In the insurance industry, they call it the "whiplash aftermarket."
Ontario is overhauling its auto insurance rules, and decreasing the amount of coverage that drivers must buy, in an attempt to curb rising premiums. Insurers said that generous minimum-accident benefits were encouraging widespread abuse that was increasing their costs.
Basic benefits in the province will still be among the highest in the country, and it's not yet clear exactly what impact the reforms will have on insurance prices.
"These reforms are designed to hold the line on [premium]increases," Finance Minister Dwight Duncan said in an interview. "You want to make sure that insurance will still be offered by companies, and at the same time that consumers have adequate choice."
Auto insurance has become a money-losing business in Ontario. The average cost of medical rehabilitation for a driver injured in a no-fault accident in the province last year was $42,000, compared to roughly $4,000 in Alberta (where there is a cap on the amount paid for pain and suffering from minor vehicle injuries) and about $8,000 in New Brunswick, according to Barb Sulzenko-Laurie, vice-president of policy development at the Insurance Bureau of Canada.
And yet, the industry argues, Ontarians hurt in car crashes aren't healing any faster than drivers in other provinces.
"With $100,000 available for medical rehabilitation benefits for any injury, regardless of its severity, there was a compulsion within the system that continued to drive up costs," Ms. Sulzenko-Laurie said. "A typical claim even for a minor injury like whiplash would regularly attract 16, 17 weeks of housekeeping services."
One insurer told the government that some clinics in Toronto are regularly submitting more than 15 separate requests for treatment for a single injury. Each one requires an assessment, and those are routinely contested.
The insurance industry says that for each dollar it is spending on treatment, another 60 to 80 cents is spent on assessments, and there has been a rising number of requests to assess people in their homes to support claims for things like caregiver benefits and home maintenance expenses.
In a submission to the industry regulator, Intact Financial Corp. (formerly called ING Canada) said the system was "excessively generous and complicated, creating an environment that encourages abuse and even fraud."
The auto insurance business in Ontario is highly regulated because coverage is mandatory for drivers. In making the 41 changes announced yesterday, the province is trying to balance the need for insurance to be readily available and affordable with the benefits that are covered.
The reforms include decreasing basic medical and rehabilitation coverage from $100,000 to $50,000; decreasing basic attendant care coverage from $72,000 to $36,000; and instituting a $500 deductible for basic coverage. Drivers could still buy extra coverage to bring them up to the prior benefit amounts (or more), and could choose an insurance package with a $300 deductible or no deductible.
Another change will make housekeeping, home maintenance expenses and caregiver benefits optional. Reimbursement must reflect actual economic losses. Assessment costs will be capped at $2,000 per assessment, fees for completing forms will be capped at $200, and those costs will be included in the basic coverage amounts. In-home assessments will be limited to people who are seriously injured, and will only be used to evaluate their need for attendant care services and home modifications. Only occupational therapists and nurses with relevant training will be allowed to assess car-accident victims to see whether they require attendant care.
The government will draft regulations that it says will become effective next summer, and each insurer will have to submit its proposed rates (insurers in Ontario require regular approval from the Financial Services Commission of Ontario, which regulates the industry, for their rates).
The Alliance of Community Medical and Rehabilitation Providers said the government is bowing to the insurance lobby with its reforms. "Accident victims will end up looking for rehabilitation and medical treatment in the public health- care system, [but]unfortunately what they'll find is that many services have been delisted," alliance spokesman Nick Gurevich told The Canadian Press. "These people will be forced to pay out of their own pockets for private care [and]many will end up in debt."
Auto insurance in Ontario accounts for about 25 per cent of all property and casualty insurance premiums in Canada. But the industry collectively lost $390-million on the auto business in Ontario last year, the only province where it didn't turn a profit. Costs and premiums began falling after prior reforms were introduced in 2003, but costs began rising substantially "as people have gotten to know the system and understand the loopholes," said Leonard Sharman, a spokesman for The Co-operators Group Ltd.