INSURANCE STATUTE LAW AMENDMENT ACT, 1993 / LOI DE 1993 MODIFIANT LES LOIS CONCERNANT LES ASSURANCES
OTTAWA INSURANCE WOMEN'S ASSOCIATION
ECONOMICAL MUTUAL INSURANCE CO
OTTAWA INSURANCE BROKERS ASSOCIATION
CONTENTS
Wednesday 3 February 1993
Insurance Statute Law Amendment Act, 1993, Bill 164
David W. Slater
Ottawa Insurance Women's Association
Debbie Olsen, past president
Rehabilitation Management Inc
Donna Klaiman, regional manager
Facility Association
Cliff Fraser, chairman
Bord Vuuty, general manager
Robin Cumine, legal counsel
Economical Mutual Insurance Co
Sam Hill, president and chief executive officer
Veljo Taht, vice-president, actuarial services
Glen Walker, vice-president, claims
Bickerton Brokers Ont Ltd
Alan R. Bickerton, president
Steve U'Ren, director, Insurance Brokers Association of Ontario
Ottawa Insurance Brokers Association
Evelyn Scullion, president
Kirby and Masson Insurance Ltd
J. Scott Kirby, partner
Ronald S. Peterson
STANDING COMMITTEE ON FINANCE AND ECONOMIC AFFAIRS
*Chair / Président: Hansen, Ron (Lincoln ND)
*Acting Chairs / Présidents suppléants / Présidentes suppléantes: Johnson, Paul R. (Prince Edward-Lennox-South Hastings/Prince Edward-Lennox-Hastings-Sud ND);
Mathyssen, Irene (Middlesex ND); Winninger, David (London South/-Sud ND)
Vice-Chair / Vice-Président: Sutherland, Kimble (Oxford ND)
Caplan, Elinor (Oriole L)
Carr, Gary (Oakville South/-Sud PC)
Christopherson, David (Hamilton Centre ND)
Jamison, Norm (Norfolk ND)
Kwinter, Monte (Wilson Heights L)
Phillips, Gerry (Scarborough-Agincourt L)
Sterling, Norman W. (Carleton PC)
Ward, Brad (Brantford ND)
Wiseman, Jim (Durham West/-Ouest ND)
*In attendance / présents
Substitutions present / Membres remplaçants présents:
Harnick, Charles (Willowdale PC) for Mr Sterling
Johnson, Paul R. (Prince Edward-Lennox-South Hastings/Prince Edward-Lennox-Hastings-Sud ND) for Mr Christopherson
Klopp, Paul (Huron ND) for Mr Jamison
Mahoney, Steven W. (Mississauga West/-Ouest L) for Phillips
Mancini, Remo (Essex South/-Sud L) for Mrs Caplan
Mathyssen, Irene (Middlesex ND) for Ms Ward
McGuinty, Dalton (Ottawa South/-Sud L) for Mr Kwinter
Owens, Stephen (Scarborough Centre ND) for Mr Sutherland
Tilson, David (Dufferin-Peel PC) for Mr Carr
Wilson, Gary (Kingston and The Islands/Kingston et Les Îles ND) for Mr Ward
Winninger, David (London South/-Sud ND) for Mr Wiseman
Also taking part / Autres participants et participantes:
Cochrane, Rosemarie, counsel and senior policy adviser, automobile insurance review, Ministry of Financial Institutions
Kormos, Peter (Welland-Thorold ND)
Owens, Stephen, parliamentary assistant to the Minister of Financial Institutions
Clerk pro tem / Greffier par intérim: Carrozza, Franco
Staff / Personnel:
Chan, Rebecca, assistant to the clerk
McNaught, Andrew, research officer, Legislative Research Service
The committee met at 1000 in the Delta Ottawa.
INSURANCE STATUTE LAW AMENDMENT ACT, 1993 / LOI DE 1993 MODIFIANT LES LOIS CONCERNANT LES ASSURANCES
Consideration of Bill 164, An Act to amend the Insurance Act and certain other Acts in respect of Automobile Insurance and other Insurance Matters / Loi modifiant la Loi sur les assurances et certaines autres lois en ce qui concerne l'assurance-automobile et d'autres questions d'assurance.
The Chair (Mr Ron Hansen): Good morning. We'll resume the hearings for the standing committee on finance and economic affairs on Bill 164, An Act to amend the Insurance Act and certain other Acts in respect of Automobile Insurance and other Insurance Matters. I'd like to welcome Mr McGuinty and Mr Mahoney, some new members, and Miss Irene Mathyssen to the committee this morning.
DAVID W. SLATER
The Chair: Our first presenter is Dr David W. Slater, and he's sitting in front of us. If you don't mind starting, we have one half-hour, and leave some time at the end for members of the committee to ask questions. You may begin.
Dr David W. Slater: Some of you would know I'm an ancient university professor, and then a public servant and then a gadfly doing various sorts of things for churches and various non-paying organizations. I've prepared notes, and in the interest of economy I'll run through those with you. I think I can get them in in 15 minutes and leave half the time for questioning.
Since I completed the Ontario Task Force on Insurance report in 1986 I've had a continuing interest in the subject. From time to time since then, I've been asked by the Ontario government to comment on automobile insurance matters and I've done so. This has been an entirely voluntary activity. I have not been a paid consultant to the government on this subject. I offered to testify on Bill 164 and hope I can be of a little help in considering the bill.
As I understand it, this bill is concerned with compensation for personal injury, physical or psychological, arising from automobile accidents. It does not deal with property damage arising from the use of automobiles. The bill proposes significant reforms and extensions of the current plan -- that is, the Ontario motorist protection plan, or OMPP -- which came into force in January 1990. That plan was an enormous improvement on the regime that existed before that time and most of these improvements are retained under Bill 164, but important additional reforms are proposed.
In all but a few jurisdictions in North America, compensation for injury arising from automobile accidents is a mixture or blend of no-fault compensation and compensation through the tort system. Each has advantages and disadvantages. It is widely agreed -- at least I believe it is -- that to base compensation for such injuries completely on the tort system would be inefficient, inequitable, outrageously costly and slow. It's also widely agreed that even if no-fault compensations are generous, prompt, fair and efficient for most injuries, to allow some use of the tort system for determining some part of the compensation can be reasonable, equitable and efficient. Thus, the issues concern the design of the no-fault and tort elements and their relationships.
Bill 164 proposes, first, more generous no-fault compensation for all economic losses arising from injury from automobile accidents, combined with the right to use the tort system for compensation for pain and suffering, but pain and suffering only, subject to the $15,000 deductible from an award. This is a unique blend of the two elements. My interpretation of the proposal is as follows:
Generous no-fault compensation is to be offered for economic losses, but without no-fault compensation for pain and suffering. It assumes that minor pain and suffering will be accepted by the injured without compensation. However, if victims consider their pain and suffering to be substantial, they can use the tort system to claim compensation for pain and suffering. They will have to decide whether the likelihood is the amount of the award would be greater than the deductible plus such costs as they may have to cover. However, under the proposed bill, use of the tort system will not be permitted for compensation for economic losses.
The bill appears to recognize, but one can hardly say so explicitly, that the Ontario motorist protection plan, the current system, was an enormous improvement on the previous arrangements in Ontario. In the first place, the system was moved to a first-party basis under which premiums are paid to and benefits received from one's own insurance organization.
Secondly, and probably most important, the erosion, in real terms at least, of the no-fault compensation in the previous system was reversed. Those benefits under the previous system had become so small that most Ontario victims were almost forced to use the tort system even for modest compensation. The balance of no-fault and tort-based compensation had been shifted enormously to the tort system. The OMPP shifted the balance back towards no-fault elements of compensation. Also an improvement, the no-fault compensation for all types of economic losses was greatly increased and the use of structured settlements in arbitration was encouraged.
The three years of experience under the OMPP have shown, I believe, considerable improvement in the fit of compensation to need, and in efficiency. In introducing Bill 164, however, the government has taken the position that some elements of the current system are in urgent need of further reforms.
In my judgement, the most important proposal is to permit somewhat greater use of the tort system for compensation, in this case of pain and suffering only, not economic losses. The use of the tort system for these purposes is to be a right of individuals. They have to judge whether or not they will use the system. They, together with their advisers, will have to consider whether they can establish that some other individual or individuals were negligent; that is, that their behaviour fell below a reasonable standard of conduct, measured objectively. As the ministry has put it, "A driver will not be liable if he or she acted with due care and attention, or if the accident was unavoidable."
The government believes that the no-fault compensations under the current plan are inadequate in a number of respects, and detailed proposals for increases in benefits have been made. These should be considered on their own merits, but I think it's important also to relate them to the proposed tort changes. If the tort system is not to be available for compensation for economic losses, then all that much better should be the no-fault compensation for such losses. If the deductible and costs are a deterrent to use of the tort system, then the no-fault program must be, and be seen to be, appropriate, perhaps even generous, compensation for economic losses.
It's generally agreed that the proposals under Bill 164 will result in increased benefits, therefore increased costs and therefore increased premium rates; by how much is difficult to say, in part because so little experience has accumulated under the OMPP. As I understand it, the automobile insurance industry has been somewhat more profitable since January 1990 than before that date. Most studies have indicated that the industry is a competitive one and that average profits over time could be expected to fall into the competitive range, having regard to the capital required and the risks.
It's too soon to be certain about where the industry is in the adjustment process to the OMPP and changing circumstances. However, and I think this is an important point, I would not expect trimming of future profit margins to be sufficient to absorb the increases in costs which will arise from the government's proposals. The fundamental economic question therefore will be whether the significant increases in benefits and increased use of the tort system are worth the increased costs.
I am of the opinion that the approach and structure proposed in Bill 164 are sound and worthwhile. I raise some questions about those in a moment, but let me indicate why I think this way.
First, the government's proposals are based on a thorough program of research and embody a carefully thought-out program. I, in the course of the consultations from time to time with the government, have been able to follow the research program.
Secondly, I accept the fundamental premise of the bill that most automobile accidents in our society are just that, matters of chance for people who are exercising reasonable standards of conduct, with due care and attention rather than being negligent, but negligence also is part of the current use of automobiles. Anybody who observes the number of people running red lights deliberately in Ottawa has to be a believer in negligence.
I therefore accept the fundamental premise of the bill that no-fault compensation should meet the vast majority of losses arising from injury from automobile accidents. No-fault compensation could be timely, efficient and equitable for dealing with most economic losses. I believe that the no-fault compensation proposals in this bill are well and carefully crafted.
The blend of no-fault compensation and the permitted resort to the tort system appears to me to be sensible, but I'm not able to evaluate its legal status; I'm not a lawyer. Even if the arrangements are sound to begin with, it will be necessary, of course, to monitor the developments because things will change over time.
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The combination of the proposed deductible from tort awards and costs which will fall on the users of this tort system should not be a barrier to those who suffer substantial pain and suffering, but they should deter the use of that system for minor pain and suffering. The proposals continue the first-party approach to the delivery system, which I think is good. I strongly support the improvement of the rehabilitation benefits.
I consider actions to promote safe driving and deter unsafe driving to be important elements of the overall program dealing with automobile use. I believe that the deterrent effects -- and there are some deterrent effects -- of a strongly tort-oriented compensation system to be small, inefficient and inequitable. Therefore, I look to other means of deterrence, including stiff penalties for bad driving records.
Finally, I think several features of the bill should be examined more closely, and you may want to consider some changes.
Firstly, the matching of the no-fault benefits to the various types of cases -- fully employed, unemployed, students, older people and so on -- has been carefully designed, so far as I can see. However, I suspect that difficult cases will arise in which people do not fit into the various categories. Can additional provision be made for dealing with what I'll call hard cases in an efficient and equitable manner?
Secondly, have the relationships to other programs, such as Workers' Compensation and OHIP, been worked out, particularly when we consider that the Workers' Compensation thing is under review?
Thirdly, can supplementary accident and disability insurance be readily available for those persons who consider the no-fault benefits to be inadequate?
Fourthly, may there be serious problems of implementation of the new program through 100 to 200 insurance companies and hundreds of brokers and adjusters? The programs are understandably complex. The translation of new proposals into premium schedules will also be complex. A massive education program for the public will be required. Have these things been given sufficient consideration?
Fifthly, while the indexation to the CPI is an improvement over the current program, sooner or later the appropriate indexation will have to reflect the costs of the program, which may differ considerably from the CPI.
Finally, is the proposed -- and this not a special pleading -- compensation treatment of persons over 65 an appropriate fit to the current and prospective earnings and work patterns of such persons?
The Chair: We'll start off with Mr Mancini.
Mr Remo Mancini (Essex South): Mr Slater, thank you for your brief. We acknowledge you've had considerable history in advising governments and other organizations and individuals on insurance reform. I'm not sure I can call Bill 164 insurance reform. It certainly changes the status quo, the Ontario motorist protection plan, which I favour over Bill 164. I'm not quite sure I can refer to Bill 164 as insurance reform.
I was wondering if you would agree with me that the new regulations that have been prepared by the government -- 68 pages of new regulations that are going to be given to the industry brokers, to consumers who have to buy the product -- are very complex.
Dr Slater: The answer is yes. The problem one's faced with in this situation is that if one's trying to define in a careful way and differentiate all the different categories of situations which people may find themselves in and you're trying, in a sense, to cover all the bases, you're necessarily going to get into something which is pretty complex. Even so, as you've seen from my testimony, I'm a bit concerned. There still could be lots of situations where people fall through the cracks.
Mr Mancini: We've heard from the industry and we've heard from brokers, people who have to sell the product to their customers and face them across the table every day, that they themselves are going to have great difficulty in understanding these 68 new pages. They are very worried that the costs of educating every broker in the province and educating every consumer are going to be very large and that these costs are going to be borne by the consumers. Would you not agree that would be the case?
Dr Slater: I don't know how large they will be. They certainly are going to require effort. The only thing which I can judge by is the dealings I've had with my own broker in the changeover to the OMPP. Partly because I guess I thought I knew a little bit about it, I would keep quizzing them and they would dig and dig. But it is a significant learning exercise.
Mr Mancini: Are you aware that the regulations under the Ontario motorist protection plan are 18 pages as compared to these 68 pages? We've had testimony from insurance experts, from legal experts, from people all over this province; we had testimony yesterday in Windsor from several litigation lawyers who spend their entire lives litigating cases who have told us they have read these regulations 10 and 11 times and still cannot understand them.
Mr Slater, would you agree with me that we need a road safety program in this province to cut down on the number of automobile accidents and therefore cut down on the costs of car insurance?
Dr Slater: I would agree with that. When I did the work on the task force on insurance, auto insurance was not the crisis thing at the moment. What was happening, of course, was that the use of the tort system was expanding rapidly and many of these kinds of North American tendencies towards excessive litigation were creeping in. But one of the things that I found from that experience was that the information base on driving records, accidents etc in Ontario, at that time at least, was highly fragmented. It was impossible, with the material that was available, to figure out what was happening and to design and implement a safe-driving program. There's no question in my mind.
Mr Mancini: I want the record to show that the opposition parties have been in favour of road safety legislation and are prepared to help the government pass road safety legislation when and if it gets the time to bring it forward.
My last question to you, Mr Slater, is the following, and I have to put on the record my bias here this morning. My bias is for the consumer who has to buy the end product, whether or not affordability is a concern of yourself and the government members and anyone else who is here listening today or is interested in the insurance industry.
I have found through testimony that has been given to this committee that most people have reached their maximum ability to pay for automobile insurance. They are very concerned that Bill 164 may add up to $200 per automobile premium and that farmers, senior citizens and women who earn less money than men, those three groups in particular, are going to be hit the hardest. Are you absolutely sure that the contents of Bill 164 are worth these extra costs that people are going to have to pay, even when we know in this terrible recession they are not able to pay?
Dr Slater: That's a judgement that you people have to come to. My view is that there clearly are going to be increased costs, and increased costs would mean increased premiums. But I am of the view that many of the improved benefits that are suggested are in fact sensible and attractive. In particular, the rehabilitation improvements are, I think, a very significant improvement for this society. Whether people will consider those things to be a decent balance between cost and benefit is for you and for them to decide.
I do, however, suggest that attention should be given to the question of whether the differentiations of the premiums reflect the status of various people. Take a specific case. If there are groups of people who under the compensation proposals would not get significant benefits and others would, one would hope that the premiums would be tailored to the group in a way that reflected the notion that if you're getting less in benefits you'll pay less in premiums.
We all know that in the insurance pool there is a significant element of cross-subsidization so that there are some people who are paying more, in a sense, than the benefits they're getting and some people less, and that's the essence of an insurance pool.
The question I think then is, are the pools and the differentiations reasonable or not? For farmers and for older people, those are serious questions. Will the rates for farmers and for older people reflect the differentiation of their benefits and experience?
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Mr David Tilson (Dufferin-Peel): Thank you, Mr Slater, for coming this morning and giving us your thoughts on this topic. I picked up somewhere in your remarks the observation that auto insurance at the time of Bill 68 really wasn't a pressing subject -- well, it was, because rates were going up; that's not true. OMPP was passed and OMPP rates were to go down. Well, they didn't go down. They've either stayed the same in some cases or have gone up in many cases. So that adventure didn't work.
If it wasn't of urgency then, I, for the life of me, can't see why it's of urgency now. Specifically when you're looking at an innocent accident victim who is now going to be paying more for less -- those are the facts that have been given to us by all kinds of different sources, by people from Thunder Bay to Toronto to Windsor and, I expect, Ottawa. Those are the facts that are being presented to this committee, and that's notwithstanding the fact that auto insurance is not going down; it's going up, and that's just through the regular course of things.
On top of that, the insurance companies are saying, "Well, it could go up as high as 20%," over and above this 4% or 5% increase that they're now talking about.
The papers came out today, with the deficit creeping up to $13 billion. We're in a terrible recession. Why would the government want to do it now, of all times, when it isn't one of the pressing issues, when jobs and other issues are more pressing, when people are more interested in keeping their jobs than paying out all of these expenditures?
I must confess, I find it interesting that you imply at least that now is the time to do it. I would think that now is not the time to make any changes in auto insurance. It's the worst time of all.
Dr Slater: Two or three points, Mr Tilson. First, facts are in the eye of the beholder in this game, as you know very well, so sorting out facts and allegations is really part of what you people are faced with.
You, I'm certain, will not believe everything you're told by me or by anybody else. But on a serious note, until the reform that was introduced in the Ontario motorist protection plan, the automobile insurance situation in Ontario was on a slippery slope, enormously well greased.
First of all, if you look at the increases in automobile premiums and separate out the property damage from the bodily injury piece of the thing prior to the new plan, it's perfectly clear that the property damage side was increasing, in part as a reflection of the more complicated cars and more expensive repairs and all that sort of stuff.
On the bodily injury side, it is also perfectly clear that that piece of the cost of the insurance in the province was increasing at much more than the rate of inflation, and the driving force behind it was the increased use of the tort system. The tort system was having to be used for everyday compensation for ordinary people because the no-fault elements were so terrible. So it's absolutely vital, if you're going to have a system which has a reasonable balance between no-fault compensations and the use of the tort system, that no-fault benefits be improved considerably.
Mr David Winninger (London South): Dr Slater, you probably know more than most people about this issue, having heard countless presenters, I'm sure, some years ago. Yesterday in Windsor and in other localities we had several people come forward and plead for reinstatement of greater access to tort. I'm sure you're familiar that on average a driver probably makes 200 observations per mile and 20 decisions per mile and one error every two miles, and that's just the average driver, according to the Canadian motor vehicle traffic accident statistics. So there is some argument to be made, certainly, that the old tort system in the early 1980s tended to penalize the average driver who might make a fractional error in judgement. Will you agree with that, first of all?
Dr Slater: Oh, yes, I think that's absolutely clear.
Mr Winninger: Secondly, you seem to appreciate some of the improvements that have been made in Bill 164 in that we've lowered the threshold for pain and suffering, we've improved the loss-of-income benefits, we've taken caps on rehab. You particularly seem to appreciate that reform --
The Chair: Sir, did you say "Yes"? Because Hansard can't pick up --
Dr Slater: I'm sorry; the answer's yes, there have been improvements. As I've indicated, Mr Chairman, if one is going to exclude the use of the tort system for economic losses, then the benefits under the no-fault system have to be good enough to cover most of the people for most situations promptly, quickly and fairly. It's just an absolute necessity if you're going to exclude the use of the tort system for economic losses.
Mr Winninger: And you'll probably know that Bill 164 takes in 97% --
Dr Slater: Those are the estimates.
Mr Winninger: -- of the wage loss of full-time earners, compared to only 73% under the OMPP.
My question to you was going to be this. On the last page of your brief you address the issue of annexation, which would be tied to the consumer price index, and you suggest that while that's an improvement, sooner or later the appropriate indexation will have to reflect the costs of the program, which may differ considerably from the CPI. I wonder if you could elaborate on that.
Dr Slater: The simplest illustration is this: If once again we get this country working with improvements in productivity on average over the years, the average industrial wage should grow somewhat more rapidly than the CPI. That's just the way in which you translate it, through productivity, into increased real income for people. If the compensation for loss of income is going to reflect the income status of people in the country instead of just the CPI, some day we're going to have to update the thing to reflect what has happened to the average industrial wage.
It's the same thing with respect to rehabilitation. If it turns out that, even with the best management, rehabilitation costs keep going up more rapidly than the CPI, some day you may want to have a fresh look at that. But that's something down the road. You don't have to worry about it today, except that one ought to, in any review arrangement, have on the agenda that kind of issue.
The Chair: Okay.
Mr Winninger: Mr Klopp had a very good question.
The Chair: I'm sorry; time's run out. Dr Slater, I appreciate your showing up this morning. Your presentation here has put maybe a little bit of new life in the insurance issue. Thank you.
Dr Slater: Thank you very much, and I wish you well in your considerations.
The Chair: Mr Tilson, as you notice, we had Kleenex ordered for you at the desk here --
Mr Tilson: Thank you very much.
The Chair: -- and for the other members of the committee who are carrying colds around the province, spreading the disease.
Mr Stephen Owens (Scarborough Centre): I thought it was because Mr Tilson was so happy.
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OTTAWA INSURANCE WOMEN'S ASSOCIATION
The Chair: The next group to present is the Ottawa Insurance Women's Association. Will you come forward, please? The people standing near the back door, there are chairs in here. For fire regulations, do not block the doorway.
I'd like to welcome you to the standing committee on finance and economic affairs. We have until 11 o'clock, and in that period of time after your presentation, leave some time. As you can see, the members of the committee are quite anxious to ask questions. Please begin, and identify yourself for the purposes of Hansard.
Ms Debbie Olsen: My name is Debbie Olsen and I'm the past president of the Ottawa Insurance Women's Association. I'm also the operations manager of the Personal Insurance Co of Canada. I'm just going to follow my brief here, and then certainly there'll be lots of time for questions.
I'm picturing everybody in their underwear. It's not working very well here.
One need not look beyond the daily newspapers to see the effects that an unprofitable bottom line will have on the number of jobs that are lost or saved in any industry or any company today. Although profitability of big business may not be a high item on the NDP agenda, certainly job retention has to be.
In a business such as insurance, where premiums collected today must be set aside to pay the claims of tomorrow, a policy that offers unlimited coverage under any section is of great concern to the industry and therefore to the employees of that industry. How will our industry be able to adequately set aside the money necessary to pay the claims when there's no way to quantify the worst-case scenario of any particular loss?
