Tuesday 26 January 1993

Insurance Statute Law Amendment Act, 1993

Ministry of Financial Institutions

D. Blair Tully, deputy minister, automobile insurance review

Eric Endicott, senior legal counsel, design

Steve Owens, parliamentary assistant to the minister

William M. Mercer Ltd.

Gordon M. Hall, vice-chairman

C.K. Khury, managing director and consulting actuary

Hon Brian A. Charlton, Minister of Financial Institutions

Insurance Bureau of Canada

Stan Griffin, vice-president, Ontario

Brigid Murphy, member, Ontario Auto Insurance Coalition

George Cooke, director

Advocacy Resource Centre for the Handicapped

David Baker, executive director

Harry Beatty, director, policy and research

Ron McInnes, vice-president

Advocates' Society

John Soule, chair, insurance committee

Duncan Read, executive director

Consumers' Association of Canada (Ontario)

Chris Ballard, executive director

Audrey Verge, chair, insurance committee

Helen Anderson, former chair, insurance committee

Board of Trade of Metropolitan Toronto

Robert P. Hutchison, vice-chair, insurance committee


*Chair / Président: Hansen, Ron (Lincoln ND)

*Acting Chair / Président suppléant: Dadamo, George (Windsor-Sandwich ND)

Vice-Chair / Vice-Président: Sutherland, Kimble (Oxford ND)

Caplan, Elinor (Oriole L)

Carr, Gary (Oakville South/-Sud PC)

Christopherson, David (Hamilton Centre ND)

Jamison, Norm (Norfolk ND)

*Kwinter, Monte (Wilson Heights L)

*Phillips, Gerry (Scarborough-Agincourt L)

Sterling, Norman W. (Carleton PC)

*Ward, Brad (Brantford ND)

Wiseman, Jim (Durham West/-Ouest ND)

*In attendance / présents

Substitutions present / Membres remplaçants présents:

Dadamo, George (Windsor-Sandwich ND) for Mr Wiseman

Haeck, Christel (St Catharines-Brock ND) for Ms Ward

Harnick, Charles (Willowdale PC) for Mr Sterling

Johnson, Paul R. (Prince Edward-Lennox-South Hastings/Prince

Edward-Lennox-Hastings-Sud ND) for Mr Christopherson

Klopp, Paul (Huron ND) for Mr Jamison

Mancini, Remo (Essex South/-Sud L) for Mrs Caplan

Owens, Stephen (Scarborough Centre ND) for Mr Sutherland

Tilson, David (Dufferin-Peel PC) for Mr Carr

Also taking part / Autres participants et participantes:

Kormos, Peter (Welland-Thorold ND)

Clerk pro tem / Greffier par intérim: Carrozza, Franco

Staff / Personnel:

Chan, Rebecca, assistant to the clerk

McNaught, Andrew, research officer, Legislative Research Service

The committee met at 1004 in committee room 1.


Consideration of Bill 164, An Act to amend the Insurance Act and certain other Acts in respect of Automobile Insurance and other Insurance Matters / Loi modifiant la Loi sur les assurances et certaines autres lois en ce qui concerne l'assurance-automobile et d'autres questions d'assurance.

The Chair (Mr Ron Hansen): I'd like to call this committee to order, the standing committee on finance and economic affairs. We're considering Bill 164, An Act to amend the Insurance Act and certain other Acts in respect of Automobile Insurance and other Insurance Matters.

I'd like to welcome everyone here this morning, and I'd like to start off by introducing the members, since we have quite a few new faces on this committee which I haven't seen before. We've got some older ones here too -- not agewise, just members. Mr Ward, would you mind starting off at the end, and introduce yourself and your position in the government here.

Mr Brad Ward (Brantford): Brad Ward, MPP for Brantford and parliamentary assistant to the Minister of Industry, Trade and Technology.

Mr Stephen Owens (Scarborough Centre): Steve Owens, MPP for Scarborough Centre, parliamentary assistant to the Minister of Financial Institutions.

Ms Christel Haeck (St Catharines-Brock): Christel Haeck, a mere backbencher representing the riding of St Catharines-Brock.

Mr George Dadamo (Windsor-Sandwich): Good morning, I'm George Dadamo. I'm the MPP for Windsor-Sandwich and as well the parliamentary assistant for the Minister of Culture and Communications.

The Chair: And Mr Kwinter.

Mr Monte Kwinter (Wilson Heights): I'm Monte Kwinter, MPP for Wilson Heights.

Mr Remo Mancini (Essex South): Remo Mancini, MPP for Essex South.

Mr Gerry Phillips (Scarborough-Agincourt): Gerry Phillips, Scarborough-Agincourt.

Mr David Tilson (Dufferin-Peel): David Tilson, Dufferin-Peel.

The Chair: Mr Kormos? Are you sitting there?

Mr Peter Kormos (Welland-Thorold): Peter Kormos. I'm the MPP for Welland-Thorold and the government's critic for auto insurance.

The Chair: I'm Ron Hansen, the Chairman of this committee, and I represent Lincoln. I'm going to call it the head table up here. I don't know if that's the head table or this is the head table. Would you mind identifying yourself and your position and how you will be involved in these hearings, from my far right. Go ahead.

Ms Pat Girouard: Pat Girouard, Hansard branch.

Mr Andrew McNaught: Andrew McNaught, legislative research.

Ms Rebecca Chan: Rebecca Chan, committees branch.

Clerk Pro Tem (Mr Franco Carrozza): I'm Franco Carrozza, the clerk pro tem of the committee for this hearing.

The Chair: Before we start, we had a delay in the committee yesterday as one of our committee members passed away, Ms Margery Ward. This committee will miss her presence, and I guess the whole Legislature will also. That's why we had a delay in the hearings, and what we were going to do on Monday has been moved to today. Wednesday will remain the same. Thursday will remain the same. The travelling will remain the same next week; nothing changes there. Tuesday, what actually was to be scheduled today, the subcommittee will be meeting. We'll find a time to meet maybe just before lunch or just right after the hearings to discuss how we're scheduling. There have been some additions of people who want to go before the committee and there have been cancellations, so there's going to have to be some slotting and some switching around. If you can keep that in mind, we can address those problems later on.

I believe Mr Mancini has a point of order. I think he had his hand up there.

Mr Mancini: Yes, thank you, Mr Chairman. I have a point of order. I want the record to show that on behalf of the Liberal caucus, I had asked yourself and the clerk to have this committee's proceedings take place in committee room 151, known as the Amethyst Room, which is on closed-circuit television and shown on cable throughout Ontario. It is my belief and the belief of the Liberal caucus that since this bill affects every driver in the province of Ontario and since information made available to me leads me to conclude that insurance rates are going to go up, forcing greater costs on drivers, it would have been absolutely appropriate for this committee to sit in room 151 so the government could explain its policies and have an interface with the general public.

I can't tell you how strongly I feel about that and how disappointed I am that we are not in committee room 151. While it is all right for people from the industry, people from legal organizations, people from industry associations, other organized groups and a few individuals -- they will be able to come and join us in this room and hear the participants from all sides speak -- the millions of drivers in Ontario who do not have the opportunity to come and join us in this particular committee room will not have the opportunity to have seen what has transpired, to have listened and to have made up their own minds. I want the record to clearly show how disappointed I am, on behalf of our caucus, and I don't know why it was not possible for us to be in committee room 151. It was only for four days, Mr Chair.

The Chair: Yes, I take your point. I know you've raised it with the subcommittee; you've raised it with me. As a committee Chair, I was approached by the clerk of that particular committee, the standing committee on resources development, that's looking after OTAB and it requested at that time if it was possible to get 151. I was surprised I was in 151 because this committee normally meets in committee room 1. At that time, I gave it away. It just seems to be that we haven't come up with any negotiations with my friend Mr Peter Kormos on an agreement. I see him sitting next to Mr Harnick, and he had his --



The Chair: Okay, I'm sorry. I haven't got my glasses on. I can't read that far, so it didn't make any difference whether you turned it around. I see Mr Kormos had his hand up there. Maybe there is some agreement now with the Chair of resources committee that we get 151 for Thursday, anyhow.

Mr Kormos: As you know, Chair, in the interest of compromise, I, being the Chair of the committee meeting in the Amethyst Room, offered you the Amethyst Room for both Thursday morning and Tuesday morning. You declined that offer.

The Chair: I was --

Mr Kormos: One moment, Mr Chair, please. I thought it was a fair compromise, because I recognized the importance. I know that people who were making presentations, for instance, who were scheduled Tuesday morning, would have been of interest the whole province. After you have your subcommittee meeting and revise your schedule, I suggest to you that perhaps we can reach a similar compromise.

I was surprised that you would not accept my offer of having the Amethyst Room for those two mornings. You insisted on having it for only one morning. It struck me as peculiar.

The Chair: It was that I wanted it for all day Thursday, which would run till 10 o'clock at night. I'm going to just recognize Mr Owens over here.

Mr Owens: I'm pleased that these proceedings have started off on such an amicable note. In the interest of people who are waiting, perhaps we can move to the technical briefing and discuss the issue in subcommittee after the hearings.

The Chair: Okay. I'm going to recognize Mr Tilson for some short remarks until we go into subcommittee.

Mr Tilson: I was just going to say the same thing as Mr Owens. Surely all of these matters can be dealt with later. We're here now, so --

The Chair: I believe some wanted it on the record.

Mr Tilson: I agree with Mr Mancini that this topic should be -- the calls that I've had asking where this is going to be heard, and why we're being put up in this room is really strange. We came here to hear the minister's staff and --

The Chair: Okay, fine. Let's proceed.

Mr Mancini: Wouldn't want to keep the minister's staff waiting.

The Chair: Okay, Mr Mancini --

Mr Mancini: It's okay that people can't watch the proceedings, but we don't want to keep the minister's staff waiting, Mr Chairman.

The Chair: Okay. Well, the one thing is that at first the subcommittee didn't request the technical briefing. Another meeting of the subcommittee agreed that there were some people who wanted private briefings, and this is why we're having them. It was optional this morning, if any committee members wanted to come for this. I just want to make that known. If someone's not here, it was optional.


The Chair: We'll carry on now with the technical briefing, and I believe the deputy minister is Mr D. Blair Tunny.

Mr D. Blair Tully: Tully.

The Chair: I pronounce names wrong all the time. That's either your first name or last name. You know how they write them sometimes; you never know. But if you don't mind introducing yourself and your colleagues there, you may begin. We have about one hour. Okay, go ahead.

Mr Tully: Thank you, Mr Chair.

The Chair: Tully. I'm sorry.

Mr Tully: What I intend to do is make some opening remarks describing the principal features of the bill and to describe for the committee the provisions and the regulation; then have a short presentation by representatives from William Mercer Ltd, who have been our actuaries in this exercise; and then to call some of my colleagues from the auto insurance review forward to join me for any questions which members of the committee might have.

With me at the table right now I have Mr Gordon Hall, the vice-chairman of William Mercer Ltd in Canada; Stan Khury, a consulting actuary and managing director of William Mercer; and Ted Zubulake, who is a principal and consulting actuary with William Mercer. I have them at the table at this time because I think it will be --

Mr Mancini: What is this gentleman's name?

Mr Tully: Ted Zubulake. I think it's easier to have them here now, and we'll just move into the Mercer presentation and then reorganize ourselves for the question period.

I intend, first, to describe the principal features of the bill and, since they are so closely connected in terms of the government's plans, the statutory accident benefit schedule, which will be a regulation under the Insurance Act.

My presentation will take place in four parts: firstly, an overview of the bill; secondly, a description of the provisions of the bill dealing with benefits and access to tort action; thirdly, the benefit provisions of the regulation; and fourthly, the statutory provisions which regulate the insurance industry.

I'll start with my overview of the bill. Firstly, Bill 164 is an act to amend existing legislation, primarily the Insurance Act but also certain other acts, in respect to automobile insurance as well as other insurance matters. I intend to provide a broad-brush review of the kinds of amendments contained in the bill and to describe for the members where these can be found.

The amendments related to auto insurance take up most of the bill. Generally, these are in sections 11 to 43 and 49 to 52. There are three major areas of change: those sections dealing with changes to the system of compensation for people suffering losses in automobile accidents, those dealing with changes in the regulatory system which oversees the auto insurance industry, and those which will update the Insurance Act as it relates to automobile insurance. The other sections of the bill are mostly technical amendments.

Because this is an amending bill, sections relating to the same subject are scattered throughout the bill. Therefore, I will talk about the three major areas of change in the bill and where related amendments can be found, rather than trying to deal with the sections of the bill in numerical order.

Changes are made to the system of compensation for people suffering losses in automobile accidents in bill sections 24, 25 and 26, on pages 16 through 23. The bill removes the right to sue for pecuniary, or economic, losses suffered as a result of automobile accidents. At the same time, it lifts existing restrictions to sue for non-pecuniary losses, or pain and suffering. Section 1 on page 1 of the bill changes the term "no-fault benefits schedule" to "statutory accident benefits schedule" throughout the act, and the bill requires that every contract of automobile insurance issued in Ontario provide the benefits set out in this schedule. At pages 20 to 23, there is a list of benefits in the statutory accident benefits schedule and there is a provision for indexing them.

In order to make the administration of the statutory accident benefits schedule run more smoothly, the bill also provides that regulations, called rules, can be issued to assist in interpreting the schedule. The commissioner of insurance is also given the authority to issue guidelines which must be considered in the interpretation of the schedule.

The bill contains a number of amendments which are required to support the new statutory accident benefits schedule and to make it work well.

Section 3, on page 2 of the bill, expands the role of the accident benefits advisory committee. This committee, appointees with a cross-section of interests in automobile insurance, currently makes recommendations on the appointment of arbitrators and advises on procedures used during arbitrations, as well as performing other functions assigned to it by the commissioner or the minister. The committee will now be specifically mandated to advise the commissioner of insurance and the Minister of Financial Institutions regularly on the operation of the statutory accident benefits schedule.

There are changes to both the Workers' Compensation Act and the Health Insurance Act which will be made as a consequence of the new compensation system. These changes are found at the end of the bill on pages 33 and 34.

The second major area involves changes to regulatory powers affecting the activities of automobile insurers.

A number of provisions in the bill are designed to work together to provide the insurance commission with expanded market management capacity and to ensure the continuing availability of automobile insurance. Section 11 of the bill contains new controls over the withdrawal of automobile insurers from the market. Section 18 gives the commissioner more power to control the underwriting grounds being used by insurers. Section 49 amends the Compulsory Automobile Insurance Act, which governs the Facility Association, or insurer of last resort.

Provisions in subsection 12(11) and sections 36 to 42 allow for the prescribing of the elements of the risk classification system used by insurers. This regulatory capacity will enable the government to eliminate the use of discriminatory factors, such as age, sex and marital status, in any insurer's risk classifications, and provide for the establishment of a uniform approach to the classification systems used by insurers. Sections 36 to 42 also give the commissioner powers to limit the rate dislocations that might arise in changes to classification systems.


A number of technical changes to the automobile insurance system are dealt with in sections 13 to 18 and sections 25 to 29.

Other amendments to the Insurance Act, including changes to the dispute resolution system, are found in sections 30 to 33 of the bill. They allow arbitrators and the director of arbitrations to make interim orders. Arbitrators are specifically provided with the authority to make interim awards of expenses, which will help the insured person to defray the cost of the proceedings as they go along. Arbitrators are also given the power to penalize persons who bring frivolous proceedings.

The bill also amends provisions of the Insurance Act that are not related to automobile insurance. Generally, these provisions are found in sections 3 through 10 and 43 through 48 of the bill.

New powers for the commissioner to limit the licence or seize the assets of an insurer found to be operating in a manner prejudicial to its policyholders are found in sections 8 through 10. These sections increase the power of the superintendent of insurance to seize the assets of an insurer. Under the current provisions of the act, the superintendent can only take possession of an insurer where there are solvency concerns.

Under the current act, the superintendent is only authorized to take possession of the assets of an insurer that is incorporated in Ontario. A number of insurers not incorporated in Ontario are licensed and do business here. The bill broadens the scope of the superintendent in relation to all assets held in Ontario.

Throughout this overview, I have referred to the regulations made under the act. The additions to regulation-making powers are all found in section 12 of the bill at pages 9 to 12.

I'd like now to turn to the provisions of the bill that deal specifically with compensation for personal injury and death resulting from motor vehicle accidents. The changes may be categorized under two broad headings: access to tort, that is, the ability to sue on the basis of negligence, and second, the framework for the new statutory accident benefits.

With respect to access to tort, the bill does essentially two things:

First, it ends the application of the current threshold system, including the abolition of the collateral source rule when the new provisions come into force.

Second, it introduces a new framework for access to tort. Access for economic losses will be eliminated and access for non-pecuniary losses, including care, companionship and guidance, will be subject to a deductible. The deductible for any individual claimant is $15,000, except in the case of claims for loss of care, companionship and guidance for which it is $5,000.

I'll say more about the deductible in a minute, but for now I'd like to point out that the proposal to repeal the current provisions respecting the collateral source rule does not reflect a change in policy. The rule will no longer be required because the plaintiff will no longer be claiming economic losses in tort. It's not intended that collateral sources be deducted from non-pecuniary damages.

The transition will work in much the same way as did the OMPP, the Ontario motorist protection plan, with the changes to both tort and accident benefits being "read in" to the insurance policies on the day the provisions are proclaimed.

