AUTO INSURANCE
RICHARD SCHOOLEY
CITIZENS' FORUM ADVOCATING INSURANCE REVIEW
ACTION CENTRE FOR SOCIAL JUSTICE
ONTARIO COALITION FOR
BETTER CYCLING
CITIZENS FOR SAFE CYCLING
ROYAL OTTAWA HEALTH CARE GROUP
COUNTY OF CARLETON LAW ASSOCIATION
REGISTERED MASSAGE THERAPISTS OF EASTERN ONTARIO
ASSOCIATION OF CERTIFIED FRAUD EXAMINERS
CONTENTS
Wednesday 28 February 1996
Auto insurance
Richard Schooley
Citizens' Forum Advocating Insurance Review
Frances Paquette, president
Action Centre for Social Justice
Aline Akeson, manager
Ontario Coalition for Better Cycling; Citizens for Safe Cycling
Avery Burdett, chairman, OCBC
Brett Delmage, president, CSC
Bickerton Brokers Ontario
Mike Berlis
Jacques Buy
Royal Ottawa Health Care Group
George Langill, executive director
Peter Henderson, clinical psychologist
David Follows, director, Work Wise program
Catherine Gow, neuropsychologist
County of Carleton Law Association
Tom Conway, trustee
Ontario Academy of Psychology
Ken Reesor, past president
Ariel Delouya
Thomas Connolly
Action Ontario
Wayne Kasbey, member
Karen MacNaught, member
Royal Insurance
Linda Matthews, vice-president, personal lines division
Carol Jardine, manager, Ottawa-Carleton region
Jacinta Whyte, underwriting manager, personal lines division
Registered Massage Therapists of Eastern Ontario
Pamela Fitch, member
Doug Alexander, member
Association of Certified Fraud Examiners
Ken Mitchell, member, insurance fraud committee
Edward Pendlebury
STANDING COMMITTEE ON FINANCE AND ECONOMIC AFFAIRS
Chair / Président: Chudleigh, Ted (Halton North / -Nord PC)
Vice-Chair / Vice-Président: Hudak, Tim (Niagara South / -Sud PC)
*Arnott, Ted (Wellington PC)
*Brown, Jim (Scarborough West / -Ouest PC)
*Castrilli, Annamarie (Downsview L)
*Chudleigh, Ted (Halton North / -Nord PC)
*Ford, Douglas B. (Etobicoke-Humber PC)
*Hudak, Tim (Niagara South / -Sud PC)
Kwinter, Monte (Wilson Heights L)
*Lankin, Frances (Beaches-Woodbine ND)
Martiniuk, Gerry (Cambridge PC)
*Phillips, Gerry (Scarborough-Agincourt L)
*Sampson, Rob (Mississauga West / -Ouest PC)
*Silipo, Tony (Dovercourt ND)
*Spina, Joseph (Brampton North / -Nord PC)
*Wettlaufer, Wayne (Kitchener PC)
*In attendance / présents
Substitutions present / Membres remplaçants présents:
Crozier, Bruce (Essex South / -Sud L) for Mr Kwinter
Marland, Margaret (Mississauga South / -Sud PC) for Mr Martiniuk
Also taking part / Autres participants et participantes:
Kormos, Peter (Welland-Thorold ND)
Clerk / Greffier: Franco Carrozza
Staff / Personnel: Andrew McNaught, research officer, Legislative Research Service
The committee met at 0903 in the Westin Hotel, Ottawa.
AUTO INSURANCE
RICHARD SCHOOLEY
The Chair (Mr Ted Chudleigh): This morning we have the pleasure of welcoming Crain and Schooley Insurance Brokers Ltd, Mr Richard Schooley. Welcome to the committee, sir. We have 20 minutes to spend together. We would appreciate your presentation, and any time remaining we'll fill with questions. Please proceed.
Mr Richard Schooley: Thank you, for the opportunity to appear before a committee. We welcome the opportunity, especially to have it come into eastern Ontario.
I very much appreciate the challenge faced by a government to reflect in legislation the extensive diversity of opinions and interests in this necessary consumer product, providing structured protection to the citizens of Ontario resulting from the use and operation of automobiles. Indeed, it might be an amusing and even fanciful exercise to try to guess what an automobile might look like if it was the product of statutory regulation.
My name is Richard Schooley. I'm an independent insurance broker. I'm a principal of Crain and Schooley Insurance Brokers Ltd, a fellow of the Insurance Institute of Canada, and a graduate member of the Canadian Risk and Insurance Managers Society. I am currently a director of the Insurance Brokers Association of Ontario from the Ottawa Valley.
Our firm, Crain and Schooley, comprises some 35 employees servicing a clientele of approximately 8,000 people on the west and southwest of Ottawa and living in north Frontenac county, Lanark county and the Leeds and Grenville area. The roots of our firm can be traced back through family connections since the 1930s. I've been an insurance broker since 1966.
First of all, I'd like to compliment Mr Sampson on his approach to the review, the wide consultation he's carried out and the draft bill, which I know reflects much of what he has heard from his consultation.
I am personally pleased to see the reinstatement of the right to sue for economic loss. Its removal with Bill 164 could be looked upon as fair for those injured and not at fault in an auto accident because of the generous income replacement benefits, extensive medical and rehab provisions. Bill 164 was, however, extremely unfair and unreasonable for what it took away from the dependants of some not at fault and killed in an auto accident. The death benefit provided under Bill 164 was simply not adequate to compensate a family for their full economic loss.
I feel the deductible and the threshold outlined in the draft are reasonable.
Other members of IBAO I know have addressed a number of points with you and I will not rehash those today, but I do have a couple of specific concerns I would like to bring to the committee.
The first is with regard to income replacement benefits. The adequacy of the $400 per week, representing 85% of net income, is a concern. I believe it should be higher. Bill 68, the OMPP, provided 80% of gross income up to $600 a week. This equated to $39,000 a year of income and in 1990 was very close to 80% of the average Ontario industrial wage, so 80% of potential income loss was covered within that threshold. In the current proposed legislation, in order to be at an equivalent level we should have that at about $500 per week. I believe the $500 a week is a fairer limit.
I've listened to the arguments against this. There has been in the broker community a fair bit of discussion in this regard. The focus of the arguments against increasing the benefit is with regard to cost, and certainly our association has an affordability concern. I'm not an actuary, so I don't know what the cost of the change would be, increasing it to $500 per week, but my instinct is, since the recovery is limited to net income as opposed to gross and tort recovery deducts the no-fault benefits paid, that the extra cost would be minor relative to the appropriateness of a higher benefit.
Another argument suggests that if $500 is the average income in Ontario, there are a lot of people below the average who would be subsidizing, through premiums, the more affluent, and those people have the option to buy up. If this is true, why is the average worker forced to buy $600 of coverage when all they need is $500, the optional benefit only being available in $200 increments?
Another concern is probably one of clarification, but it's with regard to the student disability cover, part III non-earner benefit. The summary of the draft statutory accident benefit schedule and the draft regulation leave it unclear to me whether the enhanced non-earner benefit for students -- 85% of maximum IRB or $340 a week -- increases if the optional benefits, part IV, are purchased. As the father of two graduated students who are still looking for work in their professional fields, I'd be inclined towards purchase of this coverage, the option, if indeed it were. Clarification, it appears, is necessary.
The next concern is collateral benefits. One of my cohorts thought I was, in approaching this subject, tilting at windmills. I'll leave it to the committee to decide whether this is a concern. Prior to OMPP, employer-sponsored income continuation plans, long-term disability insurance, employer-sponsored or personally arranged, paid benefits to someone disabled by reason of accident or sickness. It didn't stipulate whether you had to be in a car accident or what the source may be. These benefits were not considered by a court when considering a tort award for loss of earnings or earning capacity. In other words, what you had privately was out of the picture and so wasn't taken into consideration in determining the tort judgement.
0910
Bill 68 and Bill 164 both stated that these personal or employer plans were first payor -- in other words, the auto policy was second -- and that the auto insurance policy topped up those benefits or, in their absence, the automobile accident benefits paid first or paid what wasn't covered by private plans. Further, the accompanying legislation to Bill 68 stated that you could not sue to recover loss of income coverable under automobile insurance benefits.
Bill 164 of course removed the right to sue for economic loss altogether, so again it was not a concern there.
The new bill reduces IRBs to $400 per week and provides for the purchase of additional optional cover. I also believe the designers of the draft legislation, in accepting $400 as adequate, have done so understanding that a significant number of employees in Ontario are covered by employer or personal disability insurance which the auto insurance cover would supplement.
The new bill, as drafted, permits a person to sue for economic loss which exceeds collateral sources of income, including income replacements, personal or employer-produced, or the accident benefits under the auto policy. In other words, it only permits you to sue for amounts not recoverable from income replacement insurance or the auto policy.
It's been suggested that some workplace and personal disability plan insurers, the companies providing these benefits, plan to or are ready to exclude payments someone will receive under an automobile policy from the benefits receivable under their insurance policies, and to offer lower rates on these contracts or to restrict the policy such that their policy will become second payor. This would make it in conflict to the auto policy that exists now and what the proposed legislation I believe also is suggesting.
In the name of understandability, this should not be allowed to happen. Legislation should restrict this practice or possible practice. Prior to Bill 68, there was no thought, in my experience, of any life or disability insurer excluding disability resulting from an auto accident. Why should that possibility exist now?
If life and disability insurers are not restricted from this practice, the following will occur:
Those not at fault in an accident would be forced to tort actions for economic loss that they would otherwise be receiving from those policies, personal or employer group insurance policies, over and above SABS.
Those at fault would receive no benefit from those policies.
Those expecting that these limited plans would supplement the $400 per week from the auto policy would be denied the benefit, further increasing the tort action frequency, something the proposed legislation is going to laudable ends to avoid.
The last one, and the concern personally, is that the job of the broker in providing proper counsel to an insured with regard to the need for optional benefits is very difficult, if not impossible. A broker is probably aware of where someone's employed but certainly is not privy to the details of what the employee benefits program of that employer might be. To expect an insured to bring into my office a copy of their employee benefits program to see whether it contains an exclusion or a second payor clause with regard to the income replacement benefits I think gets a little onerous.
As brokers, we advocate insurance products that the public find affordable and understandable. No consumer can be expected to understand or indeed anticipate the problems the previous point could cause. Further, such actions will undoubtedly impede your aims to stabilize the pricing of automobile insurance.
Optional coverages: In my view, the product has too many optional coverage benefits. I have included with my submission to you a copy of a little client brochure we use in our office. We produce this to try and give our clients an understanding of the options in their policies and an explanation of what they are. To add to this seven more options makes it quite a job by way of explaining and I think in even keeping someone's attention. My suggestion with regard to options is that the funeral benefit increase be included with the optional benefit to increase the death benefit, so include the increased funeral when you buy the increased death benefit or indeed just increase the funeral benefit in the basic policy.
The second one is the option with regard to indexation. I question the need for an indexation option. The proposed legislation provides for the right to sue only for economic loss which exceeds collateral benefits, including SABS. My concern is that if the benefits aren't indexed, is this not going to be the fact an injured party is going to use as their justification for commencing a tort action? My belief is that we should be including indexation in the base legislation. My suggestion again is that regulation be the vehicle to do that. Rather than have some vague inflation clause in the auto contract, as is happening with Bill 164, periodically by regulation the amount of weekly income would be adjusted according to whatever the factors are that would justify that change.
The next point is with regard to contingency fees. While it has nothing to do with the proposed legislation the provision in Ontario for the legal community to have the right to contingency fees will no doubt be a destabilizing factor to the cost of automobile insurance, indeed all liability insurance in Ontario. In our ambition to stabilize the cost of auto insurance, the impact of contingency fees must be kept in line if the government is giving consideration to such a change.
I haven't got a lot on the next topic, but it is, as far as I'm concerned, very important: road safety. There is a significant opportunity, I believe, to reduce vehicle damage and personal injury through coordinated road safety initiatives. Recognizable reduction in death rates for young drivers has been realized through young driver training. The vast majority of that training now is carried out in the private sector, but if it had not been for the initiation and the validation by the Ministry of Education and Training of this program, it wouldn't have the profile it has today and certainly we would not be seeing the benefits to our young drivers that we have from it. I would therefore encourage the government to re-energize the road safety agency to make our highways and streets the safest possible. As a society, we have but scratched the surface of the benefits from better driving practices, road and vehicle design.
"Available," "affordable," "understandable": These are all words that the brokers' association has been bringing forward with respect to insurance coverages in our concern for our clients. "Available" and "affordable" I believe have been addressed by the proposed legislation. My concern, and what I've been bringing to you today, is understandability.
As the role of the insurance broker changes from that of providing a product supermarket to include that of personal and family risk management consultants, advising on and coordinating not just house and car insurance but life and disability coverages, predictability and consistency of various products are necessary for the consumer to understand their needs and the advice of their insurance professional. The items I've addressed today come from these concerns. I know your motivation has been the first two, availability and affordability, and it certainly is reflected in the draft legislation. My wish is to make sure that the product is also understood by the public, insurance professionals and risk managers.
Again, thank you for coming to eastern Ontario. It's very much appreciated by those of us living outside of Metropolitan Toronto. I know you've been to the north as well and, as I say, it's very much appreciated.
0920
Mr Bruce Crozier (Essex South): Thank you, Mr Schooley, for a very detailed presentation, one that's brought us a couple of new questions that may have to be answered by those who know the legislation in a little more detail.
Affordability: That's one of the two As and a U. You have had an opportunity, no doubt, to hear the presentations in Toronto of the IBC, Zurich and some of the others, and the discussion over just how much of an increase in insurance is going to be included under this plan. You're a front-line broker. You see people looking for new policies, people who come in for their renewals. Is a 7% to 10% increase per year your definition of stabilized insurance rates, and is that what the public perceives?
Mr Schooley: It's a difficult question to answer specifically that way. As a consumer and as a broker, I like to see stable pricing. We certainly have not had stable pricing in the insurance product, other than from the period of about 1989 through 1993. Whether that was because of the product or whether that was because of economic situations etc is difficult to know for sure. I feel that the changes with regard to the injury side of the insurance equation can be stabilized through this process. There was concern in the industry with regard to fraud and people's lack of willingness to get back to work.
On the other side of that, prior to no-fault the pure tort product was very unfair to the average person driving in the province. With regard to those not at fault, the process of going through a long legal process was extremely unfair. It was cruel in many cases to see the effects on many families in the long process in getting benefits.
What the public is looking for is something they can understand, not only the product but also with regard to the pricing. What concerns me is the cost of the automobile repair component of the insurance product. That really does not get a lot of attention, and it should get more attention.
Mr Peter Kormos (Welland-Thorold): Thank you, Mr Schooley. As to the issue of highway safety, I told this committee a little while ago that in British Columbia the ICBC just introduced a 30-point program to enhance highway safety as a means of controlling premiums, because really that's what it's all about at the end of the day: With less bodily injury, less tin and glass damage, premiums are going to be lower, no two ways about it. Things they've done in BC are a comprehensive fraud control program: "No crash, no cash" -- you might have heard of that one. They're implementing photo-radar because they understand that excessive speed causes accidents. The Solicitor General is still pondering whether it was wise to have pulled photo-radar off the roads as promptly as he did.
Mr Schooley: Have they sold the Ontario equipment to BC?
Mr Kormos: They haven't peddled it off yet, because I think they've got plans. But the reality is that my anecdotal experience, and I trust most people's, is that since the abolition of photo-radar we have witnessed a change in driving patterns, especially on the 401 etc. Aren't programs like photo-radar important as part of a comprehensive program to control accidents and the cost to insurers and hence to premium payers?
Ms Schooley: I believe they are, as well as vehicle inspection. That's another thing they do in BC: mandatory vehicle inspection. I believe that also is a significant contributor.
Mr Kormos: So shouldn't a very specific recommendation of this committee be that the government get off its high horse, restore photo-radar, save a few lives in the process and reduce premiums?
Ms Schooley: I certainly won't object if photo-radar comes back on the highways of Ontario.
Mrs Margaret Marland (Mississauga South): We've been hearing a lot, as you can imagine, from people who have sustained injuries, some very sad cases, as a result of motor vehicle accidents. I'm interested in what you say are some of the things insurers should do, including, "The job of the broker to provide proper counsel to his client on the need for the optional SAB benefits becomes almost impossible." I have absolutely no allegiances to the industry other than that I need it as a client. I'm wondering what recommendations you could make to us as a government to correct what I have heard and find very disturbing.
We had a very courageous young 35-year-old mother of four children before us yesterday in a wheelchair with the result of injuries she sustained, and for four years she's been fighting with her insurance company. She's upfronting the cost of the equipment she needed in her home and her chair itself. As a broker, you're in a very good position to tell us what it is that's happening. Are the people dealing with these cases not trained adequately? In another case we had one woman who had eight assessments in one year, and so on. If you can give us some advice about what we can feed back to the industry, we'd appreciate it.
Ms Schooley: What makes it difficult for me to respond about the lady you were talking about with the wheelchair and four years, is, when was her accident, or when was her injury caused? We're currently dealing with three different pieces of legislation.
Mrs Marland: Four years ago.
Mr Schooley: Under OMPP, there is with the OIC a whole process of appeal and arbitration in place. I don't know whether that has fallen down or what the particular problems might be with it. With the proposed legislation, I'm pleased to see the creation of DACs. I hope that would go a long way towards addressing this particular lady's problems, where you do have a credible -- I don't know how to say it other than "credible" -- centre they can go to that is recognizable to both government and industry, and hopefully that can solve some of those problems you were identifying with that woman.
The Chair: Thank you, Mr Schooley, for your presentation to the committee. We appreciate your input.
CITIZENS' FORUM ADVOCATING INSURANCE REVIEW
The Chair: We move to the next deputant, Citizens' Forum Advocating Insurance Review, Frances Paquette. Welcome to the committee.
Mr Kormos: I notice she has other members of the organization here. She might want to introduce them to us as well.
Ms Frances Paquette: We have with us this morning our honorary counsel, Ernie Tannis; our vice-president, John Watkins; and our membership secretary, Aline Thompson.
Mr Kormos: And this young person?
Ms Paquette: And a member of CFAIR, my daughter Cassandra Paquette.
Good morning, Mr Chairman and committee members. I would like to thank you for allotting us 20 minutes to speak to you on behalf of our membership. As noted, my name is Frances Paquette, and I am the president of CFAIR, Citizens' Forum Advocating Insurance Review. It may be worth noting at the outset, for the record, that we are a separate and distinct organization from the one with a similar acronym which, we gather, made a presentation to this honourable committee last week in Toronto.
Following a number of articles in the Ottawa Citizen last year written by Dave Brown, a public meeting was called for July 5, 1995. A diverse group of 50 people brought together by a common concern attended. Automobile drivers were and are very angry over the current insurance risk points system, which has arbitrarily forced them into Facility Association at greatly increased rates, and also over the general increase in insurance premiums for those not in Facility Association.
0930
Out of this meeting, through breakout groups with facilitators, came 250 questions, of which the top 10 questions were listed, and a core group willing to devote time and energy to creating an organization able to put forward the issues voiced at that meeting. This core group met regularly in an attempt to build a firm foundation as a starting point.
On August 23, 1995, CFAIR introduced its executive and outlined its direction to approximately 150 people at another public meeting. It was acknowledged at the outset that the organization would need to seek advice from experts in this specialized area of auto insurance. We also were mindful of the formidable task ahead in trying to create a new consumer group to cope with a large and profitable industry together with a government moving quickly forward in fulfilling its promises to its electorate. It was decided that CFAIR would need to crawl, walk, run in its development, and time would tell whether such a consumer group would emerge. Although the long-term mandate of CFAIR, as set out in its constitution, is to be involved in all insurance matters under provincial jurisdiction, for the reasons described above, the executive committee determined that it would first concentrate on auto insurance and focus on the Facility Association problem, since that was the pressing matter which inspired the formation of CFAIR.
We initially set our goal as being to establish a province-wide, non-profit, unincorporated association to initiate dialogue with the government, the insurance industry and all other interested parties in order to improve current legislation governing auto insurance. Our objective is to be a catalyst in the public interest until a fair solution for all stakeholders is found. Since then, the executive committee has, in its twice-weekly meetings and numerous phone calls, taken a three-pronged approach.
First, we embarked on a fact-finding mission, trying to discover why exactly this seemingly unfair situation exists.
Second, we undertook to present our members' concerns to the stakeholders through writing our initial position paper and through discussion. We found this to be an easier task than expected, because representatives of the various stakeholders contacted us. CFAIR's executive committee was very appreciative of the industry and political leaders who showed eagerness to meet with us, some of whom kindly made trips from Toronto, which helped us better comprehend the immense scope of the exercise that we were about to embark upon. We believe, which I want to stress, that this was in no small part due to the enthusiastic participation of our membership.
To date, we have met with many parties from the insurance, banking and political constituencies, including the following: Rob Sampson, the Conservative MPP for Mississauga West and parliamentary assistant to Ernie Eves, Minister of Finance; Stan Griffin, the vice-president for Ontario with the Insurance Bureau of Canada; Bernie Webber, the president of Facility Association; and Blair Tully, the commissioner of the Ontario Insurance Commission.
As well, CFAIR has fielded an average of 10 calls a day from concerned consumers. We have learned through these meetings and calls that this is a very complex issue, that all parties recognize that there are problems with no easy solutions and many sides to the story.
Third, we have been exploring ways of becoming a province-wide organization, but more on that later.
While much of the committee's time will be taken up with the reform of Bill 164 on compensation in injury accidents, the main focus of CFAIR at this time is in reform of the automobile insurance risk point system. The arbitrary, subjective and indiscriminate application of this system to force drivers into the Facility Association, at greatly increased premiums, has caused great anger and confusion among those affected. Interestingly enough, a growing number of CFAIR members are not in Facility but are frustrated and concerned about how the industry is conducting itself and communicating with the public. Indeed, I and many of the executive members of CFAIR are not in Facility but are committed to contributing to remedy the imbalance of power.
Numerous examples can be offered: for example, justifiable gaps in insurance coverage, such as the diplomat who was posted outside of Canada for three years and upon her return was classified as a new driver and placed in Facility; the immigrant to Canada with 20 years' claim-free driving in Europe who was told that foreign experience does not count in Ontario and is in Facility; the taxi driver who has driven a million miles on a fleet insurance policy and therefore is not identified on a policy as an insured individual, giving him 12 months without a proven insurance record. This driver was involved in a fender bender under the fleet policy, and that did count as points against him. Or the beginning driver who flipped the car and caused approximately $7,000 damage; this accident virtually prohibits her from driving and buying a car for years to come. In addition, if she remains uninsured for more than 12 months because of cost, then she automatically goes into Facility because of the lapsed time.
Three other quick stories will give a taste of the depth of the problem. CFAIR is aware of the fact that Mr Sampson was in the unenviable position of being the point man in this area and whose staff no doubt received countless letters describing the anguishing experiences of drivers in Ontario. One couple wrote a letter explaining that collectively they had almost 50 years of clear driving records, and with two speeding tickets their premium jumped to almost $4,000 per year. They felt like they were being treated like criminals, with nowhere to turn, and ended their letter to Minister Ernie Eves with the plea, "Please help." Waiting to hear.
A second additional story was brought to the attention of our honourary counsel by a broker who wished to remain anonymous and who emotionally recounted how an elderly widower with a good driving record was charged with careless driving in an accident involving no damages or claims and decided not to defend the matter, simply paying the fine but not realizing that this would put him into Facility, which, as the thousands of dollars per year was unaffordable to him, left him stranded at home when his only and most enjoyable activity was to visit friends and relatives.
Finally, with some of these reports falling into a believe-it-or-not category, only yesterday a new member was advised when an NSF cheque was returned -- and in this case, it was the bank's error -- not only were there points awarded against the driver, but when the NSF cheque was immediately presented to the bank for certification, even before the driver knew it had been returned, and the certification was refused by the bank, there was another set of points and, bingo, welcome to Facility. When the member complained that this did not make sense, the all too familiar answer was received, "That's the way it is."
All of these stories, we believe, are symptoms of a deeper-rooted problem which needs to be addressed before it spreads to other areas of insurance. Whenever our members hear, "There is nothing you can do," we are inspired to do what we can. But we need the help of the political leadership and the support of the insurance industry leadership.
Being placed in Facility can be a financial disaster, especially for the young, the elderly and the poor. It usually involves a tripling of premiums from, say, $1,000 to $3,000 per year, and in many cases much more, and can last for five years; in effect, a $10,000 fine. This can mean unpleasant choices for the affected drivers. If they elect not to drive for a while, as insurance is compulsory, then they will face "new driver" premiums when they return to the market. For most, they have no choice but to pay, as being a driver is essential for livelihood or their home is far from public transport.
When the insurance companies devised the risk point system, it was put into operation without public awareness. The first time most drivers hear of it is when they receive a letter refusing to renew their insurance. Upon investigation, they could find that all the companies subscribe to the point system and they have no alternative but to go into Facility if they wish to drive. This illustrates the depth of misinformation and misunderstanding surrounding the application of the risk point system. Although the OIC has made it clear that the risk point system's application is discretionary, too many consumers are still being told otherwise.
0940
Recently, almost 400 agents and brokers attended half-day seminars to correct a situation which we were told is unique to Ottawa-Carleton, although our membership across the province tell of similar experiences. The problem remains that consumers are being told that the placement into Facility is non-negotiable and inflexible, and since the computer has systemized the information, no adjustments are possible, although the OIC has made it clear that it is a discretionary matter under law.
Many members of the public express frustration because they felt -- in their words, not ours -- that they were dealing with some kind of conspiracy or cartel when they tried to find competitive rates. This being a legal issues, the honourary counsel for CFAIR sought the advice of Industry Canada's Bureau of Competition Policy. The deputy director of investigation and research explained that provincial legislation can pre-empt the application of federal competition law by the regulated conduct defence. After the bureau further examined the situation, it concluded that the Competition Act does not apply since the conduct of the insurance industry is "specifically authorized by law or regulated by a body pursuant to valid legislation and the power to regulate has been effectively exercised." Where else now can the consumers go for marketplace checks and balances and compliance with the rule of law?
CFAIR would not just be another special-interest group in the traditional sense, which governments and the public are used to, advancing its own particular agenda only -- which is a rightful role -- but would openly embrace principled negotiation following a cooperative process. There has been much debate lately as to how the general public and people affected by policies of institutions, public or private, are to participate in the decisions affecting their lives and the lives of their families and friends. Challenging questions are being posed, including questioning the very assumptions upon which contemporary dialogue happens among various constituents. CFAIR believes that this alternative dispute resolution -- known as ADR -- type of philosophy is what's needed generally but in particular in relation to the complex topic of insurance, which affects everyone.
It has been approximately nine months since the genesis of CFAIR in our region, and we are asking the government and the Legislature, in a non-partisan show of support, to assist CFAIR in fulfilling our mandate for the good of all the drivers of Ontario. We will always continue to have our differences of opinion and recollection, but we can be unified in our approach of attacking the problem, not the person. This is the best insurance for future long-term harmony and fairness in the difficult matters being addressed by this committee.
CFAIR hopes that this presentation and its efforts will be received by the committee as a whole, and the government in particular, in the way that the organization was formed: to reflect the needs and aspirations of the consumer by reaching out for a dignified resolution process that will teach our children and remind ourselves of how we must continue to work together to find common ground to meet each other's best interests.
On issues as complicated as insurance, it is inevitable that unforeseen situations will occur in the future and need to be resolved. At the time of resolution the views and the needs of the consumer should be represented. This has not happened in the past and the example we give you is the unilateral imposition of the insurance risk points system.
CFAIR has appreciated and enjoyed the mutually beneficial communications with the Facility Association, the Insurance Bureau of Canada and many other groups. Indeed, CFAIR was honoured to have received a letter written jointly by Bernard Webber, president of the Facility Association, and Stanley I. Griffin, Ontario vice-president of the Insurance Bureau of Canada. This letter was copied to Donald K. Lough, chairman of FA and Robert J. Gunn, chairman of the IBC. Dated February 26, 1996, the letter affirms that the dialogue between CFAIR and the industry is viewed by them as "positive and constructive"; further, they "welcome CFAIR's involvement on an increasing basis across the province." We are also pleased to note that Helen Anderson, a highly regarded and long-time consumer advocate with the Consumers' Association of Canada, has offered to work with the industry and CFAIR in helping to realize this mandate.
How can the system be reformed? The amounts involved, although significant to the consumer, are too small -- say, $10,000 -- and the cases too many to appeal through the judicial system. We are proposing a form of alternative dispute resolution where the facts of the dispute between the insured and the insurer would be put before a neutral evaluator who could decide on which risk level the driver should be assessed.
It is essential that the system be quick and inexpensive. The information supplied by the company and the driver should be cross-checked for accuracy and the evaluator could make his or her decision without face-to-face meetings with the parties.
It is not claimed that this would be a perfect system, but that it would provide a better rough-and-ready justice than no justice at all. There will always be high-risk drivers who should pay higher premiums and there must always be profits for companies, but many of the drivers now being forced into Facility are those with minor offences or non-accident issues whose rates would probably not be increased or only slightly increased, but not doubled, tripled or more. There needs to be a balance.
What we are proposing is that there be established some sort of appeal process which allows for a third-party, neutral review of the decision to place a driver in Facility Association. The draft legislation and regulations already contain a great number of ADR fora -- neutral evaluation, mediation, arbitration, designated assessment centres etc -- including industry, consumers and others. We suggest that these principles should somehow be applied to FARM, Facility Association Residual Market, in a workable manner. This could also alleviate the inequities and problems now being experienced; namely, a lack of uniformity or clarity in proper application of the system to consumers across Ontario. Ultimately, the consumer wishes to have a product that works, is understandable, accessible and affordable, just as in any other market in society. This is especially so with automobile insurance, which is a legally required product.
So far we have only operated with a few volunteers and predominantly within the Ottawa-Carleton area. To represent five million drivers in the province of Ontario will require a much larger organization and budget. As we represent consumers on a voluntary basis, we are at a disadvantage when working with organizations with paid professional staff and travel budgets. How then can CFAIR be financed? The amount we need is small, relative to the very large turnover in the insurance market. As a mechanism for raising the money, an example exists. The Ontario Insurance Commission receives a budget of millions of dollars from levies on the insurance companies. If only a fraction of that were collected as an additional levy, a province-wide consumer organization could be set up. This kind of approach could be explored. To put it in perspective, only 20 cents from each Ontario driver would generate $1 million.
