Despite legislation passed by the Ontario legislature that mandates it, the Ontario government’s goal of an 8% auto insurance premium reduction over one year and a 15% reduction over two years, is not going happen.
This was officially confirmed Wednesday when the Financial Services Commission of Ontario (FSCO) released its third quarter rate changes for the three months ending September 30, showing that for the second straight quarter, there was essentially no change in auto insurance rates in Ontario.
This means that during the four quarters that the government promised an 8% reduction, auto insurance rates in Ontario fell only 5%.
And this was no ordinary government promise that is being broken. The promise of an 8% reduction over one year and a 15% reduction over two years, was the centre-piece of the 2013 Ontario budget and is embodied in legislation and regulations passed by the Ontario government.
Some background on the issue: In 2010, the Ontario government slashed statutory auto insurance benefits that in just one year resulted in $2 billion in savings for Ontario auto insurance companies.
And predictably, auto insurance profits went through the roof giving the auto insurance industry some of the best financial results in years between 2011 & 2013.
Here are two examples of the 2010 benefit cuts:
Example 1: Because of the 2010 changes, the $100,000 maximum for medical/rehabilitation benefits was reduced to $3,500 for minor injuries (even though many so-called minor injuries are quite significant) and $50,000 for even more serious non-catastrophic injuries.
Example 2: The $72,000 maximum attendant care benefit for non-catastrophic injuries was reduced to zero (yes, zero!) for minor injuries and $36,000 for non-catastrophic injuries.
It was a direct result of these benefit cuts – and the subsequent near-record industry profits – that the Ontario Liberal government made the 15% cut in premiums the key plank in its 2013 budget.
And we’re not talking about any old promise – this was the key promise of the 2013 Ontario budget. This was the promise that allowed the Liberal government to survive because a 15% premium reduction was the key demand of the NDP for the Ontario budget – the main reason the NDP allowed the Liberal government to survive another year!
The failure of the government to honour its promise to Ontario’s eight million drivers comes as a direct result of intense and growing pressure from the auto insurance industry which has fought the premium reduction every step of the way.
And the industry has not been shy about publicly voicing its opposition to the 15% cut.
The promised premium reduction is “absolutely not” doable, the Insurance Bureau of Canada’s Barbara Sulzenko-Laurie said in a late September panel discussion at the National Insurance Conference of Canada.
Even more telling are Ms. Sulzenko-Laurie’s exact words uttered publicly at the conference which makes clear that not only was the industry doing everything possible to block the promised 15% premium reduction, but that the government is a full partner in this outright lie to the Ontario people.
When asked whether the promised 15% reduction was going ahead, Ms. Sulzenko-Laurie’s said:
“Absolutely not, and I think the government fully knows that although the government has not come out and said it”.
“But certainly in our conversations with the superintendent of insurance, he’s indicated to us that no one in FSCO (the Financial Services Commission of Ontario – the regulator of auto insurance in Ontario) believes that there’s 15% that’s in the system (to be reduced),”
“When we’re talking to the political side (Ministers and their staff), they don’t admit it, but they sort of smile knowingly in response to the question”.
So the Ontario government knew all along that it was not going to honour its promise to 8 million Ontario drivers to cut Ontario auto insurance premiums by 15%. And it finally made it official Wednesday in an obscure post on the FSCO web site.
So despite there being a law mandating the 15% premium reduction over two years and an 8% cut over the year ending September 30, the insurance industry has decided this promise is just not going to happen.
And the government, as it often does, has caved to the industry and is hoping no one will notice until it can come up with a spin-line that will provide a lame excuse for why their number one promise to the Ontario people in their 2013 budget has not been kept.
Rest assured that well paid communications staff from the industry and the Ontario government are meeting as you read this and hammering out that spin-line!