Ont. car insurance reforms too complex: prof

Millions of Ontario drivers will face an array of new choices when they renew their auto insurance starting Sept. 1, but critics say the changes introduced by the Liberal government won't help consumers.
Critics say changes to Ontario auto insurance polices will make a bad system even worse. ((Reuters))

Millions of Ontario drivers will face an array of new choices when they renew their auto insurance policies starting Sept. 1, but critics say the changes introduced by the Liberal government won't help consumers.

A key difference in the new standard auto insurance policy will be a 50 per cent cut in medical and rehabilitation benefits, to $50,000 from $100,000, and a corresponding drop in attendant care benefits, to $36,000 from $72,000.

Income replacement coverage will fall to 70 per cent of gross income from 80 per cent, to a maximum of $400 a week. Housekeeping expenses and caregiver benefits currently available to all accident victims will now be restricted to those with catastrophic injuries.

However, consumers will be able to purchase additional levels of coverage in the same way they've been able to pay higher premiums to lower deductible levels.

Giving consumers a choice is always the best way to go, especially if it can keep premiums down, Finance Minister Dwight Duncan said.

"This will enable people to decide what's in their best interests, what they want to pay," Duncan said. "And I just think choice is a good thing whenever you're shopping.

"I think when you give people choice in the coverage they get, they will respond well."

Queen's University Prof. Erik Knutsen, who specializes in insurance law, said the changes will make a bad system even worse by making it far too complex.

"No regular person can sort out what their coverage is and more importantly what it means to them," Knutsen said in an interview.

"How does the average consuming public understand what these different ramifications of coverage mean to them?"

The government says the changes are designed to keep a lid on rising premiums. Opposition parties warn, however, that consumers will end up with less coverage and won't see any real drop in their auto insurance rates.

"What I'm hearing is people are paying more and getting less in return," said Tim Hudak, the Progressive Conservative leader.

"The new product the government is putting out actually reduces coverage for Ontario families, and in some cases they're paying the same price or more for a lesser product."

The New Democrats also warn that premiums will keep rising, despite the latest changes. The insurance industry keeps coming back to government for rate increases and keeps getting them, the party said.

"The insurance industry in Ontario keeps going back to the well," said NDP critic Peter Kormos. "And now they're arguing fraud is pushing rates up, but that's absurd.

"They argued that five years ago, 10 years ago, 15 years ago, but at the end of the day they're simply looking for higher premiums and lower benefits."

The no-fault auto insurance system in Ontario has been changed so many times at the industry's request that it has become too confusing for government and consumers, Knutsen said.

"My biggest concern is we've got a very slow automobile insurance system that is so complicated that we're having to reform reforms that were reformed by previous reforms," he said.

"You'd think it would make things simpler but it's not. By adding multiple options within multiple options it's just making it more complicated ."

Duncan stifled a laugh when asked if people would be too confused by the new choices on auto insurance.

"It'll help them manage their own premiums, and I have great confidence people can do that," he said.

The Insurance Bureau of Canada said private insurance companies lost $1.2 billion in Ontario's auto sector in the last two years and the losses keep mounting, putting more upward pressure on premiums.

The new packages giving consumers more choice will help keep rates down and will not be difficult for the average motorist to figure out, especially if they take the basic package, said Barb Sulzenko-Lauri, the bureau's vice-president of policy development.

"For the average person, and I consider myself as such, it's a no-brainer," Sulzenko-Laurie said.

"I think the standard package is a very good package that would serve all of the needs that I could possibly anticipate."

The bureau said that even with the reductions in coverage on basic policies, Ontario will still have the most generous auto insurance coverage in Canada.