Another way might include the CUB model. In the United States, with Ralph Nader's organization as a catalyst, citizen utility boards, known as CUB models, were established through legislation passed authorizing the incorporation of a non-profit organization, with its own bylaws, representing consumers and having the industry mail out flyers at no expense to the industry by including them in the premium notices. With a response rate of 3% to 5%, it doesn't take long for a strong, financially stable consumers' group to be formed with memberships at $15 per year. In Ontario, with five million or more drivers, even at the lowest, most conservative, modest estimate of a 2% response, this would translate to 100,000 members and $1.5 million. There would be no cost to government or to the industry and there would be a clear, voluntary, self-financing voice for the consumer, itself a conflict prevention measure. Also, CFAIR would recommend that ADR be built into the structure of the organization, as it presently is in our own constitution. In Canada, through Democracy Watch, Duff Conacher, who co-wrote a book with Ralph Nader called Canada Firsts, has been promoting the idea of consumer associations being formed in similar fashion.
It may be helpful to briefly provide a context in which CFAIR is seeking to establish a consumer stakeholder approach with an ADR philosophy. In a broad sense, the public still enjoys a legitimate expression of its concerns or complaints in demonstration by marches. Yet there is another valuable process which deserves an equal chance, demonstration by methods, where compliments are also allowed without showing weakness or conceding anything. There is no either/or proposition involved, so that all processes throughout the general spectrum, from cooperation to confrontation, with negotiation as an underlying theme, are available for the choosing.
On an international level, we understand that conflict resolution, preventative thinking and alternative dispute resolution are gaining increased momentum after a quarter century of development, including businesses looking at the dispute resolution mechanisms of jurisdictions before setting up locations.
0950
In one of the first books in the field of ADR in Canada in the late 1980s, one observer of the ADR social phenomenon wondered whether ADR should not be understood as a modern-day example of democracy in action and summarized the future of the potential of ADR in our socioeconomic fabric as simply "a welcomed return to common sense." It's interesting to note that this historical vision fits in nicely with the government's commitment to the Common Sense Revolution.
Over the past decade in Canada and in Ontario, ADR has become increasingly accepted from the school yard to the corporate playgrounds. The Ontario Legislature took a thorough look at ADR in 1990 by the standing committee on administration of justice. CFAIR's honorary counsel was a witness at that hearing and was advised that it was the first time that the justice all-party committee had held hearings with invited witnesses as to what the policy of the government should be rather than soliciting responses from the public on a proposed policy or legislation, since it was recognized then that ADR would become more integral in governing a society. Many members of that committee are presently elected members of this Legislature, from all parties, and all of them fully support the recommendations that the government of Ontario take steps wherever appropriate to integrate ADR into interrelationships with the public, whether by law or dialogue.
It was only recently, in January of this year, that the Attorney General of Ontario, the Honourable Charles Harnick, announced to the Canadian Bar Association the government's intention to integrate ADR into the civil and criminal court system of this province to bring the administration of justice into line with the 21st century. With this background, and there are many more examples that can be cited, CFAIR is seeking to encourage a new form of partnership with government and industry on behalf of consumers in a way that is unprecedented in Canada. This government, hopefully with full non-partisan support from other members of the Legislature, has an opportunity to be a step ahead without being out of step in supporting this approach.
As CFAIR moves on to deal with other insurance issues under provincial legislation, including property and business insurance, it is our conviction that fair resolution of insurance issues can only be realized by continuous and non-adversarial negotiation between the interested parties and that CFAIR should have a place at that table.
In summary, in particular CFAIR wishes this committee to consider inclusion of a neutral appeal process in relation to FARM; in general, support of CFAIR becoming a province-wide consumers' association; and finally, inherent in the dialogue with the industry and the government, for all parties to incorporate an ADR -- alternative dispute resolution -- approach. In this way, ADR also becomes a dignified resolution.
Thank you, Mr Chairman and committee members, for allowing us this time to address you here in Ottawa.
The Chair: Thank you very much, and we appreciate CFAIR's input into our deliberations.
Ms Paquette: By the way, we invite all politicians who drive to become members. We've included an application.
Mr Kormos: I don't know how to get these guys to do it, but have you got change for $20?
Ms Paquette: Yes. Thank you very much.
ACTION CENTRE FOR SOCIAL JUSTICE
The Chair: If the committee can give its attention to the Action Centre for Social Justice, we welcome Ms Akeson to the committee.
Ms Aline Akeson: Thank you very much. That's a hard act to follow. I agree with everything she says.
The Action Centre for Social Justice is an organization that looks at the structural and class barriers that prevent poor people from escaping poverty in such a rich country and city. So we focus entirely on any of the government issues from the perspective of low-income people, and mostly low-income mothers, single-parent mothers. It's a very short, little paper.
The Action Centre for Social Justice is an Ottawa group which encourages and facilitates a development and implementation of action-based research and education projects which help the public and politicians learn about the structural class barriers that exclude the poor from our society and prevent them from escaping poverty.
We believe that the existence of poverty is shameful and that to be poor is not. We rely on the information provided to us by our advisory group of poor people because they are the ones experiencing the various problems and they are the true experts and can better define and address the issues. After investigating the proposed changes to auto insurance in Ontario, we would like to inform you about how some of these changes will impact on poor people from their point of view.
The government's proposed changes: A capitalist system is based on the idea of profit and loss in business. There are good years and bad years. What the insurance companies seem to want to do is to make sure that there are no bad years by immediately raising rates when there is a bunch of claims. This changes the idea of insurance from protection for those who suffer an accident to protection for those who invest in insurance companies. This means that the ordinary person will lose by having to pay higher fees.
In the event of an accident, the rates may become completely unaffordable for low-income people. It is already very difficult to keep their old cars on the road. There is no choice about accident insurance now. In order to be on the road, you have to be insured. If rates go up, this means less money to keep the car in good repair. With the lack of proper care, there's a possibility of more accidents.
You may or may not know that low-income people -- people who work at minimum wage or people on welfare -- often buy an old car jointly, five or six families, and one person is designated to drive people around because bus fares are so expensive that they can't do it as families. That's one way that they're managing to even try and get work.
There are some good ideas in the bill. We approve of making those who cause accidents pay more than those who never have accidents. However, the ability to get more benefits by paying more means that there will be a two-tier system. Poor people will be lucky if they can get their recovery time paid. Wealthier people can get compensation for the pain and suffering they have undergone. Also, the rich, who can afford private lawyers, will see speedy agreements. It may take forever for poor with legal aid lawyers, if they're able to get a certificate or a lawyer from a legal clinic to handle the case. Then it may take months to get to court, causing further backlogs in an almost moribund system. As you know, the courts are backed up to the hilt.
If the law says that in order to drive a person has to have insurance, the law should also make sure that the people are equitably covered by insurance and that they're not paying more and more for less and less coverage and that the rich do not benefit at the expense of the poor.
We had a meeting with 20 poor women who were trying to get their kids to school and trying to find jobs, and even getting children to school is difficult because bus passes in Ottawa are extremely expensive.
That's our small, little proposal, but we want to make sure that you hear from that particular group of the population who are being hit at every level at this time.
Mr Kormos: I don't have as benign a view of insurance companies as a whole lot of people do. I think they're nasty little corporations whose purpose is to make money at the expense of drivers and innocent victims, and their track record isn't particulary impressive. They've been picking the pockets of drivers in this province for decades and beating up on victims for as long.
1000
What's interesting is that in the first week of these hearings we saw some incredible divisiveness within the insurance industry about what this proposed reform is going to do to premiums. The IBC, the Insurance Bureau of Canada, points out premium increases on an annual basis of around 7.6%, even with these reduced benefits. Zurich, the second-largest auto insurer in the province of Ontario, says bullfeathers to the IBC and says: "Are you kidding? We're going to be looking at double, perhaps even as much as three times what IBC predicts, 15%-plus premium increases, on the basis of the reforms being proposed by this government." That's Zurich, the second-largest insurer. So even these guys haven't got their act together. The fact is that the premium payer, the driver and the consumer and the victims have not been well served. What's particularly upsetting about the regime with the private corporate insurance industry in Ontario is the lack of a real bonus malus system, and that is to say good drivers should be paying less, genuinely bad drivers should be paying more.
When we look to British Columbia we see an automatic discount, assuming they're good drivers, for seniors, which I consider a highly appropriate sort of measure, recognizing the importance that we heard earlier when CFAIR made their submission: one case study of a senior being denied the use of their car because of exorbitant and egregiously unconscionable rates. For many seniors, an automobile is freedom. For households, for mothers of young children, an automobile is more than just freedom; an automobile is a matter of life and death. It's a necessity for people living in rural communities where they don't have access to public transit. As if there were very many jobs to be had in this province, but it's a matter of whether you can work or not.
I'm concerned that this government is the third successive government to try to reform the private, corporate insurance sector. I could see that the last government wasn't capable of doing it, wasn't capable of whipping them into shape. The government before that wasn't capable of whipping them into shape. I can't think of any good reasons why this government is capable of whipping them into shape, especially after the industry itself talks about incredible premium increases even with the package that they basically have rubber-stamped.
Why isn't this government considering and looking at the Insurance Corp of British Columbia, among others, or Saskatchewan or Manitoba, the public insurance systems? They range from no-fault in Manitoba, which uses a Quebec-style no-fault, to tort-dominated with no-fault provisions in British Columbia, all of them providing lower average premiums than we have here in Ontario. Why isn't the government taking a look at those? Why is there this bias against publicly owned driver-owned insurance systems?
Ms Akeson: That's a good question. I don't know. I find this government difficult to understand at any point, particularly because we work with low-income people and it just seems that they're being hit over and over and over and over again at every level.
I see children who aren't eating. I see 10,000 kids in the middle of the city of Ottawa who are potentially going to be on the street because we don't have affordable housing, because we have slum housing, and when you cut back on welfare, they are very, very close to being evicted and there's no place to go. Once we have a generation of children who grow up on the street, our society will never be the same. Everything that happens affects them in the most difficult way, and this is one of them.
You talk about your rural areas and so on and so forth. For poor people, a car is essential. They just have to have a car to get around. They cannot afford public transit and they have to try and top up welfare. They have to try and top up minimum wage because you can't live on it. You cannot live on it.
Mr Kormos: That's right. Al Palladini would tell them, "Let them take a bus." The fact is this government has pulled the rug out from underneath public transit.
Mrs Marland: Thank you and good morning, Ms Akeson. I just would respond to our friend, our colleague across the floor, by saying if your government had got into government-run automobile insurance and had done as good a job as your government did with the Workers' Compensation Board, we would really be in a mess.
Mr Kormos: Oh, give me a break, Margaret. That was the Tory --
Interjections.
The Chair: If we could focus on questions to the witness, please.
Mrs Marland: I'm sorry, Ms Akeson.
Mr Kormos: You should apologize.
Mrs Marland: No, I'm apologizing to our deputation. We have a leadership race going on at the moment. Unfortunately, we have some of the people on the committee with us.
Your concerns address some of the concerns we are hearing. In some cases, for example, some companies now do have rates for seniors. I happen to be married to someone who has one of those rates, being a senior.
My concerns have really focused around the fact that everything seems to take so long after an accident. I'm just wondering whether you have any advice for us to pass on to the people who are drafting changes to this legislation and also directly to the industry about how we can specifically address how people are dealt with after the accident.
Ms Akeson: No, we haven't looked into that. We don't deal with seniors. That is not an area that we deal with. We deal only with poor families. In terms of seniors, the only thing I know about it is my own situation. I've been driving a car since I'm 16. I'm now 64. I had one accident. It was a young male who had had 17 accidents who hit me, and my insurance went up. I couldn't believe it, and this was in Quebec. There are some real problems with insurance companies and car insurance, and why this young man is still driving -- of course, they have a no-fault thing in Quebec. However, I can't help you with that. I don't know. That isn't our focus. Our focus is totally for the bottom 20% of the population who are the poor families, the working poor and the welfare families.
Mr Ted Arnott (Wellington): Thank you for coming in today to outline your views on this issue, because it will be helpful to our committee and I certainly understand that your expressions are very sincere and compliment you on the work that you're doing in your community to work towards greater social justice, as you see it.
Unfortunately, Mr Kormos has stepped out for a moment, but I wanted to respond to a point that he had made. He indicated and sort of implied that the Insurance Bureau of Canada, as well as one company, had indicated that rates will soar under this proposal. What he indicated, I think, was correct, but there's also another company that spoke to us last week, the Dominion Insurance Co, and they indicated that good drivers, they felt under this proposal, would receive a break relative to their policies. So that's good news for us.
I think that if we look at reducing the cost of the product to the insurance companies, they may very well, through a competitive marketplace, be able to offer at least rate stability and perhaps even lower premiums for certain drivers. That, to me, would benefit low-income people who frankly need a break.
In Wellington county, where I represent the people of Wellington county, there are a lot of people who are sort of at the border line who literally can't afford the insurance premiums they're being asked to pay. I'm concerned that more and more people are going to be driving without insurance if we don't get these rates under control.
Ms Akeson: One of the reasons the rates aren't under control are the huge profits these people are making. I really think that we have to take a look at this. Are we in the insurance business to ensure that citizens don't find themselves in terrible situations because of something they can't help or are we in the business to make sure that these companies make these huge profits and their shareholders do well?
I'm going to get off car insurance for a minute. We have a very small office. We had to have insurance because of a purchase of service agreement with the government, so we bought insurance. It was $134 in 1992. It went up to $550 this year, with no reason at all for this. So I tried to change what was in the contract because we didn't need half of the stuff in the contract. We weren't able to. I couldn't find another insurance company. There's collusion as far as I'm concerned. We could not get insurance for less this year. For what reason? We hadn't claimed on it, and they just decided arbitrarily, so we had to cancel our insurance. I think we have to look at the insurance companies, period, and how you're going to control that stuff.
1010
Mr Gerry Phillips (Scarborough-Agincourt): Thank you for the presentation. You're an important voice here for us, and I appreciate you being here because I suspect we won't hear as much from groups with less income as we will from people with more income.
One aspect of the proposed legislation is to expand what's called access to tort, I think, or more involvement by the court system in the auto insurance area. Can you give us any insight -- I know you touched on it briefly in your comments -- on the implications of that for people who may come from a background of lower income?
Ms Akeson: I think you can elaborate much more on it, but the fact is that it's very difficult now. Legal clinics are backed up, if you can get a certificate for legal aid, and then of course the courts are backed up. So if you're poor and you have an accident and you need benefits, it could be a long time, as I mentioned, before you can get those benefits, and for poor people, they can't borrow money. There isn't any way out. They either get help then or they're in real trouble. So I think our court system is a real mess and that has to be dealt with too.
So from the perspective of low-income people, anything that may be troublesome to the middle class is almost a life-and-death situation for them, and I'm not exaggerating here. I know this gentleman finds this strange, but I'm not exaggerating. If he saw how poor people live in the capital, he would feel very differently about his smiling on this issue, because it is not a funny issue. We have children who are literally -- literally -- doing without food every day in the nation's capital, and there's a lot of them. There are no jobs. There are no jobs in this city for people who are poor who aren't professionals. So all of these things, including the court system, including the lack of ability to get certificates when you need help, the whole system for the bottom 20% is bankrupt and falling apart, and this is just another example of that.
Ms Annamarie Castrilli (Downsview): Thank you very much, Ms Akeson, for bringing this very useful perspective. I've been troubled over the course of the hearings about some of the presentations that have come before us, primarily by insurers who seem to be talking about rate stabilization and give us figures that have a difference of about 15% between one insurer and another as to what rate stabilization means. I wonder, from a perspective of someone who works in the field with people who have to make do in very difficult circumstances, what you think of the statement that rate stabilization can mean as much as a 15% increase in rates over one year.
Ms Akeson: When I think of that, it's impossible for poor people. It just is impossible, and if we're going to look at a system that is only for the middle class -- and increasingly the middle class are finding this is not so easy -- then I don't think that we have a very democratic society. I think the poverty that hit this country started in the 1970s when we first started to see people on the streets. We hadn't seen that since the Depression, and yet we tend to blame the victims; we blame the poor. You're lazy, you're stupid, you're something.
Now that the middle class are beginning to lose their jobs, they're beginning to realize poverty means you don't have any money and you don't have access to money and you don't have access to jobs. As more and more people come to grips with that, maybe we'll be able to deal with some of these situations. But it's been so easy to blame the victims for the last 15 years, and I'm concerned that in doing that, because we've had it so good at the middle-class level, we just lost touch with the implications of some of our decisions, and --
The Chair: I'm afraid we're out of time.
Ms Castrilli: I'll ask you the question later.
Ms Akeson: -- what people will do if they have to pay such high rates, the people you represent, but --
The Chair: Thank you very much for your presentation to our committee. We appreciate your input into our deliberations.
Ms Akeson: Thank you. I hope it helps.
Mr Kormos: I can explain why some members of this committee feel comfortable smiling in response to your presentation, because in addition to their salaries, they grab over $100 --
The Chair: Excuse me, Mr Kormos. I believe you're out of order.
Mr Kormos: That's more than David Tsubouchi tells a single person on welfare --
The Chair: Mr Kormos --
Mr Kormos: That's why they can smile.
Mr Rob Sampson (Mississauga West): Mr Chairman, on a point of order: I want to draw to the attention of the member on the other side of the table here that I was speaking with Ms Castrilli about the matter of access to legal items. I was not smiling as a result of the comment the deputant was making.
Mr Kormos: I was speaking about $100 daily for a tax-free per diem --
The Chair: Thank you for your presentation to our committee, and I apologize for the --
Ms Akeson: May I please add one --
The Chair: You had one final comment?
Ms Akeson: My comment is that I like the idea of -- we may be able to work through that, but it is extremely difficult. As you know, I did not bring extra copies of our little report because we don't have the money to do that. There is no money for voices for the poor, for the bottom 20%, and so it is very difficult for all politicians to hear very much about what's going on, because there just is not any money for that kind of support for the bottom 20%. I hope you think about that, because otherwise you will not get that piece of information you need to make the right decision. When you talk about $100 day, from our perspective that is exorbitant. However, if you do want to hear from the bottom 20%, there are going to have to be vehicles and some way that can happen.
The Chair: Thank you very much for your input.
ONTARIO COALITION FOR BETTER CYCLING
CITIZENS FOR SAFE CYCLING
The Chair: We now welcome the Ontario Coalition for Better Cycling, Mr Delmage.
Mr Avery Burdett: My name is Avery Burdett and I am chairman of the Ontario Coalition for Better Cycling. The Ontario Coalition for Better Cycling is an umbrella group of regional cycling organizations, and our role is that we endeavour to speak on behalf of cyclists who use the roads in Ontario, all roads, not just provincial roads. We're sharing the session with my colleague here from Citizens for Safe Cycling.
Mr Brett Delmage: My name is Brett Delmage. I'm a nationally certified defensive cycling instructor. I'm also president of Citizens for Safe Cycling, a non-profit, member-based association that promotes cycling as a mode of transportation in Ottawa-Carleton. Citizens for Safe Cycling is a member of the Ontario Coalition for Better Cycling and we work together with them.
Mr Burdett: Before we give you our position on the auto insurance reform we'd like to just give you a few facts about cycling, since there are many myths about cycling, and part of these are unfortunately promoted by the provincial government, so we'd like to take every opportunity to put some facts on the table.
Cyclists, as you know, are very vulnerable to serious injury at speeds of less than 50 kilometres an hour when involved in collisions with motor vehicles, and all cycling deaths in the regional municipality of Ottawa-Carleton in the last 10 years resulted from a collision with a motor vehicle. However, most cycling crashes do not involve a motor vehicle. Cyclists, as you know, have a right to use the road system in Ontario without a requirement to be licensed or insured, and as many as 5% of Ontario's population use a bicycle as the primary form of transportation. Many of these may not own an automobile or be insured under an automobile policy. It's doubtful whether any significant number of cyclists actually carry general accident insurance, which is the other way they could cover themselves against injury or accident.
1020
Despite this and given that background, over 50% of Ontarians use a bicycle for recreation or transportation and that's according to the 1994 provincial government survey. However, only 2.5% of all road fatalities and 3% of serious injuries in Ontario are suffered by cyclists. Just to give a bit more context, for every 40 fatalities on Ontario roads, 34 are motorists or passengers, five are pedestrians and only one is a cyclist.
Cycling is really a very inherently safe activity, provided cyclists operate their bicycles as a vehicle; in other words, they follow the rules of the road. Competent cyclists, or at least the principles of competent cycling can be taught to children as young as 10 years of age and they can absorb those principles.
The other fact is the competent cyclists have actually lower serious injury and fatality rates per kilometre than motorists, so that might surprise a few people, but none the less cyclists are vulnerable when they actually do get into a collision with an automobile.
Cyclists rarely inflict serious injuries on themselves or other road users, so they're very vulnerable, as I said originally, to being hit by a motor vehicle when they do get into a collision. One of the other factors is cyclists whose primary mode of transportation is a bicycle are likely to be among low-income groups and students, and of course cycling is a very economical way of getting to work, to schools or for other utilitarian purposes.
When we look at those facts in the context of the role of motorists, motorists benefit from a number of subsidies. Many of them are hidden. An example of this is the government-funded health care for victims of motor vehicle collisions. In its March 1994 report, Ontario's safety research office estimated the social cost of Ontario motor vehicle crashes to be $9 billion annually -- that was in 1990 dollars -- and $7.3 billion of that value was placed on the human consequence of crashes, and the remainder is value of property and time and material expended on crashes.
Locally, according to The Total Cost of Travel in the Regional Municipality of Ottawa-Carleton, recently published by RMOC, by the municipality, costs to society not covered by insurance premiums were estimated at $243 million, and that was in 1993. The total annual subsidy to automobiles is estimated to be at least $315 million, compared to $80 million for public transit and less than $7 million for cycling.
That provides you with a bit of context concerning our position. What we are concerned about, the material we've received, is that it constantly refers to the insurer's responsibility to the insured. We believe it's an incorrect assumption that all parties injured or suffering damages from automobile collision have insurance. Many cyclists do not own cars, as I mentioned before, and have no car insurance.
We don't believe that the costs and the consequences in motor vehicle ownership and use is adequately borne by motorists, either through the taxation system or indeed the insurance system. Of course we believe that motorists should more fairly bear the full costs of their choice of travel. So we welcome the principle that the province will seek to recover some of the costs of victim health care from insurers, although it's not clear to us in looking at the paper which costs will be recovered; there seems to be some limit on what types of costs.
We'd like to see this principle extended to cover all costs where it's practicable and economically efficient to collect, including emergency hospital treatment, ambulance charges, the costs of police services and the costs of fire department services. In fact, locally here a number of municipalities have decided to charge motorists for use of fire department trucks if that's required in their municipalities. I'm thinking of Nepean as one. But none the less, the province can probably play a stronger role in recovering the full cost of collisions.
We have concerns about the reductions in the amounts of compensation to be paid to victims of motor vehicle collisions. There is a high proportion of low-income earners among cyclists who use a bicycle as their primary or only means of transportation and their ability to sue for losses above these proposed maximums is limited. Clearly, the lower down the scale -- and I'm thinking of those who would be entitled to claim $400 a week, but somewhat less than, say, $50,000 or $60,000 annually -- their ability to sue would be constrained and it's likely they probably wouldn't sue.
We are concerned also on the restrictions on students. It seems to be unjust. Students are high users of bicycles as a means of transportation. They're particularly vulnerable in collisions with cars because of the high usage rate. We believe that students should be permitted to claim for disrupted studies and loss of future income.
That essentially is our presentation.
The Chair: Thank you. Mr Delmage, do you have a presentation as well, or should we move to questions?
Mr Delmage: No, we share the same position. It's been developed jointly.
Mr Sampson: Thank you very much for your presentation. This is the first one representing cyclists. It's often a difficult issue to deal with in trying to understand how you compensate the various victims when a cyclist is involved in an accident with an auto. Under the current legislation and under the proposed legislation, it's the auto policy that would pay the benefit, as you know.
The difficulty is what happens when the cyclist has his or her accident and there's no car in sight, so to speak. The expenses associated with that recovery would be recovered by the public purse, as you know, because they'd have to go to the OHIP system for medical expenses associated with the necessary recovery.
What we've tried to do here is to reintroduce a level of tort to give back to the cyclists, whether it be a student or whomever, the right to sue the at-fault motorist, which I gather is the majority of the incidents where the two are involved, so give the cyclist the right to sue for the loss of income and expenses over a certain no-fault benefit for medical expenses, but it's the motorist's policy that would pay. We've tried to deal with that very difficult situation where you have an insured vehicle having a collision with an uninsured vehicle, so to speak, a cyclist.
We've tried also to deal with the student comment you had, that the student needs to have some access for the loss of future income etc. That is actually brought back for the student under this proposal; under 164 it's just not there. So I think we've tried to deal with that very delicate balance between the cyclist and the auto when they are involved together in an accident, but I'd appreciate any further comment or advice you could give us as to how we can fix up that item with regard to the fault side, with regard to the no-fault side. Would you be proposing some sort of an insurance program for cyclists?
1030
Mr Burdett: I think the issue here is low-income users of bicycles. Although you're quite correct that the individual has the right to sue the at-fault driver, practically speaking, the people who would be capable of doing that are not likely to be on a bicycle, because of the fact that low-income groups do use a bicycle in higher proportion as their only means of transportation. So while yes, they have the right to sue, practically speaking they probably don't.
Mr Sampson: But in the category of a student who was on his bike or her bike off to classes one day and got run over by an at-fault driver, a significant reduction in income, maybe the erosion of any possibility of future income as associated with maybe they were attending medical school or whatever, they would have the ability to sue for that loss of future income under this proposal.
Mr Burdett: I understand that, but I also understand there's been a reduction in the ability to sue under the proposed changes.
Mr Sampson: No, it's increased.
Mr Burdett: I believe $185 a week was the maximum.
Mr Sampson: You're talking about the no-fault benefit that would be available.
Mr Burdett: Yes. You see, we're trying to distinguish between what an individual is entitled to and what an individual has to sue for, and in the case of cyclists, as we've seen through court cases of recent fatalities, it's where drivers have been charged or were not charged to start with because it's been difficult, according to the police and the legal profession, to prove the fault of the driver.
For instance, typical, quite recently we've had some situations where cyclists have been rear-ended. The drivers claim they haven't seen them even though they've clearly been riding properly. There have been no skid marks, therefore no way for police or lawyers to reconstruct an accident or a collision. We prefer to call them collisions, because accidents are avoidable; these are collisions.
So there's a greater difficulty for cyclists to sue. The courts are generally more generous to motorists and give them the benefit of the doubt. So again it's a somewhat theoretical proposal, that the right to sue is for cyclists. It's not as clear-cut as rear-ending another car, where there's clear damage, where there are skid marks etc.
Mr Phillips: I'd like to follow up a little bit on Mr Sampson's line of questioning. I understand the reduction in the benefits one, but I'm trying to understand your first paragraph on your recommendations, or your position, where you say: "The incorrect assumption is all parties injured or suffering damages...have insurance. Many cyclists do not own cars and have no car insurance."
What are you recommending that we try and do with this legislation to address your problem?
Mr Delmage: It reads like automobile drivers, motorists are the only parties involved here and it should be more clear, because we certainly had difficulty reading all the documents as to what the status of uninsured pedestrians and cyclists is.
Mr Phillips: Your concern is of course just with an auto accident. Mr Sampson touched briefly on whether there should be any requirement for insurance not involving autos, but that's something you don't want to comment on today.
Mr Delmage: There is third-party liability insurance available for cyclists which can be purchased at a reasonable cost.
Mr Phillips: Yes, but one certainly doesn't need it to ride a bicycle.
Mr Delmage: Generally not, no.
Mr Phillips: I think Mr Sampson explained that if you are riding a bicycle and someone runs into you, if the motorist is at fault, you're covered. You're clear on that in the legislation, I gather.
Mr Delmage: Yes, except with reduced benefits. Avery mentioned the problem: the practical difficulty versus the reality of reclaiming against the damages.
Mr Phillips: I understand the concern about reduction. I'm trying to get at what wording you would like in the legislation to address the problem that you have in the first paragraph here.
Mr Delmage: We don't have any recommendations other than to say send it back to your staff to make it more clear in the documents where a cyclist specifically fits in. The words should appear in there, because the word "insured" doesn't address cyclists as it stands.
Mr Phillips: Okay.
Mr Burdett: In fact there is wording, I don't recall quite what it is, which suggests that uninsured -- it refers to the uninsured, which includes cyclists -- would not be entitled to claims. I'm sure that was not intended to include cyclists; I think it's uninsured motorists. But there was some wording in there, and I don't recall quite where it was, in some of the papers I got. So there is an underlying assumption that we're talking about motor vehicles, and insured motor vehicles.
Ms Frances Lankin (Beaches-Woodbine): I think that's an interesting point, and we'll have to take a look at it. I'm not sure whether you in your analysis have actually found any problems in the wording that would cause a problem in access to benefits or access to the coverage that would be entitled to you under tort or under no-fault, but you're just asking us to make sure that in fact is the case. This would include pedestrians as well.
Mr Burdett: Yes.
Ms Lankin: Okay. I think that's something that we could easily take a look at.
I understand the points that you're making and I think you make a particularly good point about the difficulty, in a tort system, of proving fault when it's between a large motor vehicle and a bicycle when there are so many attitudinal problems of motorists towards cyclists, the sort of attitude that cyclists weave in and out and are a problem, that they're not safe cyclists. I think we've seen a tremendous education program take place over the last number of years and a lot of people who are very conscious of safe road rules for cycling. If only motorists were as conscious with respect to cyclists, there would be a lot less problem.
I think that's an interesting point. Do any of your organizations follow court cases that have ever emerged involving this? Are there any stats or stories that could be collected and sent to us as a committee to look at this? I think in effect you've raised an interesting point: If it's not possible in many cases to determine fault, then how does that innocent accident victim actually get justice through the restoration of tort when the no-fault benefits are being reduced so significantly?
Mr Burdett: The answer to the question, do we have cases or statistics, is no. We are very limited in our resources, and as you can see, we don't have legal counsel here today, but we do track some of the more serious issues regarding the laying of charges. I guess that's another issue. But our experience is that cyclists who use the roads legally have great difficulty in getting justice through both the legal system and I think recovering loss of income also. I think they're tied together. If you can't get a charge laid, it's likely that you're not going to be able to find an at-fault driver if there's a dispute.
The Chair: Thank you, gentlemen, for combining and presenting your presentations to us today. We appreciate your input, a different perspective entirely.