One of the effects of the proposed reforms will be to virtually eliminate liability-limit problems for accidents in Ontario. The reforms are premised on the continuation of the current ceiling on non-pecuniary damages that was created by the Supreme Court of Canada in 1978. This means that those who are most seriously injured in car accidents will be entitled to $240,000, less the $15,000 deductible, as compensation for their pain and suffering. The current approach used by the courts to assess non-pecuniary damages with a $15,000 deductible will provide the appropriate recognition of fault in accidents, balanced by the availability of economic loss compensation for everyone through the automatic accident benefit schedule.

The legislation as currently drafted directs judges to assess the amount of non-pecuniary damages without regard to the restrictions on tort. An amendment proposed by the minister will further clarify the legislative intent by directing the courts to assess damages for non-pecuniary loss in the manner they would in other non-auto-related cases.

With the ceiling in place, the current liability coverage purchased by most people should be more than enough, and in fact, underinsured coverage should not be needed for accidents in Ontario.

Another issue addressed in the bill is allocation of fault when more than one person is negligent in an accident. There is no change to the policy of the current system whereby changes to the tort system do not apply to any negligent persons who were not at the scene of the accident; for example, the manufacturer of a defective car. However, rules are required to apportion liability in cases where there are both persons at the scene of the accident and others who are liable. The policy is the same as now: The other negligent parties should derive neither a benefit nor a burden as a result of the changes to the auto insurance system.

Before turning to the accident benefit provisions, I'd like to make a few comments on the deductible and the indexing of that deductible.

The reason for the deductible is twofold: to eliminate the smallest claims, which are seen to burden the system, and as part of the overall balancing of cost in the system.

A deductible is intended to reflect the intrinsic value of the claim. There are no arbitrary restrictions based on type or duration of injury. It provides the maximum flexibility to recognize the impact of the accident on the individual.

It is also seen to provide greater certainty, because it taps into the existing settlement practices for non-pecuniary losses. Although each plaintiff is unique, it's not difficult to establish a range around which a claim may be settled. The use of a verbal threshold introduces an element of uncertainty which makes settling more difficult and consequently more expensive. Also, based on the Michigan experience, it is subject to considerable change. Fluctuations in interpretations can increase transaction costs.

Case law has established that the cap on non-pecuniary damages is indexed to inflation. To ensure that recovery of non-pecuniary damages will be consistent over time, a provision has been included in the bill to index the deductible.

The minister has also indicated that he intends to establish a committee to develop general guidelines on what a $15,000 claim represents. This is not intended as a new threshold, but rather a guideline that will assist injured persons in evaluating whether it is worthwhile to pursue a claim. This is an approach proposed by the Alberta Automobile Insurance Board in its recent report on auto insurance reform in that province.

I'd like to mention briefly the other area where changes have been made to the compensation structure, the statutory accident benefits schedule. I'll take you through the provisions of the regulation where most of the changes have been made in a moment, but there are important changes in the bill itself.

The most significant change in the bill is the inclusion of a framework of the benefits that must be provided in the schedule, and a statement of some of the principles in providing compensation. These are found at sections 25 and 26 of the bill, pages 20 to 23.

The introduction of an accident benefits framework in the legislation itself is different from previous systems. For example, the types of benefits that must be included in the schedule are set out. The list is inclusive and does not prevent the addition of other types of benefits.

The schedule will set out either the amount of benefit which must be paid or the maximum amount payable. The bill specifies that when a monetary amount is established by the schedule, it cannot be reduced by a subsequent revision of the schedule. Any reduction would require an amendment to the act.


The subsection on rehabilitation sets out the objectives in making rehabilitation benefits available to claimants, specifically reasonable measures which will reduce or eliminate the effects of any disability resulting from an injury and facilitate an injured person's reintegration into his or her family, the labour market and the rest of society.

This provision reflects the fundamental importance to the scheme of insurers' obligation to provide rehabilitation benefits. It does not, however, prevent a further refinement of what benefits and standards are to be available for rehabilitation but will provide guidance in disputes over entitlement.

Finally, given the significance of indexing to persons with permanent injuries, the principle and the method of calculation have been included in the bill itself, subject to terms, conditions and exclusions that may be provided in the regulation.

The new benefit structure will increase the importance of the accident benefits in the compensation structure. One major challenge, particularly in the context of private sector delivery, where there are many different providers, is to obtain consistency in interpretation and delivery of benefits. Also, as many benefits are new, there may have to be adjustments from time to time.

To allow for greater flexibility, provisions have been added, as I mentioned earlier, to create rules interpreting the statutory accident benefits schedule, authorizing the commissioner of insurance to issue guidelines on the interpretation and operation of the schedule and to provide for regular review of the schedule by the accident benefits advisory committee.

Let me now turn to the statutory accident benefits schedule, which will be a regulation under the Insurance Act. A second draft of this document was released by the minister last week. First, I will describe the basic weekly benefits for earners, students, care givers and others. Second, I'll discuss certain other economic loss benefits, including provisions concerning rehabilitation, supplementary medical benefits and attendant care. I'll conclude with some of the new procedural provisions in the regulation.

First, with regard to the income replacement benefit, the maximum income replacement benefit is $1,000, up from $600 under the OMPP. This new ceiling covers approximately 97% of the working population in Ontario. An injured person who was employed in the three years before the accident is entitled to this benefit. The amount is 90% of the person's average net weekly income and the person chooses whether to calculate the average based on the 4, 52 or 156 weeks before the accident.

Some special adjustment rules are available to keep people from falling through the cracks. Special provisions deal with people in new jobs, those with future contracts and those who were or are on strike, layoff or leave of absence. Unemployment insurance benefits are included in calculating average weekly income. Adjustments are possible in certain situations after one year of disability.

There are special provisions for working seniors. Income replacement benefits for claimants over age 65 at the time of the accident are reduced gradually over four years. These claimants may also qualify for the disability benefit under part V.

Special rules also apply to the self-employed to ensure that the income replacement benefit better reflects their cash-flow losses from an accident. The benefit also takes into account new expenses like replacement salaries that are necessary because of the accident. Alternatively, a self-employed person can agree on a benefit with the insurer when purchasing his or her auto policy. The income replacement benefit would be based on the predetermined amount if the self-employed person has an accident.

There's a minimum income replacement benefit of $185 for anyone unable to perform one or more activities of daily living because of the accident. Activities of daily living include personal care, mobility, household or communication activities.

A loss of earning capacity benefit replaces the income replacement benefit after two years of disability. It represents compensation for a total or partial disability resulting from the accident that affects earning power. It's the difference between what the person could earn before the accident based on the income replacement benefit and an assessment of what he or she can earn after the accident.

Where claimants and insurers are unable to agree on an appropriate benefit, an independent assessment of post-accident earning capacity will be conducted by facilities accredited by a committee established under the Insurance Act. The facilities will assess the personal and vocational characteristics of the claimant and identify a job that the person is able and qualified to do. The job must be of a kind available in the area where the claimant lives.

Either the insurer or the claimant can appeal the assessment. The loss of earning capacity benefit will be reviewed at three and eight years following the initial establishment of the benefit. The claimant can also ask for a review if he or she suffers an unexpected permanent deterioration.

The schedule also provides for temporary income supplements if an accident-related injury leads to a future interruption in employment. For example, this supplement could be available if the claimant missed work for an operation needed several years after the accident.

Loss of earning capacity benefits are replaced at the age of 65 with a kind of pension benefit. Claimants receive 2% of the final benefit for each year they received weekly benefits, to a maximum of 35 years. This is payable for life and is in addition to other pensions payable to the person.

The new schedule provides significant enhancements in benefits for students. Students are entitled to two types of benefits: lump sums for the loss of a school year and weekly benefits. These benefits will increase with inflation. Students can receive one lump sum benefit per year of lost education. Only one lump sum benefit is payable after the age of 16. The benefit is $2,000 for each lost year of elementary school, $4,000 for each lost year of high school and $8,000 for each lost year of post-secondary education.

Disability benefits are payable to students over the age of 16 unable to continue with their studies. Benefits for up to two years of disability are based upon 50% of the net average weekly earnings in Ontario.

When a student reaches age 16 or has been disabled at least two years, the student is entitled to a loss-of-earning-capacity benefit. The pre-accident earning capacity is deemed to be a percentage of the net average weekly earnings in Ontario. This percentage ranges up to 90% of the net average industrial wage in Ontario at the age of 30. Benefits are adjusted to reflect a partial disability. Students who qualify may choose to receive an income replacement benefit instead of student benefits.

People who care for children under the age of 16 or for physically or mentally incapacitated people are entitled to care giver benefits. The benefit is available to those who are not working full-time and are not self-employed at the time of the accident. The benefit is $250 for a care giver who is caring for one person at the time of the accident and $50 for each additional person for whom care was being provided. The benefit is payable as long as the child or disabled person being cared for is less than 16 or continues to require care.

After one year of disability, care givers who have left the workforce to provide care qualify for special treatment. The care giver is entitled to an income replacement benefit based on earnings in any six-month period during the three years prior to the person becoming a care giver. This old income base is indexed for inflation to reflect what the care giver might be earning at the time of the accident. A person who qualifies for more than one type of weekly benefit can choose between them.

An injured person who does not meet the criteria for any other weekly benefit may qualify for a disability benefit of $185 per week. This benefit recognizes the situation of those who are unable to carry on their normal lives as the result of an auto accident. The concept used is an inability to perform one or more activities of daily living. In certain situations, a person receiving this benefit may qualify for a permanent loss-of-earning-capacity benefit after two years of disability.


Aside from the weekly benefits, the regulation also provides for other economic benefits. I'll turn to some of these.

Death benefits are the most significant. They're payable to the spouse and dependants of a person killed in an auto accident. A spouse receives four times the annualized income replacement benefit to which the deceased person would have been entitled. The minimum benefit is $50,000 and the maximum benefit is $200,000. The OMPP provided a basic death benefit of $25,000 to a surviving spouse.

The spousal benefit is paid to dependants if there is no surviving spouse. A dependant benefit of $10,000 is also payable to each dependant of the deceased. Dependants are those who were primarily dependent upon the deceased for care or financial support. The $10,000 benefit is also available to a former spouse if the deceased person was obligated to provide him or her with support. Ten thousand dollars is also available to a supporting individual where the dependant dies in an accident; for example, a parent who loses a dependent child in an accident.

Reimbursement for the cost of funerals is provided up to $6,000.

Reimbursement for child care expenses that result from the accident is payable to injured people who are working at the time of the accident. The benefit is up to $75 a week for the first dependant and up to $25 for each additional dependant. The maximum payable is $150. This is a new benefit for earners. Under the OMPP no child care benefit was available for people who were entitled to the income benefit.

A new provision provides coverage for housekeeping and home maintenance expenses. Coverage for such expenses was unclear under the OMPP.

With slight differences, this draft regulation continues the exclusions from weekly accident benefits that were in the OMPP. Those excluded include those convicted of a drinking and driving offence arising out of the accident or of driving while uninsured.

Exclusions do not apply to weekly care giver benefits because the recipients will need the money to provide for replacement for the children and disabled people in their care. Under OMPP, $50 per week per dependant was available for the care of dependants of excluded individuals.

I turn now to the regulation provisions outlining entitlement to supplementary medical benefits, rehabilitation benefits and attendant care benefits. These are found in sections 32, 33 and 34 on pages 36 to 40 of the draft regulation. These benefits have all been enhanced in the proposed regulation.

The principal change to the medical and rehabilitation benefits is the elimination of the limit or caps on these benefits. The OMPP has a $500,000 cap on medical and rehabilitation benefits and limits medical and rehabilitation benefits to the 10 years following an accident, 20 years for children. These limits have been removed to provide greater protection to the long-term disabled where the duration of treatment may last a lifetime and accumulate to over $500,000. These expenses have also been separated into different sections in order to clarify and broaden the current list of eligible expenses.

As I indicated earlier, a rehabilitation principle has been included in the bill, and it is reinforced in the regulation. This principle states that an insured person who is injured in an accident is entitled to be reimbursed for reasonable measures taken to reduce or eliminate the effects of any disability resulting from the injury and to facilitate the insured person's reintegration into his or her family, the labour market and the rest of society.

Where there is a dispute over payment of medical expenses, an insurer is normally obliged to pay the expenses while the dispute is being resolved. The regulation limits this pay-pending dispute obligation to medical expenses of less than $3,000, however. The $3,000 limit has been included to address large medical expenditures which may not be recoverable at the outcome of a dispute or which may cause financial hardship on an insured person who could be asked to repay. An insurance company would continue to have the right, as it does under the OMPP, not to pay for rehabilitation expenses where a dispute exists.

Insurers may require a certificate from a treating physician or a psychologist before paying for rehabilitation expenses. This is consistent with the OMPP approach of having physicians and psychologists act as gatekeepers to rehabilitation services. One change from the OMPP is that health professionals under the new Regulated Health Professions Act will be permitted to authorize rehabilitation expenses as long as the treating physician or psychologist does not disagree with the recommended service. Chiropractors will not have to have their own services certified by a physician or psychologist, but will not be able to certify the need for services of another regulated health profession.

Long-term care, or attendant care as it is referred to in the draft regulation, will no longer be subject to a $500,000 lifetime cap, and the maximum monthly benefit of $3,000 will now be indexed. This will provide greater protection to the long-term disabled. Under the OMPP, this benefit could be exhausted in under 14 years.

Entitlement to attendant care benefits has been clarified by describing attendant care as the services provided to assist the insured person in performing activities of daily living. The attendant care benefit can also be used to pay for a nursing home, home for the aged or chronic care hospital. The benefit could be used to reimburse a person who loses income to care for an injured person, so if a person wants to stay home from work to look after an injured family member, that lost income can be recovered.

Before incurring medical, rehabilitation or attendant care expenses, an insured person may ask to have expenses pre-authorized or directly billed to the insurer. This will make it easier for an insured person to incur lengthy or expensive treatment or services. Under the OMPP, these expenses are reimbursed on an expense-incurred basis. Often the insured person must pay for these expenses out of his or her pocket and then send the bill to the insurer for recovery.

Rehabilitation and attendant care benefit entitlements will be subject to further development and clarity as the result of a task force established by the Minister of Financial Institutions last week. The task force is made up of representatives of insurance companies, consumers, rehabilitation specialists, accident victims and government. The mandate of the task force is to establish a framework for the control of rehabilitation and attendant care costs to replace the caps that will be removed by Bill 164.

There are new procedural protections in this regulation. The most significant governs the stoppage of weekly benefits. There have been complaints under the OMPP that insurers sometimes unreasonably cut people off weekly benefits. This leaves the claimant without income benefits while the issue is mediated and appealed. This has changed. Now, where there is a dispute based on the opinion of the treating physician or psychologist and an insurer's medical adviser, an assessment will be provided by a third, independent professional. The parties can either agree on who the independent doctor should be or can apply to have one appointed by an advisory committee set up under the Insurance Act. The insurer can dispute the assessment of an independent doctor, but must continue to pay benefits until the dispute is resolved.

To assist claimants in applying for benefits, insurers are required to provide an explanation of the benefits available under the regulation and must provide information to assist claimants in making choices.

The last point I want to make with respect to the regulation is that the auto insurer is still a "second payer."

The Chair: Excuse me, could I just break in? Mr Mancini.

Mr Mancini: On a point of order, Mr Chairman: I've just been informed that the committee has a copy of Mr Tully's presentation and that it was not handed out to the committee members at the beginning of Mr Tully's presentation. We have been scribbling furiously to try to keep track of everything that Mr Tully has been telling us when all along we've had copies of his presentation sitting before you. What is going on here? Why can we not have copies of Mr Tully's presentation?

The Chair: I'll let the clerk answer this because I just requested of him copies. He said he had them already.


Clerk Pro Tem: Mr Mancini, I was asked by the staff of the deputy minister to hold on to Mr Tully's statement until he was finished.

Mr Mancini: Well, I appreciate that --

Mr Charles Harnick (Willowdale): Why?

Mr Mancini: Just a minute, I've got the floor. I appreciate that, but with all due respect to Mr Tully and his staff, he is not in charge of this committee. Our Chairman, Ron Hansen, is in charge of this committee and it's up to him to make these decisions.

Frankly, Mr Chairman, the work of this committee has not gone smoothly, as you know, and to have that information sitting before you while members are trying desperately to keep up to snuff with what the delegation is telling us is just not right, fair or in any way proper. I would request that we get to copy that information immediately.

The Chair: Mr Tully, do you have a problem handing this out? Normally when we have submissions from the finance and economics presenters, the opposition and the government can make notes beside questions they want to ask later on. It's unusual in this committee not to give information to the members of the committee and they can make notes as they go along.

Mr Mancini: Mr Chairman, you have that authority. You don't need anyone's permission.

The Chair: No, no. I'm just saying that I would rule the other way but it's nice to have an agreement.

Mr Mancini: I appreciate that.

The Chair: Okay, Mr Mancini? Fine. We'll hand them out now and notes can be made. What page are you on, sir?

Mr Tully: Page 30.

The Chair: Okay, and carry on while we're handing them out.

Mr Tully: I was in the middle of the page on page 30. I think that's the same version.

The last point I want to make with respect to the regulation is that the auto insurer is still a second payer. If an injured person has an employer-sponsored sick leave or long-term disability plan, the work plan pays first. The auto insurer tops up the other coverage by the maximums in the schedule. For example, the auto insurer will pay up to $1,000 on top of other coverage, to provide a maximum benefit of 90% of net income.

