Brokers can take heart that the Ontario government is fulfilling its pledge on reducing auto insurance costs, as another key piece of legislation gets one step closer to becoming law.
“The quick introduction of Bill 15 is a very strong message from the Wynne government that it is serious about reducing fraud and the high costs in Ontario’s current auto insurance system,” says Ralph Palumbo, vice-president, Ontario, with the
Insurance Bureau of Canada. “But we shouldn’t lose sight of the other good news: insurers are passing these savings along to consumers in the form of reduced rates.”
Some of that good news that brokers can share with their clients includes stricter rules on towing and storage, a streamlining and tightening of the dispute resolutions system, and bringing prejudgment interest rates into alignment with today’s market.
“At the end of the day, all of us – the insurance industry, government and consumers – must work together to drive down unnecessary claim costs that do not help claimants recover from injuries,” says Palumbo. “The insurance industry is committed to doing whatever it takes to build an auto insurance system that will work for decades to come. Access to affordable insurance is fundamental to the health and success of Ontarians.”
Here is how Bill 15 will change the current system:
Towing and Storage: When your vehicle is towed to a storage facility after a collision and held there for up to 60 days before you are notified, the costs can mount quickly. Some facilities will actually delay notifying the owner of a vehicle just to increase their revenues.
Under Bill 15: Bill 15 requires storage facilities to notify vehicle owners much sooner, reducing costs by controlling the cost of vehicle storage after a collision.
Dispute Resolution System: There are currently backlogs in the hearing of disputes system, and decisions on disputes can take a considerable amount of time.
Under Bill 15: There will be the creation of a new, more efficient system to expedite the hearing of disputes, prevent backlogs and reach decisions in a timely manner. (continued.)
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Prejudgment Interest: Current prejudgment interest on non-pecuniary damages (pain and suffering) is 5 per cent and 1.3 per cent on pecuniary damages.
Under Bill 15: There will be an alignment of prejudgment interest rates on pecuniary and non-pecuniary damages (pain and suffering) to what are typical rates in today’s market.
“Prejudgment interest is meant to compensate – but not over-compensate - the plaintiff for the lost time value of money,” says Palumbo. “Consequently, it should reflect the cost of money so that the plaintiff receives the full value of the award as if he/she received it on the day he/she served notice of the claim.”
Reducing prejudgment interest rate is expected to save millions in costs, ensure that claimants are not overcompensated and that they receive their settlements in a timelier manner, says Palumbo. The 5 per cent prejudgment interest rate was established in 1989–90 when interest rates were about 13 per cent.