1040
BICKERTON BROKERS ONTARIO LTD
The Chair: We now welcome Bickerton Brokers Ontario Ltd. I understand that Mr Bickerton is having difficulty on the roads this morning and Mr Berlis is going to make the presentation for him. Welcome to the committee, Mr Berlis. We appreciate your standing in on short notice.
Mr Mike Berlis: I appreciate your allowing me to be a last-minute substitute. Al Bickerton was to be here from Gananoque but he felt the driving conditions this morning were a little treacherous, so he did not want to have a car accident, which is what was important. So with your permission, I'd like to read his presentation which was sent to me late yesterday. I think most of you will have copies of it.
My name is Mike Berlis. I'm an insurance broker in Ottawa. Al Bickerton is president of Bickerton Brokers Ontario Ltd, which he owns together with three other partners. They are a medium-sized general insurance brokerage located in Kingston and Gananoque. Their client base of about 6,000 customers is made up mostly of personal lines insurance consumers. Approximately 55% of these consist of Ontario auto insurance policies. They've been servicing their clients since 1949 and are currently in an expansionary mode, adding new sales and service staff to their present staff of 16. This expansion is taking place because of the strong pro-business approach being taken by the current government of Ontario. They feel confident about the future.
Mr Bickerton has presented papers previously at similar committees in 1990 and 1993, during earlier revisions to the Ontario insurance product. In those presentations, he tried to emphasize the importance of making the Ontario auto insurance policy as easily understood as possible. Our customers appreciate the need for security in the operation of vehicles but they do not appreciate the uncertainty and confusion resulting from unending changes, many of which were unquestionably true of Bill 164. In fact, in reply to one panelist's question at the Bill 164 hearing about his gut feel, as a broker, of the changes being brought about, Mr Bickerton replied the he did not feel customers could afford the product. This time, we are encouraged that the industry is being listened to. For the sake of Ontario consumers, we need to get it right and we need to be able to afford it.
Where are we going with the proposed changes?
There is no doubt that replacing Bill 164 is a good move. The proposed changes are an excellent start at the reform required. I do not intend to analyse each section of the proposed policy, since there have been many submissions already made to you which have done a far better job than I could. I will state, however, that the changes are being embraced by most insurers with whom we deal as at least a start towards a system which can be more accurately controlled.
Brokers and our customers have become fed up with the cases of fraud perpetrated upon insurers, and hence upon consumers of insurance such as you and I and all customers, by greedy criminals and those professionals from the disciplines of law and medicine who have collaborated in these sometimes elaborate schemes to steal money from the system. I feel the provisions of the proposed legislation are a good start at controlling this situation.
I also feel you should consider making the penalties for perpetrating or collaborating in these schemes much stiffer. They should include the seizure of property to repay damages, in addition to prison sentences. We must make all those associated with this disgusting practice fully accountable on a joint and several basis. A few very harsh examples of penalties imposed will send a very strong message to would-be criminals.
We applaud your support for increasing fines for driving without insurance, but we also feel that these penalties should be made much harsher. The current fine and that proposed are still smaller than the cost of insurance that the driver should have purchased. The penalties should also include seizure of the vehicle until the fine is paid. Perhaps a period of loss of licence would also be worth implementing.
I would also like to stress how important this legislation is to the stability of the auto insurance industry in Ontario. We have seen the constriction of the insurance market since the introduction of Bill 164. This was well anticipated by, and forecast to, the previous government in the hearings of the day. It was also ignored by the previous government. This has caused a major attitude shift by insurers away from wanting to write Ontario automobile insurance. Brokers have witnessed many insurers cancelling their contracts when loss ratios were adversely affected by the loss costs imposed by Bill 164, although brokers had no control at all over either coverages or loss costs. Many of these situations resulted from brokers having to place business under the "take all comers" rule and being impacted by the losses resulting from business that was sure from the outset to cause unusual loss costs but could not be avoided. We are grateful to see in the legislation some provisions to alter these rules and to revise the Facility Association provisions.
We also embrace the trend away from the entitlement philosophy of Bill 164 to an indemnity philosophy, which of course is the fundamental precept of insurance. Our customers can easily see why our costs have gone crazy when they see benefits being paid for no reason. One of our senior citizen clients, after a small accident resulting in some minor injuries being paid under section B, actually called me to ask if she could repay the insurer to save the system some money. She said she had no need to be paid, even though she had minor injuries. She actually felt guilty about accepting the money. Don't we all wish we had more people like this?
While this new proposed product attempts to provide a reasonable balance between tort and no-fault accident benefits, we feel more can be done to further strengthen the threshold. Indeed, OMPP, though it had a few problems which could have easily been fixed, was probably the best auto insurance product we have ever had in Ontario. If your committee continues to listen attentively to our industry's suggestions, I suspect we will not have to engage in another retooling of the system. Our clientele is crying out for stability in pricing. I'm very concerned that if access to tort is too easy, we run the risk of seeing premiums increase just as they did in the late 1980s. The introduction of contingency fees for legal representation will very likely exacerbate this problem. Please give this matter very serious consideration before allowing contingency fees into the auto insurance litigation loop.
Some additional suggestions:
In the interest of the consumer being able to understand another change to their coverage, I would strongly recommend the industry publish an easily read and easily understood explanatory brochure which could be distributed by insurers.
We feel that the estimated future premium levels of 7% are still too high for easy assimilation by Ontario drivers. We ask that you continue to make revisions to the proposed legislation which will reduce those increases even more.
We ask you to consider making it possible that all Ontarians, and not just those of a particular affinity group, have the availability of using their other income support benefits to offset the impact of section B premiums. As brokers, we need a level playing field with group insurers to be able to offer all Ontarians the ability to use their other income and health payment mechanisms to offset the cost of section B premiums.
We support the general recommendations brought forward by the Insurance Bureau of Canada and its members, and have added a few items as mentioned above.
The overall message from my firm as brokers is to please make a product that the public can understand, that feels just and reasonable, and that is as consistently affordable as possible. I feel that asking the motoring public to accept a 7% annual increase for the foreseeable future is still too much. It obviously is much better than the double-digit increases of Bill 164, but it's still too high.
Please do not overlook the need to tell the public that achieving stability will not be done overnight; it will take a little time to let the new system develop its statistics.
Thank you for the opportunity to speak to your panel.
1050
Ms Castrilli: Thank you very much, Mr Berlis, for your presentation. I take it you didn't have to come from Gananoque?
Mr Berlis: I didn't, no.
Ms Castrilli: We're delighted to have you here. I'm interested in your comments on page 4 which talk about one of the four systems that has been introduced or considered in this province since 1989, and I'm referring specifically to the Ontario motorist protection plan. Mr Bickerton indicates that he thought that was a good system. In fact, information provided by the industry itself demonstrates that the actual cost of bodily injury and accident benefits was significantly lower during that period of time and then was up on either side, and also that the premiums that were paid were consistently lower, and sometimes even below the rate of inflation, during that period of time. I'm curious as to how you think you would tinker with the system. You say that this was a good system, it needed some modification. What kind of modification to it would you have seen, and are those modifications what you would see in this legislation, which seems to me quite different?
Mr Berlis: I think a lot of the modifications that have been put forward by the legislation are similar to an OMPP system, under the accident benefits section, and that's the main area that seems to be the problem. You're right, statistically there was a short period of time where premiums seemed to level off and the system seemed to be working. I don't think there was enough time given under the OMPP system to really show a long-term effect of it, but certainly in those few years all graphs and so on have shown that it was at least a positive step in the right direction. I think this legislation is going in that same kind of direction, which is positive.
Ms Castrilli: I question whether that's true, because insurers have told us that under this proposed legislation we're going to see increases of anywhere from 7% to 15%, depending on how you calculate it. So it doesn't look to me like there are going to be reductions. That's a per annum figure over the next four or five years; we're talking somewhere between a 30% and 40% increase. I wonder if that really is a fine-tuning of the system to bring it back to what was working.
Mr Berlis: I think the idea of the 7%, which is a prediction, obviously, certainly is not good enough but it's far better than it would be if the current system remained in place. At this point in time, I think they're talking about at least double that kind of percentage increase. So it's a step in the right direction. There are further steps that can be taken and hopefully will be taken to reduce that even lower. It's always a difficult thing to predict what's going to happen in the future, particularly in insurance, but I think that at least gives us an indication that it's going in the right direction. It's lowering what would happen if we didn't make the change.
Ms Castrilli: Can brokers sell a 7% to 15% increase every year for the next four or five years?
Mr Berlis: Not willingly, and it's certainly very difficult to do. As brokers, we have had that trouble in the last few years. It's a very, very difficult thing to do. There are certain steps that consumers can take with deductibles and coverages and so on to offset some of the increase, but at some point in time the increases are just inevitable. That's very tough and it's not a pleasant thing to have to deal with.
Ms Castrilli: Not for you on the front lines.
Mr Berlis: Not at all, no.
Ms Lankin: I'm interested in the comment that you made in your presentation about not overlooking the need to tell the public it will take some time to achieve stability, and you reinforced that comment in your response to Ms Castrilli, in talking about the fact that we didn't really have enough time, even with OMPP. Let me put this to you, because I feel a little frustrated sometimes as I hear people talk about Bill 164. First of all, you said it would be at least double the increases projected for under this legislation. In fact, the insurance industry's projections were about 11% to 12%, not 14% and up. I think that's way too much and I think there are things that needed to be done within the system, but I also question the number. We see this year, when the projections had been for a 12% increase, on average the increase across the industry seems to be coming in about 9.5%. We also see, if we go back -- and I looked at the presentations before the standing committee dealing with Bill 164 -- that the insurance industry was predicting 9% to 10% increases in OMPP premiums starting to kick in.
It takes time for any system to settle out. People are starting to say, and I've heard from folks in the rehab field, that insurance companies that were beginning to understand effective rehab management and managing their costs were able to bring their costs down. There are insurance companies out there with zero to 2% increases projected over the next couple of years because they had good fraud management and good case management.
So I come back to that we really have to take a look at what is the product that we want to deliver. I understand the industry's position about a move from an entitlement to an indemnity. I guess my problem is the vehicle by which that's being delivered, reintroduction of tort. I remember back in the days before OMPP -- and the whole mechanism and process of what we went through there had a lot to do with the outrage about increasing premiums in those days -- when that was a more heavily tort system. In terms of your brokerage firm, you're saying that you agree with the return to tort but you want to see higher thresholds. Can you explain that to me, because in there you're just going to transfer the costs which are now going into delivering rehab benefits and health care to people into a court system, and I'm not sure how that is better.
Mr Berlis: I think one of the problems with the system is that it is a complicated system. If it weren't complicated, if it were either, "Let's go tort," or, "Let's not go tort," that would solve the problem. That would be a much easier thing to do deal with. This whole process is an example of how complicated a system it is. I think to find the balance between some tort and getting away from tort and so on, just trying to find that balance is very, very difficult.
In terms of trying to deal with statistics and trying to predict figures and percentage increases and so on -- I'm certainly not an actuary, but even the actuaries in the business trying to look at systems -- it does take a long time to build up stable statistics over periods of years. One of the problems in the Ontario automobile insurance system has been that we've had now a number of systems in the last number of years, so to try to make any prediction on looking at the past and trying to say this is what's going to happen in the future is virtually impossible, I think. We've taken our best guess, and the actuaries put together as many statistics as they can to make the best guess.
Mr Douglas B. Ford (Etobicoke-Humber): Thank you for coming, Mr Berlis. Myself, I don't believe that there is a perfect solution to the problems, but I am suggesting that we review various insurance policies around North America and around the world, come up with some new ideas and see if we can get an amicable situation for people cost-wise and benefit-wise. If we review these other areas, we might be coming up with some fresh ideas from a different approach so that we can give a fair appraisal of what is needed. There's no true solution, so to speak, but this is what we will be trying to do, because we've heard many, many people come up to this committee giving us their views, but they all seem to come around the same issues as the insurance before or the perceived future, but a fresh approach, that's what we're looking at.
1100
Mr Berlis: That's really refreshing. We certainly approve of that kind of thought.
Mr Ford: This is what we're trying to do, and this committee is working on this. I don't think it should be really rushed through in a panic to get the solution, but we should come up with new ideas and a fresh approach on this. I just wanted to let you know that.
Mr Berlis: I appreciate that and certainly I agree with the comment about not trying to rush this through. It is more complicated than people think.
Mr Ford: That's right, it is.
Mr Berlis: As you delve into it, you can see how some of those complications are coming out.
The Chair: Thank you very much. We appreciate your presentation before the committee today.
Mr Berlis: Thanks again for coming to Ottawa.
JACQUES BUY
The Chair: We would now welcome Jacques Buy to the committee. Thank you very much for joining us this morning, sir. I understand Mr Buy's presentation will be in French.
M. Jacques Buy : Je voudrais tout d'abord remercier le gouvernement de l'Ontario.
Panne électronique.
M. Buy : -- s'intéresse et s'approche du public pour lui demander son opinion sur une loi qui doit être modifiée, et je voudrais surtout remercier le comité permanent des finances et des affaires économiques de me recevoir aujourd'hui.
Je voudrais rappeler tout d'abord que l'assurance-automobile, faire assurer sa voiture, est obligatoire par la loi. Tout ceci se trouve au moins en tête de ma préoccupation.
Mon objectif est de montrer que les compagnies d'assurances, en tout cas plusieurs d'entre elles, sont incapables de gérer le système des assurances-automobile sans chercher un profit maximum au détriment de l'assuré, qui ne peut se défendre. Et je voudrais montrer que, pour se justifier auprès du consommateur sur un accroissement des prix absolument invraisemblable, les compagnies d'assurances renvoient le consommateur au gouvernement de l'Ontario en disant, «Les mesures que nous prenons nous sont imposées par la Loi sur l'assurance-automobile.»
Les faits qui me concernent, puisque je ne suis qu'un exemple parmi tant d'autres : mon cas est simple. Je conduis depuis 40 ans, en Europe et au Canada. En 1986, j'ai fait assurer un premier véhicule par la compagnie Zurich à Ottawa. En 1990, j'ai fait assurer un deuxième véhicule par extension du contrat. Depuis huit ans, je parcours plus de 60 000 kilomètres par an. Je n'ai jamais perdu un point de permis de conduire. J'ai eu deux accidents mineurs, l'un en janvier 1991 sur une plaque de verglas sur une autoroute, ou j'ai perdu le contrôle de ma voiture mais je n'ai touché personne, et en octobre 1994, où j'ai eu une collision lors d'un freinage, le dégât se situant au niveau de mon pare-chocs avant et du pare-chocs arrière du véhicule qui m'a précédé. Le coût pour ma compagnie d'assurances était de 1600 $. Je lui avais payé jusque-là 16 000 $ de primes au cours des 10 années ou près de 10 années d'assurance.
Au moment où j'ai eu ce second accident, est c'est un fait que j'ai noté, il n'y a eu aucune réaction, ni de mon courtier ni de la compagnie d'assurances et mon contrat se renouvelait au 28 juillet 1994. Le 6 juillet, mon courtier m'envoie une lettre en me disant, «Zurich ne veut plus vous assurer», sans explication. Le contrat se terminait le 28, mais dès les délais de poste, j'ai reçu cette lettre aux environs du 12 juillet.
J'ai pris contact avec mon interlocuteur à Ottawa, le courtier, et au cours d'explication que j'ai pu avoir avec lui, je me suis entendu dire que j'avais eu deux accidents en cinq ans, que cela équivalait deux accidents à quatre étoiles, me disait-il -- étoiles ou points, je ne sais ce qu'il faut employer -- quatre étoiles égale un conducteur à risque, et un conducteur à risque doit être renvoyé à la compagnie d'assurances qui s'appelle Facilities Insurance, au coût de 4000 $ minimum pour assurer un véhicule.
Après discussion avec le courtier et au téléphone avec un employé de Zurich, j'ai pu obtenir que cette compagnie me réassure. Elle m'envoie un contrat. J'ai demandé, en voyant ce contrat, à rencontrer la responsable du service qui s'occupait de ce contrat chez Zurich.
Vous êtes venus de Toronto pour nous écouter ici à Ottawa. Je peux vous dire qu'à Ottawa, la compagnie Zurich refuse d'écouter ces clients lorsqu'ils ont quelque chose à négocier ou à discuter avec eux.
Finalement, lorsque j'ai reçu ce contrat et une analyse -- vous les trouverez dans le document que j'ai déposé -- on s'aperçoit que les postes augmentent de 134 %, 218 %, 222 %, 312 %, 120 %, 148 % sur le total du montant de l'assurance, passant donc de 1242 $ le contrat de l'année précédente à 3085 $ le nouveau contrat. Je me trouvais dans l'incapacité totale de payer un montant d'assurance pareil que je trouvais de toute façon exorbitant, et en discutant, la seule solution qui m'a était suggérée est d'enlever certains risques. J'ai fait enlever, pour un total de 870 $, les risques couvrant mon propre véhicule. De 3085 $, j'aurais dû passer à un contrat de 2215 $.
Je reçois un nouveau contrat qui est de 2431 $, et je m'aperçois que tous les postes ont été augmentés, sauf deux, par rapport au contrat précédent de 3000 $. Autrement dit, si je demande à la compagnie d'enlever certains risques pour diminuer le montant du contrat, elle s'empresse d'augmenter la valeur des autres risques pour réaugmenter de nouveau ce contrat.
1110
Je veux montrer par là que ce qui anime cette compagnie, c'est uniquement la recherche du profit maximum et non pas la simple garantie de risque avec un profit raisonnable auprès de ses clients, clients qui lui sont envoyés par la loi.
Je considère cette attitude de la part d'une compagnie d'assurances comme étant proprement indécente vis-à-vis de ses consommateurs. Toute demande d'explication -- vous trouverez dans les annexes que j'ai déposées une lettre de mon courtier qui me dit qu'il n'est plus nécessaire de lui téléphoner ni de téléphoner à la compagnie Zurich. Je dois payer ce que la compagnie m'impose.
Selon Statistique Canada, le poids des dépenses des Ontariens en assurance-automobile est de 3,4 % de leur revenu net. Du 28 juillet 1994 au 27 juillet 1995, mon assurance m'a coûté 3,1 % de mon revenu net. Je passe tout d'un coup à 7,7 % sur le premier contrat que Zurich m'envoie, et 6,1 % sur le second. Je pense que, proportionnellement au revenu, c'est quelque chose de tout à fait anormal.
Or, selon le Bureau de l'assurance du Canada, en Ontario les dégâts matériels représentent à peine 14,5 % du total des sommes que ses compagnies d'assurances paient pour les risques qu'elles couvrent, ce qui veut dire que les dégâts matériels ne représentent qu'une part relative faible des risques qui sont pris par les compagnies d'assurances. Et on m'y situe immédiatement alors que les deux accidents que j'ai eus sont deux accidents mineurs de dégâts matériels uniquement. On me situe immédiatement au maximum de ce qui peut être appliqué à un assuré en lui attribuant quatre étoiles ou quatre points, je ne sais pas, mais en disant, «Vous êtes un conducteur à risque, et quand vous êtes un conducteur à risque, il faut qu'on vous taxe au-dessus.»
Il n'y a aucun Code civil, il n'y a aucun Code pénal dans les pays occidentaux, dans les démocraties occidentales qui prévoit que l'on attribue le maximum d'une peine, quel que soit le degré de la faute commise. Ça n'a pas de sens. Je dirais que l'attitude de ces compagnies d'assurances est tout à fait amorale. C'est à dire qu'elles ne peuvent pas distinguer le mal du bien. Or, il me semble que s'il y a une loi sur l'assurance-automobile qui impose aux conducteurs de s'assurer, cette loi, comme toutes les lois, comme tout ce qui fait partie du droit se réfère à la morale qui représente lui-même un des fondements du droit, est-ce que les compagnies d'assurances sont au-dessus de la morale ?
Les compagnies d'assurances ne sont pas déficitaires, comme on tend à le faire croire en parlant tout le temps de la nécessité d'augmenter les primes d'assurance. C'est le Bureau de l'assurance du Canada lui-même qui publie des informations là-dessus, notamment son numéro de Perspectives de 1995 qui titre, d'ailleurs, lui-même ici, «L'industrie maintient le cas», et on peut voir que même pour l'Ontario, s'il y a eu des variations, elles ne sont pas si terribles que ça dans le cas de l'assurance-automobile. Les bénéfices de cette assurance sont de 900 $ millions sur une année, et on vient nous dire ensuite -- ceci a été déposé devant vous dans un rapport le 19 février dernier -- on nous annonce par là une augmentation d'ici la fin du siècle, dans les cinq ans qui viennent, une augmentation des primes d'assurance-automobile de l'ordre de 8,6 % si le gouvernement de l'Ontario intervient pour modifier la loi au profit des compagnies d'assurances, ou, sans intervention de la province, de 16,8 % par an.
L'inflation au Canada et en Ontario est bien inférieure à 2 %. De quel droit ces compagnies se permettent-elles de faire augmenter l'inflation, de provoquer une augmentation de cette inflation simplement pour le plus grand bénéfice de leurs actionnaires ?
Ce que je demande, c'est en fait qu'il y ait un contrôle plus strict des tarifications des compagnies d'assurances. Le grand projet de loi sur l'assurance-automobile du 9 février 1996 ne fait pas état des réévaluations qui devraient être faites sur le système de classification des assurés par points d'accident. Or, si l'on regard les articles 410, 411, et 412, on s'aperçoit qu'il est très facile pour une compagnie, n'importe laquelle, de contourner ces articles tout simplement en renvoyant son client vers un groupe d'assurances qui a été créé par ces mêmes compagnies d'assurances qui s'appelle Facilities Insurance, où on envoie automatiquement les assurés en leur disant, «Là-bas on vous assure, mais vous payerez le prix maximum, 4000 $, 5000 $.» Ceci n'est pas normal.
Ce que je vous demande, en tant que résident de l'Ontario -- ce n'est pas seulement une demande ; je le réclame -- je réclame la protection de mon gouvernement, protection contre l'arbitraire des organisations financières privées qu'il agrée pour faire appliquer les lois qu'il promulgue. Je réclame que la modification de la loi ne se fasse pas uniquement au profit des compagnies d'assurances, mais qu'on tienne compte aussi des assurés. Et je réclame qu'il y ait un contrôle pour cela, des compagnies elles-mêmes, pour vérifier dans quel mesure elles peuvent se permettre d'agir tel qu'elles le font, notamment en renvoyant leurs assurés vers ces compagnies dites de faciliter. Je vous remercie.
Mr Sampson: Thank you for your presentation. I will look over the documents you have left us which -- I glanced over during your presentation -- I think are the three insurance contracts you received from Zurich.
Just one brief question. In order to get to the $2,431 category, if I read this very briefly, you took off one of the autos, the Mazda 323. Is that basically what you did to get the rate down?
M. Buy : Oui.
1120
Mr Sampson: You're right. One of the things you do not see in the legislation is an attempt to deal directly with the Facility Association issue. We feel that we had to somehow come to grips with what the auto insurance product was first before we dealt with the very serious problem as to how one deals with making sure that the high-risk driver pays the higher premium and making sure, frankly, that people who get classified into that category have an opportunity to earn their way out of that category. Currently, you do that by just basically spending time in that category and there may be better ways to do that. We're going to try to come to grips with that before we bring forward the final legislation.
One of the issues that we also have to come to grips with, frankly -- I don't think anybody in Ontario would differ from me in this position -- is that the high-risk driver, however that is determined, should perhaps be paying a higher premium to reflect the higher risk that they may get involved in another accident again and potentially have higher damages associated with that, because insurance is a pooling concept whereby you and I are in the same pool with a group of other individuals and it's the money we all contribute in premiums that's there to pay for the losses and the costs associated with those who get involved in an accident. So if there's a higher risk that there are people in our pool who will get involved in an accident, we are all going to have to share in that higher risk, and that typically ends up in higher premiums.
So I want to let you know that we will be looking at the Facility Association rules, the take-all-comers rule, the rule that says the insurance companies must take all insureds, to make sure that we have somehow, after we've redesigned the product, a much fairer system to deal with the fact that higher-risk drivers, however defined, pay for the driving habits they have demonstrated and are given the opportunity, I think, to earn back a better-risk driving rating over a period of time through something more than frankly just spending time in the Facility Association. That was more of a statement than a question, but you can respond to that if you wish.
M. Buy : Il est bien évident qu'il y a des conducteurs à risque. Les points de permis de conduire sont là notamment pour le montrer et pour les dépister. Mais qu'est-ce qu'un conducteur à risque s'il n'y a pas de définition ? La définition donnée par les assurances est absolument absurde. Elle est totalement absurde, et vous ne pouvez pas admettre que ces compagnies décident elles-mêmes qui est un conducteur à risque. C'est la loi qui doit le déterminer.
Or, la loi ne peut pas se permettre de dire que, quel que soit le degré de la faute, la peine appliquée sera maximum. Ça ne s'est jamais vu et ça ne doit pas se voir. Il ne doit pas y avoir de précédent dans ce domaine. Nous sommes dans une démocratie, donc vous devez pouvoir contrôler non seulement les compagnies qui assurent les conducteurs à risque, mais aussi les compagnies d'assurances qui envoient ces conducteurs vers ces compagnies qui assurent les risques.
Mme Castrilli : Merci bien. Votre histoire est tragique mais pas du tout rare. Nous avons eu beaucoup de personnes, des conducteurs qui ont eu des accidents mineurs et qui sont venus nous dire la même chose. Nous voyons maintenant un monopole des compagnies d'assurances et nous voyons que les conducteurs n'ont pas de choix, même pas pour faire appel quand leur arrive une situation semblable. J'ai une question très spécifique pour vous. Vous parlez de changer la loi. Qu'est-ce que vous dites spécifiquement à ce gouvernement, comment on pourrait vraiment changer la loi pour contrôler les compagnies et donner plus de choux au consommateur ?
M. Buy : Je ne suis pas juriste.
Mme Castrilli : Mais vous êtes consommateur et conducteur.
M. Buy : Voilà. Je dirais simplement que c'est une question de contrôle tant au niveaux des règles de fonctionnement des compagnies d'assurances, règles selon lesquelles elles attribuent telle ou telle catégorie à tel ou tel client, lequel est un client obligatoire, n'est-ce pas ? C'est ce que je veux rappeler ici. C'est qu'on ne va pas s'assurer dans une compagnie d'assurances automobile tout simplement par plaisir. On y va notamment parce que la loi oblige. C'est la loi qui oblige. Donc, ces compagnies ont une clientèle qui leur est envoyé par l'État. À ce moment-là je pense qu'il est du rôle de l'État de contrôler la manière dont ces compagnies appliquent les règles que l'État édicte.
En ce qui concerne les articles auxquels je faisais référence tout à l'heure, je pense qu'il doit y avoir notamment un contrôle qui se fait au niveau du bilan des entreprises d'assurances automobiles, parce que, lorsque pour justifier des augmentations de tarifs ou pour justifier des pertes qu'elles font au niveau des assurances, donc des paiements qu'elles font, c'est par leur bilan qu'elles le font en montrant des bilans déficitaires sur certains postes, vérifie-t-on ce que sont les transferts de bénéfices avant de passer au bilan sous la forme de perte, notamment dans d'autres compagnies ?
Cela, je ne suis pas non plus financier. Je suis démographe et économiste et je ne suis pas qualifié pour analyser un bilan, mais je pense que je sais suffisamment de choses sur les bilans pour savoir qu'il est possible de manipuler un bilan. Je ne dis pas que toutes les compagnies le font. Je dis simplement qu'il appartient au gouvernement de bien vérifier, quand ces compagnies d'assurances vont imposer des augmentations, que ces augmentations soient justifiées. Hydro-Québec se présente devant le gouvernement du Québec pour réclamer des augmentations de tarif que le gouvernement du Québec lui refuse. Mais Hydro-Québec est obligée de se justifier et on discute de ces dépens. Je pense que c'est la même chose pour les compagnies d'assurances. Ce ne sont pas des compagnies de l'État, ce sont des compagnies privées, mais l'État leur envoie la clientèle. Il y a là un lien qui doit être fait.
1130
Mr Tony Silipo (Dovercourt) : Merci, Monsieur Buy, pour votre présentation. Vous dites que le problème essentiel, c'est en effet le contrôle des compagnies d'assurances. Comme Mme Castrilli l'a indiqué, on a eu beaucoup d'autres présentations devant nous qui ont fait le même point que vous. Mais je crois que la chose à souligner, c'est que maintenant, avec la situation qui existe, vous savez que vous êtes catégorisé comme conducteur à risque.
Le problème, comme vous dites, c'est que ce sont les compagnies qui font cette détermination et qu'il y a peu de contrôle sur cela et, selon nous, cela devrait certainement être une chose à changer. On espère que l'attitude de M. Sampson, et du gouvernement de dire qu'on est prêt à regarder cette situation, à examiner ça et à faire des changements -- on verra, mais c'est clair pour nous que ce que vous avez souligné ce matin est un des problèmes qu'il faut résoudre parce que c'est vraiment injuste d'avoir des conducteurs dans votre situation qui doivent continuer à payer au-delà de la norme pour une couverture normale.
The Chair: We appreciate your presentation to the committee and thank you for bringing your perspective before us today.
Mme Lankin : Est-ce que je peux avoir le même temps pour une question que M. Sampson a eu pour sa déclaration ?
The Chair: I'm sorry, you've been a little short. Would you like a very short question?
Mme Lankin : Merci pour votre présentation. Je regrette, je ne pense pas pouvoir poser ma question en français.
I would like to ask you about your comments on controlling profits to companies. One of the issues we have raised with the government is that the insurance industry has a system whereby a certain amount of the moneys they take in from premiums is put on reserve to deal with liabilities in the future. From that, they earn investment income, which is part of what is shown in the eventual profit and loss, but of course the money on reserve is in fact deducted overall as part of their cost.
We've asked for some legislative research work to be done to determine whether or not there are some standards or rules or regulations that could be put in place to standardize the process of putting moneys on reserve. Currently, every company does it in a different way and it's very difficult for the members of this committee, let alone for members of the public, to understand what's happening behind the scenes in the insurance industry. I take it that might be one way of addressing the concerns you've raised and that you would at least be supportive of us as the legislative committee pursuing that form of regulatory investigation.