Sick leave benefits are only deducted if the injured person receives them. If a person chooses not to use his or her sick leave, the auto insurer cannot deduct these amounts. A one-week waiting period for income replacement and disability benefits continues.

Finally, then, I will turn briefly to the provisions in the bill regulating the insurance industry, specifically the concepts of underwriting, risk classification and rates.

Drivers are entitled to know the grounds upon which an application for auto insurance may be rejected by insurers. At present, insurers are required to file a list of the grounds they use and the commissioner may at any time challenge a ground on the basis that it is arbitrary, not predictive of risk or is contrary to public policy. The bill proposes to alter this slightly. Insurers will have to file grounds at least 15 days before they can use them. The commissioner will be able to review and challenge any ground before it can be used. The regulation-making powers that govern risk selection grounds have been changed slightly to make them more flexible.

Bill 164 introduces the concept of a risk classification system, which refers to the elements that are used by an insurer to classify risks in order to determine the appropriate premium to be charged. These would be things like driving record, type of vehicle etc. The risk classification system replaces the present concept of class of risk exposure. The bill contains the power to prescribe the elements of a classification system, including the use of a uniform classification system by regulation. This will permit the abolition of the use of discriminatory criteria, such as age and sex, and the introduction of uniform criteria and rules that must be used by all auto insurers for specified classes of automobile insurance or coverages. A uniform risk classification system will assist consumers because it will be easier for them to understand how driving characteristics influence insurance rates.

Amendments are also proposed to smooth out the transition from the classification system used by any individual insurer. Regulations may be prescribed limiting the percentage and/or dollar changes in rates in a given year that might result from changes to the elements of a risk plan. In the event that an insurer cannot stay within the prescribed range, it must apply to the commissioner to phase in the new classification system. The commissioner may approve the insurer's phase-in plan if it meets certain public interest statutory tests. This is designed to minimize the disruption to both the insurer and the market. The commissioner will also be required to monitor the operation of the risk classification system and consult regularly.

The bill also enables the commissioner to request rate refilings from insurers instead of proceeding directly to a rate hearing. The commissioner will be able to deal with stale rate filings in a more effective manner.

As I indicated earlier, certain proposals in Bill 164 address the issue of auto insurance availability and market stability and the operation of the Facility Association. The plan has a "take all comers" provision that requires insurers to accept almost all applicants for private passenger automobile insurance at their approved market rates. However, "bad risk" applicants that meet a number of tests can be rejected by insurance companies and referred to the Facility Association.

The Facility Association is intended as an insurer of last resort and its rates are higher than those charged in the regular market. It is a collective pool managed by insurance companies who provide servicing capacity. Over the last several years, many people have been placed in Facility, even if they do not have demonstrably bad records. Under an agreement reached with the industry, only bad risks will in future be placed in the Facility. All others will be insured by regular insurance companies at their own rates. However, insurers may choose to share the risk on some business that can no longer be placed in the Facility Association through an invisible industry risk-sharing pool.

Other legislative changes will strengthen regulatory supervision of the Facility Association and clarify the obligation of individual automobile insurers, which are required by law to be members of the Facility Association.

There have been occasions in the past when auto insurance has been difficult to obtain because insurers decided to stop writing new business in certain areas. Amendments to Bill 164 propose to give the commission a window on insurance availability so that trends can be identified. An insurer intending to withdraw from any part of Ontario or from the entire province must give the commission 180 days' advance notice. The commissioner will assess the impact of the proposal on market availability and may permit earlier withdrawal or delay the withdrawal for up to an additional 90 days.

Notice will provide the commission with an improved capacity to ensure market availability of a compulsory product. The withdrawal provision is not intended to apply to the day-to-day business decisions of insurers.

This concludes my remarks on the bill and the draft regulation. I would now like to ask the representatives of William M. Mercer to describe the actuarial work they have done on the package.

The Chair: Fine. Go right ahead.

Mr Gordon M. Hall: Thank you, Mr Tully, and members of the standing committee. I am Gordon Hall, vice-chairman of William M. Mercer Ltd in Canada. I have acted as the overall project manager in connection with the preparation of the actuarial costing of The Road Ahead: A Comparative Study. It's been prepared for the Ontario Automobile Insurance Review. This study was published in June 1992.

It's my pleasure to introduce summary information about Mercer that's directly applicable to the study and to introduce Mr Stan Khury, who had responsibility for the technical direction of the study and who will make some remarks about the study this morning and will be available to answer questions. I'd like to also introduce Mr Ted Zubulake, who was heavily involved with the analysis and interpretation and who is assisting Mr Khury today. Other Mercer team members included Mr Karlinski, Mr Wright and Ms Bass. They are not in attendance today.

First of all, I'd like to provide brief information on the Mercer organization that's directly applicable to this study. Mercer is an international consulting firm with operations in over 20 countries and with a staff of over 6,300 employees. Professional services are provided by the Mercer firm to clients in the fields of actuarial science, pensions, benefits, human resources and insurance.

In conducting this study, Mercer drew on its extensive background and experience in automobile insurance in Canada and in the United States.


Specifically, the project team brought Ontario-specific background that began with a 1987 study for the Ministry of Financial Institutions, and Mercer's involvement has continued since 1987 with hearings by the Ontario Automobile Insurance Board. It has continued with consultations to the Ontario Insurance Commission, which was created following passage of OMPP, and it has continued with the preparation of this analysis related to the report for the Ontario automobile insurance review.

The project team's experience includes many years of direct involvement with all aspects of automobile insurance transactions in more than a dozen jurisdictions in North America.

Summary information setting out the professional credentials, the business experience, the responsibilities of all of the team members, including those specifically for Mr Khury and Mr Zubulake, are part of the package that I believe has been handed out to standing committee members; I'll therefore not elaborate on those details of our two specialists here this morning.

I'd like to call on Mr Khury to make remarks regarding this study.

Mr C.K. Khury: I have a brief statement, perhaps 10 minutes' worth. We appreciate the opportunity to present a brief statement on the actuarial costing project that Mercer has carried out for the Ontario auto insurance review.

The purpose of this statement is threefold: (1) We would like to provide some brief background on our choice of methodology; (2) we would like to summarize the key conclusions of the study; (3) we would like to present you with the status of our key conclusions, given that more recent data have become available since our study was completed.

First, some background: Our mandate from the auto insurance review was to conduct an actuarial study that would yield a comparison of loss costs and corresponding premiums for three alternative auto insurance products as of July 1, 1992. The first product was the tort product we referred to as the pre-OMPP product; the current product, that is, the OMPP product; and The Road Ahead, that is, the product described in Bill 164.

The purpose of this study would be to assist decision-makers in their deliberations on alternative auto insurance models and their costs. This mandate did not include an assessment of the adequacy of rates or what companies are likely to file for in the course of implementing Bill 164.

Mercer brought together a team of its most experienced auto insurance experts. To give you a sense of the scope of the experience of the members of the team, I can tell you that each member of the team brought to the project roughly 20 years of experience in costing auto insurance products of all manner and variety in North America.

The most significant choice that faced the team early on was the choice of specific methodology and the data base that would be used to arrive at our costs.

In our experience, we have learned that the process of costing a particular product meant literally taking an available historical body of experience and estimating what would happen to that experience under the proposed product in the environment in which it is expected to operate. We have also learned that this process, modelling past history into a future environment, can be carried out in several levels of depth, ranging from a general conceptual analysis supplemented with numerical modelling all the way to a comprehensive analysis of each data item and assumption of the new system.

Mr Mancini: Mr Chairman, I note that the gentleman is reading from a text. Do we have copies of that text?

Mr Khury: It's just my own copy I'm working from here. It's not intended to be a statement on file. I'd be happy to make it available later. I did not intend to distribute this.

The Chair: Fine. As soon as it's done, we'll have the clerk make copies.

Mr Mancini: I appreciate what the gentleman has told us, but the gentleman has to understand and you have to understand that it's vitally important, because of the complex nature of the bill and because the gentleman is giving an actuarial summary which is technical and very detailed, that we be able to go over his presentation as he's making it. Otherwise, his presentation only serves his own purposes and not the purposes of the full committee.

The Chair: Okay, another thing I will request is the Instant Hansard for members of the committee also.

Mr Mancini: I appreciate that.

The Chair: Maybe any further witnesses coming forward, if they're going to read from text, could have copies of the text prepared for all members of the committee.

Mr Phillips: There may even be a photocopier somewhere in the building we could actually photocopy it with.

The Chair: If he's only got one copy, it's pretty hard for him to read at the same time as we're photocopying.

Mr Phillips: I realize that, but maybe after he's finished --

The Chair: Have you got an extra copy with you?

Mr Khury: I have some notes for myself, which I am reading; it is marked up for my use, sir. I will be happy to get this prepared --

Mr Phillips: Even more valuable.

Mr Tilson: Those are the notes we want.

Mr Khury: I want them to have it.

The Chair: Right after you're finished, if you can hand it to the clerk, the clerk can make some copies.

Mr Tilson: We want those handwritten notes.

Mr Phillips: We have our answer.

The Chair: I think Mr Mancini's just trying to show us that he can read and write too. All right, carry on.

Mr Khury: As I indicated, this kind of analysis can be carried out on several levels of depth, ranging from a general conceptual analysis with some numerical modelling all the way to a comprehensive analysis of each data item and assumption for the new system.

Early on, the Ontario auto insurance review indicated its interest in a comprehensive study, and we attempted to respond accordingly. The basic building block of data we used consisted of the then latest Ontario auto insurance experience. That was recorded and gathered in the pre-OMPP environment. This basic body of data was augmented by numerous other sources of information from other jurisdictions that have related experience under a variety of auto insurance schemes. This extraterritorial experience included data from Quebec, Michigan, New York, US-wide data on the impact of recessions on insurance data and so on.

We also drew on several one-time efforts -- studies, interviews, surveys -- aimed at sharpening the many assumptions we needed to make in order to complete our work. This effort included numerous consultations with law firms, adjusters, injury and rehab specialists and so on.

In our opinion, the process we have used has been most exhaustive and covered all that needed to be covered in order to answer the mandate given to us. In fact, in our collective experience, we have not known a more complete assessment of a proposed auto insurance product anywhere.

One special condition of this assignment has been the fact that the OMPP product was only recently introduced at the time we conducted our work. An experience under OMPP was, for all intents and purposes, non-existent. Therefore, the only historical Ontario claim experience we had on which we could rely at the time as a starting point was the experience generated under the pre-OMPP or the tort environment. Since our report was released, additional data have become available, and we have considered the updated experience in a brief update of our conclusions. That update will be provided to you later on in this statement.

Now I would like to turn to the key conclusions of the study. Very briefly, I would like to tell you that, although I give you the conclusions here, all of the methodology, description of the methodology, the rationale and all the limitations are detailed in excruciating detail in the four-volume report, so I will not review any of that with you here. I will just describe the highlights of the conclusions.

(1) The indicated loss cost per car that would be necessary to pay for the product described in Bill 164 is estimated to be approximately 4.4% higher than the comparable indicated loss cost per car that would be necessary to pay for the OMPP product.

(2) The estimated proportion of injured persons who are not at fault who can effectively sue for non-economic damages under Bill 164 is 18.1%, compared to 5.8% under OMPP.

(3) The total cost of benefits paid to injured persons and their dependants under Bill 164 is estimated to be 13% higher under OMPP. This figure is composed of an increase of 45% in the cost of accident benefits and a 15% decrease in the cost of bodily injury liability awards.


Mr Mancini: I'm sorry. Could you back up to the beginning of that? Slowly, please.

Mr Khury: I'd be happy to. Let me do that again. The total cost of benefits paid to injured persons and their dependents under Bill 164 is estimated to be 13% higher than under OMPP. This figure is composed of two things: an increase of 45% in the cost of accident benefits and a decrease of 15% in the cost of bodily injury liability awards and settlements.

Mr Mancini: Those two figures equal 13%?

Mr Khury: Yes, they combine weight to 13%.

The Chair: Mr Mancini, I think we'll have some time at the end, because you're taking up time, which will mean less time for all members to ask questions. If you'd just make notes. Carry on, sir.

Mr Khury: (4) The total cost of awards and settlements for non-economic damages under Bill 164 is estimated to be 45% of the cost under pre-OMPP, while the cost of awards and settlements for non-economic damages under OMPP is estimated to be 31% of the cost under pre-OMPP.

(5) The proportion of injured persons, regardless of fault, who are eligible for income benefits under Bill 164 is estimated to be 98%, while the comparable ratio under OMPP is 91% and under pre-OMPP is 62%.

One additional note: In the course of doing our work, the Ontario auto insurance review also asked us to examine and estimate the efficiency of various forms of delivery of insurance benefits to injured persons. Here, let me add that the term "efficiency" is used to mean the proportion of the claim dollar that is ultimately returned to the injured person after all expenses.

We conducted a special study on the subject and the results were recently released. Our key finding in this area is summarized for you as follows: Pure no-fault systems can be expected to return roughly 91% of the claim dollar to injured persons, while pure tort systems can be expected to return roughly 70% of the claim dollar. Other elements of efficiency were outside the scope of this study.

Finally, I would like to give you the status of our conclusions since new data have become available. As I indicated earlier, shortly after the release of our report, more current insurance claim data became available. We took a look at the new data to try to estimate its effect on our conclusions.

In particular, we attempted to reflect the following: We reviewed the claim experience under pre-OMPP, specifically; second, we reviewed the experience that has emerged under OMPP; we reviewed the updated data on the recession in terms of the duration and depth; fourth and finally, we also reviewed the updated information we have on inflation and interest rates.

Based on this review, we can make the following two representations: (1) Our original conclusions on the relative cost of the OMPP and Bill 164 products remain essentially unchanged; (2) we also examined the emerging early OMPP experience on its own and we can find no contra-indication which would cause us to change our view of the relative cost of the OMPP and Bill 164 products.

One final note: We are told by the Ontario auto insurance review that several adjustments, changes and refinements in Bill 164 benefits have been proposed. We have reviewed those changes, and on balance, in our judgement, we find that those changes, if implemented, should not materially change the order of magnitude of the difference between the cost of the two products. Of course, finer comment on the effect of these revisions cannot be made until we have worked all the changes into our costing.

This is our brief statement. I return it to you, Blair.

Mr Tully: I would then ask --

The Chair: How much time is left in your presentation?

Mr Tully: We've completed our presentation. Now I would just ask some of my colleagues to join me at the table here and we'll entertain any questions the committee might have.

The Chair: Okay, fine. What I've asked the clerk to do is to hand out some paper and some markers. Can you mark your names down as you play musical chairs there, so it's easier for Hansard and for the members of the committee, so we all know whom we're talking to.

Mr Kwinter: Is it 15 minutes for each caucus?

The Chair: Each caucus. We start off with Mr Mancini.

Mr Tully: If I could --

The Chair: Oh, I see. I thought you were bringing technical staff.

Mr Tully: They are coming up, and I'll just introduce them for you so that you know, if they try not to be too shy and get up here quickly.

The Chair: What someone can do is sit in that chair right beside Mr Harnick and just turn the mike around. If someone wants to sit at that corner there, there are enough chairs. As long as you can get to a mike, that's the main thing for Hansard.

Mr Tully: If I could, I will introduce Mr Craig Simons, Ms Rosemarie Cochrane and Mr Eric Endicott.

The Chair: Are you ready for question period?

Mr Tully: We are.

The Chair: Okay, Mr Mancini, 15 minutes.

Mr Mancini: Mr Chairman, will you please let me know when 10 minutes are up, as Mr Kwinter has a number of questions?

The Chair: Okay, fine.

Mr Harnick: On a point of order, Mr Chairman: My understanding was that we were all getting 20 minutes and that was something decided by the subcommittee. Why are we now down to 15 minutes?

The Chair: Because of the time we lost.

Mr Harnick: I think we could probably survive if we stayed here till 12:15. I don't think anybody's going to starve to death by waiting 15 minutes for lunch.

The Chair: There is a problem there, because of a meeting that's going on at 12 o'clock for the government caucus at that time.

Mr Harnick: Quite frankly, the business of this committee is important and takes precedence over private meetings that the government caucus is having, and the fact that you are scheduling meetings and cutting down the time of this committee is totally improper.

The Chair: I am not cutting down the time.

Mr Harnick: We have an agreement that we get 20 minutes per caucus and that's what we're going to do. Who are you to unilaterally change the rules?

The Chair: Because I'm going within the time frame, and 12 o'clock was the time frame. Which frame do I look at, 12 o'clock?

Mr Harnick: You look at 20 minutes per caucus. This is very, very complicated material. These people have made themselves available, and the fact that you have some damn meeting that the government has to go to is totally irrelevant to the work of this committee.

Ms Haeck: It's a memorial service for somebody who died.

Mr Owens: Excuse me, Mr Chair, just to add some historical clarity, first of all, the opposition, especially Mr Harnick, suggested that this technical briefing was not necessary. Later Mr Harnick came back and suggested that he wanted a private briefing.

Mr Harnick: That's totally untrue.

Mr Owens: This is not untrue. Second, this committee was supposed to begin at 10 am. We were delayed.

The Chair: Mr Harnick, would you withdraw that, because this is what this committee had heard also and this is why the subcommittee had changed and had the technical briefing and felt that. I think the clerk can clarify that. This was optional to any member who wanted to come; it wasn't necessary.

