- Japanese insurer is about to launch a smartphone service that warns drivers when their vehicles are approaching locations where traffic accidents frequently occur.
- Companies such as Google and Amazon may pose some of the biggest threats to insurers, as consumers increasingly trust technology behemoths to provide services such as insurance.
- A recent study concluded that Americans wasted $124 billion sitting in traffic in 2013 and traffic cost the average household $1,700 a year.
- Insurance Bureau of Canada warns UberX drivers about insurance coverage (or lack of it).
- The use of anti-fraud technology by insurers in North America is on the rise however, many companies are still struggling with the deployment of proactive predictive analytics tools because of resource constraints, according to a study.
Tuesday, October 28, 2014
Insurance News - Tuesday, October 28, 2014
Here are the leading auto insurance headlines from ONTARIO AUTO INSURANCE TOPICS ON TWITTER for Tuesday, October 28, 2014:
Thursday, October 23, 2014
Insurance and global warming
The New York Times has an article about the reaction (and non-reaction) of insurers to higher risk of property damage as a result of global warming.
My guess is that the government will find itself more and more in the property insurance business. Just as it entered the flood insurance market through the National Flood Insurance Program, the government will have to make a choice about whether to abandon owners of property now at high risk for hurricanes and other disasters or to subsidize them.
My vote would be a gradually phased-out subsidy, perhaps with an income-based component. Just as I don't think that taxpayers should have to pay to protect the houses of people who choose to build on unstable lands prone to falling into oceans or canyons, I don't think that over the long-term taxpayers should have to pay to protect property that is highly likely to be destroyed by relatively predictable weather disasters. But I also don't want to see those property owners suffer a unilateral loss as a result of global warming, an event we have all caused and should all bear responsibility for. And I want to see poorer people with more protections for their limited assets.
Sunday, October 19, 2014
Ontario's Rate Reduction Strategy Likely To Fall Short
This week FSCO released rate filings approved for third quarter of 2014. Nine insurers, representing 26.65% of the market based on premium volume, had rates approved in the third quarter of 2014. Approved rates decreased on average by 0.11% when applied across the total market.
In the backdrop is the Ontario government's commitment to reduce rates in the province by 15% before August 15, 2015. The chart below breaks down the quarterly rate approval changes following the announcement of the rate reduction strategy last year. The third quarter of 2013 has been included although many of the rate approvals for that quarter may have been filed well before the strategy was announced.
The accumulative rate reductions approved by FSCO during this period have been under 6%. With just 10 months remaining, the government is considerably short of its target with no real strategy to bring down rates another 9-10%.
In the backdrop is the Ontario government's commitment to reduce rates in the province by 15% before August 15, 2015. The chart below breaks down the quarterly rate approval changes following the announcement of the rate reduction strategy last year. The third quarter of 2013 has been included although many of the rate approvals for that quarter may have been filed well before the strategy was announced.
Quarter | Rate Change |
2013 – 3Q | -0.68% |
2013 – 4Q | -3.98% |
2014 – 1Q | -1.01% |
2014 – 2Q | +0.22% |
2014 – 3Q | -0.11% |
Bill 15, the Fighting Fraud and Reducing Automobile Insurance Rates Act, 2014 will likely be passed by the legislature within the next 10 months. The Bill contains provisions to transform Ontario's auto insurance dispute resolution system into a more robust system. Other provisions would regulate the towing and vehicle storage industries through measures that tackle questionable practices. The bill would amend provisions in the Repair and Storage Liens Act and give the province authority to change the current 60-day period that a vehicle can be stored after an accident, accruing charges, without notice to the owner. The government has also served notice through the Regulatory Register that it will reduce the rate of interest on overdue SABS payments.
However, all of these initiatives as well as the proposed legislation to regulate the towing industry and the expected introduction of a new minor injury protocol could not possible bring down rates a further 9% in less that a year.
However, all of these initiatives as well as the proposed legislation to regulate the towing industry and the expected introduction of a new minor injury protocol could not possible bring down rates a further 9% in less that a year.