M. Buy : Je pense que la constitution de ce fonds de réserve est tout à fait légitime. Les banques constituent aussi des fonds de réserve, enfin, devraient le faire. Ce qui n'est pas légitime, c'est à partir du moment où ce fonds de réserve est constitué avant la fin du bilan, c'est à dire qu'il intervient dans la partie négative du bilan. Il intervient avant la déclaration des bénéfices des assurances, et je pense que ce n'est pas normal. C'est là un point particulier. Je crois qu'il y a eu 60 millions de dollars qui ont été déposés dans un fonds de réserve par une compagnie d'assurances qui a déclaré ensuite 10 millions de dollars de déficit, de perte. Alors là, il y a quelque chose qui n'est pas normal.
Mrs Marland: Mr Chair, I have a point of order, and I apologize to the next deputation. It should only take me a minute. I have a great deal of concern. I'm raising the point of order under standing order 20(b) and standing order 23(h), (i) and (k), and it's with regard to comments on the record made earlier this morning by the member for Welland-Thorold. Standing order 20(b) says there will be no interruption of other speakers. Standing order 23(h) says we are not allowed to make allegations, 23(i) says we also cannot impute false or unavowed motives, and 23(k) says we cannot use abusive and insulting language likely to create disorder.
I would ask the Chair if he would ask Mr Kormos, the member for Welland-Thorold, if he wishes to withdraw his comments made earlier this morning which in fact insult every one of the members of this committee, no matter which side of the table they're on.
It's normal for members to use some political rhetoric against the government of the day. I certainly have done that when I have been in opposition. But I have not behaved or said some of things Mr Kormos said this morning, and I think it's unfortunate when this happens in public -- we're always in public -- when we have deputations before the committee, Mr Chair, they are expecting us to say things that are factual and correct, and some of what Mr Kormos said this morning is not correct and not factual.
It's unfortunate when there is an aside comment going between -- in this case this morning it was the parliamentary assistant and Ms Castrilli. Always during committee we are making side comments for information and asking questions, sometimes while the deputation is still before us by necessity. When a smile was shown -- I don't know whether it was Ms Castrilli or Mr Sampson this morning because I didn't see it -- to go from that into the whole tirade Mr Kormos unfortunately entered into and then impugned all of us I find very distasteful, and I would ask you to ask him to apologize to the committee members and withdraw his comments.
The Chair: Does the member for Welland-Thorold wish to withdraw his comments?
Mr Kormos: I think this an important point of order, Chair. I think Ms Marland is concerned about the fact that I pointed out that members of this committee, in the midst of such despair and poverty as this province is experiencing under this government, are themselves collecting not only their salaries but tax-free per diems in the gross amount of -- I was wrong. It wasn't $100 a day; in fact it comes to $103 a day.
I find it repugnant that government members who would support, endorse and articulate a tax on the poor and on working people, who would be receiving a submission by an advocate on behalf of the growing number of poor in the city, could sit here --
The Chair: Mr Kormos, could I ask you to stick to the point on withdrawing your comments?
Mr Kormos: I am sticking to the point, Chair. The fact is that it's repugnant that these government members are taking $103 tax-free per diems in addition to their salaries, in addition to having their hotel rooms paid for, in addition to having their travel paid for, in the midst of this poverty; that they're doing it in conjunction with what is an attack on drivers and victims with an insurance scheme that's going to cause increased premiums.
I retract none of what I've said. I have no shame about what I said. It has to be pointed out. I will persist in pointing it out, as I did at Bill 26 hearings, until the public becomes concerned enough about it or until these people become embarrassed enough about it that they either donate their per diems to charitable causes -- I would recommend things like people with AIDS, who are under attack right now because of hospital cutbacks, among other things -- or until they refuse their per diems.
I'll put on the record that I have not accepted any per diems for any of the committee work for which I've been an actual member of the committee. I'm here not as a member of the committee today, but as a right as a member of the Legislative Assembly. On the two occasions when I did, I specifically indicated to the committee at Queen's Park that one was for the purpose of making a donation in that amount to the People with AIDS Foundation of Toronto. The second was with respect to seeding a fund to buy a cemetery monument for a woman who was murdered by this government when she committed suicide in the city of Welland after having her disability benefits cut off by Mike Harris and his attack on the disabled.
So no, I do not withdraw anything.
1140
The Chair: Thank you, Mr Kormos. I will take the matter under review. Thank you, Ms Marland.
Mrs Marland: Mr Chair, I have a further question. I should clarify that the imputing of motives wasn't around the area the member for Welland-Thorold was just referring to; it was a number of other things he was saying. But since he has raised a legal per diem paid to committee members, is he putting on the record that he has never in his term of office in the last 10 years -- I think you were elected in 1985 -- received a per diem? Is that what he's saying?
The Chair: Is that what you're putting on the record, Mr Kormos?
Mr Kormos: No. I put on the record exactly what I said. That was a question to me --
The Chair: Thank you very much.
Mr Kormos: One moment. That question was put to me. Chair, a question was put to me that I've determined to answer. Of course I have, but since this government has taken power and begun its attack on the poor of this province, I have not and will not accept any per diems for committee work. I find that intolerable, embarrassing and unconscionable in the face of the growing poverty among the women, children and working people under attack by this government. If these government members had any real sincerity about so-called cuts and slashing, they would forgo this little bit of the gravy train and stop porking at the trough and quit their oinking here and now.
The Chair: Thank you very much, Mr Kormos.
Mr Kormos: Thank you, Chair.
The Chair: We'll proceed with the hearing. I will take that under advisement, Ms Marland, and report back to the committee at a future date.
ROYAL OTTAWA HEALTH CARE GROUP
The Chair: We'll proceed with the Royal Ottawa Health Care Group, Dr Peter Henderson and associates. Welcome to the committee, gentlemen and ladies.
Mr George Langill: Thank you very much, and good morning to all of you. I'm George Langill, the executive director of the Royal Ottawa Health Care Group. With me are David Follows, the director of our Work Wise program; Dr Catherine Gow, a neuropsychologist at our rehabilitation centre; Dr Peter Henderson, a clinical psychologist and director of our chronic pain service within the Work Wise program. I believe all of you have a copy of our presentation. I will review it, and Dr Henderson will assist me in the recommendations portion.
As representatives of the Royal Ottawa Health Care Group, we are pleased to appear before the standing committee on finance and economic affairs as you undertake hearings on proposed changes to the automobile insurance act. We are here speaking before you today not only as hospital representatives but as representatives and advocates of people with physical and psychological disabilities.
The Royal Ottawa Health Care Group operates two hospitals: the Royal Ottawa Hospital, which offers health care services in mental health at its site on Carling Avenue, and the rehabilitation centre, located on Smyth Road, which provides specialized services in physical medicine and rehabilitation.
Each is the major institution of its kind in eastern Ontario, providing comprehensive health care to individuals with physical disabilities and mental illness. Both are fully accredited teaching hospitals that provide comprehensive health care to the residents of the national capital region and outreach services within eastern and northeastern Ontario.
At the rehabilitation centre we provide comprehensive service to people with physical disabilities such as spinal cord injuries, amputations, multiple trauma, chronic pain and acquired brain injury. The rehabilitation centre's programs include the Robin Easey Centre, a community-based transitional living centre for individuals with traumatic brain injury, and Work Wise, a program of return-to-work services for individuals recovering from injury. Many of our clients are victims of motor vehicle accidents.
Our primary concern is that victims of motor vehicle injuries should have prompt access to the comprehensive health care services necessary to optimize their physical and functional recovery. The purpose of insurance is to provide resources to ease suffering and return insured individuals to their previous life functioning. Planned, coordinated rehabilitation, provided by qualified health care professionals, is a good investment, with returns for all concerned. The critical indicator of the automobile insurance system is outcome, specifically the optimal functional recovery of the greatest proportion of insured individuals.
The proposed legislation is a reasoned, workable plan that attempts to more appropriately assign benefits according to need rather than globally to all claimants. There is an improved balance between the rights of insurers and accident victims.
(1) The reforms, in terms of income replacement and entitlement, are cost-sensitive and eliminate the potential disincentives inherent to the present system. Income replacement is limited to those who had incomes, who earn amounts conducive to work return.
(2) The requirement of detailed treatment plans is consistent with college requirements of regulated health professions, as well as the development of clinical guidelines to ensure the provision of the most appropriate interventions, their evaluation, and responsible modifications in treatment strategies as warranted.
(3) Availability of treatment plans provides insurers with the necessary information to make informed decisions in a timely manner.
(4) Improvement of the designated assessment centre system through monitoring, detailed guidelines and standardization further enhances the responsiveness and credibility of the peer-based, independent dispute resolution mechanism.
Taken together, these features are refinements in response to problems experienced with Bill 164. The adjustments are reasonable. More importantly, the proposal maintains a system which promotes prompt access to appropriate treatment from qualified health care professionals of the insured's choice.
I'll now ask Dr Henderson to take us through the recommendation portion.
Dr Peter Henderson: Needs of persons with near-catastrophic injuries. While we are acutely aware of the need for cost containment in a workable insurance plan, we are concerned about the individuals who may fall short of the proposed "catastrophic" definition. It has been estimated that 0.5% -- that's half of 1% -- of the accident population sustain catastrophic impairments to the extent that they are unlikely to work again; 97% of accident victims have injuries with benefit requirements of less than $75,000. There remains 2.5% whose injuries may be complex, difficult to diagnose and treat, and whose recovery is likely to be prolonged, that is, greater than 104 weeks.
Examples of these would include, but not be limited to, single amputations requiring surgical revision, prostheses, psychological care and vocational training. Also included would be instances in which symptom development is delayed, as in moderate head injury without loss of consciousness. This possible 2.5% of accident victims are the people frequently seen by our programs. They would not meet the proposed "catastrophic" criteria and could be severely disadvantaged as a result. Failure to provide for this group is not responsible cost containment.
Delay of intervention prolongs or mitigates against functional recovery. Ultimately, the cost for rehabilitation and maintenance are borne not by insurers but an already overburdened social system, for example, welfare and the Canada pension disability plan.
1150
Our concerns with the proposed legislation relate specifically to this group, the 2.5%. The following points deserve consideration:
(1) The "catastrophic" definition needs to consider not only impairment but the associated disability. Rehabilitation has traditionally recognized that the absence of or impairment to a body part or function differs in its impact from person to person. Therefore, we recommend that catastrophic injury should be redefined to embrace the resultant disability in addition to the physical losses.
(2) Adopting a Glasgow coma scale score of nine or less as the sole criterion for brain impairment assumes that (a) all cases of possible brain impairment will be administered the scale, (b) the scale is sensitive to and predictive of long-term functional deficits, and (c) higher scores are necessarily non-catastrophic, without taking into account who the person is and their particular role in society at the time of the accident. These assumptions are highly debatable and may result in the inaccurate classification of victims. Our recommendation is that alternative criteria and mechanisms sensitive to the nature of brain injury and recovery are necessary to define severity and the impact of brain impairment.
(3) Service from doctors, physiotherapists and chiropractors is proposed to be available without preapproval from the insurer during the first six weeks following injury. Mention of psychological services is absent. Inclusion of psychology along with medicine, physiotherapy and chiropractic as potential providers facilitates the prompt identification and containment of psychological trauma which might otherwise prolong the rehab process. Critical incident debriefing is now widely recognized as a preventive measure and needs to be included as an option for the small percentage of individuals requiring it, in the interest of containing the longer-term costs. Our recommendation is that psychological services should be a benefit available without preapproval from the insurers during the first six weeks post-injury.
(4) The proposed income replacements after 104 weeks tend to be all or nothing. Those completely unable to engage in any occupation are eligible for benefit. Those below this threshold of total unemployability are ineligible. There is therefore no provision or incentive for a graduated return to work or part-time work after 104 weeks. This all or nothing approach is similar to that found in many long-term disability plans, which often results in litigation. The litigation process is long and the claimant often ends up on welfare. As in the case of Canada pension disability, such arrangements force claimants to prove disability as opposed to encouraging ability and individual productivity. Our recommendation is to extend benefits beyond 104 weeks in a manner than encourages and facilitates return to work. One approach would be to slowly reduce income replacement benefits over time. The residual earning capacity designated assessment centres should be maintained in order to provide independent determinations of insured persons' ability to return to gainful employment.
(5) No-fault coverage provides the insured with up to 104 weeks of attendant care and/or income replacement benefits following non-catastrophic injury. Tort action is available to those who require further compensation. However, tort action generally takes longer than 104 weeks to resolve. Therefore, for individuals who are non-catastrophic but have significant functional losses, tort action is not a realistic or a humane means to secure coverage. To address these concerns, we urge some flexibility for that 2.5% of accident victims whose disability is complex, whose rehabilitation is prolonged, but whose recovery potential is significant.
A level of disability between non-catastrophic and catastrophic should be defined and incorporated into the plan, as was proposed by the Alpha plan before portions of this committee, as I understand. Alternatively, a mechanism to allow reclassification to catastrophic on the basis of later assessment should be incorporated into the plan. Independent assessment could be provided by a designated assessment centre.
Mr Langill: Thanks very much, Peter. In summary, the proposed legislation makes some very real improvements to the existing legislation. These improvements remedy many of the problems experienced under Bill 164 through the development of a "catastrophic" versus "non-catastrophic" distinction. We have some reservations regarding the definition of this distinction and the implications it may have for the estimated 2.5% of accident victims who fall short of the proposed "catastrophic" cutoff. Our interest is in timely and effective rehabilitation. It is essential that accident victims are able to obtain adequate coverage and are given an incentive to return to work, on a less than full-time basis if their injuries prevent full-time work.
We believe that addressing the above concerns will help to decrease the costs to accident victims, to the health care system and to society. We thank you for this opportunity, and we're more than happy to respond to any questions.
Mr Crozier: Thank you, and good morning. In the short time we have, I want to seek your advice in that yesterday or the day before -- I think it was yesterday -- we had a presenter who was caught in the system, caught in this area you might describe here as "difficult to diagnose," and I'm not so sure about the treatment in this case. You might also comment on the delay of intervention that prolongs or mitigates against functional recovery. This person was injured under 164, but I'm not so sure it wouldn't continue into any plan we might devise. She was caught with an insurance company trying to prove she was not catastrophically disabled, even though she was literally bedridden, with the exception of her own personal needs she needed help with.
Why is it and will continue to be so difficult to convince an insurance company when there is medical evidence on one hand that this person is catastrophically disabled but the insurance company appears to be continuing to attempt to prove that the person is not? Is there any easy answer to that?
Mr David Follows: There is no easy answer to that question. It may be in part that the stakes are very high, especially with this new plan. The difference in liability for an insurance company for someone who is catastrophically injured versus someone who is not is very great, so I see this as an adversarial problem.
Mr Crozier: I am getting the opinion, after hearing a number of presenters who have raised this very point, that it should be better defined. But I still get the gut feeling that no matter how well defined it is, your point may be continued, that once they get into that adversarial position, we've still got a company that's trying to prove one thing, through a multitude of tests in this particular case. I guess I'm just putting my frustration on the record, that no matter how many times a person is tested, there's no end to the number of medical practitioners they can be sent to, who may continue to give the same opinion. We somehow have to get insurance companies to appoint where they will at least finally agree to something. I guess I'm just putting my frustration on the record for your comment.
Dr Henderson: I think your frustration is well placed, and the problem we're dealing with, that we touched on a bit, is that it isn't easy to establish loss. There's physical loss and disability associated with that, and because it's dependent upon the individual and who that person was prior to the accident, the losses become debatable.
I think there have been refinements. The designated assessment centres, the fact that those tend to be multidisciplinary, that health care providers are making the determinations as to what the losses are, are improvements in what is by nature an adversarial system. The thing is that the right people are being put in the position to be providing information so that informed decisions can be made.
In this proposed legislation there are refinements, but I think we're talking about an evolution. It's always going to be a difficult problem, because we're not dealing with things that are easily identified in terms of losses. It's not like a car fender. It's a person.
Ms Lankin: Thank you very much. I think you hit on a point there in terms of it being a process of evolution and learning. With the establishment of no-fault benefits and the medical rehab treatments, there was much for us to learn from that, and we understand where there were problems and need to be guidelines. I personally think it's a positive step to be putting in place treatment plans and some of those mechanisms. It's not going to solve all the problems and there need to be greater controls that we develop over time.
But with the DACs, for example, while positive, there are problems there as well. We have already heard testimony about companies that refer only to certain DACs because they're confident they'll more likely get a favourable assessment. Well, something's wrong with that system.
We've heard from multidisciplinary teams of health care providers, particularly in the area of acquired brain injury in trauma settings in hospitals, who see their recommendations not acted on by the insurance company and people continuously referred for multiple assessments, sometimes by people in DACs who are not trained in understanding the complexities of acquired brain injury.
The issue of early intervention in rehabilitation I think is incredibly important, and I'm not convinced that a reintroduction of tort is compatible with early intervention.
There are a lot of issues for us to sort through from the health care side and from the treatment and rehabilitation side, to understand the impact of changes in law and the changes in the adversarial system and what it means for people getting appropriate care.
I have two very short, specific questions, however. In points (1) and (2), you raised the issues in terms of impairment and disability and the Glasgow coma scale. I think I understand what you mean in (1), but it might be a matter of semantics. We've heard from many other groups, "Don't consider only the disability, consider the functional impairment," which is the flip side of what you're saying but I think is the same thing. You're saying don't just look at the old insurance industry meat chart approach to things, but understand the functional impairment the person lives with as a result of the accident; that that has to be considered in the treatment plan, the rehabilitation, and the level of benefit. You can clarify that for me.
Second, on the Glasgow coma scale you suggest that there need to be alternative criteria and mechanisms. Do you have specific suggestions? We've heard other groups suggest that the Glasgow outcome scale is what should be used. Is there anything else out there? Is there a need for more work in this area? Would that be a good place to start, at least, in terms of improving on the criteria in the legislation now in the definition provided in order to meet the "catastrophic" threshold?
Mr Follows: Maybe I can address the first question on disability and functional impairment by giving an example. I'm a physiotherapist by profession and my employment is as a hospital administrator. If I lose the complete use of my right arm, this is not a catastrophic injury for me. I will return to either profession, albeit in a modified fashion. I believe that's a catastrophic injury for a construction worker, who may not have the same opportunities for retraining, the same abilities, and may never return to gainful employment. That's a case where the impairment is the same but the disability is really very different, and I think you have to address both.
1200
Dr Catherine Gow: Dr Catherine Gow, the rehab centre. I'd like to address your question about the Glasgow coma scale. I'm not sure if you've already heard this information from other presenters, so I apologize and please do interrupt me if this is old knowledge. The Glasgow coma scale indexes level of consciousness, and that is an index of brain stem function and white matter damage throughout the neural axis. If you were to look at comparable levels of damage within the cortex and the subcortical regions of the brain, you would find the Glasgow coma scale does not relate to those areas at all. For example, predominant areas of injury within the brain incurred in a motor vehicle accident are the frontal cortex and the temporal lobes, and neither of these will significantly impact on the Glasgow coma scale. I would agree with previous presenters who have raised that point.
The Glasgow outcome scale is a better way of indexing the relative impairment that is a result of the brain injury, but you can't ignore some of the assessment information that will be available, say, eight months to one year down the road.
Part of the difficulty in using things like neuropsychological evaluations, I think you've already heard from other speakers, is that because it is somewhat an interpretive science there will be different interpretations, but not to utilize this information in any way whatsoever is to throw the baby out with the bathwater. I think we have to find a better way of utilizing our objective evaluations in order to help both insurers and health care professionals deliver appropriate and timely treatments.
Mr Ford: Welcome, Dr Gow and gentlemen. Dr Gow, do you believe treatment protocols can be developed and implemented as a measure to control medical and rehabilitation costs?
Dr Gow: Yes, I do. I think it's very possible.
Mr Ford: How long would it take to develop and implement these protocols?
Dr Gow: Not with regard to a specific patient but generally speaking?
Mr Ford: Generally speaking, yes.
Dr Gow: I think that's doable in a relatively short period, given the research that's available.
Mr Ford: What do you consider a short period of time?
Dr Gow: Somewhere in the neighbourhood of six months.
Mr Joseph Spina (Brampton North): Thank you for a great presentation. In recommendation (3), you indicate that psychological services should be a benefit available without preapproval from the insurer during the first six weeks post-injury. One of the elements we have been facing in the various presentations is the responsibility for intervention, is I guess the way I would phrase it. The insurers, of course, feel they ought to have the responsibility to determine when intervention takes place. Others feel it is the physician first consulted or referred to, and others feel that after X amount of time, a DAC ought to come in and take over, shall we say. I wondered what your thought was with respect to your recommendation. Should that be a matter of course, that all victims get a post-injury examination where there appears to be head damage, and where should the responsibility lie?
Dr Henderson: No. In putting together that recommendation, my intent was to ensure that people who had the need to see a psychologist or to have psychological services would have the opportunity. I feel it's important, but it's not going to be routine. When I put down the idea about critical incident debriefing, what I was referring to there -- it's well understood now that people who undergo some sort of trauma may benefit from a debriefing session. If we use the example of a high school situation where there's been some sort of fatality, a motor vehicle accident or something like that where fellow students have been lost, a critical incident debriefing team goes in. They don't necessarily meet with everybody but -- well, they meet with everybody and they help people work through what has happened, get an understanding of the event. That's seen as an effective means of preventing distress down the road. All I was suggesting is that the psychologist should have -- there should be an opportunity for that sort of consultation, but it wouldn't be routine.
The Vice-Chair (Mr Tim Hudak): On behalf of the standing committee, I thank the Royal Ottawa Health Care Group for your time today. Have a good day.
COUNTY OF CARLETON LAW ASSOCIATION
The Vice-Chair: The next deputation is the County of Carleton Law Association, Mr Tom Conway. Welcome.
Mr Tom Conway: Thank you very much. It's nice to be here. My name is Tom Conway and I'm a trustee with the County of Carleton Law Association. On behalf of the more than 1,200 lawyers and judges of this region who form the membership of the CCLA, I'd like to thank the committee for giving our association the opportunity to address you on our concerns with the draft bill.
The County of Carleton Law Association was founded in 1888. Through its various activities, the CCLA strives to improve the administration of justice in the Ottawa-Carleton region and thereby promote the interests of the citizens of this region. The association conducts continuing legal education programs for its members, maintains one of the best law libraries in eastern Ontario, and addresses the government of the day on issues vital to its membership and the Ottawa-Carleton community as a whole. Without question, the vexing and apparently perennial issue of automobile insurance reform is just one of these vital issues.
In preparing the association's submission today, I had occasion to review the submissions we made to the previous governments when the OMPP and Bill 164 were proposed and subsequently passed, and on each of these occasions I detected that a common thread emerged from our submission, which went, in my view, largely ignored. When all was said and done, our association urged the Ontario automobile insurance scheme to embody three elements: fairness, simplicity and efficiency. Surely no one who is the least bit interested in this issue will deny that these are desirable attributes in any automobile insurance scheme.
Clearly, it was the failure of the two previous schemes to incorporate these elements that has motivated the government to bring forward yet another attempt at reforming the tort system. The CCLA certainly applauds the effort to correct the deficiencies and inequities of the two previous systems, but at the same time, we caution that the citizens of this province can ill afford to have a third attempt fail. The mere fact that Ontario will have had four different schemes to contend with in approximately five years demonstrates that we have failed to achieve fairness, simplicity and efficiency in our automobile insurance regime.
When the proposed changes were first announced, I read an item in the Ottawa Citizen which quoted a senior executive of Zurich Canada. She complained that the new changes were going to "be great for lawyers." When I read this, I thought, without any shame at all, "This means the changes must be good for consumers as well," and now that I have read the draft bill and discussed it with my colleagues in the association, I can say on behalf of our association that the draft legislation is a good starting point. If certain changes are made, it will be better for innocent victims of accidents and for consumers generally than either of the two previous schemes. However, I don't wish you to be under any misimpression. The CCLA is still of the view that the tort system, with all its bumps and all its warts, is still the best system to deliver fair, simple and efficient compensation to innocent victims of motor vehicle accidents.
As to whether the changes will be great for lawyers, let me be clear on one point, and I don't wish to be viewed as making an ad hominem attack on insurance companies. However, the fact of the matter is that the Ontario insurance industry is comprised of private corporations; their sole purpose in life is to maximize profits for their shareholders. I'm not saying that is a bad thing. A reasonable profit, born out of healthy competition, is certainly a key component to a viable automobile insurance scheme. But do not let the spokesmen for the industry delude you as to the industry's motivation: profit. Profit is the raison d'être of any insurance company. Whatever scheme maximizes profit is a scheme that the insurance industry will fight for.
On the other hand, the CCLA acknowledges that the legal profession also has a vested interest in the automobile insurance scheme, and for those cynics in the insurance industry, I will acknowledge for the sake of argument that the profession is motivated purely by self-interest. While from my personal experience as a lawyer working in this area for quite some time I say this notion is simply not true, one has to go further and ask, what is the vested interest of the profession? It has a vested interest in advancing and championing the cause of motor vehicle victims. By advocating fearlessly on their behalf, we hope to obtain reasonable and fair compensation for injuries, and in the process we hope to make a reasonable profit as well. For these two reasons, I suggest that the legal profession is a far better exponent of the best interests of the consumer of the scheme than the insurance industry is.
Ironically, despite suggestions advanced to the contrary, lawyers do not profit more by flogging cases to trial and beyond. A lawyer, in my experience, obtains a better fee when she or he has negotiated a reasonable settlement well in advance of trial. Prior to the OMPP, something like nine out of 10 motor vehicle accident cases were settled by agreement with the insurer prior to trial. There is certainly no monetary incentive to lawyers to prolong claims, and there is certainly no advantage to accident victims to prolong a bad and sometimes very tragic memory and to relive that memory in the adversarial environment of a trial. All plaintiffs' lawyers recognize that.
This observation leads me to a comparison of a typical case under the tort system and a typical case under the two previous systems we are now labouring with. Over five years have passed and we now have more than ample case experiences to make a comparison.
A seriously injured accident victim under the tort system typically would go and see a lawyer. The lawyer would be retained, usually without any requirement of a cash retainer. No-fault benefits, although limited, would be quickly and efficiently handled, often without the intervention of the lawyer at all and typically without any proceedings at all being commenced in the courts. The accident victim would be treated by the health professionals without interference or hindrance. Many cases were settled between the plaintiff's lawyer and the adjuster. Cases that went further required one additional lawyer to act for the defence. Most of these cases, as I've said, were settled well prior to trial. The settlement was final; it was a fait accompli. There was no more compensation from the no-fault insurer and there was no more compensation for the insurer of the tortfeasor. There was closure on the issue. Everyone got on with their lives, and the victim went on to bigger and better things.
The principles of law that applied and the calculation of compensation under the tort system were, relatively speaking, simple, and relatively speaking, the system was fair, it was simple and it was much more efficient than the systems we've experienced for the last five years.
In the experience of our members, the OMPP and Bill 164 have been veritable nightmares of complexity. These "cures" to the tort system have proven worse than the symptoms they were intended to correct. In a typical case under these systems, an injured victim now retains a lawyer. The risks involved in proceeding with a lawsuit are such that many members of the profession cannot afford to assume the risk associated with taking on a case that may be a loser. If the case is serious, there is now often a big dispute with the no-fault insurer, as there is with the tortfeasor's insurer. Whereas there used to be two lawyers, there are now, at a minimum, three lawyers, one for the plaintiff, one for the tortfeasor and one for the no-fault insurer. Then come the case managers, the rehabilitation workers, the accountants, the actuaries to calculate the level and extent of benefits. Then comes the Ontario Insurance Commission to mediate and then arbitrate no-fault benefits. Then comes the court to litigate the threshold issue, the issue of liability and the issue of damages.
I think these examples illustrate easily how these schemes are full of inherent complexities, mine fields, uncertainties and enormous potential for disagreement and discord. So when Zurich Canada, in its submission of February 21, 1996, states that in 1987, prior to the two previous systems, legal costs in Ontario amounted to $700 million, it begs the obvious question, what have been the transactional costs under OMPP and Bill 164? When I say "transactional costs," I mean what have been the legal costs? What have been the costs of rehabilitation workers? What have been the additional costs of insurers, the additional costs of accountants, the additional costs of actuaries? This information is missing from the Zurich Canada submission, and one has to ask why it is missing. It may be missing because the true transactional costs under OMPP and Bill 164 far exceed those under the old tort system.
Therefore, it is with some relief that our association welcomes the changes that would bring tighter controls to no-fault benefits. These controls should promote efficiency and will ultimately be good for the consumer. But there remain, in our view, cumbersome procedures under the no-fault provisions which permit waste, mismanagement and sometimes fraud. The no-fault scheme remains unnecessarily and overly complex. We would endorse the following changes to the no-fault system: reform of the Ontario Insurance Commission, and an end to the use of designated assessment centres.
Under the tort system, innocent accident victims do not commonly become embroiled in legal disputes with their no-fault insurers. What was intended to be a streamlined process has become bureaucratized, cumbersome, expensive and slow. Comparisons with the Workers' Compensation Board will soon become apposite, in my view.
The no-fault schedule presently pays benefits where no real economic loss has occurred. These benefits are paid, whether there is fault or not, to individuals who are not employed at the time of the accident, and under the present scheme, unemployment insurance benefits appear not to be deductible in the schedule, permitting in effect a double recovery.
We would suggest that the notice provisions proposed under section 258.3 do not promote efficiency, fairness or simplicity. In our experience, an accident victim and his or her counsel have no idea, within 120 days of an accident, whether the injuries sustained are sufficiently serious to warrant the commencement of a formal action. The provision simply encourages victims to give notice to avoid the loss of prejudgment interest entitlement. Once notice is given, it appears that a time-consuming, expensive and perhaps ultimately pointless process is commenced.
The experience of our members suggests that most physicians and health care professionals will not be able, or will not want, to provide a final or even an interim pronouncement on recovery or prognosis within 120 days. Moreover, there appears to be no limit to the number of examinations that can be conducted by the insurer prior to the commencement of an action. This provision may be too easily abused, and consequently is not, in our view, fair, simple or efficient.
On the other hand, we welcome the proposal of mediation of claims but the draft legislation does not appear to address the issue of who is to pay for the cost of mediation. If accident victims must bear the cost of mediation, this provision is unfair, because generally speaking, an accident victim is not in a good position to afford the cost of mediation.
Our association, however, does endorse fully the imposition of a duty on the insurer to settle claims as expeditiously as possible. But cost sanctions at the end of the day are hardly, in our view, proper incentive on some insurers to discharge this duty in good faith. We would endorse a provision that would permit the court to specifically award punitive or other damages against an insurer that was found to have acted in bad faith and in breach of this duty.