Mr Harnick: Let me explain something. We have a subcommittee and the subcommittee made rules. The committee started its hearings on the basis of the rules set out by the subcommittee, and that was that we were going to have one hour to question these witnesses. It's as simple as that.

Mr Owens: If you had deigned to show up on time, sir, then we would have been able to start.

Mr Harnick: I didn't tell you to wait for me.

The Chair: I'm sorry. If I could I get in here, Mr Mancini's sitting on the edge of his seat. We'll get going. We'll give him 15 minutes. We'll see what we can do at the end. Mr Mancini. We'll start over again. We'll set the clock back again.

Mr Tilson: Yes, set the clock back.

The Chair: Start your 15 minutes, Mr Mancini.

Mr Harnick: Set it back about four years.

Mr Mancini: Mr Tully, is it not correct that when the minister introduced this legislation he stated that there would be no rate increases?

Mr Tully: I think at the time the minister introduced the legislation, a little over a year ago, in the environment at that time and in a comparative sense, on the basis of the kind of indications of cost that Mercer's was providing to us, he indicated there wasn't a substantial difference in the cost associated with this product and what was being carried by the OMPP.


Mr Mancini: Let's be very clear about this. The minister indicated and was quite specific in his words, both inside the Legislature and out, that he did not foresee any rate increases under Bill 164. Is that an accurate statement?

Mr Tully: I think particularly you should ask the minister that question.

Mr Mancini: Well, you and the minister work hand in hand. Let's not play semantics here. You're the deputy minister. You're providing the minister with information, and these experts who have joined you at the table are providing you with information. Having had some little bit of experience in government, I know ministers usually rely on their experts, their deputy ministers and others to make public pronouncements. I'm assuming you know as much as the minister knew and vice versa. Is it not correct that when Bill 164 was introduced, the idea, from the government anyway, was that there would be no rate increases?

Mr Tully: You'd have to ask the minister whether any specific comment like that was made.

Mr Mancini: What was your opinion at the day then, sir? Did you foresee rate increases with the introduction of Bill 164?

Mr Tully: My view was guided by the kinds of costings that were being provided to us by Mercer's which indicated there was a minor difference in overall costing between the OMPP product and that provided in Bill 164.

Mr Mancini: Can you give us your definition of "minor"? Is minor 1%, 2%, 3%, 15%? What is a minor difference, Mr Tully?

Mr Tully: The "minor" relates to the 4.4% which Mercer's is indicating in its costing analysis is the difference in cost between the two products.

Mr Mancini: What you're telling the committee this morning then is that when the Minister of Financial Institutions introduced Bill 164, you as deputy minister had enough information to conclude that rates could go up 4.4%.

Mr Tully: No. We didn't have the specific information that it was 4.4%. Mercer's costing and the full analysis of its costing wasn't completed for some months thereafter.

Mr Mancini: Then you didn't know if rates were going to go up or not, 4% or 15%. So it was obviously wrong of the minister and members of the government to go around saying there'd be no rate increases. That was obviously wrong.

Mr Tully: No. Mercer's had been consulting with us for some time and was honing in in terms of the specific numbers it was going to come up with and was indicating a difference -- not that specific number -- in the order of what the ultimate decision was.

Mr Mancini: I have a question for Mr Hall. I missed the last portion of Mr Khury's presentation, the last minute or so, but I did sit through the portion of the hearings where he compared the Ontario motorist protection plan and The Road Ahead plan. The figures I was able to copy down, because the information was not provided to the committee, indicated that on The Road Ahead plan -- there was some other explanation that went along with that -- the rates would go up 4.4% per car. Non-economic loss would be 18.9%, payments to injured persons, 13%, and there were a lot of other percentages that were used, all in excess of 4.4%.

Not being an actuarial expert but knowing that 18.9% and 13% are substantially greater than 4.4%, how is it that when we compile all these figures, which are all greater than 4.4%, we end up with an average of 4.4%?

Mr Khury: May I answer that? Actually, this is really an outstanding question. The thing that was not stated here which is relevant is that the property coverages, which is roughly 60% of the equation, has essentially no change. So you factor in zero for all of that, with all of these, and you get to about 4.4% change in the relative costs.

Mr Mancini: Sorry, what is not changing again?

Mr Khury: The property coverages.

Mr Mancini: The property coverages.

Mr Khury: Yes. Collision, comprehensive, the damage to the automobile itself is essentially unchanged; that's at zero.

Mr Mancini: So you're assuming that the costs of automobiles will not rise? You're assuming that the costs of repairing automobiles will not rise?

Mr Khury: No, sir.

Mr Mancini: You're assuming that the people who work in the body shops will not get increased wages? You're assuming that new technology and equipment will not be bought which will force costs to go up? You're assuming that new government regulations and taxes will not force the costs of repairing automobiles to rise? Is that your assumption?

Mr Khury: Absolutely not, sir.

Mr Mancini: What is your assumption?

Mr Khury: What I said is that the zero refers to if you were to play out the cost of repairing cars and the replacing of cars, the property coverages, if you look at the costs of that, whatever it is under OMPP, under Bill 164, that change, side by side, is zero. The annual rates of increase could be anything, but the relationship between the two products is weighed in at zero.

Mr Mancini: Now I follow your argument. I don't necessarily accept it, but I follow how you came to that conclusion.

Mr Khury: If I may just add, in fact we are assuming increases in the cost of repairing automobiles, but it applies under both products. Therefore, the relationship is unchanged; therefore, they come into the equation at 0%.

The Acting Chair (Mr George Dadamo): If I may jump in, Mr Mancini, here's your time check. You've consumed about 10 minutes. Do you want to leave five minutes?

Mr Mancini: You're kidding. I started at 11:22.

The Acting Chair: Oh, I'm sorry, five more.

Mr Mancini: Mr Tully, has the ministry taken any public opinion polls as to consumer satisfaction with regard to the current Ontario motorist protection plan?

Mr Tully: No, it hasn't.

Mr Mancini: Has any other body of government taken some type of public opinion poll which would result in the population being able to express an opinion?

Mr Tully: Not that I'm aware of in government.

Mr Mancini: So you don't know whether or not the public's happy with the current plan.

Mr Tully: No, I don't. I assume that's what these public hearings are for.

Mr Mancini: If you haven't seen any public opinion polls, I'm assuming then that the minister hasn't seen any and doesn't know whether the public is happy or not with the current Ontario motorist protection plan.

Mr Tully: I think you'd have to ask him that question.

Mr Mancini: But that would be a reasonable assumption to make. Since we don't know whether or not any public opinion polls were taken, was there any work done with focus groups?

Mr Tully: In the course of the exercise of preparing for Bill 164, no, there was not.

Mr Mancini: Did you check with industry associations? Did you check with people who provide the insurance to find out what kind of feedback they were getting from their customers? Did you check with the insurance commissioner?

Mr Tully: The auto insurance review?

Mr Mancini: Yes.

Mr Tully: The auto insurance review was consulted with over the past year.

Mr Mancini: Did they find a great deal of public dissatisfaction with the Ontario motorist protection plan that they reported to you?

Mr Tully: Yes, I think there has been.

Mr Mancini: They did?

Mr Tully: Certainly, in releasing Bill 164 and subsequently, the minister has spoken very much to the problems with the existing legislation that were identified by groups that we consulted with. That, of course, was the purpose of the establishment and continuation of the auto insurance review. Those consultations have been extensive and a number of the changes that are part of this bill and the draft regulation reflect the advice we've got.


Mr Mancini: One last question, if I have time, Mr Chairman; it has to deal with the draft regulations.

These draft regulations are 68 pages long, and I defy anyone in this room who claims to be an expert on these draft regulations, particularly the government members. These draft regulations are basically turning the insurance system in Ontario into a copycat of the Workers' Compensation Board, and I'm wondering, from an administrative point of view, how many more employees is the government going to have to hire to administer this new Workers' Compensation Board we're putting in place? You must know the estimates, because Bill 164 has been in the public domain for quite a while now. How many more employees are going to have to be hired to administer these 68 pages of draft regulations?

Mr Tully: I'd say with respect to that issue that this is a more elaborate regulation, this being a draft regulation but a more elaborate regulation than that which exists currently under the OMPP. In length it's approximately twice as long.

Mr Mancini: I have the current regs and they're 18 pages, Mr Tully. The new regs are 68 pages. We all know how many pages there are. My question was, how many more government employees will you be hiring to administer the new draft regs?

Mr Tully: I appreciate that the version you have of the existing OMPP is a different kind of version. One is a typed foolscap version; the other one is a two-column legal drafting. I mean, we could argue --

Mr Mancini: How many more employees, Mr Tully?

Mr Tully: I was going to get to that issue and what is necessitated out of this product because there are so many cracks in the current regulation with respect to a variety of interest groups. There is a necessary provision of regulation relating to those things.

Mr Mancini: How many more employees, Mr Tully?

Mr Owens: Why don't you let him answer?

Mr Mancini: Well, my time is quickly expiring. All I want to know is how many more employees. Is it going to be zero, one, 50, 150? Surely the deputy can tell the committee that without an elaborate explanation.

Mr Tully: I don't have an estimate at this point of what might be required because, as I say, what one would expect out of a regulation that takes doubt and confusion out of what people are entitled to will reduce the amount of dispute that may go on in the system.

Mr Mancini: You're saying you don't know?

Mr Tully: I'm saying that at this point it's speculative to have an answer.

Mr Mancini: What is your speculation, Mr Tully?

Mr Tully: I wouldn't --

Mr Mancini: You don't know.

Mr Tully: I wouldn't have a response.

Mr Mancini: Maybe we need the insurance commissioner in to tell us.

The Chair: Okay. Mr Kwinter.

Mr Kwinter: Mr Khury, could you tell us the number of drivers in Ontario who claim on the system in a given year, a percentage of the number of drivers and the number who claim insurance?

Mr Khury: Would you narrow the question a little bit, please? It would be helpful. What kind of coverage are you talking about?

Mr Kwinter: All I'm saying is, let's say we have six million drivers in Ontario who buy insurance. What percentage of those ever have an insurance claim in a given year?

Mr Khury: Any insurance claim?

Mr Kwinter: Yes.

Mr Khury: This would have to be a speculation, because --

Mr Kwinter: I just want a speculation.

Mr Khury: Let me just tell you now; I'll give you my sort of folklore knowledge of this.

Mr Mancini: It's a speculation.

Mr Kwinter: I'll take a speculation.

Mr Khury: Basically, one accident can generate five claims. The only data that's available we look at is claims. I would have to guess at this point it would be -- all coverages, I would have to say one third.

Mr Kwinter: Okay, so two thirds of the people pay insurance and never claim on it.

Mr Khury: I didn't say people, sir. There was about one third.

Mr Kwinter: Well, I'm asking about people.

Mr Khury: Then I don't have that.

Mr Kwinter: All right. Let's try to give the same transposition. I may be wrong in the way that you may wrong as well, but let's assume that of the people who pay insurance, one third of them claim for an accident and the other two thirds pay the insurance and never have an accident.

Mr Khury: Let me say again, sir, I did not answer you on people. I said this is claims that come up, about every car, like a third of the cars --

Mr Kwinter: You can't give me it. I'm just saying it seems --

Mr Khury: Hypothetical, okay.

Mr Kwinter: It seems to be reasonable, just for the premise, because what I want to do is spend a minute to talk about the insurance industry pre-OMPP, under the tort system. There was nothing wrong with the system. What was wrong was the perceived cost. Nobody could tell you -- I was the minister at the time -- what insurance should cost. All they know is, "Last year I paid $600 and this year I'm paying $1,500, and that's ridiculous," even though $1,500 may be the best bargain they ever had in their lives.

The point I'm making is that this whole exercise is political as opposed to economic. The whole reason for all these things is that there are people out there who for whatever reason have been sold a bill of goods that their insurance costs should be cheaper. I'm saying to you, because most people don't understand insurance, that when they get their increase, whether it's 4.4% or whatever it is, the first reaction is: "Why is my rate going up and I've never had an accident? This is ridiculous." That is what triggered this whole exercise.

If the point of the exercise is to provide better service and to do it at a cheaper cost, I say to you that this plan isn't doing it, because what it's going to do is create very much the problem that started this whole thing. People are going to say, "How come my insurance is going up when I've never had a claim?"

The Chair: Mr Kwinter, I'm going to have to go on to Mr Tilson.

Mr Tilson: I'd like to continue with Mr Khury with that line of questioning, because that's how this mess started. When the Liberals brought in OMPP, it was because of the insurance companies saying, "Rates are going to go up." It was a response to that. Both the Conservatives and the NDP at that time were very critical of the OMPP, and I will say that we continue to be critical of the OMPP.

There are four studies at least that we know of; there may be some others that the government hasn't told us about, although with due respect to Mr Tully, he doesn't seem to know a great deal. He doesn't know what this is going to do to the bureaucracy. I'm saying this with due respect, Mr Tully -- I'm simply responding to your comments -- that we really don't know where we're going in this direction as far as cost is concerned. You have said 4%. The other four studies, which have been done by four other firms, say something substantially different as far as what it's going to cost the consumers of this province is concerned. You're shaking your head. I'm sure you're aware of them. Wyatt is one.

Mr Harnick: Coopers.

Mr Tilson: Coopers is another. I believe the bureaucracy will be unbelievable. The comparison is being made to workers' compensation. Who's going to explain all this to people, not only in the insurance industry but the government, the insurance commission? It's going to be substantial.

Mr Chairman, if you could cut me off at 10 minutes, I know Mr Harnick has some questions.

The Chair: Okay, fine.

Mr Tilson: There's the tripling of the number of people, according to statistics, as to who can be sued and who will be required to pay for pain and suffering awards. The caps will be lifted on the accident benefit coverage to provide lifetime benefits and there's no dollar limitation with respect to that. There will be continuously increasing benefits, as Mr Tully has indicated, which would be indexing these benefits to the consumer price index. There will be an increase of the wage-loss benefit limit by 70%. The death and funeral benefits will be doubled. The benefits for students, the unemployed, the self-employed, again repeating what Mr Tully has indicated, will be expanded. All these costs are going to be substantial. Already you're outvoted, because there are three firms that say quite different things than what Mercer says.

I try to be a reasonable man in these things, and I listen to all of these things that this wonderful legislation is going to do. I, as an individual, cannot believe the 4% figure that you're saying. I have a terrible fear that this legislation is going to be passed, because these people rarely listen to what the opposition or anyone else says with respect to legislation -- in the past anyway. I doubt if there will be any amendments. All of a sudden, Bill 164 is going to be law, and I can't believe that the cost is going to be only 4%.

I'd like you to comment very briefly, because time is limited, in response to the other three studies -- I can't believe you haven't looked at them -- and second, in response to all of this package, as to what it's going to cost the consumer.


Mr Khury: First of all, I have seen only one other costing of this. That is the one that was conducted by the Wyatt Co, I believe. I have not seen the other studies. The only comment I can make is about that. I know Coopers did a study. I was not aware that the Coopers study was a costing of --

Mr Tilson: Let's take Wyatt. Keep your comments on Wyatt.

Mr Khury: Yes. I'll be happy to give you our comments on the Wyatt report. Basically, I think the reconciliation that I will give you is that the Wyatt report stated that premiums are expected to go up by 12%, and the Mercer report indicated that the difference in cost would be roughly 4%. This is the reconciliation I'm prepared to give you right now.

Mr Tilson: I'll take anything at this stage, sir, because with all due respect, I can't believe your figures. However --

Mr Khury: Right. We have compared the Wyatt study to our work as much as we can, and we have not discussed the study with the Wyatt folks. But let me take out the areas on which we agree, indicate those, and then I can focus on the area of disagreement.

Remember, the comparison I've given you of the 4.4% compares the costs of delivering the product under Bill 164 and under OMPP. That relationship is 4.4%. That is in components, as I indicated earlier to Mr Mancini. The property coverage is essentially coming to that equation at zero. Between Mercer and Wyatt, if you take the bodily injury coverage, if you take the income disability benefits, if you compare those between Bill 164 and OMPP, then we find we're in the same ball park. There really are not very substantive differences.

The area we have found where there is substantial difference in that relationship is in the area of the medical costs. There is a very huge difference here. For example, we estimate the cost will go up around 20% and Wyatt, I believe, estimates the cost will go up around 90%.

Mr Tilson: Why are you different from Wyatt?

Mr Khury: I'm going to get to that. We have identified numerous reasons for this difference. I will not go over all of them. I will give you three key ones to illustrate the nature of the difference.

First, Wyatt assumes a much higher number of long-term disabled who will enter the benefit system than we do, roughly twice the number that we assume. That's one very important difference.

Second, Wyatt assumes that a high percentage of the long-term disabled would require continuing home and workplace modifications. The assumption of the Wyatt study is roughly $10,000 per year for each year of disability up to age 65. Then the number goes down to $5,000 per year for each year of the remainder of life. Our assumption on that is $30,000 a year, one time. That's very substantial; this is roughly one third of the difference.

A third example I will give you is that the Wyatt report assumes that medical and rehab benefits will be spread uniformly throughout the term of the disability of the long-term disabled. That's essentially for life. We feel that most of the rehabilitation work will be incurred at the front end, after the accident, and will taper off substantially, as opposed to assuming it will continue for the duration of the disability.