Friday, October 17, 2014
Insurance News - Friday, October 17, 2014
Here are the leading auto insurance headlines from ONTARIO AUTO INSURANCE TOPICS ON TWITTER for Friday, October 17, 2014:
- Studies show voice activated smartphones, dashboard infotainment systems can distract drivers.
- No surprise here that OPP statistics indicate that speeding and distracted drivers are the leading causes for road fatalities.
- An interesting article on how connectivity is enabling a new paradigm for auto mobility.
- Volvos will soon have a 360 degree accident avoidance systems in its cars that will plot 'escape routes' to avoid crashes.
- A Wall Street Journal article on how driverless cars with change retirement.
- The Ontario government is behind on its rate reduction commitment but still insists it will deliver.
Wednesday, October 15, 2014
The Test to Determine Whether an Insured "Permitted" the Unauthorized use of a Motor Vehicle
A recent decision looked at the test to determine whether an insured permitted someone else to drive his vehicle when she was not authorized to do so.
In O’Connell v.Personal Insurance Co., (2014 ONSC 1469 (S.C.J.), the insured let his girlfriend borrow his motor vehicle. The insured’s girlfriend was involved in an accident. It turned out that the insured’s girlfriend only had a G1 license and therefore she was not authorized to drive alone or on a 400 series highway, where the accident occurred. The insured stated that he had assumed his girlfriend had a full license. At trial, the insured’s girlfriend testified that she had not told the plaintiff that she did not had have a full license because she was embarrassed. The insurer denied a defence and indemnity on the bases that the insured had breached statutory condition 4(1) of the Ontario Regulation 777/93 and section 1.4.5 of the OAP, by allowing someone else to drive his vehicle when they are not authorized to do so.
In O’Connell v.Personal Insurance Co., (2014 ONSC 1469 (S.C.J.), the insured let his girlfriend borrow his motor vehicle. The insured’s girlfriend was involved in an accident. It turned out that the insured’s girlfriend only had a G1 license and therefore she was not authorized to drive alone or on a 400 series highway, where the accident occurred. The insured stated that he had assumed his girlfriend had a full license. At trial, the insured’s girlfriend testified that she had not told the plaintiff that she did not had have a full license because she was embarrassed. The insurer denied a defence and indemnity on the bases that the insured had breached statutory condition 4(1) of the Ontario Regulation 777/93 and section 1.4.5 of the OAP, by allowing someone else to drive his vehicle when they are not authorized to do so.
The court held that the insured had not “permitted” his girlfriend to drive when she was not authorized to do so. In reaching this conclusion, the court held that the test to determine whether an insured permitted the use of their vehicle by an unauthorized driver is whether the insured took all reasonable and prudent precautions to see that the statutory condition was not contravened. The court held that the insured knew his girlfriend had a driver`s license and it looked the same has his full G license, he had heard her anecdotes involving driving in the past and she had never told him that she only had a G1 license. Given this, the court held that the insured acted as reasonably and prudently as an average individual in similar circumstances, the statutory condition was not breached and the insurer was bound to defend and indemnify the insured.
Update On Fraud
It has been nearly two years since Ontario's Auto Insurance Anti-Fraud Task Force delivered its final report to the Liberal government. The task force's final report was the result of a 16-month review and contained 38 recommendations dealing with fraud prevention, fraud detection, investigation and enforcement, as well as regulatory responsibilities.
Following the release of task force report, it seems as if every auto insurance announcement released by the Ontario government has mentioned fraud. This is a strong indication that the government is very aware of the impact of fraud. To its credit, the government and the industry began implementing task force recommendations as soon as the report hit the streets. Despite all the work undertaken to implement the task force recommendations there still remain recommended action that are outstanding.
MORE POWER TO FSCO
The Financial Services Commission of Ontario (FSCO) and the insurance industry have created educational material in different media that instruct consumers at critical moments - such as when they learn to drive, select an insurer, collide with another vehicle or make an insurance claim - on how to avoid, detect and report improper activity. Insurance Bureau of Canada (IBC) and FSCO are active on social media, providing consumers with valuable tips and information.
