AUTO INSURANCE
CANADIAN ASSOCIATION OF REHABILITATION CENTRES
STATE FARM MUTUAL AUTOMOBILE INSURANCE CO
FAIR ACTION IN INSURANCE REFORM COMMITTEE
BOARD OF TRADE OF METROPOLITAN TORONTO
ONTARIO CHIROPRACTIC ASSOCIATION
INSURANCE BROKERS ASSOCIATION OF ONTARIO
PROGRESSIVE CASUALTY INSURANCE CO OF CANADA
ADVOCACY RESOURCE CENTRE FOR THE HANDICAPPED
ONTARIO ASSOCIATION OF SPEECH-LANGUAGE PATHOLOGISTS AND AUDIOLOGISTS
CANADIAN FEDERATION OF INDEPENDENT BUSINESS
GENERAL ACCIDENT ASSURANCE CO OF CANADA
PHYSIOTHERAPY ACTIVE TREATMENT TOWARDS HEALTH
INSURANCE CRIME PREVENTION BUREAU
ONTARIO PHYSIOTHERAPY ASSOCIATION
HEAD INJURY REHABILITATION INC
BROKERS ALLIANCE FOR INSURANCE REFORM
CENTRE FOR TRAUMATIC BRAIN INJURY REHABILITATION
MILTON PHYSIOTHERAPY AND SPORTS INJURY CLINIC
MISSISSAUGA PHYSICAL REHABILITATION AND WELLNESS CENTRE
CANADIAN CAR AND TRUCK RENTAL ASSOCIATION
CONTENTS
Tuesday 20 February 1996
Auto insurance
Canadian Association of Rehabilitation Centres
David Corey, president
State Farm Mutual Automobile Insurance Co
Bob Cooke, regional vice-president
Greg Hayward, chief actuary, Canada
Fair Action in Insurance Reform Committee
Lawrence Mandel, counsel
Board of Trade of Metropolitan Toronto
Bob Hutchison, chair, insurance committee
Ontario Chiropractic Association
Lloyd Taylor, government relations representative
David Chapman-Smith, general counsel
Insurance Brokers Association of Ontario
Bob Carter, executive director
Michael Carberry, president
Diane Wigley, president-elect
Spurge Near Insurance Brokers
Spurge Near, president
Progressive Casualty Insurance Co of Canada
Andrew Rogacki, president
William Conner, national product manager
Advocacy Resource Centre for the Handicapped
Harry Beatty, staff lawyer
Ontario Association of Speech-Language Pathologists and Audiologists
Maria Scaringi, chair, OSLA task force on automobile insurance
Michelle Cohen, member
Canadian Federation of Independent Business
Judith Andrew, director of provincial policy
General Accident Assurance Co of Canada
Ted Scott, senior vice-president, underwriting
Physiotherapy Active Treatment Toward Health
Judy Gelman, co-director
Insurance Crime Prevention Bureau
Jean-Claude Cloutier, president
Ontario Physiotherapy Association
Signe Holstein, executive director
Maureen Dwight, registered physiotherapist
Chaitanya Kalevar
Brain Injury Survivors of Motor Vehicle Accidents
Joe Ozembloski, member
Frank Bruno, member
Ann Lewis, member
Oleh Trojan, member
Brokers Alliance for Insurance Reform
Les Freud, member
Centre for Traumatic Brain Injury Rehabilitation
Gary Direnfeld, executive director
Milton Physiotherapy and Sports Injury Clinic
Judy Boivin, physiotherapist-owner
Mississauga Physical Rehabilitation and Wellness Centre
Carlan Stants, clinic director
Canadian Car and Truck Rental Association
Sid Kenmir, executive director
Harry Edgar, member
David Campbell, member
Stephen Malach
Nelson Owles
STANDING COMMITTEE ON FINANCE AND ECONOMIC AFFAIRS
Chair / Président: Chudleigh, Ted (Halton North / -Nord PC)
Vice-Chair / Vice-Président: Hudak, Tim (Niagara South / -Sud PC)
*Arnott, Ted (Wellington PC)
*Brown, Jim (Scarborough West / -Ouest PC)
*Castrilli, Annamarie (Downsview L)
*Chudleigh, Ted (Halton North / -Nord PC)
*Ford, Douglas B. (Etobicoke-Humber PC)
*Hudak, Tim (Niagara South / -Sud PC)
*Kwinter, Monte (Wilson Heights L)
*Lankin, Frances (Beaches-Woodbine ND)
Martiniuk, Gerry (Cambridge PC)
Phillips, Gerry (Scarborough-Agincourt L)
*Sampson, Rob (Mississauga West / -Ouest PC)
*Silipo, Tony (Dovercourt ND)
*Spina, Joseph (Brampton North / -Nord PC)
*Wettlaufer, Wayne (Kitchener PC)
*In attendance / présents
Substitutions present / Membres remplaçants présents:
Crozier, Bruce (Essex South / -Sud L) for Mr Phillips
Marland, Margaret (Mississauga South / -Sud PC) for Mr Martiniuk
Clerk / Greffier: Franco Carrozza
Staff / Personnel:
Andrew McNaught, research officer, Legislative Research Service
Alison Drummond, research officer, Legislative Research Service
The committee met at 0922 in room 151.
AUTO INSURANCE
CANADIAN ASSOCIATION OF REHABILITATION CENTRES
The Chair (Mr Ted Chudleigh): I don't have any business or housekeeping items to bring before the committee, so we can commence with our first presenter, the Canadian Association of Rehabilitation Centres, Mr David Corey, president. Welcome. We have 20 minutes together. If you would like to present a brief, we can then fill in any remaining time with questions.
Mr David Corey: I have had the opportunity to work in the field of rehabilitation for the last 18 years. I founded the first private rehabilitation clinic in Ontario in 1980, and in the past 10 years I've sat on various government committees relating to auto insurance and made recommendations about rehabilitation issues.
Today I come to you as president of the Canadian Association of Rehabilitation Centres, which is a trade organization representing the views of private rehabilitation centres. Our members have as their goal the provision of high-quality rehabilitation services which are designed to restore pre-accident levels of function and return injured persons to active, productive lives. Our members operate over 80 treatment facilities in Ontario and are recognized leaders in the industry. Information about the association is included at the back of the presentation, including a membership list and some standards of reasonable care that we have devised.
Access to effective rehabilitation services is in the public interest. It enables injured persons to return to maximum functioning and resume an active role in their families, the workplace and society as a whole. It ends disability claims which place a drain on insurance companies, workers' compensation and public income programs. It is important to recognize that failure to rehabilitate costs money, using incompetent rehabilitation providers also costs money, but using effective and quality-driven rehabilitation saves money. Timely, goal-directed and appropriate rehabilitation expenses can return anywhere from $7 to $30 per dollar invested.
Our submissions to Mr Sampson last fall in anticipation of this draft legislation are included in our written materials for your reference. We're pleased to see that many of the recommendations that we made last fall were considered by the minister in the draft legislation. The bill, in many respects, constitutes a fair and reasonable compromise and is a significant improvement over many of the provisions of Bill 164.
We continue to be opposed to the return to a tort system. A tort system sets up the injured person and the insurers as adversaries and defines success by the amount of money each party can keep at the end of the day. We have seen how difficult it is to promote the functional recovery of an injured person in such a stressful environment. Moreover, lawyers often discourage their clients from participating in meaningful rehabilitation prior to trial in order to augment the size of the future lost-income claim. As we know that most cases take two years to reach trial, and research tells us that rehabilitation outcomes two years post-injury are markedly reduced, a tort system effectively discourages functional recovery.
Given, however, that the government wishes to reintroduce tort, our recommendations will focus on how to give Ontarians and insurers access to meaningful and effective rehabilitation within a tort system.
Under the previous tort system, before OMPP on which I had the opportunity to work, it suited both the plaintiff and the no-fault insurer to settle the no-fault claims early. These claims were primarily the weekly income benefits and the rehabilitation benefits. Once this happened, the injured person would receive no further rehabilitation or case management and his or her condition would drift and often deteriorate. The plaintiff's own lawyer, as pointed out earlier, often promoted this non-recovery. The insured would then testify at trial that he was still disabled by pain and couldn't work, thus driving up the payout for the tort carrier, not to mention the legal fees.
These larger damage awards translate into higher premiums for car owners which as you know were climbing all through the 1980s. It is not in the public interest to have injured persons denied access to or refusing to participate in rehabilitation. Incentives must be incorporated into the legislation to promote participation in active and thorough rehabilitation programs. Insurance industry leaders have told us they share this concern.
We propose that the law require that the no-fault and tort claims be dealt with at the same time. In addition, the tort carrier should have the same power as the no-fault carrier to require the claimant to attend a designated assessment centre and participate in rehabilitation.
For the most part, the rehabilitation industry is unregulated. Although the individual health care practitioners are regulated, there are no measures directed at the issue of outcome effectiveness of the programming. In recent years, a burgeoning field has opened in which anyone could open a rehabilitation clinic without regard to quality of service.
We are proposing an outcome-focused accreditation system. Facilities or providers which provide continuing poor service, as measured by outcomes, or which violate conflict-of-interest guidelines, could be removed from the accreditation rolls. Insurers could veto funding to an unaccredited provider. This would increase value for the rehabilitation dollar.
We propose that treatment facilities be accredited by an independent body with a view to improving rehabilitation outcomes in the industry. We feel this is the logical step since the current draft legislation is proposing an assessment centre committee to accredit and monitor assessment centres. Furthermore, we propose that insurers need only pay for the services of an accredited rehabilitation facility.
Third proposal: We're pleased to see that the designated assessment centres will stay in some form, we would like to propose some improvements to this system.
First of all, currently a person must go to a DAC, the designated assessment centre, in his or her geographic area. However, insurers have been known to use a number of tactics to select a DAC they expect will be more favourable to their position. This undermines the principles of objectivity and independence that the DAC system was intended to foster. We propose that DACs be assigned on the basis of a rotating roster. The adjuster would call a 1-800 number, for example, and be given the next available DAC for his client's geographic location. This type of system would ensure that the DAC would be randomly assigned, which was the intention of the Legislature.
Secondly, the proposed assessment centre committee should be required to enforce the time limits set out in the regulations, and the DAC centres which fail to meet these limits should be removed from the roster. The only thing worse than rehabilitation denied is rehabilitation delayed.
Thirdly, it is important that the assessment centre committee ensure independent accreditation of the designated assessment centres, as well as the individual health practitioners who are working within these centres. This is a problem with the current system.
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Fourth proposal: We are also pleased that once again section 16.2 of the regulations describes the purpose and goal of rehabilitation benefits. They describe it as "reasonable and necessary measures undertaken by the insured person to reduce or eliminate the effects of any disability resulting from the impairment or to facilitate the insured person's reintegration into his family, the rest of society and the labour market."
This is an excellent description of the purpose of rehabilitation.
We propose that this definition also clearly apply to the delivery of medical benefits that are described under section 15. Right now, it's under section 16. We propose that it be clear it applies to both sections.
Fifth proposal: Part 7 of the regulations, which is entitled "Responsibility to Obtain Treatment, Participate in Rehabilitation and Seek Employment," describes the insured person's duty to participate in reasonable treatment and rehabilitation. This section clearly sets out the duty on the insured to seek out appropriate treatment and rehabilitation as part of his duty to mitigate losses.
Currently, the regulations permit the insurer to reduce the amount of the weekly benefit by 50% for failure to comply with the recommended rehabilitation. We feel that this is inappropriate and this section should be strengthened to permit the insurer to reduce the amount of the weekly benefit by 100% in cases of non-cooperation.
Therefore, we propose that the insurer be entitled to reduce the amount of the weekly benefit by 100% if the insured refuses to cooperate with a treatment plan recommended by a designated assessment centre.
Sixth proposal: The provision of case management is, in general, an unregulated service and we are of the view that greater controls are needed in order to achieve maximum rehabilitation, as well as cost-effective services.
Therefore, we propose that the regulations be amended to provide that the insurer need only fund case management practitioners accredited by an organization approved by the Ontario Insurance Commission.
There are also elaborate procedures set out in the regulations to determine what constitutes reasonable and necessary medical, rehabilitation or attendant care benefits in the event of a dispute. However, it is not clear how these apply to case managers. We propose that these same requirements apply to disputes involving case managers. Designated assessment centres should also be charged with the responsibility of resolving disputes concerning the need for the services of a case manager and a treatment plan should specify whether or not a case manager is required, since they're not required in all cases.
In conclusion, we hope these recommendations will be incorporated into the draft legislation and regulations. If so, this new system will more closely meet the needs of injured persons and insurers. With these changes, we feel that treatment and rehabilitation facilities will be able to play their full role in returning injured persons to functioning and, in so doing, can help reduce premiums costs by reducing the size of injury awards.
As you know, we have been through three different systems governing motor vehicle accident insurance in the last five years. This will be our fourth system and we hope it can provide a stable and predictable framework for dealing with the rehabilitation of those injured in motor vehicle accidents.
Mr Bruce Crozier (Essex South): Thank you, Mr Corey. You've given a number of suggestions and we won't have time to go over each of them, but on your proposal number 3 where you propose that the designated assessment centres "be assigned on the basis of a rotating roster," the reason or one of the reasons you give for that is that "insurers have been known to use a number of tactics to select a DAC that they expect will be more favourable to their position." Could you enlighten the committee on what makes you make that statement?
Mr Corey: Insurance adjusters tell us they have certain DACs that they feel they trust their opinions more highly than others, and since the DAC provisions spell out that if the DAC has assessed the person previously as an IE, an insurer examination, they're in conflict of interest to then do a DAC, so what they do is they deliberately pick that DAC or that centre for their IE, which then cuts them out of the loop for the DAC assessment.
Mr Crozier: Well, isn't that interesting. I see where you've pointed out that at least they attempt to keep them in the same geographic location.
Mr Corey: Of course.
Mr Crozier: You wouldn't want clients having to travel too much.
The proposal you've made too that treatment facilities be accredited by an independent body, there's also a school of thought that self-regulatory bodies work well, and in your work with your association, obviously, you haven't recommended that it be self-regulatory. Can you give us the reasons why you would suggest that it be independent as opposed to that?
Mr Corey: Self-regulation generally amounts to a peer review system. In our experience, a peer review system tends to be weak, does not have the teeth that are needed to sometimes change best practice procedures. We would prefer to see an independent body which doesn't have the vested interests of a self-regulatory organization, which would use best scientific and practice guidelines and be in a position to enforce them. The problem with the peer review is often there's a hesitancy to enforce some of the provisions. So, we feel it's a stronger and more credible mechanism to have an independent body conduct it.
In the United States, for example, there's an organization called CARF, Commission on Accreditation of Rehabilitation Facilities. They've fulfilled this role for over 50 years. In Ontario we have the Institute for Work and Health which is working on an accreditation system. A number of these independent bodies could be set up to provide it. I feel that what is important is that the insurers need only pay for facilities which have an established outcome record and can demonstrate that and are independently accredited.
Ms Frances Lankin (Beaches-Woodbine): As you pointed out, there have been three different systems over the last five years, and so from a partisan point of view, none of us has got it right.
We had a system back in the previous Tory years with a lot of the right to sue, and pre-1989 we saw rates escalating dramatically and huge costs involved in that tort system. Then we had the OMPP and we saw a stabilization of rates and controls put on but benefits were very, very low and a lot of people suffered through that. Then we saw the NDP increase the benefits and it limited issues around the right to sue, and rates started going up again, and now we see a plan come in that slashes rates, reintroduces tort and yet the rates aren't going to stabilize. According to the industry, they're still going to go up. So it's really difficult to get at the issues here and to try and understand from a government perspective what controls and mechanisms are really going to be effective.
What we're being told by the industry now is that the pressure on rates is primarily fuelled by the cost of medical rehab, and everybody's sort of skirting around what are the reasons. I think there might be a number of reasons. Some people talk about fraud, some people talk about there isn't a single gatekeeper and the idea of the treatment plans and all of that and the DACs start to get at that, but perhaps more work has to be done there. Others talk about that you'd better acknowledge that in the past the medical rehab system wasn't as well built up, it wasn't providing the services. A lot of people weren't getting the rehab and/or their needs were being met through the taxpayer health system. So there was a cost but it wasn't in the insurance system, it was someplace else.
I suspect it might be a little bit of all of that, but it is to me one of the nuts that we've got to crack as we go through the hearings on the draft legislation, because I think all of us need to understand what more has to be done in that area to get at the problems. I wonder if you could just take some time and talk to us about what is happening in the area and what is driving the costs and do you see possible solutions beyond your recommendations.
Mr Corey: I think you've touched on a number of the possible reasons why the costs are escalating at such a rapid rate. Fraud is to some extent a problem. Conflict of interest plays a big role. The College of Physicians and Surgeons has recently permitted physicians to own their own clinics. Each physician can own a small chunk of it, so now there are large numbers of clinics that are owned by physicians. Physicians are in that case both the gatekeeper and the recipient of the benefit of having that person referred. I know that the College of Physicians and Surgeons is looking at this issue. I think that's one that's driving a lot of costs.
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Ms Lankin: It's kind of like those funeral home operators who also run ambulance services. That's always disturbed me a little bit.
Mr Wayne Wettlaufer (Kitchener): One of the things that we're trying to do with this bill -- it's not a bill, it's draft legislation. It's a compromise, and even in the discussions that will ensue after the hearings, I'm sure there will be compromises. Of course, the insurance companies can't have it all their way and neither can the claimants have it all their way.
Do you consider what we have done an improvement in the tort system, when we consider that it's designed to improve the access to a fair settlement on the part of the claimant who would not otherwise receive appropriate moneys in a no-fault settlement?
Mr Corey: Compared to Bill 164?
Mr Wettlaufer: Compared to Bill 164 and compared to the previous OMPP.
Mr Corey: I have an inherent bias against tort, because I feel it doesn't fit well with recovery. But let's set that aside for a minute. I think the bill is a reasonable compromise among all of the various needs and demands of the various groups. What I'm proposing is more fine-tuning. For example, the gap between the responsibility of the no-fault carrier and the tort fees or insurance company, I think that's a serious problem. That was a serious problem in the 1980s. I don't see how this draft legislation has really fixed that. So that's an issue that could be fixed.
There's a lot of fine-tuning that could be done here. I'd like to see more controls on the med rehab side. Those costs which now are escalating at very high rates are out of control and what needs to be done is to make those dollars count. They need to count because they need to return something for the investment, and to do that you have to have outcome-based accreditation, you have to use some kind of functional recovery as your measures. I think it's a fair compromise. It just needs some improvements.
Mr Wettlaufer: I'd like to follow up on that tort bias that you have. I know that tort drives up the cost of claims. There's no doubt about that. However, there are those situations, and they are many, in which individuals, ie, the self-employed individual or the student, ie, a medical student, would have tremendous loss of earning capacity if they did not have some access to the court system. Do you not feel that is a compromise?
Mr Corey: Yes, I believe that is a compromise. However, I have to look at the picture from my seat. My seat is that of a rehabilitationist, and what I saw was a larger percentage of cases where because of the interfering effects of tort -- some of it's innocent, some of it's directed by the plaintiff lawyer -- the insurer would end up paying higher amounts than they really needed to, because people didn't recover as they should have. Here I'm talking mostly about the multiple -- the greatest number of injuries are soft-tissue injuries and chronic pain and psychological problems. Those are the big, big problems. I think everybody comes into agreement with the quadriplegic; what do we do, that's fine. But the real problems are the soft tissue, those areas that I described. There the questions are much greyer than you might think.
The Chair: Thank you, Mr Corey, for presenting to us this morning. We appreciate your input.
STATE FARM MUTUAL AUTOMOBILE INSURANCE CO
The Chair: We now move to State Farm Mutual Automobile Insurance Co, Mr Bob Cooke and Mr Harry Brown. Welcome.
Mr Bob Cooke: Let me begin by saying my name is Bob Cooke. I'm regional vice-president for the State Farm insurance organization, and their chief agent in Canada. I'm accompanied today -- despite the rumours that these are my personal security force -- by two interesting gentlemen, an actuary and a lawyer: our legal counsel, Harry Brown, and chief actuary for the Canadian region, Greg Hayward. Greg has 15 years of experience in the Canadian marketplace and is accredited in both Canada and the US, although he'll tell you he spent the majority of that 15 years during the last five years here in Canada.
To tell you a little bit about us, State Farm is a mutual automobile insurance company. We've been providing service to the Ontario consumers since 1938. Currently, we are the largest insurer operating in Ontario and we service approximately 600,000 vehicle policyholders in the province of Ontario. In addition to servicing our policyholders, we really are represented by 350 agents within the province of Ontario and some 1,800 employees who service the needs of our policyholders and our agency groups in Ontario.
I think it's important to know, when you have an employee population of that size, that these folks also experience their share of personal losses with regard to the auto insurance product, and while we try to put a name on insurance companies at times, we need to understand that these are Canadians servicing Canadians and they go about their jobs understanding the impact that occurs on families as a result of an automobile accident.
The last time we had an opportunity to make a presentation before this committee was three years ago, and these two gentlemen were accompanied by Vice-President Cliff Fraser at the time. At that hearing, we stated our opposition to Bill 164. In fact during those hearings, we stated the following:
We felt 164 would impose a very complex and difficult-to-administer auto product on the consumers of Ontario. We felt that Bill 164 was far too complicated and convoluted in terms of its accident benefits schedule, and it would ultimately lead to overutilization, overcompensation, and potential abuse.
We stated that, in our view, the public would have no choice with regard to the benefits package that they would be covered by, a benefits package, by the way, that in many regards was far too expensive for the benefits they received, because in fact they couldn't actually collect anything, from a personal standpoint, anywhere near what the benefit levels were that were provided under that product. Finally, we stated that in our experience within other jurisdictions, we have found that when we attempt to provide a benefit structure as rich as the 164 program does, ultimately it's proven that the cost to the consumer is just too high for them to continue to be willing to live with. Finally, we believe that Bill 164's unlimited, unrestrained and uncontrolled benefits package will ultimately lead to a spiralling of costs.
We now have 25 months' experience under that program, and I believe most of the predictions we made at that time have proven to be correct.
Within the material that we handed out to you earlier today we provided under tab 1 a series of graphics that kind of demonstrate what's happening within our own insurance portfolio at State Farm relating to costs. The first I'll point your attention to is medical payments, and it's interesting to note that since 1994 we've had roughly a 265% increase in our medical costs and even more disturbing is the fact between 1994 and 1995, a period of time in which we should be starting to see some flattening of costs, we've continue to see a 35% increase in costs. So that you can relate to these charts, this depicts what's happened in an actual 12-month period of time for paid costs incurred by our policyholder group. What's also interesting to note in these numbers is the number of collisions, the actual impacts of automobiles, has remained constantly level at about 5,300 claims during this two-year period of time we're looking at, yet the costs incurred under this program are growing dramatically.
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The next one shows you medical report payments. You can see a similar increase, a 300% increase in costs.
You can see rehab payments have gone up probably 700% -- 200% in the last 12 months.
Caregiver payments have gone up 1,000% since 1993 -- roughly 50% in the last 12 months.
Attendant care payments have gone up four times in that period of time.
Income replacement benefits have gone up roughly 40%. What is comforting to see here and I think we need to take note of is the fact that the income benefit has levelled off. It really does indicate, maybe where the problems do exist, that we need to be trying to find the balance to correct in the coming months.
Of course, we all know the history of that. We've seen double-digit rate increases in each of the last two years from the industry in general. While that's not been our own specific picture as a company, it's none the less what's happened within the industry.
I'd like to begin by applauding this government for recognizing the circumstances evolving from the current auto product and for taking the initiative to look for corrective solutions and introduce corrective legislation for this process.
As a company, we are supportive of the stated goals of this legislation, which we believe are designed to restore the balance between affordable premiums while at the same time maintaining fair and adequate coverage for the consumer out there who's involved in an auto accident.
State Farm believes that the new legislation takes steps towards achieving those goals, yet we also anticipate, as the product's drafted and as was presented yesterday before this committee, that it will generate a continuing upward trend in insurance costs, and that may ultimately be viewed as unacceptable to the consumer.
I would preface that to say, when you talk about the figures that were displayed before you yesterday by the IBC, the 7% ongoing anticipated increase each year can be roughly divided in half. One half of that is sheet metal costs. The cost of the vehicle itself continues to escalate, so you have to keep that in mind as you look at the impact on coverages.
Ultimately, we are willing to provide the committee with our own actuarial report as to how we view the impact of this new product. We just have not had time, as you'll understand, to completely finish that study at this time.
Having said that, we do believe the foundation exists within this regulation to achieve the desired goals on behalf of the consumer. We're pleased to offer some constructive comment as to what we think should be incorporated in the refinement of this product.
I'd like to begin by talking about the tort area, if I can, very quickly. I think in that regard, we need to reflect back to the mid-1980s -- it was done earlier for us by the previous speaker -- and recall that it was really a runaway tort train that was fuelling not only double-digit costs, but cost increases in the area of 20% per year. I think we need to learn and take heed of history with regard to what we do with the tort element under this new process.
We recognize the government's desire to maintain an affordable and basic premium by initiating a greater degree of tort into the system to allow the recovery of economic and non-economic loss by the not-at-fault consumer. We do believe that the regulations, as drafted, provide a reasonable benefit level. I anticipate that through the course of the next couple of weeks you will receive pressure to change the threshold limits as well as the income limits suggested under the tort limits. We believe 85% of net to be a reasonable limit to afford the consumer today, anticipating the costs associated with going to work every day and removing those from the bottom-line impact on a consumer who is really seeking some type of relief as a result of a motor vehicle accident.
In addition, we think to raise that further minimizes the incentive by the insured to potentially return to work as quickly as they can. Also, any increase in the benefit level will obviously have a detrimental impact on the cost of insurance down the road.
We would also urge that the definition of the threshold for non-economic loss be modified to provide a more objective definition as to what we mean by a serious injury. We've provided a overview of what we think that definition could be consisting of within our written submission.
I will say, Ms Lankin, we were watching late yesterday as several members of the public came forth and presented their concerns. We do believe, within the confines of the new legislation as well as the suggested wording we've provided, there may be relief for many of those situations within the confines of the new product.
In terms of accident benefit regulation, we believe there are a number of areas where accident benefits could be refined to preserve the integrity of the government's proposal and maintain adequate benefits for the consumer. I could sum this whole area up by saying we need to place in the hands of the insurance industry at large the ability to manage the costs in the AB area. The insureds pay their premium to us. They expect us to manage the outflow of that premium dollar in the best interests of the consumer who is injured in an automobile accident. To that end, we've provided you a list of 22 submissions on the AB side which we think would allow you to see some refinement in that area.
More specifically, while we acknowledge the need for customer choice in terms of establishing the necessary wage loss benefit for themselves -- this is a suggested means of providing a more affordable benefit for the average individual in the province of Ontario -- we believe it would be less confusing, more manageable and less expensive if we combined these various options into maybe three or five various packages for offering to the consumer. It's almost unmanageable to think of 256 various options being available to the public out there in terms of auto insurance coverage.
There's also a need to clarify the issues associated with introducing and providing these coverages to the insured and insuring public. We believe a standard method of introduction endorsed by the government must be put in place at the time we transition into this product in order to, number one, safeguard the public and ensure they're properly informed, as well as safeguarding the agent and the broker out there providing the product, as well as the insurance companies as a whole.
While the regulations call for a discussion paper by the Ministry of Health regarding the disclosure of conflict of interest, we believe this regulation should go further in its mandate in that area and should actually require anyone with a conflict of interest to come forward and state that potential conflict. We think a full disclosure by all parties, including professionals, will reduce conflict problems associated with self-referral, and perhaps the potential for unnecessary medical and rehab services at an inflated cost being incorporated into the system.
We would also encourage the committee, through regulation, to initiate a process whereby a professional fee schedule for all medical rehab and attendant care could be begun to be developed. I would ask, does it make sense today that there is a workers' comp rate for benefits, an OHIP rate for benefits and an insurance rate for benefits, each one getting progressively more expensive?
The proposed legislation does suggest that the Ontario Health Insurance Plan be allowed to assess a levy of some type against the insurance carriers without any clear-cut definition as to how that levy will be promulgated. I would say to you, we do not currently collect premiums for that type of cost. We set our premium levels based on historical payments we've made, and as such, any additional cost that we're incurring on behalf of consumers in Ontario should be designed in a way that we're allowed to pass that cost through the rate-making process without affecting our ability to apply for the rates we need to apply for, especially as that relates to the file-and-use process that you've looked at introducing.
Finally, on the file-and-use element, and what appears to me to be the philosophical regulatory outlook of this government, I think you believe that a free-enterprise marketplace really does set out the best competitive rate for the consumer at large. We applaud your initiative to introduce a file-and-use concept. We would suggest that the regulations, as drafted, seem to impose even a greater degree of regulation on that process than existed before. We would encourage you to simplify what you deem to be a reasonable file-and-use and approval process for companies to operate under and let the free market set rates for consumers in general. I think we'd be pleased with the outcome.
Finally, I think the proposed legislation sets a framework for some tremendous advances here for the consumer and to make the insurance product work better in the province of Ontario. We, as a company, look forward to working with you in the weeks ahead to provide as much counsel and advice as we can in that area. With that, I'll end this presentation. Mr Chairman, we're yours.
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The Chair: Thank you very much. You've used up almost the entire 20 minutes. It's been suggested that we have a one-minute round of questions, and I was making light of this committee's ability to get a round in a minute.
Mr Cooke: It was not my intent to use up my time.
Ms Lankin: Particularly when you were starting to see -- I could see that look in your eye, Mr Chair.
The Chair: I didn't say that. But I know you have a question. You were mentioned.
Ms Lankin: I have lots. I want to know what I did to provoke that, actually. I can't remember what I said yesterday afternoon that would have done that.
Mrs Margaret Marland (Mississauga South): Now you know Big Brother is watching you.
Ms Lankin: One of the things I've said all along is that I have a lot to learn about insurance and the lingo. Your references, file-and-use, and the fact that the regulations are more complex than the ones they replace, could you just comment and explain that to me. Also, the OHIP subrogation, if it is 2% like it was a number of years ago, are you saying that will probably get passed on or you need to be able to pass that on in rates and that will be another pressure on the rates going up? That wasn't included in the actuarial studies we saw yesterday.
Mr Cooke: Okay, Ms Lankin, I'll try to answer the first part of your question as ask Greg to answer the second part.
In terms of a file-and-use environment, which operates in many provinces in Canada already, essentially what you're permitting the insurance company to do is file for what it believes to be the necessary rate it needs to meet the cost of the consumer today. Rather than have the detailed approval process that exists within the OIC today, they would have the right to either pass that through quickly, take a look at historically how you've filed rates and are you filing in a reasonable fashion and really place their resources into looking at individual requests for a rate that maybe don't seem reasonable at the time, so that we're putting our money to work for us in the best possible way rather than the protracted concept we have today.
Mr Greg Hayward: Very simply, on the health services levy, we are collecting no premium to cover such a levy today. Any cost estimate as to what premiums would need to do would need to take that into account. Basically, for a dollar-for-dollar pass-through, if we're assessed we would need to collect that money in our premiums as well.
Mr Joseph Spina (Brampton North): Thank you, gentlemen, for the presentation. As a 20-year customer of your company --
Mrs Marland: Conflict.
Mr Cooke: I hope you've been satisfied.
Mr Spina: Well, how you handle this I guess will remain to be seen, but I understand that you have the actuarial report pending. I think you indicated that. You indicated that some of the increases that were alluded to yesterday really relate to hard costs; in other words, more expensive repair work on sheet metal, replacing the entire front bumper on a car as opposed to a corner of it as we used to be able to do.
But the thing that I wanted to ask is that in the past, when you were in a profitable situation, because it is a mutual insurance company, you were able to refund some of that profitability in terms of credits to the premiums of your customers.
Mr Cooke: Correct.
Mr Spina: With the growth, I know you may be increasing some of the rates, but if that profitability is reflected, then you have that flexibility to again be able to reduce that premium, do you not?
Mr Cooke: Correct. We have a stated return that we look for. If we exceed that return -- and that return really is to fuel growth for the State Farm Insurance organization, to the benefit of our policyholder group, which truly owns us in the years ahead -- but where we exceed that amount we do refund, in the form of a dividend, that excess amount that we've earned in that period of time. In fact, if you look back at our history since 1991, when they introduced Bill 68 we gave an 8% rate reduction. We followed that with a 10% dividend worth about $32 million that we refunded to our policyholder group. So we do try to operate in the best interests of our policyholder, Joe.
Mr Crozier: Thank you, Mr Cooke. You've acknowledged that the product, as it's drafted now, will generate an upward trend in costs that, I agree with you, will ultimately be unacceptable to the public. In fact, those costs will even be higher and more unacceptable if the health care levy is brought into this.
We have figures that indicate to us that in the years 1990 through 1993 costs decreased noticeably from prior to that and that they were significantly lower than the period from 1984 to 1989. Had the OMPP been reviewed and tightened up where necessary, do you think that it would have resulted in costs that were significantly lower than today if we repealed Bill 164, and would costs have stabilized? What were your projections at that time?
Mr Hayward: I can review that, review the data, but you're right: Shortly after OMPP went in, we implemented an 8.4% rate reduction, along with returning the dividend in unneeded premiums. But we also did have a period there where we had two and a half years without a rate increase following that rate reduction. Since then, we've increased rates twice, both slightly less than 5%. Our rate changes have significantly lagged behind what the rest of the industry has done, but certainly costs have increased much more under this product than they would have under the prior OMPP product.
Mr Cooke: If I could add one comment to that, I think my father once told me, you can never look back, you always have to look ahead. Bill 68 sunsetted two years ago. We're really not in the process of trying to reinvent Bill 68. I think all of these products have been a slow modification of one another. I think we have to take what we have today. I think because of the way Bill 164 was set up, we have to go back to the regs to make some changes, and it's incumbent upon us to throw out that partisanship and start to work on what we're doing here for the consumer's best interests in the long run.
Mr Crozier: My father told me you have to look at experience too.
Mr Cooke: Well, we set rates that way, surely.
The Chair: Thank you very much, Mr Cooke, and thank you to State Farm for your presentation.
FAIR ACTION IN INSURANCE REFORM COMMITTEE
The Chair: We now have the Fair Action in Insurance Reform Committee, Mr Lawrence Mandel. Welcome to the committee, Mr Mandel. We have 20 minutes together. If you would like to make a presentation, we can fill in the rest of the time with questions.
Mr Lawrence Mandel: Mr Chairman, you could do me a great service if after 10 minutes you interrupted me, because I'd like to field all questions, I'd like to leave as much time for questions as possible.
The Chair: Thank you very much. I will do so.
Mr Mandel: I believe there's been a handout that's been given to everybody. I have no intention of taking the time to review that handout, because there isn't enough time to do that and I know that the members of the committee will read that handout.
First of all, as you've said, Mr Chair, my name is Lawrence Mandel. Let's be clear: I'm a lawyer. I represent an organization called FAIR. I'm counsel to that organization. Although that organization consists of various diverse groups, I'm here speaking only, really, for innocent accident victims. I'm not here speaking for lawyers, I'm not here speaking for rehab groups or any groups other than innocent accident victims.
I want to make it clear to this committee that there is such a thing as an innocent accident victim and there is such a thing as a guilty victim. In motor vehicle accidents usually there is someone at fault and someone not at fault, and we have to make a distinction between the two. As much as we want to protect everybody in this society, we can't afford it. So my thesis here is for innocent accident victims.
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As some of you know, I've been dealing with governments on this issue now for six or seven years; first with the Liberal government, then with the NDP government and now with this government.
I remind the Conservative government of its promise, its election promise, and I also remind the Conservative government how, when it was one of the opposition parties, it fought against what the Liberals were doing and what the NDP was doing. I remind this government to live up to its promises and live up to the spirit of its opposition when it wasn't in power, to protect the rights of innocent accident victims.
Now what are those rights and what did the Conservatives promise? The main promise that I want to refer to with the Conservative government, and the one that we certainly expect it to uphold, is the restoration of the right of the innocent accident victim to claim for full economic loss, all economic losses. The other was the right of the innocent accident victim to claim for non-economic losses. Let me address the most important issue first, and that is the issue of pecuniary losses, economic losses. When I say "pecuniary losses," "economic losses" is simply a synonym for pecuniary losses.
The problem with the legislation as presently drafted -- and I can only talk about what is presently drafted. If there's going to be something else coming down the road, I can't deal with that. I can only deal with what this government has put out in draft form. The problem is that so far as economic losses are concerned, the innocent accident victim is deprived of many rights when it comes to economic losses.
I should tell you that at least with the Liberal plan, the OMPP, which is now a dead issue, once you passed their onerous threshold, the innocent accident victim could claim for all economic losses without restriction. Now what's happening here? If you look carefully at the draft legislation, I believe it's really section 267 -- I won't take you through an analysis of it now; there isn't enough time. Section 267 defines the pecuniary losses that can be claimed for: 85% of net income after one week and then it pigeonholes other economic losses. It doesn't say anything about something called impairment of earning capacity. It doesn't say anything about loss of competitiveness. It doesn't say anything about what happens if you weren't employed at the time of the accident. How do you determine 85% of net? Suppose you're going to be employed some time down the road in the future? It's not there.
Now you may say, "Oh, Mr Mandel, it can be interpreted as being there." Let me tell you what an innocent accident victim can't withstand: An innocent accident victim cannot withstand uncertainty. Why? Because he or she can't afford uncertainty. If an innocent accident victim asks for advice on what their rights are and they can't be told with some certainty what those rights are, they give up because they can't afford the fight. The insurer wins. That can't be so and that can't be what this government has intended.
What this government has done in its draft bill is deprive the right of a widow, deprive the right of a widower, deprive the right of little Johnny or little Susie to claim for the loss of their father or mother, the loss of someone who may be the breadwinner for the family in terms of economic losses. What do I mean by that?