There are many other differences. If you put all these together, these things compound and they just contribute to an enormous difference.

That is the reconciliation we've been able to come up with between our 4% and the Wyatt 12%.

Mr Tilson: Given what OMPP does and given what this bill is suggesting, I would then like you to comment on the second part of my question as to all these wonderful things Bill 164 is going to do while costing the consumer only 4% more.

Mr Khury: Remember, the work we have done is really in comparing how things would operate under two different environments, what the cost would look like.

Mr Tilson: The real question is getting back to Mr Kwinter's question: What is Bill 164 going to cost the consumer? You say 4%, yet Bill 164 is going to be doing an awful lot more than what OMPP or tort ever did.

Mr Khury: Let me try to answer you, sir. First, 60% of the package is untouched: That's the property coverages; that's coming into the equation at zero. The recoveries under bodily injury are going to be reduced.

Mr Tilson: The lifting of the caps on the accident benefits alone is going to create unbelievable cost.

Mr Khury: May I answer the question, sir?

Mr Tilson: You're right. Thank you.

The Chair: One minute before we go to Mr Harnick.

Mr Khury: We estimate that the cost of accident benefits, just that piece you're talking about, will go up by 45%. Against that, we have the reduction in the bodily injury of roughly 15% --

Mr Tilson: The economic loss?

Mr Khury: Yes, the elimination of the economic loss and the effect of the deductible. That generates about a 15% reduction, and the property coverages come in at zero. So if you average the zero and the reduction of 15% on 45%, you get 4.4%. That's really that balance. I think you're focusing on all the things that go up. There are other things that are mitigating.

Mr Harnick: My first question is for Mr Tully. Sir, the NDP made certain promises in 1990. They said quite simply that they were going to restore the right to sue for pain and suffering and for economic loss and they were going to hold the line on premiums. Does this plan fulfil this promise? It's either yes or no.

Mr Owens: Is there another choice?

Mr Tully: I think that's a question that you should properly address.

Mr Harnick: No, sir. Quite frankly, you understand this. You wrote the legislation with your friend Mr Endicott. Tell me, does this fulfil the promise the government made? It's a very simple question, and you more than anyone else understand this piece of legislation. You wrote it.

Mr Tully: I think this legislation meets the --

Mr Harnick: Does it fulfil the promise that was made?

Mr Tully: It's seen to fulfil the commitment made by the government.

Mr Harnick: So the government, you're telling me then, promised people it was going to take away their right to claim for economic losses. Is that correct?

Mr Tully: I didn't say that.

Mr Harnick: Let's go on to the next question. I've read this material, and it seems to me that you're sanctioning a scheme where people can still suffer an economic loss beyond what their accident benefits will pay them. Is that correct? Is that possible?

Mr Tully: I think this plan provides reasonable --

Mr Harnick: No, no. Just tell me if people are going to suffer that economic loss.

The Chair: Mr Harnick, would you let him answer the question.

Mr Harnick: I'm not asking what the plan provides. Is it possible that someone will suffer an economic loss beyond what the accident benefits pay?

Mr Tully: Yes, it's possible.

Mr Harnick: Thank you. So you are sanctioning a scheme where people are going to suffer economic losses. That's the first thing.

Now let's talk about fatal accidents. The maximum anybody can get for a fatal accident is $200,000, correct?

Mr Tully: Yes.

Mr Harnick: All right. And if somebody has an income, if a breadwinner -- a man or woman who has a family -- has a loss of income of $50,000 a year if that's what they're making at the time they're killed, it seems to me that in four years they've exhausted the $200,000 they're going to get from this brilliant insurance scheme. They might have a lifetime working loss of $50,000 a year and you're going to recompense them for four years. Is that correct?

Mr Tully: I think you have to take into consideration that other forms of life protection --

Mr Harnick: What if they don't have other forms of life protection? We're just talking about the auto scheme you've come up with.

Mr Tully: And relative to the current plan that provides $25,000 in death benefits.

Mr Harnick: Well, the current plan, as I understand it, is that if you have a fatal, you've passed the threshold and you can sue for your actual loss. So don't give me that garbage, because that's exactly what it is.

Mr Tully: If you've got somebody you can sue, if you were not at fault. I think you're making a generality out of a very specific case.


Mr Harnick: Well, sir, $200,000 is the maximum you can get. It seems to me that that covers four years at $50,000, if that's what someone's earning. If someone's earning $50,000 and has a working life expectancy of 20 more years to look after paying the mortgage for his family, to look after sending his kids through university, 20 years times $50,000 comes out to about $1 million. If you commute that to present-day value, it's probably $600,000. You're going to pay $200,000. There's a $400,000 loss from this brilliant plan you have. Correct?

Mr Tully: This is not correct.

Mr Harnick: You're going to give someone $200,000 for a $600,000 loss.

Mr Tully: This is not correct in the generality of situations. There may be a situation where someone doesn't have any other protection which people do have against death.

Mr Harnick: Are you telling me that this plan is all based upon people having other protection?

Mr Tully: No, I'm not.

Mr Harnick: That's what you just said: The beauty of this plan is that we have to have other protection to protect ourselves.

Mr Tully: The reality is not the kind of situation which you're describing.

Mr Harnick: Let me ask Mr Endicott a question. How can an insured person be expected to understand these regulations? The regulations in fact are in the standard form policy. When I go out to buy my policy, my insurance agent hands me the policy and says, "There it is; it's all there." How is any individual who is buying insurance today expected to understand what's in that policy, those 68 pages of regulations? How can an insured person who obtains an insurance policy ever expect to understand that?

Mr Eric Endicott: I would suggest first of all that if you look at the current standard policy, there isn't any basis for understanding that either.

Mr Harnick: So you're pleased about that. You're going to make that a little worse.

Mr Endicott: I am not going to do anything. I should say that, like everything else, there will be a number of different forms of consumer information that will simplify and explain the nature of the benefits.

The reason the regulation is so complex is because it is attempting to deal with a number of special circumstances in a clearly defined way so that when people have disputes they actually understand what exactly their rights are. In fact, the philosophy of the regulation is precisely to see what people can get as opposed to a system where people do not know what they get, which is what the recovery is when it's in tort.

Mr Harnick: Terrific.

The Chair: Mr Owens.

Mr Harnick: I have one more very brief question.

The Chair: I'm sorry. Mr Owens.

Mr Owens: Thank you, Chair. I'll yield my time to Mr Ward.

Mr Ward: I'd like to thank you for coming out this morning and undertaking to give us a technical briefing as well as answer some very pertinent questions that are on the minds of the committee members here today.

I would like to focus a little on the costs of Bill 164 as well. But before I do, I think it's fair to say that our government has tried to strike a balance when it comes to the auto insurance system in Ontario, where there are adequate or decent benefits for victims of motor vehicle accidents as well as keeping a lid on the insurance premium costs that all drivers face. We think we've struck that balance with Bill 164.

Some of the questions have related to the differences of the perceived costs of Bill 164 in reference to the Mercer report, which the government commissioned in relation to Wyatt, as well as Coopers. My understanding is that the representative from Mercer did not really have a chance to peruse the Coopers report that State Farm had commissioned. That says in essence that costs may go up by 20% and makes other references to tourism etc. But the Wyatt study, which the Mercer representative has had a chance to review: Did it not also include a percentage that suggested the feeling that insurance premiums currently are undervalued or underpriced, and that they had written in a percentage of the overall cost to include that underpricing? Was that not part of their overall costing?

Mr Khury: If I may, I think you're talking about what the Wyatt report indicates is the current rate shortage, the inadequacy in the existing rates. We have tried to understand that because, first of all, in our study we made no such attempt to evaluate the current rate adequacy in the marketplace. Our effort was trying to understand why the absolute numbers of the Wyatt study were so much higher than ours.

We were able to trace a number of factors in that, and there are really two large ones that I'll share with you. One is the effect of the recession on insurance statistics. Our report fully reflected the anticipated effects of the recession on the rates of accidents. To the best of our knowledge, we cannot find an equivalent reflection, at least in terms of degree, of the effects of the recession in terms of the cost of insurance. In fact, since the time our report came out, additional insurance statistics have become available where the original judgement we had made on accident rates has been more than confirmed. It indicates, in fact, that we should have gone even deeper in recognizing the recession. So this is probably the largest single area.

The second-largest reason, we believe, for the inadequacy that Wyatt points to is the jumping-off point; that is, the level of loss cost that is assumed in the Wyatt study. These are the tort-based numbers from which Wyatt goes forward to create Bill 164 costs.

The Chair: Five minutes left.

Mr Khury: Those figures are substantially higher -- the jumping-off point -- than the figures that we have used, and it reflects fully the results of the most recent experience, which in fact includes some aberrations. There are some unusual things in the data which, frankly, we cannot explain, have been unable to explain. That is taken at full face. We have discounted that somewhat, a little bit.

So those are the two largest reasons. There are others. If you would like to take time on those right now, I'd be happy to get into them, but those are two of the larger issues.

Mr Ward: Mr Tully, the minister recently announced the creation of a task force to look at rehab and long-term care. I believe there are representatives from the industry and consumers on this task force. The intent is to look at cost control; in fact, maybe even to reduce the long-term costs. If this task force makes appropriate recommendations looking at costs, may not the 4.5% that Mercer has said Bill 164 may end up costing the insurance industry in fact be even lower, depending on what this task force finds?

Mr Tully: The role of that task force is to assess the need for and kinds of appropriate standards and guidelines to be put in place to, on the one hand, ensure that the seriously injured accident victim has access to all the rehabilitation services he requires for maximum restitution, and, at the same time, put in place controls that will effectively limit abuse of that kind of system and make sure that those costs are used where they have maximum value.

As we've gone through the discussion here, obviously one of the big areas of disagreement that exists between the Mercer people and the Wyatt people and others who have looked at potential costs is what will happen; not whether or not the cap is a good thing, because I think everyone would agree that adequate care for the long-term disabled is the objective, but ensuring that that is not something that has significant impact on the consumer, that there be a balance there.


The task force has the objective of bridging the gap between what Mercer has assumed in its costing can be achieved in a reasonable environment and, I might say, what Wyatt has probably assumed, which is what might happen if we were in a situation which was abusive of access to those kinds of services. The task force will put in the kinds of standards and guidelines that will ensure that there is cost control, without using the artificial measure of the $500,000 cap, which quite obviously was imbalanced or discriminatory towards the most seriously injured, who need that kind of --

Mr Ward: Finally, to the Mercer representatives, looking at the résumés included in the background, you're not fly-by-nighters. You have a wealth of experience in the insurance industry and costing. What's the difference between loss cost and premiums?

Mr Khury: I could define loss cost by example, which is easiest. At the end of a year, you take all the amounts that were paid for claims and you divide them by the number of cars on the road. That's the loss cost: cost per car. You take all the claims and you divide them by the number of cars.

The premium is what an insurance company would charge an individual for an individual automobile insured. Usually, there's a relationship between those two.

Mr Ward: Usually.

Mr Khury: Usually there's a relationship, because the price that is charged by an insurance company does not have to follow the actuarial indication. In fact, in my 25 years of experience, I can tell you categorically that generally the actuarial indication is a point that is used for an insurance company to arrive at its costs. Then business judgements get in, as to what it is they're trying to accomplish by being in the marketplace. That includes: What are our competitors doing? What is our objective in the marketplace etc? There's a whole complex of business decisions that get in. So the loss cost is an abstract quantity. The premium is a business --

Mr Ward: Decision.

Mr Khury: A business decision, right.

Mr Ward: Mr Chairman, do I have any more time?

The Chair: Yes, you do, another five minutes. I was mistaken: You actually had 10 minutes.

Mr Ward: I thought, "Gee, I know I talk a lot, but not that much."

Again, to Mercer, I'd like to continue to focus on the cost of the actuarial study you conducted for the government. You mentioned, I believe in an answer or in your opening presentation, that you used some data from Quebec. Why did you include that data, or how did you use it?

Mr Khury: I'm just trying to frame the answer to this. Actually, I need to point out right away that by far and away the main source of data that were used in our study are Ontario data. It was part of our work to ask, what else is relevant that can be brought to the situation? What can be brought in from anywhere that can illuminate the answer to the question? Because, frankly, all of us are staring in the dark trying to bring a little candle to see what this might do. So first of all, the main source of data was Ontario-based. We looked at lots of jurisdictions, as I indicated earlier; one of them was Quebec.

So to get back to your specific question right now, one of the disadvantages of the general actuarial methodology in a situation like we have here, where you really don't have any statistics that are directly derived from a similar environment that you could impute to, you have to look at all you can get. So we used Ontario data to the maximum extent we can, then we looked at Quebec to see what elements of the Quebec experience can illuminate the answer we arrived at by just using Ontario experience.

There were three specific elements we used. I'd like to point to them. One, we used the Quebec experience to derive a table of disability durations: How long disabilities can be expected to last and how they are distributed because of auto injuries, because of auto accidents.

Second, we used a small element of Quebec's long-term trend for the income disability and medical and rehab data, because that is predominantly a first-party, no-fault system.

Finally, we incorporated some element of Quebec's loss experience itself, adjusted for Ontario demographics: wage scales and injury rates. Let me comment just a couple more sentences on this and I will stop.

The reason we used the Quebec disability duration table was that that's the only one we can find in North America that is done in a predominantly and pure no-fault environment. It was very helpful to us. May I quickly point out that that table was also one that Wyatt built on in conducting its study. That is a perfectly acceptable practice. The second item, the use of long-term trends: The reason we did that is that when you look at the long-term trends of insurance in general and long-term trends in a pure no-fault environment, we have found in the Quebec experience that there is a vast difference, over a long number of years, in what the rates of increase are. We tried to explain that difference. We reconciled some of it, but some part of it just remained unexplained. We therefore concluded that there must be something else that happens in the system when you go to a predominantly no-fault system, and we had to recognize some part of that. We took a small part of that trend and reflected it into our work.

The third and final element, the elements of Quebec's loss cost that we actually reflected: This is basically to try to overcome the advantage of building the Bill 164 costs based solely on tort-based data. There's a fundamental disadvantage but that's all that's available, so we used that to try to water down that disadvantage.

All of these together, if you take them all together, really do not change our answer to the point that it would blow it out of the water. It would make 1% or 2% difference in the answer.

The Chair: Time has run out. I'd like to thank you for appearing before the committee.

Mr Tilson: Before you thank them and ask them to leave, as Mr Tully was speaking, I wrote down approximately nine questions I had for him. My questions consisted of one two-part question to Mr Khury, and Mr Harnick asked a couple of questions in the same area. My point is, Mr Chairman, that the amount of time that's been allowed the committee to ask questions of clarification of the staff who have been preparing the regulations, the regulations alone, has been completely inadequate. I'm not critical of you; I know you're doing --

The Chair: Mr Tilson, is it possible that you can put this down on paper? The clerk will make sure that Mr Tully gets it, and all members of the committee.

Mr Tilson: Mr Chairman, I'm telling you orally that the process that has been devised is terrible. I don't know whether it's because insufficient time has been provided by the NDP. I suspect that's it.

Mr Paul Klopp (Huron): Mr Chair, if we could move on here --

Mr Tilson: Mr Chairman, my point is that surely this committee is prepared to allow more time to ask questions of particularly Mr Tully, who spoke for almost an hour, and very few questions have been directed to the many points Mr Tully has raised.

The Chair: Mr Tilson, in my record here it shows from 10 to 12. I know that in subcommittee it was thrown around that it would be 20 minutes for each caucus. It wasn't printed out. I had asked Mr Tully and his staff to shorten up so we had enough for question period. If you have more questions, address them to the clerk, who will address them to Mr Tully, and we will have those answers back, and any other questions you didn't think of today, and we'll put them through so you've got them back before we get into clause-by-clause.

Mr Tilson: Mr Chair, I'm not being critical of you, but that's not the way to run a committee. I'm just shocked that this is the process, that questions are being asked of this committee --

The Chair: Mr Owens.

Mr Owens: Mr Chair, I find it passing strange that once again --

Mr Tilson: Surely one's got the floor --

The Chair: One at a time. I've got two ears but --

Mr Owens: Just a second. I have the floor.

Mr Tilson: No, you don't have the floor.

Mr Owens: Excuse me; the Chair recognized me.

The Chair: I'm going to recognize Mr Owens for a comeback.

Mr Tilson: A comeback? I haven't finished.

The Chair: I thought you were done.

Mr Dadamo: How much time do you want, David?

Mr Tilson: I'm simply saying that I want to be able to ask these people more than one question. Mr Harnick asked about half a question.

Mr Dadamo: Then that's it. Get to the point.

Mr Phillips: Can they come back?

The Chair: Let's see what we've got on our schedule: a subcommittee at 4 o'clock. Let's discuss it then. I know these people are looking to go for lunch also, just like the rest of the members of the committee. I'd like to thank you for coming, and possibly you'll get a written invitation to come back again. Thank you.

We're recessed until 1 o'clock sharp.

The committee recessed at 1209.


The committee resumed at 1301.

The Chair: Okay, could everybody take their seats please, it being 1 o'clock. We're discussing Bill 164, An Act to amend the Insurance Act and certain other Acts in respect of Automobile Insurance and other Insurance Matters. This afternoon we'll start off with the Honourable Brian Charlton, Minister of Financial Institutions. He'll be on for one half-hour, from 1 to 1:30. At 1:30 Mr Remo Mancini will have from 1:30 to 1:40 and 1:40 to 1:50 will be David Tilson. Those are the subcommittee members, but anyone else in their caucus can ask questions. We'll have a 10-minute recess, and at 2 o'clock the Insurance Bureau of Canada will be coming on. We're going to try to keep on schedule. We're on schedule now. Mr Minister, the floor is yours.


