NDP bill would ban territory as auto insurance rating factor

Insurance Bureau of Canada (IBC) is urging Ontario MPPs to vote down an NDP private member’s bill that would ban the use of territory as a rating factor in auto insurance. Any reduction in premiums for constituents in some areas of the province would become an expense for drivers elsewhere, notes an open letter released yesterday by Ralph Palumbo, vice president of IBC’s Ontario division. If given the green light, the bill would dramatically alter the way auto insurance premiums are calculated in Ontario, Palumbo states. All MPPs – and, in particular those representing northern and rural constituencies – should vote to defeat the bill during second reading on June 7, the letter adds. “There is a serious problem with claims costs in the south, not the north,” Palumbo writes. The reason that southern Ontario drivers pay high auto insurance premiums, he explains, is because it costs more to underwrite insurance in those communities. In the Bramalea-Gore-Malton riding in southern Ontario, for example, the average premium is $1,914 a year and insurers repaid $2,981 per vehicle in claims, Palumbo notes. That compares to an average premium of $1,053 in Sault Ste. Marie because the per vehicle claim cost is only $981. Claim costs do not include insurance company operating expenses such as salaries, overhead, taxes and health care levies, he adds

Recruiter in staged collision ring sentenced to three-and-a-half years in jail, ordered to pay $375,000 in restitution

A man personally involved in more than 12 staged auto collisions received a three-and-a-half-year prison term and a freestanding restitution order for $375,000 for his participation in a staged collision ring. Uthayakanthan Thirunavukkarasu, also known as Max or Mano, entered a guilty plea to instructing the commission of offences for a criminal organization, proceeds of crime, criminal negligence causing bodily harm and fraud charges in connection with a staged collision ring, known as Project 92, across the Greater Toronto Area. Project 92 uncovered 50 staged collisions. The Insurance Bureau of Canada (IBC) estimates insurance exposure to be as high as $25 million. To date, with the support of two dedicated prosecutors, nearly 300 criminal charges have been laid and 22 individuals convicted. Thirunavukkarasu recruited more than 40 participants and instructed them to stage collisions in order to make fraudulent property damage and injury claims with insurance companies. In January, he entered a plea of guilty to 17 charges for his role in a dozen separate collisions netting him approximately $1.2 million. He is the 29th person convicted in relation to this investigation. He is the second person convicted of committing or instructing offenses for the benefit of a criminal organization. “This significant sentence is the result of teamwork and cooperation among Toronto Police Service, Crown prosecutors, Insurance Bureau of Canada and the insurance industry,” IBC notes in its release. “Insurance crime is not victimless. The cost to everyone is reflected in the health care, emergency services, court and insurance costs…. “In the Project 92 case, one particular staged collision in 2007 went very wrong, and a teenager who acted as a participant suffered a severe and permanent brain injury.”

Privacy document crucial for Canadian organizations: Chubb underwriter

A guideline from the federal privacy commissioner on how organizations should handle data security is a “very important document” for privacy management, says Matthew Davies, a senior underwriting specialist with Chubb Canada. The Office of the Privacy Commissioner of Canada and its counterparts in British Columbia and Alberta released the guidance document, entitled Getting Accountability Right With a Privacy Management Program, on Apr. 17. It sets out key steps for organizations to be in compliance with federal and provincial privacy legislation, such as hiring a privacy officer, implementing policies and education and risk assessment. “This document basically outlines how a breach will be investigated and what kind of things privacy regulators expect from a company,” says Davies, who oversees cyber liability and professional media coverage for Chubb. “Organizations should be looking at this carefully in terms of guidance and compliance on privacy and data breach protocols.” Davies also notes that cyber insurance liability policies are on the upswing so far this year, with more than 25 insurance carriers offering some form of cyber risk protection. “We have seen a 40% increase in submissions on a month-by-month basis, compared to the same time last year,” he adds. “I think organizations are recognizing this is not just an information technology concern, but an enterprise risk management issue.”

