Another auto insurance private member's bill introduced in Ontario

On April 23, 2012 York West MPP Mario Sergio introduced New Drivers' Insurance Rate Reduction Act , 2012 (Bill 71), which is intended to lower rates for new drivers.

MPP Sergio previously introduced Bill 43 which deals with allowable elements of a risk classification system. Bill 43 has not proceeded beyond first reading in he Legislature. Both these bill are private members' bills and historically very few of these bill are passed.

Bill 71 requires a risk classification system used by an insurer to determine rates for automobile insurance to provide for lower rates for new drivers by crediting new drivers with additional years of driving experience. All new drivers get credit for 3 years driving experience and those that have completed a driver education course at a recognized school get credit for 6 years driving experience.

A new driver is disqualified from receiving additional years of credit in a number of circumstances, including

(a) if he or she has been found to be more than 25 per cent at fault in an accident;

(b) if his or her licence has been suspended for non-payment of a fine (excluding parking tickets); or

(c) if he or she has been convicted of,

(i) a provincial offence related to driving,

(ii) a Criminal Code offence related to driving, or

(iii) an offence under in another jurisdiction in North America for similar offence.

The bill can be found here.

FSCO's Proposed 2012 Auto Insurance Priorities

FSCO recently released a draft 2012 Statement of Priorities for consultation. Section 11 of the Financial Services Commission of Ontario Act requires that FSCO publish in The Ontario Gazette and deliver to the Minister of Finance by June 30 of each year a statement setting out FSCO’s proposed priorities. As in the past, the document includes a number of priorities for the auto insurance sector.

1.3 Implement auto insurance recommendations made in the Auditor General of Ontario’s 2011 Annual Report

The Auditor General of Ontario released his value for money audit of Ontario's auto insurance system in December 2011. There were a number of recommendations made that FSCO will be addressing over the next two years. The most significant observations in the Auditor's report were:

• The total cost of auto insurance injury claims in Ontario rose by 150% between 2005 and 2010, even though the actual number of injury claims rose only 30% over the same period.
• FSCO offers a mediation service for people who disagree with settlement offers from insurers, but since about half of all injury claims end up in mediation, the service is so backlogged that dispute resolution takes 10 to 12 months rather than the legislated 60 days.
• FSCO had not routinely obtained assurances from insurance companies that they had paid the proper amounts for claims. Without such assurances, there is an increased risk of unnecessarily high payouts, which could help insurers get FSCO approval for higher premium increases.

FSCO will address these recommendations while continuing to implement longer-term projects announced by the Ontario government as part of its 2010 auto insurance reforms.

1.4 Work with stakeholders to reduce auto insurance fraud

The Ontario Government’s Auto Insurance Anti-Fraud Task Force is focused on determining the scope and extent of auto insurance fraud in the province and making recommendations to reduce fraud in Ontario’s auto insurance system. An interim report was released by the Task Force in December 2011.

FSCO is actively engaged with the Task Force’s steering committee and working groups, which are identifying potential initiatives to reduce fraud in the areas of:

• prevention, detection, investigation and enforcement
• regulatory practices in the auto insurance system and
• consumer engagement and education.

FSCO is also leading a working group that is investigating how the Health Claims for Auto Insurance (HCAI) system could be used to detect and prevent fraud. The committee brings together insurers, health care providers, HCAI and government representatives.

1.5 Enhance regulatory oversight of compliance with auto insurance requirements

FSCO will complete its first cycle of follow-up activities associated with the 2011 attestation on Statutory Accident Benefits Schedule controls. The annual attestations are part of the Ontario Government’s commitment to address auto insurance abuse and fraud, as announced in the 2011 Ontario Budget.

The annual attestation process will be reviewed with the industry, and amendments will be made as necessary. The review will also include additional assurance on compliance with approved rates.

1.6 Undertake long-term auto insurance reform initiatives

In response to direction from the Ontario Government associated with the September 2010 auto insurance reforms, FSCO is developing a new evidence-based Minor Injury Treatment Protocol. The new protocol will update the approach to treating soft tissue injuries and reflect current medical science. This project is expected to take two years.

In December 2011, the Superintendent provided his report recommending changes to the definition of catastrophic impairment in the Statutory Accident Benefits Schedule to the Minister.

The Superintendent’s report was based on stakeholder consultations and the two reports prepared by the Catastrophic Impairment Expert Panel earlier in 2011. This panel was struck by the Superintendent at the request of the government to examine the current definition of catastrophic impairment in the Statutory Accidents Benefits Schedule.

In the 2012 Ontario Budget, the government announced that it would move forward to propose regulatory amendments to the definition of catastrophic impairment. FSCO will work with the Ministry of Finance to implement the amendments if they are passed.

