” of the insurance industry. Although, he notes jokingly, “I must be doing something wrong, because I can’t get rid of the [insurance] file,” with reference to his longstanding involvement in government auto insurance reviews.

In this respect, some within the industry will remember that Sampson was the main force behind Bill-59 – which was supposed to have curtailed rising claims costs as a result of mostly auto injuries. Instead, insurance rates fell by more than 13% after the introduction of Bill-59 while costs mostly arising from bodily injury (BI) claims continued to spiral upward as the government failed to address regulation of healthcare vendors and in instituting treatment fee schedules.

Now, seven years after Bill-59 was introduced, and on the eve of the product reform initiatives under Bill-198 being brought into regulation, the Ontario auto market has come full circle where coverage capacity has become scarce and business turned to the non-standard high-risk Facility Association (FA) as insurers scurry to recover from the income and capital devastation wrought by Ontario auto. Notably, insurers had to “top up” reserves by about $650 million during 2002 as a result of adverse development losses mostly arising from Ontario auto. Most company CEOs are therefore skeptical to how effective the latest product reforms under Bill-198 will be in reducing underwriting losses, and in this respect are less than keen to commit further capital resources to a market where they have had their fingers burnt more than once (see cover article of the May 2003 issue for further details).

So, why is Sampson – who literally “sold a highway” during his period in office as Minister without Portfolio and responsible for the provincial government’s privatization program – so confident that the latest auto reform will appeal to insurers? In fact, he believes that the latest legislative bundle holds attraction for all parties involved – consumers, healthcare vendors, lawyers and insurers.

He points to stacked boxes in his office, presumably containing research material collected from investigation of the auto insurance system. Sampson says that he spent “countless hours” in consultation with insurers, healthcare providers and lawyers in putting together the initiatives that had originally been put forward in the second half of last year under private member Bill-166. “Which is no mean feat getting consensus. A forced solution is never a final solution.” And, he adds, “I think we have insurer consensus, which has been a remarkable achievement…If everyone is unhappy, that means that we’ve probably gone just far enough. We think there’s enough there to entice investor shareholders of insurance companies to reinvest in Ontario auto.”

Sampson concedes that, not only has delivery of the new auto regulations been slow in progressing, which he says “I share insurers’ frustration in this regard”, but that the latest reforms under Bill-198 are not a conclusive answer. “I think the reforms will be a teaser in bringing insurers back into the market. But, there will have to be ongoing review [of the regulations].”

THE FOUNDATION

Sampson maintains support for Bill-59, noting that the reforms introduced in 1996 were effective in getting insurers back into the marketplace, as well as relieving cost pressures on consumers. “The current average price of [personal auto] insurance is at 1995 levels, you show me a jurisdiction that can claim the same – despite the cost pressures. Which does not mean to say that I think we’re at the right price to the cost.”

Ultimately, the latest auto product reform initiatives under Bill-198 is really about regulative maintenance, Sampson says. As such, there is no fundamental shift in the government’s position between a tort and no-fault system. “When we brought in Bill-59, we knew that we couldn’t put it on the shelf and forget about it. You have to continue working on it – it’s a bit like buying a car, you know there’s going to be more cost than just the sticker in terms of maintenance in keeping it going.”

The issue insurers had with Bill-59 is that the government did not follow through with “maintenance” of the legislation, Sampson observes. “And I can accept some of that criticism.” In this respect, the government is now following through with that maintenance under Bill-198. Although, Sampson admits that the government’s willingness to move ahead with auto insurance reform was motivated primarily by consumer concern (read that as voter concern) regarding the growing shortage of available insurance coverage.

NEW PACKAGE

A cursory glance through the main features of the auto product reform under Bill-198 reveals a much “watered down” version of the initiatives put forward by Sampson under Bill-166. The original bill had called for implementation of a “file and use” rate approval system, a reduction in the “take all comers rule”, increased access to tort for excess healthcare claims, payment classification of healthcare services, and insurer “preferred healthcare vendor” policy endorsements. But, the latest reform package does little to directly address regulation of healthcare providers or apply limits on various treatment costs, nor does it deal with the high cost and delays of assessments under the current Designated Assessment Centre (DAC) system, insurers note.

Sampson concedes that not all of the initiatives he originally put forward made it into the final reform package, while certain items were amended. The decisions made were done in line with what was best for the consumer, he adds.

That said, Sampson notes that the initiatives carried through Bill-198 hold much of what insurers had asked for. The legislation also created “superintendent guidelines” whereby the insurance regulator, being the Financial Services Commission of Ontario (FSCO), can bring about further regulative modifications within a “pre-approved legislative framework” – in other words, further reform within these guidelines can be brought into place without having to pass (and be delayed) through the legislative process.

And, while Sampson’s original proposal had suggested insurers should have control over healthcare provider costs, this function now rests with FSCO, he says. “As the ‘preferred provider’ section of the bill now stands, FSCO can make the determination to take up an issue with a healthcare provider on services and costs. The conclusion was that this would be best for consumers.”

In terms of insurer cost and delays experienced with the DAC system, Sampson says that the new legislation does address many of the shortfalls experienced with assessments. “The big problem was the escalating number of case file assessments being made. We’ve capped the number of assessments per case to three, which means that if they’re continuing to grow, then it’s because insurers can’t control [their claims cases].” Furthermore, the reform package also calls for the creation of more DACs, as well as open up competition between assessors. “Insurers have got all that they wanted except for getting rid of DACs.”

LOOKING AHEAD

Sampson says that there is no current active consultation between the government and the various stakeholders involved with the auto insurance system. This, however, will likely change once the new regulations have been brought into effect and some hard data becomes available to provide direction on what may have to be changed. For instance, at some point the government may look at addressing the rate filing system. “The current filing system is costly, I don’t deny that. I think this is something we can look at again once we have the product back up and running.”

Sampson says that, “I’m still involved in auto [insurance], whether I lik e it or not. I know way too much about the product to lose interest in it. I’ll stay involved because I want it [auto insurance] to work.” And, with perhaps “tongue in cheek”, he adds that with the new auto reform regulations close at hand, “I just hope that insurers aren’t too aggressive [getting back into the marketplace] as they were in 1996”.