Claims costs for Ontario auto insurers "still out of control": IBC

Claims costs for Ontario auto insurers remain high despite the gains realized as a result of the provincial reforms in 2010, notes the Insurance Bureau of Canada’s (IBC) submission to the Ontario Committee Hearings on Auto Insurance on May 28. “While the September 2010 reforms were a needed first step in reducing the pressure on no fault injury costs, claims costs are still out of control,” IBC’s vice president for Ontario Ralph Palumbo told the hearings. The Standing Committee on General Government passed a motion Apr. 16 to strike the select committee, which is holding public hearings to propose recommendations to the minority government. Palumbo listed four reasons why claims costs remain high, namely mediation backlogs, an increase in catastrophic injury claims, an increase in bodily injury costs and the persistence of auto insurance fraud. “First, there is an excess of 30,000 unresolved claims cases awaiting dispute resolution at [Financial Services Commission of Ontario, FSCO] and these have undetermined costs,” Palumbo said. “Depending on how these cases are decided, it could re-ignite the accident benefits costs spiral. “I cannot stress strongly enough how this backlog is a major risk to insurance premium stability. Claimants don’t know what their benefits will be and insurers don’t know how much their claims are going to cost.” Second, Palumbo said, the number of catastrophic injury claims is rising faster than other claims. Between 2004 and 2010, the number of no-fault injury claims rose 28%, while the count for large claims has more than doubled. Hospitalizations from motor vehicle accidents are down 12% and yet auto insurers are being presented with many more catastrophic injury claims, Palumbo said. “This is a mystery.” Third, bodily injury (BI) claims costs on the tort side are increasing rapidly. Palumbo said latest available figures show that the frequency of these claims has been rising, as has the average claims cost. BI claims represent more than $2 billion in annual costs. “It is very concerning that the volume and average cost of these types of claims appear to be rising so rapidly, Palumbo said. “BI is on the same track accident benefits were before the 2010 reforms and more needs to be done to assess the causes and what can be done to alter this concerning trend.” Finally, fraud persists in the Ontario auto insurance system. “Many [insurers] are currently in the process of preparing responses to a FSCO [Statutory Accident Benefits Schedule] questionnaire about their internal practices to address fraudulent and abusive claims,” Palumbo said. “Companies have taken significant steps to enhance their claims management process — for some companies this has meant wholesale restructuring of their claims departments. As well, consumers are becoming more educated. “We want to continue this momentum because society as a whole will benefit from fighting this crime.”

Dog bite claims in 2011 cost about $1 million: State Farm Canada

Dog bites in the three Canadian provinces in which State Farm operates chewed up slightly more than $1 million in claims costs last year. In 2011, State Farm paid out $917,670 for 25 claims in Ontario, $99,800 for the two claims in Alberta and there were no dog bite claims reported in New Brunswick. The company reported its dog bite claims in May 2012, in advance of Dog Bite Prevention Week, which runs from May 20 to 26. Ontario’s 2011 total was approximately 39% higher than the $659,786 paid out for 19 claims in 2010. Overall, the highest claims toll was in 2007, when the insurer paid out almost $1.2 million for these sorts of claims. Almost 3,800 dog bite claims across North America in 2011 prompted claims costs that topped $109 million. State Farm cites estimates from the Insurance Information Institute (I.I.I.) that U.S. insurers south of the border paid almost $479 million in dog bite claims, representing more than one-third of all homeowners insurance liability claims payments. An analysis of homeowners’ insurance data by the I.I.I. found the average cost of dog bite claims was $29,396 in 2011, up 12.3% from $26,166 in 2010. From 2003 to 2011, the cost of the average dog bite claim increased by 53.4% from $19,162 to $23, 396 – attributed to increased medical costs and size of settlements, judgments and jury awards given to plaintiffs. A dog’s tendency to bite depends on such factors as heredity, obedience training, socialization, health and the victim’s behaviour, notes the statement from State Farm. The insurer does not refuse insurance based on the breed of a customer’s dog, but does require customers to answer questions about their dog’s history on a homeowner insurance application