1.7 Enhance auto insurance information and analysis to support risk-based approach to regulation

The Superintendent is required to review and approve auto insurance rates filed by auto insurers. The rates must be just and reasonable, not impair the solvency of the insurer and not be excessive in relation to the financial circumstances of the insurer.

The current benchmark return on equity level for auto insurance filings was established in 1988 with a minor modification in 1996.

The Auditor General recommended that FSCO review what constitutes a reasonable profit margin for insurance companies when approving rate changes, and periodically revise the benchmark to reflect changing capital market conditions.

FSCO will review the benchmark profit provision used in reviewing rate filings. FSCO will work with the auto insurance industry to complete a closed third party liability bodily injury claim study on tort claims. These findings will support policy analysis.

1.8 Implement Administrative Monetary Penalties model in the insurance sector

In the 2012 Ontario Budget, the government announced that it plans to introduce amendments to insurance-related legislation and the FSCO Act to provide for administrative monetary penalties. FSCO will work with the Ministry of Finance to implement this tool if the legislation is passed.

2.2 Reduce mediation backlog

FSCO has implemented initiatives to deal with the increase in the number of mediation applications and to reduce wait times for the assignment of files to mediators.

Current initiatives include: an electronic scheduling system, mandatory blitz settlement days, a consent to fail process on request and outsourcing.

In January, FSCO issued a Request for Proposal (RFP) seeking up to four private dispute resolution companies to provide dispute resolution services to address the backlog. Successful proponents will be contracted to begin offering dispute resolution services in 2012.

FSCO is currently developing a policy and process to streamline the screening of applications.
In the 2012 Ontario Budget, the government announced that it would engage in a review of the auto insurance dispute resolution system. FSCO will support the government’s review.

These initiatives address the Auditor General’s recommendations on FSCO’s dispute resolution services.

3.3 Raise awareness of FSCO’s auto insurance filing processes and requirements

Following work done in 2011, FSCO will continue to raise awareness of and enhance transparency around its auto insurance filing processes and requirements. FSCO will use several tools to enhance stakeholders’ understanding of legislation, regulations, filing requirements, the rate approval process and overall compliance obligations pertaining to auto insurance rate filings. These include ongoing meetings with the sector and online media such as newsletters, e-bulletins and webcasts.

4.4 Communicate and coordinate auto insurance regulatory issues through CARR

FSCO will participate in common training and education initiatives as well as co-operative research opportunities with other Canadian regulators on matters involving auto insurance rate regulation through the Canadian Automobile Insurance Rate Regulators Association (CARR).


Links

Auditor General of Ontario 2011 Annual Report - Chapter 3, Auto Insurance Regulatory Oversight

Ontario Auto Insurance Anti-Fraud Task Force, Interim Report

Reports by the Catastrophic Impairment Expert Panel

Mediation Backlog Initiatives

Insurance News - Monday, May 21, 2012

NY to Boot Crooked Doctors From No-Fault Insurance

Insurance regulators plan to start kicking crooked doctors out of New York's no-fault program next month, calling them linchpins in fake-accident scams that cost insurers and ultimately policyholders hundreds of millions of dollars.

Regulations are set to take effect June 12. The Department of Financial Services sent certified letters in March to 135 doctors, chiropractors, acupuncturists and physical therapists, demanding they explain suspect billing patterns and threatening to remove them from the program if they don't respond.

read more here...

Driver Qualifies for Benefits Despite Driving Vehicle Without Owner's Consent

A Financial Services Commission of Ontario (FSCO) arbitrator has ruled a 17-year-old driver who suffered serious injuries in an accident should receive non-earner benefits even though it is alleged he was driving a car without the owner’s consent.

The main issue in the arbitration of R.P. and Intact Insurance Company was whether or not the driver, who was not named because of his status as a minor, could “reasonably have known that he lacked consent to drive the 1998 Lincoln.”

R.P. had regularly driven the car, which was owned by a family with which he lived. R.P. was seriously injuried in the The vehicle owner's testimony was determined not be be reliable and that R.P. was not allowed to drive the car. That being the case, the arbitrator ruled it was reasonable for him to assume R.P. had consent on the night of the accident, April 11, 2009.

read decision here...

Psychology Of Fraud: Why Good People Do Bad Things

From a National Public Radio broadcast by Chana Joffe-Walt and Alix Spiegel

Enron, Worldcom, Bernie Madoff, the subprime mortgage crisis.

