Ontario’s Liberal government has agreed in principle to a motion put forward by the Opposition NDP to reduce average, industry-wide, private passenger auto insurance premiums by 15%.
The NDP made its demand as a condition for supporting any budget of the minority Liberal government. Without such support, the Liberal budget would fall, triggering a provincial election. The NDP is reportedly looking for the 15% rate reduction to be included in the Liberal government’s budget.
Representatives of the Insurance Brokers Association of Ontario (IBAO) met with the NDP last week, before the Liberals indicated they would support a non-binding motion on the 15% cut.
“Last week we met with the NDP and told them that we support lower rates for our customers if it is done responsibly,” IBAO CEO Randy Carroll told Insurance Business earlier in the day on March 27. “They appear to have listened and moderated their demand as their motion calls for a ‘gradual reduction of 15%,’ with no specified time limit to achieve this.”
Later that same day, however, The Canadian Press quoted NDP Leader Andrea Horvath saying that “We've said all along we want this done within a year, and we want it mandated through FSCO because we don’t want the Liberals to try to wiggle out of it.” The Financial Services Commission of Ontario (FSCO) regulates the insurance industry in Ontario.
The Insurance Bureau of Canada (IBC) said the Liberal government has recognized that reducing insurers’ claims costs will be the key to reducing premiums.
“We support any move that links key reforms to meaningful premium reductions,” said Ralph Palumbo, IBC’s vice president of Ontario. “We know that auto insurance costs too much in Ontario. This can only be achieved with a commitment to real reforms that address costs and create a better system for drivers.”
Insurers and brokers say politicians need to move forward with implementing key sections of the auto insurance reforms that the Liberal government first implemented in 2010.
These reforms include:
• the need to implement the recommendations of the Ontario Anti-Fraud Task Force;
• clarify the definition of catastrophic injury based on medical science;
• cut red tape to let insurers respond more quickly to market forces; and
• eliminate the waiting list for mediation and arbitration cases.
Now that the Liberals and the NDP have both agreed in principle about a target rate reduction of 15%, brokers and insurers are hoping that the threat of an election triggered over auto insurance rates has been averted.
Carrol said pending auto insurance reforms will already take six to nine months to pass. An election would simply add another six to nine months to that process, he said.
“It would be really nice if they could put this 15% mandated reduction behind them, and give everyone an opportunity to get back at the task at hand,” Carrol said. “And that’s implementing change instead of talking about it.”
Meanwhile, Carroll said the industry has its own talking to do. For example, the industry needs to sort out how to bring about a 15% cut in auto insurance rates.
Brokers and insurers believe auto insurance anti-fraud measures will bring about some savings. But Carroll said the industry needs to establish a realistic number indicating exactly how much anti-fraud measures might be expected to contribute to reducing premiums for consumers.
“We can’t make the false assumption that by implementing every fraud recommendation, we’re going to get a 15% reduction,” Carroll said. “What’s a reasonable target on [savings as a result of] fraud? Is it 15%? Is it 10%? Or is it 8%?
“If a reasonable expectation of [savings due to] fraud reduction is 8%-10%, then how are you going to get the rest of the 5%-7%? These are things the industry needs a discussion about.”
