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Personal Injury

Insurers' excessive profits symptom of broken regime

A report showing Ontarians are still overpaying for insurance is evidence of the province’s broken no-fault insurance system, Barrie-area personal injury lawyer Steve Rastin tells AdvocateDaily.com

The report, written by York University Professor Fred Lazar for the Ontario Trial Lawyers Association (OTLA), concluded that the province's auto insurers have accumulated more than $5 billion over the last five years in pre-tax income.

In 2016 alone, the report found that they took in a total of $1.5 billion, or 60 per cent higher profits than in 2011.

“Given the levels of excessive profitability, consumers almost certainly have paid too much for their insurance coverage,” wrote Lazar, who pegged the overpayment at about $143 per insurance policy per year in Ontario, or close to 10 per cent of all premiums paid in the period.

“This report shows that the no-fault auto insurance system is completely broken in Ontario,” says Rastin, the managing partner of Rastin & Associates. “We pay the most and get the least.”

Faced with opaque financial reporting, Lazar estimated insurers’ pre-tax profits via their overall performance and returns on equity, but Steve Kee, a spokesperson for the Insurance Bureau of Canada, told CTV that he came up with “some very inaccurate claims and assumptions.”

“We do agree with OTLA that the insurance system needs to be reformed for the benefit of consumers, but to claim that excessive insurer profits is the cause is simply false,” he told the broadcaster.

“The insurers say they’re not making any money, but if that were true, I don’t think we’d have 60 to 90 companies selling auto insurance in Ontario,” Rastin says. “They’re smart people and if it wasn’t a big moneymaker then I don’t think they’d be selling it.”

During his own term as president of the OTLA in 2014-2015, Rastin commissioned a similar report that discovered billions of dollars of waste in the province’s auto insurance regime.

“That caused a big kerfuffle but what has happened since then? Coverage has decreased even more,” he says.

In June 2016, amendments to the Statutory Accident Benefits Schedule (SABS) enacted a series of cuts, including one that halved the combined limit for attendant care and medical rehabilitation services available for catastrophically injured victims to $1 million from the previous $2-million limit.

For those without a catastrophic designation, the vast majority are limited to just $3,500 in benefits under the minor injury guidelines, while those in between saw their combined attendant care and medical and rehabilitation services cut to just $65,000, down from $86,000 before 2016. At the same time, the standard duration for medical and rehabilitation benefits was reduced from 10 years to five years, except for children.

Rastin says the latest report should be the spur the province needs to abandon its three-decade experiment with no-fault auto insurance.

While the concept of no-fault accident benefits seemed sound when introduced in the early 1990s, in practice, he says it has been plagued by complicated dispute resolution processes and shrinking coverage.  

“The whole system is broken. We’re the only jurisdiction in the world with a deductible like the one we have,” Rastin says. “What really needs to happen is that we admit the no-fault idea has failed and go back to the system the rest of North America has: 'If someone hits me, then I sue them.'”

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