We pay more for auto insurance here than anywhere else in Canada. The question is: why?

Fraudulent claims or price gouging? Our special investigation probes the issue

  • Choosing a car at dealership. Thoughtful grey hair man in formalwear leaning at the car and looking away

There is one thing on which critics and the insurance industry agree: motorists in Ontario — and particularly in the GTA — are paying way too much for their premiums.

In fact, Ontario insurance premiums are the highest in the country.

“Everybody knows that Ontario auto premiums are way too high,” says Ralph Palumbo, vice-president of the Ontario wing of the Insurance Bureau of Canada. “Everybody agrees, including insurers.”

But that’s where the agreement ends.

Critics blame greedy auto insurance companies for gouging motorists on the cost of a mandatory product. In Ontario and across Canada, drivers are required to have car insurance, whether they like it or not. The penalty for being caught without insurance is a maximum of $5,000 upon first conviction.

On the other hand, the insurance industry blames fraud, saying it adds $1.6 billion to the cost of insurance due to staged accidents, for-profit medical rehab clinics, padding or faking treatment plans and tow-truck drivers working in cahoots with questionable body shops.

Ontario residents love to hate insurance companies and the New Democrats at Queen’s Park are tapping into this discontent, demanding that the first budget under newly minted Premier Kathleen Wynn — expected next week — include an across-the-board reduction for premiums.

It’s likely that Wynne will accommodate the NDP — in some way — to try to avoid an election.

Carefully watching this political brinkmanship is the insurance industry.

“It’s just unrealistic,” Palumbo said referring to across-the-board premium cuts of 15 per cent, it that’s what it turns out to be.

“Just saying 15 per cent without attacking the problem is just not feasible.

“They have not been clear on this at all, so it makes it difficult for us to say exactly what it is they mean . . . it’s not a solution to high premiums.”

But hold on a minute, says NDP Leader Andrea Horwath, who maintains that the insurance industry was handed a $2-billion windfall when the Ontario Liberals, in 2010, dramatically trimmed the accident benefits the insurance industry must pay out.

“There is no doubt that the reforms in 2010 are helping, absolutely, to bring claims costs down,” Palumbo said, “but part of the problem is a lot of what was left for further study. For example, on the most serious injuries, catastrophic impairment injuries, they (the government) didn’t include that in the reforms.”

Caught somewhere in between all of this is a person like Jay Barrigar, of Toronto.

Barrigar, 39, says she only puts about 10,000 kilometres a year on her 13-year-old car, had a speeding ticket for five kilometres over the limit 10 years ago and is accident-free after 23 years of driving. Most the time she takes the TTC. For that, she pays $2,000 a year for insurance.

“I think it’s a cash grab. It is absolutely criminal,” said Barrigar, who works in fashion and film and lives in the Weston-Black Creek area.

“I have friends and family with a history of ‘a few tickets and fender benders’ in Montreal and Vancouver who are paying half or less of what I pay in Toronto,” she wrote in an email to the Star.

Barrigar added that when her insurance shot up about four years ago, she tried to get an explanation but to no avail. “They said the rates are set and there is nothing they can do about it,” she said.

MORE: Organized criminal gangs are what’s driving rates up, police say. Click here to read more.

Palumbo says of course there are repercussions because insurance is based on risk factors and speeding is chief among them.

In July 2011, the Liberal government created the Auto Insurance Anti-Fraud ForceEND, which issued its report in November 2012. The report contains 38 targeted recommendations based on four key areas: prevention, detection, enforcement, and regulatory roles.

It suggested that 83 per cent of the estimated fraud occurs in the GTA and that based on 2010 figures, the impact on the average premium per insured vehicle would have been $267 at the low end of the range and $540 at the upper end of the range.

“New research . . . has reinforced suspicions that fraudulent activity is increasingly premeditated and well-organized — particularly in the Greater Toronto Area (GTA). We do not think that the costs or the risks of fraud should be ignored and we believe that government and other stakeholders can and should take a number of concrete and practical steps to deal with fraud,” the task force concluded.

The task force consulted with stakeholders and received more than 50 presentations and submissions from interested parties, including insurance industry, health-care providers and consumer groups.

Ben Barkow, a psychologist and a specialist in human factors and accidents, knew he was euchred when the first words out the mouth of the driver of the car he had just nudged were: “My husband is a lawyer.”

Barkow blamed the fact his car was idling too high when he says he literally touched the woman’s back bumper while they were stopped at the intersection ofg Bathurst and St. Clair. It was his first accident, ever. Suddenly, he said, the non-existent damage to the “beat up” Chrysler van dissolved into bitter words and ultimately an insurance nightmare.

“It was barely a nudge and I don’t believe I caused any damage whatsoever,” he said.

Even though the woman didn’t have her driver’s licence, registration or proof of insurance, she went on the offensive. And before the 69-year-old Barkow knew it, her angry Bay St. lawyer husband showed up with the necessary documents.

“I knew I was in for it then; I was in the middle of (something),” he said.

When all was said and done, the couple walked away with about $650 and his insurance spiked by $300 a year for three years. Barkow said that neither his insurance company, nor the one for the other driver, would listen when he tried to say money was being paid out for no reason.

What government is doing about the quest to reduce fraud, along with slashing premiums by 15 per cent, have become political hot potatoes at Queen’s Park.

Horwath is threatening to bring down the government if the budget doesn’t promise — one way or another — to reduce rates while Tim Hudak’s Tories have accused the NDP of grabbing the figure out of thin air without offering suggestions about how to make it happen.

“Everyone is wanting their premiums to go down no matter where you live in Ontario,” said Tory MPP Jeff Yurek (Elgin-Middlesex-London). “I’m not sure where the NDP found their 15 per cent. It would be nice to work with government and the insurers and associated medical providers and come up with a solution that will lower rates but you need a plan to get there.”

Yurek argues that one way to cut costs would be to streamline the Financial Services Commission of Ontario’s system that settles disputes. Last year, there were more than 30,000 claims sitting in the mediation queue that had not been heard.

The insurance industry says setting rates and factoring in the cost of fraud is far too complicated for someone to simply come along and wave a magic wand to slash premiums.

Auto insurance executives sat down with Horwath early last month, saying they are trying to cut rates but are handcuffed by that $1.6-billion fraud bill.

“Why is the average claim in Ontario $30,000 and the average claim in Alberta $3,500? Are we more brittle? I can’t explain that. It means people are targeting the benefit system in this province,” Steve Kee of the Insurance Bureau of Canada said at the time.

Kee said the 2010 reforms helped and rates are down 0.26 per cent but the industry still pays out $1.04 in benefits for every $1 in premiums.

“There’s no magic wand that I have to wave and say these rates are going to come down but if we take an approach to reforms, and we’re really serious about this, we can see reduction in cost.”

Palumbo said of the $10 billion in premiums paid in Ontario in 2011, the insurance industry took home profits of $233 million “and that doesn’t strike me as being exorbitant.”

He said he understands that people will remain skeptical until they see their rates go down.

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  • We pay more for auto insurance here than anywhere else in Canada. The question is: why?

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