The right to sue for economic loss has been restored, and we think that is a positive starting point. However, from the standpoint of the accident victim, limiting recovery of economic loss to 85% of net income is both arbitrary and unfair. Replacing the right with enhanced no-fault benefits as a substitute has proven to be neither simple nor efficient. The CCLA believes that the restoration of the right to sue, limited as it is to 85% of net income, is a move in the right direction, but again it is going to result in an extremely complex calculation, particularly as it relates to future income and the underlying assumptions that are going to have to be made concerning taxation rates. We would recommend that if there has to be a deductible, it remain at $10,000.
Much of what I have said on behalf of our association has already been expressed by our colleagues in the CBAO. Our association endorses the content of their submissions, and I won't waste any more of your time repeating those submissions. If I can leave you with one point, though, it's this: Please consider very carefully the constructive comments our colleagues have made. Remove the complexity. Make it simple and make it fair. And don't underestimate the ability of our tort-based system of justice to change with the times and to respond to the economic exigencies of today. That has been the beauty of our common law system: It has adapted and changed frequently over the centuries and it served us well until 1990. It still offers a flexible, adaptable, simple, efficient process for the quick disposal of motor vehicle accident claims. Thank you.
The Vice-Chair: On behalf of the standing committee, thank you very much, Mr Conway, for your interesting presentation today. Have a good afternoon.
Seeing no more business before the committee, we will recess until 1:20 pm.
The committee recessed from 1215 to 1330.
OTTAWA ACADEMY OF PSYCHOLOGY
The Chair: We have with us this afternoon the Ottawa Academy of Psychology, Dr Reesor. Welcome.
Dr Ken Reesor: Mr Chairman, members of the committee, the Ottawa Academy of Psychology is a fraternal organization representing psychologists in the Ottawa area. We operate a community information and referral service and promote educational opportunities and access to rehabilitation and health services.
By way of introduction, I'm Dr Ken Reesor, a past-president of the academy. I'm also a registered psychologist and a clinical assistant professor at the University of Ottawa. Over the past 15 years I've been involved in assessing and treating people who've been in industrial and motor vehicle accidents. I've had extensive involvement in consultation to third parties involved in the management of accident claims, and for the past two years, like many of my psychologic colleagues, have worked in the designated assessment centres, or DACs, in the Ottawa area.
We welcome the opportunity to present issues and input from our perspective regarding accessibility to health and rehab services in the proposed draft legislation. On behalf of the academy, I'd sure like to thank the Ministry of Finance, its staff and the standing committee for this opportunity in this public forum. We certainly appreciate that in this process there's a variety of stakeholders and that this draft legislation has attempted to provide a balance between multiple competing agendas, including achieving insurance rate stability, access to health and rehabilitation services and the right to sue.
Psychologists are one of the six professional groups licensed to diagnose under the Regulated Health Professions Act. As such, we play a central role in the diagnosis of injury subsequent to motor vehicle accidents. We're a core professional group in the current and proposed DAC system and consult to many of the stakeholders involved, including insured persons, accident benefit adjusters, health and rehab personnel, clinics and lawyers. Psychologists are directly involved in the rehabilitation of people and their families who have been affected by motor vehicle accidents, either directly or indirectly.
Now, we share many of the issues and concerns that have already been presented to this committee by the Regulated Health Professionals Coalition on Auto Insurance and by the Ontario Psychological Association.
There's a fundamental necessity for insured persons to have access to the health and rehabilitation services that are entrenched in this draft legislation. Many of the problems that result from motor vehicle accidents are not effectively addressed in public health care services, such as OHIP, and we commend the draft legislation for implicitly recognizing this.
Some accident victims may have brain injury, compromising their ability to think, remember and make decisions. Some may have been witness to violent sudden death, sometimes people they are very close to -- a family member, a child, a parent, a friend. Some may be severely emotionally traumatized by their accident to the point they can't function normally; they can't drive a car, they can't engage in care giving, they can't work and so on. Some people are faced with the trauma of amputation. Some are faced with scars or disfigurement. Some people are faced with persistent and intractable pain, loss of enjoyment of family, work and recreational life. Some people will not be able to return to work. Some need assistance in retraining and help in seeking and acquiring alternative employment. These are fairly serious problems that can arise subsequent to motor vehicle accidents.
In the development of this draft legislation, we understand that there was a clear aim to propose reforms whereby treatment and rehab benefits could be closely tied to the severity of the injury and impairment and to find ways to limit excessive treatment provisions and ensure mechanisms whereby a treatment's appropriateness, reasonableness and effectiveness will be monitored.
One of our roles as diagnosticians, as with the other regulated health professions in this system, is to determine the nature and degree of impairment. People can have some very serious mental, physical and emotional problems following an accident. There are also individuals who, for a variety of reasons, put an unnecessary and excessive burden on the system. Our contribution to ensuring appropriate service provision is to identify those individuals for whom treatment is appropriate, necessary and reasonable, and those for whom it is not. The assessment process contained within the draft legislation allows for effective management and use of health and rehabilitation services and, at the same time, ensures cost containment.
We feel that the draft legislation had to entrench access to health and rehab services for the public good and had to include dispute resolution mechanism options, including the DACs. The assumption that a tort model or a system where the decision of the insurer alone will allow for appropriate and timely access to and cost containment of health and rehabilitation services is untenable, unworkable, too costly and too time-consuming.
The academy supports the draft legislation's definition of impairment, which means a loss or abnormality of a psychological, physiological or anatomical structure or function.
While recognizing the various impairments that may arise following a motor vehicle accident, we feel there is some discrimination against those injuries that are psychological rather than physical for access to urgent care within the first six weeks post-accident. Psychological trauma is not as obvious as physical trauma but is just as costly if it's not managed properly. Not having access to urgent care for psychological injuries does not make clinical or economic sense. Certainly clinical studies show that the impact of an extreme psychologic traumatization is significantly reduced with immediate and timely intervention. This can translate into earlier recovery, earlier return to work and fewer treatment and intervention requirements later on. These clinical and economic principles have been explicitly recognized in policies of the airline and the banking industries, for example, which provide psychologic care to employees and their families immediately following events such as plane crashes, hostage takings, robberies and other traumatizing events. Clearly, it would be inappropriate for traumatized victims, their families and children to wait months before they get this type of care.
The draft legislation has provided a variety of cost containment controls that, used appropriately, will contribute to insurance rate stability. It should be noted that under Bill 164 there were a variety of cost containment/cost control mechanisms that were underutilized by many insurers. There is a lot of variability in the insurance industry as to how it has applied cost containment and cost control options to health and rehabilitation services, with some effectively containing health and rehab costs and some not. The proposed draft legislation has even more cost controls, notably the requirement to provide a treatment plan to the insurer, a smaller cap on the total health-rehab costs and a revamped DAC process.
Members of our academy support greater cost control and containment via an effective professional review and monitoring system in the cases of dispute, as in the draft legislation's proposed pre-authorized treatment plan. We do view that this mechanism allows for efficient and effective service provision to the motor travelling public.
Also, pre-authorization ensures a certain amount of standardization for specific types of intervention for specific disorders and problems that arise from such accidents. This is important for ensuring quality of care and for contributing to insurance rate stability.
It should be pointed out that the insurance industry and the general public have assurances of quality control through the guidelines and procedures under the Regulated Health Professions Act. This ensures that not only the public but the insurance industry has a way of dealing with health professionals whose work does not meet professional quality standards.
The cap of $75,000 for total health and rehab costs has been proposed to contain such expenses for the vast majority of accident victims. There will be a small percentage of complex cases that will require health and rehab expenses beyond this cap. Alternative mechanisms such as the right to sue for additional damages are ineffective methods for ensuring necessary services in a timely and appropriate fashion. Therefore, consideration of an intermediate category between catastrophic and non-catastrophic impairment, as was proposed in the so-called ALPHA proposal, may be one possible way to address this issue.
Just in conclusion and in summary, it is our position that the government's proposal is a fair and balanced one, achieving a variety of objectives, specifically with the provision of health and rehab services and contributing to insurance rate stabilization.
The draft legislation appears to provide the basic services, while not offsetting those costs into the public purse, into OHIP or other social assistance support systems.
The proposed legislation also ensures control over excessive treatment and treatment costs by a variety of mechanisms, including the treatment plans and professional review in cases of dispute.
The draft legislation had to entrench these services because the alternatives would not guarantee appropriate access to and cost containment of health and rehab services.
We feel that the legislation needs to allow for timely access and urgent care for psychological injury in addition to other services that might be available. The cap for non-catastrophic injury may not be sufficient for a small percentage of accident victims with complex or multiple injuries, and a mechanism for determining entitlement at an intermediate level between catastrophic and non-catastrophic impairment should be considered.
Thank you. I'll entertain your questions in the remaining time.
1340
Ms Lankin: You touch on a number of important issues. I want to focus my questions on the area of psychological treatment. I understand the basic principle of early intervention in any kind of treatment and/or rehabilitation. I'm wondering if you could elaborate on what the consequences would be if there wasn't a provision for early intervention and treatment for psychological trauma. In addition to that, however, could you tell us a little bit about how attending physicians in an emergency department and/or anyone else determine that this was required. Thirdly, could you comment on what I think might be the industry's response that this is an area that is open to significant abuse? We have seen the employer community, for example, respond under workers' compensation to issues of workplace stress, and there is some body of opinion from those groups that this is an area open to abuse or it just doesn't exit. I don't agree with that but I'm wondering if you could share your experience with us and help us understand this issue a bit better.
Dr Reesor: First of all, the consequences. Not specifically within the motor vehicle area but within industrial accidents there's a fair bit of research -- and in other industries, as I mentioned, the airline industry in particular, the banking industry -- that not treating traumatization early can lead to other emotional problems, conditions that we see down the road. There's a greater incidence of something called post-traumatic stress disorder; there's a greater incidence of depressive conditions; there's a greater incidence of work absenteeism; there's a greater incidence of people going on long-term disability. What some of these studies have shown following specific industrial accidents in some of these other types of disasters is that the incidence and those costs are reduced with intervention that is very timely, within days. So there's some fairly real cost saving with that early intervention.
You raised a problem that is probably going to be the biggest obstacle in delivering this, and that's early recognition. We find this a lot in the motor vehicle arena because often people are hospitalized. The key thing is medical stabilization right away. Sometimes we don't see traumatization until people are discharged; we don't see those emotional effects. But there are a few clear examples where we can be pretty reasonably sure that there's some degree of traumatization when there has been a witness to a violent death, immediate loss, if there are other circumstances of the accident where there was a clear threat to a person's wellbeing. Some of this should be picked up pretty quickly by emergency personnel or the treating physicians to render, to get people into those services right away.
If I could just comment on the WCB system, because I did make a presentation a number of years ago regarding workplace stress, which is a very messy area, I think we're talking about a slightly different kind of thing. A motor vehicle accident is a very specific event. It can be a very traumatic event. One of the things that muddied the water in workplace stress was that there wasn't any defining event; it was very hard to define what caused the stress. I think we're dealing with a very different kind of thing here.
Ms Lankin: The allegations are the same about the potential for abuse and about the lack of understanding. I understand the difference between an occupational disease and a workplace accident, which is that argument, but --
Dr Reesor: I think one of the mechanisms, and to come back to a point I made earlier, is that the DAC system should pick up treatments that are excessive or prolonged to treat so-called traumatization or some other psychologic injury that occurred after accidents. That DAC process, certainly here in Ottawa, has been very slow to get off the ground, very slow to be effectively utilized, and I think you would find that if there isn't a demonstrable response fairly early on in that treatment, there are going to be very few DACs that are going to say or authorize that further medical rehab for that injury is necessary if there isn't demonstration of some functional gain. So I think that's a good mechanism for controlling that.
Mr Spina: Thank you, Dr Reesor. It's good to see an academic who has some good hands-on field experience as well. I just want to pick up on what Ms Lankin was just talking about and you were addressing with respect to the DACs, that is, the criticism the DACs have had in terms of their effectiveness. Can the DACs kick in sooner? Would that help the system?
Dr Reesor: Definitely. I think that's been one of the problems and one of the big reasons perhaps that Bill 164 has been perceived as being fraught with problems. In my own opinion, in seeing a number of motor vehicle accident cases, probably about 400 or 500 since 1991, and especially seeing what's happened since Bill 164 came on, I've been amazed at how many people didn't get DACs sooner. Clearly the decision, in my opinion, in the DAC would have been that further treatment isn't necessary or required. It is a mechanism that can control and contain that. I've seen cases where tens of thousands of dollars just in psychologic treatment alone have been spent when that should have been DACed months, even years earlier.
Mr Spina: Which can lead into the other factor, and I guess it's who has that key responsibility in determining what treatment the victim gets, when it kicks in; and what has also impacted on that process -- I'd be interested in your opinion on really the conflict-of-interest issue, the referral-for-profit kind of issue that has surfaced through these hearings.
Dr Reesor: I'm concerned about the conflict-of-interest issue. I think it can arise in a number of different settings. One of the advantages about the DAC system is the clear separation, the clear delineation away from any potential conflict-of-interest types of situations arising.
It's probably been said before, but there are a lot of tools that certainly the insurance industry has at its disposal to be able to track, to be able to monitor what are appropriate and inappropriate treatments. They can certainly use the resources of those regulated health professions that have a fair bit of data information on this.
I think maybe one of the problems, looking at it from my perspective, is that under Bill 164 and maybe even under OMPP there were some dramatic changes to the rehab and health end of things. It really has not been a very long time for people to adapt and get used to this, and here we're facing another set of quick changes. I think, though, that there has been an evolution, if you like, of cost containing, being more reasonable about treatment, and that can continue to evolve.
The problem that you mention, the for-profit, certainly that can be a disincentive in some situations. Again, however, I think what the proposed legislation is doing is putting a bit more teeth to the conflict-of-interest guidelines. You do have the resources of the regulated health professions which don't look very kindly on that kind of thing. I know our own college has at least four separate committees looking at how we behave and how we practise. That has far more teeth than anything set up in the draft legislation to govern our behaviour accordingly. Again, it's a mechanism that can be used and has not been used. It probably has been underutilized.
Ms Castrilli: Thank you very much, Dr Reesor. It's especially a pleasure to have someone from the DACs here. We've heard a lot of information about the DACs. I'm curious about your comment about mechanisms to contain costs under Bill 164 and that they were underutilized. I think it's quite true. If you look at the charts in terms of the costs -- I'm not sure which specific measures you're talking to, but in terms of the actual costs per vehicle -- they are twice as high as they were under OMPP, so I think you're quite right.
Let me ask you a question specifically about the DACs. We've had a large number of victims who have come before us and said: "The DACs are a problem. They are a problem because they're really not independent, they're really not unbiased and frankly they're a hindrance to my progress. I can't seem to get through, and on top of it all, that's what's causing some of the costs to escalate" -- not alone, but some. I wonder how you respond to that. I want to give you an opportunity to make the case, because an awful lot of people do not believe that the DACs are helpful to them.
Dr Reesor: A couple of things. In the legislation, in Bill 164, you have a criterion that people have to evidence a substantial impairment in a number of areas of activities of daily living. It's a pretty stringent criterion. I see a lot of people in the DACs and there's no question that they have ongoing problems, and that's a concern. Many of the people I might see for example in a disability DAC, which is separate from the treatment end DAC -- there's a medical rehab DAC and a disability DAC -- I feel really do require ongoing treatment services. However, they don't meet the criteria to enable them to continue to have income benefits. Often what we're getting in DACs is cases that are contentious. They're going to the DACs because there's a certain amount of dispute there.
There has been, in my opinion, some unevenness in applying standards of DACs which I think is starting to get addressed. Certainly within our profession, if you look at the upcoming Ontario Psychological Association convention, there's an incredible amount of presentations on looking at the assessment of disability and standards and uniformity. Again, I think it's been fairly new in applying some of these standards, but it is a stringent standard for disability entitlement.
The other thing, if you look at treatments, and again I think some of the DACs have been fair in applying what we can judge based on good clinical evidence -- an example of this is, as many of you may be aware, the Quebec study on whiplash-associated disorders -- it comes down pretty hard line that, "Look, we just don't have evidence that continuing treatment ad nauseam or past a certain point is going to produce any functional gains -- either return to work or a change in symptom status -- or somehow change people's function to any significant degree."
I sympathize on one hand, because I see a lot of people with ongoing, continuing problems that can be addressed by perhaps quicker and more efficient interventions. I can't say that the problem is with the DACs. Sometimes the problem is just with the nature of the injury itself.
For example, I was looking at a study on people who lost children. These are adults who lost adult children in an accident and they were followed up some eight to 10 years later. Many of them had many symptoms of significant grief and loss and other emotional difficulties and were still encountering problems because of that loss. These conditions do linger. I think the problem is that somewhere we draw a line between how much we can really do within the health rehab context and when is the point that people have met their maximal medical or maximal psychologic recovery. It's frustrating and I think it's psychologically very difficult for many people to accept that they've got to that limit.
Ms Castrilli: We had one woman yesterday who had four opinions from four different doctors who concurred and the DAC did not. I think in those cases you see the anomalies very clearly.
The Chair: Thank you, Dr Reesor, for your input and your presentation today. We appreciate your being here.
1350
ARIEL DELOUYA
The Chair: We now welcome Mr Delouya.
Mr Ariel Delouya: Good afternoon, ladies and gentlemen. I'm here really in the capacity of an average citizen with concerns about the auto insurance system in Ontario, particularly as it regards the question of so-called higher-risk drivers and Facility Association.
By way of background, I'm a 33-year-old bureaucrat employed with the federal government in the Department of Foreign Affairs and International Trade. I have been a licensed driver since 1980 and until recently enjoyed a six-star highest auto insurance rating with low interest rates to go with that.
Unfortunately, in 1993, 1994 and 1995, in the span of about nine months, I had the misfortune of having two minor accidents: one in inclement weather conditions at night, single vehicle, my car alone; another a minor fender-bender last August. As a result of those two minor accidents -- and I should point out that this is in the backdrop of a violation-free record, an accident-free record, having driven abroad in many different environments as a result of the work I do -- my insurance rates went from about $670 a year to $3,200 and change a year. That's a considerable hardship.
I'm fortunate to a certain extent in that as hard as that may be, I can bear that hardship. I'm sure there are a number of people who, when finding themselves in that situation, probably can't make that payment and probably have to either forego the use of their car or, unfortunately, as is the reality, many will drive uninsured, posing an even higher danger to other motorists.
In my case, I've had to deal with what seems to me the unfairness of that situation, but I'd like to point out a number of flaws that strike me with the Facility Association system, and it is my hope that this committee and the work it has before it will find some way to address this concern.
I do recognize, I should point out, that there are incidences of drivers who do drive recklessly, have chronic poor-driving records that certainly warrant higher premiums. My bone of criticism is with a system that seems blunt and unable to differentiate between a chronic poor-record driver and someone in my situation who has had the misfortune of having two minor infractions, or in this case accidents, in a short period of time.
I should point out that as a result of the timing of the accidents that I've had, I now face this situation of very high payments for the next four years. If you do the math, that's roughly $12,000 to $14,000, presuming that there are no further increases built into the system in the next three or four years.
What I'd like to point out is that I'm at odds with a system, as I said, that doesn't seem to draw a distinction but, more importantly, that seems punitive and harsh. Let me give you a couple of specific illustrations.
When I looked at the new sheet outlining my payments and breakdown according to the different benefits covering my policy, there was a $200 policy fee which intrigued me. It didn't seem to fit anything particular. I inquired with my broker as to what this policy fee was related to, and was told: "Oh, that's just a standard fee that's charged on any Facility insurance claim. It's an administrative fee. It's either 10% of the policy or $200, whichever is less." That to me seems like kicking someone when they're down. It seems very unfair. I can't figure out and neither can my broker give me a proper answer as to why that kind of a punitive fee on top of an already exorbitant policy premium is charged.
I have an eight-year-old car. What I'd like to point out in the next segment of my presentation is something that I think will interest all of you who are interested in promoting growth and promoting jobs and economic activity. I was thinking very seriously about replacing this car, perhaps with a new car, in the next couple of years. That decision has now basically been taken for me by virtue of the Facility Association system. I will not buy a new car in the next three or four years. Simply put, the money I'm going to be spending likely on insurance in the next three or four years would've paid for probably 60% of the cost of the kind of car I would've been in the market to buy in the next two or three years.
I guess there's an issue of public policy here. Do we want people who, in this kind of circumstance I've outlined, paying what certainly seems again to me to be a usurious fee for auto insurance coverage, when there's an inability on the part of the insurer to look at the overall record, and in my case, I would argue an exemplary record, against the backdrop of one year?
I should point out, as an aside, I don't quarrel with the fact that I should pay more for my insurance as a result of those two accidents. What I quarrel with is whether I should be paying five times more. I don't quarrel with paying even twice as much as I was paying. I recognize that I've obviously incurred costs for my insurance provider, and I'm prepared to compensate for that.
There's a difference between paying two or two and a half times what one was paying and paying five or more times than what one was paying. So the new car is out the window. I'll manage with the car I have, but again there is an issue of broader public policy here. Is it in the interest of the economy of Ontario to have people spending the kind of sums that people who find themselves in my predicament will pay for insurance coverage when they could be making what I would call more meaningful and productive investments elsewhere in the economy?
Lastly, and then I'll be more than happy to take questions, I'd like to offer another example of where Facility Association is, in my view, a system out of whack. And this has nothing to do with me.
As someone employed by the Department of Foreign Affairs and who has to be posted occasionally abroad, I can relate at least two instances of colleagues who have told me about situations they have found themselves in that I think are worth noting. I'll cite one.
A colleague recently came back from London, after a four-year posting at the Canadian High Commission in London. He lived in the city centre, decided that public transit in London was certainly adequate to meet his needs, liked to bike, decided he wouldn't buy a car, too costly to maintain, nowhere to park it. For the odd times that he wanted to go for a country drive or visit somewhere, he would rent a car.
He came back to Ontario last summer. He approached an insurance company to provide coverage for a car he had bought to resume his life in Ottawa and was immediately designated a high-risk driver. He was designated so not because he had accidents or previous violations; he had an exemplary record before he left Canada. The reason was quite simple. He had not been insured for the past two years.
He did not realize, incidentally, that Facility Association could be an issue for someone in his position who had forgone the use of a car for two years. As a result, he finds himself with a new car with insurance payments of close to $4,000, probably for the next two or three years before they start to gradually come down to a more reasonable level.
Those are just a couple of instances that I think illustrate certainly the problems that I see with the auto insurance scheme in the province of Ontario. It's not one I've seen echoed considerably in articles and media reports of what this committee is studying and what the draft legislation proposes, and I would hope that my intervention and hopefully the intervention of others might help steer the work of this committee in that direction, as well as in the other directions it has pursued.
Mr Tim Hudak (Niagara South): Thank you for your presentation this afternoon. This committee has had quite a bit of input actually, and Facility Association is something that I believe the government will be looking at, but I have some specific questions for you on that issue.
You mentioned two accidents within a nine-month period. I believe that you said you saw your insurance up to five times as high.
Mr Delouya: About five times, from about $680 to $3,260 something.
1400
Mr Hudak: What would be your suggestion to this committee as to when a driver would be put into Facility in terms of accidents in a time period or whether it's at-fault, not-at-fault, that sort of thing?
Mr Delouya: Certainly there are offences and there are behavioural attitudes that warrant Facility almost immediately: people who drive while intoxicated, people who violate such elementary rules of the road as not respecting flashing lights on a school bus. There are different gradations certainly of offences. As I said, I don't quarrel with paying more as a result of the claims that I've submitted.
What I don't find reflected in the Facility Association system is an ability to discriminate between, is this a person who has had a run of bad luck, is this a person who has had a couple of minor traffic violations and otherwise has had an unblemished record, or is this a person with a chronic pattern of repeated traffic violations, repeated accidents, repeated arrests for violations of the Highway Traffic Act, that sort of thing.
I also find fault with a system that, to take my case, did not seem able to look at eight or nine years of record of insurance since I have come back from my last posting where there hadn't been claims, where there hadn't been violations, where there hadn't been accidents, where basically there was an unblemished record and where I had a six-star rating and was paying the kind of low insurance rates that I was paying and then all of a sudden from one day to the next finding myself thrust into the world of Facility Association. It's that kind of bluntness in the system that I find objectionable.
Again, I'm not saying that drivers who find themselves in my predicament or in other predicaments should be absolved of their responsibility. I take responsibility for those accidents. They were clearly my fault. One was a single vehicle and one was not. I don't for a second dispute the need for that to be reflected in my premiums, but there is a question of degree that should enter the picture.
Mr Phillips: I think we all appreciate you being here. It's a story that is not unlike what we've heard elsewhere and I think Mr Sampson, looking at the problem, is trying to find a solution, I suspect. Is that fair to say?
Mr Sampson: Right. We are certainly not trying to create another problem.
Mr Phillips: Deliberately.
I guess the best we can say is, I think you've been a very good witness to give us again the unfairness of the situation where essentially you've had the bad luck really in some respects and then you're thrown into the mix with those who are there for good reason. I would hope the government may find some way to find some flexibility in the system to do what I think your fundamental recommendation is, that you appreciate there is a need for dealing with high-risk drivers, but there should be gradations of risk.
Mr Delouya: Certainly. Could I just add one thing, Mr Chairman? I don't want it to seem like I'm here strictly concerned about my own plight. As I said, I can cope with that, but as I said to you earlier, I'd like it to be reflected, if I can have it so, that there's an issue that goes beyond my situation or the situation of a habitual poor driver. It's the illustration I gave with respect to people who work in my department who come back from postings, and I'm not here speaking on their behalf; I'm here strictly in my personal capacity.
But again I think it's a good illustration of where there is a rough edge to this system when people who have driven 20, 15, 40 years, 30 years coming back from a posting to a place where they haven't had an opportunity to drive or haven't deemed it appropriate to drive because sometimes you just don't want to drive in certain environments find themselves thrust in that same kind of predicament.
Ms Castrilli: One quick comment, Mr Delouya. I think you've illustrated very well here what one of the basic problems is in this whole area and that is that the rules are not transparent. There's not due process. There isn't even an element of fairness and even if there were, it's not perceived to be that way by the public. So there's an issue here of education, as well as some basic fairness issues. Would you agree with that?
Mr Delouya: Very much so. I didn't know anything about the Facility Association. I'm a very well informed person and I'm pretty well in touch with things around me. After my first accident -- and that was a single-vehicle accident, so there wasn't another party damaged -- had someone told me about the Facility Association, had I been informed by my broker, had I been informed by anybody else in the system that there was this issue, frankly, I would have paid the damage myself, if only not to find myself faced with that probability. Even when I had the second accident, I still didn't know, and it's only after that second accident that I discovered the reality.
I should point out, in fairness, that partly because of horror stories like mine and I'm sure countless others, the press has begun to report somewhat more extensively on it. I know that even within my own department there have been administrative notices sent out to missions abroad to inform returning staff. This is certainly the kind of issue I outlined before about uninsured drivers for the past two years. The educational level seems to be rising, but it's still a very murky area and it's unfortunately too often the case that people find out once they've fallen into the abyss of Facility Association and they can't do anything about it.
Ms Lankin: I'm very glad that you have stressed this with the committee again. The committee members know this, but I myself experienced a period of four and a half years covered under fleet insurance where I didn't have my own vehicle and therefore didn't have my own insurance.
When I went to become reinsured, in this case I was asked if I could establish five years of accident-free and at that time would then be given a five-star rating for the price that I would get. I could establish four and a half years, because prior to that the company that I'd had my insurance with had gone out of business, and even though their files had been taken over by another insurance company, nobody could track it down: broker, companies, whatever. So even though I hadn't had an accident for 10 years, I had no way of proving that at that point in time and so therefore had to pay the extra costs. It didn't make a lot of sense to me, and this was for a matter of six months in terms of the driving record.
On your issue of the two minor accidents, it distresses me to hear you say that had you known, you would have paid the costs of the first one yourself for the repairs. I understand the point you're making very well, but that's what insurance is for.
I put a question to someone from the insurance industry in terms of, what is a good-risk driver? Because one of the things I want to point out is that while the government says at some point they might deal with the Facility management issue, what they are promising in this bill is that good-risk drivers are going to have lower rates, and the insurance industry official told me there is no definition. Most people would think they're a good-risk driver, but if they've ever had a speeding ticket or any kind of minor infraction, in our view, they're not a good-risk driver. So I think your issue about standards and definitions and education is very important and I appreciate your presentation.
Mr Silipo: Very quickly, I echo the feelings that others have expressed about the usefulness of your presentation in reflecting that of a number of others in raising the problem. Just to further our understanding of some of the issues, I just wondered if you would be able to tell us, if you combine the two accidents or incidents that you were involved in, what cost that would have resulted to the insurance companies in terms of outlay either to other parties or to yourself for the vehicle damage or whatever it might have been.
Mr Delouya: I would say the single vehicle accident was about $2,000. The second accident, which involved another vehicle, I actually never found out what the other party's damage was. It was less than mine, I think, just from looking at the damage. I would say that was probably $2,500.
Mr Silipo: And were there personal injury claims as well?
Mr Delouya: No. There was just body damage. They were minor. They were minor, but unfortunately, car repairs being what they are, it doesn't take much.
Mr Silipo: So when you put that together, it sounds like roughly the increase in a year and a half would have covered basically the additional costs between the two accidents.
Mr Delouya: And I'll be dealing with Facility for four more years.
The Chair: Thank you very much, Mr Delouya. We appreciate your presentation at the committee today.
Interjection.
The Chair: You can't do a point of privilege, but you can do a point of order if there's something out of order.
Mr Wayne Wettlaufer (Kitchener): It's not a point of order. It's a matter of clarification for all the members of the committee as well as Mr Delouya.
Insurance brokers traditionally advised their clients when a claim was a small claim that it could adversely their insurance acceptability and their insurance rates. That was prior to 1994. Subsequent to Bill 164, there was an agreement by the insurance companies that was negotiated. Insurance brokers, upon being advised of a claim, regardless of size, now must advise the insurance company. The alternative, of course, is being reprimanded by the regulatory body. That's the way it is.
1410
Mr Kormos: Pursuant to that point, Chair, and that point hasn't been recognized, I've got a pamphlet that's being distributed by a large brokerage in a major city in Ontario that specifically indicates to its clients that that broker will advise you against reporting certain types of claims. Get hold of that broker first because reporting those claims -- I've got it here. It's got the name of the broker on it. It's an official document: To Claim or Not to Claim. I quite frankly would expect that of a broker, but at the same time that broker not only is probably breaching the agreement, but is probably pretty close to finding himself or herself a party to criminal activity, perhaps even fraud. The fact is that's why the insurance industry has been referred to as highway robbery in this province for so long. The highwayman is still robbing out there on those roads, and that's why we advocate public auto insurance. That's the only real solution.
