How Ontario can further cut auto insurance rates

Last week, the Ontario government passed Bill 15 into legislation.

The bill relates to the Ontario auto insurance system, says Aviva Canada, and aims to:

• reduce expensive vehicle storage costs that some facilities and towing companies charge;
• create a new system that will expedite the hearing of disputes, thereby preventing proceeding backlogs; and
• align pre-judgment interest rates on pecuniary and non-pecuniary damages (pain and suffering) to today’s rates.

These changes will assist in the reduction of insurance rates for Ontario drivers, but Aviva notes there are more savings to be had within our current system.

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“To truly affect long-term change for the Ontario auto insurance system, we need to reduce claims costs to be in line with other provinces,” says Karin Ots, senior vice-president of Regulatory and Government Relations for Aviva Canada.

This is important, she adds, since Ontario is one of the most heavily regulated insurance markets in the world, and the benefits mandated by the government are the most expensive in Canada.

For example, for every $1 Aviva collects in premiums, $0.65 is paid out in claims costs. It says these costs need to come down in order to reduce premiums over the long term.

Also, accident benefit claims in Ontario cost an average of $26,863, compared to $3,628 in Alberta. In Ontario, 48% of those costs go to non-treatment expenses, such as legal fees and assessments, versus the 52% that go to actually treating of victims.

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For bodily injury tort claims, the average cost in Ontario is $157,133, while it’s only $50,020 in Alberta. Both accident benefit and bodily injury figures come from IBC Analysis of 2012 GISA data.

Not surprisingly, a recent online survey of 1,000 Ontarians revealed most (96%) would like to reduce the auto insurance rates they pay. To date, only 8% of Ontario drivers make a claim each year, says Aviva.

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As such, the company put forward a number of recommendations to the Ontario government that, if instituted, would see an overall decrease in the insurance rate paid by Ontario drivers. Overall, they would decrease the basic level of coverage that drivers receive, but would make additional benefits available as optional coverage, bringing Ontario in line with other provinces.

The recommendations include:

• Reducing the claiming period for medical and rehabilitation benefits from 10 years to four years;
• Streamlining care for motor vehicle accidents with workers’ compensation;
• clarifying the definition of catastrophic impairment to ensure that the most seriously injured claimants are covered;
• implementing a tort cap similar to that of Alberta, Nova Scotia and New Brunswick; and
• capping plaintiff lawyer contingency fees.

Aviva says Ontarians should benefit from fair, sustainable and affordable insurance products.

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