In approximately seven months, Ontario voters will be going to the polls again to elect the provincial government. The Liberal Government will tell us what they have done for us since they were elected in 2003 and undoubtedly, they will remind us that they kept their promise to reduce insurance rates.
According to Gregory Sorbara, the Liberal Minister of Finance, it was this government that implemented measures that reduced auto insurance rates by over 10%, thus, stemming the flow of double digit increases permitted by their predecessors (both the Conservatives and the NDP). Impressive for sure, but a different picture emerges if you take a walk through history back to 1985.
After auto insurance became mandatory in 1979, the early 1980's saw insurance rates spiralling out of control; by as much as 15% to 20% annually. Drivers were placed in the Facility Association after only one accident. Insurance at reasonable cost was difficult to find. Brokers were being cancelled by insurers that they had supported for years. The insurance industry blamed the increases on the high cost of litigation, although there was little objective data available to support this claim.
During this period, Bob Rae's NDP were advocating driver-owned auto insurance. Although seemingly interested, Ontario residents instead chose to replace the Conservative government with David Peterson's Liberal party, first as a minority government in 1985 and then to majority status in 1987.
The Liberals promised they had a plan to fix the high cost of auto insurance rates, but once in power, the opposition parties quickly exploited the fact that there really was no plan. However, the Liberals persevered and introduced a number of changes, one of which was quite significant.
In the short term, they put a cap on insurance rate increases and rolled back rates by 10% for taxi drivers. The public perceived that the government was being proactive. The Liberals introduced the Ontario Automobile Insurance Board Act, a committee whereby the insurance industry would make up half of the members deciding if rates would increase. The decision was made to not eliminate discriminatory insurance rating practices based on sex, age, and marital status. The Ontario Insurance Act came into existence.
In 1990, the Liberals, with a great deal of support from the Insurance Industry, implemented the first comprehensive no-fault auto insurance scheme for Ontario. This was Bill 68, more commonly known as OMPP (Ontario Motorist Protection Plan). Under this plan, weekly income benefits were increased for injured persons, but they also lost the right to sue unless their injury met the threshold. The "threshold" definition was very vague, but there was general consensus that most injuries would not meet the criteria. Direct Compensation and the fault determination rules came into existence.
The Liberals were not re-elected and the NDP, much to their surprise formed the new government. OMPP survived for another three years, but despite the Liberal party's assurances that rates would increase by less than 8% annually, the legislature abounded with stories where premiums were raised by more than 20%.
From1985 to date, all three Parties, the Liberals, the NDP, and the Conservatives and now the Liberals again have tried their hand at controlling insurance rates. With each successive new plan, (there have been four to date), there has been a period of rate stability and even some reductions, followed by a rapid increase.
The Financial Services Commission of Ontario has just approved their first quarterly rate increase since 2004. Admittedly it is just 0.5% but as the last 20 years have shown, it's never the last.
Susan Saksida, CIP is an Insurance Consultant. Questions or comments can be emailed to insurance compliancematters@rogers.com
Feeds