The Chair: Thank you very much, Mr Kormos, and thank you, Mr Delouya.
THOMAS CONNOLLY
The Chair: We now welcome Mr Connolly to the committee. We have 20 minutes together.
Mr Thomas Connolly: Thank you very much. My name is Tom Connolly. I'm here, as my paper indicates, as one voice for innocent victims. I'm one of the many lawyers in Ontario who since 1990 have been forced to observe and listen to innocent accident victims react in shock and disbelief when fully informed as to their rights of compensation under the existing motor vehicle accident systems.
What I'd like to do this afternoon, and I'm going to do this very briefly, is indicate to you how and why this draft bill does little or nothing to bring fairness and justice to innocent accident victims. I hope to assist you in understanding, from the perspective of the innocent accident victim, why this bill fails and how you might rectify it.
To fully appreciate the devastating consequences of the application of the existing insurance legislation since 1990, I suggest to you that one has to be a victim, one has to be a member of a family that has a victim, or you have to be intimately involved on a day-to-day basis in trying to bring fair compensation for that innocent victim.
This government promised to overhaul the auto insurance system in Ontario. I believe this was a philosophical belief, perhaps reflective of current public opinion, that we need less government involvement, less regulation in our lives. When I read this bill, I think it does the exact opposite.
I think it's trite to say that all an innocent accident victim asks for is really to be put back in the position they were in before the accident. We use this expression "to be made whole again," and there are a number of parts of this legislation that attempt to do that. But I think it fails on a number of headings and I'd like to deal with those. I'm sure your committee has heard from a number of interested groups and parties who claim to be stakeholders in the present system, and I don't denigrate their rights to be heard and I hope they have been heard, but I suggest to you that your primary concern is really the innocent accident victim who is in that position because of no fault of their own. In the final analysis, you're going to have to make value judgements, you're going to have to weigh the scales, but I ask you not to lose sight of your responsibility to be fair to the innocent accident victim and to make him or her whole again.
I approach this from the point of view of, what is compensation? I look at it from the perspective that money can't fully compensate anyone for an accident. But I believe the tools are already there to get as near perfect a system as can possibly be done. I heard comments this morning that we should look at other jurisdictions to see what they've done, and I think that's probably worthwhile, but a lot of this has already been done in the report by Coulter Osborne. I think if you go back and look at and study that report, you'll get quite an education in terms of what other jurisdictions are doing.
I look at compensation using the terms that are common in personal injury litigation, and these are "pecuniary" and "non-pecuniary" losses. They're nowhere defined in the legislation, they're nowhere defined in the regulations, but they're commonly used terms.
Pecuniary losses are those losses which can be calculated in money, including expected or anticipated future expenses or losses, such as the loss of future care or the loss of future earnings or earning capacity, and future income tax liability, which is nowhere addressed in this legislation. These heads of damages are limited only by the ability of the innocent accident victim to apply them to their own set of circumstances and to argue that they're reasonable when applied to them.
The concept of non-pecuniary losses is conventionally understood to encompass three components. The most common one, and the one I'm sure you've heard about ad nauseam, is damages for pain and suffering. Then there's damages for loss of expectation of life and damages for loss of amenities of life, the enjoyment of life: the ability to walk and run and do things we take for granted. They're essentially one head of damage.
The distinction of these damage components between non-economic or non-pecuniary and pecuniary can result in as near perfect compensation as can be arrived at if, and only if, the barriers to arriving at that are knocked down. That's what I want to address with you today, if I can, for a few moments.
In my view, the present insurance system sets up roadblocks to fair compensation. This draft bill has been advertised, I suggest, on the theory that it gives more access to the courts and knocks down barriers, but in my view it simply knocks the innocent accident victim off the road to fair compensation. It creates this illusion of restoring rights, but it's creating more roadblocks. I think these roadblocks have come about to a large extent because we're attempting in this legislation to find things for all possible victims, not just the innocent accident victim. We're trying to figure out levels of compensation for everyone and we're trying to get definitions.
Perhaps it's the frailty of the English language that you can't define in legislation some of these concepts. I want to just briefly talk about what I term the verbal roadblock. In a nutshell, the existing legislation wipes out any claim for non-economic loss that fails to meet a verbal threshold. There are two words in the verbal threshold that are fraught with interpretation problems, and these are the words "serious" and "important." As you know, this bill doesn't propose to change anything in the verbal threshold. We're still going to be left with these expressions "serious disfigurement" or "serious impairment of an important physical, mental or psychological function."
It's interesting that when I went back and looked at this legislation and I looked at what has been put out by way of draft, I saw that the legislation had in it this regulation-making power, where these abstract concepts in the verbal threshold were going to be defined. Further, there was a section in there saying that the evidence that must be adduced to prove a person has sustained a serious impairment of important physical function etc was going to be defined by regulation. I went back and looked at the old legislation, and exactly the same wording is in the previous bill. That bill received royal assent on July 21, 1993. We've almost come three years since then and there still isn't any regulation passed to define what the meaning is of "serious," what the meaning is of "important."
1420
So we're repeating those same regulation-making powers. I can understand why no one has defined them, because they're abstract concepts that are almost impossible to define for purposes of doing fairness to the victim. For example, at the back of my paper I've given you a real-life example of someone who finds herself in this problem of trying to define the word "serious." A woman who was left with scarring on her lower legs is denied compensation and is told that by wearing appropriate clothes the scars can be hidden and therefore are not serious; they may be a disfigurement, but they're not serious. Where does that leave that particular innocent victim?
The bill as presently drafted gives the illusion that we're going to have the right to seek compensation for economic loss. The definition sets out that the innocent victim is going to be entitled to seek 85% of his net income loss, as determined by regulation, after the first week, one week after the accident; and of course 100% of these other expenses, what we formerly used to call "special damages," though we're now defining them as medical care, rehabilitation, attendant care, housekeeping and home maintenance. Of course, the moment you try to define something, you're excluding something else.
When I look at the regulation that's been circulated to define what net income is, I come to the conclusion that the vast majority of innocent victims would have no claim for economic loss that could be pursued in a tort action. It would result in innocent victims permanently giving up 15% of their net lost income. It fails to consider the effect of inflation, the likelihood of wage increases or the promotion of the innocent accident victim in the workplace, and it just arbitrarily robs them of the first week of income.
Then I look at it from the perspective of how it affects the self-employed, the small businessman, the farmer. It defines "self-employment" by looking at profit as subject to taxation, so we'd be back to producing income tax returns. This would be an effective roadblock to any claim for overhead expenses of the self-employed during disability. The farmer who is disabled and cannot milk his cows must hire a replacement worker at his own expense, without compensation, under this draft. Most farmers have little taxable income that they actually report on their tax return, so they will fail to meet the test to receive any net-loss-of-income benefits under this proposal. In effect, a farmer loses both ways.
What about a disabled labourer or contractor? He's under disability, he's precluded by his injuries from building or improving his own home. He can't recover any of these losses. A student whose tuition fees are lost, whose career is lost or delayed, gets nothing.
A further roadblock is established for the innocent victim by failing to consider the loss of future and current earning capacity and whatever competitive advantage they may have had in the workplace.
The draft bill goes on to talk about what I refer to as the monetary roadblock, that is, seeking compensation for non-economic losses. We have the threshold set now at $10,000. This proposes to increase it to $15,000. The great thing about a monetary roadblock is that at least it's expressed in absolute dollars; we can all understand it, it doesn't have to be defined. But by increasing it to $15,000, I suggest you're in effect eliminating all claims for non-economic loss, claims for pain and suffering, to at least $30,000, because no one is going to pursue those claims when you make it that high.
The net-income-loss concept will result in the need for accountants and economists. This creates another monetary roadblock, because these costs can be $5,000 to $10,000 for the innocent victim, and much more if he is forced into a situation of trying to prove an accident at trial. The net-income-loss limit at 85% results in a permanent 15% deprivation -- you simply give up 15% of your net income -- so that's another monetary roadblock. Then of course the commencement of the claim can't take place till day eight after the accident, so you're giving up that one week's worth of income, for no good reason.
The retention of the verbal threshold for non-economic damages, for pain and suffering, creates for innocent victims a need to get medical evidence. These costs can easily be $5,000 and act as a further roadblock to justice.
My submission is that these monetary roadblocks, combined with the definition problems, combined with the cost problems, will just eliminate many claims for fair compensation.
I know you've heard something already from other parties about what I call the time roadblocks. The legislation has this new section in the draft bill, section 258, that creates some new time blocks for innocent accident victims, things that aren't there at the moment. We've got the requirement to give seven days' notice to the insurer after the accident. We've arbitrarily in this draft eliminated prejudgement interest on all damage claims if written notice is not given or an action started within 120 days after the accident. This is highly prejudicial to innocent victims. What it is going to require if it's implemented is that any time someone determines that they're going to bring such a claim, they will have to bring a motion to a judge, to a court, to authorize the mere commencement of the action before the statement of claim can be issued at the registrar's office. It's a further cost roadblock.
The verbal and monetary roadblocks will dissuade victims from involving lawyers until they're reasonably satisfied that they can overcome these hurdles. Nevertheless, such victims are going to be penalized for acting in that fashion. Victims now are often advised by adjusters, people in the insurance industry, that lawyers are not really necessary, that it's simply a question of filling in a few forms and you can establish your entitlement and your level of benefits. They're often told that they'd not likely have any right to sue for damages anyway, so why waste their time, why waste their own money?
These new time roadblocks are really anti-victim, and they presuppose a high level of sophistication of the public, not only the public but somebody who is suffering injuries and is probably concentrating all their efforts on trying to become healthy again, and they are to know about a 120-day time period.
These time roadblocks are onerous, victim-unfriendly and really serve no legitimate purpose that I can see other than to create a bureaucratic web and to wear down the victim.
1430
The present and proposed systems are so fraught with complexity and uncertainty that the costs associated with an innocent victim obtaining his or her legal entitlements are excessive and constitute a roadblock. The retention of the words "serious" and "important" in the verbal threshold for general damages creates uncertainty and additional cost.
The use of these words -- I haven't heard anybody today address this issue before you, but perhaps you've heard this addressed somewhere else. They're so difficult to define, these words, and when you apply them together, what do they mean? There's a cost, case by case, in determining the meaning of words that we're not even able to define by way of regulation.
The costs associated with self-employed victims determining what their entitlement is going to be is another roadblock to justice.
In my view, the draft bill simply creates more levels of legal and procedural complexity surrounding not only the issue of benefits entitlement, the AB claims, but it creates this greater level of uncertainty in interpreting these time periods, definitions and other concepts.
My suggestion is this: Innocent accident victims need to have these roadblocks knocked down. You've gone some level, I think, in putting in this paragraph dealing with the statutory duty on insurers to take steps to settle an action as quickly as possible. It's simply codifying what we all thought was a duty on insurers to act in good faith. But it's really meaningless if you set up all these roadblocks -- statutory, bureaucratic, cost roadblocks -- and leave them in there. The duty of good faith is meaningless. What we need is an equality of equal bargaining power, not only between the innocent victim and the insurer but between everyone associated in the industry.
If you simply focus on accident benefit entitlements at the expense of honest and innocent victims, you create an injustice to the majority of these victims. You can't legislate cooperation and trust, but you can create a level playing field so that both parties can bargain fairly.
My suggestion and respectful submission to you is that you knock down some of these roadblocks.
Eliminate the words "serious" and "important" from the verbal threshold, just take them out of there.
If we're going to have a monetary roadblock, a threshold for monetary claims to get rid of the small claims, I suggest that it be at $8,500. It will effectively wipe out, on a practical basis, claims that would be valued up to $15,000.
I suggest that there be a provision to allow full economic losses based on gross figures, so we are not faced with this problem of defining net income and this very unworkable formula in the draft regulations.
I suggest that you eliminate arbitrary notice provisions coupled with monetary penalties for failure to comply. It's one thing to have these notice provisions, but when you have the kicker on it where you're taking money out of the pocket of the innocent victim if he doesn't make it, and he may be stuck in a hospital bed for six months and never have spoken to anyone to be advised of these periods, you're penalizing him.
Mr Connolly: I'm suggesting to you that the beauty of the common law, what we've had in this country for years, is that it has a capacity for fairness and justice. The innocent accident victim simply asks to be treated fairly and reasonably. The public may not know what "tort" means or what tort law is, but they know what's fair and reasonable.
Individual responsibility for one's actions is a concept that's central to what reasonable people regard as just. The simple idea that if you behave improperly and thereby injure another, you're responsible for the consequences, seems so obvious and commonsensical. The idea that both the innocent victim and the wrongdoer should be compensated equally offends most people's sense of justice.
Since 1990, these no-fault systems have floundered, but they haven't floundered, in my respectful submission, because of any focused opposition by lawyers or other interested parties; they've floundered because there's an unfocused opposition and a belief out there in society that they're not fair and that they're not fair to innocent victims.
No major public interest group or political party appears to be advocating full no-fault, yet the goal of fairness is lost if all these roadblocks are kept in the legislation and are maintained to the detriment of the innocent victim. The innocent victim's expectation and sense of fairness is offended when access to compensation for both economic and non-economic loss is not assessed on a case-by-case basis without roadblocks to recovery.
Those are basically my comments.
The Chair: Thank you very much, Mr Connolly. We appreciate your input to the committee.
ACTION ONTARIO
The Chair: We now welcome Action Ontario, Mr Wayne Kasbey and Karen MacNaught. Welcome.
Mr Wayne Kasbey: Thank you for inviting us here today to comment on the automobile insurance policies and giving us this opportunity to dress up.
Please understand, I do have head injuries and I will often refer to my notes. I have had past opportunity over the last four years to speak with hundreds of what we call "insurance victims." The issues we will cover here today represent obvious problems within that system.
Consumers purchase the insurance product to protect themselves against loss. Should a loss occur, the principles of indemnity will return that loss to a state immediately prior to the loss. One will not profit from such a loss, but will benefit for the amount of that loss. Statutory conditions are in place to ensure that insurers do not take a position in the contract more favourable than that of the consumer.
The insurers, having extensive knowledge of their product, continue to sell the product on the Canadian marketplace based on its appealing content, whatever that may be. This leaves out limitations, inclusions and exclusions of the product, leaving the consumer unknowledgeable to the instruments of the insurance contract. Without full knowledge of the product, the capacity to enter into such a contract is compromised.
Ladies and gentlemen, we feel this is completely unacceptable today in a world of information. Consumers must fully understand the mandatory insurance policies they are compelled to purchase.
Consumers must be educated. Without this educational initiative, consumers cannot possibly be expected to understand the absolute and actual needs. The industry does not yet provide for this education. For example, my former broker, when asking for clarification on my accident benefits, told me he's never heard of the Ontario Insurance Act. By the same token, the insurer is bound by the obligations and regulations to disclose the instruments of the insurance contract.
We do agree with the industry that more accurate information upon application for insurance would produce positive results. It would not only benefit the insurer, but also the consumer. The probability exists that this may eliminate some of the conflict which occurs within the individual policies. This could have a direct impact on the number of mediation and arbitration cases, but we caution that added information to an application must not infringe upon the privacy of the consumer.
Members of the panel, we urge you to support the concept of consumer education with these new policies. To educate Ontario drivers who know little of what awaits them, we have requested education time and time again with past governments. The time to implement such a program is now at hand.
Insurers have demonstrated pre-OMPP, OMPP and now the statutory accident benefits that they cannot responsibility delegate adequate medical treatments and attention for injured consumers. Trends indicate that large corporate year-end profits are consistent with better treatment programs for consumers. This suggests that consumers should shop for their insurance in larger corporations, which will directly affect competition.
As long as profits are tied to consumer welfare, there will always remain inadequate treatment and ultimately unsatisfied and unrehabilitated consumers, and the Ontario government will foot through their bills through the Ontario provincial plans.
1440
The insurers have demonstrated over the years that rising increases in private health care costs have skyrocketed and continue to do so. This is grossly misrepresented by the industry. We ask you to consider the latest releases of health costs and expenditures within the private sector before you agree to increase premiums.
The province is now paying the greatest percentage of health care costs associated with MVAs by way of unacceptable claims denial practices. This is unfair to the consumer and the overly burdened Ontario health care plan. It is time, ladies and gentlemen, to look to alternative methods of controlling Ontario health expenditures.
For example, a simple cost-effective remedy would be to utilize the pink slip as a health card for emergency and other MVA-related treatments. The benefits are ultimately to the province, which in turn, upon implementation, may even be passed on to consumers by reductions in aggregate public health care costs associated with premiums.
This could be the answer, as we see it. Billing would be direct, with little added cost to the facilities, but I state again, a significant cost saving to the OHIP system in Ontario. We say to you here today, the simplest method of OHIP renewal is to ensure that insurers pay for MVA-related expenses.
The committee has heard from the industry on fraudulent claims. Need I remind you, the Ontario Insurance Commission carried out research on fraud claims. The result was such that the number of fraud claims is so insignificant that meaningful statistics have not been kept. In fact, they used American statistics throughout the study. WCB realizes approximately 3% of total claims that are fraudulent. For the industry to even suggest upwards of 40% is unrealistic and based on assumptions.
The influence of the powerhouse insurance lobby must be curbed in the future. The industry has shown over time that increases are necessary, but have neglected to support their claims with adequate data. Our government must not and cannot continue to accept industry claims at face value. You have seen, noted and questioned the absence of supporting documents throughout the hearings. The multitude of answers you receive tell you something. Please, for the sake of consumers, create a royal commission to investigate the unfulfilled, ambiguous claims of the insurance industry. Do it for your constituents.
The use of DACs in Bill 164 has been a significant improvement over the outdated IMEs. This concept is on the right track. With some fine-tuning, this can continue to be a supportive factor in conflict resolution. The problem associated with DACs is that it can make access to benefits a complicated matter. Accessing benefits can effectively be dealt with in an educational initiative by our government. DACs were created in hope of reducing associated conflicts involved in paying claims and to reduce the timeliness and costs associated with traditional conflict resolution. Many insurers ignore this concept. This leaves the injured patient without care.
The consequences of injury leave the injured victim in a physiological and emotional state of healing. To add psychological and financial variables to the formula devastates not only the patient, but the family as well. Past and present claims denial tactics manifest themselves in consumer abuse, abuse that is counterproductive to the patient's rehabilitation.
Corporate financial penalties or deterrents counteracting poor business ethics must be put in place. The ambiguities within past and present legislation leave many opportunities for abuse by insurers. This results in financial ruin and a significant number of other devastating barriers for the injured person to conquer. Social scientists support our claims here today and add that such tactics significantly add to the problems as a whole, which many cannot bear for extended periods of time. The results further impair one's ability to obtain accident benefits coverage.
We are here today to talk about rate reductions. Let me remind you, the concept of auto insurance is about consumers' welfare. Rates have to be secondary to wellbeing. Although a significant portion of the consumers' disposable income is spent on premiums, they continue to climb. Some are paying premiums equal to or greater than their mortgage and rent payments. Such premiums will drive down the economy, slow the marketplace by placing barriers on mortgage loans, personal loans and the like. Ends must be achieved based on the wellbeing of your constituents.
We have the problem of dealing with primary and secondary payors. As a province, more than 40% of automobile holders have other insurance plans. We must streamline these plans to eliminate the costs associated with double coverage. The confusion between who pays what is again on the consumer's uneducated shoulders. As a result, the consumer faces even further burdens to those already discussed here today.
A clear, direct path must be established to access benefits immediately following injuries. Let me tell you from experience and research that the health of accident victims is sacrificed for profits. Ladies and gentlemen, we would like to see this end.
I submit to you that the legal, medical and enforcement mechanisms in place today are confused by the complexities and the number of past changes to the automobile insurance. This overhaul will add to the confusion. When the insurers are confused, they have the experience, resources and the power to effectively interpret the legislation, mostly in their favour. Tell me, what do the consumers have to rely upon?
The OMPP placed a unique twist on auto insurance. We were given a system that would have worked, perhaps with a little fine-tuning. To continue extensive transformations is counterproductive. In 1990, the right to sue was eliminated for non-catastrophic injuries. The consumers saw no premium reductions. Thus we can only conclude by the industry's rate determination that the right to sue has no economic value. Over the past two weeks, the industry has suggested otherwise. If the right to sue for economic loss has a value, then the consumer should have realized premium reductions. Saying that, I'm still waiting for mine.
An increase in premiums based on the reinstatement of the right to sue must be balanced and offset by the indicated savings from the past. The Ministry of Finance requested William M. Mercer to proceed with an actuarial cost study. The recommendations I do not need to reiterate here.
What happened? What happened to the estimated 30% to 44% savings the insurers' aggregate claims costs were going to drop? The consumers realized no relief. The industry drives up premiums based upon theory and assumptions. The results are enormous profits year after year since 1990, at the expense of the consumer.
I've received the superintendent's year-end reports. I have failed to recognize insignificant assets and returns. Mean returns are upwards of $720,000, with many into the millions of dollars. The point I make is simply this: If the insurer cannot produce acceptable development factors to meet the acceptable profits, then they should not be allowed to write automobile policies in Ontario. Simply put, if you can't take the heat, get out of the kitchen. I say again, low profits are consistent with poor health care for your injured constituents.
Ms Karen MacNaught: I came here today to speak to you on behalf of the many people who, following automobile accidents, become long-term or permanently disabled. Although our broken bones heal, something goes seriously wrong with our recovery. We experience something called severe widespread muscular pain, cognitive dysfunctions, including difficulties with concentration, attention, memory, impaired thought processing; in fact, all these symptoms are typical of and similar to that of traumatic brain injury.
As a result, we have trouble responding and understanding what others are saying to us. We call it garbage in, garbage out. Commonly, we suffer from anxiety and depression as a result of our constant pain and we often have suicidal thoughts as well. These are a few of the many symptoms that are associated with illnesses such as chronic fatigue syndrome, fibromyalgia and the like.
Generally speaking, these are progressive, degenerative and chronic illnesses, the most significant attributable cause being motor vehicle accidents. Our problems are difficult and complex. For example, obtaining a proper diagnosis depends on the physician's experience and education, even though the diagnostic criteria are well documented. For some, diagnosis takes up to five years.
1450
The insurance industry resists most of these claims. The insurer has no justified right to deny these claims. The effects of the illnesses are catastrophic on the claimants and their families. The significance stress imposed by insurers' tactics add to the patients' distress, and this has been well documented as well. Naturally, we become unable to cope with the world of insurance companies, lawyers, claims managers, pain centres, doctor after doctor, and constantly all the while worrying about finances while adjusting to this new world we've been thrown into.
We find that many require medical aids and home modifications that we just cannot afford and our insurers refuse to pay. Most cannot cope with what is happening and become dependent on others to make important decisions for us. Like you, we once took for granted that we would always be able to make these decisions for ourselves. Our conditions are chronic and our mobility can be severely restricted. The pain does not go away, and our learned coping skills are no longer effective and tend to disappear over time.
Excuse me, sir. I do suffer from a brain injury, and I find it very difficult to read and concentrate. I can only hear the sound of the gentleman beside me speaking. It's very distracting.
The Chair: Would the committee come to order, please.
Ms MacNaught: I realize it's me. Okay.
In reality, we have purchased nothing more than a share in an insurance nightmare.
The insurance industry has an appalling label for us. The insurance industry, ladies and gentlemen -- take a look at this, please. They call us the living dead. Excuse me just for a moment. I'd like you to take a moment to think about this. The insurance industry refers to long-term disabled people as living death since their actuaries view it, profitwise, worse than dying. The disabled now may have higher living expenses than the able-bodied person.
Individuals who find themselves in this position may be down, but we are certainly not out. Our goals are simple: We try to retrieve our independence, self-esteem and moral rights. Our expectations do not exceed the insurers' obligations.
The Chair: Would you like a few minutes, ma'am?
Ms MacNaught: I'll be okay. I've done this three or four times at home so I would be prepared for it, but I wasn't. I'll be okay. Thank you.
All too often the insurer becomes part of the problem and not the solution. Most insurers know that our ability to fight them is limited because of our limitations and that financially most of us will just walk away from our claims. This is a coping mechanism that people use. Giving up at the insurer is not a weakness; it's a method of survival. And I was one of the lucky ones, because my diagnosis was relatively swift, considering that three to five years is the norm.
There are few insurers who recognize their ultimate responsibility. Most insurers refuse to acknowledge medical science and do not accept chronic illnesses in their scope of contractual obligations in paying long-term claims. Most people living with long-term chronic illnesses are afraid to come forward. The industry has shaped the market mould over years of persuasive lobbying. Insured persons live day to day in fear of their insurers. I know this to be the case. One wrong word and that's it, your benefits are cancelled.
You have to find a way to reach out to these people, ladies and gentlemen, possibly through support for chronic pain centres, rehabilitation centres and the like. I don't have any answers for you today, but we strongly urge you to make this effort in preparing new regulations. These people desperately need your help and they need it now.
In addition, let me speak to you on what I observed last week being told to you by the insurers on the issue of soft-tissue injuries. They would have you believe that with soft-tissue injuries, we're talking about some bruising. Often this may be the case, but more often it is not. Soft-tissue refers to every part of the human body that is not part of the bony skeletal structure. The opportunity for organic problems is enormous upon a traumatic event. Although a soft-tissue injury may not appear too damaging initially, the complications arising from such an injury can be extremely dangerous, for example, internal bleeding, blood clots, tumours or lumps, phlebitis, and the list goes on. Ladies and gentlemen, soft-tissue injuries are not always simple, quick-fix injuries like the insurers would lead you to believe. I had to have two major surgeries from soft-tissue injuries. I didn't put that in here.
The hearing has done a lot. I've heard a lot of whining before these hearings regarding AB payments to non-wage earners. Don't forget that the legislation makes auto insurance mandatory and that non-wage earners pay premiums equal to or greater than wage earners. Simply put, they've paid for the coverage; they're definitely entitled to the benefits. Consequently, if they are not entitled to the benefits, they are entitled to reduced premiums.
I'd just like to add this note. Unless requested by the patient, please spare us from the services of case managers. Our physicians are our case managers. We just don't need another added stress that's appointed by our insurance companies trying to manage our lives for us.
Finally, we urge you to get a knowledgeable experience of what the disabled communities face in their attempts to obtain benefits from their insurers. As such, we support an investigation, perhaps by a royal commission or task force, into the realities of the auto insurance product. We have watched the presentations on TV and we have acknowledged that consumer advocacy has not really been achieved here in Ontario.
We've supported the claims that we make today within our submissions. If you have any questions, Wayne and I would be happy to try to answer them for you.
The Chair: We thank you very much for your presentation, and we recognize the emotionalness of the issue. Your time has expired, and we thank you very much for making a presentation to the committee today.
Ms MacNaught: Thank you for listening to our side.
The Chair: It will be taken into consideration in our deliberations, I can assure you.
ROYAL INSURANCE
The Chair: We now welcome the Royal Insurance Co. Please identify yourself and your associates and proceed.
Ms Linda Matthews: Thank you, Mr Chairman, and good afternoon, members of the committee. Thank you for allowing Royal Insurance the opportunity to appear before this committee to express our views on the proposed new auto insurance legislation. With me today are Jacinta Whyte, our underwriting manager for our personal lines division, and Carol Jardine, our regional manager here in our Ottawa regional office. I am Linda Matthews, vice-president of the personal lines division.
As many of you know, Royal Insurance is a leading provider of insurance services, operating throughout all provinces and territories in this country. We have experience in this business going back to 1851, when we opened our first office in Montreal. As a part of the Royal Insurance group of companies, Royal Canada's expertise also extends internationally.
Our mission is to lead the Canadian insurance industry through expertise, innovation and outstanding service to our customers and business partners, and in our pursuit of this mission, we employ approximately 2,400 people, close to 1,500 of whom work in this province.
1500
In terms of our business, Royal is the fourth-largest provider of auto insurance in Ontario, with more than 200,000 vehicles insured at a premium level of over $310 million. When you consider that our auto insurance premiums Canada-wide total about $483 million, you can appreciate that Ontario is indeed a large market for us.
Royal is a company of people who are also consumers of our products. We understand the frustration surrounding the cost of auto insurance in this province. We had major concerns about Bill 164 and predicted the double-digit escalation of premiums that has since resulted.
I should tell you up front that Royal can deliver and service any product that is legislated. Implementation, however, is not our main concern. What does concern us is the ultimate cost to consumers, and we fear that under the proposed new legislation consumers will continue to bear costs that are higher than necessary.
Royal applauds the Ontario government for taking action to correct the significant shortcomings of the existing auto insurance legislation. We also applaud the process, especially the initiative to seek input at an early stage from the industry. In addition, we commend the government for being open-minded. The fact that Mr Sampson has publicly stated that the proposed plan may not have hit the target right on shows that the government is prepared to listen. It demonstrates that government is as concerned as we are in the industry in getting it right to ensure that the product we end up with meets the needs not just of the insurance industry or the regulators but the people of this province.
You will note that our views and recommendations are in general support of the earlier submission you have received from the Insurance Bureau of Canada. While our presentation will focus on several issues, it is the cost to the consumer that Royal is primarily concerned with.
If benefits are to be provided as entitlements, as opposed to indemnification, experience shows that the system will continue to be open to abuse, fraud and overcompensation. This in turn will lead to higher prices.
If the system is saddled with complexity, high administrative costs and escalating medical rehabilitation costs, many of which are possibly unnecessary, then premiums will rise even further.
Who pays when the price goes up? Well, the answer of course is we all do: you and me and the people of Ontario who own and insure an automobile. Therefore, we all have a vested interest in developing a product that will provide fair compensation at a reasonable price. This in turn will lead to more stability in the marketplace.
In repealing Bill 164, the government has an opportunity to refocus the auto insurance product on the founding principle of indemnity.
My colleague Carol Jardine will address our concerns in more detail.
Ms Carol Jardine: Royal believes that the key opportunity for improving the government's current proposal lies mainly in some further refinement of the statutory accident benefits.
Medical and rehabilitation benefits: Royal supports the reintroduction of limits for medical, rehabilitation and attendant care benefits.
As evidenced by the industry trends in appendix A, the rapid escalation in medical and rehabilitation costs is, we believe, largely due to the overtreatment of soft-tissue injuries and feel-good treatments. This conclusion is further supported by the Spitzer report conducted on whiplash-associated -- soft-tissue -- disorders on behalf of the Quebec task force of the SAAQ. The Spitzer report has now been endorsed by the Ontario Insurance Commission and has been put before Ontario's insurers for implementation.
