IBC launches outreach to explain why The Price Is Wrong for Ontario auto insurance
New campaign to help consumers understand their policies and start a discussion on reforms
TORONTO, July 26, 2012 /CNW/ - Who pays for medical expenses following an automobile collision? How could a small scratch from a fender bender end up costing the system $250,000 in insurance claims?
These are some of the questions addressed in a new consumer awareness campaign launched today by Insurance Bureau of Canada (IBC) that includes television, internet and newspaper ads; billboards, mail drops and mall displays in several urban centres.
The objectives of the campaign are to stimulate feedback from drivers and other stakeholder groups on how to bring down the cost of auto insurance premiums in Ontario and to make it easier for consumers to understand their own insurance policies.
Standing in front of two wrecked vehicles - IBC's own version of a "staged collision" - the Bureau's VP for Ontario, Ralph Palumbo, said, "It's all about public awareness." We want to promote awareness for Ontarians on what drives up their auto insurance costs, what goes into pricing their policies. Quite simply, claims costs drive premiums. Until we can get costs under control we will continue to have premiums that we all agree are too high.
Since 2010, the insurance industry has been working with the provincial government on reforms to the Ontario auto insurance product. The government has made important changes to auto insurance in the last couple of years designed to lower costs. And they continue to work toward more reforms. According to Palumbo, "More work needs to be done, but we continue to need Ontarians' input along the way."
"Everyone - including the insurance industry - is in agreement on one thing: auto insurance in Ontario is far too high. Consumers are paying too much for auto insurance and this is creating financial hardship for people -- especially families who have kids that drive," added Palumbo.
"Insurance premiums are driven by claims costs and right now costs have been driven through the roof in Ontario as a result of fraud and abuse in the system," he added. "Recently, in the news we have seen cases of staged collisions, fraudulent private, for-profit health care clinics and others looking to capitalize on the rich benefits available to Ontario drivers. One criminal gang netted an estimated $25 million. This has to stop," he added.
A simple message, according to Steve Sanderson, President of Accident Support Services, is when in doubt, talk to your insurance representative. "You have paid your insurer to give you advice and help you through your claims process. Be very wary if anyone recommends to you a body repair facility, or the services of a paralegal, lawyer or medical clinic. This is often indicative of a scam. If you are towed to a collision reporting centre in Toronto, leave your vehicle at the centre and have your insurer arrange the tow. We offer 24 hours free storage so that you do not face any additional expense for leaving the vehicle."
In an attempt to gain insights into consumer attitudes and knowledge of their insurance policies, IBC recently commissioned research that revealed huge gaps in consumer knowledge of how home and auto insurance works.
"And who can blame the consumer? Average people don't study their policies in great detail until they need to make a claim," said Mary Lou O'Reilly, IBC's Senior Vice-President of Issues Management and Communications. "Add to this the fact that auto insurance premiums are through the roof because there are many players with self interests driving up costs, so you can understand why consumers are angry and confused."
"Today we are launching a two-tiered campaign for consumers to better understand insurance in general and more specifically, to explain why we, as Ontario drivers, are all victims of the growing abuse of the system," she added.
The Price Is Wrong: A grassroots travelling mall display will feature an installation of actual vehicles in a minor "fender bender" to highlight the high cost of insurance fraud to the Ontario auto insurance system. Consumers will get details of recent court cases in which people involved in minor collisions were convicted of making fraudulent insurance claims for medical benefits, housekeeping and income replacement totaling many thousands of dollars.
While the display is in the local mall, a radio call-in show will take place to answer insurance questions and invite consumers to talk about Ontario auto insurance issues. The conversation will focus on how to improve the system. This consumer input will inform the direction of a multi-stakeholder insurance forum also in the works to discuss the ideal auto insurance product for Ontario. The cities we will visit include Kingston, Windsor, London, Thunder Bay, Kitchener, Brampton and Scarborough in the Greater Toronto Area.
Demystifying Insurance: The results of the polling research, which was commissioned by IBC and conducted by Pollara, zeroed in on questions that are most confusing for consumers. "This allowed us to target topics that people want to learn more about," said O'Reilly. The campaign presents information in small bits by featuring friendly cartoon 'critters' who each pose one insurance-related question. For the answer, and additional important information, viewers are directed to ibc.ca. Several 15-second television spots will run from July 26th until the end of the year on Ontario networks including Global and Omni as well as national specialty networks such as Discovery and W. The campaign will also be supported by internet ads, billboards and a mail drop.
"The Insurance Brokers Association of Ontario (IBAO) fully supports the efforts of IBC in developing and launching this consumer awareness campaign in Ontario," said IBAO CEO, Randy Carroll. "We believe it is imperative that consumers better understand their auto coverage, and IBAO brokers continuously strive to help their clients better understand their policies, and specifically conditions and circumstances that affect rates. IBAO is delighted at the opportunity to work together with industry partners, like IBC to better educate the general public in this province on the topic of auto insurance."
In concluding his remarks, Palumbo noted that the government has made important changes to auto insurance in the last couple of years. All were designed to bring down costs.
"The reforms are starting to work but there are still outstanding issues to be resolved. To reduce premiums for Ontario drivers we need to tackle these issues. We need to maintain the momentum of the ongoing reforms," Palumbo said.
To learn more about auto insurance in Ontario, for images, and to view the commercials, visit ibc.ca
About Insurance Bureau of Canada
Insurance Bureau of Canada is the national industry association representing Canada's private home, car and business insurers. Its member companies represent 90% of the property and casualty (P&C) insurance market in Canada. The P&C insurance industry employs over 114,000 Canadians, pays more than $7 billion in taxes to the federal, provincial and municipal governments, and has a total premium base of $40 billion.
