Inside Queen's Park: Tinkering bound to backfire

Sometime this week Finance Minister Dwight Duncan is supposed to make a decision over the Financial Services Commission of Ontario recommendation to cut accident benefits to $25,000 from $100,000.

The FSCO has pushed forward an insurance industry demand that accident payouts be cut in order to prevent massive rate increases.

The Ontario Bar Association, Ontario Trial Lawyers Association, and just about every other group such as the Ontario Home Care Association, the Alliance of Community Medical & Rehabilitation Providers, and the Ontario Brain Injury Association are lining up to steamroll the idea.

In effect, the plan represents a massive offloading of financial responsibility to the public health sector which obviously can ill afford it because when an accident victim’s $25,000 payment runs out, guess who gets to foot the bill for continued rehab?

Politically, it’s a minefield. The McGuinty government is already under attack for their poor handling of the eHealth project in which millions of dollars have been squandered, they’ve painted themselves into a corner by suspending the request for proposals over the Darlington nuclear power plant expansion setting up a massive energy shortfall which may force us back to coal or even higher rates, and now they risk setting themselves up to be the bad guys and hurting accident victims while also draining the public health-care system of badly needed funds.

With newly minted Ontario Progressive Conservative leader Tim Hudak sharpening his talons and recently crowned NDP leader Andrea Horwath starting to hit her stride, this is no time to hand the opposition fresh ammunition.

If Duncan rebuffs the proposal, then the insurance companies will cry poor, saying they’ve lost an arm and a leg in the financial markets meltdown which is where they invested all those premiums and will have no choice but to jack up our auto rates.

In that case, they come off like the bad guys and we all get screwed over.
Something is clearly broken here but caving in to the insurance industry’s demands isn’t going to fix anything. What needs to be addressed is not the symptom, but the root cause, says Richard Halpern, partner at Thomson Rogers and chair of the OBA’s working group on auto insurance reform.

First, he says, the OBA recognizes that the insurance companies are caught in a double whammy. The economic meltdown has crippled revenues while at the same time the first-party-accident-benefits system is increasingly complex and expensive.

“We have to ensure the economic environment is friendly for the insurance companies,” he says. “The key costs are assessment and transaction. And in the transaction costs [the cost of administrating and paying out the benefit] in claims under $25,000 every dollar of benefit costs 60 or 70 cents because of the complexity of dispute resolution and mediation.”

The message the OBA, the OTLA, and others are trying to send the government - which the FSCO has placed on review - is that we should “plagiarize” former associate chief justice Coulter Osborne’s recommendations to the attorney general of Ontario on civil justice reform.

Halpern says Osborne’s “level-headed and sober” approach to civil reform could easily be applied to the insurance sector to make the level of complexity proportionate with the amount of money being claimed. Thus larger claims would involve more checks and balances while simpler claims would be streamlined.

Ontario has the most generous first party benefits system of all provinces among those that recognize tort rights, he says, and that’s resulted in an incentive for insurance companies to be “gatekeepers” in health-care delivery and determining who, how, and where injury victims get treatments.

“The effect is HMO-style health care and that’s not something we want to import here from our friends to the south,” says Halpern. “It’s not a good thing.”
Overall, he says, the FSCO report is a good first step since it does recognize that complexity is an issue, though the OBA is at odds with the main recommendation, which Duncan is mulling.

“By reducing complexity we can achieve two goals, one to relieve the pressure to raise premiums which will benefit consumers and second to make the environment better for the insurance companies so they can achieve a reasonable rate of return for their shareholders.”

Seems like sage advice that Duncan might want to take a closer look at before he gives into the insurance companies.

Ian Harvey has been a journalist for 32 years writing about a diverse range of issues including legal and political affairs. His e-mail address is [email protected].

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