Ontario auto regulator: What does it mean to “pay too much?”

IBC president and CEO Don Forgeron, left, and FSRA vice president of auto/insurance Tim Bzowey discuss the future of insurance regulations in Ontario at the IBAO Convention on Oct. 23 in Toronto.

With all sides seemingly in agreement that auto insurance in Ontario needs a joint effort to get back in shape, the province’s regulator is poised to make it happen. And this requires a review of how much the auto product should cost, in a perfect world.

Tim Bzowey, executive vice president of auto/insurance for Ontario’s new auto insurance regulator, the Financial Services Regulatory Authority of Ontario (FSRA), told hundreds of attendees at the 2019 Insurance Brokers Association of Ontario (IBAO) Convention in Toronto that the provincial government shares the desire “to get Ontario auto right.” He said lessons have been learned from previous attempts that didn’t go the way the industry might have hoped.

“Nobody’s showing up at the table with a bunch of hubris and thinking, ‘I’m just going to press the ‘easy button’ and this thing will be done,” Bzowey said as part of a BIP Talk alongside Insurance Bureau of Canada (IBC) president and CEO Don Forgeron. “That’s really encouraging.”

A key issue is the disproportionate amount of money spent to deliver the insurance product to consumers. “Four-and-a-half billion dollars of money going to people who are not the customer to deliver $7 billion for the customer,” Bzowey calculated. “Customers are right if they’re saying they’re paying too much. They’re absolutely paying too much. And, frankly, insurers would be right to say we’re not making a sufficient return to attract more capital and more investment. They’re both right.”

A key task is to figure out exactly what the government believes is its priority from a policy perspective. Since auto insurance is mandatory, Bzowey said there are two ends of the spectrum to consider: is it an insurance product or is it a social safety net?

“We’ve kind of plotted where Ontario is, and it’s a little bit all over that [spectrum], to be honest,” Bzowey said. “Let’s be clear about what we’re trying to do.”

That means setting targets. The industry needs to define what “good” really means. “So when I get up here and make an easy comment like, ‘Customers are paying too much,’ well, what’s too much and what should it be?” Bzowey asked.

The next step is for industry stakeholders to hold each other accountable to ensure the targets are being met. “I’m not sure that we’ve done that necessarily in the past,” he said. “I think we’ve talked about, ‘If we do this, costs will come down and it’ll take a certain amount of time.’ Then for whatever reason, they don’t.”

He pointed to past mistakes made when changes didn’t deliver what experts intended. “You think about the last range of reforms, it actually did bring costs down,” Bzowey said. “But the problem with the auto insurance product is, it’s not one product. As the [accident benefits] costs declined, what happened to collision costs? All of a sudden, collision is almost half the cost of the product. This isn’t the way I thought we’d get to collision being half the cost of the product.”

Then, of course, customers get frustrated. “People who don’t understand the business the way you do look at that and think, ‘They lied to us. They said costs would come down. My premium’s only gone up,’” Bzowey said. “So we’re going to have to be better than that this time.”