Destination: Public Auto

A line in one of the songs from the ‘Sound of Music’ goes like this: “How do you solve a problem like Maria?”

While I am certain there will never be a song written about it, much less a stage play or a movie, Ontario’s auto insurance is another “Maria.” That’s not to say the auto insurance product does not contain all the drama, pathos and theatre of a dramatic production, but solving the problem is going to take more than an inspiring verse and a memorable chorus. In fact, with the Ontario government already deeply entrenched in the laws governing auto insurance, how far is the next step to a system of auto insurance resembling that of the ICBC? And is that step going to be a forced or bilateral decision? The question is, can it be prevented, or are we travelling headlong into such a state of radical change?

HOW WE GOT HERE

What has brought us this far? Consider the following: at best, auto insurance in Ontario has been a tenuous product; at worst, it has been a blight upon the financial report. It speaks of a cyclical phenomenon that recurs with the contemptible expectation of an unwanted season. Its results can neither be anticipated with a considerable degree of accuracy, nor applied in any sense of reasonable recovery. Any attempt to base profit solely on the onus-waiver of so-called no-fault is diminished by every effort to prove the system unconstitutional. It shows its most vulnerable side in conditions of economic sloughs, when unbridled gluttony often substitutes for the fundamental principle of indemnification. If the product has shown any consistency in its application over the past several years, it has been used to elaborate the minor circumstance and debase the catastrophic. Loss dollars paid rest largely on the premise of premium allocated by driver capability, only to be defused by unknown driver deficiencies. Cessation of collisions and repetitive breaches of the law is contemplated by the use of charging extreme premium dollars rather than through meaningful authoritative intervention. What used to be driving privilege is now a right of passage, flamboyantly decorated with civil rights laws.

To even the casual observer, it should be apparent that change in auto insurance is long overdue. Currently, legislation has been enacted to control unnecessary medical costs and to bring some semblance of order and rationale to a runaway system that is hemorrhaging premium reserve for unqualified claims dollars. The general fear is that because the expectation of early recovery never runs true to form, the time it could take for the reforms to successfully modify the system might continue to draw dollars away from the premium coffer, perpetuating auto insurance to be more worrisome than workable.

WHERE WE ARE GOING

Is there an alternative? Auto insurance has been stretched well into its breaking point because of its convenience of availability; it has been given an unwarranted elasticity for lack of an alternative. It has become a cistern for all manner of loss situations, even the kind that involves reckless and wanton driving. It’s time to stop using the product for anything but the true “accident”– an “accident” interpreted to mean an “unexpected happening.”

Perhaps the alternative could be split into two considerations.

First, the government could take over the liability when the loss cause is attributable to flagrant and lawless driving resulting in unspeakable carnage. Added to this could be losses attributable to stunt driving and auto surfing. The fundamental precepts of insurance do not and have never considered that a loss cause other than an unexpected happening should visit the door of an insurance company. That is anathema to the very nature of insurance.

The second alternative? That could be “Maria’s” swan song: as explained above, this might mean turning the current system into an excess function as adopted in B.C.

The recent legislative reforms enacted on injuries and related costs under auto insurance may have the anticipated effect on profitability. Only time will tell. If they do not, then the reforms can be added to a long list of events that have exposed the dichotomy between premium favourable to the public and premiums sufficient for the insurance companies to make the system work. You can try, but I doubt if you will ever find the nexus. Right now, the auto reforms can be likened to a labour situation in which a position is created before the existence of a human resources department, with HR currently reviewing the position’s past performance.

Let me make this point abundantly clear: insurance companies are doing the best they can to run their businesses successfully. It is simply that auto insurance has all the earmarks of no longer making the grade as a pure insurance product. All one can do is accept that reasonableness in claims will prevail. Otherwise, expect more and possibly cataclysmic legislation.