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Insurance cuts hit a roadblock

Last fall, the newly elected provincial Liberals ordered auto insurers to cut their rates promptly, on the grounds that they weren't doing it fast enough on their own. Then the government failed to process half the companies' paperwork for six months.
Diane Flanagan, a spokeswoman for Finance Minister Greg Sorbara, says the government regulates car-insurance prices to make sure they don't soar out of control. Which had started to happen, according to both the Liberals and their Progressive Conservative predecessors.
Many factors have contributed, including richer and richer claims for post-accident treatment such as physiotherapy and for the pain caused by so-called soft-tissue injuries, such as whiplash.
Both parties tried to reduce what insurers have to pay out after car accidents. One of about three dozen changes was increasing the insurance deductible for pain-and-suffering compensation from $15,000 to $30,000; another was limiting reimbursable towing fees to $300 outside the North.
The Liberals figured the various changes should have resulted in average rate cuts of at least 10 per cent. Because the insurance companies couldn't be trusted to work it out for themselves, the government ordered the insurers to cut their prices that much.
But because of the province's own rules, the cuts couldn't take effect until the companies had filed the requisite paperwork and the Financial Services Commission of Ontario had approved them.
According to commission documents, its staff normally approve 25 to 30 rate filings each quarter. But under the Liberals' orders, all 61 companies doing business in Ontario had to file their new rates by the first-quarter deadline Jan. 23.
How many of those filings did the commission churn through in time to get the new rates into effect by April? A typical 31, representing 55 per cent of the auto-insurance market. Ms. Flanagan says the commission hired a bunch of actuarial temps for the extra work, but not enough. The other companies' new rates won't kick in until the middle of this month.
And even then, consumers won't see any difference until they renew their policies. So if you have insurance with one of the companies whose filings didn't get processed last winter and you renewed your policy this week, you won't see the effect until July 2005, despite the Liberals' promise to get rates cut within 90 days of their taking office last October.
Never mind the question of why the 61 insurers can't just compete the way other businesses do. Given the rule change, the financial-services commission should have had enough staff to process the documents the government demanded. More fundamentally, if the consumer-protecting financial-services commission didn't have the market control it does, Ontario drivers could have had their premiums cut quickly, rather than waiting for the government to approve its own price cuts.
Let's hope the Liberals figure out soon what kind of government they're going to be, because this fiasco shows the worst of both left-wing and right-wing thinking: close regulation of private industry coupled with a lean government that isn't up to actually doing the regulating.


Insurance cuts hit a roadblock
Last fall, the newly elected provincial Liberals ordered auto insurers to cut their rates promptly, on the grounds that they weren't doing it fast enough on their own. Then the government failed to process half the companies' paperwork for six months.
Diane Flanagan, a spokeswoman for Finance Minister Greg Sorbara, says the government regulates car-insurance prices to make sure they don't soar out of control. Which had started to happen, according to both the Liberals and their Progressive Conservative predecessors.
Many factors have contributed, including richer and richer claims for post-accident treatment such as physiotherapy and for the pain caused by so-called soft-tissue injuries, such as whiplash.
Both parties tried to reduce what insurers have to pay out after car accidents. One of about three dozen changes was increasing the insurance deductible for pain-and-suffering compensation from $15,000 to $30,000; another was limiting reimbursable towing fees to $300 outside the North.
The Liberals figured the various changes should have resulted in average rate cuts of at least 10 per cent. Because the insurance companies couldn't be trusted to work it out for themselves, the government ordered the insurers to cut their prices that much.
But because of the province's own rules, the cuts couldn't take effect until the companies had filed the requisite paperwork and the Financial Services Commission of Ontario had approved them.
According to commission documents, its staff normally approve 25 to 30 rate filings each quarter. But under the Liberals' orders, all 61 companies doing business in Ontario had to file their new rates by the first-quarter deadline Jan. 23.
How many of those filings did the commission churn through in time to get the new rates into effect by April? A typical 31, representing 55 per cent of the auto-insurance market. Ms. Flanagan says the commission hired a bunch of actuarial temps for the extra work, but not enough. The other companies' new rates won't kick in until the middle of this month.
And even then, consumers won't see any difference until they renew their policies. So if you have insurance with one of the companies whose filings didn't get processed last winter and you renewed your policy this week, you won't see the effect until July 2005, despite the Liberals' promise to get rates cut within 90 days of their taking office last October.
Never mind the question of why the 61 insurers can't just compete the way other businesses do. Given the rule change, the financial-services commission should have had enough staff to process the documents the government demanded. More fundamentally, if the consumer-protecting financial-services commission didn't have the market control it does, Ontario drivers could have had their premiums cut quickly, rather than waiting for the government to approve its own price cuts.
Let's hope the Liberals figure out soon what kind of government they're going to be, because this fiasco shows the worst of both left-wing and right-wing thinking: close regulation of private industry coupled with a lean government that isn't up to actually doing the regulating.


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