There must be some kind of limit placed on the payout of an individual loss for planning purposes. Without this limit, no insurance company will ever be able to accurately determine its financial position. The resulting uncertainty will do nothing to improve market stability, and the inevitable cost-cutting programs that follow such uncertainty will cost jobs.
I'd like to add that here's an article from the Detroit Free Press dated January 29. They have a no-fault system in Michigan, and they are now looking at eliminating the unlimited part of that program in an effort to cut costs.
Because I represent a women's group, I'd like to make you aware of some real numbers for the city of Ottawa. Our organization has members in nine insurance companies in Ottawa. We conducted a mini-poll to determine the proportion of women employed by these companies. We found that out of 675 employees in Ottawa, in those nine companies 490 are women, a full 73%. You may not be able to gauge that from the group that is here today, but those numbers are real.
It's clear that women's jobs are in jeopardy as a result of the unprofitability inherent in a business where revenue is restricted by the possibility of capping premium increases and expenses are increasing dramatically without limit. Because we believe that the allowable increases will not be sufficient to meet the increased claim costs of Bill 164, the need for insurance companies to reduce expenses will be absolute and will cost jobs. For every four insurance company jobs at risk, three are held by women. Speaking for our members, I can say that the jobs we lose will be our own.
There is no doubt that premiums will increase following the enactment of Bill 164. Whether you prefer the conservative estimates of the Mercer report or the more drastic estimates under the Coopers and Lybrand and Wyatt reports, all of the actuaries agree that the cost of insurance premiums will increase. No one can afford this bill.
The concern we would like to express is that women in particular will bear the hardest burden for the increase in costs and, in return, for the most part will receive fewer benefits under Bill 164 than under the previous OMPP regime.
Under OMPP, with the $600 weekly cap for loss of income, if you have an individual earning $39,000, he will recover the full $600 per week while he's unable to work. Under Bill 164, assuming a very modest tax bracket of 25%, the recovery will be slightly over $500 per week. This is a full $100 less under Bill 164 than under OMPP, and this is due to the change from 80% gross to 90% net income.
Mr Peter Kormos (Welland-Thorold): Lower benefits, not higher.
Ms Olsen: Definitely lower.
Mr Kormos: Why does the government insist that they're higher?
Ms Olsen: You've got me; not for women anyway.
Mr Kormos: New Democrats doing that. I don't believe it.
Ms Olsen: As you can see, the change in formula and the increase in the weekly cap to $1,000 under Bill 164 will improve the compensation only for those people earning more than $39,000 a year. I'm sure you'll agree I need not present actual statistics to state as a fact that the majority of women do not earn over $39,000 in a year. It's the lower-income drivers who will be subsidizing the benefits for the higher-income drivers, and the majority of women will be paying for a benefit that they can never collect. We request a system that will deliver the fairness that is one of its stated goals.
We also have a concern that the uniform classification system proposed in the policy document The Road Ahead will further burden women with substantial increases in premiums. The proposed system will eliminate age and gender as part of the rating criteria, citing fairness as its purpose. This system will overrule the statistically based reality that certain segments of the population are responsible for, and therefore should pay for, their proportional contribution to claims costs. We suggest that it's the very concept of fairness that would dictate that these elements not be removed from the rating system.
The Road Ahead does attempt to address this issue by including several road safety initiatives specifically aimed at these high-risk drivers, and the entire industry supports this effort. The Mercer report that produces the most conservative estimates of higher insurance premiums includes the basic assumption that a reduction in the number of accidents will occur as a result of the initiatives contained in The Road Ahead. Brian Charlton can be quoted from The Road Ahead as saying, "Road safety is a critical component of our plan." The government, however, has not been following through on its commitment. Unfortunately, Bill 39 has only received first reading and we appear to be no closer to the implementation of the graduated licensing system that the insurance industry has been lobbying towards for years.
We urge the government to ensure that if Bill 164 proceeds it is enacted together with the road safety initiatives that are such a critical part of the plan. Our concern is that the reasonable containment of costs, both in human suffering and dollars, cannot possibly be realized without the necessary focus on accident prevention. We believe everyone would agree that efforts towards preventing an accident should not follow the efforts for fair compensation; these efforts must go hand in hand.
Finally, there is no one in our industry who feels that OMPP is perfect, but it's certainly salvageable. However, with Bill 164 replacing OMPP, we have an extremely complex piece of legislation that will fuel increased costs and adversely affect affordability, unfairly burden women with the greatest increase in costs while reducing their loss-of-income benefits and run the risk of significant job losses.
Given the economic climate and the lack of public demand for this bill, we believe that Bill 164 is untimely, uncalled for and downright irresponsible.
It's not a nice message I'm delivering, but on behalf of the Ottawa Insurance Women's Association I thank you for allowing us to express our opinion.
Mr Kormos: On a point of order, Chair: I want to introduce Phil Edmonston, federal member of Parliament for the riding of Chambly, Quebec. Phil Edmonston fought for the no-fault system --
The Acting Chair (Ms Irene Mathyssen): Thank you, Mr Kormos, and certainly the committee is very pleased to see a man of Mr Edmonston's stature here among us today. We've got about 20 minutes left. The time will be evenly divided among the three caucuses, beginning with the Tory caucus.
Mr Tilson: The subject of road safety comes up all over Ontario, and of course our party has been pushing graduated licensing for some time, everything from presenting petitions in the House to statements to speeches, whatever we can do to get them moving. It's difficult to understand why they haven't done that. There are all kinds of rules that could be done, whether you're talking about Bill 64, Bill 68, tort, anything else. I mean, this is almost a separate issue. It's a very important issue that seems to be put aside for something that, as you say, really doesn't need to be done at this particular time. I'm talking about the expensive benefit package they're putting forward now.
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Having said that, I think that the message you put forward, which is another one, a common theme that's a concern throughout the province, is that of the uncertainty of costs, and it gets back to the innocent accident victim. That's what it all boils down to. That's supposedly who we're trying to save, whether you're talking rules of the road, or premiums, or safety, or keeping people alive, and somewhere those people have become forgotten.
My question to you is, and it's a question I've been asking many delegations: Who is going to be the advocate for the innocent accident victim? I'm thinking specifically of educating the innocent accident victim in dealing with these unbelievable, unexplainable benefit packages, these regulations. Who's going to explain these rules to them and deal with the insurance companies, or deal with the bureaucrats or the government or whoever else they're going to be dealing with? They're left all alone. Do you have any thoughts on that?
Ms Olsen: Certainly the brokers, the direct writers, where the insurance companies are direct writers to the people.
Mr Tilson: But they'll be against the innocent accident victim.
Ms Olsen: I'd be careful of saying "against the innocent accident victim," because they are our bread and butter. That's what we do for a living.
Mr Tilson: I know you do, but let's face it, you are going to be held tight for funds.
Ms Olsen: Absolutely.
Mr Tilson: The minister, or the former minister I guess he is now -- I don't know where he's gone. He has said the rates are not going up, so things are going to be tight for you people.
Ms Olsen: Absolutely.
Mr Tilson: I'd say that the person who's going to suffer is the consumer, the innocent accident victim.
Ms Olsen: Certainly I think that lawyers will be consulted with a lot more frequency for people to learn what their rights are under the new regulations. There is a problem in that when costs start to go up and you start seeing the market instability, who suffers is exactly who you're saying, the innocent accident victim.
But the insurance people are rule-followers, they're conservative. You give them a set of rules and they will do their best under whatever adverse conditions they have to live with that set of rules. That's what we've done for the past number of years, and so that's why we make this kind of presentation against a set of rules, because we'll follow it.
Mr Tilson: I'm sure you fear for the innocent accident victim, and you emphasized the women, particularly the women who have temporarily left the workforce. You might comment on what their rights are as far as economic loss is concerned.
Ms Olsen: Certainly housewives at home who have no children will receive exactly the same thing under OMPP as they will under Bill 164 for the increased costs that will be borne. A housewife at home who doesn't earn and hasn't been part of the labour force, she stays home and looks after her kids, will receive exactly $15 a week more unless she has more than four children, okay? And I don't believe there are too many people out there with more than four children. Your average housewife at home out of the labour force with three kids will get $15 a week more, and that's not anything that I would call a benefit. I'm sure the costs will be far higher than that.
Mr Tilson: The point I was getting at was the teacher or the professional woman who has left the workforce to raise a family, gets involved in a motor vehicle accident while she is raising a family, has plans to go back to the workforce -- very qualified, very educated. What's going to become of her future potential income?
Ms Olsen: There are enhancements to those benefits under the system that will take into account what she was previously making, and the current system -- I mean, there are improvements under that system. I don't disagree that OMPP could use improvements and I don't think anybody in the industry that you talk to will say the existing set of rules that we have are ones we would choose, but they're the rules we have and those are the rules we'll follow, same as under the new system.
Mr Tilson: Give Mr Kormos a minute.
Mr Kormos: Thank you for coming forward. It's remarkable that it's a New Democratic Party government that is launching this attack on working people, on women, on seniors, on children and most regrettably on innocent accident victims. New Democrats across this province promised, when they campaigned prior to the election in 1990 and in the Legislature when they debated the issues, to restore to innocent accident victims their right to full compensation. They take away in this legislation what few rights innocent victims had after the Liberals were finished with them. It's remarkable that it's a New Democratic Party government that would attack the most vulnerable people in our society.
I tell you, if there's cynicism among the electorate, this government has done a whole lot to fuel it by its betrayal of those people who counted on it to speak out. I'm talking about the innocent victims, the people whose futures are stolen from them by drunk drivers. No-fault insurance is a victory of the guilty over the innocent. You're going to find drunk drivers being treated more respectably and with higher benefits than innocent victims. The dishonesty that's being used --
The Chair: Okay, I go on to Mr Johnson.
Mr Paul R. Johnson (Prince Edward-Lennox-South Hastings): Thank you for your presentation. I think it's interesting that the insurance companies in the last two years have made $1.3 billion in profits. Now we have a system that we're changing somewhat and there's an inference made in your brief that the insurance companies are going to penalize women as a result of a reduction in those profits. I find that reprehensible and I can't believe they would do that.
Ms Olsen: The statistics you're using for two years are the nicest set of statistics that use the maximum profit.
Mr Johnson: That's right, and the most recent two years.
Ms Olsen: Right, but if you look back over time you'll discover that the return on equity for insurance companies to their shareholders has not been anywhere near that high. The windfall profits have resulted from, in many cases, reserves going back in that were open for large losses that have not come to fruition. Those reserves going back into the capital are part of what has fueled that profit position for the companies. What I'm saying is that when those profits are realized and put into things like the cost changeover to OMPP, computer systems that are outdated, all those things, I think if you look at the insurance companies, you'll discover that some of the future investment that they need that profit for is to update their systems to provide better service to the public.
I don't think you can look at past profits and therefore say that those past profits should be taken away on a future basis, shaved away. Everybody's looking at the bottom line today. If you look at companies like IBM that have historically made that kind of profit, would that argue that since they made it last year, they'll make it next year, they'll make it the year after?
Mr Johnson: Under the OMPP, we listened to a woman in Windsor yesterday, Mary Ellen Lockyer-Cheney. She told us about her particular horror story, how difficult it was for her to get the compensation, to get the rehabilitation that she needed and so desperately required. She had to go out and fight on her own behalf. She told us about a very arduous, lengthy story of all the difficulty she had, and I think that we're going to see improvements under this new system. She's not going to have to go through that set of problems.
Mr Tilson: You didn't listen to what she said; she said it would get worse.
The Chair: Order.
Mr Johnson: I also want to give you another example. I want to talk about my wife, who's self-employed. Her name, by the way, happens to be Debbie. If she should be in an automobile accident under OMPP --
Interjections.
The Chair: Order.
Mr Johnson: -- she is not going to have an opportunity to replace herself. Because she's got to. If she doesn't replace herself -- she's self-employed -- she loses. She loses her contracts and she's out of business. This system, in my opinion, is going to make it better for her. She's going to have more opportunities under the new system than she does under the OMPP. There's a woman who's self-employed. Lots of women are self-employed. I give them a lot of credit. I give my wife credit and I think it's --
Ms Olsen: Does your wife not subscribe to a disability insurance plan?
Mr Johnson: In fact, she does.
Ms Olsen: So you're telling me that the benefits that you're saying she could recover under Bill 164 -- in fact she has another plan already to consider those benefits --
Mr Johnson: Don't you consider that prudent of her?
Ms Olsen: Absolutely I do. You're telling me that the legislation should provide --
Mr Johnson: Unfortunately, not everyone subscribes to that kind of additional insurance, do they?
Ms Olsen: I would argue that most people who have higher incomes are the people who do carry disability policies, who do carry that kind of supplementary benefit. To include that in legislation and the cost borne by the people who don't make that kind of money is not reasonable.
Mr Johnson: You also mentioned in your brief that you're concerned about some of the caps that are put on. For example, in long-term care there was a cap under OMPP for $500,000. If you met that threshold, then you were finished.
Ms Olsen: Right.
Mr Johnson: They had a 10-year threshold. If you met that, you were finished. What happened to those people who required rehabilitation or assistance beyond those points in time?
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Ms Olsen: I don't disagree, if you want to talk about increasing the limit. I don't want to argue the adequacy or inadequacy of any particular limit. All I'm saying is there has to be a limit. For planning purposes, for reserve purposes, I don't disagree that $500,000 for 10 years, if you look at the statistics, may not give you the kind of coverage you're talking about, but I'm saying to go from that to unlimited -- I mean, unlimited; how can any business, what plan do you have that you know of that has unlimited recovery in it? You tell me one. I'd be very interested to know of one that exists, and you want to impose that on insurance companies.
The Chair: Mr Klopp, one minute.
Mr Paul Klopp (Huron): We have the same concern. You agree that the $500,000, if you were 20 years old and in an unfortunate situation, is kind of unreasonable.
Ms Olsen: It's not going to be adequate.
Mr Klopp: No. That's why we said, okay, we're going to do these changes, in consultation with making sure the premiums don't go sky-high. Are you aware of the committee the minister struck with the industry and with the people on all sides, the victims' representatives, because that is really what we're all about and I'm sure you're all about too. You've said that.
Ms Olsen: The committee for compensation on long-term care?
Mr Klopp: Are you aware that that's what we're looking at, to try to find that balance?
Ms Olsen: Yes. This is the committee with the April deadline, the one you're speaking of?
Mr Klopp: Yes.
Ms Olsen: I think it's wonderful, but at the same time, I still think that any committee that is investigating costs of rehab is great, and trying to contain costs is something that everybody in every level of business and government is looking at today, but to give that as an answer to proposing that there's an unlimited amount of coverage in a policy for a stated dollar is not what I consider to be the answer.
Mr Mancini: Ms Olsen, thank you for your brief. One of the reasons the NDP members are giving you such a time and trying to badger you and not allow you to answer all the questions is because they don't like what they're hearing from you.
Mr Johnson: Remo badgerer -- best badgerer I've ever seen.
Mr Mancini: Your comments, Ms Olsen, are in fact reinforcing what we have heard over the last couple of weeks, and the NDP members are on the run. They're on the run for several reasons, and this is one of them. We have said over and over again that women, who generally earn less than men, will be hammered by Bill 164. We have another witness who's come forward to reinforce that proposal, and I'd like to ask Ms Olsen if she's aware of the study done by Coopers and Lybrand, which indicates that once the gender factor is eliminated in setting insurance rates, women will pay substantially higher and in fact women living in the Ottawa region will pay 50% more, according to Coopers and Lybrand, for their insurance rates. Are you aware of that study?
Ms Olsen: I am aware of that study. Regardless of whether you accept the quantum in that study, it is a fact in insurance rating classification systems that, based on statistics, women contribute less to accidents and they have less severe accidents and therefore the costs incurred are less. Therefore they pay a lesser premium overall, and that's a fact.
Mr Mancini: Is there anything in Bill 164 which would balance the increase in rates women have to pay?
Ms Olsen: Not in my opinion.
Mr Mancini: Thank you. Are you aware that the change indicated in Bill 164 as compared to the OMPP in regard to economic loss will in fact cost families across this province hundreds of thousands of dollars?
Yesterday in Windsor we heard from a special litigation lawyer who admitted that he voted for the NDP in the last election. He said he would never do it again, but he admitted that he voted for them because (a) they promised government-owned automobile insurance -- they broke that promise, (b) they promised lower insurance rates, and with Bill 164 they're breaking that promise, and a number of other things.
Are you aware that he told the committee that if you take, for example, a fatality where a male driver with an income of $25,000 at age 30, in the unfortunate case of a fatality under the existing legislation, the Ontario motorist protection plan, that person's family could sue for loss of income and they would receive approximately $435,000, and under the NDP legislation they would get $93,000 and that this legislation would cost that family $300,000? With your experience, do you consider these figures fairly close?
Ms Olsen: I wouldn't want to comment on those figures, but I would definitely say that not being able to sue for economic loss is going to result in a lesser amount of money to people who win those cases. The problem is that there are lawyers' fees to be considered in that, and no one who's ever paid a lawyer doubts what lawyers' fees are like.
Secondly, the economic loss that they incur: A lot of people would rather see it guaranteed in the legislation in a no-fault form than take the chances on the court system, with the time and effort involved, especially when the economic loss under the OMPP is timed such that you start to receive it immediately and the time factor comes into it. You can get your $435,000 two years down the line.
Mr Dalton McGuinty (Ottawa South): Thank you, Ms Olsen, for your presentation. One of the problems in these committees is that sometimes we get caught up in discussions which take place on kind of an abstract basis, and I want to reduce it to the practical.
I know a woman who's a single parent. She has three children. She has difficulty obtaining her support payments. She has a perfect driving record. She drives an old clunker. It eats a lot of gas and, as you know, we have a problem with gas prices in this town. She makes expensive repairs to the car. She has them made because she can't afford to buy a new car. She earns $24,000 a year. I want to know what Bill 164 is going to do for her, or "to her" may be more appropriate, with respect to premiums and with respect to her benefits, particularly regarding loss of income.
Ms Olsen: Certainly her costs are going to be increased; there's absolutely no question about that. Whenever you improve the benefits under any system that will result in higher payouts -- and I'm not necessarily talking about what I said were the restrictions under the new system, but things like the unlimited cap on rehab and things like that which will result in higher payments -- you will see an increase in costs, no question about it.
Mr McGuinty: What kind of a jump is that?
The Chair: I'm sorry, but there's no time left. Ms Olsen, I'd like to thank you for coming before this committee. Time has run out.
Ms Olsen: Thank you.
Mr Steven W. Mahoney (Mississauga West): Mr Chairman, on a point of order.
The Chair: Yes, Mr Olsen -- Mahoney.
Mr Mahoney: Here, I'll turn this nameplate around for you. How's that?
The Chair: Okay.
Mr Mahoney: Being new to the committee today and filling in for Mr Phillips, I just find it somewhat unusual. I've never seen it in a government committee operation where a member of the government caucus must literally beg the opposition parties for time to ask questions. What that does, in my respectful submission, is take away from the opposition parties' time if we want to allow Mr Kormos an opportunity to speak.
Mr Klopp: We're all opposition --
The Chair: Okay --
Mr Mahoney: I wonder, sir, why the government won't allow its own caucus member --
Interjections.
Mr Mahoney: He wasn't kicked out of caucus, according to --
The Chair: Okay, I'm sorry. Look, I'll explain it to you.
Mr Mahoney: Why can't he sit over there?
The Chair: I'll explain it to you. Mr Kormos can sit at any seat on either side.
Mr Mahoney: I don't mind him sitting here.
The Chair: The opposition parties -- and I've bent the rules -- are not allowed to give the time to an individual but only to a caucus.
Mr Mancini: That's not true.
The Chair: So you can give it to the government caucus, you can give it to the Conservative caucus, but --
Mr Mancini: Check the position.
The Chair: No, but Mr Kormos -- and I explained this yesterday and it's in Hansard -- has not signified to the Chair that he had a question.
Mr Mancini: He's being muzzled. That's what's happening.
The Chair: He is not being muzzled. That's my ruling on that one.
Mr Mahoney: If I understand your ruling, you're saying that you have bent the rules. You're saying that the rules allow Liberals to give up time only to Liberals and Conservatives to give up time only to Conservatives.
The Chair: No, you didn't listen.
Mrs Irene Mathyssen (Middlesex): Pay attention, Steve. Steve can't understand.
Mr Mahoney: I'm asking for clarification and I don't need your smart-ass remarks.
The Chair: You can give up your time to the Conservatives or you can give it up to the government --
Mr Owens: You just don't care about the --
The Chair: -- but you can't give it up to an individual. I'm sorry, Mr Owens --
Mr Mahoney: Why would a member of the government caucus not be allowed to ask questions on behalf of the people he represents? It's outrageous.
The Chair: I already explained. I'm sorry, I'm not going to take the time to explain it again. Mr Owens.
Mr Charles Harnick (Willowdale): Point of order.
Mr Owens: Point of order.
The Chair: I've got a point of order right here.
Mr Owens: Mr Chair, we have a number of witnesses who are waiting to testify, and in terms of how our caucus or the Liberal caucus runs its affairs, it is not the business of the --
The Chair: That's not a point of order. Just a minute.
Mr Owens: I suggest that we get on to the witnesses who are here.
The Chair: Mr Harnick, quick.
Mr Harnick: Mr Chairman, my understanding, and what we've done in the last several days, is you have permitted us to give our time to Mr Kormos.
The Chair: Correct.
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Mr Harnick: Are you now saying you're no longer going to do that?
The Chair: No, I didn't say that. I was just explaining that I've bent the rules and --
Mr Kormos: You better not.
Mr Harnick: But if my caucus, for instance, has extra time, you are still going to allow us --
The Chair: Correct.
Mr Harnick: -- because you're such a liberal-thinking gentleman to provide the time to Mr Kormos.
The Chair: A fair Chair, let's say.
Mr Harnick: Yes.
The Chair: Not a Liberal Chair.
Mr Harnick: You're a fair Chair.
The Chair: The next group to come forward is Rehabilitation Management Inc.
Mr Mahoney: Mr Chair, before the deputation I have another point of order.
The Chair: Okay. Your point of order. Would you come forward, please.
Mr Mahoney: My point of order is that I have received documentation by fax on the cabinet changes.
The Chair: It's not a point of order for this committee.
Mr Mahoney: No, my point of order is that we have a new minister --
The Chair: No, we don't have a new minister.
Mr Mahoney: Sorry. Financial Institutions has been transferred to Mr Laughren. Mr Charlton has been moved, but we have a new minister responsible for this bill and we haven't heard from that minister.
The Chair: Okay.
Mr Mahoney: It's entirely possible that minister has a different viewpoint.
Mr Kormos: Perhaps he's a New Democrat.
The Chair: Mr Owens, for clarification.
Mr Mahoney: I wonder if we should hear from the new minister before we go much further.
Mr Owens: In terms of the responsibility for the auto insurance review, it remains with Mr Charlton, although most of the functions with respect to Financial Institutions have in fact been transferred. Brian Charlton will still be responsible for the auto insurance review.
Mr Mancini: And for these increases in rates -- is that what he's responsible for?
The Chair: We'll explain it at lunch to you. Okay?