The legislation only says you can claim for non-economic losses in a fatality -- non-economic losses. Well, I can tell you what goes on with non-economic losses in the courts. For non-economic loss, probably the highest a person will be awarded -- let's say it's a widow who lost her husband, who's the breadwinner, in an accident through no fault of his own. The highest that she'll be awarded, more or less, will be around $50,000, and from that you have to subtract your deductible of $7,500. To that you can add your accident benefit; there's an accident benefit in the regulation of $25,000. So that widow will receive $67,500 completely and totally for the loss of her breadwinner husband who could be earning $50,000, who could be earning $100,000. It doesn't make a difference what he's earning, that's the maximum she gets. Outrageous. You can't have meant that. Surely, you can't have meant that for the widow or the widower, or for little Johnny or little Susie. You can't have meant that.
You can't allow in your legislation innocent accident victims to get thumped, bumped, broiled and bruised, and that's what's happening. This government, the Conservative government, can't allow that to happen. They can't allow it to happen because it's wrong. They fought this when they were one of the opposition parties and they promised in their campaign not to do it. I can't believe they won't live up to their promise. They must live up to their promise. The Conservative government is the last chance for innocent accident victims -- the last chance.
We can't afford enriched benefits for everybody -- it would be nice if we could -- no-fault benefits. It would be nice if we could have bit fat benefits for the entire society, but that's Utopia and we live in the real world and it can't be afforded. So if it can't be afforded, don't make the innocent accident victim pay for it, which is what the legislation is doing. The innocent accident victim shouldn't be paying all the costs.
Automobile insurance legislation first came into this province for the following reason -- and it's compulsory. The reason it's compulsory is because the government of the day, in its wisdom, said to the public at large, "We want to make sure that if you're driving a car, the wrongdoer is sufficiently protected by way of insurance so he or she can compensate the innocent." That was the purpose of insurance and that's why it's compulsory. So what's happening now? You're taking away the rights of the innocent. You can't do that. I know there's a premium problem, I know there's an accounting problem in terms of finances, but you can't have the innocent accident victim pay for it.
For those of you who may think, "Well, there really isn't any person guilty in a motor vehicle accident" -- wrong. Look at the Ministry of Transportation statistics, your own. The province of Ontario Ministry of Transportation statistics will show you that 80% of car accidents are caused by speed, people who speed -- they travel too fast; they advertently make the decision to travel fast and cause accidents -- people who follow too closely, people who go through stop signs, and the most serious accidents are caused by people who are influenced by alcohol. There is fault, and the faulty cannot be treated the same as the innocent.
As a matter of fact, under the benefits, often the people at fault get more money than the innocent. For example, if somebody is driving a car -- and this will happen under your plan -- and smacks into little Johnny crossing the street, who's completely innocent --
The Chair: You have arrived at 10 minutes.
Mr Mandel: I'll just finish this and I'll be open for questions. Then as a result of smacking into little Johnny, he drives into a tree and injures himself or herself, he or she will probably get more out of the system than little Johnny. What's little Johnny got? He's got a claim for non-pecuniary general damages -- that's called pain and suffering -- from which there is a deductible of $15,000. He has no claim that I can see here for income loss. But the person who injured him may have been employed at the time and has a claim under the statutory benefits for 85% of his or her net income loss. That person gets more out of the system than innocent little Johnny does.
Ethically and morally in North American society we can't allow the wrongdoer to get more out of the system than the innocent. You have to allow the widow and the widower their full economic loss for the loss of their husband or wife, you have to allow for what's called impairment of earning capacity, you have to allow for loss of competitiveness and you have to allow for loss of income in the future. By that I mean income going up -- raises, promotions. That's not in this legislation. Someone may say it can be interpreted there. Don't leave it to interpretation. Put it in there. Make it clear.
Thank you, Mr Chairman. I'm open for questions.
Mr Rob Sampson (Mississauga West): Thank you, Mr Mandel. I think one of the difficulties that we've had in this interpretation discussion is that the way in which we attempted to draft the legal access to tort in the legislation was to take it away entirely and then add back the sections of tort that we were proposing that an innocent accident victim would have access to. In that drafting style it's clear to me that we may not have caught the items that you're talking to, in the sense that while it was a policy intent to have the earning capacity, competitive advantage and future income loss in there, it's not specifically noted in the legislation. In fact, I think the legislation refers to a regulation which will define economic loss effectively. As you know, that regulation isn't there.
Maybe there are better ways to fix the drafting style to accommodate what you're after, but I want to make it clear that it wasn't the intent of the government to disadvantage the innocent accident victim from those categories. If there's some other drafting style we should follow to capture that, or it's to the point where we should be specific on the regulations up front, perhaps that's something we should be looking at, but I just want to make sure that you're aware of that.
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Mr Mandel: I appreciate that, Mr Sampson. The only suggestion I could make is this. There are two points I have to make in response to what you're saying.
First, I'm encouraged by what you say but I still have this in response: One, when you dealt with the fatality, the Family Law Act claimant, specifically in your legislation, you refer to certain sections under the Family Law Act under which the dependant -- the widow, the child -- can sue, and those sections don't include the section for loss of economic loss. That's a terrible mistake because by omitting the section that you can sue for economic loss under the act it looks as if you've done that by design, and I find that very scary on behalf of innocent accident victims.
The second point is this: It's easy drafting and it shouldn't be in the regulation, it should be in the legislation. It's a simple matter. The innocent accident victim should be able to claim for all his or her economic losses less the accident benefits and collateral benefits. End of story. Don't make it complicated, don't try to try pigeonhole it, because by pigeonholing it you're going to cause tremendous problems. By pigeonholing it you're going to have the insurance companies saying, "The legislation meant this by this." Then you're going to have the person acting for the innocent accident claimant saying, "No, no, it meant this." Then you're going to go to court fighting over that specific pigeonhole before you even find out what the right is.
What I'm trying to say to you is that if you have uncertainty in rights the innocent accident victim will lose every time because the innocent accident victim can't afford to take the chance. It's too expensive. So I'm asking and pleading with you for certainty for the rights of innocent accident victims in your legislation.
Mr Monte Kwinter (Wilson Heights): Thank you very much for your presentation. As always it's interesting. I think one of the problems we have to address, and I'd really like to get your comments, is that what is driving this whole exercise is premium rates. Let's face it, that is really what it is. Yesterday, or this morning actually, in the media, after it was announced that the insurance bureau actuaries said that rates are going to go up 7% or 8%, some government spokespeople said: "No, we're going to change that. We have to change that."
Every time you push down here, something comes up here, and we have all of these conflicting interests, and I'm not saying this in a negative way. We have the legal profession saying, "We won't have access to the courts." We have the insurers saying, "We want to make sure that we can have a product that's affordable." We have the police saying -- and as you've said, 80% of the accidents are caused by speed and yet we have the conundrum of the government getting rid of photo-radar. So everybody has a conflicting issue, and the number one thing I think everybody in this room is trying to do is to get it right.
How do you reconcile that with the fact that you're calling for increased benefits that are going to have a cost attributed to them which again is going to drive up premiums? We get into this vicious circle. Every government has tried to tackle it and everyone so far, in my opinion, hasn't quite got it right. What is your reaction to that?
Mr Mandel: Sir, first of all, I'm not calling for increased benefits. I'm actually calling for decreased benefits, but I'm calling for increased rights of the innocent. You see, if you have these increased no-fault benefits, it means that the guilty participate the same as the innocent and that's not right. It's against North American values as far as I'm concerned.
Politically, morally, economically, any category, any way you want to justify it -- I agree with you, we have to worry about the economics of this and therefore, in that framework, the guilty shouldn't participate in compensation to the same extent as the innocent. What I said before was that the whole purpose of insurance legislation was to protect the innocent, to make sure that the guilty had enough funds to pay the innocent.
So I'm not calling for increased accident benefits. By benefits I'm talking about the no-fault benefits, the statutory accident benefits. I'm calling for decreased statutory accident benefits in order to allow the innocent accident victim the proper rights that they originally had that have been taken away from them, and you don't do that by giving more to the guilty.
As sympathetic as I am to anybody in an accident, be he or she guilty or innocent, the most sympathy has to be with the innocent, and I can tell you, you have to be in my office to see what happens. I'm not here speaking as a lawyer, but it just so happens that I know what I'm talking about because I am a lawyer and I'm not going to apologize for that. But when people come to my office they're very angry when I tell them, "You can't claim for that." "But I wasn't at fault, Mr Mandel. He or she did it to me." I say: "I can't help it. The government took it away from you."
You've got to see the anger out there. There's tremendous anger. Now fortunately most people don't get into accidents so you're not having a revolution out there yet. My point is, there are still a lot of people having accidents and I see them, you don't, and I see what they're going through. There's tremendous anger that they don't have a right to make a claim against people who have caused them this injury through no fault of their own.
I agree with you. We have to watch this thing economically. Look, I don't want insurers being driven to bankruptcy. On the contrary, speaking selfishly, insurers are my best friends. Let's not kid ourselves. The way to handle this is to reduce benefits sensibly, so that the innocent can be better protected and the scheme is more affordable.
Ms Lankin: A quick question, and perhaps Mr Silipo might want to join in. I should say up front that I have a concern about the tort system. I have a bias probably in opposition to that system so some of what you say I have a hard time relating to, but I think within the tort system some of the arguments you're making are absolutely sound. The concerns you raise around survivor benefits and around definition of pecuniary loss or economic loss I understand, and I think that those points are very valid and need to be taken into consideration in any piece of legislation that is reintroducing tort in a major way.
I was wondering if you could help me, though, because one of the problems I have is when you talk about the rights of the innocent versus the guilty. It's very black and white and I understand what you're saying. Most of the cases that are used to illustrate that are the cases of little Johnny and Susie and they evoke an image that's very clear and very understandable; or of the high school student or medical student and future loss or the potential Nobel prizewinner who is struck and injured by a drunk driver.
Those kinds of scenarios are very, very clear, but I can think of many circumstances where the person who is "guilty" is not the drunk driver; it's not a horrendous act, a malicious act. Sometimes it's closer to just being an accident, and I think about that person in your definition not having equal access to any benefits or coverage under the insurance policy and I think about where that gets picked up and where that person gets taken care of. If that person also is injured it falls back on the state in many other ways and the taxpayer in many other ways. I guess that's one of the things that over the years has drawn me more towards looking at universal disability and those kinds of systems, while recognizing your concerns about cost. But could you address that grey area for me?
Mr Mandel: Sure, I'd be happy to, and I implore you, Ms Lankin, not to be fooled. I'm imploring you not to be fooled. The situations you're talking about are the minority situations. They are by far the minority situations. People are at fault. Don't ever get fooled. People are generally at fault. The police charge them. They get convicted. Their insurance rates go up. Insurers charge them higher rates for being at fault, as they should be charged higher rates for being at fault. The police should charge them. In virtually every fatality there's a charge laid.
Now sometimes you have one of these situations where it's called inevitable accident. The accident would have happened no matter what. Very rare. In 33 years that I've been practising law I've never seen that work but it's there. It's out there and sometimes it does work. But it's so rare that you can't turn the system on its head to accomplish what you're suggesting.
You are a member of the NDP and, as a member of the NDP, I would say to you the last thing the NDP wants is discrimination, and I tell you now that a total no-fault system is the most discriminatory system in the world. You want to know why? Because it treats everybody the same. And you know what's wrong with that? Everybody isn't the same. Everybody's not the same. If you treat everybody the same, that's the highest form of discrimination. Everybody's not the same, everybody shouldn't be treated the same, and the tort system makes sure they're not treated the same.
My wrist isn't the same as Oscar Peterson's wrist. If you damage Oscar Peterson's wrist, he deserves more compensation than if you damage my wrist. Everybody's different. The disabilities to people are different. You injure a violinist's collarbone, big problem. You injure my collarbone, I'll be in the office tomorrow. You can't treat people the same because they're not the same, and that's why I call on the NDP not to make that mistake. You have to be anti-discriminatory, and no-fault is total discriminatory.
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The tort system tailor-makes to the extent that we can afford it. So don't deprive the innocent. In by far the majority of cases, there is big difference between guilt and innocence -- a big difference. To the extent that there isn't, to the extent that the innocent is partly responsible for the accident, that comes off. In other words, if the innocent person is 20% responsible, then he or she will collect 80% of the compensation. The tort system is just and it's merciful, and I implore you not to abandon it, not by way of ideology. Please don't do it by ideology. The innocent accident victim's got too much on the line here.
The Chair: Thank you very much and I apologize, Mr Silipo. We've run out of time. I'd like to thank the Fair Action in Insurance Reform committee for presenting today. Thank you, Mr Mandel.
BOARD OF TRADE OF METROPOLITAN TORONTO
The Chair: We now welcome the Metro Toronto board of trade, Mr Robert Hutchison, chair of the insurance committee, and Gerald McGowan, the vice-chair.
Mr Bob Hutchison: Mr Chairman, thank you. As indicated, my name is Bob Hutchison. I am the current chair of the insurance committee of the board of trade and with me is Mr Gerry McGowan, who is the vice-chair of the board of trade. We're pleased to attend before the hearings. We have distributed a paper which hopefully you have or I guess is being passed out to you now.
I'm not sure I can match the fervour of the previous submissions, but it isn't because we at the board don't feel as strongly about this issue as Mr Mandel does. In a way, though, his comments, his introduction puts in some contrast what the board has to submit. By that I mean not that we are not compassionate to the sympathetic claims of the innocent victims of auto accidents, but in the sense that we take a macro view of the auto issue. This is a very significant issue to business, not only in Metro but in Ontario. The board has participated in discussions on auto insurance since the issue was put in play in 1984 and we have taken it seriously and tried to participate in an appropriate way.
The board is not a stakeholder in the special-interest sense that a number of people on your list here are, but we are a stakeholder in the broader sense, in the sense that board members are significant consumers of the product you're discussing. Business buys and pays for more auto insurance than probably anybody, one way or another.
The other aspect that's important to us is that the insurance industry itself is a very significant part of business in Metro and in Ontario, and in that sense, rationalizing and ensuring that auto insurance is delivered in an efficient, fair way is very important to the interests of our members and, we submit, the public interest at large in Ontario.
The imposition of an inappropriate system is costly to all Ontarians, in our submission. The costs incurred aren't just theoretical costs. They are real, non-productive costs; we're spending money on things to redress accidents, intentional wrongs, whatever, but we don't produce any wealth or any benefits to society. How we handle that instance is important, not only to us in Ontario but also to how people outside Ontario judge us.
This issue has been kicked around for 10 years, roughly, and as somebody commented earlier, we haven't got it right. We have to get it right now. It's too expensive for us, not just in terms of the costs borne in Ontario but in terms of how people looking to invest in Ontario perceive Ontario being able to handle these kinds of issues.
It's time for the government to make the tough calls. It's not a simple matter. We appreciate that; we appreciate the conflicting interests that have been referred to earlier. The government and members of this committee will have heard and will hear these special interests being put forward. Not to say they aren't without validity; however, to be swayed by one over another and to ignore the common interests of a stable and efficient system I think is wrong. We simply can't afford that any more in Ontario, and we hope we get it right.
With that introduction, we believe, as our submission indicates, that the proposal is generally on the right track and the board supports it. We believe it's an appropriate balance in the circumstances and in the way this issue has developed between protection and the issue of pricing and cost that we're all sensitive to.
That conclusion is based on the principle that costs can be contained in a fair way, and to the extent we have reservations or comments on the proposal, they primarily relate to that aspect. We endorse the principle the government has pointed out, that compensation ought to be the overriding principle rather than an entitlement system, and we believe that's consistent with a healthy long-term auto product.
There's no question, as indicated earlier, that this is a very difficult and complicated subject. For those of us who have had anything to do with it, you can't underestimate that. But with that in mind, we believe the government should provide for enough flexibility in the legislation and in the regulations to accommodate adjustments that inevitably will be required over the next period of time, as the system is worked in. It doesn't mean that the flexibility that's provided for will open the floodgates to change the fundamentals of the system, but there will be tinkering, and we believe the regulations and the legislation could be broadened in that regard.
The other aspect that relates to cost are the inherent abuses invited by the system of auto insurance we're dealing with. There are a number of aspects that we know the government has heard about and has addressed one way or another in the legislation, but there are areas where we think they might reconsider aspects of it.
One is fees, which was referred to one or two submissions ago. We're concerned that the fees and the costs charged for health care services ought to be the subject of some sort of schedule or parameters so they can be contained. OHIP, workers' comp and so on approach the matter that way, and the fear of abuses in that area could be contained within a fair and flexible schedule.
The other area that concerns us is conflict of interest, from a general philosophical and a specific cost perspective. Again, a system like this that's mandated and requires people to retain certain services invites abuses. Section 60 addresses conflicts of interest to a degree, but as has also been pointed out, it does not require disclosure of conflicts of interest and certainly doesn't go as far as to prohibit them.
We're not sure why we couldn't go further down that road and at minimum require disclosure where conflicts arise and possibly consider banning relationships where the conflict does become apparent. There's ample precedent for that in other areas of financial legislation, both provincially and federally, and it's something we don't think would be unfair to consider in this context.
Another area that concerns us is the operation of the exclusions provision in section 33. Exclusions, of course, are those areas where by virtue of the conduct of a driver, whether it's drunkenness, driving without coverage, driving without a licence, that sort of thing, compensation is denied. At the moment, the only exclusions relate to income replacement and non-earner benefits. We're not sure why the range of compensation payments that somebody who's injured would be entitled to shouldn't be restricted altogether.
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We appreciate that this means the cost may go somewhere else, but it seems to us that you're either in the system or outside the system, and if the exclusion is designed to take you out of the auto insurance compensation scheme, those costs ought properly to fall in whatever other safety nets society is going to provide. If that means increased costs on the health side, so be it; at least it's consistent and it makes the exclusions meaningful and introduces the aspect of accountability in the driving system.
We're also concerned about fraudulent claims, certainly an endemic problem in the industry. We were hoping the legislation could go further in that regard and specifically increase penalties and the monitoring of those kinds of abuses.
In conclusion, the board has also submitted in the past that auto insurance can't be regarded as an isolated phenomenon or product. It has to be integrated with the other services and regulations of the province. We're aware that the government is considering this, but it's important that it be synchronized with pending changes in health care entitlements and general workers' compensation, pension entitlements, that sort of thing. Hopefully, the underlying principle will be accountability throughout the system.
The last area that the board has considered appropriate to deal with in this area is road safety. We've made submissions in the past on that. There's no question that safer roads, driving restrictions, penalties and so on enhance road safety overall and the health of drivers, and we should not lose sight of those initiatives.
Mr Chairman, those are our submissions.
Ms Annamarie Castrilli (Downsview): Thank you very much for coming today. You made some interesting points. I'd like to focus on three very briefly. I'll ask you to comment on all three.
The first is that you indicate the need for stable insurance premiums. You probably have heard or seen the statements by the Insurance Bureau of Canada. Their idea of stability is an increase of 7% to almost 8% a year for the next five years.
The second point I find interesting is that you talk about flexibility within the regulation to address cost anomalies, and I wonder if you could enlarge on that.
The third point was brought up by the previous speaker, dealing with the notion that we might treat people who are at fault differently from people who, through no fault of their own, are in accidents.
Mr Hutchison: I'm not sure they're all related, but let me take a stab at them.
Ms Castrilli: They're not.
Mr Hutchison: We're concerned about the cost implications of this program, as we were concerned with the previously proposed program. Our view of it is that we're in this now; we can't unwind the economic situation we're in with respect to auto insurance. You can't start over again with a clean slate entirely. There is going to be some adjustment in the system.
What we're hoping this legislation will introduce, though, is a degree of accountability and that users will pay for what they get and that the product will match costs. At the moment and for the last number of years, that's been distorted.
As I indicated earlier, the board members probably pay more in auto insurance than anybody, if you identified one single group, so we're certainly not in favour of it. On the other hand, we understand we've got to pay for what we're benefiting from, and hopefully the system we're starting on over time will adjust and take that into account.
Can you remind me --
Ms Castrilli: Oh, I was asking about the flexibility, what you meant by that.
Mr Hutchison: We have been concerned that getting it right the first time is going to be difficult. I'm not going to go into the aspects right now where we think we can build in flexibility. Certainly the ability to make regulations is important, but we want to make sure there's an expectation that those can be dealt with without going through this kind of procedure in the future, which I just don't think we can afford or the province is up to.
Similarly with the legislation, the board does not endorse taking fundamental issues like this outside the purview of the Legislature and putting them into regulation form. On the other hand --
Ms Castrilli: Could you give me an example of the flexibility?
The Chair: Thank you, Ms Castrilli. I'm afraid in the interests of time we have to move on.
Mr Tony Silipo (Dovercourt): I want to pursue this question of what all this is going to do to premiums. I would have thought that part of what the government was attempting to do with this was to be clear that we would see some sorting out of the premiums and the costs to the consumer, I think to take into account very much what you said, that people ought to pay for what they're getting. We have no indication that's going to happen. In fact, as has been pointed out, we expect that premiums will increase.
The insurance system would have us understand that rate increases will be less than what they might be under the present system, and one could argue there's some benefit to that, but there's also the recognition that the benefits people are getting in terms of coverage as a basic package are less than people are entitled to today. There is clearly that tradeoff.
But overall, we're seeing no decrease in rates and we're seeing a product that is going to be less than what people are getting now. From our perspective, we're having some difficulty understanding how the consumer at the end of the day is going to be better off than they are today.
Mr Hutchison: I guess it depends on whether that's the objective. The fact is that what's being provided now can't be afforded. It's as simple as that. It may be that we're going to go through a period of rate adjustments. I'm certainly not a rate expert, but my understanding of the comments of the IBC and the other companies is that there's going to be an adjustment period over five years but that hopefully they'll work to a system where the benefits will be borne by the costs borne by society and that there will be a rational and fair relationship between what we pay and what we get out of the system.
Mr Silipo: So you're hopeful that over time those questions will get sorted out, and you're more optimistic it will get sorted out under this system than under the present one.
Mr Hutchison: Nothing that can be done by the government can change that in the immediate future. It's just that we're in the system, as I indicated; it's going to take an adjustment period to get there.
Mr Tim Hudak (Niagara South): Thank you for your presentation today. I just want to follow up with some quick questions on your recommendations on those outside the insurance system. If I understand correctly, you would like to see that anybody who engages in prescribed activity is taken out altogether for medical rehabilitation expenses etc. Does that, to your knowledge -- maybe I'm asking the wrong area here -- put any pressures on the rate system? Is that a significant contributor to increases in premium?
Mr Hutchison: I'm not sure I can answer that, but our objection to it is that it's philosophically wrong. You're either in the system or you're outside the system, and the auto product ought not to bear those costs. Otherwise, it's not a meaningful exclusion.
Mr Hudak: And how about the fine levels? We've increased the fine levels for driving without insurance etc to $1,000, I believe. Is that high enough, in your opinion?
Mr Hutchison: Probably not. I don't think $1,000 is much of a deterrent to a driver.
Mr Hudak: It's worth taking the risk, in your opinion.
Mr Hutchison: I don't think people think of it that way, but if it's potentially a big hit, they will take it into account.
The Chair: Thank you to the Metro Toronto board of trade for the presentation. We appreciate your input.
1050
ONTARIO CHIROPRACTIC ASSOCIATION
The Chair: We now welcome the Ontario Chiropractic Association, Mr Robert Haig. Welcome to the standing committee on finance and economic affairs, gentlemen. We have 20 minutes together. Would you please identify yourself for Hansard as you make your presentation, and please proceed.
Dr Lloyd Taylor: Mr Chairman and committee members, thank you very much on behalf of the chiropractic association to have the privilege of representing ourselves here today. I'm Dr Lloyd Taylor. I have a private practice in Welland and do Queen's Park for the Ontario chiropractors, and have done for a number of years.
On my extreme right is Dr Bob Haig, who has been involved in insurance with the association and is a past president of the association. He presented before the Osborne commission a number of years ago, has been very current on insurance relations for the profession and does government relations for the Ontario Chiropractic Association.
On my immediate right is Mr David Chapman-Smith, who is the general counsel for the Ontario Chiropractic Association and has been for the past 14 years. I'll turn it over to David Chapman-Smith.
Mr David Chapman-Smith: Good morning. If you've had an opportunity to look at our submission already, it's a little bit forbidding and it's not going to be possible to go right through it. On the other hand, we hope when you do look at it you'll see that it has been kept very brief and to the point, and we have kept it to four major recommendations. There were others that were urged on us by our members. I hope it's helpful.
I want to start today by saying something which we all know but needs to be reinforced, and that's that this legislation of course is all about a balance. Representing a health profession here today, I think it's quite fair for me to say that health professions haven't always done well. They haven't had the best evidence for their treatments; they haven't had the best guidelines; they haven't had the best control over their members; and that's acknowledged. In this law, when there's talk about submitting a treatment plan and evidence-based care and better guidelines, this association supports all of that and understands that's necessary. I want that to be clear from the beginning.
Likewise, on the other side, we have an insurance industry that is really not too concerned about adequate treatment but is concerned about cost. If anyone was ever in any doubt about that, you only had to look at the OMEGA proposal that came forth, which was grossly unfair to accident victims.
What this legislation tries to do is to create a right balance, to put some checks and controls on health providers and patients but also to make sure that they get adequate care, and it's that balance we're talking about today.
In the executive summary, in paragraph 1, we start by acknowledging and stating that the chiropractic profession now has a leading role in the research and management of patients. I'm not sure how much various of you know about the profession and its rapid growth in the last 20 years, but in this submission, and I won't have time to go through it now, we assert and it's our submission that the leading research in North America into automobile accidents is being done by teams led by chiropractors that have been involved in the recent Quebec task force.
Over the last 10 years, more and more accident victims have come to chiropractors because their management approach is the one that now has the best scientific evidence of effectiveness. Without getting into details, we're talking about an early active treatment with manual therapy, exercise, keeping people moving instead of immobilizing them, putting them in collars, telling them to rest, wait and get disabled.
So the profession now has a very major role in this. It also has the experience, though, of how minor changes in legislative wording that appear subtle from a legislator's point of view can have a very, very big impact on tens of thousands of patients when they get out there and into the war that goes on between providers and insurers and adjusters and case managers and everything else. It's that which we now address in the time that we have.
The first recommendation, which is in paragraph 2 of the executive summary, is that the term "medical" be replaced with the term "health care" throughout the bill and the regulations, except where the former describes services provided by a physician. In appendix A, which I won't look to now, we have gone through and tabulated all the relevant provisions.
The arguments in support of that recommendation begin at the bottom of page 2 of our submission. First of all, the argument is that it's technically wrong as a matter of legislative drafting to use the word "medical" because it's used in two completely different senses in this regulation. Sometimes it refers to physicians' services, sometimes it refers to the services of all providers, sometimes it refers to the services not of physicians but of other providers. That would be adequate argument in itself, we would suggest, but at the top of page 3, we raise the other arguments and said it's inappropriate in various ways.
In paragraph (c), what we're asking for was raised before a committee like this when the Workers' Compensation Act was amended. That submission was accepted then and we attach an extract from the Workers' Compensation Act where "medical benefits" is now "health care benefits."
Finally, in (d), and perhaps most importantly, we allude to the fact that this creates problems for patients. We have two patient example letters here. I'm not going to get into them today because of time, but these are cases where a person who has had an accident goes to their health practitioner, who, as you know, may be a medical doctor or a chiropractor or may be a physiotherapist or an optometrist or a psychologist, and then gets told by an adjuster, "We're only going to pay for this if you go to your medical doctor." That is something that used to be the law once, isn't now, but as long as you keep talking about "medical benefits," that's the culture. So our first submission is that this should be changed appropriately.
Recommendation 2, towards the bottom of page 3, is our most complex one, but rather important, and I'm going to walk through it now. It has to do with subsection 42(6), and I should just pause to say that we are rather unashamedly talking about health care benefits issues in the limited time we've got because that's where the expertise is, and ignoring the other wider issues that we've already heard about and that are going to be before you.
Subsection 42(6) is the provision that provides for acute care. This is the provision which provides that if patients are going to get injured and go straight to a physiotherapist or a chiropractor, there has to be some guarantee of payment for initial services, rather than their just falling into the system of prior filing of a treatment plan and everything.
In the legislation as drafted, there is an alternative. What it says is that for those services provided by a physiotherapist or a chiropractor, the first 15 treatments will be paid for, or the first six weeks, whichever is less. We're addressing that in this recommendation.
There is the text of the recommendation for (6). First of all, we're adding to the beginning, after "(6)," "despite subsection 1." For a technical reason that I won't get into now that's a drafting thing that has to be looked at, I think the intent of this legislation is that if you get a few treatments before you file the plan, those are covered, and I don't think that's going to be a practical problem. But it could be read to say that you couldn't, and if you put "despite subsection 1" into that, it makes it quite clear that the provision we're talking about, which provides for automatic payment for some initial services, does cover services before the plan is filed. That's very technical and I don't hear myself being very clear on that, but I don't think that's a problem.
The next thing is more important:
"(a) the incurred costs for services rendered during the first eight weeks of treatment by either or both of a physiotherapist or chiropractor."
Let's leave (b) at the top of page 4 for a moment, and I'll come back to it.
Clause 42(6)(a) at the bottom of page 3: We have the explanatory notes on page 4.
If you go to paragraph 3(b), at the moment this regulation talks about treatments, and this is just the simple point that it doesn't include assessment or diagnostic services, including X-rays, and obviously the intent was that those would be covered. So the recommendation is that the word "treatment" be changed to "services." It could be "visits," if that made people feel more comfortable, but it should include diagnostic services as well as treatment, obviously.
Under paragraph 3(c), we refer to another part of this recommendation, which is the deletion of the 15-visit alternative and the substitution of a period of eight weeks for six weeks, those eight weeks to run from the commencement of treatment, not the time of the accident. In the submission, we address those issues in detail and I'll walk you through those now.
First of all, the 15 visits: We ask where it came from, under (c)(i) at the bottom of page 4. There's nothing in the literature or in guidelines that would justify this. On the other hand, there is support in the literature and in the natural history of soft tissue injuries for a period of time.
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As used, 15 visits, it's appreciated, isn't meant to be an estimate of necessary care but rather the initial number of treatments where payment is guaranteed pending processing of a treatment plan. However -- and we urge you not to treat this as paranoia but experience in the trenches -- patients in the OCA have long experience of some insurers and their adjusters seizing upon and misinterpreting numbers like this and telling patients frankly, whatever their condition, that this is the maximum number of treatments. That's another reason for not using a number-of-visits approach. If you put a number out there, it's amazing how people jump on that if they're trying to save money and say that's what you should be getting.
If it was justified by the literature, we would support it, but we suggest that a period of time is what's supported by the literature, what's practical and provides the coverage that insurers want. We know what their reasonable expectations are, that you shouldn't have treatment for months or years from the same provider going on and on and on, but here we're just talking about initial weeks.
You can imagine there could easily be a case of moderate whiplash where after two or three days, when the initial inflammation has gone down, a patient is going to need quite intensive care over the first three, four, five weeks. If you run through 15 treatments in three weeks, and then you run into the system and people who won't pay and are put into a DAC system, you're getting interruption just where you least need it. We would suggest that for accident victims with those sorts of injuries, a period of eight weeks is appropriate, as opposed to a limited number of treatments.
Turning now to the eight weeks on page 5: In the draft legislation there's provision for six weeks, and that compares with the current law, which is 12 weeks, in the ways specified there. It's suggested by the OCA that the appropriate period having regard to the literature and all of this is eight weeks.
Again, under (iii), the OCA is extremely concerned that insurers will misrepresent six or eight weeks as the full treatment period. Understand that under the Workers' Compensation Act, for example, it's automatically 12 weeks. Under the current law it is, and we think that was based on workers' comp, and we think that's an appropriate period. We understand the desire to cut down. Our submission is that eight is right, but on the basis that this is an interim period for processing of a treatment plan, rather than the care that's necessary.
We also reference, under the second bullet, another submission that we're coming to next, that we really think there has to be some clearer guidance about who is operating designated assessment centres so that when treatment plans are judged, there is genuine peer review and things don't go awry then.
The final point under this recommendation, with the last bold subheading on page 5, is, "Time to run from commencement of treatment, and provision for treatment by chiropractor and physiotherapist." This really is a matter of understanding what are the reasonable rights and expectations of someone injured.
We say it's manifestly wrong from the patient's perspective to link the eight weeks to the time of accident. A patient may initially receive no care or medical care, and only receive chiropractic or physiotherapy treatment four, six or eight weeks after the accident.
It's quite common for someone to have a problem, get told medically to rest, relax, take a few pills, it'll settle down; to brave it out, tough it out for four to six weeks. But it's getting worse and worse. They can't get back to work. It's not working. They decide they will go to a physiotherapist or a chiropractor, and if it's eight weeks from the accident, that could cut in one week after they've started treatment.
Eight weeks we regard as and submit is a reasonable time for preliminary care. We're not talking about six months or a year or on and on, and we think it should be from the time that treatment begins.
The final element of all of this is under (ii). The second point is that we suggest both. The patient's freedom of care is unfairly limited unless he or she can elect to change from one to the other, or vice versa. It's common out there in daily practice that people will consult either a chiropractor or a physiotherapist, will find after four to six weeks of care that this is not working. At that stage, they're getting advice from everyone -- their mates at work, their spouse, everyone: "You should try a chiropractor," or "You should try a physiotherapist." The patient makes a decision after four or six weeks, "No, this care isn't working; I want to try something else."
The issue is, should the patient be able to do that? If you're from an insurance company, you might say: "No, we've already got six weeks. We've had quite a lot of care. We think the treatments are the same. You can't."
From a patient's point of view and from the point of view of reality, we would say, although there's some overlap in the practice, they're very different approaches to treatment and to management, and the patient should have their option. That, of course, is always subject to treatment plan. We're not talking about on and on, but we're saying the patient should have an option without having an assessor or an adjuster jumping all over them. This is a person trying to get better a short period of weeks after the accident where something isn't working -- and we all know that many treatments don't work for all sorts of reasons -- as to provide appropriateness, diagnosis etc. So that's rather technical and long, but there it is.
I haven't got on to the last point, have I? We know this will be controversial with the insurance industry, and it's in (b) at the top of 4. Where the insurer disputes any of the services and the matter is referred to a DAC, the incurred costs for services rendered on visits, but before receipt of the DAC determination, should be payable by the insurer, but of course recoverable if found not to be reasonable and necessary. The arguments for that we list on page 6 under (d). I'm going to walk through those because I think they're important; it's probably quicker than if I ad lib.
DAC reports are expected to be received promptly, but experience shows they're often delayed. I was talking to a chiropractor who does a lot of these assessments -- you're going to hear from him later today -- and he talks of cases where he waits two or three months to get the necessary reports for him to be able to file an assessment.
Who should bear the risk of paying for the interim care which a health practitioner and the insured feel is reasonable and necessary but an assessor who is not a clinician says is not? Under draft section 42 at the moment it falls on the insured, who may not have the resources to continue this care and feels it's needed etc. What we're suggesting is that it's right that it should fall on the insurer in the first instance, with right of recovery.
An important point that we mentioned under paragraph (ii) at the end is, if the insurer is waiting for a DAC report, because it's of financial consequence to the insurer, the insurer is going to be pressing to get that report and it's in a good position to do it. It's got weight, it's got clout in the marketplace. It's referred the thing there in the first place. It can say, "I want this report."
If it's the patient who's paying, the insurer can go to sleep on the file. The patient's going to have no clout with the designated assessment centre at all. These delays do occur, the insurance company is not going to hurry it along and you're going to have people who are accident victims dealing with their injury also trying to deal with paying for this care, which has been challenged by an insurance company, that is said by their provider and felt by themselves to be necessary.
We're obviously not saying the insurance company should pay for this whatever the decision in the designated assessment centre, but pending that decision there should be payment. That's a balance-of-interests issue.
We then move to recommendation 3, which is that section 1 of the bill should be amended by the addition of a new section 7.2. Section 1 adds 7.1, which is the new committee that the minister is going to establish to get these DACs organized and put in place all their policies and procedures etc. What we're saying in 7.2 is that there is one matter that is of too great an importance to leave to the committee but should be enshrined in the legislation. It is, and I read from near the top of page 7, "The members of the committee shall include at least one representative from each of the health professions defined as health practitioners in the statutory accident benefits schedule."
Then related to that, in the schedule there should be a new section 60 which is a corollary provision. If you read it, it says that where an assessment is made in a DAC for the purposes of determining whether all or any of the health care services given by a practitioner are reasonable and necessary: (a) if it's made by one person, the health practitioner should be from the same profession, (b) if it's by a team, one member of the team should be from the same profession.
In paragraph 5 we say that there's a compelling need to define these matters in legislation for various reasons. The Ontario Insurance Commission has tried to leave this to policy; we attach policy that says this. It is not policy that's been honoured. We have a chiropractor coming this afternoon of whom you can ask questions if we run out time now. Chiropractic patients who get into a designated assessment centre get in front of an orthopod and a physio who say: "Why the hell did you see a chiropractor? You should be doing this." I don't think it is the plan of this legislation to have turf wars in designated assessment centres. I think that if the principles of freedom of choice of health care by patients and peer review are to be respected, this needs to be there, and this is the way we suggest that it is there.
The Chair: Thank you very much. We appreciate the input of the Ontario Chiropractic Association, and we will have that opportunity this afternoon. Thank you very much for joining us today.
1110
INSURANCE BROKERS ASSOCIATION OF ONTARIO
The Chair: The next presenter is the Insurance Brokers Association of Ontario; Mr Carter. Welcome.
Mr Bob Carter: On behalf of the Insurance Brokers Association of Ontario, I wish to thank you and your committee for allowing us the opportunity to express our comments on the draft legislation to amend the Insurance Act and other acts related to automobile insurance. My name is Bob Carter; I'm the executive director of the Insurance Brokers Association of Ontario. With me today is Michael Carberry, president of the Insurance Brokers Association of Ontario and a principal of Carberry Davis Insurance Brokers Ltd in Oakville, Ontario. Also with me is Diane Wigley, president-elect of the Insurance Brokers Association of Ontario and a principal of Consolidated Insurance Brokers in Don Mills, Ontario.