To view media releases and information, visit the media section of IBC's website at www.ibc.ca and for IBC on Twitter follow @insurancebureau.
IBC Backgrounder: Ensuring Affordable and Available Auto Insurance in Ontario
Context
Cars are safer. Roads are better. Accidents are less severe. So what is driving up insurance costs in Ontario?
Average Private Passenger Auto Annual Premium Chart for Provinces
(as of April 2012)
| Ontario | $1,534 |
| Alberta | $1,051 |
| Newfoundland and Labrador | $989 |
| Maritime provinces | $800 |
Higher Claim Costs
Ontario has one of the richest auto insurance benefits systems in North America. Recent history shows maximum benefits are too often being targeted, despite declining auto injuries, and these are profiting the less scrupulous in the legal and medical professionals.
Between 2006 and 2010 the number of collisions in Ontario dropped by 7% but the cost of no fault injury benefits rose by 118%. Much of that increase is a result of fraud and abuse. To reduce this strain on the system, unjustified healthcare providers' assessment and treatment proposals and corresponding claims payouts had to be denied.
Rising claim costs increases and declining road injuries
| 2004-2010 | 100 per cent increase in catastrophic claim costs |
| 2006-2010 | Ontario collisions dropped 7 per cent |
| 2006-2010 | Ontario no fault injury benefits jump 118 per cent |
Let's look at the numbers another way:
- There are 62,000 collision injuries in Ontario every year, of which most are minor - strains, sprains and whiplash.
- More than 8,600 health care facilities are enrolled in the provincial online billing system to provide services to these injury victims.
- And every month, these providers submit 27,000 treatment and assessment proposals to insurers.
- So if we do the math for a year, 62,000 injuries, which are mostly minor, are generating 324,000 treatment and assessment proposals on an annual basis.
- That's 5.2 proposals per claimant.
The 2010 Reforms
Ontario government reforms in 2010 were an attempt to offer more choice, reduce claims costs and stabilize rates. Government also aimed to reduce excessive assessment costs so that more accident benefits dollars went towards actually treating accident victims.
The reforms have had some success, but auto insurance in Ontario is still too expensive. Without more changes the affordability and availability of automobile insurance in Ontario is threatened. One of the key areas for reform is the definition of catastrophic impairment.
The Need for a New CAT definition
There is a need for a new definition that is fair and uses scientifically proven tests to measure impairment. Overall fairness to severely injured victims and to the financial integrity of the auto insurance system demands that a definition of catastrophic impairment works in two ways:
- To get adequate resources to the people who need them and
- To block over-compensation of the people who don't
The current definition has become ineffective in achieving these goals for two reasons:
- The science behind the current definition is old and restrictive and does not allow current medical advances to determine impairment
- The current definition has been open to legal disputes, adding costs to the system and delaying resolution of claims for victims
Arbitration Backlog at the Financial Services Commission of Ontario (FSCO)
Another issue is the arbitration backlog at FSCO. There are 35,000 claims currently in mediation at the provincial insurance regulator. Healthcare providers and legal representatives are hoping the 2010 reforms will be reversed by arbitrators or the courts. If they win and the intent of the reforms is not upheld, then costs will rise again.
Where's the Money Going?
In 2010, there were $9.4 billion in earned premiums of which $8.7 billion were paid out in claims. That's 93 cents of every dollar. Factor in taxes, overhead and salaries and there was a loss of $1.87 billion in Ontario auto. Because of the continually rising claims costs, the industry is facing an unsustainable trend.
Losses on Ontario Auto for the insurance industry (2008-2010)
- $2.96 billion
- $1.76 billion in 2010 alone
- Too much is going to other costs, such as exorbitant legal fees, fraud and excessive assessments by for-profit medical facilities
Profits in Various Industries (2011)
As the figures above show, there are no guaranteed profits in the insurance industry, despite the fact that the Financial Services Commission of Ontario sets a benchmark profit provision of 12 per cent. Here are some industry comparisons for return on equity for 2011:
| Industry | Return on Equity |
| mining | 9.8 per cent |
| manufacturing | 10.6 per cent |
| Retail trade | 11.8 per cent |
| Insurance * | 8 per cent |
*nationwide, all lines (auto, home and business)
Bottom line
The government of Ontario is once again reforming auto insurance to tackle fraudulent and abusive practices, to base insurance benefits on current scientific and medical principles, and to ensure the regulator (FSCO) can address the issues (e.g. arbitration backlog) facing it. IBC supports the government's direction. Only through reform can those in need be sure of receiving necessary benefits; only then can predatory practices from some legal and for-profit medical facilities be righted; and only then can auto insurance in Ontario remain affordable and available for all who need it.
To learn more about auto insurance in Ontario, visit ibc.ca
About Insurance Bureau of Canada
Insurance Bureau of Canada is the national industry association representing Canada's private home, car and business insurers. Its member companies represent 90% of the property and casualty (P&C) insurance market in Canada. The P&C insurance industry employs over 114,000 Canadians, pays more than $7 billion in taxes to the federal, provincial and municipal governments, and has a total premium base of $40 billion.
To view media releases and information, visit the media section of IBC's website at www.ibc.ca and for IBC on Twitter follow @insurancebureau.
SOURCE: INSURANCE BUREAU OF CANADA
For more information or to schedule an interview, contact:
Helen Lialias
Media Relations Officer
Insurance Bureau of Canada
416-362-2031 ext. 4312
[email protected]
Ellen Woodger
Communications Consultant
Insurance Bureau of Canada
416-483-2358
[email protected]
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