Hon Brian A. Charlton (Minister of Financial Institutions): Thank you very much, Mr Chair. It's good to be here. I guess I'd like to welcome all of you to the opening of public hearings on the Insurance Statute Law Amendment Act, 1993, the government's auto insurance reform legislation. I have a few initial comments that I hope will give some context to these discussions.

First, some general thoughts about Bill 164, how it was developed and what we believe it will achieve. More detailed background on the work that led to the proposed legislation is outlined in a booklet I released a couple of weeks ago. It's called Considerations in Reforming Accident Compensation: Toward a Fair and Balanced Automobile Insurance System.

The problems Bill 164 addresses go back a long way in this province. They won't all disappear overnight. Neither are there perfect solutions in an imperfect world. That said, Bill 164 is a huge step in the right direction. It will deliver major, immediate improvements, and it also provides continuing reform.

Bill 164 will give Ontario motorists fairer, more accessible, more comprehensive auto insurance, and at affordable rates. Simply put, the reforms I have put forward will mean better insurance coverage for everyone. In fact, these reforms will provide the best auto insurance currently possible.

No system can please all of the critics because the ends of the spectrum are just too far apart for that. There are some who believe that we should go back to the old uncontrolled litigation days. That would be a disaster for both consumers and accident victims. Earlier this month, we released an efficiency comparison of various insurance systems. That study estimated that under a pure tort-based system less than 70% of total claims dollars would end up in the pockets of the claimant. Under a pure no-fault system, this figure increases to over 90%.

Unrestricted access to the courts contributed to spiralling premiums in the 1980s. Ontarians can't afford that again. Our actuaries estimate that the old tort system would cost consumers 23% more on the average policy, about $200, than what is proposed in Bill 164, and that's with only token accident benefits. In a litigation system, settlements can take years. Sometimes victims get nothing, and too much of the premium dollar goes to support the legal system rather than helping people injured in accidents.

The government itself has had to accept some compromise between the ideal and the feasible. Our first choice was a publicly owned insurance system. We still believe in public auto, but the startup cost, in both jobs and dollars, carried too high a pricetag in a depressed economy.

What we are proposing to do through Bill 164 is eliminate the injustices of the OMPP within the existing private delivery system. We believe that unacceptable compromises were made in the development of the OMPP, compromises at the expense of injured accident victims. Fairness and equity were sacrificed to provide insurer profitability and temporary premium relief.

Some aspects of that system were laudable, but it is now clear to us that the structure of the OMPP is not capable of providing a fair, equitable and affordable insurance system. It's not simply a matter of minor adjustments to the accident benefit schedule or the fine-tuning of the threshold; changes of this kind would have far-reaching cost implications.

We went back to the drawing board and found ways to address many of the outstanding inadequacies of the OMPP and to honour our commitment to fair, accessible and affordable insurance. Our reforms to personal injury compensation involved making choices between conflicting values. The new plan proposed in Bill 164 reflects compromises between the objectives of the court-based system and those of the no-fault approach. I believe that we have successfully reconciled the competing objectives by drawing on the best features and important values of the structured benefit and tort systems.

Overall, when the facts of Bill 164 are laid out, we find support for its balanced approach, but that hasn't stemmed the public debate, even though most drivers may not understand what all the fuss is about. People usually don't become aware of the need for insurance reform until they've had an accident. Then they find that they're left out, that they won't get the help they need for economic, physical or psychological recovery. By then, of course, it's too late. Many of the stories I've heard like this are extremely tragic.

Reforms are necessary. Most of us in Ontario rely on automobiles in our daily lives. Auto insurance is a normal part of this reliance. Few of us could afford the economic aftermath of an accident without it. Compulsory auto insurance protects us if we are victims of auto accidents. That's as it should be. But when government delivers a captive consumer to the private sector and when the potential risks of that transaction are catastrophic, government has an obligation to protect that consumer.

Claims costs soared through the 1980s, resulting in a decade of spiralling premium prices. For many drivers, coverage was hard to get at any price. Wide access to a costly and inefficient adversarial court system added to the costs, but didn't deliver fair or universal compensation in return.

The Liberal government responded with the Ontario motorist protection plan, and that's the system motorists are burdened with today, a no-fault plan which provides inadequate accident benefits to those most seriously injured and insufficient recognition of the suffering of those not at fault in traffic accidents.

About the only good thing to be said about the OMPP is that it temporarily curbed the rate of premium escalation that characterized the 1980s. But it was a shortsighted, stopgap solution to soaring insurance prices. Consumers may have saved something on their insurance premiums, but they have paid dearly in other ways. Insurers enjoyed a $1-billion turnaround in profits while huge gaps remained in the OMPP. Worst of all, the insurers are now telling us that the OMPP provided only a one-time fix to soaring prices. They say they still need double-digit increases in premiums just to keep pace with OMPP costs.

The scheme simply ignores the insurance needs of many people. It severely limits court access for many with serious injuries. Accident benefits are inadequate and too often fall short of required income protection. Price stability was a fleeting phenomenon. The OMPP provides only limited recognition of the special circumstances of the recently unemployed, students, care givers and the self-employed.

Benefits are not indexed. As a result, people with long-term injuries see month-to-month erosion of compensation that wasn't enough to begin with. Unrealistic caps on rehabilitation and long-term care mean permanently disabled people may not get the benefits they need.


The ability to recover for pain and suffering through the tort system is very limited, discriminatory and uncertain. One court has held that only near-catastrophic injuries qualify. The OMPP unfairly prohibits suing for psychological injuries, no matter how devastating. Only serious permanent physical injuries are recognized for purposes of tort compensation. The result is that the OMPP threshold denies access to suing to an estimated 94% -- and some would say even greater than that -- of those who had the right to sue before the OMPP.

All of that sounds like bargain basement coverage, but consumers aren't paying bargain basement prices. In fact, this minimal coverage is often unjustifiably expensive. Too many drivers have been unfairly and arbitrarily placed in the Facility Association.

Discriminatory rate classifications do not place sufficient weight on actual driving performance. Making matters worse, there's little consistency among dozens of classification systems, so drivers have difficulty shopping around for the best price available.

Overall, the system is not consumer-friendly. In addition to the confusing classification systems, drivers don't get the simple consumer information that they need, and there is little help for consumers attempting to resolve disputes. The OMPP paid only lipservice to safety, and didn't promote industry investment in safety either. The OMPP has not provided the answers it promised.

Bill 164 offers a welcome alternative. It's an innovative approach that will achieve the goal of ready access to fair and reasonable compensation for everyone, along with special recognition of pain and suffering of those who are seriously injured as a result of the negligence of others.

The new plan combines the best features of structured, automatic accident benefits and court-based compensation. It's a unique model which draws on the best of both systems, and at an affordable price.

The improved automatic accident benefits are the most generous and equitable in Canada and they eliminate the need to sue for economic losses. Access to the courts will be reserved for non-economic losses, which courts are best able to assess. Everyone stands to gain from these improvements which are designed to close the gaps in the OMPP and guarantee enhanced protection for all accident victims.

The motor vehicle is an essential part of our way of life in Ontario. A momentary lapse in judgement or attention can have catastrophic results. Auto insurance is compulsory and all drivers pay premiums as a mechanism of sharing significant financial risks. In such a system there is an obligation on government to look after the economic needs of anyone who might be injured in a motor vehicle accident, regardless of fault.

We are convinced that where compensation for fundamental economic losses is concerned, structured accident benefits provide the most compassionate and equitable response.

Automatic benefits provide reliable and equitable recovery for economic losses, unlike the court-based system, which involves high costs and lengthy delays. Compensation through the tort system is uncertain, dependent upon many things like the skill of the accident victim's lawyer, the adequacy of the other party's liability coverage and difficult assumptions which must be made about the future in determining a tort award. This can result in overcompensation for the few successful tort claimants and undercompensation for far too many others, inequities which are simply unacceptable.

Early access to compensation means that rehabilitation and recovery can begin immediately. This allows injured persons to return more quickly to productive and full lives. This in turn contains costs.

Structured benefits also mean that compensation is fair. Everyone's economic loss is compensated on the same basis.

Let me highlight some of the accident benefit improvements we are proposing:

-- Income replacement benefits will be indexed to inflation.

-- The ceiling on income replacement benefits will increase from the present $600 a week to $1,000 a week.

-- We are eliminating the lifetime caps on attendant care, rehabilitation and supplementary medical care expenses.

-- Death and funeral benefits for spouses of deceased accident victims will be improved.

-- For the first time, the earning potential of persons not yet in the labour force or temporarily outside it will be recognized, and that's especially important for students, care givers and the unemployed.

-- The plan also will better recognize the special income situations of the self-employed.

-- Injured students will receive lump-sum payments and, in the event of a permanent debilitating injury, an indexed weekly benefit for life. Those temporarily not employed at the time of the accident -- care givers who intend to return to the workforce, for example -- will receive an indexed income replacement benefit based on their employment history.

-- People who are self-employed will be able to purchase pre-determined income replacement to meet their special needs. As well, rules of determining income will be clarified.

Indexation of benefits and removal of caps on medical and rehabilitation expenses will better address the long-term needs of those with serious injuries by protecting against the erosion of their benefits over time. People with disabilities as a result of an auto accident will have appropriate access to attendant care benefits and rehabilitation services for life.

In the event of a fatality, a surviving spouse will receive a death benefit up to eight times higher than the current OMPP benefit, up to $200,000. Where there is no surviving spouse, surviving dependants will share the additional award. The funeral expense benefit doubles to a maximum of $6,000, up from $3,000 under the OMPP.

Under Bill 164, 97% of full-time wage earners will receive income benefits that cover their loss of income as compared with only 73% of full-time wage earners covered under OMPP.

Just as important as Bill 164's accident benefit provisions is its wider recognition of fault and recovery for pain and suffering by those seriously injured in auto accidents as the result of the negligence of others.

Pain and suffering are individual, intangible and difficult to define. Since such losses vary considerably from one person to the next, they are not well suited to compensation based on a fixed schedule of benefits. The more appropriate forum for addressing these special losses is the court system, which has well-established principles for determining fault, assessing pain and suffering and providing guidance in settling claims. And where the settlement process fails, people deserve their day in court.

Our reforms widen recognition of fault for those situations in which courts can best provide fair compensation. Under Bill 164, people who are seriously injured and can prove someone else was at least partly at fault will have the opportunity to sue for the appropriate compensation for their pain and suffering.

At the same time, less serious claims should be discouraged in the interests of an affordable, efficient insurance system. The OMPP's cumbersome and highly restrictive verbal threshold will be replaced by a $15,000 deductible. This deductible will result in consistent interpretation that doesn't differentiate between types of injury, including those due to psychological injuries, as has been the case with the OMPP.

Although access to the courts will be available, we expect most cases to settle through negotiation. There will be no need to argue over whether the injury meets a defined threshold. This change will allow three times as many people to recover damages, more than 15,000 annually as compared with 5,000 under OMPP. Reserving court action for assessment of significant non-economic loss will keep more money in the system to pay for enhanced benefits for everyone.

As I indicated earlier, we are not attempting an overnight fix for the complex and long-standing problems of auto insurance in Ontario. Some improvements will be swift -- enhanced accident benefits, for example. Other ongoing reforms will be carefully phased in to maintain market stability.

Continuing improvements will come, in part, from the regulatory change that will be provided for in Bill 164. Others will result from government working with the insurance industry and other interest groups in support of positive action to meet consumer needs.


We were pleased to announce just last week the appointment of a task force to develop standards for cost control of rehabilitation in long-term care. The work of this task force will be to ensure predictability and certainty in the setting of premium rates by recommending standards which are sensitive to both the concerns about costs and the need for appropriate rehabilitation services.

The task force includes representatives of the insurance companies, consumers, rehabilitation specialists, accident victims and the government. It is an initiative which demonstrates our commitment to a consultative process in finalizing and implementing our reforms.

The government plans to encourage a number of specific improvements beyond those specifically legislated through Bill 164. These improvements include enhanced consumer service; clearer, customer-friendly language in insurance policies and consumer information; development of consumer-advocacy mechanisms; a support system to help people involved in disputes with insurers and new rules to protect claimants in such disputes.

The government will also insist on uniform, non-discriminatory classifications of drivers for premium-rating purposes. Not only are there too many classification systems now; they promote discriminatory treatment based on age, sex and marital status. As well, consumers can't compare products based on varying definitions and rating factors. The resulting confusion encourages arbitrary rate setting.

Working with the industry, we will introduce a new system that will remove age, sex and marital status as rate-setting criteria. Instead, it will promote common, clear definitions and universal rating factors that emphasize driver experience and driver behaviour. Increased risk to the system should be recognized through higher premiums, but such penalties must be based on driver conduct, rather than characteristics like age or gender.

Reasonably priced insurance must also become more widely accessible. In the past thousands of good drivers have been forced to pay high rates in the Facility Association, and unfair classifications have had a lot to do with that.

Facility Association reached a peak of 267,000, 8% of all policies, up from 2% in 1987. Intended as an insurer of last resort, Facility became Ontario's largest insurer when you measure it by premiums. We are working closely with the industry to depopulate the Facility Association. Insurers recognize that the FA is often unfair. In cooperation with government, the industry began more than a year ago to reduce the number of drivers assigned to Facility. More than 60,000 policies have been removed.

But the process has to be accelerated. Our goal is to see that every good driver in Ontario is removed from the FA and has access to auto insurance at market rates. After extensive consultation, new rules have been implemented by the industry. As a result, we expect more than half of all drivers currently assigned to the FA to be able to return to the regular market. At the same time, the industry has developed a new risk-pooling mechanism to ensure that the normal market is able to deal with higher risks that don't meet the new FA guidelines.

Road safety and accident prevention is another priority of our reform program. Far too many people are being injured in auto accidents. Accidents now cost taxpayers about $4 billion a year. Where insurance is concerned, the high level of accidents leads directly to high claims costs and to high premiums.

Our reform strategy will link automobile insurance with road safety in order to save lives and reduce costs. The Minister of Transportation tabled a bill last June to establish the Ontario Road Safety Corp. The corporation will develop new incentives for safe driving, promote safety education and driver improvement programs, coordinate public education and safety campaigns, and encourage partnerships and information linkages with the private sector and other groups.

In closing, I'd like to take a few moments to address the issue of price and, in particular, criticisms that warn of major premium increases resulting from auto insurance reforms. We have not been impressed with the calibre of research. The most recent of these, the Wyatt study for the Insurance Bureau of Canada, does nothing to change my view that significant premium increases will not result from our reforms.

Cost estimates of an insurance product are necessarily based on speculation about the future. We have not had much experience with the costs of no-fault in Ontario, and therefore it's pretty easy to find room for debate. I believe the IBC report distorts the impact of the proposed reforms with assumptions that particularly skew the results, including high rates of disability duration and unreasonable projections regarding additional medical and rehabilitation costs and the costs of renovations.

Based on examination of jurisdictions with considerable experience with no-fault auto insurance benefits, our actuaries have a different view. The fact is that Bill 164 will mean better insurance coverage without forcing significant additional costs on consumers. The unprecedented profit performance of the past two years indicates to me that the insurance companies are well positioned to deal with the additional costs of these reforms.

We have designed the reforms to achieve a balance: cost savings in administration and in other areas to allow benefit improvements. On the other hand, the path proposed by many critics of Bill 164 would result in substantial premium increases. The Bill 164 reform package strikes the right balance between fair and reasonable benefits for accident victims and affordable premiums for consumers. We are committed to both fairness and affordability.

We've consulted with representatives of the industry, lawyers, consumers and advocates for accident victims. We've proposed appropriate changes to the bill and its regulations as a result of those consultations.

The public hearings and committee reviews we begin today continue the consultation process, and the government will continue to refine its reform program in keeping with any worthwhile and workable suggestions brought forward.

The reforms proposed in Bill 164 will:

-- Introduce enriched benefits, at an affordable price, for everyone injured in automobile accidents.

-- Expand access to the courts for accident victims seeking compensation for their pain and suffering.

-- Ensure affordable and stable premiums.

-- Enable the implementation of a non-discriminatory, industry-wide system for classifying drivers.

-- Guarantee wider access to insurance coverage.

Mr Kwinter: Minister, I noticed on page 2 that you say, "Our first choice was a publicly owned insurance system."

Mr Mancini: Mr Chairman, what are we doing?

The Chair: I'm sorry, but he put his hand up earlier.

Mr Mancini: No, I want to know the procedure here. What are we doing at this moment?

The Chair: Responses.

Mr Mancini: You mean this is part of my critic's time, the 10 minutes?

The Chair: Yes, it is. Okay? It's between your caucus. Tell Mr Kwinter that you want the time.

Mr Tilson: The clocks are running too.

The Chair: Yes. It's up to you. You've got 10 minutes to share.

Mr Kwinter: Go ahead.

Mr Mancini: I am pleased to have the opportunity to present the views of the Liberal caucus on Bill 164, a bill that will raise the costs of car insurance for the average person in Ontario, a point the minister tries to downplay at every turn. This bill will thoroughly and unnecessarily disrupt the insurance industry. It is yet another NDP anti-business initiative. This bill continues to expose the NDP bias against the private insurance sector, and the end result will be increased rates for Ontario's drivers.