What we'd like to do is begin with a brief overview of the role of the insurance professional in Ontario's insurance community and the role of our association. We will then comment on the government's proposals for a revised auto insurance plan, introduced on February 9, 1996.
Professional insurance brokers act on behalf of their clients, the insurance-buying consumers of Ontario. Brokers purchase insurance protection for their clients from various insurance providers.
When a consumer suffers a loss covered by an insurance product, the insurance broker is usually the first person the consumer contacts at any time, night or day. Insurance brokers offer assistance and counsel for their clients throughout the entire claims process.
As independent insurance professionals, insurance brokers represent a variety of insurance providers, while an insurance agent is limited by law to representing only one company and its products. The insurance broker offers the consumer a choice of products and prices from a variety of providers.
The Insurance Brokers Association of Ontario represents over 8,200 professional, independent insurance brokers, plus their support staff. The over 1,100 offices are located throughout the entire province, servicing the needs of the Ontario consumer. Our membership of independent business people are the front-line people who are the first to hear from consumers when an insurance product is not working. Therefore, we look at the design and content of the proposed reform in relation to its impact on the insurance consumer.
Whether an insurance product is no-fault, tort or a combination of the two does not concern us unless the consumer will be adversely affected. We are therefore here today to express our views on how the proposed changes will affect our clients, the insurance-buying consumers.
Mr Michael Carberry: In 1990, we made a presentation to the standing committee recommending a product that would be both available and affordable. The introduction of OMPP, Bill 68, accommodated these needs, but unfortunately, with its premature demise, we were unable to realize the objectives.
In 1993, we voiced concerns that the introduction of Bill 164 would adversely affect availability and affordability. We also expressed our concern about understandability. Bill 164 responded to neither our original two concerns nor the added problem of understandability.
Now, in February 1996, all our concerns have been validated. A consumers' group in Ottawa has also concluded that the product is not available and not affordable, and our clients continue to inform us that the product is certainly not understandable.
The new proposed legislation should resolve many of the above issues and provide a foundation on which to build a strong and stable insurance marketplace for the Ontario motorist.
We are pleased to see that you have empowered the consumer with the choice of purchasing coverage variables and indexation. This will allow them, in consultation with an independent insurance professional, to determine their specific needs.
The proposed initiatives in the legislation will deal with the systemic problem of fraud, which escalated with Bill 164. We support the five areas in the proposal which deal with the fraud issue: the disclosure of conflict, the cost recovery by the insurers and the three new offences in making a claim.
The new product appears to have the checks and balances which are necessary to deliver a price-stable product to the consumer while providing mandatory basic coverage.
Recognizing that the cost of insurance is directly related to the cost of claims, any improvement in benefits must be weighed very carefully against the potential increased costs.
On the question of availability, the proposed changes to the rate filing mechanism should provide a more competitive marketplace which will allow market forces and good business practices and principles to flourish. The initial response from the majority of providers is, "We will now be open for business."
On the question of understandability, Bill 164 produced an inordinate amount of ill-conceived regulations and created an excessive burden on the consumer. We are pleased that the new proposal has taken into account the need for a more understandable product for the consumers of Ontario.
A review of the draft legislation: We applaud your objective to repeal the contentious portions of Bill 164 which will be replaced by the draft legislation presented on February 9, 1996.
We are optimistic that the expanded tort provision will provide access to the courts for innocent victims while controlling costs through reduced disability benefits and higher deductibles.
The new provisions for early notice of claim and opportunities for early settlement of claims will benefit all Ontario drivers. Costs should be contained while providing a mechanism for injured parties to receive benefits in a more timely fashion.
Ms Diane Wigley: With respect to accident benefits, we agree that the benefits should be reviewed by the minister every two years. We look forward to being involved in this process.
On income replacement benefits, we find that the changes to income replacement address the needs of the majority of Ontario motorists. Consumers should be given the option to increase the level of benefits to meet their specific needs.
Non-earners and caregivers: We accept the reduced benefits as shown under the proposal, since these individuals will have the ability to top up coverage or, if not at fault, have recourse through the courts.
On medical rehabilitation, including attendant care, we agree with the recognition of catastrophic injury. Your proposal provides for basic no-fault coverage for non-catastrophic injury and substantially increased limits for catastrophic injury. You have also provided the consumer with the choice of purchasing increased benefits to suit their individual needs.
On death benefits, we agree with the reduction of the basic benefits to $25,000 on death, while maintaining the $6,000 for funeral expenses. These measures will contribute to the control of costs.
On optional benefits, we agree with these top-up provisions. The mandatory optional benefits provide an excellent opportunity for customizing the insurance product to the individual consumer's needs.
Dispute resolution: We applaud the inclusion of an enhancement to early settlement resolution opportunities. Consumers are best served by timely and fair claim resolution, without having to access the courts.
On rate review, the concept of file and use should allow our providers to price their product more competitively, knowing that they can take corrective action, if required, without undue regulation.
Anti-fraud: Consumers are becoming more aware and better informed about the impact of fraud on auto insurance premiums. We and the entire industry must continue to work together with government to control, monitor and reduce all levels of fraud. Your anti-fraud measures -- allowing insurers to request sworn statements and proof of identity for claimants; providing an explicit provision to suspend accident payments if there is wilful and material misrepresentation; tightening the initial notification and application period to 30 days; making it an offence for any claimant or service provider to knowingly provide false information to insurers in order to obtain payment, and for failing to inform an insurer of a material change in circumstances related to the insured's entitlement to benefits; and increasing fines for drivers without insurance -- should result in a substantial curtailment of fraud and eventual premium savings.
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On health care costs recovery, we are cognizant of the rapidly rising health costs in our province. We would remind the committee, however, that any rise in the cost of claims is ultimately reflected in premium costs to the consumer. We do understand the government's position that costs should be borne by users of services rather than borne by all taxpayers. The system must be fair.
Mr Carberry: We, as insurance brokers, have been involved in many other issues involved in the insurance industry. On the question of road safety, we support road safety initiatives. Lower accident frequency and severity will lead to lower insurance premiums. We urge that the government take stronger measures to curb the carnage on our highways. The Insurance Brokers Association of Ontario is committed to working with you to achieve a meaningful result.
Easier access to driver information at point of sale and easier access to insurance information by front-line law enforcement officers will ensure that consumers are properly rated and uninsured motorists instantly identified.
On the issue of discrimination, the present system does not permit the collection of information on individual policies relating to collateral benefits, income and occupation. To level the playing field, information should be available in the underwriting of all insurance policies.
On the issue of Facility, the Insurance Brokers Association of Ontario welcomes the opportunity to work with the Facility Association and the government to reform the Facility Association, the take-all-comers rule, and the insurance risk point system to provide a fair and equitable system of insurance for all Ontario motorists.
Mr Carter: The draft proposal addresses many of the concerns we expressed in our presentation of January 27, 1993. In particular, the system should move from one of entitlement to one of indemnification. The basis of insurance is to return individuals to the same position they were in prior to the loss, to the extent that money can.
The combination of this legislation and the appropriate regulations should result in readily available and affordable automobile insurance coverage in a stable marketplace. As the government proceeds with these regulations, IBAO welcomes the opportunity to be an integral part of the entire process.
The proposed legislation is a practical blend of compulsory minimum protection along with the opportunity to customize coverage to suit individual needs or requirements.
We applaud the government for taking the initiative which should result in long-term stability which will be of great benefit to all Ontario consumers. We recognize fully that the regulations will be the most important segment of this legislation. So let me reiterate: We want to be part of that process. We want to ensure that Ontario motorists get an auto policy that fulfils their objectives and ours. It must be fair, it must be available, it must be affordable, and it must be understandable. Substantial rate increases are acceptable to neither our members nor our automobile insurance customers. We must work together to bring increases to a level that are acceptable to the consumer. Thank you very much.
The Chair: Thank you, gentlemen. Time does not allow for a round of questions. Thank you for making your presentation to the committee today.
Mr Silipo: Are you sure about that, Mr Chair?
The Chair: Yes, there was less than two minutes remaining. I'm sorry.
SPURGE NEAR INSURANCE BROKERS
The Chair: Next is the Spurge Near Insurance Brokers. Welcome to the committee, Mr Near. We have 20 minutes.
Mr Spurge Near: Thank you. My name is Spurge Near. I am president of the Spurge Near Insurance Brokers Ltd and a past president of the Insurance Brokers Association of Ontario.
Spurge Near Insurance Brokers Ltd has been looking after the auto insurance needs of hundreds of Ontario motorists since May 1967. As brokers, we try to understand the clients' problems and their needs as well as those of the insurers.
I congratulate the government on the proposed changes to the Insurance Act, the reintroduction of tort, the steps to minimize fraud by claimants against insurers, and the increase in fines for operating a vehicle with no insurance.
On the availability, auto insurance is compulsory in Ontario; it therefore should be readily available. This has not been the case in the last five years. From the brokers' point of view, one could believe that the auto insurance companies have formed a combine to suppress the sale of auto insurance. Brokers who try to place safe drivers on the open market are faced with contract cancellations for unbalanced portfolios or contract cancellations for loss ratios. Many brokers have had their contracts cancelled and have found their markets for auto insurance disappearing.
Portfolio balance: The average automobile insurance premium in Ontario is over $1,000 per year while the average habitational policy premium is around $400. There are between one and a half and two cars on average per residence. May I suggest that the auto insurance legislation include a section which would remove the balanced portfolio requirement from all insurers' contracts with brokers.
Loss ratios: With such a large portion of losses being paid under the no-fault section of the policy, and insurers are the ones who set the premium to be charged, how then does the broker get blamed for high losses?
Fairness to insureds: The auto insurance industry's treatment of its insureds has drifted down to the point where the term "fair" has no meaning or does not exist. In its place has been added "void ab initio" and "misrepresentation." I will give you one example of each.
On the void ab initio: An Ontario motorist buys automobile insurance. He completes and signs an auto application truthfully. Five months later he is involved in an accident that is not his fault. The insurance company somehow finds out that the insured has since bought an expensive stereo which he had installed. Keep in mind the insured had not yet purchased the stereo when he applied for insurance. Prior to the accident, this particular insured had removed the stereo from his car. The insurance company is trying to deny the claim for damages to the vehicle, saying the policy was void ab initio. They claim he should have told them that he was thinking of buying a stereo when he applied for the insurance. This is a true story; it's in my office. Remember, the stereo was not in the car at the time of the accident.
Misrepresentation: I will again use an example. An insured applies for insurance. The insured states on the application that he has had only one minor speeding ticket in the last three years. The insurance company obtains a driving record which shows the applicant had two minor speeding tickets, the oldest of which was 34 months ago. He is refused insurance by the company for misrepresentation. This Ontario motorist is now sentenced to three years on the Facility market. Does the word "combine" ring a bell? I believe that the word "misrepresentation" in the proposed auto insurance revision should be preceded by the word "serious."
In closing, I would like to touch on the item of fairness again. An insured who has driven accident-free for 10 years and had insurance for that time with one company sells his car and cancels his policy. Three months later he decides to buy a car. God help him or her. The best most brokers can do is try the company he was insured with during that time and if lucky they will be able to give him or her a four-star rating. That is an increase of approximately 21% in premiums compared to his previous six-star rating, just for not owning a car for three months.
On behalf of hundreds of my clients, I want to thank you and your committee, Mr Chairman, for allowing me this opportunity to express my views. I only hope that maybe in some small way I might have helped you to make auto insurance available and fairer in our great province. I thank you.
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Mr Silipo: Thank you very much, Mr Near, for your presentation, and for the couple of examples particularly, which make the points quite clearly. Hopefully they're things we'll look at in terms of changes.
I wanted to ask you on some broader points, which I have to say to you in fairness twigged to my mind also as I was listening to the previous presentation. We didn't get a chance to ask them. I think as a broker, you would be able to deal with some of those issues, I'm sure.
One of the points that was made by the brokers' association earlier was that the proposed changes to the rate filing mechanism would provide a more competitive marketplace. I found it interesting that in one of the earlier presentations this morning from State Farm, they pointed out that in fact the proposals, the regulations, are actually more complicated than the existing ones. They saw that as being something that would hurt the process rather than help it.
What I wanted to ask really more about was this question of fraud that we keep hearing about. Again, I say very clearly that I don't think there's anything in what the government is suggesting around tightening up the system that I have any trouble with. I would question the efficacy of some of those measures, but I don't disagree with them. I guess what I'm looking for is, what evidence do we have about this great growth in fraud that everybody is talking about? I haven't seen any. Are we dealing here with something that's real or are we dealing with something that people perceive is a problem?
Mr Near: Mr Silipo, first of all, I'm a past president of the Insurance Brokers Association of Ontario. In no way do I want to speak on behalf of the Insurance Brokers Association, because I'm not in that position.
Mr Silipo: I appreciate that.
Mr Near: Nevertheless, the question you've asked, yes, there is some fraud in the claims. I guess it's only natural that people feel it's a way of getting some money. You're unemployed or you don't have a very good job, and here's your chance to steal enough for the rest of your life. Bill 164 more or less gave some people that privilege and there is quite a lot of fraud going on.
Mr Silipo: How do they do it? I guess that's what I'm trying to understand. What is it in the present system that encourages or allows that fraud to be there? Again, I don't think anybody here would say that it should happen.
Mr Near: I think the biggest problem -- and I haven't studied that one as much, because I'm not in the claims end of it that much -- would be that it becomes a pension. The company can't cut them off while they're on it. That made it easier for the people to stay on it. In fact, I am told by claims people that if you've paid a guy for two years, you can't cut him off even if you know he's a phoney and never was injured.
Mr Silipo: I find that interesting, because we also heard even just on the first day of submissions here in front of us a couple of examples of people -- and certainly I know lots of stories of people, at some point in benefits payments, just being cut off without any explanation by the insurance company. It's something I really would like to see more information on.
If there's time, I'd like to get to the question of rates. Again, one of the other points that was made was that the benefits that people see -- and I guess I'd like your perspective as a broker -- the new system would allow you to customize the product to the consumer's individual needs. What would you as a broker say to the average policyholder that you now would be dealing with? When you look at the reduced benefits that are available, would your advice to them be to buy the additional coverage and, if so, what is your sense about what additional cost that might entail? Or would you say that the basic package would be sufficient for the average person that you would be selling insurance to?
Mr Near: In all honesty with you, I'm scared of that provision, because if you get into an accident and you didn't buy that extra coverage, you're going to sue me, saying that I didn't tell you about it, even though I might have. That part scares me. I would rather have the system maybe be at the $600 limit than the $400 limit. In fact, when I was the president of the association, I argued with the minister then, Murray Elston, and we did bring it up from $400 to $600. That way more people wouldn't have to buy that extra thing.
That scares me because my errors and omissions coverage is liable to go sky high, when somebody can say, "You didn't tell me about the availability of this." That scares me. I don't like it. I would rather have it there and still only a certain percentage of people would be entitled to that amount. But the $600, to me, is better level than the $400.
Mr Wettlaufer: Thank you, Spurge. One of the concerns that our government has and that I personally have is availability of coverage today. Under Bill 164, the insurance companies have produced mountains of evidence to show that they have not made a profit in the automobile insurance field, and as a result, they seriously restricted their writings of automobile insurance, even to the point of terminating brokers' contracts, as you mentioned. Do you have any feeling from the insurance companies that they will open up the marketplace to writing more automobile insurance as a result of the new legislation?
Mr Near: At this present time my answer to that, Wayne, would be no. There's general speaking that it's going to open the market but I don't see it coming out that fast. Insurance companies -- I'm not saying they're dishonest -- have a way of hiding profits. If I look at a balance sheet of any insurance company, 10 years ago and now, you'll see that the retained earnings have substantially increased or they've paid out dividends during that 10 years.
They're the only type of industry I know of that can decide which year they're going to make money and pay tax, because they put reserves in for losses and they don't bother telling anything about the profits they make on the reserves they have. They've got to be earning, during the last five years, at least 7% to 10% on all the millions. In my own brokerage alone, I think they've got reserves of over $10 million in losses. They don't give me credit for the interest they're making on those reserves.
Mr Wettlaufer: But would you agree that perhaps the demands of the shareholders are greater today than they were 10 years ago, that the shareholders are demanding a greater return on equity? We heard yesterday that shareholders of the insurance companies are in some cases fund managers, mutual funds. We heard also that some of the holders of the shares are large unions. Of course, everybody is concerned about their pensions and they're demanding a greater return on equity.
Mr Near: Mr Wettlaufer, we know one another. You've been in this insurance business on both sides of the market. You were a vice-president of one insurance company at one time and a broker at a very good brokerage in later years. In fact, you and I were on the board at the same time of the insurance brokers association. So I think you've got the answer to that question. Yes, they do have shareholders. Shareholders do demand profits, but they can still hide whatever profits they have from time to time with the reserves. There must be a better way of controlling reserves. I don't want them to be underreserve, because then they won't be able to pay claims, but there can be such a thing as overreserves and they can decide which year to show their profits at.
Last year, I understand, they were all showing pretty good profits, because they raised their premiums higher the year before to protect themselves in case the NDP won the election again. There you have it. It's a hard one to answer. I'm not in the head office of the insurance companies, as you were.
Mr Crozier: Thank you very much, Mr Near. It's nice to have someone before us this early in our hearings who is on the front lines. I suggest to you and to others that the public, having heard over a period of five or six years everyone promise rate reductions, minimum cost for auto insurance, stable rates, that the perception may be that this time we've arrived at it. In selling an auto insurance policy or in renewing one, if it comes in with a renewal rate that's increased anywhere from 8% to 9%, will you have a difficulty in explaining that to your client?
Mr Near: For the ones who call me and complain about it, yes, but that's normal. We've gone through this for the last four years, and we're not talking 8%, we're talking greater than 8% increases. Some clients might end up with a 20% increase. It is a difficult thing to try and explain, especially when the guy hasn't had any claims or anything to make it worthwhile why he got into it.
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Mr Crozier: What do you think the perception of the public is when we talk about stable rates?
Mr Near: I don't think they believe us.
Mr Crozier: That's nothing new.
Mr Near: You asked me the question. I don't think they believe us. The average policyholder does not believe anything that you as a government would do is going to make things any more stable. Besides, it's all so difficult. I've got to get on the side of the companies for a second here, too. They're not making fenders any cheaper than they did before. It costs more to fix cars and we keep trying to pay more in benefits. I don't personally believe that we're going to stabilize the premiums.
Mr Crozier: You don't believe that they can do that. You're saying the public doesn't trust the government to do that.
Mr Near: I'm not saying "trust." They don't think they can.
Mr Crozier: They don't think they can. Okay, thank you. I guess what you're saying is that if they don't believe it can be done, they'll accept an 8% or a 10% increase.
Mr Near: It's compulsory. What else can he do? He goes down the street, it's going to be 12%.
Mr Crozier: That's not my point. Obviously they're going to have to pay it, but will they accept it?
Mr Near: I don't quite understand the question. If they're going to pay it, they've accepted it.
Mr Crozier: The question is that people out there expect that stable rates mean no increases. That's my perception. I'm just saying that you're the person, you're the one on the front line who's going to have to sell this. The insurance companies aren't, the government is, although the government, I think, in the end, will be accountable for it. I just wanted your reaction. How are you going to handle this with your clients?
Mr Near: I can't sell the idea of a stable premium to anybody when I'm handing him a renewal that's 8% higher than it was the year before.
Mr Crozier: Okay. I guess that's the point I was getting at.
The Chair: Thank you, Mr Near, for your presentation to the committee today. We appreciate your input.
PROGRESSIVE CASUALTY INSURANCE CO OF CANADA
The Chair: Our next presenter is Progressive Casualty Insurance Co of Canada, Mr Rogacki. Welcome.
Mr Andrew Rogacki: My name is Andy Rogacki and I'm the president of Progressive Casualty Insurance Co of Canada. With me is Chip Conner who is our product manager for Canada.
I'd like to take a few moments to tell you about Progressive. We're part of the Progressive Corp, a Cleveland-based holding company specializing in automobile, motorcycle and commercial vehicle insurance. Progressive is the largest writer of auto insurance in North America through independent insurance brokers. We're growing rapidly, writing over $4.3 billion of auto insurance in 1995, which is equivalent to the entire Ontario private passenger market, making us the sixth largest automobile insurer on the continent.
Progressive's roots are in non-standard insurance; that is, coverage for consumers whom other companies deem risky. However, in the US, Progressive offers coverage to standard and preferred consumers as well, insuring both good and bad drivers. We remain a small insurer in Ontario, writing roughly $55 million of non-standard insurance in 1995.
We have had expansion plans ready to implement for the last five years, but we have waited, initially because the NDP government wanted to nationalize our business, and subsequently because the environment created by Bill 164 made expansion a bad business proposition. We applaud the government's resolve to banish Bill 164 from the marketplace and to introduce new, better auto insurance legislation. We want to recapture our growth momentum which was stunted in the September 1990 election.
The legislative proposal introduced by the government is a good foundation. Our comments this morning will focus on highlighting improvements to the proposed legislation and regulations.
As the IBC costing prepared by Mr Miller shows, the price trend of the proposed product is about 7% per annum. We believe that even this trend rate may be understated, given impending contingency fees for lawyers. Although the forecast 7% compares very favourably to the actual 11% to 12% annual increases under Bill 164 in 1994 and 1995, there is room for improvement in the government proposal to allow for greater price stability.
We believe that a new auto insurance system in Ontario should:
(1) Be easily understood by consumers and easily administered by insurers.
(2) Contain controls and tough penalties for fraud and abuse.
(3) Be based on the concept of indemnity rather than the concept of entitlement. As shown by Ontario's experience with both the Workers' Compensation Board as well as auto insurance under Bill 164, the concept of entitlement leads to abuse and high costs for everyone, exactly the opposite of what consumers want.
(4) Generate reasonable insurance rates which are not escalating rapidly.
(5) Be stable for the foreseeable future, reducing the need for additional review and change by government.
Finally, we believe that consumers are best served by a free, competitive market. The time has come to treat consumers as intelligent buyers, as the government's proposal with a base product and optional buy-ups does, allowing consumers to make choices regarding their insurance coverage.
Mr William Conner: In the context of these principles, we're recommending 11 specific changes:
(1) Both the draft legislation and the regulations require greater detail. We've worked with the IBC to produce a list of suggestions, additions and changes to the legislation and to the regulations. We encourage the government to review this list and to work with the IBC to improve the proposal as suggested in appendices C and D of the IBC submission.
(2) The government's proposed regulations need more controls with respect to the medical and rehabilitation coverage. The lack of these controls in Bill 164 has facilitated fraud, excessive treatment and conflicts of interest. For example, Bill 164 requires that an insurer pay now and dispute later for the first eight weeks or $2,000 of treatments, which has resulted in rampant abuse. The proposed legislation in some ways has an even worse provision. An insurer must pay on demand, with no opportunity for dispute, for the first six weeks or 15 visits to a chiropractor or physiotherapist.
Under first-party accident benefits coverage, insurer and insured interests are the same: rapid recovery with a swift return to pre-accident circumstances. It is in insurers' own economic interest to provide intensive treatment immediately after the accident to quickly rehabilitate claimants. Given that prompt treatment is a common goal, the government should not tie insurers' hands by requiring payment on demand. This is a big cost-driver that can and must be tamed.
(3) The draft bill creates a new neutral evaluation as an additional step in mediation. Mediators are supposed to be neutral under the current system, so why create another level of unnecessary bureaucracy and expense?
(4) Designated assessment centres, or DACs as you've heard them referred to, have proven unworkable due to high cost, delay and the administrative burden involved in getting an assessment on claimants. Furthermore, DACs are granted geographic monopolies that limit competition and increase prices. We believe that the current DAC system and its attendant bureaucracy should be eliminated. If independent evaluation of a claimant is needed, we recommend that the OIC produce a list of approved advisers. Insurers could then choose an adviser from that list.
(5) We believe that the legislation should adhere to the concept of indemnification. For example, a minimum benefit of $185 per week for non-earners is unwarranted, as is continuation of income replacement benefits past the age of retirement. If cost stability is important, then hard choices need to be made even if these so-called freebies are politically popular.
(6) We will only have an efficient product when market forces are allowed to operate in the marketplace. The legislative proposal attempts to streamline the rate filing process, but does not go nearly far enough. We recommend a use-and-file process be put in place whereby an insurer can use any combination of classifications, rates and rules, but must file them with the regulator. Market forces will automatically prevent rates from becoming excessive, but cannot prevent them from becoming inadequate. Therefore, the review process should include, and be limited to, cases where the rates may be below cost or lead to insolvency, which would ultimately be borne by all insureds.
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(7) Facility Association issues need to be resolved. In 1993, the NDP government decided that the Facility Association was too large at 5% of the market and ordered the industry to reduce it by half. This irrational decision was despite ample evidence to the contrary. In fact, at 5% it was an average-size involuntary market in North America. The results were the take-all-comers provision, the risk-sharing pool and the risk point system. All of these impair the market's ability to function as a market and all do not work. They also subsidize bad drivers at the expense of good drivers. Facility Association has submitted proposals to Mr Sampson, which recommends the repeal of the take-all-comers provision, the risk point system and the risk-sharing pool. We support this proposal and believe it should be implemented as soon as possible. Facility issues cannot be ignored nor dealt with separately. They are not a symptom of the problem; they are a part of the problem.
(8) Formerly, the government disallowed the use of income, occupation and the existence of collateral income benefits in rating, despite evidence that such information was necessary to properly match risk with cost. However, group insurers have neatly sidestepped the regulation by selling insurance through employer or affinity groups. Clearly, if an insurance company sells auto policies, for example, to hourly employees of a given manufacturer's auto assembly line, that insurer will have much knowledge about their occupation, their wage level and the existence of any collateral benefits that they have. We believe that the use of these variables should be allowed for all insurers as part of the proposed reforms. The only logical alternative is to prohibit group insurance in order to ensure a level playing field and prohibit employer-based discrimination. This is a very important issue and cannot be ignored any longer.
(9) Currently, insurers cannot use not-at-fault events and claims under the no-fault coverages in rating or underwriting. Empirical evidence demonstrates that such losses are predictive of subsequent losses. Rating on not-at-fault events and claims under the accident benefits coverages should be allowed.
(10) Life and medical insurers have begun to exclude payments for claims resulting from motor vehicle accidents. If this continues, collateral benefits will vanish for auto insurance claim purposes and the cost of auto insurance will soar. The OIC has the authority now to stop this practice and should act immediately.
(11) The legislation should facilitate the use of preferred provider organizations by insurers to direct claimants to specified health care organizations and automobile repair facilities. This wold lower loss cost and ultimately premiums.
Mr Rogacki: Finally, let's address a key matter: the transition from Bill 164 to the new law. We offer the following two suggestions:
First, make the new law effective 30 days following proclamation. Bill 164 is so bad that every insurance company will be eager to settle claims under the new legislation and will prepare to do so in advance. Companies and brokers can and should begin training staff once the legislation reaches second reading. From an insurer's viewpoint, this transition will be very easy.
Second, deal with all the issues at once: the new law, Facility Association, new rating variables etc and introduce stability into the marketplace once and for all. There will be dislocation, but let's get through it in one bold stroke. A slow transition would guarantee that a different group of consumers is unhappy every year until the transition is finished.
If the vast majority of these suggestions is not introduced with the new legislation, the annual cost trend will be about 7%, but if our suggestions are followed, we believe the figure will be much closer to 5% to 6%. Once Bill 164 is repealed, the reparations system changed and the take-all-comers provision eliminated, the market will become very competitive, availability will cease to be a concern and consumers will benefit.
Let's not have auto insurance as a hot issue again for a long, long time. A stable environment that allows the insurance industry to improve its product offerings, increase efficiency and decrease prices is best for everyone. Let us get back to business.
Thank you. We'd be pleased to respond to any questions you have.
Mr Douglas B. Ford (Etobicoke-Humber): Mr Rogacki, will this new product help brokers? Will it lead to fewer broker cancellations? Will it lead to brokers being able to represent a larger number of companies and offer the consumer more choice?
Mr Rogacki: The answer on all counts is yes. We believe that companies will want aggressively to market auto insurance once again, therefore brokers will have more choice of companies and markets and therefore consumers will have a much easier time shopping for insurance.
Mr Ford: Do you think it will reduce rates with competitiveness?
Mr Rogacki: If costs decrease, rates will decrease.
Mr Ford: So you think it'll make a better competitive situation.
Mr Rogacki: Yes.
Mr Sampson: We heard yesterday and again today that 7% to 8% is the guesstimate, by the industry, for the future rate increases. Your indication is today that you might be able to get a point out of that. I think that was the same comment we heard yesterday, if certain other provisions are added to bring control back. Where is the increase left? How come we still have 5% to 6% base increase there year over year in spite of the fact that we've delivered a package that does bring the controls back in the industry's view?
Mr Rogacki: I'm not an actuary, but looking at the work that Mr Miller did, the increases came from two places, the med rehab coverage, the accident benefits part, and BI. The accident benefits was trending at about 15%, and that was a capped figure; the true number was much higher, and the BI, the bodily injury part, the tort part was about 7%. Clearly, to get down the cost of increases in insurance, we must control the trend in accident benefits and rehab in particular, and to do that we need tight controls. That is very difficult.
Mr Sampson: But you've got them here and we still have price increases, so where's the --
Mr Rogacki: We don't quite have the tight controls in the legislation yet that we suggest. But mind you, the medical and rehab industry costs keep increasing year after year and the government has not been able to slow down the increase in medical cost substantially, so we simply reflect that that takes place.
Mr Kwinter: Thank you very much for your presentation. I noticed in your material you are concerned about the possibility of contingency provisions being given to the legal profession and what that will do to premium rates. You're also concerned about the health care cost recovery in the private sector. I'm sure you know that in the draft proposal of this government they are calling for OHIP to get health care cost recovery. What is that going to do to you with the premium rates if both the contingency and health care cost recovery are allowed, or mandated more than allowed?
Mr Conner: I'm sure there's not a good, simple, glib answer to that. I can respond that, having looked at Mr Miller's work which was tabled yesterday, my understanding is that he's made no provision really for either of those two factors. So the introduction of an additional recoverable amount might be passed along to consumers in the form of a different rate.
Separately, contingency fees in other jurisdictions have caused an increase sometimes in utilization of legal services, bringing forward more claims than might otherwise have been brought because there's very little downside risk to the plaintiff in that case.
I don't think there's a simple, quantitative answer to your question but I think it's fair to say that both would be cost pressures on a new system.
Mr Kwinter: That is the point I want to make. It was interesting, you appeared the other day with the IBC, and I'm glad to get the opportunity to question you about one of the statements that you made. You said that your company is in what you might term the high-risk insurance business. You take people whom others won't take, and I assume the reason you do that is because you can make money at it. Obviously, that's what you're in business for. You said that you're out of the standard market, but that if this particular legislation goes in with your recommendations, you would be back in the market, which means you can make money in that market.
My concern is, and this is something that is unfortunate, that everybody who appears has, and again not in the negative sense, a conflicting interest. You want to make money and you say, "If you give me this product, I can make money," and the lawyers say, "If you give me this product, I can make money because I can take people to court," and you get the health practitioners coming in and saying, "If you allow me to do this, then I can make money." Everybody is making money but is costing the purchaser of your product more money. I think this is what we're trying to resolve, so that we get a balance.
No one is suggesting that you should be in the business and be philanthropic and give people a product at a loss, but somewhere along the line the issue of affordability has to be addressed.
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Mr Rogacki: Two things to what you said. First of all, I think I said yesterday that Progressive's roots are in the non-standard market, that Progressive never sold standard and preferred business in Ontario and that we've had plans for a number of years to get into that market in other products, but we basically were held back first by the nationalization potential and then by Bill 164, which made it a very bad business proposition.
The idea is that if legislation changes and does provide us an environment which is propitious to business, we will be aggressively expanding in a market. Whether it is standard business or other products doesn't matter; it will be a good business environment again to write insurance and we'll be back in business.
The second part you talked about, affordability: Yes, it is absolutely a concern to everybody. The only answer I can have to affordability is that there are some 100-plus companies in the market, it is a very competitive market and will be even an increasingly competitive market, so consumers will have a choice.
Mr Silipo: As I would try to explain this issue to a typical constituent of mine who has been complaining about the fact that insurance rates have continued to go up under all governments, why would it make sense for me to tell that constituent that under this new system -- as you're saying -- there will be a greater incentive for insurance companies to sell their product, if I'm not able to tell him also that as a result of these changes he's going to be able to get insurance at a lower cost than he's getting now, if at the same time he is getting less coverage than he's receiving now? Why would it make sense to that typical constituent of mine to see this as a great solution to that ongoing problem?
Mr Conner: At the risk of being flippant, I think in phrasing your question you've in some ways answered it: that governments have been interceding in this issue for a great many years now and have demonstrated a keen ability to interfere with the behaviour of the marketplace, that what this legislation does, at least in part, is to return some measure of competition to the industry beyond what has been taking place for the last several years and, as Mr Rogacki has pointed out, to create an environment under which insurance companies have an appetite to write business, as distinguished from not to write business.
Mr Silipo: I take issue with you on that. If you recall -- go back in time a few years when we as a party took the position that we did towards public auto insurance -- it followed a period of time where there had been huge increases in prices at a time when the marketplace was pretty free. I'm not sure that by simply returning this to the marketplace, to use your phrase, we're going to be giving the average consumer a great sense of comfort that they're going to be taken better care of and have a good product at a reasonable rate.
Mr Rogacki: Forgive me, but as a matter of historical perspective I believe we have a difference. When you took over, OMPP was working, was beginning to work. Had you left it alone and had you played with it, modified it, made it slightly better, we would not be in the same place we are today because Bill 164 was a mess.
Mr Silipo: If we're talking about, within the present system, one of the big problems, as I've continued to hear in these presentations, being the big costs or the bulging costs of rehabilitation, why is it not possible to deal with those issues, and why is it necessary to throw out the whole system that exists as a way of getting again that right balance between good rates and good product?
Mr Rogacki: Because the Bill 164 system is based on a concept of entitlement, not indemnity, and it's a gold-plated Rolls Royce for people who don't need it.
Mr Conner: And had to be.
Mr Silipo: Are you able to show me, because I haven't seen them yet, that that has resulted in people getting more money than they're entitled to get? I've heard that phrase a number of times and I still don't understand what it means. I still don't understand how it is that under the entitlement provisions, people are getting more money than they should get. That, I think, is the logical conclusion to what you and others of your colleagues have been saying, that somehow people are getting more money under the present insurance system than they should be getting. As I understand it, there are caps in terms of what people get. If you look at the $1,000, that's not something that everybody's entitled to; that's dependent on whatever they were earning before and it's done as a percentage of what they were earning and so on and so forth with each of the other areas. So how is it that people are getting more than they should be getting?
Mr Rogacki: It's really simple. It's a lack of controls in the system and the ability of an insurer to control claims on an individual basis. When you take an individual claim to which an insurer can't say no, can't stop payment on an individual basis, and you multiply that times millions, that's how you get the abuse and that's how you get the cost increases.
Mr Silipo: Why not deal with the problems of abuse rather than throwing out the whole system and lowering benefits for everyone?
Mr Rogacki: It's structural.
The Chair: Thank you very much, Mr Rogacki and Mr Conner, for your presentation, and we thank the Progressive Casualty Insurance Co of Canada too.
That brings to an end our morning session. We do have one item of business. Last week the member for Mississauga South raised a point of order with respect to the scheduling of a member as a witness before this committee.
At the outset, it must be acknowledged that members of the Ontario Legislative Assembly do have many opportunities to voice their views on a given issue, whether speaking in debate in the House, whether participating as a member of the committee during public hearings or as a member not of the committee also present. In my opinion, members should be encouraged to use these avenues to express their comments and concerns. Nevertheless, my review of past committee practices and precedents does indicate that members have indeed been scheduled to appear as witnesses before Ontario legislative committees. Such appearances are, however, with the agreement of the particular committee.
In this instance, the member for Welland-Thorold requested to be scheduled at our hearings in Toronto. The member's name was on the list of potential witnesses that was provided to and reviewed by each of the three caucuses. The clerk of the committee was duly instructed, by motion of the committee adopted on Monday, February 12, 1996, to schedule everyone who had registered a request to appear in Toronto. I must therefore rule that the member for Welland-Thorold is properly scheduled as a witness before this committee.
Thank you. I remind the committee that we will reconvene at 1:20 pm. This committee stands in recess.
The committee recessed from 1207 to 1320.
ADVOCACY RESOURCE CENTRE FOR THE HANDICAPPED
The Chair: We have with us as our first deputee this afternoon the association of ARCH, a legal resource centre for persons with disabilities, Mr Harry Beatty. Welcome.
Mr Harry Beatty: Thank you, Mr Chairman. ARCH is a community legal clinic which has served people with disabilities since 1980. We have been involved for about a decade in the automobile insurance reform debate. Actually, to a large extent I have been personally involved. I have listed some of the committees I've been on on the second page of the presentation; most recently a member of the accident benefits advisory committee at the Ontario Insurance Commission and during the last couple of years the chair.
In the debate on auto insurance, throughout the years we have sought to bring an independent perspective, independent of lawyers, insurers and rehabilitation professionals, and to try and focus on those aspects of the various packages that would be of most importance to people with disabilities. Clearly today we are only able to give a preliminary reaction to the extensive reform package released on February 9, and it's our hope that there will be some possibility for future consultation as more information about the new proposals are made available.
We thought it was worth mentioning at the outset that the underlying problem in this area continues to be not the compensation package but, in our view, the devastating injuries and death caused by motor vehicle accidents. While we are not expert in the area, we certainly want to encourage the government to continue with all of its safety-related measures, including vehicle and road safety, driver education, particularly directed at younger drivers, and prevention of offences like drunk driving.
