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What is Really Going On with Ontario Automobile Insurance Premium “Cuts”

Time for a Fact-Check


Source: Twitter

At some point in early 2016, all Ontario drivers received a letter from their insurer announcing a number of changes to their policy. This was the Wynne government platform coming to fruition: to reduce automobile insurance premiums by 15% within two years of her election. That sounds great. We all love saving money. But what did our government do “in exchange” for this.


To answer this question, we need to understand the basics of our insurance system. First, why do we have automobile insurance? The simple answer is, because it is mandatory in Ontario. The more complicated answer is that we, as drivers, want to protect ourselves in the case that we are involved in an accident. We also want to protect ourselves from liability in the case that we cause an accident. This is tied back to the underlying purposes of the law of tort: to be able to effectively compensate those who are injured for their losses. As a result, contracts of insurance have been said to be consumer protection in nature.


Second, we need to understand how our no-fault system is supposed to work. If you are in an accident, regardless of whether you are at fault, you are entitled to make a claim under your insurance policy for benefits. Your own insurer is the first payor in all cases, even if another driver is totally at fault. This is our no-fault system. Furthermore, depending on the level or impact of your injury, you are entitled to different maximum payable benefits levels. The more severe your injury, the more benefits you are entitled to. This relationship makes sense because someone who is rendered paraplegic as a result of a motor vehicle accident will have greater needs than someone who has a simple fracture.


In 2012, the Insurance Bureau of Canada commissioned a study which claimed that, despite Ontarians being charged the highest automobile insurance premiums in the country, and some of the highest in the world, the vast majority of insurance companies are not profitable. Without getting into a semantic debate into the numbers, this was blamed, at least partly, on fraudulent claims driving up the cost of the industry.


In response to this study, the Wynne government, in 2014, passed the Fighting Fraud and Reducing Automobile Insurance Rates Act. What was the purpose of this Act? You guessed it, to fight fraud and reduce automobile insurance rates. This Act put into effect a number of changes that are going to have drastic effects on Ontarians.


The first major change is to the maximum benefits payable under a standard automobile insurance policy. Prior to 1 June 2016, if you sustained the worst possible injury—paraplegia, quadriplegia, brain injury, amputation etc.—you would have been entitled to up to $2,000,000.00 in benefits. As law school students, with long life expectancies and high-income projections, even this number has been said by some to be drastically inadequate.


For accidents after 1 June 2016, the maximum amount payable under a standard policy has been cut in half. For those who become the most severely injured, who will require twenty-four hours of care for the rest of their life, all that is available is $1,000,000.00. Some have suggested that this will cover a severely injured person for approximately four years following an accident. It is easy to see how this becomes problematic for us twenty-somethings. It is difficult to imagine a fraudulent claim by someone this severely injured. While fraud likely exists at low level of injuries, it seems that the changes are being targeted toward those most injured.


The second major change is the removal of the right to sue your insurance company. For accidents prior to 1 June 2016, if a person’s benefits are denied—which frequently occurs—a claimant could choose to resolve their claim through arbitration, or to sue through the Superior Court of Justice. Additionally, if a person chose arbitration, the decision could always be appealed to a single Justice of the Superior Court. For accidents following 1 June 2016, a claimant can no longer choose to sue their insurance company for disputed payments and a person can no longer appeal the decision of an arbitrator. The government created a quasi-administrative tribunal that is given full jurisdiction to resolve claims.


The last change I wish to discuss is the removal of the right to seek costs. Costs, in civil litigation, typically follow payable to the winning party. This cost recovery scheme helps facilitate access to justice because individuals who may not have the money to pay for legal representation, as part of a contingency agreement, can have an agreement to provide their lawyer with any cost awards. Additionally, it helps ward off unmeritorious claims because a person would have the threat of having costs awarded against them personally.


The most troubling part of these changes is that a recent article suggests that following the changes, not only have we not had a premium decrease, but in the second quarter of 2016, premiums have risen. Furthermore, there is no way to fact-check the Insurance Bureau of Canada on the impact of fraud because insurance companies are not required to, and in fact do not, report any impact fraud has on their company.


To summarize, we have had our maximum benefits cut by 50%, we can no longer sue our insurance company and the government seems to be taking active steps to prevent claimants from accessing justice in exchange for, what seems like nothing. The additional costs of healthcare that are limited under your insurance will undoubtedly fall to the public health care system, which is already heavily burdened. Despite being publicized as a win for Ontarians, it is difficult to view as anything but the total opposite and a violation of the consumer protection nature of insurance contracts.