REHABILITATION MANAGEMENT INC
The Chair: Rehabilitation Management Inc, I'd like to welcome you to this committee. You have one half-hour to make your presentation and the committee will be five minutes later going to lunch, so you haven't lost any time here. Okay? We have until 11:35 and you may begin.
Ms Donna Klaiman: I would like to thank you for allowing us to present today. I'd like to introduce myself. My name is Donna Klaiman and I'm with Rehabilitation Management Inc, which is a community-based rehabilitation management firm. I'm an occupational therapist by profession and have been in the field for many years. I would just like to note that Barbara Baptiste, the president of our company, was the author of this paper and I am presenting on behalf of the company.
Rehabilitation Management employs 45 people in the province of Ontario and we work with individuals who have sustained injuries resulting from automobile accidents. I'm here today as a representative of this company to voice our critical concerns and provide answers and recommendations for serious consideration by this committee.
Today we walk a path reminiscent of the basic issues that surrounded the Liberal government's proposed changes, which became law in June 1990. Again, we see two issues raise their heads: One is cost, including premium issues, loss of jobs in the insurance industry and loss of investment dollars by the insurance industry. The second is choice, specifically including options for rehabilitation treatment and service provision, and future living options for persons disabled and/or handicapped as a result of a motor vehicle accident.
I am a community rehabilitation specialist. That means I work with persons who have experienced a temporary or permanent disability or handicap as a result of a motor vehicle accident. I work with them towards resolving the day-to-day concerns related to functioning in their home and at work and with their families, friends and work peers. I work at accessing the necessary resources and providing counselling, education and direction based on their medical conditions. As you can see from my training and experience, while the issue of cost is better left to the economists and the consultants available to the insurance industry and government, the issue of choice is clearly one I am most qualified to comment on.
I'd like to address the issue of vocational rehabilitation. The proposed regulations are quite liberal and generous for financing rehabilitation. In addition, the NDP are the first to specifically include vocational rehabilitation. We compliment the NDP on this more holistic approach.
We are quite concerned, however, that all issues related to income loss have been relegated solely to the regulations. To exemplify why we are concerned, I'd like you to consider this scenario. Consider a student or a recent graduate who is permanently disabled from competitive employment and can never recover the income he would have earned in his chosen profession. Basically they are relegated to a WCB-like pension system based on their status as a student or recent graduate and have no right to access their fair and due future income losses.
We could provide you with many such scenarios, from the independent businessperson to the upwardly mobile worker. The most catastrophic disabilities consistently occur in motor vehicle accidents, yet these persons will have no access to fairly recover their future income losses. Suddenly a person is left with limited financial resources and limited choices in life compared to what they once had before. These choices, for which all of us use our discretionary income, include travel, building the family resources, hobbies and simple daily activities. These are quality-of-life issues.
To have a pension system along the line of the WCB system is to invite all the travesties of that --
Mr Harnick: On a point of order, Mr Chair: This is a very important brief. It deals with rehabilitation, it deals with the significance of not being permitted to claim for economic loss, and more than half of the government members aren't in the room.
The Acting Chair (Mr Paul R. Johnson): That's not a point of order.
Mr Harnick: It's disrespectful to the person who's coming to make this presentation and it's in very -- excuse me. Can you please turn my microphone on?
Clerk Pro Tem (Mr Franco Carrozza): The Chair has turned it off.
The Acting Chair: Please continue. It's not a point of order.
Mr Winninger: Mr Chair, I think it's entirely inappropriate for Mr Harnick to comment on who's in the room. We don't comment --
The Acting Chair: That's not a point of order either.
Mr Harnick: It's totally disrespectful to the person who's --
The Acting Chair: Could we have some order here, please. I'm sorry for this.
Interjections.
The Acting Chair: Order. Is it necessary that we recess for five minutes?
Mr Harnick: Do whatever you like.
The Acting Chair: I apologize for this unfortunate interruption. Would you please continue.
Ms Klaiman: What we're recommending is that the innocent person who's disabled in an automobile accident have access to the courts to establish loss of future income. This is the only system that ensures basic quality of life. While the NDP has made it clear that quality of life is an issue, it now is important that it consider the application of that concept in the delivery of lost income. If this cannot be provided through Bill 164, we would rather have the threshold which, although severely stringent, allows the person with a serious and permanent injury the right to sue for income losses.
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A second issue concerns the severely disabled person -- and we work with a lot of individuals who've suffered traumatic brain injury -- who is not capable of vocational reintegration but who requires avocational rehabilitation. This does not fall under the attendant care section, and it better not because a $3,000 cap for this care is insufficient for the majority of severely injured persons. The issue is, though, will this person be able to access the various rehabilitation services he requires if vocational re-entry is not an option?
We're looking at individuals who will not be able to sustain competitive employment following the injury. They would need cognitive-behavioural rehabilitation, occupational therapy, vocational therapy strategies, family counselling and individual counselling services. Accessing these various services and, more specifically, vocational rehabilitation for the purpose of avocational rehabilitation, which is again non-competitive employment -- which is really directed towards being productive in a non-competitive situation -- must be covered under rehabilitation benefits.
Therefore, rehabilitation benefits cannot both be available for reducing or eliminating the effects of a disability resulting from the injury and facilitating the insured person's reintegration into his or her family. The issue is labour market. It must be clear that rehabilitation benefits are not just available to facilitate reintegration into the labour market, but that is only one of the goals, and the avocational rehabilitation is essential to maintaining one's sense of productivity and quality of life.
I would refer you to the fact that part VII of the rehabilitation benefits is not clear, and I will make the recommendation at the end of the presentation.
We must underscore that this is not about being pro- or anti-lawyer, pro- or anti-insurance company, or pro- or anti-government. We work with the day-to-day needs of the disabled and the handicapped, and we know the frustrations and barriers they must put effort into overcoming and the financial and service provisions they need to achieve this. Allowing access to recovery of vocational losses, which can be much more easily quantified than pain and suffering, and allowing access to rehabilitation services when a person is not a vocational or labour market candidate, allows necessary recovery of some rights and life choices among many that have been lost. Again, quality of life and choices are the issues here.
I would like to address the issue of access to advocacy. I'd like you to consider the profile of this person whom we see among our referrals on a regular basis. The person has sustained a mild head injury. There are no severe physical restrictions or pain, but a loss of important information processing functions such as his memory, attention, planning and judgement, or perhaps the person has had a psychiatric disability like depression or stress disorder.
Research is ongoing in this field, and recent research out of the University of Virginia is showing that even mild acceleration-deceleration injuries, which are common in automobile accidents, lead to permanent damage including actual biochemical changes. Who is ensuring that this information is being passed on regarding vocational rehabilitation issues, how to access the rehabilitation process? Individuals are often confused and certainly vulnerable at this point. If they have no access to an advocate, who would research or contact the right groups that would have this information for the injured party?
They become victims of the lack of the professional knowledge, facts in this system and financial pressures. Often they quickly come off the insurer's case load but show up on government social services' case loads in one to five years. Also, when the organization with sole financial interest has the scope to penalize per part XV, numerous ethical issues related to conflict of interest come into play. Provision must be made to ensure that drivers are protected, and this does not happen in this bill.
I'd like to address the issue of attendant care. According to part IX of the attendant care benefits, the maximum amount payable for such services is $3,000 per month. This does not cover full-time attendant care for seven days per week over eight hours per day, and I can certainly give you the costs of attendants at various levels of health care providers.
In addition, catastrophic cases, 70% of which make up our case load, often need nursing care because of medication dispensation or likewise, and the person does not have the mental and cognitive capacities to self-administer the medication or other medical service.
I'll give you an example of a situation we recently had where a hospital would only accept a young woman if 16-hour attendant care was provided. The hospital had neither the staff nor the financing to care for this dependent and behaviourally challenged young woman, who had sustained a very severe head injury. Monthly attendant care costs were in the range of $15,000. The insurer only agreed to pay because it would be covered in settlement. This would not happen under Bill 164 because the person would not have the right to sue for such losses.
Therefore, we must ask this committee to please specify where this money will come from. It will not come from the Ministry of Health and not from Community and Social Services. This province cannot have its legislators put their heads in the sand and hope these cases will disappear into the air. They will not. They will increase because of our lifesaving techniques and strategies, and this issue must be addressed now.
The choice would be to substantially increase these monthly benefits, and the amount would be dependent upon whether or not there would be additional access to the right to access some of these losses through a tort claim. The latter appears to be the most reasonable way to manage this.
In summary, we understand that the insurance industry, government officials, lawyers and persons with disabilities and handicaps as a result of motor vehicle accidents, in addition to the rehabilitation providers, have numerous concerns regarding Bill 164. Each of us will have different perspectives, but we have found that one thing is in common: This bill is not satisfactory.
Our concern regards the day-to-day realities that we face in working and problem-solving with individuals who are attempting to become part of their community following a serious motor vehicle accident. Sometimes, as I have outlined previously, this seriousness is not detected by even the family physicians because of very specialized areas like mild head injury. As legislators you must be very vigilant about these very real concerns. As persons with families and friends who could easily be in this situation, you must see beyond political agendas. As you consider the importance of choice in each person's life and the loss of these choices through the legislation, as we have outlined via the community rehabilitation process and the process of reintegrating into one's community, we hope you will understand its impact and implications.
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We now include specific recommendations which relate to the body of this report. I would like to review the recommendations with you.
In part XV, 53(1)(a)and (b), outlining the penalties for not becoming involved in the vocational rehabilitation, a section (c) should be added. What we're recommending is that we add this statement:
"The choice of a rehabilitation treatment company, just like the choice of a treating physician, must be made by the injured person, and the person must be informed of this basic right."
By including this provision, this would also relate to part XV, 53(3). It has been our substantial experience that when a person is given a right to choose, to have some control and empowerment in their life, compliance is very seldom an issue and would be of minimal concern.
Part VII, rehabilitation benefits: We're asking that we change the "and" in subsection 33(1) between (a) and (b) to the word "or." The reason for this, as outlined in the body of the report, is that in many catastrophic cases persons will not get back to the labour market or competitive employment, but must have available to them avocational rehabilitation so they can be productive and have some positive involvement in their community -- get back into some kind of volunteer work, for example. This is vital for a person's self-concept as well as for the family and the community's resources.
Differences in future income loss that do not fit into this pension system and which were readily available to a person prior to their injury must be compensated. This right appears to be best addressed through the tort system and consequently the regaining of this differential income should be obtained through the tort action, as it is a figure that can be quantified.
Finally, part IX, attendant care benefits, subsection 34(6): The maximum amount payable under Bill 164 for attendant care benefits is $3,000 per month. By experience we have found this to be clearly not enough for catastrophic injuries. This amount must be increased and we would recommend that this be included for recoverable losses under the tort section as it is currently being done.
We thank you for allowing us to present.
The Chair: Thank you. Maybe, after we get finished the questions here from the committee, you wouldn't mind talking to Rosemarie on some of these points and maybe some more clarification if it doesn't come out in the committee questions.
Mr Kormos: Who's Rosemarie?
The Chair: Our technical adviser here.
Ms Rosemarie Cochrane: Rosemarie Cochrane.
The Chair: Ms Cochrane. It's okay to go to the government. Three minutes. Mr Owens.
Mr Owens: In terms of your comment around the right to sue, are you aware that only 5% of innocent accident victims actually make it through the threshold, and that doesn't necessarily guarantee them a win in court?
Ms Klaiman: I'm not quite sure what your point is.
Mr Owens: One of your premises in your brief was that we should have a return to the tort system where the tort system under OMPP was a good thing with respect to innocent accident victims. My question to you is, are you aware of the statistics that indicate that only 5% of those innocent accident victims actually make it through the thresholds currently in place? Secondly, just because a person makes it through the threshold does not guarantee them a win in court.
Mr Harnick: On a point of order, Mr Chair: I'm a little upset about the fact that the parliamentary assistant asks these questions in total isolation, pretending that in conjunction with the tort --
Mr Owens: It's not a point of order, Chair.
Mr Harnick: May I please complete my point of order?
The Chair: Okay. Can you be quick about it?
Mr Harnick: I'll be as quick as I can, and I expect that I'll be able to put it on the record. You know, when you ask these questions about the tort system and pretend --
Mr Owens: It's not a point of order.
The Chair: I'm sorry; it's not a point of order, Mr Harnick.
Mr Harnick: Who's making the ruling here, Mr Owens or the Chairman? How do you know what I'm going to be saying unless you let me complete it?
Mr Tilson: There's an echo in here.
The Chair: It looks like a difference of opinion here.
Mr Harnick: No, it's not a difference of opinion, but the parliamentary assistant persists in misleading the witnesses when he asks the question.
Mr Owens: On a point of privilege, Chair: The member for Willowdale is insinuating that I'm lying. I'd like him to withdraw that comment.
The Chair: I didn't hear him say that; I'm sorry, Mr Owens.
Mr Harnick: If maybe you'll let me finish, he'll understand that I've not just said that he's lying.
Mr Owens: He just said that I'm misleading the witnesses. He should withdraw that comment.
Mr Harnick: If the parliamentary assistant and the Chairman would let me complete my point of order, they might see that I'm not insinuating that the parliamentary assistant is lying. But again, he that protesteth too much -- maybe he is. May I complete --
The Chair: Mr Harnick, would you come to it quickly with your point of order.
Mr Harnick: I could have been finished five minutes ago if you didn't interrupt me. All I'm saying is this: If you're going to ask something about the tort system, don't pretend to the witness that the no-fault aspect doesn't continue to exist. What we're talking about is a blended system, and by trying to say to the witness that people can lose only a 5% claim is totally misleading.
The Chair: It's not a point of order. I rule you out.
Mr Harnick: Well, at least it's on the record now --
The Chair: I'm sorry; I rule you out, because there have been some items that have been said, that other witnesses have said, that haven't been completely correct, but I'm not going to correct everyone when they're wrong. That's not my job.
Mr Owens: On a point of privilege, Chair: In terms of precision, I'd ask the member for Willowdale to withdraw the accusation of lying.
The Chair: He did not say that you were lying. I'm sorry; I have ruled on that one. Mr Owens, you have one minute left.
Mr Owens: No. Excuse me, Chair, my time has been used by the member for Willowdale and I want my time back.
The Chair: You had two minutes; you've got one minute.
Mr Owens: I respect your submissions around advocacy and I appreciate those suggestions you've made. In terms of the regulations, a couple of things are happening. Part VIII of the regulations specifies that an accident victim is entitled to case management as part of the entitlement. Secondly, there is currently being put into place the Advocacy Commission and the Substitute Decisions Act, which will assist the innocent accident victim and others in the province of Ontario in terms of their care needs.
Interjections.
Mr Owens: Excuse me, Chair, I'm being interrupted here. I'm losing more time.
The Chair: You're losing your time there too. Go ahead.
Mr Owens: Thank you, Chair. In terms of the issues with respect to rehabilitation, you're aware of the task force that's been announced by the government to set standards of care, to look at the attendant care cap --
The Chair: What's the question? Your time's running out. I've been patient.
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Mr Owens: My question to you then is, in terms of setting standards of care, do you think this task force is a good idea, and the participation of groups like the Advocacy Resource Centre for the Handicapped is a good thing for the innocent accident victims?
Ms Klaiman: I think a task force would be a positive effort, provided that there are rehabilitation professionals involved in this as well.
Mr Owens: Can I respond to that?
The Chair: Mr Mancini.
Mr Mancini: Thank you. I appreciate the rather extensive and well-written brief that the presenter has given to the committee this morning. It's Ms Kaliman?
Ms Klaiman: Klaiman.
Mr Mancini: Klaiman. Sorry. I see that you have echoed a couple of the concerns that I have raised over the last number of weeks in your brief, and I want to ensure that I understand the concerns correctly.
In rereading your brief, I understand you to say that you do not believe losing the right to sue for loss of income is a fair exchange for being able to sue for pain and suffering, along with the $15,000 deductible that the government has imposed. Is that correct?
Ms Klaiman: That's correct.
Mr Mancini: Do you believe that innocent accident victims will suffer even more by having the right to sue for economic loss taken away from them?
Ms Klaiman: Yes.
Mr Mancini: Would you agree with me, as a number of witnesses already have, that the 68 pages of regulations are incomprehensible and are in fact a consumer's nightmare?
Ms Klaiman: They are challenging, certainly.
Mr Mancini: Would you agree with me that the advocacy provisions that you have espoused and the rehabilitation needs that you have espoused in your brief are not being met by the government, even though people who have to buy insurance by law will have to pay more for their insurance under this bill than under OMPP?
Ms Klaiman: We're concerned about the advocacy issues, yes.
Mr Mancini: Early on in your brief you mentioned your concern about cost. We have received numerous presentations before this committee about cost. Even the government members have admitted that automobile insurance rates are going up. They say 4.5%, but that's only because their New York consultant has factored in a 5% decrease because of the road safety program that is non-existent. If you add that in to the government's own piece of work, we get almost a 10% increase in automobile insurance. Would you agree with me that's a pretty hefty increase in these serious recessionary times?
Ms Klaiman: As I said before, I'm not an expert on the costs, okay? So I really won't comment on that.
The Chair: Okay. Mr Tilson -- Mr Harnick.
Mr Harnick: Ms Klaiman, are you aware that under this particular piece of legislation, a student who is injured and will never work again will earn $391 a week for the rest of his life, which effectively puts him under the poverty line? Are you aware of that?
Ms Klaiman: That's one of our major concerns.
Mr Harnick: And the reason that is so is because innocent victims of an accident, such as a child or a student, are not permitted under this legislation to sue for their actual losses beyond what the accident benefits schedule allows them to receive. Are you aware of that?
Ms Klaiman: Yes.
Mr Harnick: When you are trying to rehabilitate someone who is receiving, at best, poverty line compensation, how does that affect your job in being able to successfully rehabilitate that person and put them back as close as possible to the position that they would have been in before the accident ever happened?
Ms Klaiman: There are a couple of issues here. One is, is this person permanently disabled, and will he or she be able to sustain competitive employment? That's one of the questions. If they are not competitively employable, do we have access -- and this is one of the issues here -- to rehabilitation funding for what's called avocational rehabilitation? This is what we're arguing, that there is no provision for that.
Mr Harnick: What does the receipt of poverty-line compensation do to a person who has been severely injured in an accident in terms of his quality of life?
Ms Klaiman: Obviously, their quality of life is significantly impaired, and the fact that they don't have access to avocational rehabilitation means that any potential for them to be productive in any way would not be available for them.
Mr Harnick: At least under the --
The Chair: Mr Harnick, I'm sorry, the time has run out. We have given extra time. I'd like to say to the members of the committee here that it is the presenters' time, not the committee's members' time at these hearings. I'm going to extend time when committee members take up time of presenters, and maybe there won't be any lunch today.
Mr Mahoney: On a point of order, Mr Chairman.
The Chair: You have a point of order.
Mr Mahoney: Before the witness leaves, I think this is an extremely important brief, and since the government members won't allow it, I would like to move unanimous consent to allow Mr Kormos to have two minutes to question this witness.
The Chair: I'm going to overrule. I'm sorry.
Mr Mahoney: I'm moving unanimous consent. Let it show that the government members said no.
The Chair: You want to put it on the record every time someone comes forward.
Mr Kormos: If you like workers' comp, you'll love this bill.
The Chair: Thanks for coming.
FACILITY ASSOCIATION
The Chair: Our next presenter is the Facility Association. If you'd like to come forward, and if you have any colleagues with you who would like to sit up here and maybe assist you, I'd like to welcome you gentlemen to this committee. We have until 12:10, so you have a full half-hour. You may begin by introducing yourselves for the purposes of Hansard and the members of this committee and possibly by telling us your positions.
Mr Cliff Fraser: It's good to be with the committee again. My name is Cliff Fraser. I'm here today as chairman of the board of directors of the Facility Association of Canada. Also with me is our counsel, Robin Cumine, and our general manager, Bord Vuuty. I appreciate the opportunity to appear before the committee. We have a few comments directed specifically at the Facility Association and how Bill 164 would affect that organization.
First, I'd like to take a moment and speak to the Facility Association's role in Ontario society and, of course, in the insurance industry. The Facility Association was originally brought into existence by companies engaged in automobile insurance in various jurisdictions in Canada as a voluntary mechanism for ensuring that a market would be available for any risk that, but for that mechanism, would be unable to obtain automobile insurance. It also provided a mechanism for sharing the cost and losses associated with such risks.
Facility grew out of its predecessor plans, the assigned risk plan, the exchange and the basic Facility, and was an attempt to meet the concerns and perceived problems and inequities of these previous plans.
We filed our Facility brief with the clerk. You should have that before you, and it should be available for your perusal.
The Acting Chair (Mr David Winninger): That brief has been distributed.
Mr Fraser: Good, thank you. The plan establishes the organizational structures of the Facility Association and its method of operation, governing and operating bodies, what business may be placed in the Facility and the basis upon which costs and losses are to be shared by members. It is important to understand that the Facility currently operates in eight jurisdictions, including Ontario, and that the plan governs the operation of all eight jurisdictions across Canada. Its directors and officers are unpaid volunteers or elected by the members and are senior officers of member companies or represent the Insurance Brokers Association of Canada.
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Although Facility was already in operation in Ontario when the Compulsory Automobile Insurance Act was enacted, it called for the continued operation of the Facility in Ontario, recognized it as a legal entity, required it to establish a plan to ensure the availability of automobile insurance, required it to obtain approval of the superintendent of insurance for all rates used and required it to obtain approval from the superintendent for all amendments to the plan.
As you can see, we are already closely regulated by the superintendent's office, which is part of the Ontario Insurance Commission. The Facility has operated to provide a residual market in Ontario for some years by having one of a number of designated servicing carriers, which are insurance companies, provide coverage to any person who has not obtained coverage in the normal, voluntary market. Facility coverage has been at Facility rates, approved by the regulatory authorities.
As of January 1, 1993, Facility has begun the operation of a pool in Ontario to ensure that only those risks with records that warrant payment of Facility rates are actually charged those rates. The balance of such risks written by Facility in the past are to be insured by regular market carriers at their standard rates and may be either retained in the carrier for its own account or transferred into the pool for sharing, pursuant to its terms. You'll hear more on the pool in a moment from one of my colleagues.
I'd like to say that the Facility will be depopulated through this pool mechanism to approximately 2% of the market, down substantially from its highest point of 5.7%, reached in 1990.
Just an editorial comment here: When the Honourable Brian Charlton made his presentation last Tuesday in Toronto, I believe in his presentation he made reference that the Facility had reached a point of 8% of the marketplace. Unfortunately, the minister used the premium volumes to measure the size of the Facility. That is an incorrect measurement. The measurement should properly be the number of risks or the number of vehicles in the Facility. Obviously the Facility premium, on average, is higher than the normal marketplace, so it would have an imbalance. I think that gave a wrong impression.
Mr Mahoney: He's not the minister any more, though.
The Acting Chair: But I think you should know that Mr Charlton is still responsible for this bill.
Mr Mancini: It's even more important for him to get his facts right.
Mr Fraser: I appreciate the help.
The Acting Chair: I'm sorry. Please carry on with your presentation. We get these interruptions from time to time. You have the floor, sir.