We believe in order to control the upward spiral of these costs that firm controls must be put in place in the following areas:
Conflict of interest of referring parties: Whether those referrals are legal-medical, health care or insurer based, this issue must be addressed by the Ministry of Health in its upcoming review of the health care process.
Accreditation: We recommend professional, outcome-based accreditation of health care practitioners, plus the right of insurers to direct care of the injured parties to those accredited facilities.
Standardization: There should be standardization of treatment protocols and approved fee schedules for all health care practitioners.
Without strong controls, both the health care system and the insurance industry are severely hampered in any effort to ensure all injured parties receive the appropriate level of care in a timely and cost-effective manner.
Regulatory wording: Another area of our concern involves the definition of "accident." We strongly recommend that the word "indirectly" be removed from the definition, as its use continues to expand the scope and coverage of automobile insurance to non-automobile incidents. Examples of potential abuse in this area are shown in appendix D.
In order to assist the government in the implementation of new regulations, we have prepared detailed recommendations and suggestions for consideration in appendix F.
Fraud control and penalties: Insurance fraud is thought to be the second-leading source of illegal profits after illicit drugs in North America. As established in a recent IBC study, the estimated annual fraud losses to the property and casualty insurance companies in Canada range between $1 billion and $2 billion, or between 10% and 15% of total claims.
As evidenced by this week's news items, fraud in the automobile insurance industry is organized and deliberate and it's not a problem that can be tackled by any one group. It requires a concentrated effort by all stakeholders to tackle the problem and to minimize this leakage from the insurance system.
Royal fully supports the position put forward by the Insurance Crime Prevention Bureau that the industry must be provided with reasonable ability to prove fraud and the facility to deny all benefits to guilty parties. To that end, we strongly recommend that all benefits be denied for wilful fraud, driving without insurance and/or a licence, and injuries sustained in the course of criminal activity.
Uninsured motorists: Collision reporting centres in Metropolitan Toronto have discovered that approximately 20% of reported claims involve uninsured motorists. These people have chosen to drive without insurance and have indicated a blatant disregard for the laws of the province. They've made a deliberate choice not to have insurance protection for themselves or for the protection of innocent victims.
Insured persons are confused when they discover that these uninsured people are able to collect accident benefits from the insurer of any other vehicle involved in the accident. Their bewilderment turns to anger when the uninsured motorist is completely responsible for the accident but still entitled to benefits. Why should these uninsured motorists be entitled to receive any benefits from an automobile insurance policy?
The SABS statistical plan does not segregate claims for uninsured or unlicensed motorists; therefore, we've analysed a small sample of our catastrophic claim file. We realize that this is a small sample, but it does demonstrate the impact of claim costs for uninsured and unlicensed drivers in the system. Of 25 files reviewed, 8% involved uninsured drivers and a further 8% unlicensed drivers. The total claims cost for these claims was over $41 million. Of this, over $4.3 million was attributed to uninsured drivers and an additional $1.2 million to unlicensed drivers.
1510
What must be understood is that these uninsured motorists are taking money out of a system to which they've contributed no premium. These costs must be borne by law-abiding citizens who pay their premiums, adding unjustly to the premiums that those people pay.
SABS summary: We estimate potential future overall savings of 3% to 5% in the cost of automobile insurance with: additional controls in the management of accident benefits; fraud detection and control measures; denial of benefits for willful fraud, driving without insurance and/or licence, and injuries sustained in criminal activities.
However, if additional cost-control measures are necessary, then Royal would recommend that the government revisit the provisions contained under the tort proposal.
Tort: In 1990, the Ontario automobile insurance system was amended to eliminate, as much as possible, legal fees, then estimated to be about $500 million per year. With the proposed increased access to tort, we believe that now the door has reopened to allow at least 20% of this prior saving to be added back into the cost of auto insurance in Ontario. Royal's experience shows that the involvement of lawyers in case handling prolongs and complicates the process, driving up overall settlement costs. Again, increased costs mean increased premiums for consumers.
A key element in controlling these costs would be the addition of the words "permanent" and "physical" in the threshold definition, mitigating the need for a monetary deductible.
To assist in your deliberations, we attach additional recommendations in appendix F.
Furthermore, the potential introduction of contingency fees in Ontario should be avoided in automobile litigation cases.
I'll pass you back to my colleague Ms Matthews and she can conclude the presentation.
Ms Matthews: We just have a few other concerns we'd like to table this afternoon.
Regulation: Royal supports the move to a file-and-use rate-setting philosophy. However, it is our belief that the proposals, as currently outlined, are cumbersome, inefficient and perhaps work against the free market system. We believe this is to the detriment of Ontario consumers.
Our position is that government should not be involved in the setting or prescribing of rates, premiums or the price to be charged, but instead should be focused on solvency and a limited range of market conduct issues.
Also of significant concern is the fact that some companies, through their writing of collateral benefit plans, have recently been successful in excluding benefit for injury to automobile accident victims. We've included a sample wording in appendix E. Our difficulty here is that this practice is contrary, without just cause, to the collateral source regulations. If allowed to continue, it too will add significantly to the costs of automobile insurance in Ontario.
OHIP assessment: With the government's stated objective of price control of automobile premiums, the inclusion of an OHIP assessment is a factor that will only add to and increase the overall cost equation.
Let me conclude: With the introduction of the government's proposed plan, Royal believes that we can eliminate any planned rate increase for 1996. As the experience of the plan unfolds, we will review our ability to decrease premiums as we did in 1991.
However, we believe the government's proposed plan, modified to reflect our recommendations, would further reduce the loss-cost trends, as indicated by the Miller study. Royal would commit to maintaining its current average rate levels through 1996 and 1997, a two-year commitment to no overall rate activity if these proposals are adopted.
We thank you for this opportunity to come before you and we offer our continuing support and assistance in finalizing the reforms. We believe we all share a common goal in this process: to ensure that the final product is fair and affordable and provides long-term stability and access for the people of Ontario.
Mr Crozier: Thank you for the presentation. I think your overview has been concise. As well, what I have had the opportunity to look at, the information that accompanied it, seems to be very complete.
You said at the outset that you, in essence, support the IBC proposal that we heard last week. I'm interested in that, notwithstanding their proposal, they said that there would be increases in rates that ranged anywhere from 7% to 9% or 10%, depending on what you included, like the recovery of OHIP costs, that sort of thing. Yet in your conclusion, you feel that, "As the experience of the plan unfolds, we will review our ability to decrease premiums as we did in 1991." How do we compare that with the IBC proposal that they in fact would increase?
Ms Matthews: I believe, Mr Crozier, that what you're talking about with respect to the Miller study and the IBC proposal were rate trends of, as you say, 7% to 8%. We certainly see rate trends in the future as well, but what our proposals do, we believe, is allow us to further reduce those trends, by a 1% to 2% factor. But the focus on fraud would take a major component of cost out of the system. It would reduce the base where you're starting from. Again, the industry trends -- excuse me, let me perhaps clarify.
Mr Crozier: We only have a couple of minutes.
Ms Matthews: The industry figures reflect average trends in the industry. Different companies have different experience, different estimates of their current book. This would give us an opportunity, with our proposals, to reduce the increased trends to the extent that we could have a flat increase over the next two years.
Mr Crozier: But you say, "With the introduction of the government's proposed plan" -- that's not following any of your suggestions -- you can eliminate your increase for 1996.
Ms Matthews: This year.
Mr Crozier: So you just won't increase rates at all in 1996, and that in fact, as it unfolds, the government's plan, you think you can decrease premiums.
Ms Matthews: No, with our proposals.
Mr Crozier: That's not what it says here. It says, "With the introduction of the government's proposed plan..."
Ms Jacinta Whyte: The issue of price in a rating is a function of one's rate adequacy within your current product profile. So it's a function of your mix of business, your claims management process, your own internal trends and the pricing. Currently the pricing at Royal is not rate-adequate but it's closer to rate adequacy than much of our competitors. What we are looking at is the additional impact of our position relative to the government plan, in addition to which are additional measures and controls which will actually add to our position and commitment to maintain price overall.
Mr Crozier: My point is that you're saying, "With the...government's proposed plan...." I wanted to clarify that. So it isn't the government's proposed plan; it's the government's proposed plan as amended by you?
Ms Whyte: The government's proposed plan currently does decrease the cost in the system, there's no doubt about that. But the ability or the level to which it decreases the costs in the system is a function of individual companies' rate activity and rate adequacy at that time. Royal as a company is more rate-adequate than many of our competitors because of our pricing strategy over the long term. It has been our position to review our pricing and price adequacy on an annual basis throughout the whole process, across all plans.
Mr Crozier: All that said, it doesn't make me feel comfortable that rates won't go up. I think my time's up.
Ms Whyte: We're talking from Royal's perspective, not the industry's.
Ms Matthews: Mr Crozier, with respect to that final comment about confidence, when Royal was in a position to review changes in the past, in fact we put before our consumers a 6% rate reduction. We set our prices based on the adequacy of the rates and, given the opportunity, we have proven in the past that we would reduce rates.
1520
Mr Kormos: Ms Matthews, people, how are you?
Ms Matthews: Fine, thank you.
Mr Kormos: I thought there was a trio of lawyers up there. I saw those Mont Blanc pens and I thought, "By God, they've got to be" --
Ms Whyte: Excuse me, I'm a cheapie.
Mr Kormos: Well, you're the poor country cousin, obviously. Don't hide it. Put it back up there on the table there. I thought we had a gaggle of litigation lawyers.
Ms Matthews: Does he have one too?
Mrs Marland: The reason he noticed is because he has one.
Mr Kormos: I know. I used to be a lawyer.
The Chair: Did you have a question, Mr Kormos?
Mr Kormos: Zurich is the second-largest auto insurer in the province and they have a substantial amount of auto insurance coverage, a great deal of experience in the industry. Huh?
Ms Matthews: Yes.
Mr Kormos: And high, good-quality skills in terms of actuarializing and costing policies, I trust. They must. How come then the IBC, the Insurance Bureau of Canada, George Cooke et al, tells us, as has been referred to, that this scheme is going to result in 7.6% premium increases, but then Zurich -- you're the fourth-largest insurer in the province, auto insurance -- says: "No. Seven point six? You guys are from Mars. We're looking at double, maybe three times that in terms of premium increases"? And you're talking about zero. How is it that IBC can be so at odds with a major, respected, skilled, capable insurer? Because I've got to tell you, when Zurich said that, they weren't referring, as you did, to their own premiums; they were talking about industry-wide premiums. So how can IBC and Zurich be so at odds? Is one of them right out to lunch?
Ms Whyte: Will I have a crack at that?
Ms Matthews: Go ahead.
Mr Kormos: Ms Matthews wanted to answer it, and I've got an idea what you're thinking, but go ahead.
Ms Whyte: Mr Kormos, as always, we're entertained and amused and confused by some of the questioning that you put before us. However, we are in a free-market enterprise system and we do look at individual companies and their ability to do their business and manage that business over a period of time. We're not in a position to comment on Zurich's business practice, the level of their practice or, indeed, the competency within those business practices. We can only speak for Royal, and Royal, as its history and as Ms Matthews has pointed out --
Failure of sound system.
Mr Kormos: -- and I appreciate you're talking about your insurance premiums. I've got to tell you, Pilot's got my coverage now, unless you don't want it. But maybe Royal's next.
But IBC is talking about the industry in general; Zurich is talking about the industry in general. Both of them have strong, long-rooted positions in the insurance industry. You're telling us that from Royal you're not going to see premium increases. What about insurance premiums across the board? You people have enough expertise and enough experience in this industry to predict with some reasonable accuracy whether this bill is going to result in zero premium increases across the board, 7.6% like IBC says, or 15% to 20% the way Zurich says. Who's right, who's wrong? You can't all be right.
Ms Matthews: I guess our position is, Mr Kormos, as we stated in the paper, a general support of the IBC's assumptions and positioning. You have, what, over 200 insurance companies in this province. Every one of them establishes what its market strategy is, what its rates are. Depending on where you are as an individual company, you can have a different starting point. Therefore your assumptions, of course, produce different results.
Mr Kormos: Some leaders in the industry have said there are simply too many insurance companies. Do you agree with that?
Ms Matthews: What we have seen happening over the last several years is a major consolidation of insurance companies.
Mr Kormos: And would you like to see yet fewer?
The Chair: Thank you, Mr Kormos.
Ms Matthews: I'm afraid I'm out of time, Mr Kormos.
The Chair: If we could move to the government side.
Mr Matthews: We thought you meant we were out of time, Mr Chairman.
The Chair: No.
Mr Kormos: No, the government is out of time on this bill.
Mr Jim Brown (Scarborough West): This is a great presentation and I just wanted to go over some numbers with you. In your presentation, on page 1, you said that you have 200,000 vehicles for $310 million worth of premiums. What market share would that be in Ontario?
Ms Matthews: We have approximately 5% to 6% market share.
Mr Jim Brown: In terms of billing or vehicles or both?
Ms Matthews: I believe market share is on vehicles.
Mr Jim Brown: Would premiums sort of follow --
Ms Matthews: Yes. We would have 5% market share of premiums as well.
Mr Jim Brown: I'm just trying to get a handle on costings and overhead expenditures and so on. I was looking at that great chart in appendix A and I noticed that the total accident benefits per car is $414.
Ms Matthews: Yes.
Mr Jim Brown: If I multiply that out by 200,000 vehicles, I get $82 million spent --
Ms Matthews: That's not your total premiums, sir. That's just the component for accident benefits. The average premium would be in the neighbourhood of $1,000 per vehicle.
Mr Jim Brown: Wait a minute. If I add up all of these boxes here, it comes to $414. Okay? So $414 total accident benefits, that's a total cost for the accidents per car.
Ms Matthews: Accident benefit portion of the premium per car. I'm sorry, am I misunderstanding the question?
Mr Jim Brown: I multiply it out and I see you spending $82 million and taking in $310 million. Where am I going wrong? Where's the difference?
Ms Matthews: The numbers in this report are all-industry figures. We felt that was a better way of projecting --
Mr Jim Brown: Okay, it's even better. But if you take $414 a car times 200,000 cars, you spend $82 million, your share. You would spend $82 million and you take in $310 million. I'm just trying to figure out where I went wrong. You take in $310 million.
Ms Matthews: Yes, Royal Insurance.
Mr Jim Brown: And if I use the industry average of $414 a car times 200,000 cars, you pay out $82 million. I'm trying to figure out where the difference is. Where did the $227 million go?
Ms Jardine: Into damage to vehicles, into tort, into reserve, into all the other areas.
Mr Jim Brown: Where are those figures here?
Ms Jardine: This is only accident benefits, so you're quite correct. If you use the math that you used, you would come up to that number, but that's only one component of the automobile insurance premium.
1530
Mr Jim Brown: Where's the rest?
Ms Jardine: We're not dealing with the other costs of the product, being --
Mr Jim Brown: So the other costs are not in here.
Ms Jardine: No. We're only dealing with --
Mr Jim Brown: Do you have any idea, of the $227 million, what the split is?
Ms Jardine: Not off the top of my head, no.
Mr Jim Brown: Can we get that from you, in the same fashion? You've done a great job on this chart here and I'm sure you could probably do a great job on the rest of the components. I'm just curious as to what the other components are and the figures.
Ms Matthews: Since these data were supplied by the IBC, we would have to go back and entertain trying to get at that information for you.
The Chair: Thank you very much. We do appreciate Royal Insurance presenting to us today. Now we are out of time.
Ms Matthews: Now we are done. Thank you.
REGISTERED MASSAGE THERAPISTS OF EASTERN ONTARIO
The Chair: We now welcome the Registered Massage Therapists of Eastern Ontario, Ms Fitch and Mr Alexander.
Ms Pamela Fitch: Good afternoon, members of the committee. My name is Pamela Fitch. I am a registered massage therapist specializing in trauma recovery and I have been in private practice in Ottawa for eight years. I'm also a member of Registered Massage Therapists of Eastern Ontario, RMTEO. With me is Doug Alexander, a registered massage therapist and another member of RMTEO. He is an independent massage therapy assessor at a local DAC and editor-in-chief of the Journal of Soft Tissue Manipulation.
We are grateful to your committee for giving us the opportunity to present our views regarding this important legislation. In general, RMTEO supports many of the proposed changes because the legislation will ensure greater accountability among health professionals as we help our clients to rehabilitate. Unfortunately, according to this legislation, registered massage therapists, RMTs, are not designated as one of the health providers listed under the statutory accident benefits schedule, and it is to this point that we wish to address our remarks.
Under the proposed legislation massage therapy is not included, and our clients will be the losers. Massage therapy would be permitted if it is recommended in the treatment plan of a physician, a chiropractor, a physiotherapist, an optometrist, a dentist or a psychologist. However, if one of these health practitioners is unfamiliar with the benefits of massage therapy, such a treatment plan may not be suggested. In these cases, clients would be left without massage therapy as a benefit and their pain left unaddressed. In fact, the client may actually end up costing the insurer more money in the long run. Myofascial pain syndrome, so commonly a result of motor vehicle accidents, and successfully treated by massage therapy, will not be treated by the health practitioner who the RHPA states is trained to do so.
For many years, registered massage therapists have treated clients who are recovering from motor vehicle accidents. Massage therapy is unique among all the health professions because its principal medium of intervention is touch. Our hands are our tools. We work manually on the soft tissue of the individual, assessing with our fingers the degree of restriction due to pain, adhesion or micro-scarring that a survivor of an MVA may experience. We have our hands on our clients for up to an hour, palpating deeply into the connective tissue and searching for fundamental causes of muscle dysfunction. Our ability to determine whether someone's pain is a result of injury or due to occupational stress stems from spending literally thousands of hours assessing pain and muscle dysfunction with our hands. Our strength lies in our practical, hands-on techniques.
Within a multidisciplinary framework, there are many accepted modalities for the treatment of an injury due to a motor vehicle accident. The client may be prescribed anti-inflammatory or muscle relaxant drugs, take time off work or consult with a chiropractor, physician or physiotherapist. Each of these interventions has been proven to be successful in a number of cases, but not in all. Clients may or may not have resolution to their discomfort, depending on their general health, their level of fitness, their degree of flexibility or the effects of a previous injury. If the above treatments have insufficient benefit, a client may be sent to a psychologist who determines if there's a psychological reason for the pain. If, after two years, a client still experiences problems, which is not uncommon, he or she may be unable to work because of a chronic pain syndrome or fibromyalgia, and as a result cost the insurers even more.
Massage therapists do not claim to have a solution for all chronic pain syndromes and post-injury recovery. However, we frequently see clients who've been around the system for two or more years seeking relief from unremittent headaches and unresolved pain due to motor vehicle accidents. They are astonished to discover that through massaging the muscles, reducing muscle spasms, addressing trigger points and soft tissue restrictions, their headaches and spasms may reduce or disappear completely. If we were to see these same clients soon after the injury, the recovery time would likely be greatly decreased and costly chronic pain syndromes might be averted.
RMTs take their role as health professionals seriously. We support the enhanced requirements for accountability which this legislation establishes, but with accountability comes a need for improved communication between RMTs and the insurance industry, one of the principal issues which our profession is facing currently. For example, I've heard some therapists say that they cannot understand why insurers do not ask them for progress reports on their clients. Under the RHPA, we are required to have permission in writing from our clients to divulge any information about their case to anyone. Massage therapists must wait to receive these waivers prior to sending in any reports. Recently, in consultation with insurers, we realized that many claims adjusters wanted RMTs to simply send progress reports with their monthly billings. Neither profession had taken the time to establish this requirement clearly.
As a result of this discovery, our profession is now actively educating practising therapists as to the needs of the insurers. Through RMTEO and the OMTA, whom you met last week, regular assessment and re-evaluation models and reporting requirements have been shared with practising therapists so that the quality of care remains high, consistent and focused on recovery from an MVA to pre-existing levels of function.
1540
As massage therapists, we want our clients to recover quickly and we are prepared to be fully accountable for our treatments. We have a place in the recovery of motor vehicle accidents. We are legislated under the RHPA as health practitioners who assist in the rehabilitation of soft tissue injury and pain. I ask you to include massage therapists in the SABS under the definition of health practitioner.
Thank you for your attention. I would now like to ask Doug Alexander to speak on the cost-effectiveness and efficacy of massage therapy as a treatment.
Mr Doug Alexander: Good afternoon, members of the committee. Thank you for giving me this opportunity to speak to you. I've been a practising massage therapist for 11 years and am the founding and current editor-in-chief of the Journal of Soft Tissue Manipulation. I've served on the faculty of the American Back Society and the Physical Medicine Research Foundation. I currently am writing a textbook on connective tissue massage for Churchill Livingstone, a major medical publisher in England.
My massage therapy practice is located in Ottawa. In my practice I focus mainly on long-standing headache, low back and neck pain complaints. These may range from several months to years and occasionally decades of duration. I also serve as an independent assessor for a designated assessment centre.
Massage therapy works at the physiological level to normalize muscle spasm. Like a very sophisticated biofeedback machine, the massage therapist systematically explores the client's muscles for spasm and fibrosis. When muscle spasm is found, the pressure of the therapist's fingers allows the client to become precisely aware of what muscle or subvolume of muscle is affected. The massage therapist then guides the client's nervous system to reset the tonus, or the resting tension, of the muscle towards a more appropriate level. As the client relaxes, the tissue is manipulated to further the relaxation and begin restoring normal muscle length. Over the course of the treatment series, the client's musculature approaches normal tonus and the frequently large component of the impairment that arises from muscle tension and spasm is resolved.
The precise clinical skills of the massage therapist are combined with caring and respectful touch. This type of touch is very therapeutic and has been shown in scientific study after study to produce a relaxation response which is mirrored by changes in blood hormones and nervous system tonus. One of the key findings of a recent landmark report on whiplash was the importance of the clinician in placing clients at ease and reassuring them of the normalcy and benign nature of their symptoms. Massage therapists are uniquely placed to provide this reassurance.
The physical learning that begins on the massage table continues off the table, as the client practises movements that restore pain-free and functional motion to the neck, shoulders and back. The ongoing assessment of the muscles during treatment places the massage therapist in a unique position to monitor the effects of the client's exercises and either reassure him when pain is necessary and unavoidable or temper his enthusiasm when he's pushing too hard and is reaggravating the condition.
All the health care professionals listed in the statutory accident benefits schedule perform valuable and necessary services for motor vehicle accident claimants. Massage therapy is an invaluable therapy for the subset of claimants who experience muscle spasm and tension problems.
When people have unresolved problems with muscular tonus, their symptoms do not resolve fully. They become an economic burden to all of us. In genuine efforts to recover, they visit their physician more frequently and expensive and inconclusive diagnostic tests such as CAT scans and MRIs are often performed. Doctor shopping can go on for years. If massage therapy is finally employed, it often gives significant relief. However, the case is often much more difficult to resolve than if they'd initially received appropriate care.
While not all claimants who become chronic after motor vehicle accidents suffer from muscular tonus problems, experience in my clinic and as an independent assessor with a designated assessment centre leads me to believe it's a very significant proportion of unresolved cases.
Massage therapists are accountable to the College of Massage Therapists of Ontario under the Regulated Health Professions Act, which regulates all health professions in Ontario. Our scope of practice demands that we perform needs assessments and either refer the person on or generate a treatment plan if massage therapy will be instrumental in their recovery. This is for any client, not just motor vehicle accident claimants. Our professional association, as Pam has mentioned, is also actively working with the insurance industry to establish rapport and guidelines.
Massage therapy performs a valuable and necessary service for some motor vehicle accident claimants. Including massage therapists in the health professional citation of the statutory accident benefits schedule will ensure that massage therapy will be adequately available to those people who require it. This will help speed recovery for some and will remove a major stumbling block to recovery for others. We will all benefit as these people return to functional, enjoyable lives.
Thank you for this opportunity to address you on this important topic. If I or Pam may be of further assistance in later deliberations, please do not hesitate to contact us.
Mr Silipo: Thank you very much for the presentation. It's certainly my sense, although I'll let them speak for themselves, that there's been some understanding through these hearings about the need to broaden the definition to capture certainly those health care practitioners who are covered under the Regulated Health Professions Act. My sense is, that's also been the indication that the government members have been giving. I thank you for reminding us of that and pointing out again the need to do that.
I just wonder, while we have you here, if you have any comments to make around one of the other recurring themes that we've heard through these presentations, which is the big increase in rehabilitation costs as being one of the big factors that we keep hearing about, certainly from the industry, that has driven costs up and therefore is keeping them, I think they would argue, from being able to lower premiums.
Mr Alexander: I'd like to address that as best anyone can or as I can. There was recently a landmark study coming out of Quebec called the Spitzer report. It's a three-year report by an expert panel of clinicians, epidemiologists and basic scientists. Everyone's puzzled as to what the story is behind soft tissue injury and how best to resolve these problems. The idea of the Spitzer report was to ground all their recommendations in hard science. They started up with 10,000 papers in their literature review and narrowed it down to 1,200 related to soft tissue injuries. Only 294 were considered worthy of in-depth consideration; only 62 of the 294 papers were considered scientifically sound.
Basically, I think we don't really know scientifically why people are in pain and we don't understand all the balance of factors in the blend. The small minority that is not getting well is responsible for the vast majority of costs. No one can say confidently that they have the answer to that, and every profession wears a different set of filters on their glasses. So massage therapists will identify among the chronic people those who are suffering from muscular tension difficulties, psychologists will identify a different group and so on. I'm sorry, there's no easy answer. I guess the only real answer to minimizing costs is to research further exactly what the effects of different therapies are and what the boundaries are between the different professions.
1550
Ms Fitch: Just a minor point in addition to that: In addition to the scientific quagmire or quandary that goes on around soft-tissue, I also believe there's a certain felt sense among certain of the insurance industry representatives that massage therapists and other health professions perhaps have driven up this cost exponentially because they are offering feel-good treatments, as we heard earlier this afternoon. If you knew some of my clients, they would not agree that these are feel-good treatments, that massage therapy, if you're working in a therapeutic way on an injury, is not always comfortable at the time of the treatment, but it is necessary to release some of the restrictions that are going on. I just wanted to make that point.
Mr Sampson: Thank you for your presentation. I can maybe direct my question to Mr Alexander, but Ms Fitch, you may want to respond. I gather from your brief that you are a member of a DAC team?
Mr Alexander: Yes.
Mr Sampson: You also provide treatment obviously.
Mr Alexander: Primarily I'm in private practice.
Mr Sampson: We've heard from some individuals, and we had a chiropractor in front of us yesterday saying, "Try to disengage the process of DAC assessment from the process of treatment, because if you don't do that you're not going to be able to deal with the word `independent' or the concept of independence in the DAC assessment process." You clearly are doing both. How do you feel about that statement? Is there a way to bring true independence back, either perceived or otherwise?
Mr Alexander: I'm not sure. It's a very good question. In a large centre I don't think it needs to be as much of a problem. If you're going to have someone do an accurate independent assessment, they need to be a practitioner who works with the problem daily.
When I assess someone, I treat them as if I've seen them for the first time and I'm going to be treating them and you darned well figure out what's going on and what the balance of factors are that will best serve this person. If I'm not treating people daily or at least quite frequently along the whole scope of the recovery continuum, then how can I do an accurate assessment as to what's going on and what their prognosis is? It's impossible. You need to have practising people. You could shift them around the province or something, so I'd go to Barrie to do DACs, but I don't know. Is that helpful?
Mr Sampson: I guess the dilemma is --
Mr Alexander: Oh, how can you be independent?
Mr Sampson: Right. If it's not physically possible to be independent, and I can understand how in some communities that's not possible because the volume of business isn't sufficient, how do we get at the independence issue?
Mr Alexander: There are guidelines which are supposed to ensure independence in that you haven't treated the person before, you're not related to them and so on. There's a number of these guidelines, and you can't be shopping for clients. In my experience the guidelines that are there are enough for my --
Mr Sampson: These are guidelines by your college?
Mr Alexander: No, these are DAC guidelines. In my experience, which is limited because I have only been doing DACs for about six months, it's quite sufficient for me. Ideally, the health care practitioners care most about the patient and not themselves, so if you don't have that, people are always going to subvert the system.
Mr Phillips: I'm not sure what your concern was. Is it that the people who currently under the provision are allowed to prepare the plans don't appreciate the role that the massage therapist can play?
Ms Fitch: The health professionals who can, under this proposed legislation, prepare treatment plans may not know anything about massage therapy, may have a confused view of what massage therapy can do or what its benefits are. As I understand this legislation, the way it reads a doctor would have to prepare a treatment plan recommending massage therapy, then the client takes that treatment plan to their massage therapist, the massage therapist prepares a treatment plan, goes back to the doctor, the doctor approves my treatment plan and then this goes to the claims adjuster who then says yea or nay over the whole thing.
In my opinion, this is not appropriate because if the physician has no idea what I'm basing my treatment plan on as a massage therapist, because they have no basic understanding of the therapy, then it strikes me that they should not be in a position to say yea or nay whether my client should get that kind of treatment. It puts the client in a position of almost begging their physician, chiropractor, physio or psychologist to support that request when, under the RHPA, that would not be the case.
Mr Alexander: I'd like to add to Pam's comment. The way I view it is, under the RHPA, we are considered primary contact practitioners so that the RHPA feels that we can meet people and assess their needs and decide in concert with them what course to pursue, which really puts us on the same footing as the chiropractors, the physiotherapists and so on.
Mr Phillips: My point, just to get your professional advice, is that I have a very simplistic view of it, I guess, which is that in the ideal world one person can see somebody and say, "Here is the best possible plan for you." If, however, the only way the system works is for every health profession to look at everybody, somehow or other, conceptually, I can't imagine all of this working. I understand how you feel about your profession, but it seems to me you'd end up with 10 or 12 people having to look at every individual who comes to a DAC and then there's -- I conceptually see a bit of a dog fight about what is the best treatment. Is there a simple solution to this simple dilemma I see?
Ms Fitch: The simple solution is to have us listed as one of the health professionals. I understand your point, that it seems everybody has access. If you consider a scenario where a client has had a motor vehicle accident, they're going to go to their physician, and if they see a chiropractor or a physio on a regular basis, they'll see one of those as well. But we also have clients who see us on a regular basis, who don't see a chiropractor, who don't see a physio, who see their physician maybe once a year for their physical, but we see them more often than anybody else. If that client ended up having an accident, they would have to go through quite a rigamarole to get a treatment plan and get massage therapy accepted.