It is now easier to report suspected fraud. Both IBC and FSCO operate fraud hotlines that consumers can use to provide anonymous tips of suspicious activity.
The government amended Ontario's Insurance Act in 2013 to enhance FSCO's powers. The Superintendent is now able to investigate anyone who was previously in the business of insurance; licensed service providers; or anyone else the superintendent considers may be engaged in unfair or deceptive acts or practices. This would include examining records, books and other information held by a licensed service provider.
A number of regulatory changes also became effective in 2013 specifically to combat fraud. The government has amended the Statutory Accident Benefits Schedule (SABS) so that claimants play a more active role in helping to detect and prevent fraud. As well, the list of unfair or deceptive acts or practices has been expanded.
Insurers now have the ability to examine a claimant under oath, where this is necessary to determine which insurer should be responsible for coverage, without prejudice to the right for an examination under oath with respect to questionable claims.
Finally, the government has broadened the terms of reference for the required review by the superintendent of Part VI of the Insurance Act to reflect the additional powers and responsibilities assigned to FSCO. In addition, the amended Insurance Act provision now requires the review to be conducted at least every three years.
A WORK IN PROGRESS
Although there has been considerable progress made in developing tools and mechanisms to combat fraud, there are still outstanding task force recommendations. The previous government's minority status and the recent election have contributed to delays in implementing a number of recommendations. Now that the Liberals have returned to power with a majority, it is expected that adoption of the remaining task force recommendations will accelerate.
A positive sign was the introduction of Bill 15, Fighting Fraud and Reducing Automobile Insurance Rates Act, 2014 shortly after the spring election.
Should Bill 15 be passed by the legislature - and there is no reason to believe it will not be - it will implement a number of outstanding task force recommendations.
Included are provisions to transform Ontario's auto insurance dispute resolution system into a more robust system. Responsibility would be transferred to the Licence Appeal Tribunal under the Minister of the Attorney General.
Other provisions would regulate the towing and vehicle storage industries through measures that tackle questionable practices. The bill would amend provisions in the Repair and Storage Liens Act and give the province authority to change the current 60-day period that a vehicle can be stored after an accident, accruing charges, without notice to the owner.
In 2013, the insurance industry established CANATICS, or Canadian National Insurance Crime Services, a not-for-profit organization focused on using state-of-the-art analytical tools to identify potentially suspicious claims in insurance industry pooled data, to facilitate further investigation by individual insurers. CANATICS recently added a 10th insurer as a member and now has access to data from 75% of the market based on direct written premiums in Ontario. CANATICS is expected to begin operations in 2015.
Health Claims for Auto Insurance (HCAI) has developed the Professional Credential Tracker to assist regulated health professionals in preventing their identities from being misused by health care facilities. HCAI continues to look at additional anti-fraud tools.
FSCO is well on its way to licensing health clinics that treat and assess auto insurance claimants and to sanction clinics that are not following FSCO's business-practice standards. FSCO has a wide range of sanctions at its disposal, including the ability to limit or curtail a facility's access to HCAI. The licensing system is expected to be operational in December 2014.
There are a number of other ongoing initiatives identified by the task force that the insurance industry is eager to see completed. FSCO continues to lead the work on developing treatment protocols for minor injuries that are based on scientific evidence. Meanwhile, the Ministry of Transportation is still working on its Electronic Collision System project.
MORE WORK TO BE DONE
Although it is anticipated that Bill 15 will pass, there are still a number of legislative and regulatory changes recommended by the task force that the government has not acted on. There still has been no legislation introduced to protect individuals who report suspected fraud from reprisals and retribution. The government has also not amended the regulation to permit insurers to collect a cancellation fee from claimants who fail to attend a medical examination without a good reason, and to suspend income replacement benefits when there is compelling evidence the claimant has submitted a fraudulent claim for medical or rehabilitation accident benefits.
