The worst of both worlds

When Ontario’s Lieutenant Governor David Onley granted Premier Kathleen Wynne’s request to dissolve the legislature, it wasn’t only the proposed budget that was put to the sword. Work also stopped on a key piece of legislation designed to reduce automobile claims costs. Bill 171, the Fighting Fraud and Reducing Automobile Insurance Rates Act, was tabled in early March by Finance Minister Charles Sousa. The Bill had since passed second reading but had not come to a final vote in the legislature. With the Bill not passed at the time the writ was dropped, Ontario’s automobile insurers are left with the Auto Insurance Cost and Rate Reduction Strategy, which requires them to reduce automobile insurance rates, but have been denied the legislation that was meant to provide an offsetting reduction in the cost of claims.

With the calling of an election, there will be winners and losers on the political front. The leaders of all three main parties have said they expect to be voted in as Ontario’s next premier. Clearly, two of these leaders are going to be disappointed. The ruling Liberals have been in a minority position since the last election. Presumably, Premier Kathleen Wynne is hoping to win a majority this time around. If voters re-elect a minority Liberal government, it is fair to assume all three leaders will be disappointed.

Once the outcome of the election is known, it will be easier to predict what may come next with respect to insurance legislation. If the Liberals are voted back into office, they may re-introduce Bill 171 and basically pick up where they left off, albeit with a time delay of many months. If the Progressive Conservatives are voted into office, it’s hard to imagine they would re-introduce a Bill that was proposed by their political rivals. The same is true of the NDP. Although both the Progressive Conservatives and the NDP voiced general support for the Bill, they also made it clear they want changes. During the initial debate, Sylvia Jones, a PC MPP, described the legislation as ‘okay’ but in need of some key amendments. For her part, Teresa Armstrong, a former insurance broker who is now an NDP MPP, was quoted as saying there is ‘a lot of work – tons of work – that needs to be done with that word that has been thrown loosely in there about helping consumers with the fraud piece.” If either of these parties comes to power, it is fair to assume it will be a while before a new Bill is presented, one that reflects the changes these parties have said they desire.

In this atmosphere of political uncertainty, an open question is whether Ontario’s auto insurers will still be expected to deliver, at least in part, on the promise of reducing auto insurance rates. In releasing its draft 2014 Statement of Priorities, the Financial Services Commission of Ontario (FSCO) recently stated it ‘will support the government’s implementation of the auto insurance Cost and Rate Reduction Strategy, utilizing the powers provided to the Superintendent in existing legislation’. At the time this document was released, there was no reason to assume Bill 171 would be de-railed by the calling of an election. With the shuttering of Queen’s Park until MPPs are called back to sit in the next parliament, there is the possibility FSCO could decide to go easy on insurers and not hold them to the commitment of an average eight per cent reduction target by August 2014. This is by no means a certain outcome. In stating why she decided to withdraw support for the Wynne government, Andrea Horwath, the leader of the NDP, accused the Liberal government of failing to deliver on three promises. One of the three promises Horwath cited was the promise to reduce the cost of auto insurance. Given the political atmosphere, it would be a bold move by any Minister of Finance, during or after the election, to give FSCO a green light to go easy on insurers when it comes to delivering on the promise of reducing auto insurance premiums.

Time will tell how long insurers will need to wait before once again seeing legislative measures designed to deal with the cost of auto insurance claims. In the meantime, the insurance industry could be placed in a difficult position. In a press release last week in which it urged legislators to pass Bill 171, the Insurance Brokers Association of Ontario mentioned the Anti-Fraud Task Force report that estimated the cost of Ontario auto insurance fraud to be as much as $1.6 billion every year. It is unreasonable to expect Bill 171 would have eliminated all fraud in the system. But it was meant to take a significant bite out of the fraud problem. Without the relief this Bill would have provided, auto insurers will be hard pressed to cover the loss in premiums called for under the Auto Insurance Cost and Rate Reduction Strategy.