FSCO head optimistic about auto reform despite break at Queen’s Park

Although the Ontario legislature is prorogued, there is still a possibility that some auto insurance reforms can be implemented, says the head of the province’s financial regulatory body. 

“I know there has been a lot of angst in the past week by (Premier Dalton McGuinty’s) decision not so much to announce his resignation but to prorogue parliament,” said Phil Howell, chief executive officer and superintendent of financial services for the Financial Services Commission of Ontario (FSCO).

He said he has been talking with insurance CEOs about the impact of the break at Queen’s Park on proposed auto reforms. “I think it’s important to remember and understand that a lot of the work of reforms that are in progress don’t actually require legislative authority.”

Howell made his comments during a luncheon keynote address at the 12th annual Regulatory Affairs Symposium, organized by the Insurance Bureau of Canada and held Oct. 24 in downtown Toronto

He noted proposed reforms include a new definition of catastrophic impairment and improving the dispute resolution process and the regulation process “will continue” but he emphasized that their implementation will still depend on approval from politicians.

“Within the Ministry (of Finance) there’s a lot of forward momentum on these initiatives and it does depend on political will.”

Howell noted the attention focused on auto insurance has helped educate consumers. He said Ontario is seeing benefits from reforms announced in September 2010 because premiums are stabilizing and loss ratios are dropping.

He added that the 2012 budget also included a review of the dispute resolution system.

“Once the details are worked out, we at FSCO will fully support this review,” he said, adding FSCO is already taking action to eliminate the mediation backlog with ADR Chambers, which was selected to provide external dispute resolution in August.

At the time, FSCO announced that a maximum of 2,000 files per month would be handled by ADR Chambers, an alternative dispute resolution firm employing retired judges and lawyers. “The use of these external services will wipe out the backlog,” Howell said. “How quickly this happens, depends on how willing all the participants are to step up.”

Howell said many consumers don’t understand the auto insurance product, how it’s priced or how it works but there are opportunities for agents and brokers to “communicate the realities” about insurance to clients.

“Consider how many of us find out about premium increases,” Howell said. “In many cases you just notice your premium’s gone up in the renewal documents. Often the consumer accepts it. On the flip side, imagine if they got a detailed explanation from their insurance agent or broker as to why the premium increased and an overview of the various factors that impact all consumers’ rates and not just their own.”

 He added: “I appreciate that your industry is finding increasingly sophisticated ways to (assess) risk and that’s good, but it’s still important to remember that consumers expect an explanation as to why their premium is what it is and you have a responsibility to ensure that a credible explanation can be given.”