As a general principle it is ARCH's position that automobile insurance premiums should pay for the consequences of automobile accidents. In media coverage of the issue, and I'm sure in what you hear from the public as members of the Legislature, people are quite focused on the premiums and that tends to become the major issue, which is understandable because all drivers have to pay premiums but it's only the unfortunate few where individuals and family members are personally affected. But I think it's worth keeping in mind that if it was really presented to people, if they wanted some of these coverages compared to the cost, for example, the attendant care benefit, do you really want to save $10 or $15 or $25, whatever it is, in premiums at the cost of having that reduced if you're one of the few who are affected?
If automobile insurance premiums do not pay for the costs of disability arising from auto accidents, then someone must pay. It may either be the individual, if they have resources, but more often the family providing support in kind, often through unpaid caregiving by a spouse or a mother. But ultimately if these plans don't pay and the person winds up in a long-term-care facility or dependent on public services, the cost returns to the taxpayer.
For that reason, we're pleased to see in the bill the provision that would provide for some assessment of health care costs against insurers for accident injuries. It's logical that that be there and that the taxpayer or the public system of health care should not be covering automobile injuries which should be paid for in that way.
The basic model has of course changed in Ontario a couple of times in the last few years. The draft bill proposes a return to a system more dependent on tort. On page 4 of our submission we list a number of concerns with the return to tort.
Just to highlight the main points, clearly there is limited public support for at-fault drivers, particularly people who are clearly, through their own negligence or wilful misconduct, responsible for their own injuries. But in the legal sense the group of at-fault drivers also includes those who may be just guilty of a moment's inattention or whose accidents are perhaps caused by road conditions. They skid off the road and there's nobody there to sue. But they're really not in the terrible drivers or drunk driving category. Even where at-fault drivers are responsible for their own injuries, the point I just made was that if rehabilitation or long-term care in particular are not paid for by automobile insurers, then it will be the families that are asked to pick up the slack or the government.
As well, we believe it's important to keep in mind that the way the tort personal injury system has worked, innocent victims are not necessarily fully compensated. We received numerous calls over the years at our office about people who have concerns about the tort system, although, to balance it, there are other people who have received significant awards as well. But people may have problems proving their claims. Someone may have forced them off the road, but if they were knocked out, they may not be able to remember. A difficult situation is where the negligent driver, the at-fault driver is actually a close family member, and this may create an emotional obstacle to full pursuit of the claim in an adversarial system.
There's also the limitation created by liability coverage. Admittedly, I think most drivers in Ontario would carry $1-million coverage or at least $500,000, but it can occur in a catastrophic case that there is only the minimum coverage, which is at $200,000, and that's what's available in hit-and-run cases if the driver can't be identified. So what is actually available in catastrophic cases may be much less than the theoretical full compensation offered by the tort system.
There are also the legal and administrative costs associated with tort, and finally a concern that in the past the tort system in a sense polarized health and rehabilitation professionals into those primarily aligned with the plaintiff's bar and those primarily aligned with insurers. This has clearly not ended as a result of no-fault, but we still have concerns that this kind of dynamic may be reinforced.
In fairness, we recognize that the package does contain a number of proposals to limit the administrative costs of tort, to encourage early settlement and so on, and we think on the whole the whole system should be looked at carefully before, once again, we have a fundamental change. There may be some possibility where cases have both a tort and no-fault component of having some kind of integration of the dispute resolution process.
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I want to comment briefly on the rehab system, although others much more knowledgeable will appear. I would start by saying that a couple of years ago I was one of the participants in the Task Force on Rehabilitation and Long-Term Care Benefits appointed by the previous government, with representatives of the insurance industry. That task force made fairly strong recommendations, I believe, about addressing conflict of interest within the rehabilitation and legal communities.
We were concerned that this was not really addressed. The provisions that are in the draft bill proposed by the Ministry of Finance to deal with conflict of interest as well as outright fraud, while we haven't examined them in detail, seem to be a very reasonable beginning. Clearly, given that there are scarce dollars, they should not go on inappropriate services.
We are also pleased to see continuation of the designated assessment centre system. We would continue to support that process, which also came out of the task force, even though we recognize that there have been problems, largely because of the very short time frame in which the whole thing had to be set up when they started a couple of years ago. Nevertheless, the direction of encouraging centres of expertise and some accountability and trying to move away from the polarized system we would generally endorse.
In terms of specific things that we did not agree with in the bill, one major concern would be the definition of "catastrophic impairment." If you don't make that definition with a serious injury. then you're limited to two years' long-term care and $75,000 in rehabilitation.
Again, I believe others who are more knowledgeable on specific injuries may address this, but our general concern to start with is that there appears to be an intent in the definition, notwithstanding a general inclusion clause, to exclude people whose injuries are significantly psychiatric or psychological in nature or involve extensive pain-related impairments. Consideration, we believe, should be given to looking at the definition to ensure that these diagnoses can be recognized as catastrophic in appropriate cases.
There's no doubt that there's a lot of medical controversy about the assessment of these types of injuries, but we don't believe the medical controversy should be settled by definition. While these diagnoses may sometimes be questioned, we also believe there are cases in which they genuinely apply.
Finally, and I think our most serious concern about the package has been left to last, is the reduction of the attendant care benefit. We do not believe there is a huge cost saving by limiting the maximum back down to $6,000 rather than $10,000 and imposing the lifetime $1-million cap. Without seeing the costing, we don't know how much money is involved but these high levels are clearly only reached in the most serious catastrophic cases and, as I argued earlier, we believe that they will not always be picked up by the tort system even for innocent victims.
This kind of cap, which just says, "Here's a maximum," rather than looking at the legitimacy of the claim, simply takes the most serious claims, those involving children and young victims and cuts the claim off at a certain arbitrary limit. Although cost control is a legitimate objective, we believe that this is not an appropriate way of achieving it.
That's my presentation basically.
Ms Castrilli: Mr Beatty, I have the pleasure to see you yet again. You are a most industrious member, may I say. I'm interested in your analysis with regard to the tort system. I gather from your presentation that you would seek to go back to the no-fault model as a better model. It might surprise you to know that representatives of the plaintiff's bar that we've had here have also rejected the current system as not being a very good system for victims.
The conclusion, and I'd like your comment on that, is that this bill really combines the worst of all possible scenarios: that it takes away some of the protections that might have been under the no-fault but in fact creates some real difficulties, and that the average wage earner in the end, is the contention, ends up not being any further ahead. If the purpose of insurance would be to return people to the position where they were, roughly, before the accident, this system doesn't do it, and we've had some ample calculations with respect to that issue. I wonder if you might comment on that.
Mr Beatty: This package has been presented as a starting point for discussion, and I think I indicated in my presentation that while there are certainly some components we would disagree with, there are others that I think are worthy of discussion and working with.
By pointing out the limitations to tort, we are not saying that we are unequivocally advocating a no-fault system or that tort shouldn't be part of it or that the fault principle is wrong, because many in the disability community -- although I wouldn't say everyone, there are certainly people who support that. At the same time, unfortunately, we believe it has a significant cost, and I think it's important before the government passes this package to be aware of what the true costs are.
It's not only the cost. While we hope the reforms will mean that the cases are not caught up in the overloading of the courts problem, it appears to us to be somewhat probable that that may happen, given the general issues affecting the justice system at present. That's why we hope that perhaps some coordination of the mediation and arbitration system at the insurance commission with the court process might be possible.
Ms Lankin: In a couple of areas of your presentation you've touched on this issue that if benefits aren't covered under the insurance system, whether they are for at-fault drivers or whether they are for innocent accident victims, but through either the caps on the benefits under no-fault or through tort they don't get fully covered, and caps like the reduction of attendant care, the problem is it falls back on alternate systems. In many cases, that may well be the tax-funded health care system. I would imagine that ARCH recognizes the difficulty with this, given the pressures in the health care system and the people on whose behalf you advocate seeing reduced access to benefits and supports that they need.
We saw some tables this morning in a presentation from State Farm that showed over the last couple of years under Bill 164 dramatic increases in costs in medical rehab care, including attendant care, for example, and some other forms of services in that area. It strikes me that much of that is because these are areas that we're learning more about in terms of how to provide services to help people remain independent in the community. In the past, many of those people would have just been perhaps institutionalized and the state would have picked up a cost in a different way.
Could you comment on that, and particularly if you have any examples or any case studies that may well not be accident victims but that look at costs in the community versus institutions and that sort of thing?
Mr Beatty: I think a starting point has to be the theory behind OMPP and Bill 164 and so on. They were deliberately created to increase spending on rehabilitation and long-term care because of the theory that in the long run it would be cost-effective. If you spent more at rehabilitating accident victims early on, for example, ensuring that a child or young person got involved in the education system, got accommodation to live at home and so on, down the road you would have a participating member of the workforce who would be a taxpayer rather than a dependant.
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Whether the system would actually do it in the long term, I think no one really knows what the long-term impact of that spending will be because it's still pretty new. We don't have people who we could look at 10 or 15 years down the road in this system and say, "Here's the outcome." Clearly, we know many individuals, including the president of our own organization, who have had productive careers in the community after major trauma. But really to say in terms of statistics, is it working or isn't it working, the hope was that the accident benefits advisory committee would provide that monitoring over time, but with the programs only being in place two or three years, you don't really have the long-term picture. Again, maybe individual rehabilitators who have been more directly involved with individual cases would have a better perspective.
Mr Ford: Mr Beatty, in order to ensure the level of benefits to the injured accident victims that you advocate, would you make any change to the provisions relating to the property damage? What might those changes encompass?
Mr Beatty: I really appreciate your raising that question. We're certainly pleased to see that if there's any kind of fraud involving repair and so on that that be addressed. That seems like a good beginning.
If you're looking at the overall premium, you could make it cheaper, Mr Ford, by having folks drive with a bigger deductible for property damage. I guess the problem is that people who were in accidents then would be upset that they had to pay more out of their own pocket, but if it's really a choice between that and the attendant care maximum, it's really sort of the interests of the few who are badly hurt against the interests of the great majority of drivers, I guess, who are more likely to be in a fender-bender and want to claim property. I guess that's what you could look at, things like deductibles under property damage.
The Chair: Thank you very much. We appreciate ARCH and you, Mr Beatty, presenting to us today and providing us with this information.
ONTARIO ASSOCIATION OF SPEECH-LANGUAGE PATHOLOGISTS AND AUDIOLOGISTS
The Chair: We now move to OSLA. I usually don't use acronyms, but I'm going to this time.
Ms Maria Scaringi: We will need a projector and a screen.
The Chair: It will be set up for you. Do you have any introductory remarks while we're setting up?
Ms Scaringi: We will attempt to do both a visual and an auditory presentation, quite apropos to the field that we're in.
The Vice-Chair (Mr Tim Hudak): Go ahead when you're ready.
Ms Scaringi: Mr Chairman, members of the committee, may I introduce my colleagues, Michelle Cohen and Joanne Wilk, along with myself, Maria Scaringi. We are here on behalf of the Ontario Association of Speech-Language Pathologists and Audiologists, OSLA.
Speech-language pathologists and audiologists are regulated health professionals and belong to the College of Audiologists and Speech-Language Pathologists of Ontario, CASLPO. The mission statement of CASLPO is to regulate in the public interest the practice of the professions and to govern its members in accordance with the various acts, including the Regulated Health Professions Act of 1991. Our clinical work includes assessing and treating disorders in communication as a consequence of motor vehicle accidents, MVAs.
Judging from the facial expressions, I assume that we're integrating all the visual input.
Interjections.
Mrs Marland: Actually, if you came more to the middle, and the screen has to come out. It's blocked by the corner of the wall.
Ms Scaringi: As you can see, integrating input auditorially and visually is quite a complex task.
Communication impairments include difficulties with speaking, understanding, reading, writing, cognitive or thinking skills, social skills, voice, swallowing or hearing.
Today, our purpose is to highlight OSLA's position on selected issues in response to the draft legislation. The first issue is: Communication needs to be included as a category in the definition of "impairment." The second issue is that speech-language pathologists and audiologists must be included in the definition of "health practitioners." Finally, the third issue is in the definition of "catastrophic impairment." The Glasgow coma scale should not be the only measure used to determine whether a brain impairment is catastrophic or not.
Communication as a separate impairment and speech-language pathologists as health practitioners are intertwined. Communication disorders are very complex and require speech-language pathologists for identification and treatment. In acquired brain injury, the cognitive communication impairment results from the interaction of thinking skills and language.
Let us illustrate. If an individual has difficulties following conversation, then a speech-language pathology assessment is necessary to determine the underlying cause or causes. For example, the problem may be language-based, that is, they do not understand the grammar, meaning or vocabulary of the message. On the other hand, the problem may be cognitively based, that is, they do not attend to the information or maybe they do not process the information quickly enough. If rehabilitation is to be effective, then the underlying impairment must be determined. Speech-language pathologists have expertise in identifying cognitive communication impairments and developing associated treatment plans.
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Individuals experiencing undiagnosed communication impairments from brain injuries can experience significant and often catastrophic difficulties in integrating into their former lives. Cognitive communication impairments are often overlooked by insurers, health care professionals, employers and teachers, resulting in an epidemic of silent sufferers.
To illustrate these points, allow us to present a case example. In order to maintain client confidentiality, certain identifying information has been changed. AB was a 35-year-old articling law student in her final year. She sustained a brain injury in a motor vehicle accident in 1989. At the scene of the accident, she was unconscious for less than 20 minutes. She was rushed to hospital and assigned a Glasgow coma scale score in the range of 13-15, which would indicate a mild impairment. After a brief period of observation, she was discharged home. The following day, she returned to hospital with symptoms of headache and a memory problem.
Several weeks later, she tried to return to work but was unable to perform at pre-accident levels and had to resign. Two years post-accident, she was referred to a speech-language pathologist for assessment. Results revealed a rare reading disorder as a result of the accident which was not identified by other professionals. This reading disorder precluded AB from succeeding at her previous work in any capacity and, more important, what saddened her most was that she could no longer read to her two-year-old son. Until the communication disorder was identified, AB suffered in the silent epidemic.
This case illustrates that communication disorders do occur in isolation of other impairments. Legislation must therefore acknowledge communication as a separate category of impairment. Communication should not fall under psychological, physiological or mental categories.
AB needed the type of rehabilitation as outlined in the draft proposal in section 16, rehabilitation benefits. But how would she get these services without the appropriate health practitioner to identify the impairment and write the treatment plan? Speech-language pathologists should be recognized as health practitioners. It is common sense that experts in a field assess and write their own treatment plans.
Michelle will now discuss the issue of using the Glasgow coma scale as the only measure to determine whether brain impairment is catastrophic.
Ms Michelle Cohen: It is our position that the Glasgow coma scale should not be the only measure of brain impairment. This scale is a measurement tool used to assess level of coma; it is only a general guideline, and it does not predict specific outcome. We believe that the determination of "catastrophic" needs to reflect not only the actual impairment but the impact it has on the person's daily life.
We will illustrate our point through a comparison of two cases, KP and AB, who was introduced earlier. Again, in order to maintain client confidentiality, certain identifying information has been changed. KP, a 30-year-old male, was involved in a MVA in 1992. He was unconscious at the scene of the accident and remained in coma for two weeks. He was assigned a score of less than nine on the Glasgow coma scale. Both these individuals were functioning at a reduced capacity in comparison to their pre-accident status, but according to the draft proposal only KP would be labelled with a catastrophic impairment.
The different impacts these individuals have on society is shocking. AB cannot work and is presently home collecting CPP benefits. KP was initially unable to return to his pre-accident vocation as a second-year university student studying accounting. However, with rehabilitation, he successfully completed his program and is currently preparing to write the board exams while articling full-time.
AB is receiving CPP benefits of approximately $12,000 per year, which if collected until age 65 will cost society over $360,000. On the other hand, KP will be a contributing member of society and over the next 35 years should contribute in excess of $500,000 in income taxes.
It is our opinion that KP received the required rehabilitation in order to succeed thus far, and will continue to require periodic rehabilitation when presented with new challenges in life. AB did not get this opportunity. We feel that AB's case has proved to be more catastrophic than KP's.
These two case histories, which are typical of the clients we treat, highlight a number of issues. The Glasgow coma scale does not take into account the impact or handicap the injury has on an individual's functioning in society, and therefore cannot predict functional outcome.
Many clients with a GCS score of 9 to 15 will need to surpass the $75,000 limit as outlined in the draft. Their deficits may have an impact on their lives equal to someone who has a bilateral amputation. The difference is that you can see the latter; you cannot see the former. Brain injuries are often invisible.
Therefore, the GCS cannot be the only determinant of whether a brain injury is catastrophic. A scale such as the one illustrated in the handout could be used in conjunction with the GCS score.
Mr Chairman and members of the committee, on behalf of OSLA, we urge you to consider changing the following three definitions: First, "impairment" should include communication impairments; second, "health practitioners" should include speech language pathologists and audiologists; and finally, "catastrophic" should include other objective measures in addition to the GCS score for brain impairments.
To conclude, we would like to leave you with an unsolicited letter to Mr Rob Sampson from a client with an acquired brain injury. This client was an award-winning journalist who could write a front-page story in a matter of minutes. It took her days to put together this letter which you will find in your package. Her score on the Glasgow coma scale was 15 out of 15. Thank you.
Mr Silipo: Thank you very much for the presentation and for making the argument about the usefulness of rehabilitation. You've given some pretty useful indications of things you think we need to change in the proposal. I wonder if you could address at the same time something we've heard a fair amount about, and you may have heard some of it if you've been here for some of the previous presentations, that it's the bulge in the costs of rehabilitation that is one of the big reasons costs are projected to go up in terms of premium costs. Is there a way to mesh the continuing emphasis on rehabilitation, which you clearly are saying we should continue to have in the system, with a way to deal with that concern?
Ms Scaringi: We've thought long and hard about many of the points you've just brought up. The one thing we have to keep in mind is the fact that brain injuries are very, very difficult to fake. They need the support as outlined in section 16 on rehabilitation benefits, and I believe they need to be looked at very closely.
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Mr Sampson: A quick question. The individual, and I can't remember, KV, or what --
Ms Scaringi: Was it a female or a male?
Mr Sampson: The one who did not pass the scale.
Ms Scaringi: AB.
Mr Sampson: Would the expenses associated with the recovery have fallen within the $75,000 limit we have, or did they have to spend more to get to the stage of recovery they eventually got to?
Ms Cohen: That's a good question, and it's hard to know. She fell under the old tort system, so she lost the window of opportunity. By the time she saw a speech-language pathologist, the $25,000 allocated to her had been spent and her most debilitating deficit had not yet been identified. So it's difficult to answer that question right off. She did have other deficits, and the $25,000 went to them.
Mr Kwinter: Thank you very much for your presentation. We've had various groups representing various sectors in the health care field coming forward asking that they be included in the definition. I'd like to explore the practicality of what it does for you. For example, usually in conjunction with that, they also want to make sure that when there's a DAC they have someone representing their particular specialty representing them so that decision can be made. How do you see that working? Is it going to be a very practical thing when there is a wide range of health care providers categorized in a broad sense but not in a specific sense?
Ms Scaringi: I think that will require a lengthy answer, but I'll make it very short. The basics of rehabilitation identifying are based a lot on the trust of that profession. For any of the individuals we're working with, who have difficulty with thinking, processing, speaking, getting their thoughts together, that affects their daily life, and that is the field we work in. Those persons, whether they can get to work or whether they have a job, need to work with those strengths and weaknesses, and they need to be addressed by a speech-language pathologist because they're in the areas of cognitive and language.
The Vice-Chair: On behalf of the standing committee, thank you for your presentation today. Thanks also for your patience with our equipment. Have a good day.
Ms Scaringi: Thank you. It was a great test.
CANADIAN FEDERATION OF INDEPENDENT BUSINESS
The Vice-Chair: The next delegation to appear before the committee is the Canadian Federation of Independent Business, Judith Andrew.
Ms Judith Andrew: Thank you, Mr Chair. My name is Judith Andrew. I'm the director of provincial policy with the Canadian Federation of Independent Business. I'm joined today by my colleague Colleen Ladd, who is our director of member services.
Our presentation to you today is entitled Auto Insurance Reform: Four on the Floor. I guess that's a fairly cryptic reference to the various plans we've seen in the last several years: the old tort, the OMPP, Bill 164 and, currently on the floor for debate, the government's draft legislation.
The Canadian Federation of Independent Business appreciates the opportunity to appear before this standing committee respecting the government's draft legislation to amend the Insurance Act. We're a national business association representing independent Canadian-owned businesses before government. About 40,000 of our 87,000 members do business here in Ontario.
At the outset I'd just like to point out that the profile of business in Ontario is overwhelmingly small. Small business is the predominant form of business. When you look at the total number of firms in Ontario, numbering over 300,000, more than 96% of them have fewer than 50 employees. In fact, 72% of all Ontario firms employ fewer than five employees. In addition, an estimated 600,000 individuals in Ontario are self-employed.
Of course all our members, and self-employed people certainly, are interested in auto insurance coverage as both business and personal consumers of insurance products. We count in our membership business people involved in the industry as insurance brokers, agents and adjusters, as well as lawyers, medical practitioners and rehabilitation specialists.
We've had considerable member feedback on the issue of auto insurance which is regularly received by my colleague's department, the member services department. They handle unsolicited comments from members on a fairly frequent basis. The types of comments we're getting are that members are concerned about the high auto insurance premiums they pay and they're especially incensed about the double-digit rate increases that they've had to shoulder in recent years.
Certainly for businesses, operating a vehicle or often a fleet of vehicles is a necessity, so the mandatory auto insurance costs take on the characteristics of a tax, and I would say a hated tax because they're high and they're unavoidable. The 5% provincial sales tax placed on auto insurance by the former government added insult to injury because it too could not be easily avoided.
CFIB members in the insurance brokerage industry are disturbed about the lack of price stability in the industry which tends to put them on the receiving end of clients' wrath over repeated double-digit increases, this usually in the face of unblemished driving records. There are also individuals who are so-called higher-risk types, who have been thrown into the Facility Association owing to a series of small mishaps. In this case premiums skyrocket, and of course the brokers are caught in the middle. We also have lawyer members who are obviously concerned about the business side of their practices but also disturbed about the reduced scope for individual indemnity inherent in a modified no-fault plan. For all of these reasons, we're pleased that the government has resolved to review and revamp the auto insurance legislation in the province.
CFIB members determine direction for our organization on the basis of their majority votes on public policy issues. We operate on a one member, one vote principle. Some 64% of our Ontario members oppose the concept of publicly owned and operated car insurance. Of course when we read media reports suggesting that Mr Sampson had said that if this third overhaul in six years does not rein in premiums, public auto insurance may be the government's only remaining option, that gave us a certain amount of heartburn.
I would also point out --
Ms Lankin: It's a source of amusement for me, Judith.
Mr Sampson: See what happens when you meet with Peter Kormos just once.
Ms Andrew: Maybe Mr Sampson was misquoted.
Ms Lankin: You are being too generous.
Ms Andrew: In any case, CFIB would certainly point to the other publicly run insurance system in this province, the Workers' Compensation Board with its second-highest premiums in the country and its $11.4 billion unfunded liability, as a prime example of publicly run no-fault insurance gone awry.
I would just like to review briefly our members' goals for auto insurance. Our members are looking for fair and certain levels of compensation for loss of income to victims. They want fast and efficient payments, reasonable legal and administration costs, affordable premiums, accountability for drivers' actions, some elements of choice related to individual circumstances and fair treatment of smaller businesses. What we've done is review the draft legislation in light of these goals.
Under tort provisions for economic loss, I would point out that CFIB was critical of Bill 164 for banning legal action for injured persons whose economic prospects were adversely affected beyond the structured benefits. Accordingly, we feel that access to tort will be important to small business owner-managers who sustain economic losses requiring indemnification beyond the available benefits.
Of course, the question in all of this, and it has obviously been the subject of some controversy within the insurance industry, is how expensive is this piece of the auto insurance plan. One would certainly expect that this would mean a significant increase in the number of lawsuits plus the administration around them. We believe that actuarial costings are needed to measure the impact of this element of the plan.
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Turning to tort provisions for non-economic loss, we've noted that the government is proposing to raise the deductible to $15,000 and we assume that the increased deductible is intended to discourage minor claims, and again how effective this will be remains to be costed and of course later proven.
Under accident benefits, we were disturbed when Bill 164 introduced significant parallels between the auto insurance benefits structure and entitlement rules with those of the Workers' Compensation Board. In our brief on that legislation we predicted that the high replacement ratio at 90% of net income plus the lax entitlement rules would give rise to significant excess costs, especially when unemployment rolls are high. Unhappily, this seems to have been proven correct. It has certainly put pressure on premiums.
The proposal to reduce income replacement benefits to 85% of net income plus the reduced ceiling of $400 per week after collateral benefits, the elimination of expensive indexing and expensive partial disability benefits and the adoption of an "any occupation" rule for continuation of benefits after two years represent together major reductions in the basic benefit which should translate into significantly reduced loss costs to insurers.
Theoretically, since auto insurance pays last after other sources of benefits, it makes sense for the basic plan to be a modest one; otherwise many insureds end up overpaying in auto insurance for coverage they already have under their employer or individual disability policies and it is that coverage that is called upon first to meet their needs. We would be concerned if auto insurers started to look at the availability of collateral benefits and refused to insure or charged higher premiums to insureds lacking top-of-the-line employer or individual disability policies. This would be the case in some small businesses so this would be a potential concern.
Looking at the income replacement benefit for self-employed persons, we see that it is to be based on the last 52 weeks or the last fiscal year prior to the date of the accident. We're concerned about the possibility that that particular time frame may not be representative and we would argue for flexibility to average prior years. We believe the calculation of income from self-employment is fairly straightforward and we also support the provision which allows insurers and self-employed persons to agree on the person's self-employment income in advance so as to eliminate unpleasant surprises just when the insurance is needed.
In the optional accident benefits arena, we believe it's sensible to offer an array of optional benefits that people can choose depending on their circumstances and other coverages they may have. Obviously insurance brokers will be called upon to explain to a much greater extent what these options are and the need for them, but we take the view that consumers are mature enough to make responsible insurance choices provided they have the pertinent information.
I'd just move down now to the overall impact on premiums. We were surprised to learn that the government has not commissioned its own actuarial work on the proposed auto insurance package. It's our understanding that the Insurance Bureau of Canada's costings will be reviewed by peers in the field and this would be the extent of the effort. While we understand that engaging actuaries is a costly endeavour, we would argue that in this case it's well worth the outlay of tax dollars. We believe the government's responsibility to auto policyholders in Ontario is to ensure that this fourth, and hopefully final, auto insurance plan in the province, at least for a while, meets all of the necessary criteria, including those that we identified as important to small business.
I would just say as a sidebar that looking at the insurance bureau's costings and their trend line of an increase of 7% to 8% is fairly disturbing, which would argue for going back and costing each piece of this plan and looking at the overall impact and making decisions with that full information.
The government has not put open for debate the issue of the 5% provincial sales tax on auto insurance premiums, but we would like to note that this a major bone of contention and has been since it was introduced. We would suggest that there be some investigation into blending it with the 3% premium tax, which would reduce administration costs for brokers, insurers and the government and put a better face on the whole area for consumers.
In conclusion, I'd like to say that small and medium-sized businesses are looking forward to this fourth plan in six years actually meeting their needs in a competitive environment which delivers fair, efficient and affordable auto insurance coverage.
We'd be pleased to attempt to answer your questions.
The Chair: I don't believe we have time for questions. Oh, I'm sorry. My watch is difficult to read sometimes.
Ms Lankin: We noticed.
Ms Andrew: It looks like seven minutes.
The Chair: You caught me once this morning. We can have perhaps a two-minute round of questions.
Ms Andrew: We did start just at 2.
Mr Sampson: Can I just speak to the tax issue? I'm not exactly sure how the blending of the two solves some administrative issues. I heard that through the first round of discussions at negotiations we had on this package, but it wasn't quite clear to me how blending the 3% and the 4% will save administration other than just frankly hide the two taxes. Maybe you can help me out as to how that might improve efficiencies.
Ms Andrew: Our first option is to eliminate it altogether. The fact that it has to appear on all the invoices and consumers pay it and the insurance broker is responsible for collecting it and remitting through to the insurer -- that adds a separate step. It just seems unwise to have two taxes levied two different ways. This is a suggestion that we heard coming out of the insurance industry and it seems to be a sensible one, but if it's not feasible, obviously --
Mr Sampson: The other comment I have is I would agree with you the 7% and 8% is somewhat disturbing, although I'm not exactly sure we should go through a full costing until we know what we're finally costing. I'd hate to go through three or four or five rounds of costing or actuarial studies, because each one of those is quite expensive. We felt it was important, as a government, to hold back on that until we knew what it was we were doing an actuarial study on.
Secondly, quite frankly, it's the industry who will be selling this product. I wanted to hear from them where they felt it was coming on the cost side.
Ms Andrew: I think our members have a healthy scepticism vis-à-vis the insurance industry just as they do vis-à-vis the banks and so forth, so in terms of fashioning this plan, they would have more confidence if the government commissioned some actuarial work. I know in terms of Bill 164 there was work done by the Wyatt Co and by William Mercer Ltd, so there are firms out there other than the ones that the insurance bureau --
Mr Sampson: They were the ones who said we'd have 4% increase too, and look where we are now.
Ms Andrew: I think the Wyatt Co predicted a much higher increase over Bill 164, and they were right.
Mr Kwinter: Thank you very much for your presentation. I have a couple of questions. One has to do with your comment about if the 7% to 8% premium increase is there it's disturbing. That does not factor in the fact that the government may be moving to a contingency plan for the legal profession plus cutting back on the health care transfer, so that the insurance industry is going to have to pick up a portion of what was once covered by OHIP, which means that we're looking at a number that is yet to be determined. But that will be added on, plus on top of that you get your 3% and your 5% sales tax, so when it grosses up there's a good chance you're going to be into double-digit premium increases. What is your reaction to that?
Ms Andrew: Yes. Maybe it's unrealistic to think that we could hold the increases to a more modest level. Certainly people's incomes are not increasing at 7% to 8% a year, much less the 11%, 13%, 15% that you're suggesting, so I think we need to look at each piece of the plan, cost it and make a determination about what kind of auto insurance package we need here in the province and what it's going to cost. Colleen can add to this, but we're certainly hearing expressions from our members about their concern with the existing level of premiums and the kinds of increases, and if this is only the beginning, it could be very difficult.
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Mr Kwinter: One last question: You're supporting access to tort, yet in your material you show a ballot that shows that 63% of your people support no-fault, which is no tort. How do you reconcile that?
Ms Andrew: We felt that the former government got it wrong in terms of adding access to tort for non-economic loss. That someone has actually lost income or been unable to run a business or whatever and then been restricted to a fairly modest benefit is a very difficult situation to be in, whereas non-economic loss is more difficult, less provable and so forth. So I think the issue is to have a blended system that has some elements of tort but also a basic no-fault benefit that will cover in many instances.
Ms Lankin: I have a couple of comments, Judith. In respect to your last answer, the result of the ballot was very clear from your membership in terms of total no-fault, though. They're not looking for a blended system. Now, granted, that was at a point --
Ms Andrew: It's fairly old, actually.
Ms Lankin: It is, 1986. But I think what it's reflective of is what was happening in the late 1980s with insurance premiums at that point in time and how quickly they were escalating. Quite frankly, at that time everyone would have told you the reason was because of the tort system. The proposal before us has some major limits on tort, but that's part of what's being debated and I think you'll need to get your membership to take a look at that.
A couple of other comments: On the tax on premiums, irrespective of what the government does on that, and Monte mentioned this, there is a very real expectation that they're going to reintroduce the health care tax. A few years ago it existed, before OMPP. It was eliminated under OMPP and it was retained as eliminated under 164. I think it was 2% at that point. There's every expectation that's going to be reintroduced. That's a new tax which the insurance industry has said quite frankly is not included in any of its actuarial studies of the 7% increase. So you can take that, in the first year at least, to 9%. It may not be an escalation, but it will be there, it will be passed on. You can be sure of that and we've heard that from the industry.
Ms Andrew: Are you speaking of the fair share health levy?
Ms Lankin: I'm talking about insurance. I'm not talking about the Common Sense Revolution. It will be passed on to the consumer.
The other thing I wanted to point out to you is that you said that you were concerned about companies being able to take a look at collateral benefits etc. Again, we've heard very specifically this morning from one of the insurance companies that was here that this is an essential that they need to have in order to bring the rates down. They want to be able to rate risk against what your other benefit plans are. I tend to agree with your position on this, but you should know that's out there and there's pressure coming from the insurance industry on that.
Ms Andrew: Oh yes, I know.
Ms Lankin: I guess one of the things that I'm still concerned about is that while I recognize the arguments that you've put forward, in fact all of the costing that's being done and the actuarial studies that have been done say that premiums are going to continue to increase and it's because of the medical rehabilitation costs. In fact, your analysis around 164, if you look at State Farm's presentation and others, is not quite right, because the wage costs and other things have levelled off. It is the medical rehab section.
It seems to me that's what we need to be getting at, as opposed to just slashing benefits. Maybe there's a difference in approach in the way we would look at this, but do you have any suggestions of what controls need to be put in place around the medical rehab side of things? Because it seems that's the largest cost driver, yet that's also, if not taken care of in terms of appropriate benefits, the thing that spills over into the regular OHIP health care system and drives up costs there, which puts pressure on government deficits and taxes, which your membership is also concerned about.
Ms Andrew: There's a lot here. First of all, I just would like to say that our vote on no-fault auto insurance was -- the stark question was put, although in Ontario there was never a question of having an absolutely pure no-fault system. Even the OMPP had the threshold access and so forth, so what we've said is not inconsistent.
On the issue of medical benefits and controlling them, obviously that's not our area of expertise but we do know that insurers will say, actuaries will tell you that the level of benefit does play into the duration of the claim. The more generous the benefit is, the more easily it is accessed and continued, the longer the disability experience. People stay on claim longer. This happens especially in high unemployment periods. So the benefits do have an impact on the medical end of it.
In terms of the adequacy of the caps that are being proposed by the government in the medical area, that's not our area of expertise. I'm not sure what is appropriate in terms of controlling that area, but if that's being identified as the area that's the runaway one, we need to have a plan that provides people with the medical treatment and rehabilitation that they need but no more than they need. They shouldn't have treatments that aren't necessary. There should be basic treatments offered that will do the job -- no more and no less.
The Chair: Thank you very much, Ms Andrew and Ms Ladd, for your presentations today. We appreciate the Canadian Federation of Independent Business's input.
GENERAL ACCIDENT ASSURANCE CO OF CANADA
The Chair: Our next presenter is the General Accident Assurance Co of Canada; Mr Ted Scott, senior vice-president of underwriting. Welcome to the committee.
Mr Ted Scott: I'd like to thank the members of this hearing for providing General Accident Assurance Co with the opportunity to state our views on the proposed legislative changes involving the Insurance Act and accident benefit regulations.
Before I get into the points I would like to cover on behalf of General Accident, I would like to take the opportunity to express appreciation for the efforts that Mr Sampson and his staff have put into the development of the proposed changes. I'm sure there will be many critiques of the changes, as comments have been made already today, but it is obvious that considerable thought and energy has gone into the development of the proposed automobile product. In our opinion, the proposal goes a very long way in meeting the self-imposed mandates of the government with respect to providing fairness, entitlement and rate stability to the consumer. We are hopeful that, once the hearing process has been completed, the government will move quickly to institute the necessary reforms which will allow these very necessary changes to begin effectively working for insureds.
In order to ensure that the product is provided in the best form possible and supported effectively, we would like to take this opportunity to express the following points for the consideration of this hearing.
(1) Assessment of health care costs: While it comes as no surprise that the government has a very real concern for providing health care costs in an automobile environment, the proposed change merely transfers this cost from one source to another. In our view, this change does nothing to enhance protection or increase fairness for the insurance consumer. On the contrary, by setting up an additional infrastructure that any form of assessment will require, additional administration costs will be incurred, which will ultimately result in increased insurance premiums. If it is the intention of the government to move forward on this issue, we would suggest that any contemplated change should be made in such a way as to minimize administration costs while fully disclosing the impact of the increased costs to the insurance consumer.
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(2) The file and use option, as contained in the material and the recommendation on change: We feel that the inclusion of this option represents a positive move which will hopefully streamline the rate approval process in future. We do have a concern that the option will be truly applicable only in very limited circumstances due to the apparent continuing powers of the Ontario Insurance Commission. The proposed change indicates that the commissioner will continue to have responsibility for the approval of changes to risk classifications, coverages, and categories.
If it is the intention of the legislation to limit the scope of programs to a very narrow differentiation band, many benefits to the consumer could quite possibly be lost. Allowing and even encouraging variety in the programs offered by insurance companies would result in consumers having the opportunity to access a product and a program that best suit their needs rather than being forced into a classification and/or category designed to address a majority approach.
(3) Catastrophic Impairment: The draft accident benefits regulation provides a definition of "catastrophic impairment" which includes a clause (f) which reads as follows: "Any other impairment or combination of impairments similar in severity to the impairments described in clauses (a), (b), (c), (d) or (e)." Our concern here lies in the reference to "combination of impairments." We feel that this reference is far too general and would allow proceedings to take place on cases which truly would not justify the term "catastrophic." We recommend that this clause be removed from the wording.
(4) Underwriting criteria: The issue of what is acceptable underwriting information has not been specifically addressed in any of the proposed changes. Under the present system of Bill 164, insurers' access to pertinent underwriting information is severely limited, with the result that many consumers have been disadvantaged in their search for a fair premium.
Due to the collateral source rules, many individuals injured in an accident are indemnified in large part by programs other than auto insurance. Because insurers are barred from obtaining details on collateral programs, rate structures, by necessity, tend to be developed on more or less a worse-case basis. The result is, many consumers are probably paying more than they should for specific coverages.
