Ontario government announces rate reduction plan

The Ontario government announced in late August the next steps in its plan that it says will reduce auto insurance rates by an average of 15%, a measure it included in this year’s budget.

The government said it’s aiming to make the average reduction within two years, with an average 8% reduction target by August 2014.

According to the government’s statement, its steps to make the reduction include:

• Providing the Superintendent of Financial Services with authority to require insurers to re-file rates

• Continuing to crack down on fraud, including licensing health clinics that invoice auto insurance companies

• Reducing unexpected costs by making the Superintendent’s Guidelines on accident benefits binding

• Exploring other cost reduction initiatives, including provincial oversight of the towing industry and addressing collision repair practices

• Continuing to require insurers to offer discounts for consumers with safe driving records

• Helping ensure that all regions of Ontario benefit fairly from cost savings.

The government will take further action “as necessary,” its statement said.

In a statement, the Insurance Bureau of Canada said that the government’s plan does nothing to address costs in the system before insurers are expected to lower premiums

“The Ontario government’s commitment to combatting fraud, such as licensing health care clinics and providing clear direction around the 2010 reforms, is a good first step; however, it will still be some time before these measures are in place producing savings,” IBC said.

“On a positive note, the government has signaled its intent to implement further reforms in order to resolve long-standing problems that plague the current auto insurance product. That is a welcome development.”

Also, the Insurance Brokers Association of Ontario reiterated its position that changes to auto rate reductions must be made in a “responsible fashion” or run the risk of having insurers leave the segment entirely.

“Our expectation of today’s announcement was that we would see progress made in identified cost reductions resulting from fraud but what we heard were more promises of change and not enough action,” said IBAO CEO Randy Carroll.