There were also a number of recommendations that dealt with information sharing that have yet to be developed. There is a need for protocols for active information sharing about suspicious cases among the investigative divisions of FSCO, the Workplace Safety and Insurance Board, the Law Society of Upper Canada and the Ontario Health Insurance Plan. In addition, protocols are needed to permit FSCO investigators to exchange information with investigators from relevant federal entities (such as the Canada Revenue Agency). The insurance industry is still waiting for these regulatory bodies and agencies to begin work out these issues.
The task force report contained several recommendations directed at introducing greater transparency with respect to independent assessments that have not been implemented. This includes requiring insurers to disclose publicly how they choose and assess the performance of independent medical examiners they refer consumers to see. Health regulatory colleges are also expected to work together to develop professional standards, guidelines and best practices to improve the quality of independent assessments of auto insurance claimants conducted by their members.
The fight against fraud is far from over but progress has been made. Under prevention, consumer awareness has been enhanced and a new licensing system for service providers will soon be operational. The industry will be in a better position to detect fraud when CANATICS is fully operational next year. FSCO's powers have been expanded to allow for more effective fraud investigation and enforcement. All this would not have been possible without the co-operation of government, the insurance industry, police services and service providers.
Following the release of task force report, it seems as if every auto insurance announcement released by the Ontario government has mentioned fraud. This is a strong indication that the government is very aware of the impact of fraud. To its credit, the government and the industry began implementing task force recommendations as soon as the report hit the streets. Despite all the work undertaken to implement the task force recommendations there still remain recommended action that are outstanding.
MORE POWER TO FSCO
The Financial Services Commission of Ontario (FSCO) and the insurance industry have created educational material in different media that instruct consumers at critical moments - such as when they learn to drive, select an insurer, collide with another vehicle or make an insurance claim - on how to avoid, detect and report improper activity. Insurance Bureau of Canada (IBC) and FSCO are active on social media, providing consumers with valuable tips and information.
It is now easier to report suspected fraud. Both IBC and FSCO operate fraud hotlines that consumers can use to provide anonymous tips of suspicious activity.
The government amended Ontario's Insurance Act in 2013 to enhance FSCO's powers. The Superintendent is now able to investigate anyone who was previously in the business of insurance; licensed service providers; or anyone else the superintendent considers may be engaged in unfair or deceptive acts or practices. This would include examining records, books and other information held by a licensed service provider.
A number of regulatory changes also became effective in 2013 specifically to combat fraud. The government has amended the Statutory Accident Benefits Schedule (SABS) so that claimants play a more active role in helping to detect and prevent fraud. As well, the list of unfair or deceptive acts or practices has been expanded.
Insurers now have the ability to examine a claimant under oath, where this is necessary to determine which insurer should be responsible for coverage, without prejudice to the right for an examination under oath with respect to questionable claims.
Finally, the government has broadened the terms of reference for the required review by the superintendent of Part VI of the Insurance Act to reflect the additional powers and responsibilities assigned to FSCO. In addition, the amended Insurance Act provision now requires the review to be conducted at least every three years.
A WORK IN PROGRESS
Although there has been considerable progress made in developing tools and mechanisms to combat fraud, there are still outstanding task force recommendations. The previous government's minority status and the recent election have contributed to delays in implementing a number of recommendations. Now that the Liberals have returned to power with a majority, it is expected that adoption of the remaining task force recommendations will accelerate.
A positive sign was the introduction of Bill 15, Fighting Fraud and Reducing Automobile Insurance Rates Act, 2014 shortly after the spring election.
Should Bill 15 be passed by the legislature - and there is no reason to believe it will not be - it will implement a number of outstanding task force recommendations.
Included are provisions to transform Ontario's auto insurance dispute resolution system into a more robust system. Responsibility would be transferred to the Licence Appeal Tribunal under the Minister of the Attorney General.
Other provisions would regulate the towing and vehicle storage industries through measures that tackle questionable practices. The bill would amend provisions in the Repair and Storage Liens Act and give the province authority to change the current 60-day period that a vehicle can be stored after an accident, accruing charges, without notice to the owner.