10 habits of highly ineffective drivers

Sympatico.ca Autos is counselling drivers to cure themselves of 10 bad habits that frequently lead to vehicle collisions. These bad habits are as follows: •Holding the wheel incorrectly. For example, the wheel should not be held with the wrist draped over the top. Holding the wheel at the 9 o’clock and 3 o’clock positions is actually better than the traditional 10 and 2 positions, the online post states. This allows the driver to fully turn the wheel from one direction to another without having to take his or her hands off the wheel. So-called ‘hooking the wheel’ – that is, turning the wheel while holding the top of the wheel underhanded – is another bad habit. Should a collision deploying the airbag occur, this could break the wrist. •Failing to look both ways at intersections. Drivers can miss pedestrians if they focus too intently on viewing oncoming traffic. •Driving with impaired vision. Drivers must take the time to clear all of the snow from the car’s windshields, and change wiper blades when they no longer clean the windshield correctly. •Improperly adjusted mirrors. •Talking or texting. •Crowding crosswalks at intersections. This makes tight turns for vehicles difficult, if not impossible. Also, this habit pushes pedestrians into a live traffic lane. •Driving in the wrong lane. If driving more slowly than traffic around you, your car should not be operating in the middle or left-hand passing lanes. •Driving in a manner unsuited to road conditions. •Sitting incorrectly. An example would be passengers who sit in the front with their feet up on the dash. Think of what the 200 km/h force of an airbag might do. •Not using turn signals

Ontario court denies bid to use new summary judgment rules to determine "catastrophic impairment"

The Ontario Superior Court has derailed a plaintiff’s bid to obtain under new provincial rules for summary judgment a declaration that she suffered a “catastrophic impairment.” Nancy Stewart was severely injured in a motor vehicle accident on Nov. 4, 2005. The plaintiff was insured by State Farm and applied for no-fault benefits under the Statutory Accident Benefits Schedule (SABS). State Farm agreed Stewart was entitled to some benefits and paid her more than $281,000 as of Feb. 29, 2012. But the insurer argued that Stewart had not established she had suffered a “catastrophic impairment”, and as such, was not entitled to enhanced medical-rehabilitation benefits of as much as $1 million. Based on Ontario’s new rules for summary judgment, Stewart argued the court had sufficient evidence before it to find a “catastrophic impairment” on a balance of probabilities. Therefore, she submitted, there was no genuine issue requiring a trial to determine “catastrophic impairment.” State Farm responded there was insufficient evidence on the summary judgment motion for the court to make a finding on “catastrophic impairment.” In support of its submission, State Farm noted the findings of a September 2008 assessment could not be relied upon and additional tests, including a psychiatric examination the plaintiff had refused to attend, had been ordered. The plaintiff responded this test request was invalid, because it had not been made within 30 days or in writing, as required under the SABS. In its decision, the Ontario Superior Court observed the province’s recently amended rules for summary judgment now say the court shall grant summary judgment if it is satisfied “there is no genuine issue requiring a trial with respect to a claim or defence.” In Combined Air Mechanical Services Inc. v. Flesch, the Ontario Court of Appeal in 2011 established a “full appreciation test” to determine whether or not there is no genuine issue requiring a trial. In essence, the court requires a trial if it cannot achieve a full appreciation of the evidence and issues before it on the summary judgment motion. “Can a ‘full appreciation’ of the evidence and the issues required to make a finding of ‘catastrophic impairment’ be achieved by way of this summary judgment motion?” the court wrote in its decision. “In the case at bar, expert evidence will be critical in determining whether or not Ms. Stewart is ‘catastrophically impaired.’ “There is potential for conflicting evidence from a number of expert witnesses as to physical, psychiatric and psychological impairments. There is a significant gap in the evidence with respect to psychiatric impairment, although there is some evidence from a psychologist regarding psychological impairment. Evidence from an expert in applying the AMA [American Medical Association] Guides may also be required. “The motion record presented by the plaintiff in this case, even if supplemented by hearing some oral evidence on discreet issues, would not enable me to achieve the ‘full appreciation’ of the evidence and issues required to make a dispositive finding of ‘catastrophic impairment.’” The full decision can be found at: http://www.canlii.org/en/on/onsc/doc/2012/2012onsc2615/2012onsc2615.htm