Mr Fraser: Thank you. Bill 164 gives the Facility great concern, and in particular we're concerned about the following issues: (1) the withdrawal features of the bill, as it pertains to servicing carriers -- insurance companies -- on whom we depend to service the consumers, brokers and agents; (2) the onerous liability placed upon directors and officers of the Facility Association -- and I have a personal feeling for that particular issue; (3) the restrictions the bill would place upon Facility to make even the small, necessary, everyday changes needed to keep our system running smoothly; and finally, the ability given to unilaterally change any part of the Facility plan of operation by regulation.
With me, as I mentioned, is Robin Cumine, our counsel to the Facility Association, and Bord Vuuty, our general manager. I'll now ask our general manager to make some more specific comments.
Mr Bord Vuuty: As mentioned by Mr Fraser, my job is to run the Facility Association. We operate in the Atlantic provinces, in the Yukon, the Northwest Territories, Alberta and of course Ontario. The new pool, which operates only in Ontario, by the way, is a part of FA and therefore one of my responsibilities. I'd like to take a minute and talk to this pool.
In 1990, 5.7% of private passenger risks in Ontario were written through FA, up from 4.3% in 1989. It was apparent to the industry, and certainly to the Ministry of Financial Institutions, that depopulation was a must. The industry took immediate voluntary action to reduce the risks written through FA and the percentage was reduced to 4.7% in 1991. Our estimate for 1992 is about 4%.
Nevertheless, it was felt that a number of risks found their way into the Facility Association that shouldn't be there. For this reason, the industry took further steps to depopulate FA. In the early months of 1992, the industry laboured hard and strong, in close cooperation, I might add, with the Ontario Insurance Commission, to develop the pool. We are happy to say that we were able to move quickly. We got it in place and going at the first of this year. This meant we really had to have it up and going by November 1 because we had to handle January renewals.
A few points about the pool: It applies only to personal-use private passenger risk. More than 90% of the FA was in this category; that's most of it. Characteristics of a risk that is eligible to be placed through a servicing carrier -- those are the people who write the business for the FA -- in what we call a residual market segment are specifically set out and, as of January 1, 1993, servicing carriers can no longer write risk unless they qualify.
Just as a matter of figures for January and February, this meant that they had to non-renew 56% of the risks they had coming up for renewal. Risks that do not meet residual market criteria must be provided insurance by the regular market at regular market rates. Because the plan of operation of the Facility Association is regulated by the Compulsory Automobile Insurance Act, this requirement of insurance companies has the force of law behind it.
Members must write any risks submitted to them, as I've just mentioned, but they can transfer these risks to this pool, in part for sharing by pool members, subject of course to the limitations and qualifications set out in the plan.
The pool is expected to meet its objective, which is to reduce the amount of business written through servicing carriers as residual market risks to approximately 2% of all private passenger risks. There will undoubtedly be a large number of changes required as we go into this pool, getting it settled down and into place. This manual right here is the pool manual, for example. We're going to have to make changes in that all year long, and this leads us to one of the concerns we have about Bill 164.
As we understand the present Compulsory Automobile Insurance Act, the changes to the plan of operation -- that's the articles of association -- and the operating principles -- that's this book here -- must be approved by the Ontario Insurance Commission. We cannot make changes in that book without the approval of OIC. Also, anything that has anything to do with rates must be approved by OIC, and that's our rate manual with all the rules. But everything else we do -- we have manuals coming out our ears -- are rules which we must follow to get the day-to-day work done.
At the present time we do not need the authority of OIC to make a change in that. We just made a number of changes in this, some as simple as typographical changes. One says to use the word "quit" instead of "exit" for a computer program. Under Bill 164, we would have to have the approval of the Ontario Insurance Commission before we could make a change like that.
At times it even burns me that I have to get the approval of the board of directors to make these changes. That slows up things enough, but we do go through that process and changes are approved by the board. But we must be allowed to move quickly when we need to make changes to get the day-to-day job done. In our opinion, the commission has all the power it needs to control what we do at FA by controlling that right there.
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We're also very concerned about the withdrawal features in this bill as far as servicing carriers are concerned. We really think it will discourage companies from being servicing carriers in the future, and we may very well need new servicing carriers in the future. There may be times also when changes in market conditions make it desirable for a servicing carrier to reduce its ability to act as a servicing carrier, and there seems little purpose in the bill to restrict this.
The current plan and contract provisions obligate servicing carriers to provide services to deal with FA business as required, and a part of my job is to ensure that they do theirs. We're pretty tough on servicing carriers. Ask Cliff here. We just did an audit on him.
Mr Fraser: I'm still chairman.
Mr Vuuty: We monitor, counsel and audit them on a regular basis. They must provide quality service to consumers and brokers' agents, and copies, by the way, of the contracts that we have with our servicing carriers -- you do have a copy of that; it's in one of these manuals here, one of these books. Also there's a copy here of the contract that exists between the servicing carrier and the broker. We have all the necessary controls in place to ensure servicing carriers comply, and further controls are unnecessary. It would only serve to make it more difficult for us to get servicing carriers in the future.
We're also concerned with that section of the bill that proposes that officers and directors of FA be subject to the same duties and responsibilities and subject to the same exposure to a substantial penalty as are officers and directors of insurers. As you know, FA is not an insurer.
It should be noted that under the FA plan, officers and directors are elected by members, must be senior officers of insurers or representatives of the Insurance Brokers Association of Canada. They serve on a voluntary basis without compensation. It should also be noted that the officers and directors of FA are not engaged as such on a full-time basis and in most cases do not have much involvement with the day-to-day operation of FA. It should be further noted that FA is required by the Compulsory Automobile Insurance Act to be a non-profit organization.
The extremely wide range of offences and the substantial nature of the fines that are outlined in this bill make us wonder if we'll be able to attract directors in the future. We'll be recommending changes to the bill that will be consistent with the earlier approach taken by the government in other legislation affecting the liability of corporate directors of non-profit organizations.
Mr Chairman, I'd like to turn over the mike to our legal counsel, Robin Cumine, of MacLean and Kerr, to speak on specific changes we are proposing to Bill 164.
Mr Robin Cumine: I'm here today as the legal nitpicker with respect to the language, because we perceive that there are two or three very large nits which should be picked out of this legislation for everybody's benefit if we're to achieve the objectives that we're all seeking to achieve through the Facility Association.
The greatest concern, as Bord Vuuty has told you, is with respect to subsection 49(7), which on its face says that no change to anything can come into effect without prior approval. That would include things such as the specification for the type of magnetic tape used. The effect that's going to have is to slow down our ability to confirm coverage, to respond to claims, to meet problems resulting from broker changes and to adapt to changing circumstances. Those are not desirable results.
We currently file all changes of every sort so there's nothing being hidden, but to say nothing can come into effect without prior approval is going to cause great difficulties. We have filed copies of the various manuals. We haven't burdened you with them here today, because 40 copies would have taken quite a bit of managing.
At the third last page of our brief, which is section 10, we have summary and suggestions and in particular, in 10.3, specified four suggested specific wording changes we would like to see made. We think they're all valuable changes from everybody's point of view, and when you get to clause-by-clause consideration, please don't forget that's what we'd like you to specifically look at.
The next area of concern -- incidentally, item (c) in 10.3 is the one that deals with the first one. We have concerns that under section 14, the power is being given to change anything from the smallest bit in a manual up through the formula for sharing losses, for voting of members -- anything by regulation, unilaterally.
Aside from causing uncertainties and difficulties and putting us in a position where there could be fundamental changes that prevent us from carrying out our objectives, we suggest you should keep in mind the fact that this plan applies in eight jurisdictions, not just Ontario. If somebody starts unilaterally changing by regulation some of the fundamental contractual obligations, we may all have difficulties, both legal and jurisdictional. We don't know why anybody on the government side would want to get into the ability to change sharing of losses in the pool and in the Facility Association, or defining who's got what rights to vote for what companies.
If there are some areas, I suppose we could speak to somebody about them, but we don't understand -- the bill does give much wider powers to the commission to come in, complete powers of investigation and access, complete powers to demand production of things, to have reports, to refuse to give us authority to make fundamental changes in the plan and to be informed of all other changes. We don't know what else you logically should have. Probably the most nitpicky on a wording basis is the one Mr Vuuty referred to as the provisions with respect to withdrawal from the market.
The present wording would bring in, as an act for a servicing carrier constituting possible withdrawal from the market, reducing his ability to act as a servicing carrier or any action resulting in the termination of a contract with the Facility Association. Both of those things are, in some cases, highly desirable from our point of view.
The servicing carrier's got to be able to adjust to the demand for its services or you're going to add to cost. The servicing carrier is mandated by contract at times with us to cancel contracts: if a broker defaults in payment, for example. So the wording there now just doesn't fit. We don't understand the concerns that gave rise to it, but those provisions really aren't going to help anybody. We suggest they should be deleted. Again, if there's some legitimate concern to be met somewhere, we'd be happy to try and meet it.
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There has been reference made to the other issue, which is the liability of officers and directors. If the intent of this act is to discourage members of the industry from helping to provide this non-profit service to provide insurance to the public, then, boy, this is going to do it. This provision says that the senior executives who volunteer for these positions are exposed to personal fines of not less than $5,000 for the first offence, and not more than $100,000 and up to $200,000 for each subsequent offence. Now, what's an offence? If they fail to take "reasonable care" to prevent the Facility Association from contravening any provision of the act or any regulation? That's a pretty high onus to put on volunteer directors, to make sure that nobody in the FA organization contravenes any provision of any regulation.
There are substantial obligations imposed by law, the existing law, on directors of organizations such as this. We suggest that it is inappropriate and detrimental to the continued good operation to try to impose this type of duty. It's taken from the same duty that has been put on people who are paid operating directors of operating companies and public companies. We don't think it's appropriate; we think this government has recognized the distinction in other legislation and we think it should be recognized here.
So those are the areas. The specific ways in which we suggest that the legislation be changed are in 10.3. If there are other areas of concern, we'd be happy to try and work with anybody to meet those areas of concern, particularly where we simply don't understand what the purpose is.
Mr Fraser: That concludes our formal presentation today. We'd be glad to try to answer questions, Mr Chairman.
Mr Mancini: How much time do we have?
The Chair: We've got three minutes.
Mr Mancini: I have one brief question, and then I'd like to turn it over to Mr Mahoney. Are you aware, Mr Fraser, that the Ontario Insurance Commission has asked for 100 more civil servants and six million more dollars to be able to carry out its duties and functions, and do you think many of those new civil servants will be reviewing changes in these massive regulations such as commas and periods and question marks, and putting in the word "exit" for "close" and "stop" and all of that stuff? Do you think we need more civil servants to do that kind of work, sir?
Mr Fraser: I heard that information last week at the hearings in Toronto. I can't comment on why they need that number of people, but the thrust of our brief is that the Facility works very well and I don't think we need more regulation on its daily activities.
Mr Kormos: That's part of the Jobs Ontario fund.
Mr Mahoney: Mr Kormos says that's part of the Jobs Ontario fund. I'm not sure if it's true.
What would the average premium be? The Facility is really a last resort for a consumer, as I understand it. What would the average premium be? Do you know that?
Mr Fraser: Not offhand. Our general manager may. But let me put it into focus. We have street premiums, and about half of the Facility today will come out and go into the pool at street premiums. So we've cut the problem in half. The remaining half in the Facility are demonstrably poor risks, meaning they have a series of accidents or a series of convictions.
Mr Mahoney: If I could just interrupt you, because I don't have much time, what I want to get to is that this is a very detailed brief outlining your concerns about the technical aspects of how FA will work under this new legislation. Have you examined how it will affect the customer base, the consumer who is forced to go to the FA for insurance because he or she can't get it in the voluntary market, and have you done a cost analysis as to how much your premiums may go up, how much your claims may go up -- how the whole issue of cost will affect the consumer from the FA perspective?
Mr Fraser: No, we have not done a Facility actuarial study. The basic Facility rates are based on the industry rates, and we are working under the assumption from the four actuarial studies that have been done, so if the basic street prices go up, Facility will go up considerably.
Mr Mahoney: I've got about 30 seconds. I'll give it to Mr Kormos.
Mr Kormos: Mr Fraser, you're a veteran of these wars and you are still in the trenches.
Mr Fraser: We meet again.
Mr Kormos: You are still in the trenches. As it is, you and I go back quite a way now. I find it just remarkable, and you'll recall how New Democrats fought so vigorously against the threshold, insisting that they were going to restore the right of innocent accident victims to be fully compensated, and now this appears to be a complete reversal of their position, because they've indeed shut the door in terms of economic loss. Can you account for the betrayal of innocent accident victims by the New Democrats?
Mr Mahoney: Good question. I wish I had asked that.
Mr Fraser: It sounds like a setup, Peter.
Mr Kormos: Far be it from me, sir.
Mr Fraser: Not that I'm mistrustful of you. I think the question is more directed at the product and I expressed myself as an officer of State Farm Insurance last week on that subject. We're here for the Facility Association, but a quick answer, Peter, is that we prefer the current program to Bill 164, primarily based on costs.
Mr Kormos: Who does support Bill 164? There's been nobody supporting it. It's remarkable.
Mr Fraser: Correct.
Mr Tilson: The three or four very large points you've made are certainly new points that have come to this committee dealing specifically with the Facility Association. The brave new world of the NDP gets scarier and scarier, particularly when you listen to these various points you have raised. If the amendments you have recommended, specifically the one dealing with directors -- I think it was set forth under number 8.0, I believe -- or something similar to them are not made, what will happen to the Facility Association?
Mr Fraser: I think, Mr Tilson, that there are two prime points we're concerned about. The first is the servicing carriers. There are 150 auto insurance companies in the province. There are about 10 companies that insure all the Facility risks. State Farm is one of those companies. This legislation would prohibit State Farm from resigning at any point as a servicing carrier without government permission. If I were not a servicing carrier and this bill were in place, I don't think I would offer my services to be a servicing carrier. We could see a drying up of the ability to insure people who can't purchase insurance in the normal marketplace.
On your second point, about the responsibility of officers, I am chairman of the Facility Association. I do that without compensation. Frankly, the severe aspects of this legislation would cause me personally to ask myself, why am I doing this? If officers did not come forward, it would be a real problem, because there would be many people out there who could not purchase insurance.
Mr Klopp: Thank you for your brief today from the Facility. We have worked with the industry, as you pointed out, in reducing the number of people in Facility from 4% down to 2%. I have a personal case when a chap was in my office about four months ago and complained about his insurance. He was in Facility. When he talked about his four fender-benders, it was a little odd. I've heard a lot of automobile accident stories from friends, and just from my background a little bit, so when I heard what he had done, I thought it was a bit odd that he was in Facility, going from $2,500 or $2,700. It was just bizarre what he was paying. I do believe that he is now out of Facility, because I think the industry recognized -- and we helped do that with you -- that we need to have people who really should be in the other insurance. I think he's still happier now for the insurance industry, because he sure wasn't happy that day. So I think there are some good points to this. He might even be at State Farm, for all I know.
With regard to this, we're hearing about the tort and "Let's get back to tort." Since Facility is the high-risk people and undoubtedly, unfortunately, they are probably followed around by court cases -- I'm sure that's why the premiums are there -- what would you think the rates would be if we would go back to a full tort system?
Mr Harnick: Nobody's saying to go back to a full tort system.
Interjections.
Mr Winninger: On a point of order, Mr Chair: Once again Mr Harnick is interrupting Mr Klopp and others on the opposition side are telling him --
Interjection.
Mr Winninger: Can I complete my point of order?
The Chair: Yes, you can.
Mr Winninger: Others on the other side of the committee room are telling him how to put his question. I submit, Mr Chair, that it's entirely improper for members on the committee to be interrupting these procedures to tell you how members should put their questions.
The Chair: Mr Klopp, carry on. You have a valid point of order there.
Mr Klopp: I've asked the question.
Mr Fraser: The only comment I could make is that the normal business in the industry has an average premium of about $800 to $900 a year. Facility would be about $1,500 to $1,800 a year. If the base cost of insurance goes up 20%, as has been suggested, by Bill 164 --
Mr Klopp: No, no, no.
Mr Harnick: Yes, yes, yes.
Mr Klopp: I asked about, if we went back to tort the way it was before, what would that do to the socialist --
Mr Fraser: Oh, traditional tort for economic loss and pain and suffering?
Mr Klopp: All those things that some people said we should have done.
Mr Mancini: What you promised in the last election.
Mr Harnick: What kind of accident benefits go with that?
The Chair: Order.
Mr Harnick: How's he going to answer the question?
The Chair: The time has run out. Mr Fraser, I hope you don't have the problems I have as a Chair.
Mr Fraser: It sounds like I'm saved by the bell.
The Chair: I'd like to thank you for appearing before this committee, and before this committee leaves, Mr Kormos has a point of order.
Mr Kormos: Yes, and I tell you, sir, a bona fide one, which is why I waited until this presentation was completed.
This committee process is not unique to the auto insurance issue, of course a time-honoured and historical process whereby legislators and the Legislature have an opportunity to consult. It seems to me that on an issue as important as this one, the fullest consultation possible should be made, and it would seem to me that in a democratic society and with a democratic Parliament there would be every effort to accommodate all of those people.
Why, therefore, Chair, was the Carleton County Law Association, perhaps the second biggest in all of Ontario, the Medical-Legal Society of Ottawa-Carleton, a significant player in this issue, and Lawrence Greenspon, a plaintiffs lawyer here in the Ottawa area with a great deal of expertise, why were all three of those bodies denied permission to participate in these hearings and present their views? It seems to me most undemocratic and contrary to what this government says it stands for in terms of inclusiveness. This seems to be the height of exclusion. Could it be because they merely don't agree with this bad legislation? But I would ask that the Chair accommodate these people, who do want to make submissions. That is the point of order.
The Chair: Mr Kormos, anyone in the province of Ontario can make a submission to this committee, a written one.
Mr Kormos: These people were denied the opportunity --
The Chair: The oral ones were picked by the subcommittee from the three parties.
Interjection.
The Chair: Please, Mr Owens. This process was agreed upon by the three House leaders on the amount of time of the hearings and we've accommodated as many presenters as possible. So your point of order is standing, yet it has --
Interjection.
The Chair: Mr Owens.
Mr Kormos: Don't you think it's unfair?
The Chair: I think it's quite fair the way it was done in a democratic process.
Mr Kormos: Don't you think it's unfair to exclude important people from the process?
The Chair: I'm sorry. all their briefs will be handed in to the clerk and will all be gone over. It is no different making an oral one or a written one. It is as valuable.
Mr Kormos: Can you guarantee all the committee members will read those briefs?
The Chair: I will make sure that everyone has one.
Mr Kormos: Can you guarantee that they'll be read?
The Chair: I can't guarantee anything there, and I haven't got it in writing.
Mr Kormos: Thank you, Chair. I appreciate your interest in the matter.
The Chair: Before we adjourn here, I just saw in the Globe and Mail a headline, and I think this is pointed towards Mr Kormos. It says, "According to the Tabloids: Devoted Dog Waits at Rail Station Six Years for Master to Return." Is your beagle at the rail station?
Mr Kormos: My beagle's driving the 'vette.
The Chair: Okay, this committee is recessed until 2 o'clock.
The committee recessed at 1215.
AFTERNOON SITTING
The committee resumed at 1359.
The Chair: Good afternoon. This is the standing committee on finance and economic affairs on Bill 164, An Act to amend the Insurance Act and certain other Acts in respect of Automobile Insurance and other Insurance Matters.
Before we start, Mr Kormos has a point of order.
Mr Kormos: Yes, sir. I want to introduce the committee to Lawrence Greenspon, counsel and plaintiffs' lawyer and advocate for injured people here in the city of Ottawa, who has come here along with Bill Simpson, another noted advocate for victims, prepared to fill in any slots that are created by presentations and presenters that fail to show, to accommodate the committee. These were people who were denied the right to address this committee earlier. Thank you, sir.
The Chair: I would say, Mr Kormos, that we would do the best we can as a subcommittee and meet on it.
ECONOMICAL MUTUAL INSURANCE CO
The Chair: We'll carry on and we have the Economical Mutual Insurance Co. Welcome this afternoon to this committee. We have a half an hour; we have until 2:30. If you can leave some time at the end of your brief for questions from the committee members, you may begin, but please identify yourselves for the purposes of Hansard and the committee, and your position.
Mr Sam Hill: Thank you, Mr Chairman. My name is Sam Hill. I'm president and chief executive officer of Economical Mutual Insurance Co. With me are Veljo Taht, who is our vice-president, actuarial services, and Glen Walker, who's vice-president of claims.
We would like to thank the committee for giving us the opportunity to appear before you today to raise our concerns with some of the aspects of Bill 164.
Economical Mutual Insurance Co was founded in Berlin, Ontario, now Kitchener, in 1871 as a Canadian mutual company. We continue to operate today as a policy-owned Canadian mutual company.
Over the years we have enjoyed considerable success and have expanded, both by way of company acquisitions and internal growth, to become the fifth-largest property and casualty company in Canada, based on 1991 net premiums written. We operate in eight provinces in Canada and have a staff of 1,100 employees. We are a major factor in the automobile insurance business in Ontario and in Canada. More importantly, we have some 270,000 automobile policies in force in Ontario, serviced by some 800 brokerage offices.
Almost 47% of our total premium volume across Canada is generated by Ontario automobile insurance premiums. Therefore, we are vitally concerned that any changes that may be made to the present system will work to the long-term benefit of Ontario motorists, our employees and our brokers.
By way of background, the introduction of OMPP in June 1990 was the culmination of many years of exhaustive studies, reports and hearings into Ontario automobile insurance. The plan featured a threshold no-fault system, greatly enhanced accident benefits and substantially higher income benefits. The public, in large measure, has indicated a high degree of satisfaction with OMPP.
The plan generated badly needed price and cost stability, while eliminating most of the criticisms levied against the previous plan, particularly with respect to the uncertainties that surrounded tort awards. Importantly, benefits under OMPP were delivered in a more timely fashion, claims service was improved and much greater emphasis was placed on rehabilitation.
With the advent of the new plan, there was a dramatic shift in the manner in which benefits were paid to accident victims. Understandably, the new product is not perfect and some alterations are now obviously required. We would prefer that, rather than making radical changes to the existing plan, a more cautious approach be taken, particularly with respect to the tort area.
I turn now to the issue of withdrawal from Ontario automobile insurance. Section 11 of Bill 164 has been amended significantly, thereby removing the threat of expropriation of capital of insurance companies, both foreign and domestic. The revised wording for this section now reads in part:
"For the purpose of this section, an insurer is withdrawing from the business of automobile insurance if the insurer does anything that results or is likely to result in a significant reduction in the amount of gross premiums written by the insurer for automobile insurance in any part of Ontario, including any of the following things that have or are likely to have that result."
It goes on to say in part, "taking actions that directly or indirectly result in termination of contracts between the insurer and the agents or brokers who solicit or negotiate contracts of automobile insurance on behalf of the insurer."
Should this section of the bill be passed unamended, it will have the effect of removing from insurers the ability to responsibly and effectively manage the operation of their companies. Importantly, the wording is elusive and fails to set out definitions of key terms, particularly with respect to "a significant reduction in the amount of gross premiums written" and, in addition, "in any part of Ontario." The apparent impact will be to virtually lock companies into existing relationships with their agents or brokers.