In the mid-1980s, rising insurance claims led to rapidly escalating car insurance costs in Ontario. People were upset about high insurance rates. They called Queen's Park, and the Liberal government listened to their concerns and responded with necessary action. The NDP members opposite will recall that Bob Rae opposed the Liberal government's action to protect people from higher rates. The NDP made outrageous promises and has broken every one of them since the election. Bob Rae's response to any broken promise is to say, "Well, that was then and this is now."


None the less, the Liberal government passed the Ontario motorist protection plan. This plan brought greater fairness and stability to the marketplace and ensured the best possible protection for consumers at the best possible price. It kept auto insurance rates affordable and struck a balance between comprehensive protection for insured victims and keeping costs down. This progressive reform undertaken by the Liberal government of the day preserved fair access to the courts by allowing injured accident victims to sue for loss of income, something the minister has taken away. This Liberal legislation is fair and has stood the test of time.

The NDP ran an election campaign on the promise to create a government-owned automobile insurance system, but the NDP forgot to tell the people of Ontario during the 1990 election that it was going to cost nearly $2 billion for the government to take over the insurance industry and that more than 12,000 jobs would be disrupted.

Mr Owens: You forgot to tell the people --

Mr Mancini: Maybe your job is not disrupted at the present time, Mr Owens, but there's the possibility that many thousands of people will have their jobs disrupted.

The Chair: Mr Owens, you'll have your chance later on.

Mr Mancini: Thank you, Mr Chairman. After the election, Bob Rae, the man of broken promises, dropped the idea of government-owned auto insurance, a cornerstone of the NDP election platform. He said it would cost too much money and too many jobs. Guess what? Studies conducted by the previous Liberal government had already come to that conclusion about government-owned automobile insurance. By backing away from his promise, by flip-flopping on automobile insurance, Bob Rae and his government started, and continue, a trend of broken promises.

Bob Rae and the NDP, in order to save political face, have introduced Bill 164. This bill is a complete reversal of everything the minister and the NDP stood for. But who needs a place to stand when you don't know what you stand for? Far from restoring the right to sue, which the --


Mr Mancini: Mr Chairman, can we have order?

The Chair: Yes. If you want to make comments, I'll ask you to be removed from the room.

Mr Kormos: I didn't mind the interruption.

Mr Mancini: Far from restoring the full right to sue, which the NDP promised, this bill will actually eliminate the right of accident victims to sue for loss of income, a point the minister just sloughs off. This bill will cause insurance costs and rates to go up, perhaps as high as 20%, Mr Minister, or more than $200 per vehicle. This, by the way, is the opposite of what the minister promised when he first introduced the bill in December 1991. Who knows what the minister will say tomorrow, the next day or the next? The NDP just wants to be able to say that it has done something about auto insurance. Well, they are doing something; they are raising your insurance rates.

As you know, I have been a member of this assembly for more than 17 years, and in that time I've seen many members come and go. I've learned to respect those who believed in what they said, like Mel Swart, who served in this assembly for more than 13 years. Mr Swart, the NDP member for Welland-Thorold, was a hard-working, dedicated member and an advocate of government-owned auto insurance. His commitment to that issue has never wavered. While I respect Mr Swart for his honesty, I don't agree with his ideas or policy. However, with Mel Swart what you see is what you get. Unfortunately, this is no longer the case with Bob Rae and the NDP. What you see today is not what you get tomorrow. That's the problem. No one knows where the NDP stands on this issue or many others.

With auto insurance, the NDP is changing a system that doesn't need to be changed and wasting precious resources in the process. It is causing further disruption to consumers and providers and is forcing the entire industry to retool for the second time in three years. That costs money, Mr Minister, and these costs will be passed on to the consumer, thanks to your legislation.

Do you remember what the NDP did in its first budget? They imposed a 3% tax on all auto insurance rates. With this tax, they made every consumer pay more for their insurance rates while at the same time saying that rates should go down. What hypocrisy. Average people in Windsor, Kingston, Ottawa, Sudbury and elsewhere in Ontario can't afford to pay more for their insurance. They are already paying enough.

This bill and its accompanying regulations will cause car insurance rates to increase. There's no doubt about that. Even the government's own study proves that. The only question left is by how much.

The minister says the rates will go up 4% or 5%. Others say the rates are going to go up significantly higher, and I remind the minister that when he introduced the bill, he said this would not cause rates to go up at all. That's what the minister said at the time. Now it's only 4% or 5%, maybe.

The government study is based on unrealistic and flawed assumptions. It relies on data from Quebec which doesn't work in Ontario, and it assumes the existence of road safety initiatives which aren't in place yet. This report, I say to the minister, is baloney.

The minister should review the three other actuarial reports that have been prepared right here in Ontario. They clearly show the possibility of insurance rates rising by between 12% and 20%. This could mean an increase of up to $200 per vehicle per year, money that people just don't have. Average people in Ontario simply can't pay more. Maybe NDP ministers can pay more, but the average person cannot.

The Liberal party is also concerned because the regulations that accompany this bill are so complex that one will need to hire a Philadelphia lawyer to figure out exactly what they're entitled to.

Mr Kormos: Would you settle for a Welland lawyer?


Mr Mancini: Even the lawyers from Welland can't understand the legislation.

Mr Kormos: We've got some good lawyers down there, Remo.

Mr Mancini: The NDP government has taken the 18-page, user-friendly regulations approved by the past government and you've turned it into an incomprehensible 68-page document which is a bureaucrat's dream and a consumer's nightmare. The NDP is creating a new Workers' Compensation Board.

If this government is really determined to reduce insurance costs, it should stop messing up the insurance system and make a genuine effort towards road safety. Despite all its rhetoric, this government has done nothing to promote road safety.

Liberals believe this is bad legislation. It will drive up insurance costs. It will eliminate the right to sue for economic loss. It will needlessly disrupt the insurance industry. It is another NDP anti-business initiative.

We cannot support Bill 164. The NDP government made a mistake in promising government-owned auto insurance, and this bill, Bill 164, is another mistake. Average people across Ontario and accident victims will be forced to pay for these NDP mistakes.

We here in Ontario are in the middle of a long and devastating recession. We have record unemployment, record plant closures, record disinvestment, record deficits. With all these major issues the NDP government is facing, what does it turn its attention to? The insurance industry. Why? For ideological reasons. And the result? Increased costs of up to $200, taken out of the Ontario family's already tight budget.

Let me put these costs in perspective. In the recent past, the government has said it had no money to give to hospitals because taxpayers couldn't pay any more.


The Chair: Is it very short?

Mr Mancini: It's very short, but very important.

The Chair: Okay.

Mr Mancini: The government said it had no money to give to hospitals because taxpayers couldn't pay any more. If the government is correct and insurance rates only go up by the minister's assumption of 4% or 5%, that means Ontario drivers will pay $158 million per year more for insurance, while the last time hospitals got any money, all of the hospitals in Ontario only got $140 million.

I say to the government, where are your priorities? Get in touch with the real world. This legislation deserves to be withdrawn.

The Chair: Okay; Mr Tilson.

Mr Tilson: I have a few comments to make as critic for the Progressive Conservative Party. I guess the good news about being here this afternoon and at these hearings is that we're not throwing a bon voyage party for the 25,000 jobs, since the government backed away from its plans for the nationalization of the insurance industry. The bad news is that what we're here for amounts to a promise from this government to take control in the future. Bill 164 is bad legislation. I can put it simply no simpler. This legislation serves no purpose other than for this government to cover its collective political behind for failing to live up to its promise to nationalize the industry.

What is amazing about this government's approach to this legislation is its virtual admission that it does not have any real policy motive for introducing it and that the only reason it is here at all is political. The minister as much as admitted it last June when he was required by law to table an adequacy report on the performance of the existing legislation.

That report was all of one page long and consisted of four paragraphs. In this, the minister claimed that "after extensive consultation, we determined that the schedule must be amended to correct its significant deficiencies," but he did not say whom he had consulted with and he didn't say what those deficiencies were. From what we heard this morning from the administrative staff, I have to wonder whether he bothered at all to consult with anyone other than his political staff or if indeed he knew what the deficiencies were.

Over the past two weeks before this committee began, examination of this bill has commenced. We have been subject to a virtual orgy of action by the minister's office as he attempts to deflect criticism of the bill. He released, first of all, a thesis on insurance which attempts to make a case for change. Secondly, he released an actuarial study which demonstrates absolutely nothing related to this proposal. Thirdly, he proposed amendments to the bill which temper one of the peripheral issues associated with his proposals. Fourthly, the remaining regulations were presented, which demonstrate only the extent to which this legislation will confuse the issue. Finally, he has announced the formation of a task force to discuss the rehabilitation and long-term care benefits.

I have to wonder, when this legislation was introduced over 13 months ago, why all of this activity has occurred only within the last two weeks other than to try and deflect attention away from the examination of the legislation which we are about to undertake.

When the Liberal government introduced the Ontario motorist protection plan, we felt that it too was bad legislation. The reason we felt this was that it sought to change our system of insurance -- which we did not agree with, although others did. It was and is our argument that legislation needlessly deprived consumers of their full legal rights and fell far short of meeting the needs of innocent accident victims. We believe that some of the evidence this committee will hear will demonstrate the specific aspects of OMPP which may be improved upon.

Bill 164, on the other hand, is bad because it is unnecessary and malicious. It claims to improve upon the existing legislation, but that is not true, as I'm sure we will hear from many of our witnesses. The real fact of the matter, which I am confident will be borne out by the testimony of our witnesses, is that this legislation has no support whatsoever. Over the past two weeks, we've seen a flurry of activity from the minister's office as they try to justify their actions. This hasn't worked. We don't buy it and neither does the public.

I'd like to take just a few moments to go over some of the highlights of the bill. I will start with the area which is of most interest to consumers, and that is rates. The minister started off with a claim which he was slow to relinquish, that rates under his plan would go down. Four different reports have since come out to prove him wrong, including one commissioned by the ministry itself. The only difference between the studies is the amount by which the rates will increase. The report commissioned by the government from Mercer, which we heard some comment on this morning, to no surprise shows the lowest level of rate increase, although I must say that some of the assumptions employed by Mercer are highly questionable and do not, I think, fairly represent the current state of either the industry or this legislation.

I'd like to give the committee one example. Mercer assumes that the road safety initiatives promised by this government will result in a 5% decline in accidents, but the government has not even told us what these initiatives will take, let alone introduced them. How can anyone extrapolate from that vague promise a 5% decline in motor vehicle accidents? I don't know.

To add insult to injury, Mercer does not consider the fact that such a decline in accidents would have a beneficial effect on any insurance system, not just under Bill 164. A move to graduated licensing, which is an issue my caucus has been encouraging this government to act upon, would be as effective in reducing costs under OMPP as it would under Bill 164, a fact which Mercer neglects to mention.

The level by which rates will increase varies by reports, as we have seen. The report completed by the Wyatt Co for the Insurance Bureau of Canada calculates a double-digit increase between the current and the proposed schemes. Regardless of how you cut it, no matter which report you look at, rates are going up, and they're going up a lot.

The NDP seems to feel that it can do the same thing to the private sector that it has done to the public sector, and that's drive it into bankruptcy. I have tried to understand this, but I'm afraid I simply cannot. How do you offer more product for less money? It doesn't make any sense. I spent some time with the representatives from Mercer on that this morning.

Bill 164 proposes to remove a number of caps on costs and it also provides indexation for a number of benefits. Now I can understand these amendments, but what I don't understand is that the claim from costs will only be moderately effective. Where do these ideas come from? Perhaps in the testimony that's going to be given to this committee we'll hear from that, but I must confess it's just voodoo. If the minister thinks he can force the industry to increase the benefits under auto insurance while at the same time decreasing costs, he's dreaming, and he's dreaming in Technicolor. Just ask Floyd.

The minister also makes the claim that more individuals will be able to seek compensation from the courts under this scheme, and while this may in part be true in pure numbers, it's really an example of manipulating the public. Under OMPP, with the threshold so ambiguous that it will take years for innocent accident victims to actually receive adequate compensation, those who pass the test are at least allowed to sue for future economic loss, and this is the most significant loss the people of Ontario are being put to. Bill 164 removes this ability while allowing people to sue only for pain and suffering and then withdraws, on top of that, the first $15,000 of that claim.


The Chair: I can't hear the speaker.

Mr Mancini: Throw Mr Owens out. He's been interjecting all afternoon.

The Chair: Go ahead, Mr Tilson.

Mr Tilson: Even the lawyers, whom I hear talking in the background, will agree that the deductible you have implemented in this legislation is fictitious. The judges will quite quickly and simply top off the value of awards by the level of the deductible, so that costs will not decrease for the involved parties and the only effect will be to needlessly discourage innocent accident victims from seeking their full rights under the law. I would even venture that with time, the courts will increase the size of pain and suffering awards to accommodate the removal of economic loss. This serves no one.

This bill does create more work for the lawyers; it certainly does. With the regulations, someone's got to explain all this to people. That's not necessarily to the benefit of the public. As my Liberal counterpart has indicated, under the existing legislation there are 18 pages of regulations. This is an acceptable number for many members of the public to understand, and this is being replaced by 67 pages of confusion which I challenge anyone to understand.

Under the amendments being proposed by Bill 164, it will be necessary --

The Chair: Mr Tilson, can you wind it up there?

Mr Tilson: Yes, I'm very close.

The Chair: I'll give it one minute.

Mr Tilson: Thank you, Mr Chairman. If I keep getting interrupted, I won't have that.

The Chair: That's extra time I gave you.

Mr Tilson: Under the amendments being proposed by Bill 164, it will be necessary for all accident victims to retain a lawyer just to determine what they are supposed to receive under the system. More work for the lawyers, but not of the sort that anyone, themselves included, actually needs.

Last week one of the legal groups that has an interest in this issue released a new proposal for an add-on portion of insurance which would have a tort base. I look forward to hearing the response of the minister to this proposal.

I also look forward to further discussion of this proposal to determine if it really would be of benefit to Ontario consumers. The recession, which has decimated the employment ranks of Ontario, is, according to Statistics Canada, over, but this government seems intent on continuing to erode the economic base of Ontario. In particular, the relevant sections of this bill will effectively destroy the reinsurance market in Ontario. The companies that rely on that market are not the large US patent firms, they are the small Canadian firms. To what purpose?

When OMPP was first introduced, we fought against it, as did this government that's sitting before us. While we still believe that OMPP is flawed, we do not see the purpose in revamping a system which appears to be working and which no one appears to want. We believe that the current system can be amended to better serve the interests of the consumer, but we don't believe that it's necessary to throw out the baby with the bath water. If this piece of legislation is allowed to pass this committee, we'll then have three different schemes of automobile insurance before the courts -- pre-OMPP, OMPP and Bill 164 -- and neither the consumer, the courts, the lawyers nor the industry needs this confusion.

The misdirection of this legislation is being recognized not only by this province but also by insurers outside of Ontario. US insurers have been warned that their existing policies will not provide coverage sufficient enough to protect their clients while travelling in Ontario. As a result, US tourists may be forced to seek additional insurance just to visit Ontario. This does not mean a boom for insurers, this means a bust for the Ontario industry.

The Liberal government foisted --

The Chair: Mr Tilson, I'm sorry. I'm glad you're not paying me, because one minute -- it's a long minute. Perhaps you can make some of your comments in some of the questions coming up. We've got the Insurance Bureau of Canada coming. I know Mr Mancini had about 12 minutes, you've had about 12 minutes and I think I've been overly fair. You know, another thing --

Mr Tilson: Mr Chair, when we originally set these meetings, we were allowed more than that. Somehow the time is being shortened considerably.

The Chair: No, I remember I read it out before we went for lunch and I read it out after lunch, so everybody knew exactly what the time frame was. We recess now until 2 o'clock.

The committee recessed at 1354 and resumed at 1401.


The Chair: Would everybody take their seats. Insurance Bureau of Canada, come forward please. I'd like to welcome you to the standing committee on finance and economic affairs. Today we're taking witnesses on Bill 164, An Act to amend the Insurance Act and certain other Acts in respect of Automobile Insurance and other Insurance Matters.

For the purposes of Hansard, before you begin, if you would identify yourselves, and the clerk will be coming down with a piece of paper to put in front of you so all committee members will know who you are when they come and ask questions later on. It's easier for Hansard also. We have until 2:30. If you can, leave some time for the committee members to ask questions on your brief. If you go 30 minutes, committee members don't have a chance to ask some very important questions.

We'll be starting off with the Conservative Party, then the government and then the Liberals, and we'll keep rotating throughout the rest of the day. We'll start off the next one with the government and go around like that. The time will be equally divided, what's left up until 2:30. You may begin.

Mr Stan Griffin: Good afternoon. My name is Stan Griffin. I'm vice-president for Ontario at the Insurance Bureau of Canada. Thank you for the opportunity to appear before this committee. With me is Brigid Murphy, who's senior vice-president, underwriting, at Guardian Insurance Co, who is here today as a member of the Ontario Auto Insurance Coalition. Also with me is George Cooke, who is president and chief executive officer of Dominion of Canada Insurance Co and is here today as a director of the Insurance Bureau of Canada.