In 2013, the insurance industry established CANATICS, or Canadian National Insurance Crime Services, a not-for-profit organization focused on using state-of-the-art analytical tools to identify potentially suspicious claims in insurance industry pooled data, to facilitate further investigation by individual insurers. CANATICS recently added a 10th insurer as a member and now has access to data from 75% of the market based on direct written premiums in Ontario. CANATICS is expected to begin operations in 2015.
Health Claims for Auto Insurance (HCAI) has developed the Professional Credential Tracker to assist regulated health professionals in preventing their identities from being misused by health care facilities. HCAI continues to look at additional anti-fraud tools.
FSCO is well on its way to licensing health clinics that treat and assess auto insurance claimants and to sanction clinics that are not following FSCO's business-practice standards. FSCO has a wide range of sanctions at its disposal, including the ability to limit or curtail a facility's access to HCAI. The licensing system is expected to be operational in December 2014.
There are a number of other ongoing initiatives identified by the task force that the insurance industry is eager to see completed. FSCO continues to lead the work on developing treatment protocols for minor injuries that are based on scientific evidence. Meanwhile, the Ministry of Transportation is still working on its Electronic Collision System project.
MORE WORK TO BE DONE
Although it is anticipated that Bill 15 will pass, there are still a number of legislative and regulatory changes recommended by the task force that the government has not acted on. There still has been no legislation introduced to protect individuals who report suspected fraud from reprisals and retribution. The government has also not amended the regulation to permit insurers to collect a cancellation fee from claimants who fail to attend a medical examination without a good reason, and to suspend income replacement benefits when there is compelling evidence the claimant has submitted a fraudulent claim for medical or rehabilitation accident benefits.
There were also a number of recommendations that dealt with information sharing that have yet to be developed. There is a need for protocols for active information sharing about suspicious cases among the investigative divisions of FSCO, the Workplace Safety and Insurance Board, the Law Society of Upper Canada and the Ontario Health Insurance Plan. In addition, protocols are needed to permit FSCO investigators to exchange information with investigators from relevant federal entities (such as the Canada Revenue Agency). The insurance industry is still waiting for these regulatory bodies and agencies to begin work out these issues.
The task force report contained several recommendations directed at introducing greater transparency with respect to independent assessments that have not been implemented. This includes requiring insurers to disclose publicly how they choose and assess the performance of independent medical examiners they refer consumers to see. Health regulatory colleges are also expected to work together to develop professional standards, guidelines and best practices to improve the quality of independent assessments of auto insurance claimants conducted by their members.
The fight against fraud is far from over but progress has been made. Under prevention, consumer awareness has been enhanced and a new licensing system for service providers will soon be operational. The industry will be in a better position to detect fraud when CANATICS is fully operational next year. FSCO's powers have been expanded to allow for more effective fraud investigation and enforcement. All this would not have been possible without the co-operation of government, the insurance industry, police services and service providers.
Saturday, October 11, 2014
Appeals Court reminds us that when it comes to insurance, it's usually Buyer Beware
In Kleycamp v. USAA Casualty Ins. Co., 86 Mass. App. Ct. 1113, 2014 WL 4799608 (unpublished), the Massachusetts Appeals Court affirmed summary judgment to a defendant insurer that had not recommended that the plaintiffs purchase underinsured coverage with their auto policy.
The plaintiffs had never specifically inquired of the insurer about underinsured coverage, and the insurer never made any specific assertions or representations about the adequacy of the plaintiffs' coverage.
The court noted that the general rule in Massachusetts is that insurers and their agents do not have a general duty to recommend insurance coverage, or to guarantee that insurance policies are adequate for a particular insured's needs. There is an exception only for special circumstances, such as reliance on specific assertions or representations concerning the adequacy of coverage.
In a footnote the court noted that the same analysis might not apply to homeowner's policies.
In my view, underinsured and uninsured coverages are among the most important insurance you can buy. They can't protect you against the risk that another driver's carelessness will injure you; but they do protect you against the risk that that careless driver doesn't have enough insurance to cover your injuries.
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