Some insurers have found a solution to this by taking a group approach to insurance marketing. By selling to groups that have some sort of collateral benefit, rates can be set at a very competitive level. This certainly benefits the individual consumer who is part of that group, but hardly provides a level playing field either from a business standpoint or for consumers unable to access such a program.
By eliminating restrictions on underwriting information which is indeed pertinent to individual risks, consumers would have a much better opportunity to, firstly, buy the cover that they need and, secondly, pay a fair price for that coverage. We recommend that the current restrictions on information be amended or eliminated in order to allow companies access to details which are pertinent to acceptance and pricing of an individual risk.
(5) The residual market, specifically the take-all-comers rule: Because of the inequities of Bill 164, as well as the limited capability of making a profit under the program, an artificial approach to the residual market has been taken by way of introducing a take -- all-comers rule. While the concept behind this rule is reasonable -- that is, all consumers should have access to insurance coverage -- its implementation has had a truly disabling effect on many consumers' ability to find coverage at a reasonable price. The take-all-comers rule imposes an artificial structure on the market which is very difficult to work with, particularly in a market where profits are minimal or non-existent.
Companies trying to control their bottom line tend to look for ways to reduce their exposure to marginal or poor risks. By introducing a fair and balanced program, which this legislation contemplates, the ability of insurers to make a reasonable return on their business is enhanced, and this should automatically mean a greater willingness to accept what is currently termed as "facility" business into the regular market stream. Furthermore, if the previously mentioned issues surrounding file and use are considered, we feel individual insurers will develop programs to address and attract marginal and possibly even poor risks to their account. As a result, we would recommend that, in concert with the introduction of the new legislation, the take-all-comers rule be eliminated.
(6) Over the past few years, there have been a number of initiatives commenced by both government and industry to combat insurance fraud and heighten awareness of this costly problem to consumers. Estimates of the cost of fraud and misrepresentation have ranged from 10% to 20% of the total claims-paid amount, a truly staggering sum. This is a cost which is passed to all consumers, and every opportunity we have to control and reduce fraud must be acted upon.
Current and past legislation have required insurance companies to make payments in situations where it is apparent fraud or misrepresentation exist and then attempt to recover amounts paid after formal hearings or arbitrations have deemed those payments to be inappropriate. This approach represents a means of protecting the rights of the innocent consumer but does little to control fraud or reduce costs. In the proposed legislation, there are a number of areas where allowing insurance companies to stop or limit payments before the hearing process would significantly reduce these costs. We believe this initiative should be part of the final product. At the same time, the Insurance Commission should be given appropriate power to take quick and corrective action on any company which abuses this process.
Mr Chairman, I would like to thank you again for giving us the opportunity to address this hearing. We do look forward to the final development of the new product and the benefits it will bring to the insurance-buying consumers of Ontario.
Mr Crozier: Thank you for your submission. I note that you say, in your opinion, this proposal goes a long way to meeting the mandates of the government. In fact, as we go through your proposal, I'm sure that not only will you like what they've done so far, you'll be ecstatic if we can implement all your recommendations.
But the problem that we're facing is, after only a day and a half, it's become very evident that the problem with the government's proposal is that expected increases in the next years and the foreseeable future are too high. The public perceives insurance rates to be too high now, and any increase in those rates, I'm afraid, is going to be a problem with the public. What we need, I think, are suggestions on how we might take the government's proposal and even make it so that premiums can be reduced. That may be a bit much to go after, but at least not escalate. What about suggestions like returning to the tort for economic loss, of having a threshold that would minimize or reduce the access to tort?
Mr Scott: It possibly could, Mr Crozier. We haven't costed it. We haven't applied an actuarial analysis to that specific situation, so I can only speak from off the top of my head. I think there probably are ways to control the cost of tort by limiting access to it or changing the deductible in some fashion. Part of my presentation deals with the issue of fraud, and frankly, I think that is a huge opportunity to reduce costs and pass those through to the consumer.
Mr Crozier: Has General Accident costed the government plan?
Mr Scott: No, we have not. And I have personally not had the opportunity to go through the actuarial costing prepared by Mr Miller. We do have staff on the technical committee that works with the IBC on various aspects of the changes and so on, but I really can't speak to the projected costing that's been put on the table.
Mr Silipo: You make the point, in arguing for in effect having better access to details on what kind of coverage people might need, that in fact under the present situation what we have are rate structures that tend to be done on a worst-case basis and therefore, to quote your words, "resulting in many consumers probably paying more than they should for specific coverages."
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Why is it then that under this proposed system, which results in fewer benefits as the basic package, we are not seeing offhand and right from the start an indication that rates would actually drop for people who would be buying into that basic package, while they may stay the same or increase indeed for people who might be then purchasing those additional options? That, quite frankly, is something that continues to puzzle me and I think, to be quite frank with you, where I think the insurance industry is at a real problem in convincing not just me but many people in the public that what we've got in front of us is something that's more useful than the present system with all the problems that we know exist in the present system.
Mr Scott: In answer to your question, again I can probably only give you at best a partial answer because I haven't been involved in the costing of the product. But I would say that certainly on the accident benefits portion of the cover, particularly as it applies to weekly indemnity, I would suppose that the projected cost is significantly lower under this proposal than it was under the current Bill 164 system. But some of those costs transferred to other areas such as the tort piece of the cover, because that portion of the coverage has become somewhat more enriched than it is under the current system.
The exact percentages and the transfer of loss costs, I really can't speak to specifically. I guess the point I'm trying to make in my submission is that there's no doubt that there are parties who have been injured in an accident, where the auto insurance does little to provide anything to bring that person back into the workforce. From a personal standpoint, I guess more than anything else, I feel that's not really a fair and equitable approach, and I think it can be adjusted or addressed in certain fashions by changing some of the insurance scheme as it exists today.
Mr Wettlaufer: Ted, having been a broker, I can attest to the amount of fraud not just in the claims end but in the number of people who would come into the office, sit across from the broker's desk and out and out lie about what their driving records were. Do you have any way of knowing the increased cost to administration for your company or for the industry for such a thing?
Mr Scott: It's very difficult to put a firm number on it. I can speak to our operation, or our company, where we have hired a total of 10 people who work in our claims department and address, and only address, the issue of claims fraud. You could take those salaries, I guess, and say that is a specific cost to our company to try and control fraud in one fashion. Frankly, 10 people are far too few. We are only touching the tip of the iceberg, so to speak.
Mr Wettlaufer: What about the client who comes in and gives improper driving record information to the broker beforehand; ie, would access by the broker or by your company to an immediate online driving record system cut your costs?
Mr Scott: It probably would. By how much, it's very difficult to say, because we do access claims information pools and so on. What it would do would be to introduce efficiencies into the system that don't exist today, if that access were at the front end and many of those issues or questionable pieces of information were addressed and answered at that point.
The Chair: Thank you, Mr Scott and General Accident Assurance, for sharing this information with us.
PHYSIOTHERAPY ACTIVE TREATMENT TOWARDS HEALTH
The Chair: We now have an organization by the name of PATH to present to us. It's the Physiotherapy Active Treatment Towards Health. Welcome.
Ms Judy Gelman: Hi. I'm Judy Gelman. This is Toula Reppas. We are co-chairmen of a group called PATH. PATH stands for Physiotherapy Active Treatment Towards Health. We are both physiotherapists. If we were nice today, I guess we'd say that we could all have a physiotherapy break and a stretch now after you've been sitting all day. Would you like that? So, everybody. Sorry, but we do have kind of a full thing we'd like to speak to you about.
Before we begin to discuss the issues at hand, I'd like to thank the committee, and particularly Mr Sampson, for providing us with the opportunity to voice our views. We feel that this consultation process is valuable in terms of developing an auto insurance policy which meets both the objectives of the government and the needs of the consumer. We hope the suggestions that we provide you with will be acted upon in accordance with your promise to make necessary amendments to improve the legislation.
As I've discussed now, PATH represents 65 physiotherapy-owned clinics across Ontario. A high percentage of our clients are motor vehicle accident victims. It is for that reason that we wish to have some input into this new insurance legislation.
Having reviewed the draft auto legislation materials which have been circulated to us, our organization has reached the conclusion that the proposed legislation will not be advantageous to accident victims, the government or to physiotherapists. In particular, we are concerned with the procedures for claiming benefits outlined on page 4 of the summary chart of the draft auto insurance legislation. We believe very strongly that the proposed legislation will limit and in some cases prevent accident victims from having the physiotherapy care they require. Also, I will discuss how the new automobile insurance plan will end up costing taxpayers more money through increased numbers of physiotherapy treatments charged to OHIP.
Under the new legislation, a physiotherapist must submit a treatment plan to the insurer and have it approved before treatment can begin. This raises two problems. First, the client's access to rehabilitation is often delayed and it is subject to the whims of the insurer. One of the tenets of our organization and the profession of physiotherapy in general is that early intervention improves the rate of recovery and the extent of recovery of patients.
In my professional career I have encountered numerous patients who have not gotten treatment early enough and have suffered injuries that have become permanent. Sometimes their muscles or ligaments heal in shortened or weakened conditions and they often become chronic and become a real burden. Treatment during the initial stages of injury to reduce pain, encourage active motion and educate the patient are imperative to prevent complications from occurring. Also, this early stage of rehabilitation can focus the patients' goals and encourage involvement and commitment to recovery.
These advantages of early treatment are in danger of being stripped from patients under the new legislation, where they will have to wait until an insurance company gets around to approving their treatment plan. The legislation also creates a conflict of interest for the insurers. They will be placed in a very strong economic position if they are responsible for both the approval of treatment plans and the payment for these. PATH is very concerned that an increasing number of patients may be denied treatment in order to bolster insurance companies' bottom lines.
Further to this argument is the question of the logic in placing accident victims' medical wellbeing in the hands of insurance company employees who have little or no medical knowledge upon which to base a decision of whether or not a patient should receive treatment, and what kind of treatment they need. If a qualified physiotherapist recommends treatment because he or she determines that it is medically advisable, that decision should be respected.
Under the RHPA, physiotherapists are currently allowed by law to assess and treat patients at their discretion. As regulated professionals, we are bound by the rules, regulations and code of conduct of our college. The college is very diligent in enforcing and monitoring these to ensure that the highest standards are being maintained. We do not believe the government consciously wishes to challenge the integrity of physiotherapists by forcing the approval of treatments to be regulated by insurance companies. We are trained experts in the field of rehabilitation and therefore we submit that we do not require insurance companies to tell us how to best treat our patients.
Also, many independent physiotherapists would not be able to absorb the time and the costs of a full assessment and preparing a treatment plan, as well as possibly paying staff, without knowing if their costs would be covered. This is what we would be submitted to under the proposed legislation.
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The next issue I'd like to deal with is the government's proposal to send patients to an independent centre for assessment after only six weeks of physiotherapy. This makes neither economic nor medical sense.
It is a medical fact that even mild to moderate musculoskeletal injuries can often take at least 12 to 16 weeks to heal. More severe injuries such as fractures, multiple injuries and those requiring surgery can often take months to resolve. Research has proven that within 12 to 14 weeks, 75% of patients return to work after active rehabilitative therapy.
If you want to just have a glance at the Canadian Underwriter magazine just published, February 1996, there are our PATH results of this. I have provided each of you with a copy of it. There are also some other results there with time lines for the healing of soft tissue injuries.
It is inadvisable to send patients who are only six weeks into their rehabilitation and not yet healed to an independent centre for assessment. The cost of rehabilitation treatments for eight to 10 more weeks, enough time to return 75% of these patients to their pre-accident level, will often cost less than a DAC type of assessment, which costs upwards of $1,500. Therefore, in 75% of the cases, these DAC assessments will be totally unnecessary. The patients' treatments are interrupted, money is spent unnecessarily, patients' injuries may be exacerbated and everyone loses. It is extremely wasteful to spend money on assessments and not on treatment.
If the patients are not allowed to heal fully and return to full function as soon as possible, they will remain a burden to the system and thus in the long run the insurers and the public will be paying more for these premature assessments. A delay in rehabilitation can cause the patient to deteriorate or plateau, thus causing even further delay in their return to full function.
If the DAC assessment finds that the client is not to return for further treatment, which they often do, many patients still in pain or too weak to return to full function or work, especially if they've only had six weeks of treatment, will turn to OHIP clinics for treatment. This will cause the OHIP clinic waiting lists, which are now 46 weeks or more, to grow, which will result in pressure being placed on the government to add resources to the OHIP clinics. This scenario has occurred in all of our clinics many times. In effect, this allows insurance companies a release from their obligations and the public will end up paying for the remaining physiotherapy treatments.
In a letter from Mr Sampson to ourselves -- sorry, Mr Sampson -- he wrote that, "Consistent with the government's fiscal objectives, these proposals will not shift costs to the public sector." If in fact this government's proposed legislation is passed without amendments, unfortunately this is exactly what will occur.
In his communication to us, Mr Sampson also stated that the proposed new legislation will be fairer, simpler and more cost-effective. Our question is, for whom is this true? How is the legislation fairer when patients who are in need of physiotherapy could be potentially denied or cut off too early? How does the legislation create a simpler system when it adds two more levels of bureaucracy to providing patients access to physio services? How does the legislation make physiotherapy more cost-effective when it is the taxpayer who will end up bearing the brunt of the extra burden on OHIP-funded clinics?
Clearly, the new legislation is flawed and needs to be revised to prevent the negative effects I have just discussed. At this point I'd like to summarize PATH's original proposals to you.
(1) Regulated health professionals, ie, those professionals who are regulated and in good standing with a professional college, be allowed, as they're entitled by law, to assess and begin treatment of injured patients. Within two days a full assessment and treatment plan should be sent to the insurer and the physicians of the patient.
(2) Patients should be able to receive at least 12 weeks of active physiotherapy treatment to allow them to heal, covered by the motor vehicle insurance before an independent assessment be allowed.
(3) If after this three-month period a patient is not progressing, ie, almost back to full function unless there are very unusual circumstances, then a DAC type of assessment should be allowed.
(4) Treatment should, however, not be disrupted while a patient is waiting for this independent assessment and report, as they will only plateau and regress, which puts them at greater risk for not returning to function and work.
We ask that the committee examine our proposals carefully. They are based upon fact and years of medical rehabilitation experience. Our research documents support our proposals. Implementing our suggestions will prevent taxpayers from picking up extra OHIP physiotherapy costs, as well as provide better and more immediate treatment to patients who will be able to return to active, productive lives in the quickest possible time.
Again, I would like to thank the committee for providing our association with the opportunity to present our suggestions in this public hearing and hope that you will be open to our suggestions.
Ms Lankin: I think your presentation is very straightforward. Your recommendations accord with some that we've heard from other health professionals and I really don't have any questions. I understand it and I appreciate your presentation. Thank you.
Mr Spina: Thank you for a good presentation; it was rounded. I wondered what your view of treatment plans would be as a way of balancing the need maybe to control costs with the need to provide proper treatment. Is there another or better way that you can suggest maybe to do this?
Ms Gelman: Our suggestion is that, as professionals who are under RHPA and who are not-for-profit referral, usually we're hoping that the treatment plan would be provided by a professional who has had years of experience and would be trying to do it as inexpensively as possible and as quickly as possible.
If you're talking about later on down the road -- it's been proven by very much research that if you assess a patient too early, very often it's very hard to tell, to see if they've had good treatment. When you come to three months down the road, if they're not resolving properly, then yes, it's time to look at something a little bit more drastic and there are many different ways of doing that. You can have an IME or you can have the DAC assessments.
I'm not sure if that's exactly what your question is. You meant from the very beginning?
When we do assessments, we examine a patient fully. We do a physical assessment, plus we do all the other kinds of assessments we have to do as far as social, economical and all that and then we base our treatment plan on that. If a patient's mild, then we put them in a very quick track program. If they're moderate or more severe, we put them in a different program.
Mr Spina: You would like the opportunity to be able to make that decision as opposed to the insurer, I gather.
Ms Gelman: Rather, as I've spent many years having practised doing it, went to university to do it and I am also under my college which tells us certain protocols we have to follow. Obviously somebody who's just -- and I don't mean this meanly, but you wouldn't like the newspaper boy across the hall to tell you whether you can go in here and listen to the -- even though he pays his taxes. You have to have some experience behind you and you have to be responsive to experience.
Ms Castrilli: The Ontario Chiropractic Association was before us earlier and it pointed out a provision of the legislation that it feels should be changed. For instance, where the insurer disputes any of the services that are provided and the matter is referred to a DAC, they would like the cost in effect to be paid first and disputed later. Is that your position as well?
Ms Gelman: They'd like the cost of DAC assessment?
Ms Castrilli: Yes, of the treatment. The individual treatment can be disputed, as you know, and they would like the legislation changed in order to make sure that the costs, in this case the chiropractor, in your case your members, would be paid first and then disputed later.
Ms Gelman: Obviously, if you think about it, many of our clinics are small, individual clinic owners -- physiotherapists own their own clinics -- and for them to put out the time and the effort and not be paid is rather hurting in this economy. They have all their other expenses, so we feel that if they're providing the service and they feel as physiotherapists or chiropractors that the service is necessary, then yes -- anything afterwards should not be paid, if the DAC decided that it wasn't necessary after, but up to that time of course we feel it should be paid when the service was rendered and it was rendered for good, honest reasons.
Ms Castrilli: You concur with that position then?
Ms Gelman: Yes, absolutely.
The Chair: Thank you very much and PATH for presenting today and sharing your information.
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INSURANCE CRIME PREVENTION BUREAU
The Chair: We now have the Insurance Crime Prevention Bureau to present to us, Mr Jean-Claude Cloutier. Welcome to the committee, sir.
Mr Jean-Claude Cloutier: My name is Jean-Claude Cloutier; I'm president of the Insurance Crime Prevention Bureau. Rick DeGraff is the Ontario division manager for the Insurance Crime Prevention Bureau, and Jim Adams is a special agent and investigator for the Insurance Crime Prevention Bureau in our Toronto office.
We have had the opportunity to review the proposed changes to the current insurance legislation and what I would like to do today, with your permission, is to address strictly the anti-fraud measures that you have proposed. We think there's a small step that is being taken towards controlling insurance fraud, but it is insufficient, in our view, to really control that cost.
In the submission we gave to Mr Sampson last summer, it had been estimated that approximately $1.3 billion in losses were related to insurance fraud and about one third of this cost is Ontario's cost. Of course because of the loopholes which remain we feel that the fraudsters will continue to milk the system at the expense of the honest insurance-buying public.
The three new offences created under the act are unduly burdened with the obligation to prove "knowingly" and "willingly" under the terms of these new offences, which makes it very difficult to come in and prove a case. If instead the wording were to say something like "causing an insurer to act on statements and representations as if they were genuine in connection with the entitlement to a benefit under a contract of insurance," then it would become a little easier to prove the wilful acts of these persons and let them then justify his or her actions.
Our understanding of the amended act is that it does not relieve an insurer from the obligation of immediately paying accident benefits to a claimant in cases where there are strong suspicions of fraud. What we had recommended and what we would like to see in this is that in cases where there are very strong suspicions of fraud, the insurer be allowed to suspend or withhold further payments, providing notification of this is given to the Ontario insurance commissioner's office, as well as to the insured, as to the reasons why these payments are being withheld. To do otherwise is to invite the money to disappear from the country, or at least from the province.
We suggested that insurers be mandated to report all losses to the Insurance Crime Prevention Bureau's central database to help prevent fraud. At a breakfast meeting Mr Sampson expressed some concerns with respect to the freedom of information act, but I would like to mention in this respect that the freedom of information act does not apply to private industry. It applies strictly to government institutions, and for this reason we feel it would be the right thing to do to mandate this reporting to the Insurance Crime Prevention Bureau.
Still, in reaction to the concerns about privacy, most of the property casualty insurance industry in Canada has adopted the Canadian Standard Association's model code for the protection of personal information, as has the Insurance Crime Prevention Bureau, which clearly defines how information obtained is to be treated, who may access it and why, and thus provides some consumer privacy. This model code, in passing, is somewhat similar to law 68 in the province of Quebec.
We also note that nothing was provided in the amendments with respect to the creation of an auto theft prevention authority, as suggested on page 5 of our presentation to Mr Sampson. Considering the continuing increase in motor vehicle theft in Ontario and the parallel increase in fraudulent auto theft claims, we believe the time is appropriate for the government to step in and impose measures which will help contain and possibly reduce the costs of automobile insurance.
We understand that you're looking into some form of legislation dealing with the treatment given to salvage vehicles. The safety and peace of mind of the motoring public dictates that tangible action must be taken immediately, not only to rid our roads of the time bombs represented by improperly repaired vehicles but also to help reduce the number of vehicles stolen which are then sold to an unsuspecting public under the identity of a previously salvaged vehicle, or the obtention of insurance on a piece of junk which is then reported stolen.
When we made our verbal representation to Mr Sampson in August, we discussed the value of pre-inspection of motor vehicles from a fraud prevention point of view. Professors Hosios and Jump of the University of Toronto, in a paper prepared for the Canadian Coalition Against Insurance Fraud in 1995, which will be received by the coalition's board shortly, determined that if such a program were in place in Ontario, automobile insurers, hence Ontario insurance buyers, would save approximately $20 million, as some 2,679 fewer vehicles would be reported stolen. Furthermore, this measure would prevent the insurance of damaged vehicles, which damages are then reported to the new insurers as a hit and run or a one-vehicle accident.
In this respect, you will find in our folders an article by the International Association of Auto Theft Investigators' president, Mr Crepeau, that gives all the benefits of such a program. To have any measure of success, such a program, we feel, must be government mandated. To rely on everybody's goodwill is to ask too much, I think, and we suggest that the government should promulgate this.
At the initial moments of my presentation, I forgot to indicate that the Insurance Crime Prevention Bureau is a non-profit organization. It has been in existence in one form or another since 1923. We operate across Canada, and Ontario is one of our biggest divisions. Thank you.
Mr Ford: How do we balance the costs of prevention and the costs of savings?
Mr Cloutier: It's a perennial question, and it's always very difficult to establish. But if we look, for instance, at pre-inspection of vehicles, what it has done in certain of the American states, it has more than paid the cost of doing this pre-inspection by keeping the theft of vehicles at a lower rate. Michigan, New York, New Jersey have all had that experience of reduced costs in so-called vehicle thefts, where vehicles didn't exist in reality or where vehicles were claimed to have a $3,000 or $5,000 or $10,000 stereo set when it didn't in fact have such a set.
Mr Ford: I realize that, but sometimes the cost of prevention costs more than the cure. But we still have to keep a sense of balance here; we just can't let it wander off by itself.
Mrs Marland: I'm wondering if you have suggestions about how we can actually reduce the theft claims. Is the key solution to be found in education, in vehicle design, or -- and I don't want to mention "the famous," you know -- in insurer discounts?
Mr Crozier: What's "the famous, you know"?
Mrs Marland: I'm not going to mention it, because I'm not going to give them a free commercial. Is it in insurer discounts for safety features or in some other approach that hasn't been researched or developed yet?
Mr Cloutier: It's a mix of everything, actually. It's a mix, definitely, of education of the public to take care of their vehicles, which oftentimes they do not.
Mrs Marland: Like not leaving it running with the keys in it.
Mr Cloutier: Correct, yes. I'm just going in to buy a paper or get a pack of smokes and the car is running outside. We have to educate the public. Some of the states, Michigan in particular, have passed legislation where, if your car is stolen with the keys in the vehicle, you automatically get a 10% penalty on the actual value of your vehicle. This is one way of saying: "Come on now, guys, wake up. Don't do it." It's a question of educating the public to the reality of this problem.
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Mr Sampson: Thank you for your presentation today. I want to assure you that on the med rehab side fraud component, we're trying to deal with the items you raised to tighten that up. Perhaps there's more tightening up we need to do to accommodate your concerns on the med rehab side as it relates to how to deal with a wreck and when a wreck should be delisted, and perhaps more important, taking the VIN number off -- the VIN, vehicle identification number. I'm using phrases that --
Mrs Marland: You're getting like everybody else.
Mr Sampson: Scary, isn't it? Taking the vehicle identification number off the system. We are working on that and we're going to try to bring that as part of the final solution.
If we could follow a vehicle from birth to death, so to speak, in your view would that help with some of the fraud problems as related to repair work etc?
Mr Cloutier: It certainly would, particularly if the document that attests to the life of the vehicle were to be marked in a permanent manner that this is a salvaged vehicle, so that John Q. Public, when buying the vehicle and getting their kit from the motor vehicle registrar, would see, "This vehicle was in an accident, so I'd better check on that closely."
Ms Castrilli: Thank you very much. I'm grateful to you for the novel information you've provided this committee. I have one question with respect to the changes you recommend to subsection 447(2) of the act in your first paragraph. My concern is that you would change the civil standard of proof to a criminal standard of proof; in other words, if you're deemed to have told a lie, it's a lie and that's that. I wonder what you would do in the case of someone who legitimately makes a mistake, as can happen, if you take away that requirement.
Mr Cloutier: If a person has made a legitimate mistake, that person would be able to explain that mistake away and would not have any more onerous requirements.
Ms Castrilli: How would that be, though? Your new wording would be "Causing an insurer to act on statements and representations as if they were genuine." As long as the insurer believes the statement that is in fact a lie, the individual is on the hook, regardless of whether it's an innocent mistake.
Mr Cloutier: I guess I've seen this from a criminal investigation point of view perhaps more than from a civil point of view, but if a person states, "I can't work any longer because my back is injured," and you see this person playing a hefty game of tennis, that person has lied outright and it's knowingly and willingly that he has done that. But if we have to try to prove that in that person's mind, he knowingly and willingly did commit this criminal act, it is a problem, as we see it.
Ms Castrilli: You prefer a system where the individual has to disprove as opposed to the insurance having to prove. Is that it?
Mr Cloutier: Yes and no.
Mr Crozier: Thank you, sir. Just a couple of items on the practical side of your work. When you talk about pre-inspection, I recall in my broker days where, if I insured a commercial property or an individual residence, we were required to submit pictures with the application for insurance, pictures of the home, let's say. I suppose it could be as simple as that, could it not, where if we were to insure an automobile, the broker would simply take a couple of side views and a front and rear view of the vehicle and have that with the application as evidence that the vehicle was in whatever shape at the time?
Mr Cloutier: It would be a start, but we feel it's not just the pictures that are important here; it's the identity of the vehicle. Unless the broker is really well-honed into looking into the vehicle identification number and the safety sticker and other such matters, it would perhaps not be a good thing to impose that on a broker.
Mr Crozier: So what you're suggesting goes a bit beyond that, and the more we do, the better we can be assured that there would be less fraud.
Mr Cloutier: That's correct.
Mr Crozier: I suppose it would be too much to go as far as having almost like a log book with an automobile, where service would have to be indicated, accidents, damage, that sort of thing. That'd be going a little bit too far, I suppose?
Mr Cloutier: I wouldn't even dream of that at this present time.
Mr Silipo: Thanks very much for the presentation. You gave some figures in your presentation about the extent of the loss that comes as a result of fraud. Could you break that down a little more for us in terms of where you see the major problem being? Is it in the area, as you pointed out in your letter to Mr Sampson, of people staging accidents or double-dipping? Is that where the bulk of it is? It's important for us to get your sense of that.
Mr Cloutier: Presently, I think the bulk of the fraud is in staging accidents where none exists, but you also have the false vehicle thefts and the arson cases as well, the false burglary cases. But presently, the trend seems to be on fake bodily injury claims.
Mr Silipo: Do you have some sense that this has increased if you were to look back over the last five years? Your comments attribute some of that to Bill 164, and I just want to be clear. Are there some things under Bill 164 that, as you see it, have increased that from before or was that something that was there before and now we're just noticing it more? What is going on?
Mr Cloutier: With Bill 164 and the rich indemnities that were given to the people, we attracted in Ontario a lot of people from other provinces who came here with the express intent to collect up to $1,000 in indemnity for fake bodily injuries.
Mr Silipo: So you're saying it's because of the additional benefits that are available. When you look back to the pre-164 days, though, do you see the bulk of the fraud being in other areas? If we went from a tort system to a non-tort system, one would expect that the categories of where the fraud might be would inevitably shift. Do you have some indications on that?
Mr Cloutier: We don't have real hard indications on that, no, but all of a sudden we saw the explosion in bodily injury claims after 164 came into being, which we had not seen previously. We were involved in some investigation involving rings of fake bodily injuries.
Mr Silipo: But if the bulk of the fraud is in these staged accidents and the double-dipping, there's nothing to say you couldn't deal with that problem and still leave the bulk of the benefit levels there for the honest consumers. You're not making the argument that you need to remove those benefits as a way to deal with fraud. You're saying deal with the fraud provisions.
Mr Cloutier: What we're saying is that the richer you make the benefits, the more you will attract people to come and share in those rich benefits. This is what we're saying here.
Mr Silipo: That means basically, then, stripping things down to the bare minimum, so making everybody suffer as a way of diminishing the risk of those few who will defraud the system. It seems to me a pretty sad way to have to go.
Mr Cloutier: Or making it more difficult for people to present claims or less --
Mr Silipo: Absolutely. That's the point we continue to impress here. If there is a problem with fraud, and we're not arguing there isn't, let's deal with that, let's deal with the question of fraud. Let's not try to do that by stripping away basic rights and basic products that we think good consumers should have. We don't disagree at all with the points you're making about the need to deal with fraud.
The Chair: Thank you very much for presenting to the committee, Mr Cloutier. We appreciate your information.
Mr Spina: Point of order, Mr Chair.
The Chair: If you think it's necessary.
Mr Spina: This was included in all our presentations, and I just wondered if it was of some significance that we should be aware of.
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Mr Cloutier: I'm sorry, Mr Chair. I was to have kept a copy of the package that went to you so I could refer to it, and unfortunately I gave everything away. But, yes, this is strictly an example of a recent fraud that we were involved with that shows all the ramifications. Every person you see there claims to have been employed by the organization which is in the centre at the time when they had an accident and they produced a certificate of employment. Yet this is only a shell company. They never had any employees. This is to show you how they want to collect up to that $1,000.
Mr Spina: So it was an organized fraud scheme.
Mr Cloutier: Yes, sir.
Mr Spina: Thank you. Sorry, Mr Chair.
ONTARIO PHYSIOTHERAPY ASSOCIATION
The Chair: We now have the Ontario Physiotherapy Association joining us. Welcome to the committee.
Ms Signe Holstein: My name is Signe Holstein, executive director of the Ontario Physiotherapy Association. I'm also educated as a physiotherapist. With me is Maureen Dwight, a registered physiotherapist with a large practice here in Toronto. She is a member of the accident benefits advisory committee under the current legislation. At Maureen's clinic, about 20% of the patients treated are MVA victims.
We appreciate this opportunity to appear before this committee and to have the opportunity to comment on the draft legislation and regulations. We compliment Mr Sampson and the government on taking this consultative approach. Quite frankly, as was the case with Bill 26, we wish we had more time to study the proposals and consult with our members, who are on the front line in treating MVA victims. However, we've done our best in the very limited time available to us.
Next to physicians, Ontario physiotherapists assess and treat more motor vehicle accident victims than any other health care profession. We think, therefore, that we have something to offer in the committee's review of the proposed legislation.
If I may make a general point at the outset, we have many what one might call nits with the proposed legislation and regulations as drafted. Clarity of intent is essential in MVA legislation. We should have learned from the lessons of the past that we cannot leave much to the interpretation of victims, insurance companies or health care practitioners. We agree with Mr Sampson, as quoted in the Law Times, that "...the language of Bill 164 is ambiguous. It's a mess."
I'm not going to use our very short time today to talk about the nits, however. If you agree, we would be happy to prepare a list of these points of detail and give them to the committee before you complete your review. What we want to do today is to focus on a few major policy issues that are raised by the draft regulations and legislation.
One nit that we would like to address, however, relates to terminology: the consistent use of "medical," as in the "medical benefits," "medical and rehabilitation advisory panels" and so on, in the legislation and regulations. From section 15 of the regulations, 13 or 14 health care professions, including physiotherapy, are lumped together under "medical."
We think the proper term is "health care," not "medical." The use of "medical" presupposes medicine and a monolithic medical model of treatment. The Regulated Health Professions Act, proclaimed in 1993, abandoned the monolithic medical model in favour of a more multidisciplinary approach. We think the terminology in this legislation and regulations should be adjusted accordingly.
Ms Maureen Dwight: The first policy issue we'd like to raise is the issue of multiple payors. Under the current system, health care practitioners may receive payment for treating MVA victims from any of three or four sources: OHIP, the automobile insurer, the victim's group benefits plan carrier, and we may also have to report to the victim's disability plan administrator. The same will be the case under the proposed reforms.
The system of multiple payors places an enormous paper burden on health care practitioners and adds considerably to the overall cost of treatment. Multiple payors often means that the treating health care practitioner must deal with different reporting requirements, different standards and different fee schedules or coverage policies from each insurance company.
From the victim's point of view, multiple payors cause confusion. We regularly see victims who have delayed necessary treatment, to their long-term disadvantage, until they figured out which payor paid what and under which circumstances.
Also from the victim's perspective, we often see victims who exhaust their group benefits coverage limit in treating their MVA injuries and later on have an unrelated injury or disease. Since they've exhausted their group benefits coverage, they either go without proper treatment or they pay for it out of their pockets. Either way, they end up indirectly paying for the MVA, and that's not right.
From the payor's perspective, a multiple payor system is too susceptible to fraud. It allows the unscrupulous practitioner to bill more than one payor for the same treatments. It also allows the adaptation of the treatment program to the most comprehensive coverage package.
We think there should be only one payor for rehabilitation treatment, and if it's a motor vehicle accident, there should be only one payor, and that is the automobile insurer.
The second policy issue we'd like to address relates to the two-tier approach to maximum aggregate benefits for medical and rehabilitation treatments. I'm referring to subsection 21(1) of the draft regulations.
The physiotherapy association agrees with the $1-million limit for catastrophic injuries, but we do think that there should be two other tiers under that $1-million limit: a basic tier with a maximum of $10,000 and a second tier with the $75,000. In our experience, the majority of MVA cases could be treated within that basic tier.
The two-tier approach that has been proposed by the government does not reflect reality. Another tier with a lower limit would actively encourage practitioners to be cost-effective in their treatment programs. The first threshold of $75,000 also risks becoming a self-fulfilling prophesy, that everyone has a right to treatments up to that level. A basic tier with a lower maximum would allow for more accurate categorization.
The third point we'd like to make relates to the designated assessment centres, or the DACs. As long as DACs play a central role in the decision to continue or to discontinue treatment, it is essential that the DACs be truly independent and impartial, beholden to neither the insurer nor the insured.
The DAC's assessment must also be a peer review of treatments. A physician must review physician treatments, a chiropractor must review chiropractic treatments and so on. It is fundamentally inappropriate for one profession to critique the treatment approaches of another profession that the first profession is not educated in nor fully understands.
Further, DACs are very expensive assessment tools and we question whether they are cost-effective in our proposed tier 1 category or even in proposed tier 2. We think in these two tiers there should be provision for an alternative independent peer review and assessment by an accredited practitioner.
We would be happy to discuss our ideas on this concept at greater length if you are interested, and we believe it is important that physiotherapists be included in the advisory committee on the DACs.
Ms Holstein: The fourth issue we'd like to address is something called referral for profit. Referral for profit may occur when a health care practitioner refers his or her patients to a clinic in which that practitioner has a beneficial but passive interest for a course of rehabilitation treatment.
The potential for referral for profit has increased exponentially in Ontario since the College of Physicians and Surgeons removed its regulatory prohibition against physicians owning rehabilitation clinics.
Referral for profit raises serious questions about quality and efficacy of treatment. It raises serious questions about patient choice, and it provides the opportunity to churn patient treatments in order to maximize billing. Each is a serious problem.
From our discussions with the government, it's obvious the government is aware of and concerned about referral for profit. To our surprise, however, the proposals do not address the issue at all.
We think that if the government and the insurers are serious about containing costs and encouraging cost-effective treatment, referral for profit must be banned. This would mean that the legislation could authorize insurance companies to refuse payment for treatments to clinics in which the referring practitioner has a beneficial interest. In such cases, the clinic could be prohibited from going after the patient for the unpaid account, in the same way that the WCB prohibits rehabilitation clinics from going after WCB clients when the injured worker's claim is denied by WCB or abandoned by the worker.
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We recognize that there would have to be some exemption to cover clinics with bona fide specialization or for clinics in remote or underserviced areas where travel to another clinic would impose an undue hardship on the accident victim.
It's important to note parenthetically that referral for profit is also a phenomenon outside the health care sector. Lawyers and other professionals with some type of MVA practice sometimes have a passive interest in rehabilitation clinics to which they refer their MVA clients. The concerns raised by this type of referral for profit are much the same as in the health care sector and we think equally deserving of careful attention.
A final issue we'd like to address is not really statutory or regulatory, but it does impact on the cost and effectiveness of rehabilitation for MVA victims.
Under the Regulated Health Professions Act, physiotherapy is a direct access profession. This means that patients may access physiotherapy directly, without the need for referral from a physician or other health care practitioner.
We think that in the majority of cases, the requirement for physician referral is a duplication of effort that imposes a large systemic cost on the MVA system, namely, the cumulative cost of medical examinations and reports that may not be required. Bear in mind that in the vast majority of physician referrals, the physician simply directs the physiotherapist to assess and treat. In other words, the physiotherapist assesses the injury and determines the appropriate treatment plan.
Furthermore, the requirement for physician referral builds a delay into the system, delaying the MVA victim's assessment and rehabilitation treatment. This often means that the victim's treatment program is longer and more intensive than it needed to have been and the patient's return to maximum functioning is delayed.
