Canadian Insurance News

Ontario auto insurance is in need of a major overhaul. Tinkering with the already poor system can only serve to make matters worse, and once again, miss an opportunity to make the significant changes required to return the system to efficiency and fairness.

Many stakeholders have voiced their disappointment with the latest review of auto insurance conducted by Justice Douglas Cunningham, former associate chief justice of Ontario's Superior Court of Justice.

The result of the review is just another temporary fix to a broken system. The last thing needed in Ontario automobile insurance is another change to the Dispute Resolution System (DRS), yet another attempt at fixing a bad product.
Ontario must get back to basics. Automobile insurance in the past was intended to provide protection for liability exposures and physical damage to the car.
There has always been insurance coverage available to people who required protection for loss of income, medical expenses or loss of life. These benefits are still available through many insurers for people who need protection and are willing to pay for it.

Many people are also protected through their employer's group plans or private disability and life insurance plans. Retired people do not need loss of income protection and most of their health care needs are provided by government.
That being the case, they should not be required to pay for such benefits under a compulsory insurance plan. Automobile insurance was never intended to provide health, loss of income or life insurance benefits.

Most jurisdictions in the United States have stayed away from no-fault systems and, rather, relied on the tort system to protect innocent people who suffered injuries or vehicle damage from accidents caused by irresponsible drivers. In fact, some states have a provision for minimal protection for hospital and medical benefits regardless of fault.

The tort system is alive and well in the U.S. and helps to keep down insurance costs for motorists. Claims are handled on a low-cost basis with minimal delays. Very few disputes resort to the courts for a resolution.

OVERHAUL, NOT TINKERING REQUIRED

Ontario must return to basics and stop making changes to an expensive system that does not work. Now is the time to accept the fact that the current system must be scrapped and a new plan adopted. The province needs a task force with experienced people to revamp the automobile insurance system, not just modify a bad plan.

In 1986, the Ontario Task Force On Insurance was formed by the Ministry of Financial Institutions. The task force was charged with examining many areas of insurance, not just as it relates to automobile insurance.
The mid-80s offered many problems for the insurance industry that led to a lack of availability for corporations buying general liability insurance, as well as substantial increases in premiums. Automobile insurance was also part of the concern since premiums were being increased at a dramatic rate, partly because the courts did not cap awards.

There was an additional concern that Ontario was beginning to be known as "California of the North," since many high court awards were similar to those in the U.S.

Among the many suggestions presented to the Ontario Task Force on Insurance was information relating to benefits available in New Zealand for injuries, the Accident Compensation Corporation, or ACC, plan. In New Zealand, the government looks after any person who suffers an injury regardless of whether that individual is injured at home, in a car or even when, for example, just falling on the street.

There are a variety of "levies" to fund the plan, including a fee paid when a car is registered and also a fee per litre of fuel. In addition, there are also a number of other assessments and taxes that support the system.
It is not free and fraud naturally exists. Anytime there is a system that is not based on fault, there will be a certain amount of abuse.
Some task force members considered this type of protection to be desirable, since there should not be a preference given to people injured in a car accident.
There are many accidents that cause both minor and serious injuries, and they should be treated equally. However, the majority of task force members felt the system would not be practical in Ontario, and automobile injuries should be separate from other injuries in the same way that workers are dealt with in a special plan.

There are some merits to looking at the needs of people regardless of how their injuries were caused. There is an argument that people involved in a car accident should not be protected and treated any differently than a person who falls on the sidewalk or while walking through a park.
At the same time, it must be recognized that some people do not need the same level of benefits or compensation. All residents of Ontario have benefits provided by the Ontario Health Insurance Plan (OHIP). Seniors also have the majority of their prescriptions covered.

Any retirement benefits will still carry on if seniors are injured. Therefore, most seniors do not need to buy protection for a loss of income.
This then raises the argument that seniors should not be forced to pay for some of the accident benefits under compulsory automobile insurance.
The political parties in Ontario do not seem to be completely satisfied with the current automobile insurance system. The issue always comes up at election time, with some parties promising rate reductions to gain votes.
There have been a number of reviews over the past 30 years, with each one making some changes. In most cases, the individual reviews have concentrated on fraud that is prevalent in most no-fault plans. High costs have also been reviewed, but in most cases, the cost is in connection with generous benefits and fraud.

It makes sense to take a serious look at the benefits that should be provided under compulsory automobile insurance. Then people can decide what protection they need and purchase it as a separate insurance plan.
Most workers already have group plans that cover loss of income as a result of sickness or an accident. Many others who are self-employed buy protection under individual policies.

It is far better for people to purchase tailor-made protection to cover all possibilities, not just protection if they are injured in car accidents.
After all, if these people need income protection, it should be for any situation and not hope that their loss is due to a car accident. Likewise, life insurance is important to protect dependents and is a benefit that people must consider.
The insurance industry has all of these benefits available at competitive rates. Why, then, are these benefits considered under automobile insurance policies?
It is necessary to get back to the concept of basic automobile insurance. Auto insurance in Ontario was never expected to cover injuries and income loss on a no-fault basis.

Under a tort system, only innocent parties are covered for death or injuries. When coverage is provided for people injured in all vehicles involved in an accident, it is only logical that more claims will be paid and premiums will increase.

Why should seniors who have pension income pay for loss of income benefits? They cannot collect under such a benefit. People who need life insurance and income protection can buy the protection. OHIP provides most of the medical benefits that are needed.

There will be an election in Ontario very soon. The party that makes a decision to again have automobile insurance as a basic product will win a majority.
The number of seniors is growing quickly and that party will get the seniors vote.