There are many circumstances in which insurers would wish to take actions for absolutely sound business reasons, which could put them in a position where they are deemed to be withdrawing from the business of automobile insurance as defined, or perhaps not defined, by Bill 164. Examples of such actions follow:
Most companies are federally licensed. Their solvency position is monitored by OSFI. In the event that a company reports an unsatisfactory solvency position, it must either add capital, difficult for a Canadian mutual company which finds itself under financial pressure, or reduce its liability exposure. A reduction in net written premiums may be required. Such action could well be a significant reduction in automobile insurance written premiums and could well be interpreted as withdrawing from the business of automobile insurance in Ontario.
Again, from time to time companies find themselves in a position where it is difficult and not cost-effective to service various parts of Ontario. Brokers could initiate termination of contracts with a company, leaving the company with one small-volume broker which, because of remoteness, could not be realistically serviced. Would the termination of this broker place the remaining Ontario automobile insurance book of business in jeopardy?
Lastly, an insurance company may find, as a result of internal growth and/or merger with another company, that it may have an excessive amount of exposure to risk in any part of Ontario. Such a situation could impact negatively on the company's property catastrophe reinsurance costs. Indeed, many companies in the United States, as a result of hurricanes Hugo and Andrew, have taken action to reduce their exposure on the Atlantic coast region.
Canadian insurers may then implement programs for valid and prudent insurance risk management reasons to reduce property premiums written, which would have the unintended effect of also reducing automobile premiums. Once again, such an action might be construed as withdrawing from automobile insurance in the entire province.
It is not apparent to us why the government believes it requires this legislation. Certainly this section of the act is a very blunt instrument. There have been few instances of significant shortages of market in Ontario. When they appear and persist, market pools could respond. Competitive market forces, enlightened regulation and rate adequacy will normally provide solutions to market shortages.
I turn now to the issue of industry profitability. The decade of the 1980s proved to be a difficult period for Ontario automobile insurers. It was a period of relatively high inflation, which impacted particularly on the settlement of third-party bodily injury claims. Buoyant economic conditions have had a negative impact on claims frequency, and companies were reluctant to reduce rates to appropriate levels due to competitive conditions. Third-party bodily injuries usually take a number of years to settle, and many companies failed to realize how significantly the ultimate cost of these claims was rising.
Although Ontario automobile insurance results were proving to be unsatisfactory, overall insurance profits were reasonable, thanks in part to cross-subsidies of business in other provinces and other classes. For a time, these unrealistic automobile insurance rate levels were a bonanza for the consumers who were not aware, nor indeed informed, of the fact that their premiums were underpriced. The inevitable premium increases were decidedly unwelcome by the public and once more became a hot political issue. The political action was dramatic, and in 1987 automobile rates were frozen for all companies in the province, without regard to their competitive positions in the marketplace or the adequacy of their rate structure.
Clearly OMPP has to date proven to be profitable, on balance and for the industry. It has been estimated that the industry experienced an average pre-tax loss of $294 million for the four years ending 1989, while 1990 and 1991 generated an average pre-tax profit of $480 million. Undoubtedly 1992 will also be profitable. Nevertheless, the industry recorded a pre-tax loss of $218 million over the six years ending 1991. This is clearly a negative return on the automobile business for six years.
It has always been a mystery to me how the industry allowed itself to be trapped into talking about pre-tax profits, when the real world only deals in after-tax profits. In reviewing results under OMPP, it is important to realize that experience remains incomplete on claims incurred during this period and that reserving practices are not fully reflecting upon unpaid claims liabilities incurred to date under OMPP.
It is also clear that this was a period in which Ontario experienced minimal growth in economic activity and an exceptionally high rate of unemployment, which combined to reduce automobile usage, resulting in the reduction of automobile claims frequency.
Investment income has been reduced this year and will be in the future. Indeed, one would believe that with Ontario facing desperately high annual fiscal deficits, the prospect of automobile insurance, an important part of the provincial economy, returning to a tax-paying position should be viewed positively.
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Losses incurred in automobile insurance in the 1980s were offset by profits generated from property insurance. This position reversed in 1990 and 1991. Under OMPP, rate stability was achieved in Ontario automobile insurance and a significant number of companies reduced rates in 1992. Overall industry return on equity, the most important measure of profitability, was restrained through the period. There is now, however, considerable evidence that current rate levels for OMPP, when trended over the next year, could be inadequate. If one adds a factor for changes required under Bill 164 as it is currently proposed, Ontario motorists could well be facing an increase in automobile insurance premiums of some 20%.
I'll turn the microphone over to Mr Taht at this point.
Mr Veljo Taht: I'll try to cover the costing considerations. There is probably a perception held by some that there's a margin in current private passenger automobile rates to absorb any increases that might occur as a result of the implementation of Bill 164. Economical Mutual filed a rate program with the Ontario Insurance Commission on January 11, 1993. The average rate increase in that program was 3.5% and the proposed rates are expected to produce a before-tax loss from insurance operations. Needless to say, it is our view that there is no margin in current rate levels.
We have reviewed the revised accident benefits regulations for the new product released January 18. It is our assessment that the changes will increase discounted private passenger loss costs by a minimum of 15%. This would translate to a $108 increase in the average premium.
This assessment is based on our experience during the first two years of OMPP, consisting of over 500,000 car-years of exposure.
The increases in loss costs are spelled out in the table. The key numbers, I guess, would be the accident benefit totals, going from $152 to $205 roughly, and the bodily injury going from $64 to $82. The combined costs of the people cover, those related to injuries, would increase by 33%. The other covers, the physical damage covers, would be unaffected and the total increase for all covers combined would be 15%.
That's based, as I say, on our experience, the numbers used in the filing. The increase in the medical rehab area is restricted to potential costs as we are currently aware of them. There's no allowance for advances in medicine or future treatment services, aids or devices that might become available. As well, there is no allowance for any shifts in costs from the public to the private sector, which are possible in the future.
To compare these numbers to Wyatt or Mercer's costings, the internal claims costs would have to be factored in at 8.1% and losses should be trended forward two years to an average loss date of June 30, 1993, for fiscal policy year 1993.
The costings carried out by both Mercer and Wyatt have been meticulous and detailed. However, both have had to rely on assumptions in areas where no experience was available.
Our experience for the first two years of OMPP has differed from those assumptions in one major area. Individuals are remaining disabled for longer periods than allowed for in either of the previous costings. For example, starting with 1,000 individuals receiving some disability payment, the table below shows the number still expected to be disabled at various durations, based on our actual experience for the first two and a half years of OMPP.
The key number is that roughly, after six months, you would have 380 individuals still disabled; the costing assumptions were 195, or almost half of that. After two years we would have 136 people still receiving disability payments; the costing assumptions were 47. The longer periods of disability would significantly increase Mercer's costing of both OMPP and Bill 164.
Mr Glen Walker: From a claims perspective, we have a slogan at the Economical Mutual Insurance Co used by our claims department to define its role in the handling of customer claims. It simply states, "We are the product."
The claims department of any insurance company is the end result of what the consumer buys, and the product that we deliver at the end all depends on how the company delivers that service. We are the ones who have to deal with the face-to-face human issues of the whole matter, and we also have to accomplish this by interpreting the policies that are presented by the policies, and also applying those on the street level, coping with all the wide spectrum of problems in doing so.
As you will appreciate, in the short time we have it's impossible to address all the situations we feel Bill 164 poses, but I'll just start with some.
On the tort access reform, we all know that the new recommendations replace the present "verbal threshold" with a deductible threshold in determining access to the court system for non-economic-loss compensation, and the present verbal threshold allows only cases that are very serious to be adjudicated upon. That also includes economic and non-economic benefits.
Our point here is really that the Ontario motorist protection plan is only two and a half years old and has not had enough time to mature in its interpretation of the verbal threshold. Only recently have the courts now ruled on several cases, and one of the most recent cases lightened that threshold quite considerably. Therefore, really, we feel that more time is needed to spread that out before testing of that threshold really takes place.
In Michigan, as you're aware, which has had that verbal threshold for quite a number of years, it took approximately five years before they reached a satisfactory, stable level.
We are opposed to the new proposal for court access for the following reasons:
(1) The proposal represents a return to the disastrous adversarial relationship which precipitated the product reform of OMPP.
(2) It signals a return to excessive court backlogs, case building, exaggerated injury and recovery periods and an overall delay in case settlements.
(3) The adjudication and administration of bodily injury claims are extremely expensive and time-consuming.
I'll just refer you to exhibit 1 on the back, the first page. This is an attempt to give you a snapshot view of the number of hours the average field adjustment would be in a two-year period. Pre-OMPP, approximately 95% of the injury cases that were outstanding after two years took a minimum of 30 hours of field work, and this does not include the examination or administrative work inside the company. When OMPP came around, if you can snapshot this, 80% of the claims are basically non-existent. They were claims for minor injuries where not much time was adjudicated and not much time spent.
Ten per cent of the claims, we have estimated, are intermediate claims, claims where we're not too sure what the threshold was, but that were serious enough to require further investigation, about 8 hours' time. But when the threshold claims, which we know, I think, in the industry are about 6% of the claims that have been there, about a 10% band -- require that same amount of investigation. A serious bodily injury is the same now as it was before that.
I feel, in checking with colleagues and a number of people in the industry, that a return to tort, as Bill 164 proposes, would bring us back up to 95% of most claims that are going to be around and will require full investigation, another 30 hours plus. When you look at those hours, whether you do them yourself as a company or use independent adjusters or other vendor services, you're talking a lot of significant expense money.
(4) It is impossible to restrict the degree of investigation necessary to defend cases which may exceed the deductible suggested.
In other words, it's very difficult to go out there on a grass-roots basis and say, "This case will not reach the new determination of the $15,000 deductible." Two and a half years ago in Toronto, average whiplash cases of two years' duration were getting anywhere from $15,000 to $30,000 in non-economic-loss awards.
Mr Harnick: Baloney.
The Chair: Mr Harnick.
Mr Walker: Well, sir, I can show you that --
The Chair: You have the floor, sir. Don't listen to the members on the side there. You're talking to me and I'm listening.
Mr Walker: Okay. Anyway, the point of the matter is that it is very difficult under Bill 164 to make that determination, as it is today under the present OMPP.
(5) Bodily injury losses will increase significantly both in costs and numbers, which in turn will force up premiums.
(6) Costs associated with litigation are significant, and these are funds diverted from accident victim benefits.
(7) Consumers are presently satisfied, we feel, with the present no-fault program.
It is our opinion that the present verbal threshold needs to be kept in place and given sufficient time to acquire a stabilized level of interpretation through the court system. Increasing tort access is an unwise application of premium dollars. Those dollars should be directed to satisfy the obligations under the accident benefits program, which provides essential treatments for injured victims of accidents.
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It must be remembered that all motor vehicle accident victims in Ontario have access to this enriched plan. It is not a determination of fault; it doesn't matter who's at fault in the accident. I think we've got to keep that in mind in these discussions at all times. It took some 20 years for this plan to be developed and we're at a point here where we're changing it drastically after a two-and-a-half-year period.
In the area of accident benefit enhancements, it has afforded the insurance industry, and in particular claims persons, significant new challenges in the handling of clients' claims. We've moved from an adversarial tort environment to a no-fault structure, and this is a 360-degree turnabout from the traditional we've used in the past in claims handling.
It's not an unwelcome change, believe me. The elimination of tort for all but the more serious cases allowed full emphasis to be directed towards the wellness aspect of those person injured as a result of a motor vehicle accident. Because of the increased interaction of dealing in a non-adversarial atmosphere in which fault plays no part, customer service attitudes have been enhanced and the system readily accepted by the public.
For our part, we are convinced that a no-fault automobile accident program such as we enjoy under OMPP is by far the best system of compensation for accident victims possible. Having said that, we realize that there is always need to explore improvements to any plan. On that basis, we applaud many of the changes suggested in Bill 164 and the attempt to clarify and correct some apparent OMPP deficiencies.
The regulation wordings are extremely complicated and in some areas are ambiguous, but we are confident the government will be open to suggestions to fine-tune them prior to implementation so that they may become readily understandable.
I'll give you an example in the death benefits. The proposed death benefits changes present far too many complications, especially in the area of determination of amounts. In order to assess the benefits payable, it will be necessary to intrude upon a bereaved family's financial background at a time when it would not be very sensitive and perhaps an offensive procedure to do. If the intent is to enhance the death benefits, why not simply retain the present system of a lump sum payment that is common to all life policies? If more coverage than a basic amount is required by a policyholder, this could be made available by choice of the consumer and his personal needs. To attempt to determine the net income of an insured after death is an unwieldy and unnecessary procedure.
We urge you to keep it simple so we can then quickly issue and deliver the benefit cheque to the survivors when they need it most. Do not make it necessary for us to negotiate the amount owing with widows and orphans.
Removal of caps in the accident benefit area: This causes a lot of concern to all insurers. Removal of caps to provide unlimited financial benefits to an insured person may in theory appear to be the right direction to move but the question is, can this coverage be afforded? In order to fully understand some of the ramifications of providing unlimited coverage, I refer the committee to the accompanying exhibits 2 and 3, which outline the amount of benefits --
The Chair: Mr Walker, you have six minutes left.
Mr Walker: Okay; I'm trying very quickly.
The Chair: No, the thing is, that leaves only two minutes for each caucus.
Mr Walker: Yes, okay.
The Chair: We all have copies of your brief. It's up to you if you want to carry on and use your whole time.
Mr Walker: I would just like to show, using those exhibits 2 and 3, the case of the 16-year-old quad. This is an actual case which would show you the amount of money available under Bill 164 as proposed, indexed and discounted, to be fair. It's something the committee can examine. It's not designed to show anything other than the fact that there is more money available for that purpose.
Indexation we feel needs to be capped, needs to have a proper form of indexation so that we can restrict it to a yearly maximum to allow for the predictability of future costs.
Again, just in summary, prevention -- you've heard it all before -- we think road safety and improved safety items, especially in impaired driving areas, need to be addressed as part of this program.
The Chair: Mr Harnick, one question.
Mr Harnick: Under your pink tab, the fourth page, it says: "Loss cost per car $483.39 under OMPP." Do you see where I mean? If someone's paying a $900 premium for annual insurance, that would mean that the profit you're making is approximately $400 on a policy, correct?
Mr Taht: Oh, this is the average cost.
Mr Harnick: That's right, and if the average cost of premium is about $900 --
Mr Taht: Our average cost isn't $900.
Mr Harnick: I'll tell you, I haven't had an accident and Dominion of Canada gives me the best rates, it tells me. I pay $900. If you take $900 and you take the $483 off it, it means that you're making about $400 profit on a policy.
Mr Taht: No.
Mr Harnick: It seems to me there's five million drivers in Ontario, which means that accounts for the industry making about $2 billion a year.
Mr Taht: I think you're starting from a false premise. You're starting from a premise that the average premium and our average premium is $900.
Mr Harnick: What's your average premium?
Mr Taht: Our average written premium per car is $721 for 1992 written premiums.
Mr Harnick: I'm moving to you then.
The Chair: Charlie, we're with the wrong company. I've got Dominion also and I'm a bit higher.
Mr Harnick: Yes, I'm paying more.
Mr Taht: Perhaps if I could just comment on that, the premium that you pay depends on the type of car you drive and so on. I would assume a person in your position would drive something better than an average car and so on.
Mr Harnick: How about a Tempo?
Interjections.
The Chair: I go on to Mr Winninger. You can have this discussion and shop for insurance after the committee meeting.
Mr Winninger: Just two brief points: I think it is worthwhile studying your exhibit 3 under exhibits, because there are figures there that show quite illustratively some of the benefits that would accrue under Bill 164 that might not have accrued under pre-OMPP or under OMPP. I think we should certainly study that one closely, because it appears that the amount that an accident victim would be entitled to is greatly enhanced under Bill 164, giving your criteria.
Mr Taht: No. What this demonstrates is just the average length of disability. The length of disability, I would expect, would not be affected by either Bill 164 or OMPP; that is, if a person is disabled, whatever length of time he's disabled, Bill 164 would give him higher benefits but would not --
Mr Winninger: Are you talking about exhibit 3, Bill 164 impact case study?
Mr Taht: Oh, I'm sorry.
Mr Winninger: You're on a different table. Sorry, he was on the wrong table, Mr Chair, but I did have one other short question.
The Chair: There are no more short questions for short people.
Mr Winninger: Tommy Douglas used to say, "In our party we measure stature from the neck up."
The Chair: Your mike isn't on, Mr Mahoney. Wait until your mike comes on there.
Mr Mahoney: It's unfortunate we don't have more time, because I wanted to ask about some of the reinsurance treaties that you referred to and also how you actually justify exhibit 1, where there is not going to be non-economic access to the courts, how you justify that being the same.
Since I'm limited really to one question, maybe you can try to fit this into your answer. Nobody this morning or whom I've seen in any of the briefs has touched on the impact on small business. We're talking about average premiums. I don't know who pays $700, but I'd sure like to get a premium like that myself, so I don't know how the average is arrived at. But small business was concerned about the OMPP, and we're looking for amendments and regulations, and you referred to some minor changes making sense to the OMPP rather than this radical surgery that this government is foisting on us.
The Chair: Question.
Mr Mahoney: My question is, can you reply in some way to how you see the impact of Bill 164 on small, independent entrepreneurs?
Mr Walker: I can probably give you an example. Under OMPP there is no formula for determination of benefits, wage benefits for a product. My wife has a small business and she's in that position too. If she's injured, it is really going to be a hard thing to determine how much money she can get and how much it would be to carry on the business.
Companies are left at the present time with their own resources to work with accountants and come to a fair figure. Now that may be fair for one and not fair for the other. I think Bill 164 presents a better alternative in the sense it has some formulation there. It's not perfect and there are still holes in it but it's a better step. I think the idea of letting business persons predetermine what they want is better.
The Chair: Mr Walker, the time has run out. I'd like to thank you, gentlemen, for appearing before this committee.
BICKERTON BROKERS ONT LTD
The Chair: The next group coming is Bickerton Brokers Ont Ltd. I believe you have associates to join you there. Do you have other associates to come forward?
Mr Alan R. Bickerton: He's sitting beside me.
The Chair: Okay. I know I talked to that gentleman earlier. I'd like to welcome you to the standing committee on finance and economic affairs. We have until 3 o'clock, and if you can leave some time at the end of your brief, as you can see, the members like to ask questions on your brief to get a better idea of where you're coming from. If you don't mind identifying yourself, you may begin.
1430
Mr Bickerton: Thank you, Mr Chairman. My name is Al Bickerton. I'm president of Bickerton Brokers Ontario Ltd, a medium-sized brokerage in Kingston and Gananoque, and I'm the past president of the Kingston Insurance Brokers Association. I have with me Steve U'Ren, whom I'll have introduce himself right now, and then I'll continue with my presentation.
Mr Steve U'Ren: My name is Steve U'Ren. I represent and am a partner in a medium-sized brokerage in Brockville, Ontario. I have approximately 30 years' experience in the insurance industry. Fifteen years of that was spent as an insurance adjuster, both at the company level and as an independent insurance adjuster. The last 15 years have been spent as an independent insurance broker.
With this background I feel I am in a position to fairly comment on the insuring public's attitude towards the automobile insurance product, both in its old form, its present form under OMPP and what that attitude might be if Bill 164 is implemented. This is Mr Bickerton's presentation. My only involvement from here on in might be during the question and answer period, and I turn it back to him.
Mr Bickerton: Thank you for the opportunity to present my position on your Bill 164 this afternoon. My presentation will take about 10 minutes, and I will look forward to answering any questions you have. In order to maximize the usefulness of time, I would appreciate partisan chip shots being kept until after my 30 minutes so that we don't repeat the efforts of this morning.
My firm in Kingston and Gananoque represents about 5,000 clients and has been in operation since 1949. About 50% of our total business is made up of auto insurance.
First, I think it's important to remember the history surrounding auto insurance over the past several years. Up to the mid-1980s, lawsuits and auto repair costs were rising rapidly, with an increase of 16.5% over five years. The increase in those costs meant higher costs for insurance companies and subsequent dramatic increases in insurance costs for consumers. Consumers reacted very angrily to these cost increases.
In 1987, the Liberal government froze premiums through the OAIB, the Ontario Automobile Insurance Board, of the time, and tried to eliminate any discrimination on rating by removing age, sex and marital status as rating factors. However, after having companies waste hundreds of millions of dollars with computer system changes, form changes and staff training to deal with the new rating variables, they called it off at the last minute, reinforcing what our industry had been saying all along: This system would cost too much for consumers.
1990 brought the Liberals implementing OMPP and the current no-fault system. In September 1990, upon election, the current NDP government promised to bring in its long-planned publicly owned auto insurance system. Once again, the insurance industry successfully pointed out that this initiative would cost the economy of Ontario very dearly and would result in greatly increased costs for consumers. As a result, the public auto initiative was dropped and the NDP faithful expressed their disappointment at the government's decision.
In December 1991, with NDP members disaffected by the government's decision to back away from public auto, Minister Charlton introduced the current Bill 164. The minister initially said that despite the enhanced benefits of 164 and increased access to tort, Bill 164 would not result in increased premiums because insurers could afford to provide these new benefits since they were very profitable under OMPP. The minister now concedes that the government's own actuarial study, even with its inaccurate assumptions, indicates that an increase will indeed occur from the implementation of Bill 164.
We in the insurance industry know that even now, with the 1993 reinsurance contracts seeing huge increases, the current level of auto premiums under OMPP is inadequate. Insurance costs will have to increase in order to bring current OMPP rates to an adequate level, so consumers will pay more even without Bill 164.
We also know that the government's own study was done by looking at none of the experience of OMPP. The insurers' actuarial study of the available period of 18 months of OMPP indicates Bill 164 would result in cost increases of around 19%, taking into consideration the cost increase necessary to bring OMPP rates to an adequate level.
Suppose both parties are wrong and the real figure is only 10%. Regardless of the amount of the increase, can you really support any level of increased costs of auto insurance imposed on your constituents when inflation is about 1%? The province is still in a recession and pay raises are flat for the jobs that still do exist.
Just last week I was asked to speak to a local seniors' club at a luncheon. Many seniors explained how hard things were with their investments yielding about half of the income of just five years ago. These folks will suffer large premium increases, with virtually no benefit changes under clause (b). Remember, these people are not employed and will be paying increases in their insurance so that others can enjoy enhanced benefits. How fair is that?
I can assure you that they were very upset. I have presented to the clerk of this committee letters from 46 seniors who took the effort to extend their feelings to you. I would hope you each have an opportunity to read some of those at a later time. The overwhelming message they sent was: "Why doesn't the government just leave auto insurance alone? It was working very well and prices were actually declining over the past two years."
As I mentioned earlier, my office serves about 5,000 clients, most of whom have auto insurance. Compared to the pre-OMPP system of "Sue and we'll win the lottery," when claims often took up to eight years to settle, claims are now settled very quickly, within even a few weeks or even days, and disability payments are made quickly throughout the period of disability.
We've polled every client after a loss to ask their satisfaction levels. We used to get regular complaints about adversarial adjusters and arguments among the various parties in the transaction. Since OPPP, we get virtually no complaints. The system is working. People generally do not want to return to tort. It's just too messy and too painful for all.
The insurance industry has already provided suggestions for improvements in benefits payable under associated costs which they see as required to the current OMPP. Additionally, they have made extensive recommendations to improve road safety, such as graduated licensing. So far, the government has apparently disregarded this informed advice.