Over the past decade or so, news stories about unethical behavior have been a regular feature on TV, a long, discouraging parade of misdeeds marching across our screens. And in the face of these scandals, psychologists and economists have been slowly reworking how they think about the cause of unethical behavior.

In general, when we think about bad behavior, we think about it being tied to character: Bad people do bad things. But that model, researchers say, is profoundly inadequate.

What causes unethical behavior? — has been getting a fair amount of attention from researchers recently, particularly those interested in how our brains process information when we make decisions.

And what these these researchers have concluded is that most of us are capable of behaving in profoundly unethical ways. And not only are we capable of it — without realizing it, we do it all the time.

Over the past couple of decades, psychologists have documented many different ways that our minds fail to see what is directly in front of us. They've come up with a concept called "bounded ethicality": That's the notion that cognitively, our ability to behave ethically is seriously limited, because we don't always see the ethical big picture.

One small example: the way a decision is framed. "The way that a decision is presented to me," says Ann Tenbrunsel, a researcher at Notre Dame, "very much changes the way in which I view that decision, and then eventually, the decision it is that I reach."

Essentially, Tenbrunsel argues, certain cognitive frames make us blind to the fact that we are confronting an ethical problem at all.

Tenbrunsel told us about a recent experiment that illustrates the problem. She got together two groups of people and told one to think about a business decision. The other group was instructed to think about an ethical decision. Those asked to consider a business decision generated one mental checklist; those asked to think of an ethical decision generated a different mental checklist.

Tenbrunsel next had her subjects do an unrelated task to distract them. Then she presented them with an opportunity to cheat.

Those cognitively primed to think about business behaved radically different from those who were not — no matter who they were, or what their moral upbringing had been.

"If you're thinking about a business decision, you are significantly more likely to lie than if you were thinking from an ethical frame," Tenbrunsel says.

According to Tenbrunsel, the business frame cognitively activates one set of goals — to be competent, to be successful; the ethics frame triggers other goals. And once you're in, say, a business frame, you become really focused on meeting those goals, and other goals can completely fade from view.

Now if these psychologists and economists are right, if we are all capable of behaving profoundly unethically without realizing it, then our workplaces and regulations are poorly organized. They're not designed to take into account the cognitively flawed human beings that we are. They don't attempt to structure things around our weaknesses.

Some concrete proposals to do that are on the table. For example, we know that auditors develop relationships with clients after years of working together, and we know that those relationships can corrupt their audits without them even realizing it. So there is a proposal to force businesses to switch auditors every couple of years to address that problem.

Another suggestion: A sentence should be placed at the beginning of every business contract that explicitly says that lying on this contract is unethical and illegal, because that kind of statement would get people into the proper cognitive frame.

And there are other proposals, of course.

Or, we could just keep saying what we've always said — that right is right, and wrong is wrong, and people should know the difference.

Insurance News - Monday, May 28, 2012

Quality of Website Can Make or Break Auto Insurance Sale

A good customer website experience can lead to increased sales and recommendations for auto insurers, but a poor website experience can drive consumers away, says a J.D. Power study.

The Westlake Village, Calif.-based information-services company released its 2012 Insurance Website Evaluation Study yesterday, which indicates that with 34 percent of auto-insurance consumers preferring to shop online, the website experience “impacts the likelihood to shop and recommend the insurer” to others.

According to the study, of consumers who said they were “delighted” with their website experience, 63 percent say they are more likely to shop with that insurer.

Conversely, of consumers who were disappointed with their experience, just 14 percent say they were likely to shop with the insurer.

read more...

Consumers Think Beyond Price; Not Interested in Online-Only Experience

Consumers do not want to do all their insurance shopping online, they care about more than just price, and good claims service is something consumers expect, rather than an extra bonus that will help a company’s retention rate, according to the findings of an Ernst & Young survey.

The survey polled 24,000 respondents across 23 countries. E&Y breaks down the results for the Americas respondents in a report, “Voice of the Customer: Time for Insurers to Rethink Their relationships.”

read more...

Rehabilitation Clinics, Owners and Directors Face 15 Charges Related to Submitting False Invoices

The Financial Services Commission of Ontario (FSCO) has charged five rehabilitation clinics and 10 individuals affiliated with these clinics with offences under Ontario’s Insurance Act.