Safety advances could spell end of auto insurance: Celent

The auto insurance industry may suffer a steep decline if technology that reduces the frequency and severity of car accidents is widely adopted, concludes a new study by research firm Celent. The research points to four specific types of technology — telematics, collision avoidance, automated traffic law enforcement and, to a lesser degree, robotic vehicles — as examples of widely available safety tools. If these are deployed at national and local government levels, Celent suggests that insurers would see a significant drop in revenues and premiums. “The scenario is plausible because most of the technologies on which it depends are already available — and to some extent are already in use,” the research firm states in A Scenario: The End of Auto Insurance: What Happens When There Are (Almost) No Accidents. “The likelihood of the scenario depends primarily on political decisions.” Under the scenario, insurers could see reductions in total property/casualty industry premium by 9% from 2013 to 2017, and by 26% from 2018 to 2022. “Celent believes that… the probability of it occurring is sufficiently high that auto insurers should devote some resources to considering the scenario and its implications for their business model and enterprise,” notes the report. “For an insurer whose auto premium is a material percentage of its total premium

Insurers should prepare for the rise of the emerging global middle class

A huge market for personal insurance — perhaps as much as 1 billion people — is about to emerge in developing countries, and this new global middle class will need to learn all about insurance. The global growth and transformation of the middle class is one of three megatrends of which Forbes.com is recommending that people be aware. Two others are the growth of more individualistic capitalism and the rise of the new business ecosystem, noted Steven Weisbart, senior vice president and chief economist for the Insurance Information Institute. Weisbart presented these trends to a San Diego seminar audience in a slide show entitled, The Past and Future of P/C Insurance. As the middle class in advanced economies is shrinking, the global middle class is emerging. Whole populations will need to be taught what insurance is, how it works and why an individual would choose one brand over another, Weisbart’s presentation notes. With regard to the other megatrends, online services — retailers and special-interest community/peer sites — are giving customers and users more control, resulting in a more personalized shopping and information-gathering experience. Can new technology — through such platforms as Amazon and Apple — set in motion radically different claims apparatus or distribution system? Also unclear at present is how indications of a hardening market may play out — if at all. Weisbart’s presentation notes there are several criteria to signal a true hard market, none of which seem definitive right now: •A sustained period of large underwriting losses. This is somewhat in place. Overall, property and underwriting losses exceeded $10 billion in three of the last four years and combined ratios are rising, although these are masked by reserve releases. •Material decline in surplus/capacity. This isn’t even close to happening yet, Weisbart says, noting the surplus hit a record $565 billion as of the end of March 2011. Some excess capacity may still remain in reinsurance markets. •Tight reinsurance market. This is somewhat in place, with higher prices in Asia/Pacific, but only modestly improved pricing for U.S. risks. •Renewed underwriting and pricing discipline. This is not broadly evident, Weisbart notes, adding that commercial lines pricing trends are now modestly rising and there is no broad tightening in terms and conditions