If insurance companies are serious about making the system as efficient and responsive as possible, they should rethink any requirement for physician referral. Bear in mind that under the standards of practice enforced by our regulatory body, physiotherapists can only assess and treat within their scope of practice and area of competence. Should a physiotherapist encounter a condition beyond the physiotherapy scope of practice or beyond that therapist's competence, the physiotherapist is required to refer the patient to a physician or other health care practitioner.
These conclude the major policy points we wish to raise.
Ms Castrilli: Thank you for your presentation. I'm a little troubled by your first page, where you talk about the nits. As a lawyer, I think language is very important and I think there might be some quite substantive issues around those nits. I wonder if you could talk a little bit about that. I notice that you left out a phrase in your presentation that talks about inconsistent use of terms and the need for definition of terms and more clarification. Could you give us some examples of the kinds of things you're talking about?
Ms Dwight: The quickest one that comes to mind is issues regarding physiotherapy and physical therapy -- the difference in the terminology of "physiotherapist," which is a regulated term under RHPA, and "physiotherapy," which is not a regulated term, so that there's some confusion in that whole aspect -- and what was alluded to about "medical" versus "health practitioner," keeping the consistencies there.
Ms Castrilli: What flows from the first examples you cited?
Ms Dwight: When we were looking at, for example, your regulation of health practitioners and the fact that the treatment plans have to be done by a health practitioner, physiotherapists are a health practitioner, but if you later then talk about physiotherapy, that doesn't fall under your health practitioner standard. So there's an inconsistency there. When you talk about your 15 treatments, you talk about physiotherapy being the 15 treatments, whereas one of the things we'd probably like to see would be that it be "regulated physiotherapist," and that would cover under RHPA and under your health practitioner definition.
Ms Castrilli: Essentially, this would not disadvantage the client in this particular case?
Ms Dwight: No, I think it would be more consistent with the tone of the legislation. Our assumption, as we read through it, was probably that it was just quick in some of these areas. Some of the difficulties under the RHPA of the term of the practice versus the professional are difficult things to come to grips with and we'd like to assist with that.
Ms Lankin: Every time I hear these debates it reminds of the RHPA and the days of talking to ophthalmologists, optometrists and opticians, the scopes of practice and the different names, and that's true of a number of professions. I think that this legislation and many other pieces will eventually need to be brought in line with the new reality of a multidisciplinary approach to delivery of health care services. It is good that you point that out. It has been pointed out by other groups, and it's something I'm sure the government would be receptive to.
I'd like to ask you about the second issue you raised, and that's the two-tier approach to maximum aggregate benefits. You're looking for some greater stratification of that. I'm of two minds on this. I think when you speak about the first threshold of $75,000 that you risk it becoming a self-fulfilling prophecy, that practitioners may treat up to that level if that amount is available. One, it casts doubt on the professional judgement and the motives of the practitioners, but it also does speak to this thought that there is some kind of psychological impact of having caps on thresholds.
It seems to me that most of the problem that we've heard from the industry in medical rehab overutilization does happen at the lower level that you're talking about, and so if it's useful perhaps there should be a lower cap, and many of the other cases might go over $75,000 and, as we've heard with some acquired brain injury, if you do use the Glasgow coma scale, that doesn't adequately judge impairment and you may find that people are being inappropriately cut off at that point in time.
My concern is that you really want to get the appropriate treatment to the appropriate patient for the appropriate length of time, and I don't know how caps help you one way or the other. I guess what it comes to with what you've suggested, the numbers are fine, but what are the definitions to go with that and how would those definitions be judged and be helpful to the therapy of the individual, the treatment of the individual versus another tool for insurance companies to look at trying to manage costs?
Ms Dwight: I think we were looking at it two ways. One is that we want to get practitioners to really think about what they are doing and to come up with a treatment plan that is cost-effective. We feel that the health practitioners can work well within a cost-effective system and we can be pushed to be cost-effective. I think that we want to become not only cost-effective but outcome-oriented, and one of the things that we can be looking at by having a very tightly wound system is what sort of outcomes are we getting for these type of clients under that sort of dollar. You're going to push us a little bit to justify our outcomes, and I think there's nothing wrong with pushing the health practitioners a bit.
Ms Lankin: But let me ask you, how would you judge a person's injury that they're only going to get up to $10,000, or they're going to be between $10,000 and $75,000, or they're catastrophic and over? That comes back to the cost management of the insurance company versus, I don't know what, in terms of judging what that client is likely to need in their treatment plan.
Ms Dwight: We struggled with that as a profession and among the individuals within the profession, and one of the areas that we felt was that that could be somewhat determined on functional terms rather than on a medical model-type term, whether people were working or were not working. There are a lot of walking wounded out there who are going to work every day. The insurance industry doesn't need to be paying for a functional capacity evaluation, which takes two days, for someone who's actually going to work every day. They don't need the intensity of the programs. A lot of the more expensive programs are predicated on people being off work in a program five days a week for four hours at a go. If people don't require that sort of treatment and they are working and they're functioning up to a certain level, we don't see that there's a need for that to be self-fulfilling.
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Mr Sampson: I appreciate your making the presentation today. I want to note with respect to the physician referral, this plan, of course, doesn't require it. The industry plan that was put to us did, so OMEGA did, and that was one of the items that we felt -- strangely enough, the physicians came to us and said, "We don't want to be the gatekeeper either," so that was one of the items where we felt we didn't have to rely upon the physicians for the referral items.
With respect to three tiers, we certainly struggled with that. It wasn't the first time we heard of it. I'm not exactly sure where the three-tier concept came from, but it does have a lot of merit. I think if you really look at the 15-visit process, that's kind of our attempt to get at the three-tier concept to some extent, although what we struggled with was what the definition was between the various tiers. We're already struggling with one, catastrophic versus non-catastrophic, where there has been some history, so you can imagine how difficult it might be to introduce a brand-new tier and have that definition work through the system.
But I want to talk to the conflict, if I can, briefly, the conflict-of-interest issues. We struggled with that one as well as to whether or not we could do something in the Insurance Act that would deal with the automobile insurance industry, but it was felt by us that with respect to all the professions involved it might be more appropriate to try to do that across the board, which would mean you would have to get into the health practitioner act issues and the issues as it relates to the governance of lawyers in this province. That's the can of worms that, given the time constraints, we felt we couldn't get into, but we hear your concerns. I'm wondering whether you share our concerns that you'd kind of have to do it across the board as opposed to just the Insurance Act.
Ms Holstein: Certainly we recognize that it's a very complex issue and any regulatory framework needs to be as broad as possible. It is an issue in this particular area certainly, and has been for a while, but we would support a much broader approach to it. I think it's that we need to know that something is moving in that direction.
Mr Sampson: We're certainly moving in that direction. I think the dilemma is all the help we can get. Going back to my second question, defining the three tiers would be very helpful, and I look forward to seeing something from you on that.
The Chair: Thank you, Ms Holstein and Ms Dwight, for sharing your knowledge with the committee.
CHAITANYA KALEVAR
The Chair: We now have Mr Kalevar to present to us. Welcome to the committee, Mr Kalevar.
Mr Chaitanya Kalevar: Thank you very much, Mr Chairman. First, I must thank Mr Sampson for doing the needed thing, that is, getting the consultation process going. Last time I tried to get on this process I didn't get anywhere. That was, of course, Bill 26. I must say that this is a much-needed improvement in the government process; however, I found out about my being on the list only yesterday, and between yesterday and today I was not able to do much more than a page of what I call "Executive Summary." I thought you wouldn't have time to read more anyway, but every word of it is perhaps important and I hope you will pay as much attention to it as to some of the lengthier briefs you have heard.
I am the insurance consumer, if you like, the guy who funds all these medical professionals, legal professionals, insurance industry professionals and so on. I am in many ways appalled with some of the presentations I heard, in particular I must say, the presentation I heard from Mr Scott a few minutes ago. When Mr Silipo asked him, "When the benefits have slowed down, how come the rates haven't come down?" he had some answer that, "I'm not the one who costed it," or whatever.
Well, he should have brought his costing expert with him, because as far as I'm concerned the transparency of the insurance industry is like a wall: You can't see nothing. Why can't we have legislation which requires transparency from the insurance industry, just like the federal government did with transparency in terms of interest rates? I think until this committee grapples with the issue of transparency, it doesn't matter how many changes you bring about -- one time it is the NDP's expensive legislation, another time I don't know what it is of the present legislation, but the price keeps on going up and up and up.
Having said all that, let me come down to the summary page that is before you. I feel that, first and foremost, the insurance industry is related to many industries. For example, there are many things that are happening. Many accidents happen regularly at specified locations because the locations are dangerous, period.
I have written to the Ministry of Transportation before and asked that such locations be marked with a tow truck, because they are just around the corner anyway. I would suggest you pass on that message to the appropriate minister so that we get these dangerous locations identified on the highway. It's a simple thing. I'm not asking for a very difficult thing. If that is identified, drivers will be that much more careful and there will hopefully be less accidents at those locations.
Again, I'm very dissatisfied with the previous government, that they failed to give us affordable public auto insurance. I can't expect from this government that. However, right now, with public transit being cut back and unaffordable insurance rates, you are stranding people in their homes. They can't get anywhere, and then you want them to go out and look for jobs. In this large, vast GTA, looking for jobs is just not possible on a bike or on the TTC. You need a car. So it is important you deal with the unaffordability of the insurance rates and provide some flexibility in it.
Point 2: It is assumed that most of the insurance consumers have a job and can afford to buy. Well, the facts are, when people are without jobs, the unemployed, those on social assistance also have to look for jobs and they can't afford the insurance the way we have it. You can't write legislation as if everybody is playing at the golf club. Everybody is not playing at the golf club.
I think I called point 3 already.
The Facility Association is another interesting situation. One of the things they say is if you don't have coverage under an automobile insurance policy for at least 12 months in the last 24, then you get four risk points. Then it's back to the Facility Association, that high level. Obviously, that is ridiculous. Insurance expense is an expense. Either you have insurance or not.
Let's start from today. What is this going backwards and checking your thing? Suppose for two years somebody couldn't afford insurance at all. Why are we then suddenly putting him into the Facility Association four-risk level? It should be much lower, if at all. The cost of re-entry into an insured driving situation is just too high.
I am an auto driver when necessary. Otherwise, I like to use TTC or use a bike or even walk. I would suggest that right now, the cost of re-entry into insured driving after, say, 24 months' absence of driving, for whatever reason, is such that I would say it is easier to separate from your spouse and make up than to make up with your car or make up with the insurance industry. It's ridiculous. Am I married to my car or the insurance industry? Why is it so hard to get back in? It just doesn't make sense.
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Insurance is not something out there. It affects everyday decisions. Why is the insurance industry not able to provide the consumer a winter-only package or a weekend-only package or a two-week vacation package, just as the car rental industry does on a daily basis? Why can't they do that? I like to use my bike and TTC as often as possible, but occasionally I have to do things where I need a car. If I can go and buy the insurance on that basis, I should be able to do that. The flexibility for the consumer is missing. It looks like the insurance industry runs in the interests of the insurance industry rather than to serve the consumer. There is no need for that.
Let me point out that the GTA is a net CO2 producer. That is true of all urban areas. The fact that you are producing net CO2 causes global warming. I don't have to tell you anything about that; you already know. It can also cause ozone depletion and ozone holes, which can also lead to skin cancer. Why are we making sure this is allowed to happen? When are we going to start writing legislation with a holistic picture of what impact that has rather than listening to the professionals in the industry, who have an economic interest to promote one way or the other and will forget the environment all the time? It's there.
The insurance industry and the way it is structured is not serving the environment, is not serving the consumer who wants to break the car habit. If you can't support the TTC, at least support legislation which will allow a flexible package of insurance for people who want to use it that way. You are making it very difficult to break the car habit, and the car habit is not serving the world or the environment, as we all know. If somebody doesn't know, I'll be glad to talk to them. It is certainly worth considering a holistic point of view, not a narrow point of view from an industry perspective.
It appears we have considerable concern about fraud in this area and in many other areas, but we have created a class of people by government regulation which does not allow any adverse consequences for them when they do something in the sense of civil wrong. That's like saying: "Hey, come on, do the fraud. There are no adverse consequences anyway." The kind of legislation which removes the adverse consequences of civil wrongs should be scrapped. I think this government is doing well in scrapping legislation, but start with scrapping legislation which removes the adverse consequences of civil wrongs. There are many I can point out, if you have time. Thank you very much.
Mr Silipo: Thank you, Mr Kalevar, for bringing a slightly different approach to this issue. The question of transparency I found interesting. Could you talk a bit more about the reference you made to the federal insurance rates as an example? One of the points we've been trying to make in these two days of initial hearings is that there ought to be some way to tie, in a much more direct fashion than we've seen so far, the product consumers are getting to the rates they are paying. What I find troubling, and I'm sure other members do, is that we're seeing in this package from the government less in the way of benefits, but we're not hearing from insurance companies that there'll be less in the way of premiums consumers have to pay. That is something we'll continue to press as a point to be addressed.
I'm glad to hear that even the government is indicating that a 7% or 8% increase is not stability in rates, as they seem to want to get to. I was interested in your point about transparency and how that might be better addressed through this legislation.
Mr Kalevar: First, I did not refer to the federal legislation on insurance. I think I referred to the --
Mr Silipo: Interest rates.
Mr Kalevar: Interest rates, so it's a different kettle of fish. I am not an insurance professional, as I brought to your attention. I am not privy to the cost structure of the insurance industry -- and neither are you, I was surprised to find, even after these hearings.
Mr Silipo: We're not.
Mr Kalevar: I would suggest that Mr Sampson take the stance of standing firm and saying: "We want the cost structure of the insurance industry. We want to know how much it is costing. Why can't you tell us? Tell us now before we pass the legislation." I am sure, Mr Sampson, like the Samson I know, you can stand up to them.
Mr Wettlaufer: Mr Kalevar, I found your presentation very interesting. On a couple of questions you raise here, I, as a former insurance broker, feel very similar to you: the issue of availability, in particular the four risk points for no evidence of coverage under automobile insurance policy for the last 12 months out of 24. Perhaps that could be changed.
However, there is an issue we have to deal with in the legislation, and that is the issue of fraud. We've heard a lot about fraud here today, and one of the most common instances the insurance companies cite is fraud in the acceptance of a policy, whereby people apply for insurance and give totally inaccurate information prior to the acceptance of the policy. If they have had an accident or if they have had convictions, which can be readily traced under a previous insurance policy, they would prefer to go to the insurance broker and say, "No, I haven't been driving for the past 12 months and I don't have a policy." As a result, what has happened in the past is that insurance companies were giving policies with inadequate information. This rectified that problem, but it probably created a whole new problem, and we will try to deal with that.
Mr Kalevar: Right. It has overshot the mark.
Mr Wettlaufer: It perhaps did, yes. I really find your proposals on winter-only or weekend-only or two-week vacation packages interesting. The problem there would be one of cost, because the insurance companies tell us that it costs a minimum of X dollars to issue a policy before the coverage ever takes effect. I don't remember what that minimum is, but I know it is substantial. Is it affordable to have these packages? I don't know.
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Mr Kalevar: Thank you for the question. As an insurance broker, it appears you also are not privy to the cost structure of the insurance industry. Neither am I. And I said just a minute ago, get the cost structure in the open. Why not? Now that some of banks are selling insurance at the corner, I don't think the minimal cost is that high, and I would rather pay that minimal cost than cover myself end to end when I don't want to use the car end to end.
I strongly suggest you get the cost structure out and make the insurance industry flexible so we can get a consumer-sensitive rate structure that would encourage people to -- some of you would benefit from going on your bike, healthwise. I strongly suggest you do that.
Mr Kwinter: Thank you very much for your presentation. It indeed was interesting. I assume you have a sense of humour when you made the comments about the tow trucks, because it would seem to me that if you truly meant that, they may not have the same sense of humour you have and may not understand at all what the tow-truck sign is doing there. But certainly if we had signage that indicated where there were high accident locations, that would probably be a very helpful to do so that motorists and pedestrians would be more aware of the problem.
I'm sure you know that when an insurance underwriter is trying to set rates, they have to evaluate risk. The question you're raising is, how do they do it and what is the risk? Again I don't know whether it was intended, but I get the impression when I read your presentation that you think as long as you're involved in transportation, whether you're a TTC rider, a bicycle rider or a car driver, you should get the same kind of rate because you're in transport, you're moving.
Mr Kalevar: That's right.
Mr Kwinter: Well, that's where we have a problem. It would be a very tough sell to tell an insurance underwriter that the fact you ride the TTC or a bicycle gives you the same kind of driving experience as someone who drives a car. I think that is going to be a major problem.
I really feel you have made some interesting points, the idea that if you want to just have short-term insurance for a specific purpose, possibly that could be structured. You'd have to pay a premium. I don't think you can just take the insurance premium and divide by 12 or 52 or whatever period of time.
Mr Kalevar: Of course not. It would be a little more.
Mr Kwinter: You'd have to pay a premium. It would be interesting to hear from the industry whether that is feasible. But you also should know that if you do have insurance and something comes up, for example, you've bought a new car and you still have your old car and it's going to take you 10 days or two weeks to dispose of it, most insurance companies will cover you. They'll just do it as a courtesy, if you're a customer and you've proven what you're doing. There is some flexibility, and maybe there is a possibility to get that into a regulated form so people can access the kind of insurance they need to suit their particular needs.
Mr Kalevar: With all due respect, my experience with the insurance industry is that when you have a claim, they show you their tail. It's not easy to collect an insurance claim. I think they're showing you their tail right now with respect to the cost structure. Get the cost structure out first; let the public know what the cost structure is. It's as simple as that. If you people can't get the cost structure out, don't expect me to find out for you.
The Chair: Thank you very much, Mr Kalevar. We appreciate your input to our committee this afternoon.
HEAD INJURY REHABILITATION INC
The Chair: We now welcome Head Injury Rehabilitation Inc to our committee room. Welcome, gentlemen.
Mr Joe Ozembloski: Good afternoon, members of the committee. We are survivors of head injuries due to auto accidents. I myself am Joseph Ozembloski. This is Mr Frank Bruno, Ms Ann Lewis and Dr Oleh Trojan.
Before we begin our presentation, we would like to thank the committee for inviting us here today. As I said, we are survivors of motor vehicle accidents who have suffered a head injury resulting in brain damage. Although we have rehabilitation in the same clinic, we would like to make it clear that the difficulties we encounter daily are representative of most who have suffered brain damage through a motor vehicle accident. We understand that proposed changes to the legislation will not affect us; however, we are concerned. Because of our common experience, we are concerned that the changes may have a negative effect on future brain-injured survivors in motor vehicle accidents.
It is our hope today that we will be able to clearly state our purpose for attending by supplying the committee with the knowledge we have gained by being brain-injured; not the least is the personal suffering each one of us, and many others, has been subjected to. Therefore, we will be focusing on the following areas:
(1) To educate the committee on the effects of brain injury following a motor vehicle accident.
(2) To underline the benefits of rehabilitation -- for example, cognitive and supportive therapy; occupational therapy, physiotherapy, speech and language pathology; as well as the need for good case management, because being brain-injured, we are, especially at the time of the accident, unable to advocate for ourselves.
(3) Brain injury is often an invisible impairment. We wish to raise concerns that the needs of future brain-injured individuals may not be met because of poor diagnosis.
(4) To present to the committee the personal experience of what it means to live with a brain injury.
If the standing committee knew what it took to put this presentation together, we would not need to be here today. Because our deficits are so great, we had to do this as a collective effort with the assistance of our therapists. This presentation was written while experiencing constant pain, but we confronted the daily emotional turmoil that disrupts our lives because we felt it was imperative to be here today. We have worked on this presentation over the last two months, and it has been a constant struggle. Please do not take the logic of our prose as an indication of our current health, because this would be a false impression.
Let us tell you what each of us, in varying degrees, goes through. Try to imagine how you would be unable to do your present job, as members of the committee, if you had to confront the following difficulties constantly, every day:
Constant debilitating mental and physical fatigue.
Mr Frank Bruno: Constant and debilitating headaches.
Ms Ann Lewis: The inability to focus on a task.
Dr Oleh Trojan: Poor to almost non-existent concentration.
Mr Ozembloski: Little or no short-term memory.
Mr Bruno: The inability to process information sufficient to keep employment.
Ms Lewis: Difficulty with speech and word finding.
Dr Trojan: Difficulty in communicating effectively with others.
Mr Ozembloski: Constantly being misunderstood or misinterpreted.
Mr Bruno: Constantly misunderstanding others.
Ms Lewis: The inability to follow a conversation.
Dr Trojan: Difficulty reading and comprehending what you have read.
Mr Ozembloski: Just not being able to follow the plot of a movie or a TV program.
Mr Bruno: Not being able to handle more than one task at one time. For example, we either listen or write while on the phone; we can't do both at the same time.
Ms Lewis: Visual impairments such as constant double vision and perceptual problems.
Dr Trojan: The inability to tolerate sounds except at an extremely low volume. This means you can't enjoy your children playing as children do, or music, or being able to block out the sound of traffic.
Mr Ozembloski: The physical and emotional pain of physical impairments resulting from brain injury.
Mr Bruno: Confusion; that's a big one.
Ms Lewis: Disorientation resulting from confusion; that's why it's so big.
Dr Trojan: The inability to follow or understand simple instructions.
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Mr Ozembloski: The inability to initiate tasks on one's own.
Mr Bruno: Lack of motivation resulting from depression.
Ms Lewis: Depression.
Dr Trojan: Anxiety.
Mr Ozembloski: Frustration resulting in extreme stress.
Mr Bruno: Loss of confidence in ourselves and our ability to do almost anything.
Ms Lewis: Loss of self-esteem.
Dr Trojan: Behavioural difficulties; for example, being overly rigid in one's thinking, poor anger management, misreading the intentions of others, impulsiveness, socially unacceptable behaviour such as invading the personal space of others, inappropriate touching, always saying the wrong thing in the wrong place at the wrong time.
Mr Ozembloski: The inability to organize or follow a daily plan.
Mr Bruno: The inability to work in a routine manner.
Ms Lewis: The inability to learn new things or remember things that were once commonplace to us.
Dr Trojan: Loss of our previous skills and knowledge.
Mr Ozembloski: Sleep deprivation.
Mr Bruno: We lose our friends, children and families because of our difficulties, which are often inexplicable to them.
Ms Lewis: Divorce is extremely high among the brain-injured.
Dr Trojan: We are unemployed and often unemployable.
Mr Ozembloski: Poverty is far too common.
Mr Bruno: And we feel constantly overwhelmed by our difficulties.
If, after this long but by no means complete list of our daily difficulties, you are feeling overwhelmed, this is only a small portion of what we have to face. However, it is important to point out that without sufficient access to rehabilitation services, we would not be able to be here today to make this presentation. As difficult as our deficits are, they would be much worse without such access.
In any proposal that is made for changes in automobile insurance legislation, the need for speedy access to such services as mentioned above must be highlighted. This is especially true for survivors of brain injury, as the first two years of recovery are the most important. At the same time, it must be stressed that it is also a perilous time for survivors of brain injury; our injuries and inability to cope are at their greatest and our ability to understand is at its least. This means that we are extremely vulnerable to making poor judgements about treatment without proper representation.
We understand that the proposed legislation recommends the establishment of regional assessment centres. We applaud this recommendation. However, we strongly suggest that such centres must be available to accident survivors from the start and not simply as a mechanism for settling disputes between survivors and insurers. Such centres must be independent in nature and, from our experience, must include health practitioners well versed in the needs of the brain-injured with respect to treatment modalities and treatment planning.
Sending the brain-injured to their GPs for assistance in the formulation of their treatment plan is grossly inadequate; few have the kind of extensive knowledge required to form good judgements about our treatment. The brain-injured and their families are ill equipped, especially at the time of the accident, to make comprehensive decisions about something so debilitating as a brain injury. We are extremely concerned about the possibility that, without early access to such a facility, which ought to offer assistance in obtaining good case management services, the potential for the brain-injured to suffer the double injury of neglect is great.
Ms Lewis: Why neglect? Because just looking at us you cannot see our injury. We may very well present ourselves to you as seemingly perfectly able, but we are not. We suffer from what we have called an invisible impairment. Indeed, because of shame or concern for the loss of friends and family, we often try to hide our deficits. But not today.
You see before you representatives of the brain-injured who were once good mothers, fathers, sisters, brothers, lovers and friends. We were bank executives, physics professors, graphic designers, entrepreneurs, students who once had a promising future and even insurance adjusters; we were lawyers, doctors, fork-lift truck drivers, gardeners, athletes and even government employees.
We stand before you having lost our place in society due to our brain injuries received in a motor vehicle accident. Since that time, we have seen a great deal. We have seen hospitals and doctors and no end of specialists and tests upon tests upon tests; so many tests to see if we are brain-injured, to see if we deserve less, not more; and worse, to see if we are to be believed. That is the most invisible part of our invisible impairment: to be so subjected to a system that seeks not to believe us when we say we suffer, to be held to the tyranny of having to repeat our story endlessly, because in all honesty we are not believed. That is why, year after year, we are made to go through gruelling tests which leave many of us sick for weeks after, because our brains are forced to attempt to do things they can no longer do.
Dr Trojan: In conclusion, we are very concerned about the way the proposed legislation has defined the division between the non-catastrophic and catastrophic head-injured. The danger of such an approach is that a significant fraction of survivors may indeed receive inadequate rehabilitation. Minor head injures, whose debilitating effects can include much of what we have reported in our list above, can in fact go initially unrecognized, to the point that rough justice is dispensed.
Moreover, we are of the opinion that it may be unfair to head-injured persons to have court cases settled within a two-year period, as the impact of minor head injuries can go, and has in the past gone, unrecognized beyond a two-year period. As we noted above, we welcome the establishment of regional assessment centres, but only under the proviso that they be skilled in head injury prediction, prognostication and production of valid treatment. To this end, we would like to propose that a working party or task force be established to develop and subsequently propose criteria and policies for triaging head-injured claimants and to define more clearly the hierarchy of benefits and treatment modalities. The composition of such a task force should include representatives of: (1) head injury survivors; (2) members of the general public; (3) key professionals, such as medical head injury specialists, rehabilitation specialists, psychologists, lawyers, insurance experts and government officials.
In addition, as sound judgement can be poor to non-existent following a motor vehicle accident, these centres must be allowed from the outset to assess brain-injured individuals for financial incompetence. Such an assessment must be bound to an appropriate appeals and review process.
Our presentation comes, as we have said, from our experience. We trust that this committee will include this experience and its deliberation and subsequent drafting of the final legislation. Future brain-injured people do not have the luxury of waiting for a bill that corrects omissions. The quality of their life depends on legislation sufficient to their needs at the moment that they suffer such a tragedy.
Mr Ozembloski: Presenters, representatives of head injuries due to MVAs, motor vehicle accidents, Ann Lewis, Dr Oleh Trojan, Frank Bruno and I, Joseph Ozembloski, would like to thank you for your attention in listening to our presentation.
Mrs Marland: Speaking on behalf of the government, we would like to thank you very sincerely, because obviously you have spent a lot of time and, as you said yourselves, have put a tremendous effort into being here today and making this presentation. But your presentation is so well worded and put together that you obviously put a lot of effort into that before you even got here today. So we appreciate very much your input. It is very important to us.
I do have a question for you, because obviously this whole subject of automobile insurance and all the different stakeholders in it presents a tremendous challenge to this government, as it did to the previous governments. We're trying to find a solution. I'm just wondering if you could tell us perhaps how you would rebalance the distribution of benefits in the auto insurance system in order to give the assistance to everyone in all the categories that is needed, without increasing the premiums. Is there a way that you would suggest that could be engineered?
The other thing I want to say to you is that I'm absolutely shocked where you say, on page 6, when you're talking about the tyranny of the testing that you go through, "because in all honesty we are not believed." I think that must be the worst black mark possible for a commentary on the industry. I hope we can get the industry to a format of dealing with all claims so that no one else will need to come back and tell us that they're not believed. Aside from that, I'm wondering if you can give us some help about how to deal with these different approaches.
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Dr Trojan: First, to bring things into perspective, I'm the oldest surviving member of a head injury except for one individual. It's been nine and a half years since my head injury. I have recovered to a significant degree, mainly due to rehabilitation. I am not privy to the information or the details of how to balance things. However, our suggestion for a task force to look into the various aspects of dealing with head-injured accident cases would be such a place where this could be handled.
Ms Castrilli: Speaking from the Liberal Party perspective, I couldn't be more moved by the presentation you made. It was thoughtful, it was articulate, it was well presented. The government will do well to listen to your suggestions. There are no questions from us, except I do want to say we applaud your efforts for coming here today.
Ms Lankin: I also appreciate your presentation. From what we've been hearing over the last couple of days, it's like there's two solitudes out there. The insurance companies are saying benefits are too rich, there's too much fraud in the system, there are too many people getting rehabilitation for too long who don't need it, that "We're not making any money, there's no profit any more, so we're stopping writing policies and benefits have got to be cut." And then people like yourselves come forward and you talk about being put through test after test after test, and you know there's got to be duplication of costs in that. We had people come forward yesterday who were accident victims, not brain-injured but soft tissue injuries, who have paid hefty premiums for years and then have one accident and are seriously incapacitated, functionally incapacitated, yet are fighting the insurance company every step of the way just to get the benefits they thought they were entitled to under their premiums. It's hard to understand what's going on between these two areas.
Could you tell us a little bit about your experience in attempting to get the coverage for the rehab benefits that you believed you were entitled to under your policies, what sorts of tests or duplication of tests you've been put through, and the attitude of the insurance company you dealt with at the time?
Mr Ozembloski: I was most recently exposed to tests of this sort. It consisted of seeing three doctors: a psychiatrist, a neurologist, and I went for psych-neurology tests. The psychological or neurological tests were the last, and that happened mid-January, approximately six weeks ago. I'm still waiting to have a meeting with the insurance company; six weeks I've been waiting for a meeting to have the results to decide whether I'm even entitled to certain benefits. My accident will have been two years ago this coming June.
Prior to this last neuropysch test I'm talking about, I also saw a neurologist and a psychiatrist. They were a good way out of my way to get there, and there was no benefits whatsoever. I'm covered by Bill 164, and under one of the things in there, it's the insurance company's right to insist on this testing, which is fair, in my opinion. But -- well, that's as far as it goes: but.
Ms Lankin: Does anyone else want to add to that?
Ms Lewis: Over the last two years, I have had to go for neuropsychological testing. I went to a very reputable doctor who teaches at U of T, but the insurance company would not take his word for what he diagnosed. As a result, I went to him for two days and then I was sent to a doctor chosen by the insurance company for another two days. The next year, I was subjected to both of those again, two days with the doctor of my choice and two days by the insurance company's choice, then again for psych-vocational testing. Because of my inability to concentrate and to sit for a long time, because I have physical injuries, that took me about four times going there, which might normally be in one day.
That's just a part of it. But for those particular types of tests, it seems, regardless of how reputable the caregiver is, the insurance company insists on sending you to a doctor of their choice in addition. I personally think it's a terrible waste of all our money.
The Vice-Chair: I thank the representatives from Head Injury Rehabilitation Inc for a very, very poignant presentation. Have a very good day.
BROKERS ALLIANCE FOR INSURANCE REFORM
The Vice-Chair: Next is the Brokers Alliance for Insurance Reform, Les Freud.
Mr Les Freud: Thank you very much. My name is Les Freud. Good afternoon, ladies and gentlemen, Mr Chairman. I wish to thank you for the opportunity to appear at these hearings. I'm here to address you on behalf of the clients, consumers of small-size insurance brokers. Two hundred of these brokers have dared to join force under the name BAIR, which stands for Brokers Alliance for Insurance Reform. These 200 brokers act on behalf of over a quarter of a million insureds.
The proposed draft legislation goes a long way to be fair to all parties concerned: insurance companies, insureds and lawyers. It is, however, by no means perfect, but the fact is, I don't think you can fashion an insurance act that will please all parties.
My intention is not to focus on the benefits section of the proposed act, as I believe that by the end of these hearings you will have heard from groups with much greater expertise on the subject than I possess. However, I would like to point out that unless the verbal threshold is clearly defined, using legal precedents set by actions brought under the OMPP, insurers will be forced to reflect the high cost of litigation in their premiums. This in turn will negate the savings brought about by the reduction of benefits under the proposed act. Just as we should not underestimate the legal profession's ability to find sources of income, we should keep in mind the insurance industry's ability to justify increases in lost reserves and premiums.
The aim of our organization is to make sure that automobile insurance becomes accessible and fairly priced. It has been estimated that 20% to 25% of vehicles on our roads are uninsured. Most of these vehicles are driven by what has been described to me by a member of the Metropolitan Toronto Police as middle-class citizens. Naturally, some of these vehicles will never be insured, and that's regardless of cost or accessibility of coverage; however, the vast majority of uninsured vehicles in Ontario and, more specifically, in Metropolitan Toronto are without insurance because coverage has become inaccessible, just not available. By the way, the percentage of uninsured vehicles on the roads in 1990 was 5% to 10%, according to the same police officer.
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In 1990, there were approximately 2,500 registered insurance brokerages in Ontario. In 1995, the number declined to 1,900. I have no doubt that there is a strong correlation between the decline in the number of brokers and the increase in the number of uninsured drivers.
What has caused the decline in an industry known for its independent-minded brokers? Naturally, some brokerages just failed. Others were sold following the death or retirement of the principal. But the majority of the brokerages had to merge with others. Why this great need all of a sudden to give up one's independence, one's corporate identity, and amalgamate with another brokerage? The most common reason is loss of markets; insurance companies have cancelled their contracts with brokers after years of contractual relationship. The reasons given by the companies for the termination of these relationships ranged from "low volume of business" to "unprofitable book of business" to "We do not wish to be the only market in your office."
I realize this is not the right forum to address the issue of broker-company relationships. However, I believe this is the right forum to address the effect of these contract terminations on the public.
Each time an insurance company cancels a broker's contract, accessibility becomes an issue. What happens to the insured who is covered through a broker whose contract was just cancelled by the insurer of his vehicle? In a real-life scenario, the broker is forced to offer the discarded book of business of one insurance company to another. Ladies and gentlemen, that book of business is in fact the insurance policies of hundreds or, at times, thousands of Ontario drivers -- people, not just paper.
If the broker is lucky, he will persuade one of his carriers -- companies -- to take on the risk of insuring people the other company did not want. But there is a catch. They may not want all these clients; the clients with two or maybe three not-at-fault losses in the last five years may not be acceptable. Perhaps the client with an at-fault accident in the last 12 months will not be offered accident forgiveness. In other words, all-comers rules notwithstanding, a new set of underwriting criteria has to be agreed to. The broker, being at a disadvantage, has to agree to the terms of the new company for the replacement of his insureds' coverage. The end result: Drivers who would have been able to continue their coverage with the incumbent insurer, paying a fair and reasonable premium for their automobile insurance, find themselves without a ready market for insurance protection. All that is available to them is a substandard insurer with considerably higher premiums than in the previous year, and I don't mean a meagre 10% or 20% increase in premium. The new premiums are literally double those of the previous year, yet the drivers are not necessarily what we would call Facility risks. Therefore, 20% to 25% of vehicles on Ontario roads are uninsured.
There is an irony to this whole situation, an irony which seems to be missed by all concerned other than perhaps insurance brokers. The insurance industry has fought tooth and nail to keep auto insurance out of the government's hands, the general insurance industry is fighting tooth and nail to keep the banks out of automobile insurance distribution, but at the same time, they prohibit brokers from selling auto insurance. We have broker members who have been told by one or another of their auto insurance carriers not to submit any automobile insurance applications.
I come back to my earlier statement. What we want is fair access for the public to a mandatory product: automobile insurance. You have an opportunity to help reduce the number of uninsured vehicles in Ontario. You can do this by giving the Ontario Insurance Commission, through legislation, a strong and clear mandate to deal in a decisive manner with non-compliance by insurance companies with the all-comer rule as well as rules relating to the treatment of policies for those insureds who express a desire to continue their coverage with an insurer following the cancellation of the broker's contract.
Ladies and gentlemen, this matter is in your hands. This is the time to deal with it and this is the time to send a message to the insurance industry: "You want to remain in automobile insurance? Make it accessible." Thank you very much.
Mr Crozier: Thank you for your presentation. We had representation from the Insurance Brokers Association of Ontario. Do members of your group belong to that as well, or are you a separate group?
Mr Freud: Some are members of the association and some aren't.
Mr Crozier: But your objectives would be similar?
Mr Freud: I would think they are similar, but we are more involved at the grass-roots level. We don't generally make representations to government committees. We try to deal with the broker and the insurance company directly. We are a relatively new organization, sort of a mutual benefit society, if you please, for the moment, and what we are trying to do is just deal with the day-to-day problems on behalf of the brokers.
Mr Crozier: You mentioned the threshold. Were you referring to the economic loss, that it should have a threshold, in your opinion?
Mr Freud: Whatever the final legislation is going to be, it must take into consideration the precedents set under litigation brought about under OMPP: a definition of what is "catastrophic," what is "long-term disability." I meant it in that sense.
Ms Lankin: I'm hoping we'll be able to get a copy of your presentation in writing. There are some interesting issues you raise.
The issue of accessibility: I'm wondering if you could explain that a little more for me. You indicated that there are brokers who are being directed not to write automobile insurance, for example. Presumably, those companies are not writing new policies at this point. Is that the problem, or is it more the relationship with certain brokers or groups of brokers?
Mr Freud: It's a problem of individual brokerages and individual companies. Interestingly, this week I spoke to two brokers. One said to me, "We've been told by the XYZ company, `No more automobile insurance.'" A day later I met with another broker who said: "I guess these hearings are really coming along. Guess what? We were called by the XYZ company saying, `Send us all your automobile insurance.'" On Monday I have one report; on Tuesday I have another.
Ms Lankin: What would be behind that? What would the company's reasons be?
Mr Freud: From personal experience, insurance companies, to put it very simply, are looking for what they call a balanced book. If a broker's book of business consists a lot more of auto than property, they don't want this broker to continue to do automobile insurance business. I did ask the second broker, "Just out of curiosity, would you agree that your mix of business is heavy on property?" He says yes.