The following clinics were charged with one count each of knowingly making false or misleading statements to an auto insurer to obtain payment for goods or services provided to an insured and engaging in an unfair or deceptive act or practice:

• Professional Medexam Management Inc. (2414 Major MacKenzie Drive, Maple ON)
• Assessment Direct Inc. (2888 Bathurst St., Toronto ON)
• Century Diagnostics Inc. (37 Kodiak Crescent, Toronto ON)
• Evident Diagnostics Inc. (160 East Beaver Creek, Richmond Hill ON)
• Supermed Rehabilitation Centre Inc. (7777 Kipling Avenue, Woodbridge ON)

The following individuals, affiliated with a clinic as a director, were also charged with one count each of failing to take reasonable care to prevent the corporation from making false statements to an insurer and from engaging in an unfair or deceptive act or practice:

• Mark Zinger
• Yan Krivoruk
• Alex Smolar
• Paul Benchetrit
• Pavlo Tsysar
• Ivan Terziev
• Vladimir Naidenov
• Alla Pechenik
• Eugene Gurevich
• Valeri Znamenski

On May 24, 2012, these individuals and corporations were summonsed to appear in the Ontario Court of Justice.

Interest on Overdue Amounts for Accidents Before September 1, 2010

An arbitration decision that should be of interest to all parties is Federico vs. State Farm. Mr. Federico's accident occurred prior to September 1, 2010 when reforms became effective in Ontario. One of the issues in dispute was the amount of interest to be paid to Mr. Federico on overdue benefit payments.

On September 1, 2010 the amount of interest paid was reduced from 2% per month compounded monthly to 1% per month compounded monthly.

The transition provisions in the new SABS (section 2 of Ontario Regulation 34/10) state that "Parts VIII and IX...apply with such modifications as necessary in respect of benefits provided under the Old Regulation with respect to accidents that occurred on or after November 1, 1996 and before September 1, 2010." The section dealing with overdue amounts is found in Part IX of new SABS.

An analogous amendment was made to the old SABS (section 3 of Ontario Regulation 403/96) stating that "Parts X, XI, XII, XIII and XV do not apply after August 31, 2010." The section dealing with overdue amounts is found in Part X of the old SABS.

On April 26, 2010, the Superintendent issued a bulletin (A-04/10) covering the transition to the new SABS. The bulletin stated that as of September 1, 2010, as a general rule the new SABS will govern claims processing relating to old accidents and the determination of amounts payable by insurers on account of expenses paid to establish benefit entitlements arising out of old accidents. One of the examples provided in the bulletin was that interest on amounts that become overdue on or after September 1, 2010, in respect to old accidents, will accrue at the new SABS rate of 1% per month compounded monthly.

The bulletin went on to provide some exceptions to the general rule and included interest on amounts that become overdue before September 1, 2010, in respect to old accidents, will accrue at the old SABS rate of 2% per month and be compounded monthly both before and after September 1, 2010. That means that an amount that is overdue prior to the reforms continues to accrue interest at the same rate. The rate for these overdue amounts does not change on September 1, 2010. However, the intent of the SABS was that new overdue payments (for example delayed payment for treatment provided after September 1, 2010) falls under the new SABS and the new interest rate.

So it is not surprising that the arbitrator ruled that the interest rate that applied to overdue amounts in this claim was 2% for the periods before and after September 1, 2010. This was consistent with the direction provided by the Superintendent in his bulletin.

Insurance News - Wednesday, May 16, 2012

Ontario Drivers Satisfied With Their Auto Insurance

Auto insurance isn’t everyone’s favourite monthly expense, but just how do Canadians feel about the subject? Canadian company InsurEye Inc. has completed an auto insurance consumer satisfaction survey to answer the question: “How do Canadians feel about auto insurance and which provinces have the most critical consumer perspective?”

The most critical attitude towards auto insurance is in British Columbia. The most positive attitude towards auto insurance was registered in Quebec, closely followed by Ontario and Saskatchewan.

The survey suggests that auto insurance stakeholders in Ontario may be exaggerating consumer unhappiness with the 2010 reforms. Consumers are positive about claims experience but negative about value for money despite the fact that rates have stabilized. The reforms have not produced much in the way of lower rates after two years of increases. Rates remain the highest in Canada.

read more...

Texas Turning Up the Heat on Fraudsters

The heat is getting turned up on fraudsters in Texas as the state’s Department of Insurance is backing the designation of a second county insurance fraud prosecutor and investigator with the aim of adding more in the future.

The Texas Department of Insurance (TDI) has agreed to pay for a new insurance fraud prosecutor and investigator at the Harris County District Attorney’s Office.

read more...

Allstate Files $6 Million Insurance Fraud Case

Allstate Insurance Company has filed its second insurance fraud lawsuit of 2012, seeking to recover $6 million against 4 New York area defendants. The Complaint names a physician, a medical professional corporation, a management company, and an unlicensed layperson who allegedly used his management company to control at least one medical professional corporation.


The Allstate action is similar to civil suits filed against Toronto health care facilities by a number of Ontario insurers.

read more...