Last week, an Expert Advisory Panel appointed by Ontario’s Minister of Finance issued some preliminary findings which suggested that the province’s regulatory regime “is not as effective as it could or should be.”
In particular, the panel believes that deregulation of FSCO will create a more competitive environment for the P&C insurance market, which will result in lower auto insurance rates for consumers.
Brokers familiar with the regulations back this assertion.
“I served on the Facility Board in Canada, particularly dealing with Ontario auto for 10 years,” said Thom. C.J. Young, CEO, Lundgren & Young Insurance Ltd, in a previous interview with Insurance Business. “Ninety percent of everything we dealt with was surrounding Ontario’s regulatory arena.”
Young says that while Ontario would like to blame a lack of capacity and competition resulting from insurers’ overzealous attempts to participate, the reality is that it all boils down to two factors: administration costs and claims.
“The claims process in Ontario is highly regulated and automobile reforms in the claims process were instituted to provide for very quick and uncontested payouts for action and benefits without having to verify or preview a loss.”
As a result, minor damages would go “uncontested and uninvestigated” injuries such as soft tissue damages. This led to a situation where “millions and millions of dollars were being paid out for suspicious claims,” according to Young.
While some critics believe that publicizing Ontario’s auto insurance industry would alleviate these issues, Young contends “They tried that. It didn’t work.” Instead, he advocates for fairer market conditions made possible by a curb in government regulation.
“We have a number of insurers who are limiting their involvement in the marketplace because regulations forced them to operate under restrictive conditions,” he said. “This has created a lack of capacity, which causes a false hard market and makes it difficult for clients to obtain competitively priced insurance.”
He believes that this is exacerbated by the government’s decision to expedite claims processing without “checking to make sure they’re valid.” While Ontario has taken strides to crackdown on this practice, it could take years to be reflected in the budget – Young notes that most changes do, which is why it used to be customary for Lloyd’s syndicates to wait 36 months before declaring financial results.
In the meantime, Young hopes that the province continues to move toward a more favorable business climate for consumers.
“If you want a healthy insurance marketplace, let it be competitive, let it be fair to the public, and let it compete with each other on the issue of fairness and competitive pricing,” he said. “Whenever the government tries to regulate anything, it doesn’t save anybody money.”