Returning to tort with a $15,000 deductible fools nobody. The seniors I spoke to just last week laughed out loud when I mentioned that Bill 164 increases access to lawsuits but imposes a $15,000 deductible. They realized immediately that settlements will simply be inflated so that claimants are not adversely affected by the deductible. I believe it will only take a few cases in the courts to establish new higher levels and inflate court awards as a result of this deductible.
Also, Bill 164 creates an extremely complex insurance system and Ontario drivers will become confused by this incredible complexity. The goal should be to provide a system that's easily understood by consumers. Bill 164 is not needed at this time. The industry has acknowledged that there are areas of OMPP that need improvement and has made suggestions on how to do this. All Bill 164 accomplishes is a greatly increased level of complexity for auto insurance and an unacceptably higher cost for the people of Ontario.
I'm also concerned that Bill 164 gives cabinet the power to change the class plan and rating basis for auto insurance. This enables politicians, who know very little, if anything, about insurance rating, to change such things as the current system of rating based on actuarially sound factors of age, sex and marital status. The Liberals tried to eliminate these factors and cost the industry hundreds of millions of dollars before they realized that the changes would not work. The only thing that made them change was the public pressure and concerns resulting from the public hearing process.
Do you really think it's sound to enable politicians to establish rate changes without consulting the public and allowing your electorate to speak their minds, or indeed to even be aware of the changes to their cost of insurance that are being contemplated? The public will perceive these changes by cabinet as being motivated for political reasons only. This is not fair to your public.
In summary, there are two key points I want to leave with you. Your proposed system under Bill 164 is far too complex and will be far too costly for Ontario consumers. I'm not suggesting that it's completely unworkable if necessary modifications are made to the bill; however, you'd better anticipate the political fallout from the cost burden you will impose on the very people whose best interests you have pledged to serve.
Thank you for your attention and consideration.
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The Acting Chair (Mr Paul R. Johnson): Thank you for your presentation, sir. The first question goes to Mr Wilson.
Mr Gary Wilson (Kingston and The Islands): Welcome. Thank you for taking the road this morning travelling here. It's a pleasure to meet you here, as it always is a pleasure to meet you, and as usual you've done a very thorough job of presenting things. I would, though, like to mention some of the benefits that the new system brings into place. I'm not sure, when you were talking to the seniors for instance, that you itemized the benefits and the improvements that we've made under Bill 164: the removing of $500,000 caps on rehabilitation and medical services, indexation of benefits, addition of education disability benefits for students, increase in death benefits, extension of dependent-care benefits to working people and increasing dependent-care benefits to those not working, payment of visitation expenses and mental or psychological injury considerations. I just wonder what your view is on some of those benefits.
Mr Bickerton: Without getting specific on any one, I'm sure that a lot of the benefits in there are excellent. I'm not contesting that. All I'm saying is that they come at a very high cost. I think, for instance, uncapping the rehab costs will wind up representing a very difficult thing for insurers to quantify. I think you'll wind up ultimately with a very unstable premium pattern as companies try to jockey their reserves to accommodate those unlimited future claims. I'm certainly no actuary, and I'm lucky if I can count to 10 without a mistake, but I can tell you it's going to be expensive. So if you want expensive delivered to your constituents, you've got it in Bill 164. If you want it, you've got it, and pass it tomorrow, but I'm telling you that there will be an enormous political fallout from it, from the people I speak with.
Mr Gary Wilson: Of course, we've done the same kind of investigation as you have and have listened to people and also looked at the record of the insurance companies over the last couple of years under OMPP to see that there is money in the system.
Mr Bickerton: But Mr Wilson, your own actuarial study, which came out suggesting 4%, didn't even look at OMPP. So how can anybody rationalize that 4% is a sound number when you don't even look at the system from which you're progressing? I think there's a bit of a shortfall in the basis on which you're making your judgements.
Mr Gary Wilson: I'd like to ask you about the tort system. You call it messy and painful. What are some of the things that you are referring to there?
Mr Bickerton: With respect to the lawyers in the room, the protracted duration of claim settlement is exceedingly slow and painful for people. We had a client in our office whose claim you may recall in our region. This is pre-OMPP. The poor chap was in court for years, didn't work for years and settled ultimately for a reasonably paltry amount of money. I don't know where all the money went, but it eroded and it went to fee settlement and so forth.
I'll give you a quote from a friend of mine with whom I used to work. He was one of the leading tax lawyers in the United States, and he said: "I just love it when the government comes out with a new tax act. It's terrific. My income is directly proportionate to the thickness of the act." That's a direct quote from one of the leading tax attorneys in the States.
Again, with respect to the lawyers in the room, everybody has a living to make, but I'm telling you that a lot of the cost of this thing is going to go to fee support. I can't tell you the specific numbers, but the insurers can and, I'm sure, have.
The Chair: Mr Mahoney.
Mr Mahoney: Mr McGuinty's first.
Mr McGuinty: Thank you, gentlemen, for your presentation. I think the points that you've made with respect to the costs were very well taken. Maybe at some point somebody could make an argument to the effect that this somehow was going to make for good legislation, but surely the argument can't be made that the government should be unilaterally causing insurance premiums to increase in the context of a very severe recession. My understanding of this program was that it will put premiums up, all told, by some $500 million. Is that correct?
Mr Bickerton: I don't know the gross amount. I'm just told that it's double-digit for sure.
Mr McGuinty: We're talking about premiums going up, then, something in the neighbourhood of 20%. That can translate into $200 increases, and this at a time when the government is telling us that inflation is less than 2% and we've got a rate of unemployment in this province in the neighbourhood of 11%. There are 550,000 people unemployed. That's $200 for each driver that will not be free to inject into the economy and try to get things rolling once again.
So for the life of me, I simply cannot understand why the government at this particular stage -- notwithstanding all the other very good arguments that were made against Bill 164 -- is telling us it intends unilaterally to apply what is effectively a regressive tax. It's going to hit the people at the poor end of the spectrum harder than those at the upper end of the spectrum in terms of income. I can't understand why they're doing it now. I don't know if you can shed any light on that. If you can't, then I don't blame you and I'm going to turn it over to my colleague here.
Mr Bickerton: I guess it's difficult for me to shed any light on it -- because I have the same difficulty -- other than excusing it by way of saying that there is great rejection within the NDP about its turning down a publicly owned system. This is maybe a way to make a change -- make a change for better or worse, but make a change. I think it's going to be very expensive, like you said.
Mr Mahoney: I think you hit it, by the way, that it's a back-off position to try to satisfy the Peter Kormoses of this world and that obviously hasn't worked. That's the reason they're trying it.
I appreciate the fact that both of you as brokers are probably less impacted by this than the insurance companies, because your clients still are going to need insurance, regardless of the cost. So I think you're coming at it, really, from a very neutral position and your brief is quite excellent.
I wonder if you've given any thought to what might be the next political step in this government's march along these lines -- that is, a freeze to any premium increases. How do you think the industry would react to that?
Mr Bickerton: If they're obliged to support the kinds of benefits that 164 would legislate and they're told premiums will freeze, I think we'll see a substantial constriction in the market. I'm sure the insurers who have gone before me alluded to that. I don't know how their hands would be tied by the withdrawal provisions, but it puts them in a very, very awkward spot if they cannot return a profit of any kind, or any hope of a profit, to their shareholders.
Mr Tilson: The word you've mentioned which pops up in delegation after delegation is "uncertainty." I can remember quite clearly, when OMPP was introduced there would be no more insurance rate increases. At that particular time, at least, that was one of the reasons why OMPP was introduced. Of course, time has gone on and there are insurance rates for the reasons you've given and, notwithstanding what Bill 164's going to do, there are going to be some insurance rate increases now.
Then, of course, we have the minister come along and say, "With Bill 164, there'll be no rate increases." Since Mercer, he's said, "Well, there'll be some rate increases." So there's all that uncertainty. People don't know whom to believe. They don't know whether to believe the insurance industry; they certainly don't know whether to believe these people --
Mr Mancini: They shouldn't believe them.
Mr Tilson: Well, they're not believing them and I think that's the biggest fear of all: the whole subject of uncertainty. It gets back to the words "the innocent accident victim." That's what it's all about. That's who you people are trying to protect; that's who the road safety rules and all the things you're proposing and that our party is proposing -- and that's what seems to be forgotten. How can we create some certainty?
Mr Bickerton: Leave the system alone and make the modifications the industry, which has seen whatever inequities do exist within OMPP -- they can be made with the costs that the industry has supported and can support by statistics and actuarial studies, and leave the rest of it alone.
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The more the government gets involved, the more complex it is, the more it's going to cost. The party before us, from Economical Mutual, well cited the fact that it has to now, or will have to, investigate every claim, because there's no way of telling what will now be pain and suffering, and all the other nonsense that goes with it.
Mr Tilson: Time, Mr Chairman?
The Chair: You've got three minutes left.
Mr Tilson: Mr Harnick has one question for you, but I have one more question for you. Just to comment again on that very topic that you're getting at, and that is the whole subject of bureaucracy: bureaucracy among the insurance industry, bureaucracy at the commission. The innocent accident victim, again, getting back to him or her, doesn't know who -- the lawyers have gone, because the tort system has essentially been withering away with the emphasis on the benefit package.
You people -- not the brokers, necessarily, but the insurance industry -- are going to be making it more difficult, simply because the government's going to make it tougher and tougher for you to exist. The Facility people came along and told us how they're going to be regulated to death. So I guess that gets to the next fear that I'd like you to emphasize or at least talk about briefly, and that is the comparison that this whole mess of bureaucracy, the thick pages of bureaucracy, the possible expansion of the insurance commission, could turn into a Workers' Compensation Board.
Mr Bickerton: God forbid that it should. Our industry -- you've heard this before too -- is legislated in the form of the product we sell, absolutely legislated in that, which is why we're here today. We're legislated in the price that we can sell it at, and a couple of the other industries you do that with are Ontario Hydro and workers' compensation. I would submit to this commission that you've kind of screwed those up in a big way, so don't do it again. That's my only comment.
Mr Harnick: On page 6 of your brief, you state that, dealing with the $15,000 deductible, settlements will simply be inflated so that claimants are not adversely affected by the deductible. How do you know that?
Mr Bickerton: I don't know it definitively, because it hasn't occurred yet, but I don't think you have to be a rocket scientist to figure out that it's going to happen. I see it, frankly, Mr Harnick, every day in body shops. A body shop will inflate -- and this is no secret to anybody -- a claim to cover the deductible.
Mr Harnick: So you're saying that the judges will do the same thing and the juries will do the same thing.
Mr Bickerton: I would think in time it will gravitate through the system, yes.
Mr Harnick: What bothers me is that you go on to say "so that claimants are not adversely affected by the deductible." It's almost as though you want claimants to be adversely affected.
Mr Bickerton: The implementation of any deductible is to have the damaged party share in that settlement.
Mr Harnick: And that's not right if someone's seriously injured.
Mr Bickerton: If that's called "adversely affected," then yes, that's what happens. When you have a claim on your car and you pay a $250 deductible, you're adversely affected, and that's why I stated that. Do you have anything else on that?
Mr Harnick: What I'm concerned with is whether you want seriously injured persons to be adversely affected.
Mr Bickerton: No, I don't think that's the intention of anybody, but what I put it in there for was the fact that if you're implementing a deductible and a settlement is $35,000, the party injured is going to be paying $15,000 right now. My submission to you is that over time -- and I can't tell you how quickly -- that settlement will be $50,000, so the party's put back in the correct economic position he would have been in the first case.
The Chair: Mr Wilson.
Mr Harnick: We're finished that round.
Mr Tilson: We're not going to do it again.
Mr Harnick: He started the questions.
Mr Kormos: May I, Chair?
Mr Tilson: I've heard enough of Mr Wilson.
The Chair: I walked in at the end. The Liberals --
Mr Tilson: You've got to learn how to count, Mr Chairman.
Interjections.
The Chair: Okay, then I go back to Mr Mancini, because the Conservatives have had six minutes.
Mr Bickerton: We've got six minutes left, so could somebody ask a question?
Mr Mancini: I want to thank you for making your presentation today.
Interjections.
Mr Mahoney: You're done. It's over here.
Mr Mancini: The Chair made an honest mistake and he cut the Liberals' time short because he thought that you people hadn't asked your questions. It's as simple as that. It happened, and that's the way it was.
Mr Johnson: The honest mistake was when we changed Chairs. I told Mr Hansen that the Liberals were to start at 12 to, and when the question Mr Wilson was asking was finished, he went to you, and in fact he shorted Mr Wilson three minutes.
Mr Mancini: Thank you. I want to --
The Chair: Mr McGuinty had the floor at that time.
Mr Winninger: Point of order: The time should be prorated, Mr Chairman.
Mr Kormos: Prorated? Give it to Kormos.
Interjections.
The Chair: Mr Wilson only had one question?
Mr Winninger: No, I have a question.
Mr Tilson: Give it to Kormos.
The Chair: Okay, I'm going to make the decision to go back, because I thought Mr McGuinty had the floor at that particular time.
Mr Mahoney: Make him do it all over again.
The Chair: Mr Winninger.
Mr Mancini: That's ridiculous.
Mr Winninger: Back in August 1991, I had about 800 insurance representatives congregate outside my office in London. The story went across the province. They were saying to me, "Don't take over auto insurance and make it public, because we can improve benefits, we can contain premiums and we can improve the rating system without your taking it over."
Now we make a modest effort to follow through on the very things that your industry undertook to do and basically we're hearing you cry foul. You can't offer the better benefits, you say, and contain premiums, and the rating system can't be improved to restore equity to the rating system without premiums skyrocketing. I don't follow the arguments that were made at that time or that are being made now, because they're contradictory.
Mr Bickerton: I don't recall any suggestions from the brokerage community that we could change the rating system for the better. Frankly, the discriminatory rating system which exists right today makes a lot of sense. I think it's an excellent system. To de-discriminate the rating system, I think, makes absolutely no sense. I said that repeatedly to Mr Wilson in Kingston.
On the issue of rate reductions or rate stability, I think that if you look back over the last two years you'll find that rates have in fact declined. There has been no rate increase for other than accident-related situations. Premiums have come down.
I've forgotten the third point you made.
Mr Winninger: Improve the benefits, which is what we are doing, for the consumers.
Mr Bickerton: I think you'll find that the Insurance Brokers Association of Ontario, which you heard from last week, and the insurance industry have also stated that there can be benefits brought forward without substantial increases in premium. They've already made that point to you, so I don't know what your point is.
Mr Winninger: You're arguing for the status quo, and that bothers me.
Mr Mancini: I'm almost flabbergasted by Mr Winninger trying to chastise the witnesses because the NDP didn't keep its own promises.
Mr Winninger: You had a witness walk out in Thunder Bay; you shouldn't talk.
Mr Mancini: That's because you guys were yelling at the Tories.
The Chair: If you don't cut that out, I'm going to leave too. Let's get on with the question.
Mr Mancini: The NDP is chastising you because it promised three things. They promised government-owned automobile insurance and they failed on that promise; they promised lower rates and Bill 164 breaks that promise; they promised the full right to sue for everybody and they broke that promise. I don't ever remember the brokers association making promises; they're the ones that make the promises.
I want to cut through all of this and get right to the heart of the matter. Bill 164 does in fact give more benefits in some areas. Is that not true?
Mr Bickerton: That's true.
Mr Mancini: At the same time, Bill 164 takes away the right to sue for economic loss and, in doing so, takes away a great deal of benefits for some insured people. Is that not true?
Mr Bickerton: That's true.
Mr Mancini: Therefore, you have some people getting more benefits and some people getting less benefits, but at the same time, sir, you would agree with me that all statistics, even government statistics, have shown that rates are going to go up. Is that correct?
Mr Bickerton: That's correct.
Mr Mancini: Would you not agree with me that women who earn less than men are going to end up having to pay more for their insurance than men if all these changes go forward? Is that not true?
Mr Bickerton: Yes, especially if they try to de-discriminate the rating base. That'll hugely affect women and seniors, no question.
Mr Mancini: That was going to be my second point. Is it not also true that once they eliminate the age factor in the rating factor, senior citizens, who by and large statistically have good driving records, are going to have to pay more so that young men, who statistically have poorer driving records, are going to pay less? Is that not true?
Mr Bickerton: That's correct.
Mr Mancini: Where is the fairness in this legislation?
The Chair: I'm sorry, Mr Mancini. Time has run out.
I'd like to thank you for appearing before this committee.
OTTAWA INSURANCE BROKERS ASSOCIATION
The Chair: The next group is Dale Intermediaries Ltd. Would you come forward, please. Do you have any colleagues with you?
Ms Evelyn Scullion: No. As a matter of fact, I'm not here on behalf of Dale; that's my employer. I'm here on behalf of myself and my association.
The Chair: That's fine. We've got it straight. Would you please identify yourself and the association for the purposes of Hansard. We have from 3 until 3:30. You may begin.
Ms Scullion: Mr Chairman, I wish to thank you and your committee for allowing me the opportunity to express my views on Bill 164. My name is Evelyn Scullion and I am here today as a consumer and as president of the Ottawa Insurance Brokers Association, representing 500 local insurance brokers in the Ottawa-Carleton area.
Personally, I am quite satisfied with the pricing of my automobile insurance as a component of my annual expenses and have found the pricing very stable over the last five years. While I was originally negative towards the concept of OMPP, the experience that clients have had with the product has converted me to a supporter. I do agree that some improvements to OMPP are required and that some aspects of Bill 164 offer needed reforms, but feel there must be a balance between cost and benefit.
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As president of the Ottawa Insurance Brokers Association, speaking for my members, I wish to state that we cannot absorb any further market instability. The various factors in the economy have had an impact on the profitability of brokers, as our fortunes follow that of our clients. With our clients downsizing their businesses, bankruptcies, slowdowns in construction and the reductions in our clients' assets, there is already less income to keep brokerages alive and support our employee base. Bill 164 represents yet another disruption within the insurance industry, the sixth legislative change in the last seven years.
With the present economic situation increasing the cost of claims due to the increased frequency and severity of criminal activity and the interest rates at their current levels providing no relief for underwriting losses, brokers cannot face any more instability in their business.
Furthermore, the insurance brokers I represent are concerned that their clients will be faced with double-digit increases at a time when they can least afford it. The recession in Ontario has meant that a growing number of our clients are on fixed incomes or are currently unemployed.
With regard to OMPP, consumer surveys indicate consumers are satisfied with the new system because premiums have stabilized and claims are settled quickly with improved customer service. It is still very early to judge OMPP since it has only been in effect since June 1990. The industry has acknowledged that there are areas of OMPP which need improvement and has forwarded suggested areas of improvement to the government.
The cost to employees of the benefit package provided by my employer doubled this past October, and the coverages were substantially reduced. This package involves term life insurance and disability, dental and the like. My salary is also not keeping pace with the cost-of-living index; this is another economic reality.
I have read the Mercer bulletin of December 1992 entitled Workers' Compensation: Systems in Crisis, and I quote the following passage from it:
"For most workers' compensation programs, the problems began with increasing levels of worker expectations that rose in the 1980s throughout North America. Significant pressure was exerted to liberalize the work-relatedness requirement in fulfilling the criteria for a compensable injury. Changes were made to react to the higher expectations.
"Most systems are simply incapable of meeting the expanded level of entitlement plus elaborate combinations of benefits and complex rehabilitative and rehiring requirements. The greatest challenge faces Ontario, where the financial situation is increasingly desperate. The unfunded liability passed $11 billion at September 30, 1992, and will be higher by year-end."
If the province cannot fund a capped system, how is the private insurance industry to finance a system of benefits with unlimited and uncapped medical and rehabilitation benefits? Currently, under OMPP the right to sue is limited to those with injuries severe enough to meet the threshold. This has reduced the cost of investigation and legal costs in the majority of non-threshold cases. Removing the right to sue for economic losses in all cases is patently unfair. An example reported to me by a local broker is a case in point.
On December 4, 1990, a 47-year-old man riding a bicycle was rear-ended by a car, and he died, leaving a wife and eight children. This broker happened to represent both parties and can state that within three weeks of her husband's death $235,000 in death benefits were delivered to the widow and that a structured settlement of two thirds of a $600,000 settlement is now being concluded. I won't attempt to calculate what the outcome or time frame under the proposed system would be, but the point is that the current system works well in giving immediate relief and rehabilitation to the most seriously injury and to those bereaved.
The Road Ahead states: "While a costly form of settlement, the adversarial system does offer certain advantages. Injured people who are able to prove someone else's fault can receive formal recognition and customized recovery for their losses."
I feel that increasing access to tort in Bill 164 is a costly form of settlement and should be reserved for the more traumatic injuries and for those cases not exclude economic loss.
To quote once again from the government document The Road Ahead: "There is an urgent need to try to prevent road accidents from happening in the first place and to reduce their severity when they do occur. If this is achieved, tragedy and suffering, health care and insurance claims costs will be reduced."
Clearly, road safety is an issue here in Ontario. Some shocking statistics indicate that two thirds of the people killed in vehicles were not wearing seatbelts and only 79% of Ontario drivers and passengers use seatbelts. Studies prove that 85% of all road accidents can be traced to human error. This is especially true for young or new drivers, who are significantly overrepresented in all traffic accidents. Alcohol is involved in over 40% of all driver fatalities. Half of all drunk driving convictions involve repeat offenders. The number of accidents has risen by over 25% in the past 10 years.
The number of people killed or injured in accidents in Ontario has increased over the past 10 years by 18%. New Zealand, since implementing graduated licensing, has reduced the number of accidents involving fatalities of young drivers by 25% and injury by 40%.
The Road Ahead: Ontario's Strategy for Automobile Insurance Reform emphasized the need for safer roads as important in reducing the social and monetary costs of accidents. I believe that the creation of the road safety agency and the implementation of graduated licensing should be the first priorities of this government.
One of the goals outlined in Bill 39 is to influence public opinion and convince motorists that it is just not acceptable today to have careless and dangerous driving habits. The insurance industry has long been involved in educating the public on driver safety, and the drinking and driving campaigns certainly have changed attitudes and the actions of the majority of people.
I understand that formation of the road safety agency has been delayed and has in fact not received second reading. This concerns me, since the real cause of the cost of auto premiums is the number of accidents. Addressing road safety and implementing graduated licensing instead of moving ahead with Bill 164 is the real way to address insurance costs and, more importantly, to save lives.
Nova Scotia has just implemented graduated licensing, and British Columbia has just announced plans to proceed.
A further quote from The Road Ahead: "Safety and the associated cost savings should come first, not last."
The purpose of Bill 164, as stated by government, is to achieve reasonable and fair compensation for victims. The concepts of "fair" and "reasonable" must also be applied to the cost of insurance. Insurance premiums are based on the cost of claims, which is the product of the benefits payable under the policy and the frequency and severity of claims. When improvements are made to benefits, the average cost per claim increases.
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During this recessionary period, consumers cannot afford any increase in their insurance premiums and will be dissatisfied with a government that implements legislation that will increase the cost of insurance. Only higher income earners benefit from the higher weekly maximum, and groups such as seniors will be disadvantaged by Bill 164.