The Vice-Chair: Ms Fitch, Mr Alexander, thank you very much for your presentation this afternoon.
1600
ASSOCIATION OF CERTIFIED FRAUD EXAMINERS
The Vice-Chair: The next delegation is the Association of Certified Fraud Examiners. Welcome.
Mr Ken Mitchell: My name is Ken Mitchell and I'm a member of the insurance fraud subcommittee of the Association of Certified Fraud Examiners.
For the first time, an auto insurance plan has recognized the impact of insurance fraud on insurance premiums. I have some specific thoughts that I can share with you to improve the anti-fraud provisions within this draft legislation, but I would also like to make some specific proposals to perhaps step it up a notch and make the fight against insurance fraud an articulated government policy.
In June 1990, the Ontario motorist protection plan was introduced by the government of the day as a response to soaring insurance premiums. Ontario's foray into no-fault was seen by some as a panacea for insurance woes. For those of us who specialized in the investigation of fraud, AMP was a Pandora's box which, once opened, would change forever the face of insurance fraud in the province. Those who cared to examine the fraud exposures in precedent plans in other jurisdictions warned the Ontario insurance industry, but we were seen to be alarmist or were seen to be dealing from self-interest. Today, staged motor vehicle accidents, multiple-claim fraud and income replacement fraud are commonplace, and are often the result of organized criminal activity.
To a fraud examiner, the acronym GONE is axiomatic. When Greed is presented with Opportunity and propelled by NEed, the victim's money is gone. OMPP and its successor program, Bill 164, were doomed to fail because they were premised upon the notion that people were basically honest and would deal with a statutory entitlement program honestly and in good faith. What these plans failed to recognize was that the greed of a minority of dishonest persons could rape and pillage a system in the absence of adequate anti-fraud safeguards.
Opportunity was created in the form of a rich, consumer-biased accident benefits schedule, further enriched under Bill 164, that encouraged insurers to pay rather than question. The requirement to pay quickly, without adequate time to investigate, the spectre of heavy fines, the heavy front-end cost of claim investigation, and the fear of government auto insurance encouraged insurers to rely upon the relative inelasticity of demand for auto insurance to allow them to pass fraud costs along to consumers. Hence soaring premiums.
Need was fuelled by the worst recession to hit Ontario in 60 years, followed by a jobless recovery that rendered many working Canadians obsolete and unemployable. Accident benefits became an income-replacement plan not for motor vehicle accident related injuries, but for displacement caused by worldwide economic restructuring.
In its 1993 report, the National Task Force on Insurance Fraud reported that up to 15% of insurance claims were fraudulent. Privately, members of this task force will admit that a cost measurement study done in 1993 developed a fraud profile almost 100% larger than the reported figures. The fraud figure privately talked about but publicly denied is very close to the 30% fraud rates reported in California.
It is axiomatic that every 1% reduction in insurance fraud losses should result in a corresponding 1% insurance premium relief. Ontario needs an anti-fraud program that will facilitate the investigation and prosecution of insurance fraud, bringing rate relief to consumers. An effective anti-fraud program must include an insurance fraud statute, a provincial fraud bureau, mandatory fraud programs, specific legislation and regulations governing evidence of fraud, and legislation governing insurance fraud investigators. I'll deal with each one separately.
Insurance fraud is illegal in Ontario. However, it is not defined as a specific crime and so it falls under the general fraud provisions of the Criminal Code of Canada. In theory, proper application of the Criminal Code should provide adequate remedy to society for insurance fraud, but in fact sentences handed down by courts often make a mockery of the time, effort and expense involved in investigating insurance fraud, and they don't reflect the societal costs of the crime.
In 36 of the US states, insurance fraud is defined as a specific crime, along with penalties that can be imposed. I would refer you to schedule A in my presentation that I have in front of you. The preamble to an Ontario fraud statute could articulate the serious effects of the crime and the economic damage that it wreaks on society. Sentencing guidelines incorporated in a statute could include minimum fines and jail sentences, giving the statute deterrent value and circumventing the slap-on-the-wrist sentences that are often handed down under Criminal Code prosecutions.
The Coalition Against Insurance Fraud in the United States has drafted a model fraud statute and I have inserted a copy of this into your presentation package.
Despite the magnitude of insurance fraud, the fear of potential legal consequences often causes the failure of insurers to aggressively pursue fraud investigations. Privacy laws, perceived duties of confidentiality and threats of lawsuits for defamation, invasion of privacy, malicious prosecution, bad faith or interference with contract and business relationships and anti-competition liability, substantially retard the free flow of information that is necessary to stop insurance fraud in its tracks.
In the United States, a conditional privilege attaches to the "free flow of information to further a legitimate private or public interest." The condition on the privilege is that the publication not be abused. The underlying principle is expressed in the US case Richmond v Southwire Co, which states:
"The protection is based on a public policy that recognizes the need for the free communication of information to protect business and personal interests. To encourage open communications, it is necessary to afford protection from liability for information given in an appropriate effort to protect or advance the interests involved."
Simply put, the US decisions have recognized that there is a public interest in the abatement of crime and in the apprehension of crooks, and this takes precedence over a citizen's interest in suppressing communication related to law enforcement. What is further clear is that the public interest privilege applies even if the information flows to a non-public official. This is of paramount importance in a jurisdiction like Ontario where the preponderance of insurance fraud investigation is conducted by private individuals, including insurance adjusters, fraud examiners, private investigators and forensic accountants.
Insurers share not only the private interest inherent in the preservation of the integrity of the claims resolution process, but also the public interest in detecting and preventing criminal activities; ie, insurance claims fraud.
Many US jurisdictions have found that common-law privilege is inadequate to ensure the free flow of information and so they have enacted immunity statutes. Thirty-seven states have enacted some form of immunity legislation -- and this is included in schedule A -- facilitating the free flow of information among insurers, their servants, and police and government authorities. An immunity statute must be clear, concise and unequivocal to be effective. The model act adopted in many of the United States reads as follows:
"In the absence of actual malice, no person furnishing, disclosing or requesting information pursuant to an insurance claim shall be subject to civil liability for libel, slander or any other cause of action arising from the furnishing, disclosing or requesting of such information. No person providing information pursuant to an insurance claim shall be subject to civil liability for any cause of action arising from the person's provision of requested information. Any person against whom any action is brought who is found to be immune from liability under this section, shall be entitled to recover reasonable lawyer's fees and costs from the person or party who brought the action. This act does not abrogate or modify in any way any common-law or statutory privilege or immunity heretofore enjoyed by any person."
I've enumerated some of the safeguards that are requisite to an immunity legislation. I won't go into these at this time, but they're in my submission.
It's clear, however, that insurers relying upon the proposed immunity statute may do so with confidence if they seek and provide information in good faith, without malice and have adequately investigated to establish reasonable grounds to seek or provide such information.
1610
Again, in many of the states they're taking a tough stance against fraud by creating fraud bureaus to investigate insurance fraud. These bureaus coordinate investigative efforts with various law enforcement agencies. Some of the bureaus are embodied within the Department of Insurance, the Attorney General's office, the Department of Labour, or they're established as an independent agency. Funding of state fraud bureaus may come from industry assessments, insurance premium surcharges, general revenues, civil or administrative fines, or a combination of any of these.
An Ontario fraud bureau could be incorporated within the Ontario Insurance Commission if its mandate was restricted to insurance fraud, or could be incorporated within the Attorney General's office if its mandate was expanded to include all statutory entitlement frauds, including workers' compensation, welfare and any frauds against the government of Ontario.
The function of a provincial fraud bureau would be to implement mandatory reporting protocols and to review, investigate and prosecute any fraudulent insurance act.
Mandatory reporting will require any insurer, agent or other person or employee having knowledge of or who believes that a fraudulent insurance act is being or has been committed to furnish the bureau a report of the information. Information so reported may be referred for prosecution or referred back for further investigation. What this will do is prevent insurers from expediently paying fraudulent claims and passing the cost along to the consumer.
The purpose of a provincial fraud bureau would not be to create another bureaucratized investigative agency but to create an authority for the expediting of prosecutions flowing from insurer-sponsored investigations. A provincial fraud bureau would be empowered to receive complaints and to commence prosecutions without the necessity to refer complaints to a local police authority. The Ontario insurance industry has developed the infrastructure internally and externally that is effective in identifying and investigating fraud. Insurers' anti-fraud initiatives are continually frustrated when compelling investigations are placed on the back burner by police agencies or by trial coordinators. It's difficult to fault the police; they have dwindling financial resources and these have to be carefully allocated. So-called soft crimes, including insurance fraud, are accepted by all as being of secondary importance to the violent and anti-social crimes, including murder, sexual assault and drunken driving. But conversely, it's difficult to ignore the complaints of insurers that costly investigations bear no fruit because of the lengthy delay in police investigations and in the court process.
A provincial fraud bureau can be an efficient and streamlined operation by seconding prosecutors from the Attorney General and investigators from the Insurance Crime Prevention Bureau and by utilizing the investigative resources provided by insurers. There is no need to duplicate effort and waste resources with concurrent police and private investigations. A very small auto insurance premium tax or an assessment on insurers, I believe, would be welcomed by insurers and policyholders alike, provided that the proceeds were clearly seen to be funding a department taking a proactive role in the investigation and prosecution of insurance fraud.
A provincial fraud bureau may be empowered to play a role in the regulatory process as well. Recognizing the fact that the cost of insurance fraud is borne by the consumer, many US jurisdictions require insurers to have minimum anti-fraud measures in place, and these are monitored by the state fraud bureau. These may include:
The requirement for insurers to have special investigation units or to have a contractual relationship with a third-party provider.
The establishment of either internal or industry-wide fraud hotlines actively promoted and used. These are used effectively in the United States and by ICBC in British Columbia. They work and they should be mandatory.
Industry-accepted standards for flagging and investigating suspect claims. One should have industry-wide standards. This eliminates systemic bias against suspect groups.
Internal fraud training.
Public fraud education.
Insurance premium stability was an enunciated objective of the draft legislation under consideration. A requirement that insurers make a determined effort to investigate and prosecute fraud should be a condition of future applications for insurance premium increases. A provincial fraud bureau could report to the OIC on licensed insurers' anti-fraud activities.
Now I'd like to deal with the anti-fraud provisions within the draft legislation as we see it.
Anti-fraud statutes work most effectively when the intent of the measures is made clear and when the standard of proof necessary to rely upon the statutes is clear and concise. Ambiguity in legislation often results in the application of the provisions in a manner inconsistent with the legislative intent. In so far as the anti-fraud measures incorporated into the draft legislation will be adjudicated at the Ontario Insurance Commission, imprecise drafting will undermine the effectiveness of the measures and the confidence of insurers relying upon them. There are three anti-fraud measures found within the draft legislation that I would like to comment upon.
Under subsection 33(2), which deals with the identification of an applicant for income replacement, non-earner and caregiver benefits, I would like to point out that it's far too easy in Ontario today -- and it's sad to say that it's easy -- to fabricate non-photographic identification. I think it should be made very clear, and within the legislation itself, that identification provided for these benefits should include photo identification.
Under the draft legislation, an applicant is required to advise the insurer of his address. I think the applicant should also be required to advise the insurer within five business days of a permanent or temporary change of address. This is required with a driver's licence; it's not a big deal for auto insurance benefits either.
In subsection 37(4), which deals with the delay in payment when an accident is not reported within 30 days, I can tell you from my experience that delayed reporting is a major red flag for insurance claim fraud. What delay does is allow tracks to be covered and investigative barriers to be put in place. The draft legislation allows an insurer to delay payment for 45 days. I think the insurer should be entitled to go to the Ontario Insurance Commission and obtain an extension of that 30 days when an investigation, a bona fide investigation, is in progress and more time is required to make an informed determination of entitlement.
Subsection 53(3) will be the most effective anti-fraud measure within the draft legislation. The only thing I would do here is suggest that an amendment be made which requires an insurer relying upon this section to provide to the Ontario Insurance Commission and to any party who will be making a recommendation to the commission, any and all of the information that they have in their possession which led them to suspend benefits under section 53(1), and the legislation should require the commission and any party giving a recommendation to the commission to receive and give adequate weight to this information. If we don't do this, we'll have the OIC and DACs looking at one set of information when insurers were relying on a second set of information, and we're not going to get a proper weight given to the information that the insurers relied upon.
Finally, I would deal very briefly with the issue of regulation of fraud investigators. Presently, there are a number of professions involved in the investigation of insurance fraud. These include insurance adjusters, fraud examiners, forensic accountants, private investigators, forensic engineers, accident reconstructionists and medical investigators. Each is governed under separate legislation. Of these, only insurance adjusters are governed under the Insurance Act and require specific insurance education and training. It may be the appropriate time to examine the governing legislation of all of these professions involved in the investigation of insurance fraud and to bring all under one licensing authority. Properly implemented, this could result in administrative cost savings and cost reduction via self-governance. Alternatively, minimum educational and professional development standards may be enacted for any person involved in insurance investigations. Clearly, insurance law is sufficiently complex, with four insurance regimes in play, that the public is entitled to the highest standards in the investigation of insurance fraud.
The Vice-Chair: On behalf of the standing committee, thank you, Mr Mitchell, for a very thorough presentation today. Have a good day. That will expire the time; I'm sorry we don't have any time for questions.
Mr Kormos: What about on consent, Chair? The witness has presented some interesting issues. Two or three minutes per caucus?
The Vice-Chair: The government side? Any comments on this side? I see all-party consent, so we'll go to two-minute questions per party.
1620
Mr Wettlaufer: Mr Mitchell, I'm particularly interested in what you said in so far as the number of people being involved in doing fraud investigations, and that the only one licensed to do so or governed to do so are the insurance adjusters. I presume that you mean independent insurance adjusters, not company-trained or company employees.
Mr Mitchell: That's correct, because company employees are exempt from licensing under the Insurance Act.
Mr Wettlaufer: Given that scenario, have you seen a dramatic increase in fraud as a result of companies' efforts to cut administration costs in their claims and a transfer from claims handling by independent adjusters to claims handling by company adjusters?
Mr Mitchell: No. I don't see any increase that could be attributed to that kind of transfer of authority or responsibility.
We saw the early advent of fraud in 1990, 1991 and early 1992, when the full effects of OMPP came into play. What we had were insurers who, over a brief period of time, experienced higher profits than they anticipated. They were under extreme pressure because of the election of an NDP government that was about to bring in government auto insurance and what they found, from my perspective, was simply a willingness to pay claims and not adequately investigate.
What that allowed was organized insurance fraud to take root, and it has penetrated significant sectors to the point where we can now read about staged accident rings. I tell you, Mr Wettlaufer, I could bring in a flow chart of an investigation I worked on that would stretch from that wall to that wall, and I think it would go on a little bit farther, showing the linkages of staged accidents and the organization of the fraud that's involved. I take this directly back to the willingness of insurers to pay early on rather than investigate.
When OMPP was instituted I went to Michigan, which had a very similar insurance regimen, I studied what happened down there and I asked insurers down there, "What are your fraud exposures?" They told me a story of a particular group in Dearborn, Michigan, which had organized an insurance fraud school to the point where they had blackboards, they had books, they had courses in how to fake your independent medical examination and whiplash 101 and so on. This group was finally penetrated and broken by the FBI in 1986, but it had been in place since 1974. That's how long it took a concerted effort to penetrate and break an insurance fraud ring in that jurisdiction.
Insurers in Ontario were warned, but they preferred to ignore those warnings and to pay.
Ms Castrilli: It's certainly a bold presentation you've made here today. You state that OMPP introduced a Pandora's box. I wonder if you could tell me what fraud provisions were repealed by OMPP when it came in.
Mr Mitchell: I don't think there were any fraud provisions repealed. I think what happened was an attitude that took over, and what did come in with OMPP was very high fines. The insurance industry's very timid. If you wave a fine in front of them, they will cower and back off. I've recently asked people in the insurance industry about these huge fines that were instituted under OMPP -- I believe they were $100,000 fines for bad-faith negotiating and claim settlement and so on -- and how many people were actually ever fined and I was told zero. Nobody's ever fined, but the spectre of the fine caused a lot of these companies to turn tail and run from their fraud investigation responsibilities.
Ms Castrilli: I would have thought that since the industry has produced all kinds of statistics that have demonstrated that all measurable costs under OMPP went down -- that is the cost of premiums, costs of accidents and so forth -- there would have been less incentive for fraud. But I think I heard you say, and correct me if I'm wrong, in response to a question from Mr Wettlaufer that the fraud that actually occurred under OMPP was in anticipation of what might happen under Bill 164. I would take from that then that OMPP was working?
Mr Mitchell: No, no.
Ms Castrilli: You assume that there's a whole crew of people who organize --
Mr Mitchell: No. Please don't misunderstand.
Ms Castrilli: Well, I'd like you to be clear because it's confusing.
Mr Mitchell: Yes. Please don't misunderstand. Fraud was not caused because of OMPP and it wasn't caused by the spectre of government auto insurance. It was a result of the spectre of government auto insurance, which we had up until Bill 164 was enacted, that caused insurers to say, "We'd better be good little boys and we'd better not offend too many people in power, ie, the government of the day, or they'll take over our industry, so we're going to pay claims," and they paid claims and they paid through the nose and they turned a blind eye in many instances of fraud until it got to the point where they said: "Wait a minute. We're being" and my terms in my report were "raped and pillaged." All of a sudden, claim costs were going through the roof. The OIC was being faced with double-digit premium increase requests year after year.
Ms Castrilli: Do you have statistics you can show us?
The Vice-Chair: Thank you, Ms Castrilli. I'm sorry.
Ms Castrilli: I think this is an important point. Do you have statistics that you can show us about the increase during that period of time?
Mr Mitchell: Increase of?
Ms Castrilli: Fraud claims.
Mr Mitchell: There are no definitive studies. When I come to you and talk about fraud I can tell you that in 1990 there were no certified fraud examiners in Canada; now there are over 1,200. There were no chapters of the Association of Certified Fraud Examiners in Canada; now there are five in Canada. I can give you one specific example that could be replicated across the province.
The Vice-Chair: Mr Mitchell, do you have any specific statistics that you could present?
Mr Mitchell: These are numbers which could be in the form of statistics. What I was about to say was that in London, Ontario, about five years ago there would have been five private investigation agencies; now there are 20. So the numbers of those involved in fighting fraud are increasing.
Ms Castrilli: But you have no statistics.
The Vice-Chair: Thank you, Ms Castrilli. On to the third party; Mr Kormos.
Mr Kormos: Trust me, I remember well the very moment that public auto insurance was no longer a threat.
Mr Mitchell: I'll bet you do.
Mr Kormos: The key didn't fit in the ministry lock any more. I hear what you're saying and I suspect -- this is just suspicion and based on anecdotal stuff -- that with the advent of no-faults, the higher the no-faults, beginning with OMPP, the more there is of at least no-fault fraud or at the very least the phenomenon that lawyers call "malingering." I know health care people don't like the usage of that word, but I can't recall the word they use. I think that's a given and it's quite logical. That was one of the fears about no-fault, because with tort recovery, of course, you had to go through the test of scrutiny, of discoveries and of its being an adversarial system.
No doubt the spectre of government auto insurance also produced significantly lower premiums. If you take a look at the data, the insurance company was quite clever in the response.
You've talked primarily, though, about "post-writing fraud," and again my suspicion -- and you'd know more about this than I would -- is that the fraud begins at the point of writing the policy. Granted that the vast majority of policies are written by brokers or direct sellers, the fact remains that brokers and direct sellers range from very good to quite frankly very sloppy or very bad. Policies are being written over the phone. Policies are being written without ascertaining the true identity of the vehicle or of the insured.
With the entry of banks into this business, which are tending to do almost 1-800 selling of insurance, my suspicion is that having adequate fraud controls means starting at the very beginning, making sure that the person you're insuring is the person they claim to be, making sure that the vehicle you're insuring is the vehicle it's purported to be. That is the genesis of a fraud curve. Am I close on that point?
Mr Mitchell: Yes, and I would have to agree with you. I sponsored a fraud conference in Toronto back in November, and the response that I got to the questionnaire, and it was mostly insurance industry people who were at it, was that this is the kind of conference that should be put on for our brokers. I think the insurance industry recognizes that as well, whether they're admitting that publicly -- they have admitted it to me. It's exactly what you say. I think if we go back to the kind of immunity legislation I'm talking about, something that would allow industry-wide databases and sharing of information so that an insurer could immediately know, through relational databases and accessing those by searching by name, by date of birth, whatever --
Mr Kormos: That's where ICBC has a leg up, because of course everything is on one database. That's why their fraud control has been particularly effective.
The Vice-Chair: Mr Mitchell, thank you for staying a little while longer with the committee. Have a good day.
1630
EDWARD PENDLEBURY
The Vice-Chair: Next is Mr Edward Pendlebury. Good afternoon.
Mr Edward Pendlebury: My concern really in this presentation is simply the so-called FARM, that is, the Facility Association residual market. I obtained my driver's licence in 1952 with a test in Victoria and I've renewed my driving licence without a break. But, like almost all drivers, I was unaware that each at-fault accident in the last five years would count two points -- that's where a person has four or more years of driving experience -- and that with a total of four points there would be a mandatory transfer to the Facility Association residual market, or FARM.
On that sheet, I have given how my insurance premiums reflected my accident history. As you can see, in 1991 I had two claims, one for $977.21 and another for $3,137. I am not sure -- I haven't checked with Campbell Motors, who did the repair -- but I believe the one for $3,137 is where my wife was apparently threatened by a truck on a road which was really under repair. She pulled over a bit to the right, and there was a drop of two or three inches immediately after the asphalt. So, with the car out of control, she headed for the ditch. All the apparent damage was that we lost the front licence plate, but examination on a lift showed that there was more damage, and that's why that one is high.
The third accident was reported in 1993. You will see how I have been moved to the FARM. I have been advised by my broker that my 1997 premium is the first that I can expect to be free of the FARM and have selection on the market, with only two points registered against me.
Another application of the FARM which is not generally known to motorists, also with a four-point application, is when the applicant has no evidence of a valid automobile insurance policy for at least 12 months out of the last 24. Although she has driven for the last eight years, my friend Kim McEwan has fallen into this trap and is faced with insurance costing from $3,000 to $4,000 per annum. This is one of the cases where people are unaware of some of the dangers that are listed on the second sheet, the insurance risk point chart, which gives the number of points you can lose and where you are on the FARM for at least four to five years at high rates of premiums.
That's all I have to say. Thank you.
Mr Crozier: Thank you, sir. I wish each of the presentations was as brief and concise as this one. I gather, although I'd like you to clarify for me, that you're not disputing whether a person should or should not be in the Facility. You're just saying that when you don't know it, it causes some difficulty down the road.
Mr Pendlebury: In part, yes, that is quite correct. There are a number of things on that. You take like recently in the newspaper, Mr Brown in his column drew attention to the fact that you can fall into this trap very easily. In other words, you may have two points that you've lost on an accident. If you are caught speeding, you lose I'm not sure whether it's one point or two.
There are a number which are covered in the traffic act, and the result is that you can suddenly find yourself in a bind where you thought it was cheaper or quicker to pay your fine, rather than to go to court to have them decide as to whether the facts presented by the policeman are in accordance with what you understood.
Mr Crozier: Well, that certainly might be the case.
Mr Pendlebury: I think everybody is aware that it is only sensible that if you are accident prone, you should be liable to higher premiums. But one of the catches on this one is the fact that if it takes you at least five years, and you take like in my case one of the things I have discovered is that when it comes to speeding, we have a problem here in Ottawa that certain areas have a 40-kilometre speed limit regardless. The general one is you have this speed imposed unless it is posted contrarywise. You have the same thing in Ottawa. There, it is normally 50 kilometres. On the other hand, I'll defy anybody to go down a number of these streets and find people who are travelling on major roads at the posted speed.
This is one of those that will affect everybody's premiums. This afternoon, when I was going down the parkway, I noticed the RCMP, two of them, one sitting watching one lane and one the other. Normally, everybody on a road which is designed for 50 miles an hour is likely travelling maybe 40, 45. On the other hand, again they run the risk of losing points for their insurance. It's somewhat sensible and, in other words, it can be a nuisance.
Ms Castrilli: Thank you very much, Mr Pendlebury, for being here. You've done a great job of putting down the figures for us. It strikes me, if we do a calculation of the math involved, that you had roughly about $4,000 worth of claims that were paid to you, a little more or less, and that's basically it. For that, you will be in Facility for five years. That's by your calculation.
Mr Pendlebury: That's the minimum, yes.
Ms Castrilli: Right. You're looking at somewhere in the neighbourhood of $2,500 on average for each of those years. I guess what's really happened is, by making a claim, you've asked for a loan from the insurance company, in a way, which you were paying back with interest, a big, hefty interest, over five years. Had you paid it yourself without resorting to making a claim, you wouldn't have subject to that. Does that analysis ring true with you?
Mr Pendlebury: Let's go back and put it the other way. You are saying that after my accidents, or claims, they paid it and paid it up front and I am repaying it.
1640
Ms Castrilli: Right, with a big, hefty premium.
Mr Pendlebury: On the other hand, let's put it this way: If you go back to 1952, how much have I paid in with a minimum of accidents, in other words, where I have prepaid for some things? That's the other side.
All I'm trying to do here is point out that we have something which has been imposed in the last four or five years and which should be considered, and that's it.
Ms Castrilli: You made your point very clear.
Mr Silipo: I don't really have a question, Mr Pendlebury, but I just wanted to say that I think the point that you've made we've heard from other presenters here in Ottawa and I know throughout the rest of the hearings, and I think what we've heard continuously in these kinds of situations is the need to fix this problem. Many people, and I think you're saying the same thing, are not arguing against the need for a Facility system, or even the sense of having people pay more when they're involved in accidents. At the same time, there's a combination of problems that range from people not knowing clearly what the rules are and getting caught with these huge increases, not taking into account the good driving record that they've had for many years back, and all of a sudden, because of a couple of accidents, although those are our accidents, it sort of changes a situation for somebody for the next five years at least.
Mr Pendlebury: I think Dave Brown brought out something again in his column which is applicable, and that is on that last one I had where if you dispose of a car, and assuming you only have one car per family, but if you dispose of your car and don't have one for two or three years, when you buy another car, then automatically you are into this particular pitch. That I think is the unfair one.
Interjection.
The Vice-Chair: Did you want equal time, Mr Kormos?
Mr Kormos: The balance of our time, yes, sir. Mr Pendlebury, yours is not an uncommon complaint. It speaks to the fact that, firstly, when is insurance coverage not insurance coverage? Ever since Bill 68 and no-fault, you might as well not have insurance coverage, because at the end of the day you're going to pay and pay and pay. You'd have been better off to have been self-insured and covered your own losses, because you've paid for them manifold.
Secondly, you've been driving for 43 years, give or take a few months. That means you're over 28; I'm confident of that. I simply speak to these committee members once again of a system like ICBC, the Insurance Corp of British Columbia, that affords seniors automatic and significant discounts, recognizing the reduced income of seniors and recognizing that seniors as a class are by and far safer drivers, in view of, among other things, their experience.
Mr Pendlebury: There is one thing I would point out, and that is in 1952, when I took my exam in British Columbia, at that time if you were over I think 65, you took an examination. At 70 and over, I think you had an examination every year. That would mean that in British Columbia in particular there would be the check on seniors that they were safe drivers.
Mr Kormos: Thank you, sir. Hope you belong to CFAIR.
Mr Pendlebury: No.
Mr Kormos: Please consider joining it.
Mr Pendlebury: I will.
Mr Wettlaufer: Thank you, Mr Pendlebury, for appearing. I would like to go back to something that Monte Kwinter of the Liberals asked another gentlemen, a senior, last week. He asked what the person considered to be a fair premium. In 1991, you paid $730 premium. Did you consider that fair at the time?
Mr Pendlebury: At that time, I think somewhere in the $600, $700 range was very common.
Mr Wettlaufer: Okay. That was based on --
Mr Pendlebury: Presumably their experience.
Mr Wettlaufer: Yes, and the fact that you were a good driver.
Mr Pendlebury: I think so.
Mr Wettlaufer: And you considered that a reasonably fair premium at that time.
Mr Pendlebury: At that time. Mind you, my data do not go back to what the premium would be in shall we say 1972, 1973, 1974, before inflation had really taken place.
Mr Wettlaufer: Probably about $300.
Mr Pendlebury: Possibly.
Mr Wettlaufer: But that's a guess. The thing that I'm getting to is that insurance companies assess risk. That is how premiums are developed. It's based on an assessment of risk. They would have considered you less of a good driver in 1993 as a result of three accidents in a three-year period than they did prior to 1991.
Mr Pendlebury: Certainly. Yes.
Mr Wettlaufer: As a purchaser of insurance, we are asking insurance companies to put up, or risk, $500,000 or $1 million, or whatever figure, based on our ability to drive a vehicle based on their assessment of us.
Mr Pendlebury: That's right. That's including, I take it, personal liability.
Mr Wettlaufer: That's correct. Now, when they assess us as being less of a good driver, then of course the premiums rise and --
Mr Pendlebury: Yes, but did you notice that in that there is no -- well, when it comes to an accident -- pardon me. When you're buying insurance, there are a number of premiums, subpremiums, shall we say. In my case, there was no claim for any loss of income, because I'm retired. There was no claim for medical, on that part of it. There was no claim for any third-party liability.
Mr Wettlaufer: I agree, but what I'm trying to get at is I've often heard people say, when they back into another vehicle or they back over somebody's lawnmower or whatever, they say: "But it wasn't much of anything. There wasn't much damage." I always think, "But what if that had been a child?" There's a very slender line between a minor claim and a major claim, and this is what insurance companies do in assessing risk. It's not the amount of claim, it's the what ifs.
Mr Pendlebury: That is quite correct. But if you go into a mall, take a look at the pedestrians who walk along behind cars and don't pay one bit of attention to whether you've got a backup light showing.
Mr Wettlaufer: I agree.
Mr Pendlebury: That is one of those where I am now in the habit of giving a little honk on my horn before I back out. I often try to back into the slot. So that would cover that point.
The Vice-Chair: Mr Pendlebury, thank you very much for your very candid interview today.
Mr Kormos: Mr Wettlaufer, he sounds like an outstandingly good driver, in view of what he just told us. Why shouldn't he be paying lower premiums? What gives here?
Interjection.
The Vice-Chair: Seeing no more business before the committee, we will be standing adjourned and resuming at 9 am tomorrow morning in London, Ontario.
The committee adjourned at 1652.