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Mr Wettlaufer: Thank you, Les. I wonder if you could shed a little light on a couple of factors for the record and for the benefit of all the members of the committee. We have in the province compulsory automobile insurance, correct?
Mr Freud: Correct.
Mr Wettlaufer: We have a take-all-comers rule, correct?
Mr Freud: So I understand.
Mr Wettlaufer: Correct; thank you. We have a system by which tied selling is not allowed.
Mr Freud: That is also correct.
Mr Wettlaufer: Yet we have balanced portfolios.
Mr Freud: Well, we are being asked for balanced portfolios, yes.
Mrs Marland: What does that mean?
Mr Wettlaufer: Tied selling is a process by which an insurance company cannot insist on an automobile policy only for someone who has other business. Would you say that the Ontario Insurance Commission has been effective in preventing abuses of these programs?
Mr Freud: Based on a meeting I personally attended, the answer is absolutely not.
Mr Wettlaufer: Would you comment on what makes a broker become bad in so far as an insurance company is concerned, ie, that one year he might not be and another year he might be?
Mr Freud: A simple answer is loss ratio, which means that if the total payout on claims and expenses exceeds the total income of premium for his book of business to a particular company, he is not a good broker, and that can change from year to year and from company to company. At the same time, it sort of begs the question, if the insurance company is ultimately responsible for underwriting the risk provided by the broker, if the risk "goes sour," why is the broker penalized?
The Vice-Chair: Mr Freud, thank you very much for your presentation today. Have a good day.
CENTRE FOR TRAUMATIC BRAIN INJURY REHABILITATION
The Vice-Chair: Next is the Centre for Traumatic Brain Injury Rehabilitation. Good afternoon, and welcome.
Mr Gary Direnfeld: Thank you. It's a pleasure to be here. I'm Gary Direnfeld, the executive director of the Centre for Traumatic Brain Injury Rehabilitation. Handed out to you is a copy of my presentation, as well as some very specific amendments to the proposed draft bill.
Page 1 talks about our centre. We're a private facility providing services to persons who have sustained a brain injury as a result of motor vehicle accidents, and our service process has been developed to enable claimants reasonable access to treatment within the regulations governing rehabilitation funding by auto insurers. Our centre has been operational for 21 months. Over this period, ladies and gentlemen, we've had over 200 referrals. Of these referrals -- they all go through a screening process -- roughly one third we see as not appropriate referrals, for various reasons. Rather than coming from their family doctor, they may really have been sent by their lawyer or they may have other problems that can preclude their participation in our program, such as pain or psychiatric issues. Another third we will offer limited services to, which in essence is neuropsychological assessment. The remaining third wind up getting more comprehensive assessments, leading to rehabilitation.
Our average length of treatment is between seven and nine months. The average cost of treatment ranges from $60,000 to $80,000, and there are about 30 to 40 persons receiving active service at any one time. You can do the math and figure out just how well we're doing on an annual basis.
Our centre is staffed by 20 full-time staff and 10 part-time staff. The staff represent various professional disciplines, including neuropsychology, speech-language pathology, education, social work, occupational therapy, vocational counselling and physiotherapy.
Our centre, I'm proud to say, is the first and currently the only private brain injury rehabilitation program accredited by the CCHSA, the Canadian Council on Health Services Accreditation. This is the body that accredits hospitals throughout Canada.
On page 2, my executive summary:
(1) Brain injury is often accompanied by other injuries. Assessment of brain injuries is more complex and time-consuming than other injuries. Assessment and rehabilitation is lengthy and requires services of an integrated multidisciplinary team. We are recommending that with respect to brain injuries the $75,000 maximum aggregate amount of all benefits should be increased to $150,000. You saw on the page before that the average cost of treatment in our facility is between $60,000 and $80,000. There is still a large group of persons who require residentially based treatment that will far exceed that $75,000 maximum, and they need it. They may not be catastrophically injured, as defined currently by the act, but they still need far more in excess of $75,000 worth of treatment.
(2) Designated assessment centres, the DACs, must be seen to be operating without bias or conflict of interest; with broad representation from professional clinical groups; with the highest standards, operating with a quality assurance program; and under the direction of a committee appointed by the Minister of Finance. The point I'd like to drive home is that of a quality assurance program. This is a relatively no-cost mechanism that subjects the DACs to scrutiny to say they are operating within certain standards, and they must give evidence and proof of those standards. You don't want people acting outside of what we refer to as their scope of practice, where, for instance, an orthopaedic physician comments on cognitive issues.
(3) When the conditions of the act have been satisfied, insurers must pay for rehabilitation. It's a simple point, but it needs to be driven home. If a fee schedule is to be set, it must be set by the Minister of Finance and only after broad consultation with service providers, professional groups and the insurance industry rather than by the Ontario Insurance Commission. The insurance industry must recognize their obligation to pay directly to service providers for goods and services provided to the insured and must accept billing provided using general accounting practices. Straightforward.
(4) Rehabilitation, to be truly successful, must begin very early on in the recovery process. In treating brain injuries, part of the rehab process includes a comprehensive assessment. Persons with brain injuries must be given access to these services immediately. Currently, the draft legislation does not provide a mechanism that ensures a timely conclusion to the approval process. We believe a section must be added to the act which gives the insured person with a brain injury the right to treatment. Further, the act must provide a mechanism whereby the insurer is held responsible for payment for any reasonable costs of services outlined by the hospital in their discharge plans for the insured person who has sustained a brain injury.
Not written into my report are some interesting points or facts. When I reviewed my receivables list last week I discovered that a full 36% of my outstanding receivables were greater than 120 days. This is payment for services rendered to persons who bona fide have brain injuries as a result of motor vehicle accidents, where the insurer is supposed to be paying under Bill 164 within 14 days. That 36% of outstanding receivables represents 46% of my outstanding dollars and cents. I'm saying that a large chunk of my money is tied up carrying the weight of non-paying insurers.
One of the other problems that we see is the undermining of claimants by insurance companies on a routine basis. Arbitrarily, their income replacement benefits are withdrawn and then reinstated after some point in time. There seems to be no substantiating documentation to say, "You did such and so," or "We found out this and that, and therefore...." They're just taken away.
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People are not given their clear entitlement in terms of access to service. A lot of rehab companies worry about getting paid, as do we, and they enter into agreements negotiating the rehab plans with the insurers on the backs of the needs of the insured person. A lot of companies will go to the insurer worried about their receivables and say, "Here's the treatment plan." The insurer looks at the treatment plan and treats it like a menu and says, "I'll have line 1, give me a little bit of this and half a taste of that."
The rehab company, worried about its receivables, enters into this, what I call a devil's pact, thinking: "This is good. I'll get the insurance company on board, we'll show them that we're reputable, that we're nice people. We'll work them in and little by little they'll do more in terms of the rehab plan."
Working with brain-injured persons simply takes time. Most of the brain-injured persons we see don't have a full appreciation of why they're coming to our centre until they're about three months into treatment. They have impaired judgement. They shouldn't be expected to have a full appreciation until they've received some of this treatment.
What happens is, the insurance company, after one, two or three months, says, "Send me a progress report." The rehab company says, "Well, they haven't made progress yet, and really, they've only attended for part of it because we're still trying to work that -- " They say: "What? No progress? I've let you do such and so. Obviously they won't benefit from rehabilitation, so we're cutting off funding." So a large number of our clients have been seen at other private facilities where their funding has been withdrawn by the insurer and now they're out without service again.
We have a policy at our centre: We will hold the insurance companies responsible for payment of funds. If the insurance company says it's withdrawing funding, we have the claimant on board that they will support us through the mediation, arbitration and litigation process. So we will offer ongoing service, but there are very few facilities that have the financial backing that would enable them to do that.
Even mediation; my experience in having gone to many mediations is that it's not entered into as an honourable process. In the mediation that I was at on Friday, the representative for the insurer looks across the table at me and says: "You know what? In a few more weeks when this proposal goes through, you're going to be out of business anyway, so what does it matter?" These are the attitudes I have to face.
In another mediation where I had my intake worker go, the lawyer for the insurance company takes my intake worker aside and says -- and there was $50,000 outstanding on this -- "Listen, I'll pay you 80 cents on the dollar. Just discharge the client." This client was two thirds of the way through treatment. My intake worker, simply aghast at this, says "What do you mean, just discharge the client?" "We're both businessmen. You walk away with 40 Gs, we close our file, and the client got something out of it. Everyone's a winner." That case is currently in litigation.
These are our experiences.
My message to you is, if we're going to have legislation governing auto insurance, we can't have the myth of auto insurance. The way the draft legislation is written right now, I call it the five-and-five plan. Auto insurers will pay the easiest, lower 5% of claimants or, alternatively, the 5% of clearly catastrophic, those that -- you know what? -- no one can deny because, my God, this person's lying dead in front of us. That will leave 90% of these claimants with nothing. That's not the intent of auto insurance. Auto insurance has to be a promise to pay. Simple.
I have left a copy of my report. I have 23 recommendations in terms of amendments to help put teeth into the legislation.
If you listen to the auto insurers, the tow-truck drivers are ripping them off, the auto mechanics and auto body shops are ripping them off, the rehab facilities are ripping them off, the doctors are ripping them off and so are the claimants because they're using it as a form of welfare. Well, you know what? That doesn't leave a decent resident in the province of Ontario. I refuse to believe that all citizens in the province of Ontario are bad.
We have to have legislation with teeth. Kindly review my recommendations. Our centre will always stand available for consultation on these matters. Thank you very much.
Ms Lankin: Thank you very much. I appreciate your presentation and I think your comments at the end are why even Mr Sampson was driven to the point of saying that if the insurance companies didn't lower rates, he'd introduce public auto insurance. So it seems to be the inevitable conclusion.
Mr Sampson: Careful. You've been reading the Star too much.
Ms Lankin: You made two points I want to comment on, one the fact that rehabilitation has to start early and the fact that there should be a guarantee that the hospital's discharge plans for a treatment plan should be followed through, and that should be something that would be covered by the insurer until you get down the road and go through DACs and all those other sorts of things.
Mr Direnfeld: Correct.
Ms Lankin: Could you tell me some examples that you have where that's not happening and what it means?
Mr Direnfeld: Oh, yes --
Ms Lankin: Second question: Your figures of average cost of treatment of $60,000 to $80,000. Does that include case management? Because the $75,000 limit that's here doesn't include case management. If yours doesn't include case management, is that cap still a problem and does $150,000 solve all the problem?
Mr Direnfeld: That figure does not include case management. You can appreciate, with the size of the multidisciplinary team that we have, it's rare that we have to use resources outside our own centre. Case management is redundant when people are referred to us. So if you're using a multidisciplinary setting, the necessity of case management declines.
Ms Lankin: Even if there are physical problems as well as brain injuries?
Mr Direnfeld: There you may need the case manager, but even some of the larger brain injury facilities have facility for physiotherapy treatments as well.
In respect of your first question, we've had a number of referrals from the Hospital for Sick Children, and in a few cases we've been used to bridge the gap for some patients being referred to the Hugh MacMillan Medical Centre, which is a subacute rehabilitation centre. So the discharge planner at Sick Kids phones us up: "Could you put some services in at home to bridge the gap? Then when the waiting list is down, the person will get into Hugh Mac." Beautiful, no problem; very reasonable use of our resources. Let's do it. There happened to be a case manager on this file, wanted to get the insurer approvals in place; went ahead, got insurer approvals. We put in our services.
The child next goes to Hugh Mac. While at Hugh Mac, they were short a speech-language pathologist. They phoned us, could we do outreach by coming into their hospital? I was flattered. Yes, let's do it. Again, we work it through the case manager. We get insurer approval. In this situation, everything's on board. That case wrapped up in October. I still haven't been paid. I --
The Vice-Chair: I'm sorry. I thought you had concluded there.
Mr Direnfeld: No. Would you like me to finish?
The Vice-Chair: Please finish off. My apologies.
Mr Direnfeld: We still haven't been paid. The insurance company looks at our bill, which is detailed billing, and now they're saying: "When I look at line 3, item 4, there was preparation. What did that worker prepare?" "They prepared, they had to talk and coordinate." "Oh, they did some coordination in there?" "Well, yes, in working between the case manager and two hospitals, you can imagine that's going to take some coordination." "Well, that's case management. There's already a case manager, so why should I pay you for that?" "Wait a minute. This is the cost of our delivering these services to make sure that we're prepared to bridge; reasonable and appropriate. You know what? If your case manager is on the phone to us, that's coordination; we're talking back to somebody at the other end of the line. This has to be acceptable."
They still haven't paid the bill because they're trying to ram it through higher levels of scrutiny that are inappropriate.
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Mrs Marland: I was very interested listening to you describe the fact that you have so many fees for your service that are outstanding from the insurance company, and I'm wondering if you can suggest a more direct way of payment, whether the solution is that the money flow directly from -- there's a contract here between somebody who buys automobile insurance for their personal protection and the company that provides that protection for a payment of a fee. So there are two parties to the contract, and then there's an MVA, there's a motor vehicle accident, and then all these other different parties come to help the injured individual.
I'm looking at it quite ambivalently, trying to see what would be the best solution, because there are major costs here that all of us end up paying. So I'm just wondering if there's a more direct, more efficient way of handling this. If it flows directly to the insured, would that remove some of the management responsibilities that you have, the case worker has and everybody else has who, by necessity I understand, have to be paid for their time?
Mr Direnfeld: You know what? At this point in time I don't care who they give the money to, as long as they give the money, because I'd be able to get it. There are two issues. One is, they don't pay, so it doesn't matter who you target as the recipient of the payment. So the first thing is, they have to pay.
Second to that, my preference is, if I'm delivering the goods and services, my feeling is, as an independent businessman, I should be paid directly. Now, you have to appreciate I'm in the business of helping persons who are cognitively impaired. They forget things, they lose things. That puts me at risk if I'm going to expect my payment from them. At the end of treatment I'd like to think that all of them would be well enough to be able to forward those cheques on, but they may not be. I have to be assured that the day after tomorrow I'm still in business. I think it's reasonable and appropriate for me to have direct payment and I think that needs to be reflected in the act. I've made some very specific recommendations in terms of amendments on this.
Mr Crozier: Thank you, sir. For the past day or so when we've reviewed this legislation, conflict of interest has been of great concern. For example, would a health care practitioner, a lawyer, be an owner of a firm like yours and then in a position to refer individuals to it?
Mr Direnfeld: I think they can be in that position. That's not the case with our centre, though. We're very careful about conflict of interest issues personally. We only accept referrals from the person's primary health practitioner, their family doctor. That way it makes it one step removed. If your family doctor isn't convinced that you should be coming to us, then we're not going to see you. Under the current legislation, I do have facility with the health practitioners we have to make internal referrals. I can do that, but we never do that, for that very reason. We have to be perceived as always operating appropriately.
Mr Crozier: So you wouldn't refer within your own office, yet a family practitioner may -- and I just throw this out for your comment -- refer a patient of theirs to an internist within their office of doctors?
Mr Direnfeld: Correct.
Mr Crozier: But you've chosen not to.
Mr Direnfeld: We find that we're subject to a higher level of scrutiny because there are third-party payors. Why wave a red flag? So it's our choice not to. I think some of the concerns that insurance companies may legitimately have are with the physician-owned physio clinics, where physicians are referring to their own owned physiotherapy clinics and persons are in there longer than the six to 12 weeks that one might expect on a soft tissue injury.
The Vice-Chair: Mr Direnfeld, thank you very much for your presentation today. Have a good day.
MILTON PHYSIOTHERAPY AND SPORTS INJURY CLINIC
The Vice-Chair: The next delegation before the committee is the Milton Physiotherapy and Sports Injury Clinic; Judy Boivin. Hello and welcome.
I know the Chair of the committee, Ted Chudleigh was looking forward to hearing your presentation -- I believe he's your representative -- but he was pulled away on business and sends his regrets.
Ms Judy Boivin: Let me begin by introducing myself. My name is Judy Boivin. I am a physiotherapist who has owned a private physiotherapy practice in Milton since 1989. It is a relatively small facility, employing two physiotherapists besides myself, and approximately 25% of our caseload is made up of patients who sustained injuries in motor vehicle accidents. However, with the ever-changing auto insurance act over the past six years, this segment of my practice has been an ongoing challenge. It is because I recognize a need for change of the current legislation that I have asked to come before you today.
I would like to share a story with you and, in doing so, highlight issues as they relate to Bill 164 reform. It is a true story of a patient of mine. Her name, for the purpose of this story, will be Joy. Joy is a 50-year-old woman who owns a successful candy store in Milton. Last June, while coming home from her daughter's, she was struck by a drunk driver and her car rolled three times, landing on its roof. Remarkably enough, the worst injury she sustained was a dislocated shoulder. At the emergency department, Joy was appropriately treated by an orthopaedic surgeon who put her in a sling and told her to return to see him next week. It was at this time that he referred her for physiotherapy at a clinic of which he was a part-owner; let's call it clinic P.
Joy was happy to comply with his wishes as she was anxious to get on with her daily activities especially her work at the store. Having only one good arm made it impossible to stock shelves and serve customers. She attended treatment daily at clinic P for the next four months, but despite her efforts, she progressed very slowly.
Initially, the cost of her rehab at clinic P was billed to the extended health benefit company connected to her husband's workplace, but the annual maximum of $500 was quickly used up. Joy's car insurance company was paying for her income replacement benefits and eventually began picking up the tab for her rehab too. It was now October and the insurance company was concerned about the increasing cost of this claim and requested that she go to the designated assessment centre for evaluation. The recommendation was for continued physiotherapy, but using a more active, hands-on approach.
This is where I come into the story. I first saw Joy in mid-November, some five months after the original injury. She was somewhat weak, but most restricted functionally by her inability to reach to shoulder level. Unfortunately, this far after an injury, research shows us that the tissue has changed in such a way that it becomes more difficult to rehabilitate. We had missed the very important window of time right after an injury when soft tissue is easily remodelled and related disfunctions can be avoided. None the less, by using techniques that are proven effective in dealing with this type of injury, she improved quickly and I'm happy to report Joy was back working in her candy store by mid-December.
So what's the point of this story? Am I telling you this just to prove that I am a competent physiotherapist? No. The point is, I did nothing special in terms of treatment of her injury, nothing more than any other physiotherapist would have done who bases their practice on scientifically proven techniques. Joy's injury was nothing special as far as injuries go, certainly far from catastrophic, but it cost the insurance company six months of daily treatment; I hesitate to call it physiotherapy because in Joy's case, as in many rehab facilities, patients are being treated by unlicensed personnel. The six months of income replacement benefits the insurance company paid out should have been closer to two or three months if she had been properly managed from the outset.
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My first concern is this: Referral for profit, as occurred when Joy went to clinic P, not only drives up costs; it very often means inappropriate and ineffective treatment for the patient. Joy knew her orthopaedic surgeon had a financial interest in her having physiotherapy at his clinic, but she wanted to follow his orders as she trusted his judgement.
Joy had the inner drive to get back to work. Imagine how many of those unmotivated individuals are still at clinic P, enjoying their slow recovery and weekly income replacement benefits. As for the orthopaedic surgeon, I think you know why I called his rehab facility clinic P. It stands for profit, and for every referral he makes, whether they really need to go or not, he makes a very good profit. A physiotherapy clinic like mine depends on reputation for referrals. If my treatment is not effective, my referrals will dry up. I think it is plain to see how important these interprofessional checks and balances are.
In speaking to insurance adjusters, I've realized they are also well aware of the problems that exist in these conflict-of-interest situations, but they are often unable to do anything about it, regardless of how blatant it is.
Reforms to Bill 164 have failed to address this huge issue of referral for profit. I urge you to include in your legislation a clear prohibition against referral for profit if you are truly interested in cost-effective treatment. The auto insurance companies need the power to refuse payment when they recognize there is a conflict-of-interest situation, regardless of whether it has gotten to the point of being abusive or not. This protects them and the patient.
You will find articles from several American medical journals in your package that support the claims I have just made in regard to referral for profit. They conclude that lengthier treatment durations and less direct patient care by unlicensed practitioners result in costs being driven up.
Secondly, my story of Joy serves to illustrate the potential problems associated with the designated assessment centres, or DACs. I recognize that the evaluation of treatment plans, costs and outcomes will often be necessary and I feel this is the appropriate framework. I applaud your decision to make this available early into the rehab process so we are not wasting that valuable window of time I referred to earlier. You'll recall Joy wasted five months receiving inadequate treatment. However, since the proposed legislation offers no definition of what reasonable and necessary treatment might be, it is really left open for interpretation and abuse. What's to stop a rehab facility from providing the very least in terms of treatment and billing the very most, even if it is limited to the first 15 treatments?
I propose that the DACs be given very clear guidelines to make the difficult decisions they will be faced with. The health care system, under this legislation, has to strive for cost-effective treatment techniques based on proven outcomes, not just reasonable care. Similarly, the assessment process must be cost-effective, and I question whether an individual practitioner might be just as effective in the cases of non-catastrophic injury as a multidisciplinary team would be. Assembling a competent multidisciplinary team in a small community is quite difficult and costly.
The third and final point I wish to expand upon is the problems surrounding multiple payors. Hopefully, Joy will not sustain any further injuries this year that require physiotherapy. If she does, she won't have any coverage left in her extended health care for physiotherapy. Her $500 maximum has been spent on her motor vehicle accident injuries. This certainly doesn't seem right.
You can imagine the administrative nightmare multiple payors cause a small office like mine -- calling each insurance company to see who covers what and to which limit. Inevitably, one company says the other is responsible and vice versa, and the bill gets sent back and forth, delaying payment as long as possible. My reception staff spends at least 50% of their time on the administration of 25% of our patient population.
I would imagine that, from the insurer's point of view, having more than one possible payor makes them very susceptible to abuse from fraudulent rehab facilities billing them both for the same service.
I strongly urge you to rethink this payment system. I feel there should be a single payor for injuries sustained in automobile accidents, and that should be the automobile insurance company.
Joy's story is not unlike many others. I hope that in putting my points across in story format, I have not oversimplified the issues, as I feel I am well aware of how complex they really are. But whether we choose to look at it from the patient's perspective, the insurer's perspective or, in my case, the health care provider's perspective, I feel the three issues I've discussed need to be addressed more carefully in this auto insurance legislation: Eliminate referral for profit, clearly define the role of the DACs and go with a single payor.
The commonsense approach would be to eliminate any opportunity for abuse in this system. Although these proposed reforms to Bill 164 will cut down on abuse, it still has left too much room for it to occur. As a physiotherapist, I want to work within a system that makes me strive for excellence. As we all know, nothing's as sweet as a full recovery and being back to work in your own candy shop.
Incidentally, the candy in your package is compliments of Joy. I'd be glad to answer any questions.
The Vice-Chair: Thank you, Ms Boivin. On behalf of the committee, thank you for the candy as well.
Mrs Marland: I'm glad you mentioned the candy, because suddenly everybody was chewing.
Mr Sampson: I'd resist the temptation to say this is one of the sweeter presentations we've had, but it's late in the day and I had to do that.
By the way, this is not the first time I have heard the conflict-of-interest stories. For the last six or seven months, I heard numerous ones. Could you tell me what has been the involvement of either one of the colleges in this particular case at all, if any?
Ms Boivin: You're referring to the College of Physiotherapists as well. We have certainly been communicating with the College of Physicians and Surgeons, as far as I as an independent practitioner know, since the legislation changed in 1994. It has become apparent to us that they really have no intention of doing anything about it at this point in time. It appears it's a nice venue for business opportunity for the physicians. I agree that's where it should be dealt with, but it appears that's not what's happening.
Mr Sampson: As I said to an earlier deputant, one of our dilemmas is, we can choose to deal with it, and we may have to deal with it, because it's a serious cost and a serious problem in the auto plan, but it really goes across the health practitioner industry.
Ms Boivin: Yes, we agree.
Mr Sampson: It also includes, we've heard, various aspects of the legal community.
I think your suggestion here, though, is that you might want to say that the insurance companies have the power to refuse the payment when they recognize there is a conflict. So I gather we'd have to kind of work on what that word "recognize" means. But is that the way to do it? Say, all right, the insurance companies, when they feel there is a conflict here that is having a negative impact on treatment or costs, can stop paying regardless of whether or not they've previously committed to pay? Is that the way to do it, do you think?
Ms Boivin: I believe that's one of the ways, within the reforms of this particular bill, that it can be dealt with. Obviously, there's going to have to be some sort of definition as to what exactly conflict of interest is and what the ownership of rehab facilities is in order to make that information available to the insurance companies, albeit most of them are quite aware of what facilities are in conflict.
Mr Kwinter: Thank you very much for your presentation, and I hope you'll convey to Joy our thanks for the candy.
I am absolutely in agreement with you that any of the parties to the process, whether they be insurers, lawyers, doctors, should not be in a conflict situation or appear to be; no problem with that. I do have a problem with your illustration, because I think you're maligning some people. Regardless of the issue of conflict, the impression that you get is that because the doctor was involved, it was a schlocky operation. I'm sure there are some doctors or whoever who are involved in first-class facilities that are doing their job. Again, I don't condone their involvement because I think it really is a conflict, but I just wanted to make sure that this wasn't a general situation.
Also, I'd like you to address the issue of, regardless of who owns it, if it is not meeting professional standards and it's not doing the job that it should be doing, then your regulatory body should be dealing with it, as I say, regardless of who owns it. Could you comment on that?
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Ms Boivin: I would agree, and I think that's what I was trying to bring out about the role of the DACs, because I think they do have a very important role here in that you can't compare physiotherapy in one facility to the next and just automatically assume you're comparing oranges to oranges. I think the DACs, and hopefully the physiotherapists within the DACs, recognize the difference between the quality of physiotherapy that's being received at one facility or the next so that when they are making recommendations about treatment plans, they recognize whether a treatment that's being provided is ineffective or inefficient and then will make the recommendation to pull that person from that facility and move them on to somewhere else.
I agree with you that it's a problem within our own physiotherapy regulatory body that we need to be dealing with, but I think the other issue I tried to allude to in this is that quite often the people working in those facilities are not physiotherapists. The typical scenario we see in the physician-owned rehab facilities is that they have one or possibly two physiotherapists and then for the volume of their work they're paying kinesiologists or athletic therapists or unlicensed personnel to be carrying out the daily treatment.
Ms Lankin: You present a very large problem for the government to try and deal with. I think everyone would acknowledge that there are probably cases like the one you brought forward that are very suspect and there should be a way of getting at that. And if you can't get at it through the regulatory structure, then there's a problem. It seems to me that at the very least, if there is a treatment plan that was assessed and put in place by a physiotherapist in that orthopaed's rehab clinic, then there's someone who should be responsible for that plan of treatment, even if it's being carried out by someone else. There needs to be some responsibility in the self-regulatory professions, or we don't have a hope of fixing it at a government level.
On the other hand, I've heard many stories like this, and not just with respect to physician ownership of physio clinics, but laboratories and referrals for outpatient tests on labs is another whole area where this conflict comes in, and I suggest it's an area that needs to be looked at.
But for those who are going to try and rip off the system -- and I suspect it's the minority, not the norm out there, a minority of practitioners -- if they have clinics and you say you can't refer to your own clinic, that's the rule that comes in. It's very easy for me to work it out with you that I refer to your clinic and you refer to mine. So if people are going to rip off, they're going to rip off and you've got to get at the individuals, and I'm not sure the rules, the structural rules, while we should look at them, are going to fix the problem. I think it's investigative and I think it's proving individual action.
My question to you, though, is about the single-payor system. You said that 25% of your clientele are automobile accident victims, and you indicated that in a number of cases your staff are working on going from one insurer to another and it's bouncing back and forth. Could you tell me what percentage of the motor vehicle accident clientele you have actually receive their first benefits from someplace else other than auto insurance policy? What proportion of them would be workplace --
Ms Boivin: You mean their first rehab benefits, like the payment to me?
Ms Lankin: Yes.
Ms Boivin: I would say probably about 25% of those that we're struggling to find out where to send the bill to, and typically it's to the extended health care.
Ms Lankin: The reason I'm interested is because, again, we're coming at this because of the issue of cost of premiums going up and the companies are saying it's going up because of huge rehab costs, and yet all day long we've been hearing about people with legitimate injuries who are being denied treatment costs, rehab costs. Here we hear about the other insurers who are picking up the first, at least, part of the payments. I really wonder what's going on to drive the costs up when you've got all these other factors we should be considering. I'm starting to get to the point where I think we should be calling for a royal commission, Mr Sampson, but I'll hold that recommendation till the end of the hearings.
The Vice-Chair: Ms Boivin, thank you very much for your presentation today. Have a good evening.
MISSISSAUGA PHYSICAL REHABILITATION AND WELLNESS CENTRE
The Vice-Chair: The next delegation is the Mississauga Physical Rehabilitation and Wellness Centre, Dr Stants. Good evening and welcome.
Dr Carlan Stants: My name is Dr Carlan Stants. I would like to thank the standing committee for the opportunity to speak today with respect to the proposed Insurance Statute Law Amendment Act, 1996, and the amendments to the statutory accident benefits schedule, SABS. As a licensed chiropractor, I am also the owner and clinic director of a multidisciplinary medical-rehabilitation and disability designated assessment centre. I feel that I can provide this committee with a unique perspective on the proposed legislation.
I have spent a substantial portion of my career involved in the physical rehabilitation of claimants who have sustained injuries in motor vehicle accidents. Most recently, since January 1994, my practice has been primarily devoted towards conducting medical rehabilitation and disability assessments on the same population group. In this two-year period, my facility has performed in excess of 600 assessments.
Throughout my career, there has been a plethora of insurance acts and amendments which have frustrated all parties. I would like to congratulate Mr Sampson, the government and the various stakeholders for their involvement in developing this proposed new legislation. It is my opinion that it provides an excellent template for an auto insurance plan that potentially protects the rights of consumers and insurers equally.
The majority of insured individuals readily heal and go on to lead productive lives within six months of being injured in an automobile accident. However, there is a small portion of insured persons, most likely less than 20%, who account for the lion's share of the costs in the system. It has been my experience that the major portion of insurance costs stem from medical and rehabilitation benefits and income replacement benefits. Liberal benefit limits and definitions, coupled with easy access to tort, have encouraged overpayment of benefits, improper treatment and fraud.
The designated assessment centre provides both insured persons and insurers with an effective means of resolving disputes over benefits and indirectly controlling costs. I am pleased to see that this legislation recommends that these centres be maintained. However, in order to ensure their ongoing effectiveness, it is important that the role of each health practitioner group involved in the assessment process be clearly delineated. It is vital that the best qualified health practitioner, licensed as per the Regulated Health Professions Act, provide the required assessment. For example, chiropractic issues should be addressed by chiropractors.
At this time, I would like to propose the following changes to the Insurance Act and the SABS:
(1) Throughout the SABS and the act, the term "medical benefit" is liberally employed. Normally this term is associated with services rendered exclusively by the medical profession. However, in the proposed legislation it is used to encompass all services provided by all health care professionals. In reality, changing this term to "health care benefit" would be a more appropriate and correct application, except where the term is utilized to mean those services rendered exclusively by a medical professional.
(2) In part I, general, under the section "Definitions," the term "impairment" is defined as "a loss or abnormality of a psychological, physiological or anatomical structure or function." However, abnormalities or losses which manifest themselves solely as symptoms should not qualify and this definition should be amended accordingly. For example, pain is not an impairment.
Further, when discussing impairment it is important that a distinction be made between impairment which is of a temporary nature or is permanent. I would recommend the inclusion of the following definition:
"`Permanent impairment' means impairment that has become static or well stabilized with or without treatment and is not likely to remit despite treatment."
This definition is critical in the designated assessment centre process. The reasonableness and necessity of ongoing benefits hinges on whether an impairment continues and whether it is permanent.
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(3) In part I, general, under the section "Definitions," no definition of "disability" has been included. I would like to recommend the inclusion of the following definitions:
"`Disability' means a decrease in, or the loss or absence of, the capacity of an individual to meet personal, social or occupational demands, or to meet statutory or regulatory requirements.
"`Permanent disability' means when the degree of capacity becomes static or well stabilized and is not likely to increase despite continuing use of therapeutic or rehabilitative measures."
(4) In part I, general, under the section "Definitions," insured person, subclause (a)(ii), be amended as follows:
"(ii) is not involved in an accident but suffers substantial psychological or mental injury as a result of an accident in or outside of Ontario that results in a physical injury to his or her spouse, child, grandchild, parent, grandparent, brother, sister, dependant or spouse's dependant."
I feel that without the addition of the word "substantial," individuals will potentially seek benefits for the purposes of secondary gain for insured persons who have sustained only minor injuries.
(5) In part I, general, under the section "Interpretation," section 5, complete inability to carry on normal life, be amended as:
"5. For the purposes of this regulation, a person suffers a complete inability to carry on a normal life as a result of an accident if, and only if, as a result of the accident, the person suffers an impairment that continuously prevents the person from engaging in substantially all of the essential activities in which the person ordinarily engaged before the accident."
The prior definition is too liberal. It would increase the number of insured persons who would qualify for benefits as all activities regardless of how essential or how often the insured person was involved in the activity prior to the accident.
(6) Under part II, income replacement benefit, subsection 8(3) be amended as:
"3. The insured person,
"(i) was entitled at the time of the accident to start work within three months under a legitimate, written contract of employment that was made before the accident, and"
Unfortunately, it has been my experience that this definition is often at the centre of fraudulent claims for income replacement benefits. It is extremely hard to dispute the legitimacy of the written contract of employment that the claimant presents.
(7) Under part II, income replacement benefit, subsection 10(1), calculation of gross income, be amended as:
"10(1) For the purpose of calculating gross income, an insured person who is eligible for an income replacement benefit under paragraph 1 or 2 of subsection [cross reference: section on who is eligible] (1) shall designate one of the following time periods:
"1. The 12 weeks before the accident, if the person was employed at the time of the accident.
"2. The insured person's immediately prior taxation year."
While there are limits on the extent of the insured person's income replacement benefit, the problem arises more specifically with self-employed individuals. If, for example, a commission salesperson has an exceptional month, he or she would then potentially become eligible for a benefit in excess of what they would normally receive. A 12-week period would also be more representative of an insured person's income if they were a seasonal worker or had been employed for a full year before the accident. Using an insured person's taxation year would simplify the processing of claims with respect to a one-year determination, rather than the immediate prior 12 months.
(8) Under part II, income replacement benefit, section 12, temporary return to employment, be amended as:
"12. A person who has sustained a disability and is receiving an income replacement benefit under this part may return to or start an employment at any time during the 104 weeks following the onset of the accident in respect of which the benefit is paid without affecting his or her entitlement to resume receiving benefits under this part if, as a result of the accident, he or she is unable to continue in the employment."
It is important to stress that an insured person may not in fact be disabled at the time of the accident and may not sustain a disability until an unspecified time after the accident. The current legislation only serves to extend the period over which an individual may seek benefits and serves to promote secondary gain issues.
(9) Under part VIII, reimbursements, section 28, who is eligible, be amended as:
"If an insured person sustains a catastrophic impairment as a result of an accident, the following individuals are entitled to an allowance that is reasonable having regard to all of the circumstances for expenses actually incurred in visiting the insured person during his or her treatment or recovery:"
Amending this benefit would preclude individuals from being reimbursed for travel expenses for an insured individual who has sustained a minor impairment.
(10) Under part VIII, reimbursements, section 29, who is eligible for expense, be amended as:
"29(1) The insurer shall pay an insured person who sustains a disability as a result of the accident for additional, reasonable and necessary expenses incurred by or on behalf of the insured person in respect of housekeeping and home maintenance services if the insured person suffers a substantial inability to carry out the essential housekeeping and home maintenance services that he or she normally performed before the accident."
If an insured person is unable to complete an essential task then the correct term to employ is "disability" and not "impairment."
(11) Under part VIII, "Reimbursements," section 31, "Costs for the services of a case manager," be amended as:
"31. The insurer shall pay an insured person who has sustained a catastrophic impairment and is receiving health care, rehabilitation or attendant care benefits for all reasonable and necessary expenses incurred for the service provided by a case manager related to the coordination of health care, rehabilitation or attendant care services."
Case management costs typically arise from the insurer's inability to effectively manage claims. It is traditionally a function of too much work and not enough staff to handle the claims. Case management beyond this level tends to result from service providers having case managers who coordinate rehabilitation and health care services in a manner that invariably leads to unnecessary and unreasonable care with resulting higher costs. With the exception of catastrophic impairment, case management should be at the sole discretion of the insurer and should not be an insured benefit.
(12) Under part VIII, "Reimbursements," subsection 32(1), "Cost of examinations," be amended as:
"32(1) The insurer shall pay for all reasonable and necessary expenses incurred by or on behalf of an insured person in obtaining and attending an examination or assessment or in obtaining a certificate, report or treatment plan for the purposes of this regulation, including,"
There are service providers who conduct a lot of unreasonable and unnecessary tests and assessments in an effort to justify reasonable and unnecessary therapies. It is recommended that the words "and necessary" be added to the definition to discourage this practice.
(13) Under part X, "Procedures for Claiming Benefits," subsection 42(6), "Minimum expense for physiotherapy and chiropractic treatment," be amended as:
"(6) Despite subsection (5), if the insured person submits a treatment plan for services rendered by a physiotherapist or a chiropractor, the insurer during the first six months after the accident and the initiation of the service, shall pay an amount for,
"a) the reasonable incurred costs for eight continuous weeks of physiotherapy and/or chiropractic services."
I am not aware of any place in the scientific literature that justifies 15 sessions of physiotherapy and/or chiropractic care being sufficient to resolve a soft-tissue injury. However, there is plenty of evidence to justify a time frame of eight continuous weeks. The expenses incurred should be reasonable.
