Soaring premiums prove insurance reform overdue

Provincial regulators recently gave insurance companies the green light to raise auto insurance premiums in Ontario.

Auto insurance is a contentious issue for Ontario drivers; it's also an issue that needs to be addressed.

On one side, you have the insurance companies, lawyers and health-care providers, all of whom have a vested interest in maintaining the status quo, because they make a decent living with the current system.

On the other side, you have motorists forced to pay higher premiums – to the tune of 20 per cent in some cases – during one of the worst recessions in decades.

This price hike will make driving a vehicle in Ontario significantly more expensive, and it will serve as a deterrent for people who want to buy a vehicle, but who simply can't afford the insurance.

Over the past four decades, I've seen the negative effect that insurance premium hikes have on consumers and on the new-car industry.

Customers visit dealerships with the intention of buying a particular model. While they may be approved for the financing, the cost of insurance may make it prohibitive to drive that model.

In such cases, customers wind up selecting their second (and sometimes third) choice of vehicle. When that happens, they are ultimately unhappy. Plus, it devalues the model and the brand.

Clearly, the reason premiums are going up is because of certain abuses that have crept into the system over the years.

I've heard about situations in which people involved in accidents may have suffered mild injuries. Within a month, their symptoms disappear and they are given a clean bill of health.

Still, that may not stop their insurance companies from contacting them repeatedly, urging them to accept physiotherapy and housekeeping services they don't need.

When an insurance claim is opened up, health-care providers and other professional services are notified that an accident victim may require treatment or services. If they haven't heard from the victim within a few weeks, they may contact the insurance company because they're eager for the business.

These businesses are just doing their jobs, but from an accident victim's perspective, it may appear they are trying to milk the system.

This example exposes a flaw in the current insurance model, which seems designed to pay out maximum benefits to insured victims, even if those benefits are unnecessary or unwarranted.

The insurance industry has reported that the average accident benefits claim in Ontario is approximately $38,000. In Manitoba, which operates a public insurance system, average claims cost is only about $3,000.

The litigation aspect of auto insurance should be addressed as well. Lawyers often advise clients to sue for outrageously high amounts. In many cases, the courts award damages that are in the millions, completely out of proportion to the victims' suffering.

The insurance companies are caught in the middle, forced to pay huge settlements, which in turn cuts into their profitability. Hence the need to raise premiums.

Admittedly, insurance premiums have dropped an average of 4 per cent in Ontario since 2003. But that is a moot point when motorists are now faced with double-digit increases.

At a time when tens of thousands of Ontarians are out of work, this auto insurance price hike is plain wrong.

I'm not advocating a public insurance system for Ontario, but the current model needs to be revamped.

Finance Minister Dwight Duncan has hinted that he is prepared to introduce reforms to address the main problems affecting auto insurance in this province.

I urge motorists who oppose the private insurance model to contact their MPs to register their displeasure. Maybe this latest attempt to gouge motorists will serve as a tipping point for some long overdue insurance reform in Ontario.

This column represents the views

of TADA. Email president@tada.ca

or visit www.tada.ca.