Ontario auto insurance rates decline by 0.18% in 2012 Q1

Ontario auto insurance rate filings approved during 2012 Q1 declined an average of 0.18%, based on the entire market. Rate filings for the Top 5 individual companies, ranked in order of market share, are: 1) State Farm Mutual Automobile Insurance Company Market share: 12.43% Rate Action: Flat (0.00%) 2) Aviva Insurance Company of Canada Market share: 4.65% Rate Action: -0.84% 3) Co-operators General Insurance Company Market share: 4.35% Rate Action (Effective New Business Date and Effective Renewal Business Date of Mar. 26, 2012): -1.94% Rate Action (Effective New Business Date and Effective Renewal Business Date of Apr.15, 2012): -4.46% 4) Wawanesa Mutual Insurance Company Market share: 4.27% Rate Action: Flat (0.00%) 5) Economical Mutual Insurance Company Market share: 3.70% Rate Action (Effective New Business Date and Effective Renewal Business Date of July 16, 2012): -0.82% Rate Action (Effective New Business Date and Effective Renewal Business Date of July 15, 2012): +2.2%

Creating transparency in the Canadian insurance market

InsureEye Inc. has introduced an online service intended to enhance transparency and provide consumers with a sneak peek at reviews for home, auto and life insurance. Touted as a first in Canada, the independent and consumer-driven tool was rolled out in April. Beyond gaining access to more than 600 reviews for home, auto and life insurance, users will be able to see reviews of Canadian providers, notes a statement from InsureEye, a Canadian company that provides online analysis to help buyers manage their insurance. The consumer reviews cover almost all Canadian insurers — including large, nationwide carriers and smaller regional providers — and their products. Consumers can rate insurance companies on a scale of 1 to 5. Before publishing, consumer reviews are assessed by moderators to ensure the quality of the content, the company adds. “We have created a service for consumers that changes the rules of the insurance game, providing a trusted tool to navigate the insurance space,” company co-founders Dmitry Mityagin and Alexey Saltykov add in the statement. The service is available at: https://tools.insureye.com/pct/rating

Ontario Appeal Court muddies waters regarding homeowner coverage of innocent co-insureds

The Court of Appeal for Ontario has issued a ruling that may have muddied the waters concerning homeowner coverage of innocent co-insureds. “There may now be coverage for an innocent co-insured who is alleged to have failed to act to prevent an intentional act, as long as that failure to act is not, in and of itself, intentional or criminal,” Dutton Brock LLP, a firm specializing in insurance law, notes in a May 3 bulletin. “If the innocent co-insured’s actions are not proven at trial to be intentional or criminal, indemnity will follow as well.” The case at issue, Durham v. Grodesky v. ING, follows an incident in which a child was accused of setting fire to the contents of recycling bins at a school owned by Durham District School Board. The fire spread to the building, causing extensive property damage, notes the Apr. 27 ruling by the Court of Appeal for Ontario. The parents were sued for their failure to prevent an intentional act by their son. They failed to properly and adequately supervise the boy, and knew or ought to have known he had a propensity for getting into mischief, the ruling says. ING Insurance Company Canada (now Intact Insurance) denied coverage, prompting a response by the father to advance a third-party claim against ING for indemnification under his homeowner’s comprehensive form insurance policy. The appeal court concluded ING had a duty to defend the father under the liability coverage of his homeowner’s policy. The phrase “failure to act” was modified by the preamble “intentional or criminal,” the bulletin points out. In denying the claim, ING relied on an exclusion clause in the homeowner’s policy: “We do not insure your claims arising from (6) bodily injury or property damaged caused by any intentional or criminal act or failure to act by: (a) any person insured by this policy.” Harms resulting from negligence can typically be characterized as a failure to act, the appeal court notes. “This would render the insurance coverage provided by the policy largely useless.” The high court set aside the judgement with the appellants cost fixed at $3,500 as agreed by counsel. The bulletin says the appeal decision appears to be at odds with an earlier decision by the court. In Thompson v. Warriner (2002), the appeal court held there is no coverage for an innocent co-insured under a policy’s liability insurance coverage where there is an exclusion that precludes coverage to all insureds for an intentional act by “any insured.” The full ruling can be found at: http://www.ontariocourts.ca/decisions/2012/2012ONCA0270.htm