Ontario moves to crack down on insurance fraud

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Ontario will set up a new specialized team of police and prosecutors to hunt down insurance fraudsters and bring them to justice.

The new "fraud squad" is one part of a broader plan unveiled Tuesday to crack down on insurance fraud in a bid to ease pressure on the industry and help bring premiums down.

Other measures include speeding up arbitration between accident victims and insurance companies, licensing medical clinics to stop them helping people from make false claims and double-billing, and cut the amount of time a vehicle can be stored.

"These actions will reduce fraud, these actions will reduce costs in the system," Finance Minister Charles Sousa said in Toronto. "These actions will reduce rates in Ontario."

For the last year, the government has been ordering insurance companies to cut their auto rates, something the ruling Liberals agreed to do as part of a deal with the New Democratic Party to pass last year's budget. The government is aiming to cut the average auto insurance rate by 15 per cent by mid-2015.

This policy, however, has drawn criticism from insurance companies who say it is cutting into their bottom line. Mr. Sousa's actions Tuesday are designed to cut costs for insurance companies to make it easier for them to absorb the rate decreases.

Some elements of the government's plan are things insurers have long said are necessary. They blame some medical clinics, for instance, for helping fraudsters make claims, and they argue the arbitration process takes too long as leaves companies uncertain every year how much they will have to pay out in claims.

These moves will have to be implemented in a new law Mr. Sousa tabled Tuesday.

The creation of the special investigation team will not require legislation. Mr. Sousa said he is working with the Attorney-General to create it. It is not clear when the new unit will be in place.

The insurance industry applauded the government's plan, contending it needs a break from fraud in order to afford the cheaper rates Mr. Sousa has ordered.

"The government's mandated a 15-per-cent cut in rates – so that's the law, it's going to happen. But it can only happen if some costs come down," said Ralph Palumbo, vice-president Ontario of the Insurance Bureau of Canada.

NDP MPP Jagmeet Singh, who pushed hard to have the insurance cut included in last year's budget, attacked the government for helping the insurance industry cut costs.

"This is another example of the government putting insurance companies first and not putting people first," he said. "We need to make sure that those profits that the insurance companies are enjoying translate into reductions for the people of Ontario."

It was not immediately clear whether his party would vote in favour of the legislation or not.

The government has already slashed auto insurance premiums by an average 4.66 per cent since last August, and says it is on track for a 15 per cent reduction by August of 2015.

The Progressive Conservatives have taken the opposite tack to the NDP: they argue the government should not force companies to reduce premiums, but should instead help the industry cut costs – such as through what Mr. Sousa is proposing – in hopes the savings will be passed on to consumers.

"You can't mandate a direct cut – what you need to do is look at how the industry is performing and reduce the cost pressures in the system," PC MPP Jeff Yurek said.

He also said that, instead of creating a new licensing process for medical clinics, the government could save money by having the College of Physicians run the system.