Significant reforms are proposed for Ontario’s auto insurance system, which is described in a new report as structurally flawed.
“Claim costs continue to rise while auto accidents continue to fall,” says David Marshall, former ceo of the province’s Workplace Safety and Insurance Board, in his 103-page review of the system, titled ‘Fair Benefits, Fairly Delivered.’
“The main cause is not inefficiency or excess profits by insurance companies or the behaviour of claimants, providers or lawyers.
“It is the way the system is structured.”
Mr. Marshall’s report makes 35 specific recommendations and offers a five-part action plan to fix what he describes as one of the least effective auto insurance systems in Canada.
“It is filled with disputes and inefficiencies, and a very high percentage of premiums are being used to pay experts and lawyers and not going directly to injured persons.”
Mr. Marshall calculates that if Ontario could simply achieve an average annual premium level approaching the Canadian average of roughly $930, it would save Ontario drivers almost 40% .
“No one in the system is actively managing medical care for accident victims,” the report says.
“There are clear indications that accident victims are not receiving appropriate care, they are taking longer to recover and many report that they have developed permanent impairments from simple soft tissue injuries.”
Mr. Marshall says Ontario has devised a guaranteed safety net for victims of auto accidents and outsourced it to insurance companies without giving them the authority to decide how to deliver it.
The province’s auto insurance legislation, he notes, is on one hand very broad and open to a wide latitude of interpretation but at the same time regulations for insurers’ delivery of the product are very rigid.
“This creates an opening for disputes as to interpretation on the one hand and restrictions on efficiency on the other,” Mr. Marshall said. “It is a structural flaw in the system.”
The report says there is currently little agreement about what constitutes fair diagnosis and care for injuries.
And consequently, many applications for benefits are rejected based on medical opinions obtained by insurers while claimants hire lawyers and generate countervailing medical opinions.
“Simple minor injury sprains and strains (80% of claims) often take over a year to settle and incur high medical costs.
“Instead of a system that helps accident victims recover from their injuries, a significant portion of the system has been diverted into a cash settlement system in lieu of care.”
The report says that roughly one-third of benefit costs is now being paid for competing expert opinions, lawyer fees and insurer costs to defend claims — instead of going to treatment of injured parties.
“The solution does not lie in reducing benefits. Fair benefits must be taken as the starting point in any recovery, and they must be delivered fairly.
“If these two conditions do not exist, the system will always fail to meet expectations.”
And Mr. Marshall says changing from private sector delivery to a government-run system is not a solution, either.
“Run properly, the premium cost for drivers under either system can be roughly the same.”
The report says that while Ontario’s accident benefits are, on the whole, fair, they are not being delivered fairly.
“The main cause is that the system does not promote a timely, conflict-free means of deciding what care is needed and providing it to accident victims.”
The system, it says, currently allows participants to work at cross-purposes to its original goals:
# Insurers do not aim to provide care to their customers; instead they focus on controlling costs;
# Accident victims may seek to maximize their entitlement rather than address their need;
# Lawyers working on conting-ency fees work to boost the value of claims, and
# Providers are paid on volume of treatments, not results.
Mr. Marshall’s proposed five-part action plan starts with setting up an arms-length regulator with a skills-based board, which is already underway with the creation of the new Financial Services Regulatory Authority that will replace the Financial Services Commission of Ontario.
More coverage on the report included in Thompson’s Apr. 24 weekly edition. Email email@example.com for a copy or to subscribe.