(14) Under part X, "Procedures for Claiming Benefits," subsection 42(9), "Report of assessment centre," be amended as:
"(9) Subject to the determination of a dispute relating to the expense in accordance with sections 279 to 283 of the Insurance Act,
"(a) during the dispute resolution process, subject to the report from the designated assessment centre, the insurer shall pay for all reasonable and necessary expenses incurred by the insured person for treatment for an additional eight-week period for to a limit of $3,000."
During the dispute resolving period, it is important that insured persons have access to reasonable and necessary care if it is required. However, the insurer must be protected from service providers who unreasonably abuse the system.
(15) Under part X, "Procedures for Claiming Benefits," section 47, "Suspension of payment for non-compliance" be amended as:
"47(1) If an insured person fails or refuses to submit to an examination requested by the insurer under section [cross reference: previous section insurer examination], the insurer then may request the claimant to attend at a designated assessment centre."
The role of the designated assessment centre is to resolve disputes between insured persons and insurers. If based on an insurer's examination the insurer can terminate benefits the role of the designated centres is effectively reduced.
(16) Under part X, "Procedures for Claiming Benefits": clause 48(2)(b), "Duty to provide designated assessment centre with information," be amended as:
"(b) the insured person shall submit to any reasonable physical, functional, psychological and mental examination requested by the persons or persons who conduct the assessment."
This is in keeping with the definition of "impairment."
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(17) Under part XI, "Designated Assessment Centres": subsections 59(4) and (5) be amended as:
"(4) The designated assessment centre must begin assessment within three weeks of receiving approval from the insurer of the assessment plan."
"(5) If the designated assessment centre is unable to begin the assessment within three weeks of receiving approval of the assessment plan, the insured person or insurer may request another qualified designated assessment centre that is next to the residence of the insured person to perform the assessment."
Often, the request for assessment is not complete from the insurer and time is spent in clarifying the rest and obtaining additional information so the appropriate assessment is conducted. Once the request is complete, the insurer is provided with a cost of assessment and a declaration on potential conflict of interests. Only once these issues are mutually resolved can the assessment be scheduled. Given schedules for the insured person and the individuals conducting the assessment, a three-week period is not unreasonable.
(18) Under part XII, "Responsibility to Obtain Treatment, Participate in Rehabilitation and Seek Employment": subsection 61(2), "Description of duty re treatment and rehabilitation" be amended as:
"1. The insured person,
"i. is able and qualified to perform the substantial and essential tasks of the employment, or
"ii. would be able and qualified to perform the substantial and essential task of the employment if the insured person had not refused to obtain treatment or participate in rehabilitation that was reasonable and necessary to permit the person to engage in the employment."
(19) Under part XII, "Responsibility to Obtain Treatment, Participate in Rehabilitation and Seek Employment": subsection 61(3), "When duty does not apply," be amended as:
"(3) Subsection (1) does not apply if compliance with subsection (1) would be detrimental to the insured person's treatment or recovery as determined by assessment at a designated assessment centre."
Without further clarification as to who can certify that the insured person is unfit to participate in therapy, a loophole has been created for the insured person to refuse to attend for treatment and still be eligible for income replacement benefits.
In conclusion, I would like to thank the standing committee for providing me with the opportunity to comment today. I trust that my recommendations will be considered for inclusion in the proposed legislation.
The Vice-Chair: Thank you, Dr Stants for a very thorough presentation. Unfortunately, the time has now expired. Thank you. Have a good evening.
CANADIAN CAR AND TRUCK RENTAL ASSOCIATION
The Vice-Chair: The next group before the standing committee is the association of Canadian car rental operators, Mr Kenmir and friends.
Mr Sid Kenmir: My name is Sid Kenmir. I am the executive director of the Canadian Car and Truck Rental Association. I would like to take a minute to introduce my associates from the Canadian Car and Truck Rental Association: David Campbell, Farouk Vevaina and Harry Edgar. Thank you for the opportunity to appear before the committee.
The Canadian Car and Truck Rental Association is the major industry association for the car and truck rental operators. I speak on behalf of the daily rental companies in Ontario ranging from the large multinational operations to the small single-store independent operators.
The car and truck rental industry currently employs about 7,000 people. Our industry is one of the major purchasers of automobiles and trucks, buying and insuring over 80,000 vehicles in Ontario annually. The cost to insure our vehicles is our second-largest cost of doing business, and the cost of auto insurance for our industry has increased well over 25% under Bill 164. Our industry now suffers from the combined problems of continued cost increases and a very limited number of automobile insurers that are willing to underwrite our industry members. These insurance problems have put some smaller operators out of business, and they continue to threaten the survival of the entire industry.
In our review of this proposal, we believe that the basic problems with auto insurance in Ontario have not been effectively addressed. The costs of automobile insurance under this legislation will not go down, the problems of fraud and abuse have not been addressed and, within a few years, the issue of auto insurance will have to be revisited by the government.
Our industry was victimized under prior legislation due to the combination of the ease of renting an automobile and the attractive schedule of accident benefits under Bill 164. In our industry's experience, it was the low-income earners and the unemployed who most frequently claimed accident benefits. The legislation under discussion today does little to reduce the opportunities for fraud and abuse from these groups.
Our industry is extremely concerned about the provision permitting accident victims the right to sue for economic losses. While we do not oppose this provision in principle, we believe that its introduction in the manner proposed in the draft will only perpetuate fraud and bring about nuisance claims that are sought to be eliminated by this bill.
Our industry believes, because of the large numbers of vehicles that we have on the roads of Ontario, that our industry will be the focus of a large number of tort actions to recover economic losses. Accordingly, our industry members will pay substantially to investigate and defend these claims. We urge the government to seriously consider a threshold amount, not a deductible, to be applied before permitting any access to tort.
The car and truck rental industry is concerned that this proposed legislation promises to reduce the cost of automobile insurance, yet it does nothing to address the issue of road safety.
Our industry's suggestion is to make each driver in Ontario purchase a policy of automobile insurance that would be primary in the event of an accident, as part of the cost of being licensed to operate a motor vehicle. If the objective of this legislation is to make Ontario's roads safer, the responsibility for any claims should rest with the driver, not the vehicle owner. Requiring licensed drivers to have this policy of automobile insurance will more effectively address the concerns regarding uninsured vehicles than the fines proposed in this legislation.
According to the 1994 Ontario Road Safety Report, the province of Ontario had seven million drivers and six million vehicle owners that year. Ontario's present insurance laws require that the vehicle owner be liable for the cost of insurance, and be liable for the negligence of the vehicle driver. Given that some percentage of vehicles on Ontario's roads are uninsured, perhaps five million vehicle owners in Ontario are paying for the accidents of seven million drivers. The cost of automobile insurance can be reduced if we increase the number of people who are contributing to the overall pool of premiums. Responsibility for the costs of the accidents should rest with the individual that can most directly affect road safety, that being the driver.
A third area of concern for this proposed legislation is the low levels of deductibles for non-economic losses. We ask for an increase in the deductibles for non-economic losses to restrict the access to the courts. We propose that the deductibles be raised to $25,000 for general damages and $10,000 for Family Law Act claims, as access to the legal system is a significant factor in increasing the overall cost of automobile insurance.
Finally, the legislation does nothing to address the outdated daily transportation limits specified under section 7.4.4 of the Ontario auto policy, known as loss of use by theft. In the late 1980s, the limit for the amount that we can charge for our services was raised to $30 per day, taxes included. In 1996, some eight years later, our industry costs have increased dramatically; it costs our industry almost $40 per day, before taxes, to offer a vehicle for rent. Frequently, our customers are asked to pay the shortfall when their vehicle is stolen.
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If the intention of the government is to update Ontario's insurance laws, then our industry asks that all areas of the policy be brought into 1996 levels. Some members of the insurance industry have voluntarily increased the levels of their OEF #20 loss-of-use endorsements, and we ask that the government do their part. Our ability to earn a living should not be legislated at 1988 levels. We ask that the limits of the loss-of-use-by-theft section under the auto policy be raised to $45 per day to address the cost of making a vehicle available for rent.
In conclusion, the car and truck rental industry is concerned that the legislation is not going to solve the problems with automobile insurance in Ontario. The government suggested that its reforms would bring much-needed stability to the insurance industry. What is tabled here is inadequate. If the government is intending to introduce more reforms, we ask that you do it quickly.
Our industry is gravely concerned with allowing tort access provisions for economic loss and the long-term cost implications of allowing this tort access. While the provisions of Ontario's automobile insurance are being revised, our industry suggests that we enhance road safety and put the onus for cost increases on the person who can most directly influence the costs: the driver.
I appreciate the opportunity to appear before this committee and I thank you for your consideration. We are now willing to entertain any questions from the committee members.
Mr Crozier: Thank you, sir, for your deputation. I note that you're obviously not very happy with the 25% increase in rates under Bill 164. On your comments about, with this proposal, auto insurance rates not going down, we've learned that in a like two-year period they will probably go up anywhere from 14% to 16% to 18% in the next two years, so we do have some work to do.
I was interested in your proposal about insuring drivers. It's the first I've heard of that and I think it's rather unique. I'm not so sure I agree with it, but I wondered what prompted you to make this suggestion and if, in making it, you'd done any research into it. Have you talked to insurance companies about this? Have you done any research of your own when it comes to insuring drivers?
Mr Harry Edgar: No, we haven't really talked to too many insurers in Ontario, but it's not a new proposition in North America. In fact, it's quite old. Unfortunately, it has the spectre of being government-run insurance, which scares off a lot of people, but it doesn't have to be. There have been other jurisdictions in North America, I think North Carolina in the States, that have entertained licensing drivers and farming it out to private insurers and making the driver responsible, as opposed to the owner.
Mr Crozier: Yes. Certainly when you think of it for some insured services, the CAA membership that I have insures me and not the car for the services they provide. In other words, I can be driving somebody else's car, and if I get a flat tire I call the CAA and it's I who am insured. So it is kind of interesting. If you had any information, just for my own interest, I'd be pleased to read some of it.
Mr Kwinter: I was interested in your concern about the fact that the limit for reimbursement for a stolen car claim on a rented car is $30, and it's costing you $45. What happens if your members are approached by a person who is trying to rent a car under that provision and says, "Well, my insurance company only pays $30"? Do you tell him he's got to pay the difference, or too bad, or do you let him have the car?
Mr David Campbell: There are a number of options. The first option is that we can say, "We do have a car that's available for that price," and typically that's a smaller car such as a Geo Metro or Suzuki Swift. If you're not happy with that size of car, which is basically a subcompact, then the option is, "Well, we do have other cars which are available, but unfortunately there's going to be a price difference." So we would be asking that person to pay the difference. If they say, "I need a Lincoln or a Cadillac," we can't offer that kind of car for $30.
Mr Silipo: When someone rents a car and they have insurance on their car that they own, it's possible for them to use, depending on the current coverage they have, that insurance so as not to have to purchase insurance through the car rental agency. Do you have any sense statistically as to what proportion of people who rent cars use that route as opposed to purchasing insurance along with the rental of the car?
Mr Campbell: There are some members in our industry who specialize in dealing with insurance replacement customers, so in that case it can be 50% to 80%, but as an industry as a whole we're dealing with people who need cars because theirs is in for repair, tourists, people travelling on business, government employees. On the whole, my guess is that we're looking somewhere in the 30% to 50% range.
Mr Silipo: Sorry, 30% to 50% which are --
Mr Campbell: That 30% to 50% of the people have their own insurance which can apply, in the big picture.
Mr Silipo: Would it get at least some way towards what you're suggesting here if that was something that was promoted more, used more as an alternative? I tell you frankly, in the experience that I've had in renting a car, I haven't seen the car rental operator encourage me to use my own insurance. I just want to put that in front of you and get your reaction. It seems to me the attitude I've seen -- I may be wrong and it may not be typical -- is that there is some benefit to the car rental agency to actually have me purchase the insurance that goes with the rental fee for the car, which sometimes, depending on the rates and specials etc, may end up costing as much as the rental of the car itself for the day.
Mr Campbell: The problem that we have is that as an industry it's costing us a lot of money to put a car available for rent, and we're not necessarily getting the money back on the pure rate portion. I think what you're referring to more is in terms of your having collision coverage or comprehensive coverage that would cover the rental car. Our industry's concern is that we're talking about liability for other people's injuries, because that's a definite cost to us as well.
Mr Ford: Welcome here today, gentlemen. It's nice to talk to some people who have the inside information on what goes on in some of these businesses. A question I have is, what suggestion do you have on how to reduce the cost of collision repair? Are there opportunities for fraud and abuse in collision repair that can be addressed through this legislation?
Mr Edgar: There is certainly opportunity for fraud in collision repairs. No, we're at a loss as to how to reduce legitimate collision repairs. The manufacturers are making increasingly sophisticated cars out of increasingly expensive equipment and the cost of repairs is just skyrocketing. Legitimate repairs alone cost a lot. You add the potential of fraud and it just multiplies.
Mr Ford: I realize what you're saying, because I've had people I knew who were in that business. People bring back their cars and certain things have disappeared or been exchanged and all kinds of nonsense. I just wondered; you're probably very familiar with that type of thing, or maybe you've been very fortunate and it hasn't happened to you.
Mr Edgar: We encourage that the repairs be made in legitimate dealerships or manufacturer-approved shops. That keeps us from paying for an entire door that turns out to be partially cardboard and so on and so forth.
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Mr Ford: How long do you usually keep a car?
Mr Edgar: Usually six months; maybe a year.
Mr Ford: Yes, I noticed some of the larger firms kept them much shorter times.
Mr Edgar: It depends on the operator. Six months to year, sometimes two at the most. At that point in time the cost of maintaining it begins to overtake the cost of --
Mr Ford: If you have any ideas, we'd like to know about them. You could send them to us, on these bases, okay? Thank you.
The Vice-Chair: Thank you very much for your presentation today. Have a good evening.
STEPHEN MALACH
The Vice-Chair: Next is Mr Stephen Malach.
Mr Stephen Malach: Good afternoon. My name is Stephen Malach. I have with me my associate, Ivan Luxenberg. I'll be making the presentation.
I'm a lawyer who has been practising in this field for 27 years. The bulk of my practice today involves cases at the Ontario Insurance Commission. You could do me a great favour by leaving the bill the way it is, because if you do, the number of cases that will be assigned to me will probably go up 25%. It doesn't matter to me what you do with this legislation. In our practice we have a full caseload, we've always had a full caseload and we always will have a full caseload. I have been spending 90% of my time at the Ontario Insurance Commission. I am chairman of the bar dispute resolution group forum, sometimes called the Council Forum at the insurance commission. I know what this is about. There probably are few people who know more about this than I do because I live this, day in and day out, and I've been living this for all of my professional career.
Now, I was sitting and listening to the last deputation and almost had a stroke when he suggested that you raise the deductible for not-at-fault, innocent people and instead give them an extra $15 a day for car rental. That's a good idea. The poor person who's not at fault, who has fractures and surgery, let's give him nothing, but let's give him another $15 a day for car rental. What a tremendous idea.
The first thing that ought to be done with this is, someone has to look at controlling the cost of medical and rehabilitation expenses. This new SABS, your new statutory acts and benefits schedule, does nothing, absolutely zero, zilch, to do that. By simply creating a two-tiered system and allowing the non-catastrophically injured person only $75,000, that doesn't help. No one will be very happy if every person who has a minor neck injury spends $75,000 on medical and rehabilitation expenses. You've done nothing in this schedule to control that.
Why do you think there's a rehab clinic on every corner? Rehab clinics are opening up on every corner because those people make profit. If you compare the number of rehab clinics that have failed that have opened in the last five years to the same rate of business failure at other businesses, you'll get the shock of your lives. There's extraordinary profit in running these clinics, and of the people who come before you, everyone has their self-interest that they're pursuing. They want to get more and more business for their clinics and preserve more and more of their business.
But what's happened since June of 1990 in the area of medical and rehabilitation expenses? The chiropractor who in June 1990 charged $26 a treatment now charges $35 or $45 or even $60, and that's coming out of this plan and that's where people's premium dollars are going. OHIP used to pay physiotherapy charges of $11.90 per treatment. Then why are the bills that I deal with every day approaching $65 per treatment? Where is the extra $50 per treatment going? Why haven't you addressed that? This is money that's going down the drain.
When I spoke to the reporter from the Star today I said, "It's being pissed away," and he said, "Is that what you're going to tell this committee?" Yes. That's exactly what I`m going to tell you. Money is being pissed away down the drain on medical and rehabilitation expenses, and you haven't addressed it. If you can save some of the money on this side of the ledger, maybe you'll have money left to pay the not-at-fault accident victim more than 85% of his net loss and maybe he won't have to bear a $15,000 deductible.
So how do you control that? Let's have a medical expenses and rehabilitation expenses schedule. You have private plans. Does your private plan let you spend $1 million in massage every year? Of course it doesn't. There's a maximum provided. I'm not suggesting that you put a maximum on medical expenses, although you've put a $75,000 maximum. What I'm suggesting to you is to address the per treatment cost, and you haven't done that. You have addressed the duration of the benefits, but you're forgetting the per-treatment cost, and I assure you, I bet my reputation on it, that if you don't do something about this and create such a schedule, the major problem for insurers when this is passed will soon become the control of medical expenses on a per-treatment cost basis because there's absolutely no control. You wouldn't stand for it if you were the committee for the Ministry of Health. Why are you standing for it now?
Moving on through the schedule, non-earner benefits: Why are you paying a non-earner benefit, $185 weekly, starting in the period 27 weeks post-accident? Why are you doing that? That's giving the person a form of general damages. Look how you're treating the wage earner. The wage earner only gets 85% of his income loss if he's not at fault, $400 of it under accident benefits and the balance under tort, to the extent of 85% of his net income. The poor guy who has two fractured femurs and a fractured hip, who was hit by a driver while he was a pedestrian, you're making him lose 15% of his net income. But some person who wasn't working, you're going to give him a benefit of $185 weekly. Why are you doing that? He's not out of pocket.
Mr Sampson, I thought you said in your comments that this was a schedule that provided for actual expense, actual loss. The non-earner doesn't have an actual loss. Why are you preferring the non-earner to the poor wage earner? You're not giving the bonus of $185 weekly to the wage earner. Take it out of this schedule. Free up some money. You said, Mr Sampson, that this is a fine balancing act. You said there's only a finite amount of money available. If we pay it under no-fault, we can't pay it out of tort.
I'm here to tell you that there's waste in this no-fault benefit schedule, in your statutory accident benefits schedule. Let's get rid of it. Let's pay actual losses. Let's pay true losses. Let's not allow overcharging or overbilling. Let's cut it. Let's make it efficient. Then there'll be more money left to reimburse the poor not-at-fault person who is going to be out of pocket. He's going to lose $15,000 off his general damages and he's going to lose 15% of his net income even though he's not at fault. How can that be a fair system? Not to speak of the family of the person who is killed in the accident. There's nothing in your legislation to award pecuniary loss to those people, probably because you don't have enough money left. Curb the benefits in this schedule so there's no abuse, so there's no overpayment.
In the case of income replacement benefits, explain to me why you're going to pay such benefits to a person who's on unemployment insurance. Unemployment insurance, paid by the federal government, is a contributory plan. Everybody pays into unemployment insurance. If a person is receiving unemployment insurance and he has an accident, he will qualify for 15 weeks of sick benefits from unemployment insurance. So great, you've devised a plan that you're going to pay him under the auto plan. That money will be deducted from his unemployment insurance. Explain that to me. Why are we finding new people to pay who are already getting payment somewhere else? That makes no sense to me.
Why are you providing benefits for life, if he qualifies, to a person receiving unemployment insurance at the time of an accident? The poor guy whose benefits ran out last week gets no income replacement benefit. But if he's still collecting unemployment insurance, you're going to give him an income replacement benefit for life, for a longer period of time than he even would have collected the unemployment insurance, because as we know, there's a limit to the number of weeks during which you qualify for unemployment insurance. Why wouldn't you at least limit it to the same number of weeks that he would have collected unemployment insurance? Why do you allow him to claim beyond that? He's coming out ahead of the game. The wage earner loses 15% of his net income if he's not at fault. The person who's on unemployment insurance gets a benefit that he would never get if he wasn't lucky enough to be in a car accident.
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I just don't understand why we're finding new ways to pay money to people who shouldn't qualify. We're expanding the number of people here rather than contracting it. Rather than motivating people to go back to work, we're trying to give people benefits. So why would they work? There's all kinds of abuse in these cases.
Transportation expense: You have a system where nobody recovers 100% -- even the not-at-fault victim, subject to the deductible and losing 15% of his net income -- yet somebody drives their car to physiotherapy 10 blocks away and you're going to pay this person 15 cents a kilometre. Explain that to me. Why isn't there a restriction on the transportation expenses? Why don't we allow nothing for each trip unless it's more than 50 kilometres? Isn't it better to spread the deductible aspect of the auto compensation system to everybody? Would you rather give a person 15 cents a kilometre to go 10 blocks and then hit the guy with the broken hip with the big deductible and not give him all his earnings back?
I see great abuse in the transportation expense claims. Plus, if that's not bad enough, the cost of administering them is impossible. It costs more to have the clerk tabulate the 15 cents per kilometre for the 10 blocks than the 15 cents per kilometre that you're paying. I urge you, in your transportation expense schedule, that no one should recover any amount for the first 50 kilometres travelled on each trip.
Caregiver benefits: You've changed those. Instead of just getting $250 a week if you have one child or one person cared for, you're going to pay them for "the reasonable expenses incurred in caring for a person in need of care." Good change, but you know what's going to happen? It's already happening. The lady has a child. She cares for the child. Now her husband will care for the child or her mother-in-law will care for the child or her daughter will care for the child, and they will all submit a bill for it and want to be paid. That's what's going to happen. The arbitration decisions are clear: They'll award money for people who give care services under OMPP.
My suggestion to you is that you go back to the OMPP provision in clause 7(1)(a). Allow payments for family members who give care but only if they've lost some income, to the same maximums that you've set out. Otherwise, believe me, every single caregiving case will have father and sister and mother-in-law and mother and daughter; everyone's clock will be running. There will be claims paid and all the money will be used up and the premiums will go up for no good reason because you forgot to control the other family members. People are ingenious when it comes to dreaming up ways to get around regulations to try to get money, and the till keeps churning away and the bell keeps ringing and all the money's used up and then we don't have enough money to pay the poor guy who's really hurt.
Case management: No control. Tell me, if you have a soft-tissue injury to your neck, do you really need a professional person to make your appointments for you? Funny, you manage to make your own appointments if you have a heart attack. Funny, you manage to make your own appointments if you have warts on your foot. All of a sudden, every person who's in an accident is an idiot and he needs someone to arrange all of his appointments? You've given no control. You say that everyone is entitled to receive payment for reasonable and necessary expenses for a case manager. So the case manager says, "Oh yeah, he needs me." My goodness, I'll make my law clerk a case manager. Every file I have, we'll send in a bill to the insurer. What a great system. I can make more money than I make now if you allow that to happen. You must control case management. There should be an amendment to section 42 so that there will be DACs for case management.
Suicides: What happened to the suicide exclusion? A guy puts two cement blocks in his front seat and chains himself to it and drives down the ramp into the river and kills himself, and I have to defend a claim for the death benefit claims. It's alleged that those claims are valid death benefit claims because he happened to be in a car. So we have people committing suicide left and right, and all of their relatives then want to make claims for death benefits and funeral expenses. Surely there ought to be an exclusion covering suicides. What about the person who intentionally injures himself to claim benefits? You haven't excluded that either. There is a great deal of abuse in this system. I don't have all the answers, but I have some of the answers. I urge you to read my brief and to exclude these things from the SABS.
Changes that are necessary at the Ontario Insurance Commission: There is absolutely no good reason why there should be neutral evaluation at the insurance commission. The present system of mediation is such that it works extremely well. High percentages of cases are settled. If you introduce neutral evaluation following mediation, what you'll find is that fewer cases will settle at mediation, because people will say, "Hey, there's another step; let's try that." Besides, in our system, if mediation fails and a person proceeds to arbitration at the insurance commission, they will go through a pre-hearing. At that pre-hearing, it's almost the same as neutral evaluation. An arbitrator will give you their view as to what will happen if you proceed. Many cases settle after pre-hearing. If the case goes to the court system, there will be a pre-trial conference and a judge will give his view as to what would happen, and many cases will settle that way. There will be no more settlements if you introduce neutral evaluation. You'll simply enlarge the staff at the insurance commission, you'll go to further expense and people will stop settling cases at mediation.
The system at the Ontario Insurance Commission works fine. You may not know this, because you're not there. You should come and see what goes on there. Thousands of cases are handled. Mediation settle most of the cases. Arbitration pre-hearings settle the bulk of the other cases. Very few cases that enter the system go on to arbitration. You have developed, in the last five years, a group of arbitrators who know the most about this system, more than the judges in the Ontario Court (General Division), because it's the arbitrators who have been hearing the cases. We don't need neutral evaluation. It will increase the expense and it will not reduce the number of cases that go on to arbitration or trial.
The nature of the appeal before the director cannot simply be confined to an error in law. What if the arbitrator makes a colossal error on a finding of fact? What if there's absolutely no evidence to support the finding of fact? What will be the remedy of the aggrieved person, be it the applicant or the insurer? There will be no remedy. I suggest to you that you allow appeals to the director, in addition to questions of law, in respect of findings of fact on a material issue supported by no evidence. So if a wrong finding is made with no evidence, at least the aggrieved person will have a remedy.
Conflicting decisions at the Ontario Insurance Commission: A terrible problem. We have one arbitrator deciding that you deduct net collateral benefits from income benefits; we have another arbitrator saying no, you deduct gross benefits from ordinary benefits. We have conflicts in decisions between arbitrators. We have conflicts in decisions between arbitrators and judges. There has to be a provision to sort it out. There has to be an immediate appeal. There has to be an immediate application to the director so the director can sort out the conflicts. If you don't do that, you'll have all kinds of cases proceeding for no reason because no one knows what the law is.
Now, are you short of money? Do you not have enough money to fund the benefits that you'd like to fund? Is there not enough money to reduce the deductible that not-at-fault victims must bear? Is there not enough money to pay the innocent person that 15% of his net income that he will lose under your plan? I have a solution for you: Instead of not allowing income replacement benefits for the first week after an accident, don't allow income replacement benefits for two weeks after the accident. That means every single person collecting income replacement benefits, which average in this province $272 a week, will give up an extra week.
You think that's a strange idea? Look at the unemployment insurance act. There's an elimination period there of two weeks. You want to motivate people to go back to work? Give them no benefits for two weeks following the accident. That will give you enough money to give the innocent person, the not-at-fault victim, that 15% of his net income you're taking away, and that will give you enough money to reduce that deductible.
I'm sorry for talking so quickly. I had a lot of things I wanted to say, and you limited me to 20 minutes.
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The Vice-Chair: Thank you, Mr Malach, for a very thorough and very candid presentation. That expires the time, folks. No questions there.
Mr Malach: I'd be happy to answer your questions outside the door.
NELSON OWLES
The Vice-Chair: Next is Nelson Owles. Good evening, sir, and welcome to the committee.
Mr Nelson Owles: Okay, great. It's good to be here this evening. My name is Nelson Owles. Up until this moment, I've remained one of the silent majority in this province who does not complain about public policies. But I'm very pleased to be able to contribute to the process that we have in our democratic country.
I really believe, from my personal experience over the last month, that the business and government-legislated compulsory system of insurance in this province is totally out of touch with the real wages, increases in rates and competitiveness issues that are going on. I heard today on the news that the legislation would still allow 8% increases over the next five years, according to the opposition, after 20%-plus over the last two years. Are the companies not making a profit at all? Do changes year after year really do nothing? We have to pay whatever is offered or not drive at all; don't take a car, just stay on the TTC, whatever. So rich people drive, and good used cars sit on the lots because the insurance costs are up to five to 10 times the value of a $500 junker, because all you can get is Facility insurance or something stupid like that.
I'm particularly concerned with the use of the Facility Association by insurers. This is the aspect of our system that I'd like to deal with tonight. Just a basic thing I found on Facility insurance in one of the other publications from a few years ago when it was being reviewed by Brian Charlton:
"Competitive pressures have created a situation in which insurers have tended to select low-risk drivers to keep costs down. Thus, many drivers with clear records have been forced to buy very expensive insurance from the insurer of last resort, Facility Association. Policies written by Facility Association rose from 2% of the industry total in 1987 to 8% in 1990." I don't know what the up-to-date figures are. "The last resort had become the only resort, the sole choice for far too many motorists. Once a driver is insured by Facility Association, it's difficult to get back in the regular market."
Then another part of it was: "Too many drivers cannot obtain insurance at reasonable rates. Insurance in the regular market is currently unavailable" -- these are 1990 figures -- "to some 250,000 drivers, despite the fact there are over 150 companies writing auto insurance in Ontario. Drivers who were unable to obtain insurance with individual companies at market rates had to rely on expensive Facility Association coverage."
Facility Association -- and they explain what it is, for my benefit -- 8% of policies, up from 2% in 1987, and then they were saying how it is now making a profit. In 1990, it was collecting $534 million in premiums, more money than any other insurer in Ontario.
What I found was that I was being put in this market, and I really didn't agree that I needed to be in this Facility pool. Let me go back to where I was. In my personal case, I have 18 years of driving experience -- personal, business. I was licensed in the province, took driver training, have had a spotless record, clean driver's abstracts my whole life. I presented my record to the insurance companies here in Toronto last month, and I was told by some that because I've not had insurance since 1988, I'd be placed in the Facility group, something I'd known nothing about before then. Others told me that because I was not presently insured, they would not even give me a quote over the phone.
In terms of background information about my case, I was last insured with Allstate in 1988. I sold my car and moved into the city proper and used the TTC, like a lot of people. At the time, I was insuring a 1972 VW Beetle, a 15-year-old vehicle, for approximately $500 a year, which was almost what I paid for it. Third-party liability of half a million dollars was the coverage I got, with a deductible of $50 for comprehensive. I was driving 12,000 kilometres a year, pleasure rating, at age 27.
Now here it is 1996, I still live in the same geographic driving area, I still have an old car which I just purchased before I found out that Facility was going to cost me an arm and a leg. It cost me $500. I thought it would keep the insurance rates down, give me a good deductible, save me on repairs. Now that 1981 Mercury Capri, 15 years old, is costing me $3,000 a year in the Facility market to insure.
The increase was unbelievable to me; I couldn't believe it. I'm getting $1-million third-party liability, and that's it. I can obtain nothing else in coverage without paying right through the roof. I'd pay maybe $75 to $100 less if I just got the $500,000.
So that increase was from $500 to $3,000 just because I was out of the market. Yet when I present it to all the insurance companies that I would vouch for my record in terms of all the abstracts I've had issued by the Ministry of Transportation, my past employers who would vouch for my clean record while I was in their employment, and even my present employer, none of them would give any better rates or say they could get me out of Facility, because I haven't been insured continuously over the last three to six months.
Over those intervening years, it's gotten worse for me in all ways. I cannot believe the rates I was being quoted and being stuck in the lowest category. In a compulsory system I don't believe that increasing a person's rate about 75% a year, since I last obtained insurance, is a system that is working for an average citizen with a perfect record.
In my case, a 500% increase from 1988 to 1996 is incomprehensible, when inflation has maybe increased 20% maximum over that time, and maybe a little bit of profit on top of that. Maybe 40% would have been a fair increase. I expected to pay a little more, but this is, I really believe, outright greed. A 10%-a-year increase for the last two years and maybe 5% to 8% over the next five years is totally outrageous when people like me have lost wages over the last five years and are lucky to stay stable. Forget about raises.
Five per cent increases when wages are being slashed is not what I call stability. Even $1,500, half of what I now pay, is outrageous from the $500 I paid in 1988. That is still a 25%-a-year increase. Half of what I pay now is 25%. Who's making that kind of money to pay those kinds of increases? We don't need stability; I need a rollback of outrageous increases over the past five years to fair and reasonable rates. Then maybe stable, inflationary increases might be justified.
Profits for companies are never enough, it seems. Government does have power to change things, I know that, and hope that through all the vested interests, the government policies, the rhetoric and everything, the never-ending changes to the system will finally get it right. The good drivers, like myself, should expect lower rates, not being a good driver and then getting increases.
The business of insurance should not be allowed to put people in a high-risk market like Facility for no good reason except the profits that they make there. I would really like to think that the people in government can fix these systems and police the business interests so that I do not become cynical about how many of these things operate.
Mr Sampson and members of the committee, I do not envy your task. Time will tell.
Mr Silipo: There isn't really much to ask. The point, I think, has been made quite clearly. I hope that in the discussions that follow there will be some way to address the very issue that you raise, because it really is something that we've heard in a couple of other instances so far. I think if we really are serious about giving drivers a good product in terms of coverage at reasonable rates, we need to also address the very issue that you've put before us of good drivers who just have been out of the market, not needing insurance, and all of a sudden they get categorized in the worst situation possible.
Mrs Marland: I would like to congratulate you on your presentation. It really was superb. I said to Mr Arnott, the member for Wellington, sitting beside me -- I think you said you had been driving 18 years?
Mr Owles: Yes.
Mrs Marland: I find that very hard to believe looking at you.
Mr Owles: I know. I get it all the time.
Mrs Marland: You have been one of the best presentations we've heard today because you introduced us to yet another perspective. I'm quite sure that Mr Sampson has heard that perspective because he's been working on this for eight months now, but no one else --
Mr Owles: I tried to keep the rhetoric and the hyperbole to a minimum.
Mrs Marland: I know, and that's what we appreciate. But the other government members haven't been meeting for eight months with all the stakeholders and parties to this subject of automobile insurance, and it's been most refreshing and just been wonderful to hear your articulate, well-expressed presentation today. So we thank you very much for coming.
Mr Owles: It just seems to get so far out of whack; that's all I felt. I saw that the public forum was available -- and it's so far removed; you really can't believe how far removed it is. When you finally get down to brass tacks with the people -- and this is their business, but they really don't see that they're just in a compulsory system, taking a whole group of people and saying: "Sorry, we won't even consider you. We're not even going to look at all your record. We just really don't want to insure you. You haven't been in the system, we don't really know what kind of risk you are, and even though you present ideas to say there are ways around it, we don't want to hear that."
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Mrs Marland: What it's similar to is someone who has always paid cash for absolutely everything for maybe 10 years of their life, and then they go to get a bank loan and because they haven't used plastic money and established a line of credit -- it's similar in a way.
Mr Sampson: Thank you very much for coming. I will resist asking Mrs Marland how many years she's been driving so I can guess her age. I'm going to pay for that one, I think, after the committee's over obviously, and maybe for a number of months.
I must admit, of the many things I didn't know when I started this eight months ago, one of them was what the Facility Association was and how it could impact me as an insured driver. One of the messages I've been trying to give the industry is that we need to fix that. I think the concept is right; we need to have a way to insure the higher-risk driver and frankly make sure that the rates of that higher-risk driver appropriately reflect their high risk and that it not be passed on, as it currently is, to people who shouldn't be in that system.
The dilemma, of course, is that there is a grey area between, and I'm going to use these words, the good driver and the bad driver, and the dilemma the industry hasn't been dealing with is, how wide is that grey area and how does one get in it -- and how do you graduate out of it, so to speak? Clearly, people do have bad driving habits and there should be a mechanism for them to earn their way back into a good driving category. But the methodology that is currently being used by the industry to deal with that high-risk driving category, the governing rules of the Facility Association, do not appear to be doing what they're supposed to be doing, which is to penalize the bad driver and provide an ability for somebody to graduate out of it. We'll be looking at that as part of the review.
My bigger concern initially was to try to fix the problem. I think what's happening in the Facility is more symptomatic of the fundamental product misdesign. If we can get that right, get the rate increases down to a level that does represent stability, then we should be able to move on to say, "Okay, now how do we deal, in that environment, with someone who continuously wants to display bad driving habits, ie, an indication of their propensity to get involved in an accident?" That's clearly what that system is trying to do but is not doing a good job at it.
Mr Kwinter: Thank you, Mr Owles, for a very, very good presentation. I think that, next to the medical rehabilitation, the number one issue that really has to be addressed is the Facility. Most people have no idea what it is, they have no idea how it works. But basically what happens is of course, if you make insurance mandatory, then the industry has an obligation and the government has an obligation to provide insurance. You can't say, "You must have insurance to drive, but unfortunately you can't get insurance, so you can't drive."
So what they have done is, they've set up this Facility that is run by the industry to get what they consider to be high-risk drivers. The problem is that it is being abused, it is being utilized in a way that it wasn't intended to be. To give you an example, we've had cases today where we've had insurance brokers telling us that insurers are in some cases cancelling their arrangements with brokers. If you're an unscrupulous broker and you can't place insurance, and a client comes in and says, "I need insurance," rather than say to him, "I'm sorry, I have no market for you. Go somewhere else," they'll say, "Well, you've got to go to the Facility." That means the broker then gets a commission from the Facility for placing a very, very high-premium package.
I think that's something we really have to address. We have to make sure that the Facility does what it's supposed to do, and that is, if you're a high risk and you must have insurance, you're going to have to pay the penalty. Unfortunately, too many people are shoved into the Facility, are paying premiums, and they don't know how insurance works. They take it as a matter of faith that the person they're dealing with seems to know what he's doing. If he says that's what it is, that's what it is.
But you're absolutely right. You're absolutely right that it makes no sense that a male under 25 is penalized just because he's a male under 25, when someone who may be 65 and has never driven before gets a license and doesn't have the same penalty. So it should be experience. At age 25, you could have been driving for 10 years, maybe longer, with an absolutely unblemished driving record. But because of the way the rating system works, it can't be done on an individual basis, so it's done in categories based on actuarial experience.
I think you've really done this committee a service in bringing your concerns to it and hopefully it will be addressed.
The Vice-Chair: Mr Owles, thank you very much for your presentation this evening. Have a good night.
The committee will resume its hearings at 9:20 tomorrow morning. The committee is now adjourned.
The committee adjourned at 1836.