Also, it is my feeling that the current system under OMPP of offering the higher coverage as an additional endorsement is fairest to the majority of car drivers in Ontario. Since many seniors are not employed and live on fixed incomes, they will not benefit from higher weekly accident benefits, yet they will be forced to pay the additional costs associated with those benefits.
However, many clients choose not to purchase the enhanced benefits as they feel an automobile accident is only one source of potential injury and have purchased other products which give them broader scope of coverage and peace of mind.
Also, the regulations accompanying the legislation are extremely complex and not easily understood by consumers or even insurance personnel. Ontario motorists are just starting to become familiar with the current system, and further changes will only serve to confuse them and not be in their best interests.
In conclusion, I would like to state that the current OMPP strikes a balance between affordable premiums and adequate financial protection. The proposed reforms interject another layer of uncertainty for both the industry and consumers.
Graduated licensing and Bill 39, which relate to the goals of improving road safety and saving lives, should be initiated now to companion the reforms of the finalized Bill 164.
There is no public demand for the sweeping changes proposed by Bill 164, and clients in general express confusion as to why so much time and money has been spent on reviewing the subject of automobile insurance over the last six years when the priority should be concentrated on getting the Ontario economy moving again.
I am also concerned about the sweeping powers granted under Bill 164 to the cabinet to change regulations -- especially class and rating methods -- through an order in council without requiring legislation to be introduced in the House or any public consultation or discussion.
Thank you for your attention and consideration during my presentation.
The Chair: Thank you. Mr Mancini first.
Mr Mancini: I thank you for your brief. You've certainly touched on all of the points that have been raised in this committee since the first day of our public hearings. You've talked about the complexity and I've called this 68-page document, which even long-time litigation lawyers have told this committee through their deputations that they can't understand, a consumer's nightmare. Would you agree this document is unfriendly to consumers?
Ms Scullion: Yes, I would.
Mr Mancini: Would you agree with me that under the new regime the NDP government has introduced, while all policyholders will be asked to pay more in premiums, people at the lower end of the earning scale will in fact be subsidizing people at the higher end of the earnings scale because of the new weekly benefits regime?
Ms Scullion: I do, and it was a point in my brief.
Mr Mancini: Do you think it's fair that low-income earners should subsidize high-income earners for a basic commodity such as automobile insurance?
Ms Scullion: No, I don't, because I don't think if I'm driving a Volkswagen I should pay the premium for a Cadillac.
Mr Mancini: Your brief also indicated that you believed in having the right to sue for economic loss. The NDP members and the government are taking that right away from you and substituting for that right, the right to sue for pain and suffering, a $15,000 deductible. Do you think that's a fair tradeoff?
Ms Scullion: I think it would be very unworkable. It would become --
Mr Mancini: Thank you. I have been saying before this committee, in the Legislature and other places that the opposition members have been more than willing to assist the government in passing its road safety legislation, which it introduced quite some time ago and has left sitting on a desk collecting dust. Maybe when the government members get their turn to ask you some questions, you might want to ask them why they've not proceeded with the road safety legislation, because there's certainly not going to be any opposition in regard to enhancing, educating and training people on how to be better drivers, which will cause fewer accidents and lower the cost of insurance, or at least not increase the cost of insurance. That might be something you might want to ask them directly.
I've stated before, earlier today, that people in the Ottawa region are going to be socked with higher automobile insurance because of Bill 164, no matter whose statistics you believe. If you accept the government's statistics -- its New York consulting firm's -- they'll tell you that rates are going to go up almost 5%. If you look at Coopers and Lybrand, if you look at Wyatt, they'll tell you that rates are going to go up anywhere from 13% to 20%. The Coopers and Lybrand study says that people in Ottawa will have premiums increased by $150. Do you think they're really receiving $150 worth of new benefits?
Ms Scullion: I don't think the benefits at this time are worth $150 out of our consumers' pockets.
Mr Mancini: We've heard from many individuals, groups and organizations, the vast majority of which have spoken against this legislation and have made many comments and suggestions, like yourself, such as review the OMPP and work with the industry and all the stakeholders to see if modest, affordable improvements can be made. Do you think that's the route the government should go?
Ms Scullion: Yes, I do.
Mr Mancini: We have yet to find any substantial numbers of groups or individuals endorsing the government's proposal. The lawyers are against it. The automobile insurance industry is against it. The brokers are against it. Senior citizens are against it. Women are against it. Farmers are not for it. The Toronto taxicab association came before us; it's against it. Who do you think the NDP is appealing to with this legislation?
Ms Scullion: I'm not sure.
Mr Mancini: Thank you for your help.
Mr Tilson: The NDP, during Bill 68, was a great advocate of returning to full tort and opposed the OMPP. They opposed specifically these words: "in a threshold test," "serious" and "permanent." They opposed those words. Someone over there came up with the bright idea of a $15,000 deductible. They did away with economic loss, and that is one of the most valuable assets the innocent accident victim has. They've done away with that. You don't have any rights. I don't care, you can have all the benefits in the world but that is a very valuable asset. That's the main part of a lawsuit and that's gone. That's the major claim. A person who is permanently injured for life loses that.
My point is that I'd like you to comment in your own words as to what you think about the deductible, because it's most strange. If you sustained pain-and-suffering damages in an amount that equals $15,000 or more, then you can go to the courts, you can sue. You can't sue for economic loss but you can sue for all the other things. If you recover $15,000 you get nothing; if you recover $20,000 you get $5,000 and so on. It's really quite silly.
My theme, which the Progressive Conservative Party has been putting forward in all these hearings, is, what has ever happened to the protection of the innocent accident victim, the wonderful person these people are suppose to be defending? From the insurance industry -- I know we've all got our own little areas that we try and cover. Insurance, legal, brokers, rehabilitation people, we've all got our areas of expertise, but that's the one common theme. Can you tell me in your own words what you think of this deductible test?
Ms Scullion: I think that a good percentage -- I believe it's 85% of all pain and suffering -- would be under $15,000, so basically there would be no more people benefiting from the system than are currently under the OMPP. Why go for a routine that definitely does penalize directly the injured parties?
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Mr Harnick: You would agree that somebody who suffers a serious injury and is innocent should be able to claim for his or her pain and suffering and loss of enjoyment of life if the injury is serious?
Ms Scullion: Definitely, if the injury is serious and has lasting effects, I believe they should have full rights.
Mr Harnick: What if it's serious and causes pain and suffering for a couple of years, but the person recovers to a large degree? Would that change your impression?
Ms Scullion: It's more difficult to gauge, because pain is such a personal thing. What might put someone into bed for a long period of time, another person might be able to keep going with. I think certainly for those cases, there would have to be determination by experts as to whether there is some deserving of benefits.
Mr Harnick: If there's a serious component to it, though, you would not disagree that a person should be able to receive compensation?
Ms Scullion: Right.
Mr Harnick: You're aware that this legislation, in the eventuality of a fatality, would pay a person a fraction of what the OMPP or the previous scheme paid?
Ms Scullion: Yes.
Mr Harnick: What do you have to say about that and what are you going to tell your customers if, God forbid, somebody should come in and say: "My 35-year-old spouse died. He's left me and two kids. They're telling me that even though he used to make $40,000 a year, all I'm going to have to live on for the rest of my life and until my kids, who are seven and nine years old, become independent, is somewhere between $115,000 and $120,000"? What are you going to tell that person?
Ms Scullion: Hopefully, I won't have to tell them anything, because hopefully Bill 164 won't go through.
Mr Tilson: Hear, hear.
[Applause]
The Chair: Mr Klopp.
Mr Harnick: You'd think we rehearsed that, wouldn't you? I've never seen you before in my life.
Mr Klopp: Oh, I thought they were clapping for me. Sorry.
Mr Harnick: Don't worry, Mr Klopp.
Mr Klopp: Thank you for coming today. It's interesting -- I've been on this committee for a while now and been involved in this whole issue of insurance for a long time. I've heard the word brought up today that farmers aren't for this. I just have to wonder; under the OMPP, I just hoped and prayed I never got into an accident on my farm. At least under the old tort system, although I couldn't afford to get a good lawyer or even a poor lawyer if I would have got hurt on my farm -- under the OMPP system, I definitely couldn't have got any money. Under this system, I'm at least allowed to get my neighbour hired to do my farm work now, because really what I need on my farm is cash flow. It's just interesting that all of a sudden farmers aren't for this. I remember the old bill.
But it's interesting that just in the last moment, Mr Harnick brought up an example, and you apparently answered something to the effect "if this bill goes through." Am I to understand that every client you have right now who is under the unfortunate situation that Mr Harnick is talking about, which is very unfortunate, is able to get $120,000 or $130,000 or those kinds of dollars, every one of those clients?
Mr Harnick: Try $500,000, $600,000, $700,000.
Ms Scullion: I don't keep track of statistics on fatalities.
Mr Klopp: It's not a statistic; it's either 100% or it's -- you can tell that dear, unfortunate woman or her husband or whoever that they're going to get their --
Ms Scullion: The death benefits are prescribed depending on the number of dependants who were left behind. We have a multiplication factor. In the case I referred to in my brief, a woman was widowed with eight children. I'm told that $230,000 in death benefits was delivered within three weeks.
Mr Klopp: So every one of your clients, then, has been able to get a --
Ms Scullion: They haven't all died.
Mr Klopp: No, but it's just that a minute ago we had another person in front of us -- and that's interesting. I mean, that's how it goes in this; everybody has their own version. They commented that the old tort system was a lottery and a lot of their clients took years to get benefits and some didn't, except your clients all do, and that's fine. I just wanted to know.
Interjections.
Ms Scullion: I have a client, for example, who's a trucker --
Interjections.
The Chair: Order. See that booth back there? Those are for people when they get a little bit older and talk out loud and they don't know they're talking, so we can always put you in there for a period of time.
Mr Harnick: I hope you haven't insulted the people who are here translating. I think you should apologize.
The Chair: I'll apologize to them.
Ms Scullion: I have a client, for example, who sort of parallels your comment, David. He was getting into his truck, he fell off and he broke his leg. He wasn't able to work for a period of time and had to hire someone to drive for him. He had a disability policy, but he also collected between $5,000 and $6,000 under his OMPP auto policy, and he wasn't even driving at the time. The vehicle was parked in his backyard.
Mr Klopp: And I believe under this program, if he's under disability benefits he's also going to automatically receive benefits when he slips, without having to --
Ms Scullion: Sure, but in the previous pure tort system he wouldn't have received anything.
Mr Klopp: Yes. You brought up about our economic woes, and unfortunately, when people do have accidents, even if they are taken out of the workforce, it costs us money. We have lots of statistics over the years. I've listened to them and I thought they were just really weird, but as I got older, and now in politics and inside in here and a little closer to the system, I understand what they mean.
Would you not agree that under the new system, under Bill 164, if someone has the misfortune to be in an accident, the new schedule of benefits -- example, a supplementary medical on rehabilitation, getting them upfront money right away so they can get rehabilitated very quickly to get back in the workforce -- is that not a good thing for our economy in Ontario?
Ms Scullion: Rehabilitation is always a good thing. Preventing the loss from happening in the first place is even better.
Mr Klopp: You need both, for sure.
Ms Scullion: You need both.
The Chair: Thank you for coming before the committee today.
KIRBY AND MASSON INSURANCE LTD
The Chair: The next group is Kirby and Masson Insurance Ltd. Would you come forward, please? I'd like to welcome you to the standing committee on finance and economic affairs on Bill 164. We have one half-hour, and in that period of time if you can leave some time at the end for questions. I was reading your brief. It's short. It looks like the members are going to get quite a bit of time for questions of you. Please identify yourself and you may begin.
Mr J. Scott Kirby: My name is Scott Kirby. I'm an insurance broker and I'm a partner in a small family insurance office called Kirby and Masson Insurance Ltd here in Ottawa.
In our office we deal directly with the driving Ontario consumer. This consumer is my client. We talk to the consumer every day of the week, even on weekends, holidays, and then they even call me in the wee hours of the morning. I attempt to match the consumer's request for insurance protection with the best possible coverage, at the most competitive price available from the insurance companies with whom I have secured the contractual right to sell their products.
I am concerned that the proposed enhancements of the accident benefits as outlined in Bill 164 and the suggested expansion of the right to sue and the increased no-fault benefits will cause insurance premiums to rise. Whether the increase in premiums which will result from the proposed enhancements is only 4% to 4.5%, as suggested by Mr Charlton, the economic reality of the 1990s is that this increase is too much. Of course, Mr Charlton has acknowledged that his estimate is really just a guesstimate. In fairness, who really knows for sure exactly how much rates will go up, but there is no doubt that insurance rates will increase.
It really is very simple to explain why this will occur. If benefits are expanded and the frequency and severity of accidents are not reduced, then claim payments will increase. In order to pay the claims, the insurance companies will be forced to charge more premium, even to the good, safe and accident-free drivers.
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I know of several insurance companies who were allowed the right by the Ontario Insurance Commission to reduce their rates in early 1992 but now have been authorized by the Ontario Insurance Commission to apply premium increases. These rate increases are based on the current legislated benefits. If benefits are increased and the right to sue is expanded, please, pray tell, where will the money come from to pay the cost of the claim? The answer, ladies and gentlemen, is that the money will come from you and me and the Ontario driving consumer.
Our government should be more concerned with the practical and immediate implementation of life-saving road safety legislation. There is far more benefit to have graduated licensing for newly licensed drivers, regardless of age, than once again reinventing car insurance benefits in Ontario. This government should first concern itself with reducing accident frequency and severity before suggesting richer benefits.
Presently, the licensing system in Ontario is only concerned with requalification when a person is old or a person has excessive traffic violations. At the least, graduated licensing must be put in force in conjunction -- that is, simultaneously -- with Bill 164 as a mechanism to reduce the premium increases for which Bill 164 will be the driving force. The impact will be felt where consumers can least afford it -- their wallets.
The introduction of the withdrawal provisions will hopefully not cause insurance companies to leave Ontario nor dissuade other insurers from entering the Ontario marketplace. There is no question that several years ago, prior to OMPP, there were a few insurance companies who were uncooperative with brokers and other insurers, to the detriment of the consumer. Fortunately, the present car insurance plan, the Ontario motorist protection plan, in conjunction with the Ontario Insurance Commission and now, as of January 1, 1993, the risk-sharing pool, has significantly improved the delivery of car insurance protection and benefits to the Ontario consumer.
A uniform classification system will result in higher premiums for the average driver above age 25, and it will remove specialty rating categories for individuals who qualify as senior citizens. Rather than simply lump all drivers under one uniform classification system, a suggestion might be to develop a classification system which includes new drivers and drivers under age 25, where age stipulates the specific classification pool; however, sex and marital status are not used as rating criteria. It is curious that age-banded classifications are accepted rating criteria for life insurance companies but are frowned upon by some politicians when applied to car insurance driver classifications.
In closing, I feel that Bill 164 will be expensive for the Ontario driving consumer. The fact is that implementing Bill 164 without real, meaningful road safety legislation means that there will never be a reduction in the cost of car insurance claims paid in Ontario. Legislation which implements practical risk control techniques to reduce car accidents will help achieve cost control. Enhanced benefits and expanded rights to sue under a car insurance policy will simply increase the amount of claims, which will result in an increase in the premiums which the Ontario consumer will be required to pay.
Kirby and Masson Insurance Ltd dates back to 1859. As insurance brokers, we accept being in the line of fire for questions from our customers. Without a doubt they will want to know what has been done on their behalf to protect them against increased premiums, and I will tell them that I said to the government, "No to Bill 164; yes to road safety."
Thank you for the opportunity of presenting this brief. I hope I have provided a down-to-earth view of the concerns of the average car insurance consumer.
The Chair: Thank you very much for your presentation, sir. First we're going to go to Mr Tilson.
Mr Tilson: I hope the government will listen to your warning because, certainly, we in the opposition have been giving similar warnings since these hearings began, in fact, since the bill was first introduced, as has the insurance industry, as have the legal people, as has every other group or interested group or, to use their word, "stakeholder" in this province. So I thank you for coming and giving your thoughts and, yes, you can say that you've told the government, "You were warned."
The interesting thing you have said is that your fear is that rates are going to go up because of these unbelievable benefit packages that are going to cost more, and other bureaucracy, I suppose -- the minister has said, "Don't worry; rates aren't going to go up." He's modified that a little bit now that his own consultant has come forward and said that rates are going to go up but, basically, it's still, "Rates aren't going to go up because of Bill 164." Do you believe him?
Mr Kirby: If no political pressure is applied to the Ontario Insurance Commission, then, no, I don't believe him.
Mr Tilson: The difficulty of course is that the Ontario Insurance Commission can be appointed by the government. They can put their own people in there. That's another way of keeping rates down. They put their own people in there and give those people directions, "You keep the rates down." Wouldn't that be a cute thing to do?
Mr Kirby: It looks like the system's been developed for that purpose.
Mr Tilson: Kind of scary, isn't it? I don't know what knowledge you have of the income replacement formula that Mr Charlton has talked about. That has to do with lost earnings, and he has increased the maximum no-fault benefit from $600 to $1000 a week. He says this is the income-replacement formula and he boasts about this.
The difficulty is that the word is "earner," because that's how he thinks. He thinks in the words "worker," "earner." But there are other people. There are the highly qualified people who are between jobs. There are, particularly, the women who have left the workforce temporarily to go back and raise a family. There are the self-employed, the people who pour money back into their business. They don't take wages; they keep the capital going into their business to build it up. There are the children.
What are you going to tell your clients, all those people? Because you'll have a whole slew of those people. What are you going to tell them?
Mr Kirby: I'd just like to touch on the $1000 limit, from $600. Whether I am a fortunate individual or not remains to be seen, but I happen to have purchased increased loss-of-income coverage under my current car insurance policy from the $600 limit up to a $1,050 benefit. I pay over $225 more for that benefit alone. I have increased my wife to the first level, and I also have put primary care giver coverage on to our policies because we are a two-job family. Now if, as proposed in the legislation, this benefit's going to be included automatically, I'm comparing it to what I am paying now, which is an option for me to choose from. I would say that 96% or 97% of all my clients in my office with car insurance policies have chosen not to purchase the increased optional income benefit. If it is automatically included, the money to balance the actuarial tables that I'm sure the insurance companies use and must submit to the OIC has to come from somewhere. All of a sudden people will be forced to pay more insurance premium than they are paying now for benefits which they have already chosen under OMPP not to purchase.
Mr Tilson: But you're talking about the people who qualify for that. There's a whole group of people who don't even qualify.
Mr Kormos: The vast majority.
Mr Tilson: Yes. As Mr Kormos has indicated, the vast majority. You can name group after group that doesn't even fit into that category.
Mr Kirby: That's right. Under the current system, students and seniors are entitled to reimbursement of up to $185 per week, and they don't have to be "earners."
But I'm a little concerned about what the new legislation will be. To tell you the truth, I went through that legislation. I have a business to run and, to tell you the truth, it would have taken me days and days on end without any interruptions, as an individual, to come to a clear understanding of it, because I have to compare it to the current system. I'm not a lawyer; I'm not an adjuster, so that requires a great deal more study, as a broker, on my part. I have to know how I'm going to interpret it to present it to my clients.
Mr Tilson: Don't feel badly. There are lawyers -- I'm sorry, sir.
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Mr Kirby: Perhaps I'm a simple individual and I'm just a broker, but the fact is that you cannot expand benefits, expand the right to sue, have no controls on improvements on Ontario's roads and expect rates to stay the same. It doesn't work. We all know it in our families, when we're doing our budgeting; if you haven't got the money, you don't spend it.
The Chair: Two minutes, Mr Tilson.
Mr Tilson: That's a common theme, that people don't seem to understand these regulations, lawyers, accountants. Insurance companies have hired people to tell them what the heck they mean, and they don't know, so don't feel badly. I don't mind saying that I have no idea what in the heck they mean, and I'll bet you this group over here doesn't know what they mean. I'm not embarrassed to say that.
But when you look at all of that uncertainty, when you look at the uncertainty of this so-called threshold test, this deductible test, this new test they have, let's face it, the tort system took years and years to develop what was to be meant in dollars and cents in that system.
The OMPP is going through a process now. There are at least two cases that are mentioned constantly in these hearings. One goes to one extreme, the other may or may not go to the other extreme, and since they're probably both under appeal, I don't think it's proper for me to say one way or the other. But the fact of the matter is that this test, the OMPP test, is going through a test, a flux.
There's no question, beyond a shadow of a doubt, that the deductible test -- for example, will courts award more just to make people qualify? Will they be more generous in the pain and suffering, since economic loss has been taken away? I don't want to get into too many legal jargon phrases, because I'm not so sure I understand them, but all those things. If the trilogy test was taken away, if the cap was taken away, there are all kinds of predictions. Is it possible that the 20% estimate of increase in rates is too low with all these uncertainties?
Mr Kirby: I have no idea. To tell you the truth, I really don't know. The cost, when you change a system around, even with OMPP -- we've had it just over two and a half years, and even now statistics are barely sufficient to keep rolling. To get a good handle on it, you need to have a number of significant years, three to five years of solid, regular working of a plan to know what you're doing.
Lloyds of London has unlimited liability. They run on a three-year plan. They don't know what their liabilities are for 1992 and they won't know until 1995. So how can the government of Ontario expect to have unlimited benefits and expect the private insurance companies to be able to predict what premiums they're going to need and provide the stability which the Ontario consumer expects and deserves?
Mrs Mathyssen: Thank you for your brief. I have a couple of questions. I'll try to make time for other members of my caucus.
The first is in regard to a statement on page 3. You say in the second paragraph, close to the end of the page, "Rather than simply lump all drivers under one uniform classification system, a suggestion might be to develop a classification system which includes new drivers and drivers under age 25, where age stipulates the specific classification pool." And I wonder, why age? Why not driving experience? You could have a 17-year-old with one year's driving experience; you could have a 19-year-old with one year's driving experience.
Mr Kirby: The reason for that is that presently in Ontario, drivers who are age 25 and over -- let me just exclude seniors, people who qualify for specialty discounts that some insurance companies have, because not all companies provide those specialty discounts, other than putting them into that classification -- are classified based on the type of car they drive, their years of experience, whether they've been accident-free, the use of the car. Rather than just lump everybody all in at once, because those drivers over age 25 will be adversely affected, they will be compensating for the young drivers whose rates will go down as a result of melding into one classification.
All I'm saying is that in the current system over 25 age is used but it's used as an overall pool. It doesn't matter if you're 45, 32 or 52, your classification is based on use of the vehicle, type of vehicle and your driving record. Why can't they have a second classification pool between the ages of 16 and 25, so that the age category is, are you between the ages of 16 and 25, yes or no? If you are, what do you use your vehicle for? You may end up with two different ratings for the same use of the car, but it will be a step towards uniform classification. There's no question that uniform classification has been an instruction from the Supreme Court of Canada and that it has to be developed. All I'm saying is that there are different ways to do it than lumping everybody into one category.
The Chair: Mr Winninger. Oh, did you have another question?
Mrs Mathyssen: I have another question. I draw your attention, I'm not sure to which page of your brief, but you do say that our government should be more concerned with the practical and immediate implementation of lifesaving road safety legislation. I come from the Ministry of the Environment and we do believe in prevention. It's far more intelligent.
I presume that with an implementation of safety practices, ultimately not only would it save carnage on the roads, but it would save insurance companies a significant amount of money. I wondered, has the industry pledged any money to this road safety program, and if so, how much?
Mr Kirby: I don't know if the industry has or has not pledged money -- I'm a private insurance broker -- but I have heard numerous advertisements on, I think, the radio and maybe the TV -- I'm not sure; probably not TV, it's too expensive -- about the Insurance Bureau of Canada and I think the Insurance Brokers Association of Ontario touting or asking for graduated licensing.
Mrs Mathyssen: Are they sponsoring education courses? Are they putting some money into what they're asking the government to do?
Mr Kirby: I'm sorry, I don't know that.
Mrs Mathyssen: That would be interesting to find out.
Mr Winninger: As you know, sir, there are many improvements included in Bill 164 that don't presently exist in OMPP; for example, indexation, increasing weekly benefits to cover 97% of full-time income earners as opposed to 73% under OMPP, a lower threshold for suits for pain and suffering, removal of the rehabilitation caps, a better rating system and extending injury to include psychological and mental injury as well.
We've had many groups that have come forward and expressed approval for these changes, such as the Advocacy Resource Centre for the Handicapped, the Consumers' Association of Canada, the Canadian Independent Adjusters' Association, the Ontario Chiropractic Association, the brokers, the Coalition of Motorcycle Organizations. These groups have suggested that they're quite pleased with the improvements we've introduced under Bill 164. You, sir, keep dwelling on the cost. I believe you're aware that Minister Charlton has indicated that it's his intent to contain premium increases.
Mr Mancini: On a point of order, Mr Chairman: All of those groups that Mr Winninger has named did not holus-bolus endorse Bill 164. That's a bunch of poppycock.
The Chair: I'm sorry. You're next, Mr Mancini. You can set the record straight on your beliefs.
Mr Winninger: The members heard the same evidence I have, and in fact I'm glad that some of the members opposite me are back now because this morning they were chastising government members, myself included, for going out and making a phone call. I see that the opposition members are not above that, so they can earn their salaries the same way we are.
The Chair: Excuse me, Mr Winninger, carry on. The witness is there.
Mr Winninger: Perhaps he could give an answer to the question without undue interruptions from members who flip back and forth.
Mr Mancini: Give him an accurate answer to the inaccurate question.
Mr Kirby: Excuse me, ladies and gentlemen. Thank you. First off, I want to go on the record. I think the benefits are wonderful. I absolutely do. I think they're just great. But we don't live in a perfect world and in all fairness everybody in this room knows that there are hundreds of thousands of people out of work, and there are just as many who are on the brink of bankruptcy, who cannot afford increased premiums. If this Bill 164 is put through without working towards helping insurance companies and the consumer avoid and reduce accident frequency, you will ultimately end up with rates going up.
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Mr Winninger: Are you prepared to take steps in your industry to make your operations leaner the same way all other sectors are trying to make their operations leaner, to ensure that you can deliver a better benefits package to the consumer at a reasonable premium?
Mr Kirby: How many more people would you like on unemployment insurance?
Mr Mancini: Just for the benefit of our witness, four or five organizations appeared before our committee that Mr Winninger tried to indicate to you endorsed Bill 164 holus-bolus. He tried to leave that impression with you. Just a couple of them, I noted the chiropractors, under questioning from myself, were unable and refused to make any comments regarding the cost of Bill 164, what it would do to seniors and women and the whole affordability aspect. They had nothing to say about road safety. The only thing they said to the committee was they appreciated the opportunity to be part of the medical establishment that would be treating accident victims.
The Ontario motorcycle association told the committee flat out that 5% to 6% of its members now do not carry automobile insurance because of cost and they told the committee that they believed 9% to 12% would not carry motorcycle insurance if Bill 164 was passed. That was the testimony before the committee, so don't for a moment believe all these groups came before us to support Bill 164. You know, we have been in a struggle to try to find out, Mr Kirby, who in fact is in favour of Bill 164. Do you know who Mel Swart is?
Mr Kirby: Yes.
Mr Mancini: The former NDP member for Welland-Thorold. Mel Swart put it better than anyone else I've heard before the committee or on the committee. He came before us at our early sessions and said the following, "Bill 164 is before the Legislature only because, after the NDP leader and members had made so much fuss in opposition, they couldn't be seen to do nothing now."
Mel Swart said the only reason we have Bill 164 is not because of some concern with automobile insurance rates, but that people are concerned about and don't want to pay more; seniors don't want to pay more; taxi drivers don't want to pay more; women can't pay more; people on welfare can't pay more; people who've just lost their jobs can't pay more -- just some ideological reason, some political reason.
I'm willing to sit down with the government, Mr Kirby, as I heard you say you're willing to sit down, and see if OMPP can be improved. Modest improvements at modest costs, that's what the people are looking for. They can't reach in their pockets any more, there's nothing there. We've had four years of recession; we've had record unemployment; we've had record disinvestment; we've had record plant closures; we've had record deficits in our province. With all these huge economic problems facing our province, do you not agree with me that maybe the government should be turning its attention to something more productive?
Mr Kirby: I would hope so, in light of the fact that we've all got a big debt to pay off. But I don't have a lot more money to pay for car insurance.
Mr Mancini: Thank you. I'd like to give the rest of my time to Mr Peter Kormos.
The Chair: Mr Kormos.
Mr Kormos: Thank you. How much time do I have, Chair?
The Chair: Four minutes.
Mr Kormos: Thank you kindly.
Mr Kirby: Will you give me one minute to reply?
Mr Kormos: You may not have to. Listen, we find ourselves in a most peculiar circumstance.
Interjection: Strange bedfellows.
Mr Kormos: Because here I am. I earned a couple of purple hearts, I think, in the last insurance war. We were arguing about Bill 68. New Democrats and a whole lot of other people were angry about the threshold, about the restriction on the right to compensation.
But I admit and I concede that at least there was an ideology there; not one that I agreed with, but clearly there was a constituency that was being served. There was an element in the community, the industry specifically, that said, "Look, we're requesting a threshold and this is why." It's consistent with what they said in front of Mr Justice Coulter Osborne, for instance. Mind you, the threshold at Osborne was a little bit more generous than the one the government gave him, but so be it.
I, of course, alleged freely and frequently and vociferously that the last government, by God, was in bed with the industry, must have been. Now I find out that perhaps it's a king-sized bed and maybe what we're witnessing here is one of those -- and the lawyers can tell me whether or not these things are illegal any more -- but one of these ménages à trois. In any event, New Democrats promised that if they were elected and, by God, they were -- and I know that not everybody here voted for New Democrats; I just get that feeling.
But I suspect that even those people who didn't vote for New Democrats thought: "Maybe they are a little bit different. Maybe we can count on them to keep their word the way we couldn't count on the two older parties, because New Democrats promised that they'd fight to help innocent accident victims, to give them at least a little bit back of what was taken away from them by Bill 68, and that they'd help drivers, that the last thing they'd want to do is leave a legacy of higher premiums."
Well, who'd `a thunk? Here we are. We've got a piece of legislation, the legacy that this government is going to leave Ontarians is going to be higher premiums for drivers, reduced benefits for the vast majority of victims. How dare I say that when the government, its little spindoctors, its little communications people, scurry around here whispering in people's ears prior to interviews, saying, "Tell them about the 90% wage replacement" -- 90%, they borrowed that from workers' comp. By the way, if you like workers' comp, you'll love Bill 164 -- 90% of net; that's in the fine print, as compared to 80% of gross.
Let me tell you, you know as well as I do. Take a pen or pencil out. Ninety per cent of net is inevitably going to be less than 80% of gross. They're taking money away from the people who looked to this party historically to protect them, the little people. Oh, sure, they increased the cap to $1,000. What have you got to make, around $1,700 a week, before you can take advantage of the $1,000 cap? Ninety per cent of net -- you're talking about people who make around $1,700 a week, and who's paying for it? The little people, the people making $600, $700, $800 a week.
You know, I'm in a position where I've got to tell you this. If I have to make a choice, and I do, do I prefer Bill 68 or Bill 164? Lord knows I'm as strong a critic and remain as strong a critic of Bill 68 as anybody could ever be, but I tell you that if I were going to suffer as a victim in Ontario, I'd be better treated as a victim under the Bill 68 regime than I would be under Bill 164.
It strikes me as strange that New Democrats are turning their backs on the people who looked to them the most. A sad, sad day, friend. Go ahead.
Mr Kirby: Thank you. One of the things I just want to mention is that they mentioned the $15,000 deductible in pain and suffering suits. My understanding, and I'm sure the gentleman after me will be able to correct me if I'm wrong, is that the Supreme Court roughly calculates pain and suffering at a maximum of about $250,000.
Mr Kormos: Mr Tilson can tell you that.
Mr Kirby: We're not talking about $15,000 deductible here. We're talking about possibly, eventually, that $250,000 getting pushed up because you no longer have the right to recover economic loss.
Mr Kormos: Likely those judges have got short arms and deep pockets too.
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Mr Kirby: The other thing is that I spoke with a gentleman this morning, and I'm sure he was a lawyer. I couldn't get over the fact that at least twice, if not three times, this particular lawyer indicated the consumer's right to revenge. Well, there's an inherent risk in getting into a car. There's an inherent risk in driving that car on the road. That is accepted by the mere fact of people buying and owning vehicles. We need car insurance as a buffer, but it's not a social net.
The Chair: I'd like to thank you for coming before this committee.
Interjection.
The Chair: You know, Mr Kormos, I would say that I know you're looking after those innocent victims, but I think you're looking after those innocent lawyers also that don't have the right to sue for victims.
Mr Kirby: Thank you very much.
Mr Kormos: I'll be looking after the innocent accident victims.
Mr Owens: Whose economic philosophy are you looking after?
Mr Mancini: Why did you promise it, if you don't like it today?
Mr Owens: We'll pull out yesterday's Hansard if you want to start throwing Liberal quotes around about what Mr Mancini was called in his own home town.
RONALD S. PETERSON
The Chair: Would Mr Peterson come forward, please. Welcome to the committee, Mr Peterson. We have 20 minutes. In that 20 minutes, if you can leave some time for questions. I know with this last gentleman, they each had eight minutes and they just enjoyed getting all those questions out. You may begin.
Mr Ronald S. Peterson: Thank you very much, ladies and gentlemen, for allowing me to speak to your committee with regard to the proposed changes to Bill 164. I propose to try to provide you with a perspective on behalf of some of the victims of motor vehicle accidents that I've dealt with.
I'm not an expert in the insurance field; I should point that out. I don't act for any special-interest group, not at all. I'm a civil litigation lawyer. I've been out for 10 years and I've done some motor vehicle work. It doesn't represent 50% or 60% or 70%. In fact I've checked my accounting records, and prior to Bill 68 coming through, it represented about 15% of my work. It now represents about 7% of my workload.
I can tell you, though, that for litigators, it hasn't affected the amount of work, so I'm not here to try to say that I've lost work or anything to that effect. I have plenty of other work. But I'm here to just give you some grass-roots experiences that I've had. There was a letter that I had written several years ago to Evelyn Gigantes when they were about getting rid of personal injury claims. I wanted to follow up on it and, fortunately, I've been asked to speak today.
I don't think there are actually too many lawyers who have been hurt by the loss of motor vehicle files, because most of those were litigators, and I think they've all been taken over. All the bankruptcies, unfortunately, have kept us plenty busy, so there's no lack of work for litigators in this part of the province. I guess some of the lawyers who acted for insurance companies may be hurting somewhat.
I did deal with people who suffered as a result of motor vehicle accidents. I followed their improvement and recovery until finally we reached a settlement. This was prior to the law. My practice was to speak to the people every month and listen to how much pain they had to live with through their period of recovery. In particular, they often described to me how it affected their lifestyle.
Whiplash has often been brought up as an example of a type of claim where it's suggested that the clients have exaggerated the pain and that it's not really worth it. It has been my experience that a whiplash injury dramatically changes a person's lifestyle. I've read many diaries of my clients who have talked about having headaches every day for one, two, three or four years, where the pain would be so bad that they would have to lie down at lunch-hour or at the end of the day; how they had difficulty studying at school; how they could not go shopping any more because they couldn't lift the grocery bags.
What would often seem to strike me was how parents had a real problem with whiplash in that they couldn't lift up their little kids. Again and again it seemed to do -- yet the rule of thumb for whiplash was generally $5,000 or $6,000 per year. So mild whiplash, we'd be talking maybe two years; medium, three to four years. We're not talking a lot of money; we're talking $10,000 to $20,000. That's the type of numbers that we're talking about.
This was never worth the unbelievable loss of enjoyment of life by these people. Many of these clients became my friends and I've continued to be in touch with them for other matters, such as wills or perhaps purchasing of a house. Some others were my personal friends prior to the accident and continue to be my friends now. Every one of them, 100% of them have said to me that they would never take the injury again to take the settlement money that they obtained. The money, however, seemed to represent some type of retribution or some type of comfort or return of the loss of enjoyment of life over this period of recovery. It seemed to take the edge off psychologically to seek revenge against the people who did wrong against them.
I am sure you've been made aware of the quantum of damages and how in Ontario it's been our tradition that we don't receive the million-dollar type of claims that the Americans receive in their claims. The Supreme Court of Canada set out a limit, and I believe I heard Mr Kirby talking about the $250,000. That's for a quadriplegic. That's not for, like I talk about, a whiplash or some other type of injury. It isn't the huge sums. There are those cases, but a large number of them dealt with loss of income and loss of future income. I think the present law somewhat covers that issue. We're only talking personal injuries, so we're not talking the multimillion-dollar claims. That dealt more with loss of income, and I think that's being covered somewhat.
I don't think that at any stage could anyone ever say that the damages compensated people for the loss they suffered in their life. Lawyers who handle these types of cases became aware of how it affected the individuals and their loss of enjoyment. I have spoken to many other lawyers over what's happened in the last few years since there's been a loss of the right to sue. In a very unscientific survey, litigation lawyers in the Ottawa area whom I've spoken to find that they generally have to advise someone at least once every three months that they have no right to sue for loss of enjoyment of life arising out of a motor vehicle accident.
I can tell you that it's a very painful thing to tell someone who recognizes that his life will be dramatically changed as a result of an accident for the next two or three years, or perhaps permanently. Many of us have resorted to listening to the facts and then we take a copout: We write an opinion letter to them, because it's tough to tell somebody: "I'm sorry, you're not going to get anything. Your life is ruined for the next so many years and you're not going to get anything, except perhaps loss of income."
I have a couple of examples, just to give you an idea of how this may affect you on a personal basis. I had a gentleman come to my office who'd been involved in a car accident on Highway 17 in Plantagenet. He was coming around a corner, and a car came around and was trying to make a quick turn, didn't quite make it and hit my client head on.
His knees went into the dash and he broke his kneecaps, but they recovered. His face went through the windshield, and as a result of that, every bone was crushed from just above his forehead to his mouth. His cheekbones and all above here were totally crushed. Fortunately, he had a fantastic doctor and what they did is they came up underneath his lip and put in metal supports to support his face, above his eye, and also to support his eye. From the outside, it didn't look like he had had anything. He had three very serious operations, but he'd recovered that way, except that he had nine plates in his face.
He said to me: "If I go outside my face freezes, it's frozen solid. I live in Plantagenet, so I go snowmobiling. I go cross-country skiing, I go ice-fishing, I take my kids tobogganing. That's gone for ever. What do you mean, I have no right to sue? That's not fair. I want to do something. If I have to go take it out on this guy, who's just walking away getting charged with careless driving, that's not fair. Sure, I'm getting compensation, but actually I had a disability insurance policy, so it's not any great additional value. It's not taking away from my loss of enjoyment of life."
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Another situation is a case where a five-year-old little boy was hit by a bus. He wasn't hurt extremely badly; he broke his arm and he broke his leg, but that recovered. He has had nightmares for the past year. He's afraid to drive in a car. He won't take a bus. They had to move to be closer to the school. This little boy has suffered. Under the old law, he would have got something. The parents have to live with the nightmares and the screaming and the yelling; that's not being compensated for. That type of loss hurts, and people get mad about that.
We're not talking about the majority of people, and I know this is dealing with the majority of the people, but often I think in Canada some of the rights of the individual, the victim -- and we're talking a very small minority. It's not going to win an election, there's no question about it, but these people are upset about it. As lawyers, we often have to hear these types of cases, and they're very difficult things to deal with.
The Chair: You have seven minutes left.
Mr Peterson: I have about one minute in summary. A lot of it is from memory; I just wanted to see if I had forgotten anything.
The last thing is sort of a philosophical view. Mr Kirby was mentioning it too when Mr Kirby and I were on CBC this morning. I don't know if he understood what I was saying or maybe we didn't have quite enough time to explain it; it's often difficult on the radio. The basic concept in our common-law system is that if someone does something to hurt us, we should be compensated. If there's a breach of contract, we should be put back in our position as if the wrong is going to be righted. So we try by financial awards or whatever to be put back from where we were wronged.
We can sue doctors, lawyers, accountants, everybody for malpractice. If they make a mistake, they pay for it. The insurance of all these professionals is going up, and we think nothing is wrong in dealing with that. The basic concept we have is that if someone hurts someone else, then they should be compensated somehow. That's why we get insurance. That's what the whole insurance industry is set up for, basically risk. We take insurance to protect ourselves from that risk. If we make a mistake, we've got to pay.
This money allows a person to feel he's been compensated for a wrong, either by breach of contract or negligence or a tort, and it seems to me that there's an obvious frustration and anger at not being able to get this compensation. The losses have been suffered, and I think these people need some type of compensation. Thank you very much for listening to me.
The Chair: Mr Winninger, we have a total of five minutes for the three caucuses.
Mr Winninger: I certainly appreciated your presentation. You may have seen me nodding from time to time as vignettes of my own litigation practice came back to me. But I can also remember situations where accident victims would come in, and one in particular, where a man's wife came in. He was rendered quadriplegic in a single-car accident. There was no tortfeasor to sue. He had kids who had to be supported. He had long-term care needs. He's presently in a long-term care facility in London called Parkwood Hospital.
This gentleman had no benefits under the pre-OMPP tort system other than some very meagre no-fault benefits, $140 because he could meet the employment criteria. If he hadn't been working, he would have got $70 a week. The tort system did not serve him very well, and even the not-at-fault accident victims often had to wait years until they got a payoff at the end of the road. The litigation was time-consuming obviously; it was somewhat costly. There was a payoff at the end of the road, but in the meantime they had to endure great hardship and dislocation in their lives, because they didn't have the kind of income approximating the income that the wage earner was earning. They didn't have access to the kind of rehabilitation that they can get under this plan. The benefits certainly weren't indexed.
All I'm saying to you is there is a bit of a tradeoff there and the question is where the pendulum should finally land, because if you have access to full tort, you may not get good benefits.
The Chair: I'm sorry, Mr Winninger. I'm going to Mr Mulroney -- Mahoney.
Mr Mahoney: You've given me three different names today. Would you get it straight?
Interjection: We're in Ottawa.
Mr Mahoney: It's not Mulroney, let me tell you that much.
Mr Harnick: He'll be calling you Prime Minister soon.
The Chair: Yes, Mr Prime Minister, go ahead.
Mr Mahoney: You're using my time here.
Somebody earlier asked the question, "Why has the government been spending six years" -- successive governments -- "dealing with auto insurance?" Many of you may recall -- and you may recall, sir -- the Brampton case of the young lad who was riding the bike and had a serious accident on city of Brampton property and was awarded $7 million in grossed-up income over his lifetime, and care costs and everything. The family went through a very lengthy court battle. I think at the time $7 million was considered the highest award ever for such an incident. It was subsequently appealed by the insurance company, and the long and the short of it is that this young victim got nothing at the end of the day.
Your cases are heart-wrenching, and I understand where you're coming from. What we're dealing with here is a government that is fooling around with an insurance system that by and large is working, with some exceptions and some situations perhaps, like the ones you talk about, falling through the cracks.
Rather than going back to the system that didn't work for the youngster from Brampton that started this whole kerfuffle on insurance, would you not think that we would be better finding a way for some redress by victims to go to court rather than just --
The Chair: Sorry, I've got to cut you off. I'm going to let you respond at the very end. I'm going to go to Mr Tilson or Mr Harnick.
Mr Mahoney: What's the hurry? The plane doesn't leave for a couple of hours. This is our last presenter. Let him answer the questions.
The Chair: He will, at the very end, all three.
Mr Mahoney: Let him go now.
The Chair: Mr Harnick.
Mr Harnick: What I think you're saying, sir, is --
The Chair: Wait a minute, Mr Harnick. Your mike's not on there yet. Okay. I wouldn't want to miss anything here, Mr Harnick.
Mr Harnick: I'm sure.
Everybody gets the impression that what you're saying is that we should go back to the pre-OMPP days and have a pure tort system. I don't think you're saying that at all. What I think you're saying, and everybody is trying to manipulate around it, is that there's nothing wrong with the enhanced accident benefits and the OMPP, but we still have to treat innocent victims a little differently.
In other words, why can't innocent victims claim for their actual losses? We're not taking anything away from everybody else who gets the basic benefits, but if you're innocent you should be able to claim certainly for your economic loss, certainly for your pain and suffering and certainly with some kind of a threshold so that the insurers can make a decent return on their dollars. Am I wrong in that interpretation?
The Chair: Mr Peterson, if you can just sort of sum up the three questions or statements you heard from the three caucuses.
Mr Mahoney: Do mine first. Take your time.
Mr Tilson: The trick is to remember the first question.
Mr Peterson: Actually I don't think there was a question from Mr Winninger. I think it was just a commentary.
I'm just dealing with personal injury, and I think, Mr Harnick, you set it out quite accurately, that we're only dealing with innocent victims, the right for some additional compensation.
Mr Kormos: Fair compensation.
The Chair: Mr Kormos, let the gentleman answer.
Mr Kormos: I'm letting him answer. I'm responding.
Mr Peterson: "Fair" is very subjective, Mr Kormos, and I'm not going to get into what is fair compensation for that. That's for the politicians to decide. If we can agree that there should be compensation for innocent victims, then what type of compensation and what type of alternative dispute resolution, or how much, or fixed amounts or something like that?
I'm not sure, but I just think that innocent victims should be entitled to some type of compensation. I am not suggesting that we go back to the old system. I think the system that's in place has dramatic improvements. I have cases where it's really, really helpful to people who are receiving some type of funding.
The Brampton case, just to clear that up, that boy didn't get those types of numbers for pain and suffering, nowhere near that. That represented a future loss of income, and you take a young person for his entire life, it's a staggering amount of money.
Interjection: Who said that?
Mr Mahoney: I said that.
Mr Harnick: More than $391 a week, right?
The Chair: I'm sorry. Can you just -- Mr Harnick. Just answer his question.
Mr Kormos: The plane doesn't leave for two more hours. You've got two hours to talk.
Mr Tilson: Let's have another round.
Mr Peterson: As a result, I just wanted to make that comment, but I'm not suggesting we should go back to the old system, clearly not. I think a newer system -- and I'm suggesting that we not get involved in the courts. The new board that's been set up, I think that appears to be very quick. It's an alternative dispute resolution. The courts are clogged up. We don't need these types of cases.
The Chair: Mr Peterson, I'd like to thank you for appearing before this committee. These gentlemen would like to talk to you for the next two hours and buy you supper. This committee is dismissed until 10 o'clock in Hamilton tomorrow.
The committee adjourned at 1622.