IBC is the major industry association for property and casualty insurers in Canada. More than 80% of all private general insurance business written in Canada is done so by our members. IBC's primary mandate is to represent the interests of its member companies to governments and the insuring public.

Canada's property and casualty insurance industry currently employs about 118,000 people, of whom 47,500, or 40%, work in Ontario. Total industry employment is split about evenly between insurance companies on the one hand and independent agents, brokers and adjusters on the other hand.

Total assets for our industry in Canada were approximately $32 billion in 1991. Current industry investment in the province of Ontario is about $9 billion. In 1991 total premium income in Canada was $14.5 billion, of which $7.3 billion came from business in Ontario. Auto insurance in this province represents 60% of that $7.2 billion.

Through Bill 68, the Ontario motorist protection plan was introduced to this province just two and a half years ago following extensive public review. It has worked well. In general, consumer satisfaction is high. However, the industry has recognized some deficiencies in OMPP and has recommended to government improvements to OMPP. We believe that the fundamental structure of OMPP provides a more stable and predictable pricing environment than that currently proposed in Bill 164.

Bill 68 required a review of OMPP at the two-year period following OMPP introduction. This was to have included a review of cost control, particularly in rehabilitation services, to ensure not only fairness of benefits available but also continued affordability. If appropriate cost controls were in place, this might have allowed for the removal of monetary caps on rehabilitation and medical services currently in the regulation.

These hearings, however, are intended to review the government's proposals to change the auto insurance system in Ontario as set out in The Road Ahead and more specifically in Bill 164 and draft regulations. Effectively, Bill 164 proposes conditions for withdrawal of business, gives authority for risk classification and no-fault compensation to cabinet and establishes conditions for tort access. We note that the minister's extensive consultation with various interested parties over the past months has resulted in some positive changes to the bill and draft regulations as originally proposed.

We will focus our comments on four major areas: the complexity of the Bill 164 proposals, the absence of any road safety initiatives, tort versus no-fault compensation in auto insurance and cost. In general, we believe Bill 164 creates an administrative nightmare, will help lawyers more than accident victims and will cost people too much money.

Brigid, whom I introduced earlier, is senior vice-president at Guardian Insurance Co. She will address the issues of complexity and road safety and George will address the issue of access to tort.

Ms Brigid Murphy: The draft accident benefits regulation is, in our opinion, unnecessarily complex and lengthy. The government's own regulatory body, the Ontario Insurance Commission, estimates it will need 100 more staff and a $5-million increase in its budget to administer the new system. This is an administrative nightmare that will add costs all through the system, not just at the commission. In our opinion, we should look for every opportunity to simplify the system, first of all, to make sure that Ontario drivers are not financing paper-pushing and, just as important, to have a system that can be understood. In our experience, it is virtually impossible to satisfy customers who do not understand what they are buying, what benefits they are entitled to and when.

The draft regulation attempts to address a wide variety of potential losses and to prescribe appropriate compensation. The detailed categorization of benefits in the regulations may create certainty in the minds of those who have drafted the document, but in fact it creates barriers for consumers, claims handlers and adjudicators. If I can use a very simple example, being specific is like saying, "We cover broken arms and broken legs," rather than being more general and saying, "We cover broken bones." In our experience, there will always be situations that could not possibly have been anticipated, so being specific is not the preferred approach.

We believe that the complexity of these regulations will result in an increase in the number of inquiries and findings necessary to process a claim. This increases opportunities for confrontation and frustration for consumers, who of course must pay the increased costs for this process.

While creating barriers for some, the attempt through these regulations to adequately address all possible losses will lead to overcompensation for others. Some claimants will receive more money than they have lost as a result of an injury. This will increase the incidence of "illness behaviour," a condition well documented in medical journals as a major disincentive to rehabilitation and reintegration. We fully support the reintegration benefit approach now included in the draft regulation and the welcome recognition that this is a major component in rehabilitation.

The degree of complexity in the proposed regulation will also mean inconsistency in the payment of benefits to accident victims. The regulation cannot be easily understood, and the best of intentions will not be sufficient to provide equal and consistent access to benefits. Straightforward and timely access with a minimum of red tape and complications are important benefits in themselves and must not be overlooked in the review of this proposal.

No amount of brochures, ad campaigns or other explanatory material can, in our opinion, demystify this complex schedule and help the accident victim or his or her family in understanding exactly what they are entitled to. Spending more money at the commission, at insurance companies or claims adjusters' offices will not eliminate the red tape and the number of confrontations the proposal entails.


Where that money could be well spent is in the area of road safety. People want action to reduce the number of individuals killed and seriously injured in road accidents. Improvements on a number of fronts can and should be made to reduce the frequency and severity of accidents. There is too much carnage on our highways which could be reduced by government action. We need decision and execution, not proposals for shell corporations without mandates. Progress in road safety will result in reduced human suffering, lower medical costs and lower insurance costs.

Drivers who don't wear a seatbelt while travelling on Ontario roads are 16 times more likely to die in a collision than if they were wearing one. Seatbelt use in Ontario, at 81%, is the lowest rate in Canada and far below the compliance rate in Quebec, at 92%, where driver fatalities have been declining for more than a decade. Furthermore, alcohol is involved in close to 40% of all driver fatalities, and half of the convictions for drunk driving involve repeat offenders. Progress can and must be made to promote the use of seatbelts and to reduce drunk driving.

Car accidents are the leading cause of death for men and women under 25 years of age. In particular, the lack of driving experience and training, rather than the age of the drivers, is the most important factor contributing to more frequent and more severe accidents. Accordingly, a program of graduated licensing has been demonstrated to reduce car fatalities by 25% or more. We know that Nova Scotia is about to move forward with legislation in response to our public awareness campaign. Our campaign in Ontario drew overwhelming public support. Still, there has been no action on graduated licensing here. George?

Mr George Cooke: Mr Chairman, members of the committee, I think we can agree that any product, whether it be that proposed in Bill 164, OMPP or any other, involves tradeoffs among the level of compensation, that is, fairness, equity and adequacy; the timeliness of compensation, that is, how quickly payments are received; and affordability, that is, cost. The balancing of compensation, timeliness and affordability is fundamental to the public interest, but at the end of the day people must be able to afford insurance.

It seems clear that at least part of the intent of the amendments in Bill 164 is to allow greater access to tort while at the same time controlling the cost of damage awards. You must decide if Bill 164 achieves either, or an appropriate balance. The industry is opposed to the tort-deductible approach in Bill 164. We believe it is unfair and unaffordable.

To illustrate the significance of the balance between tort and no-fault compensation, the two charts in the package distributed to you may be of assistance. These are the charts that I refer to, if you could find them in your package. They indicate the differences in approach between OMPP and Bill 164 to the compensation for economic loss -- for example, income replacement or medical costs -- and non-economic loss, that is, pain and suffering and loss of amenities of life.

Under OMPP, tort access is determined through a description of injuries. People with permanent and serious physical injuries and the families of those killed in car accidents have access to the courts. Approximately 6% of claimants for compensation for economic and non-economic loss obtain tort access. The threshold remains largely untested by the courts at this time and, as such, the 6% that we use, that Mercer used, that Wyatt used, that government uses, could very easily become 12%, depending on the eventual interpretation by the courts.

For economic loss under OMPP, some 94% of claimants are compensated on a no-fault basis. This 94% of claimants do not suffer injuries sufficient enough to penetrate the verbal threshold and therefore are not compensated for non-economic loss.

The structure proposed by Bill 164 compensates all economic loss on a no-fault basis. The government estimates that Bill 164 will allow tort access for non-economic loss for 18% of claimants after application of the proposed deductible; 82% of claimants receive no compensation for non-economic loss. Others believe that up to 35% of claimants will be permitted to recover non-economic loss under this scheme. In any event, there is great uncertainty. If anything near the 35% penetration turns out to be correct, this product will simply cost too much.

With the changed structure, the real winners are the lawyers and the at-fault claimants who will recover more than under OMPP through higher benefits. The losers are the most seriously injured not-at-fault claimants, who won't recover their full economic or non-economic loss, and the consumer, who will pay more.

What's wrong with the deductible approach? We have a philosophical objection to the notion of applying a deductible to damage awards. Damages for pain and suffering and loss of amenities of life are assessed on very subjective grounds with an attempt to put the victim in the position he or she was in before the injury so far as monetary damages are able to do. The courts intend to be fair, having regard for the scope of the injury. Thus it is inconsistent to immediately deduct $15,000 from an assessment which was set at a level thought to be fair.

A very seriously injured person will now potentially receive less than full compensation. There is no objective set of criteria with a deductible by which the fairness of an award can be judged. The deductible invites inflation of the damage award to ensure that the final result, after deduction, is fair. This will either lead to significant inflation of damage awards for personal injury or it could lead to a situation of unfairness to those most seriously injured and subject to compensation, without the deductible, under OMPP.

The level of monetary deductible is not based on any defined set of criteria. Where did $15,000 come from? It is unlikely to be understood by injured people, who cannot reasonably be expected to translate injury to dollars. We believe that public understanding would be enhanced through a verbal threshold, that is, a description of injuries, which, admittedly not easily understood either, has at least an expressed set of criteria as the standard.

Under Ontario's regional court system we fear that there may be different reactions to the deductible in different regions. In the absence of a common definition to be applied by the courts in all regions, there is a much greater potential for inconsistent damage assessments.

It is not clear how a monetary deductible will be handled in a trial situation either. Judges and lawyers are now permitted to propose a range of damages to juries and it is reasonable to assume that the jury will either be told or will soon understand that there is a deductible to be applied in personal injury awards. While most courts will attempt to apply the spirit of the law, we are concerned that there will be a natural tendency to inflate damage awards, particularly near the margin.

There will also be a strong incentive for claimants and their lawyers to drive damages above the deductible level. This way, the injured party, who by definition has suffered damage, will receive something. But to the extent that settlements are achieved by paying small sums in cases approaching the deductible level, the legal costs will be disproportionately high. The lawyer will have to charge a fee based on the work required to develop a claim worth, say, $20,000 and yet recover the fee out of the $5,000 paid to the plaintiff. The resulting increased insurance premium pays the lawyer, not the claimant.

It is argued by some that the deductible will discourage lawyers from taking on cases which are close to the line and that therefore there will be many claims at or about the deductible level which will not be advanced. This is probably true. The same can be said about the verbal threshold.

However, a deserving accident victim may not receive compensation because the return after the deductible does not justify obtaining expert legal advice. The same situation probably exists with the verbal threshold, although it may be that lawyers will be more prepared to take on marginal threshold cases because success means 100% recovery of legal fees.


Where uncertainty exists, unnecessary transaction costs -- such as legal, adjusting and investigation costs -- increase and consumers will be forced to pay unnecessarily high prices, increased prices. From an insurance perspective, this uncertainty will make it difficult if not impossible to accurately set claim reserves or close files, and so the minister's goals of predictability and stability of prices, which we share, will not be achieved.

The analysis undertaken by Mercer and introduced by the minister demonstrates that under a pure tort environment, some 65% to 70% of claims costs pass through the system to the claimant. Under a pure no-fault system, some 91% of claims costs pass through the system to the claimant. A public policy question you must answer is whether the perceived or actual fairness introduced through a tort remedy is worth the added cost to the system, the increased cost to the consumers and the corresponding reduction in the award to the claimant.

The courts have set a cap on general damage awards of some $240,000, commonly referred to as the "trilogy cap." This trilogy cap is premised on there being full recovery for economic loss. A very serious concern, however, is whether the basis of the $240,000 trilogy cap will hold given the proposed no-fault compensation scheme for economic loss. To the extent that economic loss is not fully compensated, one must expect that the cap on general damages will be removed by the courts. The obvious consequence is an increase in awards and an increase in costs. The affordability of auto insurance is jeopardized. The structure of OMPP does not create a similar problem.

To clarify this situation, the industry strongly recommends that a cap on general damages be legislated. Alternatively, we recommend that the government immediately, while the bill is proceeding through committee, state a case to the Court of Appeal to clarify the court's interpretation of the trilogy cap, given the structure of Bill 164. If the court agrees with the industry's view that the cap is unlikely to be maintained, then there will still be time for an amendment to be made prior to the bill receiving third reading and royal assent. It is our view that a failure to pursue either of these two options is to seriously ignore the responsibility we have to the public to provide affordable yet fair auto insurance.

Mr Griffin: For governments that regulate auto insurance, insurers that deliver it and consumers who pay for it, the real issue is affordability. Even though estimates of costs of insurance under Bill 164 have been made by William M. Mercer for the government and by the Wyatt Co for the insurance industry, there is still a large uncertainty as to what actual costs will prove to be. Mercer acknowledges this uncertainty, noting in its report that actual costs may vary significantly from its estimates. But they make no allowance for it in their costing estimates.

Both Mercer and Wyatt studies indicate that under OMPP costs are rising. Both studies reach the same general conclusions about Bill 164: Auto insurance after Bill 164 would be more expensive than it would be under OMPP.

The actuarial studies differ in a number of significant respects. I will summarize just four.

Wyatt relies on recent experience under both OMPP and tort environments in order to estimate costs, whereas the Mercer study ignores OMPP data entirely.

Wyatt relies only on historical experience within Ontario, whereas the Mercer study, as we heard this morning, blends experience from other jurisdictions, most notably Quebec.

The minister, in speaking just a few minutes ago, in his criticism of Wyatt, has ignored the fact that our assumptions through Wyatt reflect the most comprehensive review of claims details since the Osborne study, giving rise to the figures on catastrophic injuries, whereas the Mercer study relies exclusively on data from the tort environment of the mid-1980s. This isn't presumption; this is reality.

Mercer includes a reduction in the frequency of claims by 5% as a result of some unspecified road safety initiatives assumed to be in place on January 1, 1993. Wyatt makes no such assumption. Road safety initiatives announced in The Road Ahead over a year ago don't yet exist.

We are concerned that the government may act on inaccurate and outdated information on the actual cost of these proposals. The issue is not whose actuary is better, but rather, what is the real cost of change and who benefits from it? You might ask whether it's lawyers or claimants. The balance of compensation, timeliness and affordability must be based on relevant costings.

The Mercer study is not intended to be, and is nothing more than a relative comparison between the costs of two products at a point in time under a number of assumptions, some of which are now dated and others not identified. In fact, a rate filing made by an insurance company to the Ontario Insurance Commission using similar analysis undoubtedly would be rejected.

In his announcement of January 18, creating the rehabilitation task force, the minister has clearly recognized the need to address cost and affordability while providing timely, acceptable levels of compensation. Until the work of the task force is complete, neither Mercer nor Wyatt can reasonably predict costs in this area.

In summary, we are concerned that the insurance system presently proposed is unnecessarily complex and will result in increased costs to consumers.

In conclusion, the insurance industry recognizes that the current auto insurance product can be improved.

The minister has engaged in constructive consultations with the industry and others and has expressed willingness to continue to do so. We are prepared to work with the government and others to introduce change that is in the public interest. We will be submitting a more comprehensive brief to this committee at a later date.

We appreciate the opportunity to appear before this committee and thank you for your consideration.

The Chair: We don't have much time. We've got 27 minutes for the brief. Mr Owens had a technical --

Mr Owens: Just a quick explanation with respect to the deductible: I think it might be instructive for those in the audience and those who will be watching the news this afternoon to have an understanding of exactly how we came to the deductible, and I'll turn the floor over to Mr Endicott.

Mr Endicott: Mr Cooke, in his presentation, commented about the uncertainty associated with the deductible, and we thought this might be helpful. The starting point, which I think you can infer from Mr Cooke's remarks as well, was that no attempt to restrict or eliminate the smallest claims is going to be perfect.

Mr Tilson: On a point of order, Mr Chairman: I think this is wonderful, hearing the administration give its explanation of the deductible --

Mr Harnick: We heard from them this morning.

Mr Tilson: -- as long as it doesn't interfere with our time to ask questions.

The Chair: What I was going to do, Mr Tilson, was to skip the government and come around, a question there and a question here, with the remaining time.

Mr Tilson: Fine. Thank you.

Mr Endicott: In any event, I will be brief, just to say that the deductible approach was chosen because it does cater to, if you like, the existing settlement practices that are already in place. It's true there's no certainty, but as lawyers will tell you, most cases settle out of court. Very few actually go to court because people can generally evaluate what the claims are worth. On that basis, because that's the traditional system, the existing structure that is in place, it was felt that system which didn't introduce any additional factors or components, new words defining what is and what is out -- additional, if you like, litigation around what additional words mean --

The Chair: Okay; that's it. Mr Tilson.

Mr Tilson: With respect, that probably tells us nothing.

I have one question to the delegation. All four reports have indicated that insurance rates, which is really a lot what the public thinks about, are going to go up, you say, I think, 20%. The minister has said and still continues to say no, that rates will not go up.

I assume he has therefore two alternatives to fulfil his promise that rates will not go up. Either he'll make a cabinet decision, which is allowed for in the bill, that the cabinet can decree that there will be no more rate increases -- I believe there's a provision in the bill that says that -- or he can put his socialist puppets on the insurance commission and they will then say, "Too bad; you don't get any rate increases," when you apply to have your rate increases --

The Chair: Mr Tilson, it's got to be a quick question.

Mr Tilson: -- notwithstanding these unbelievable costs that we're being put to. I would like you to comment again on the impact if that takes place and there are no rate increases to allow for these tremendous costs that you're going to be put to.

Mr Griffin: First of all, I tried to make the point during the presentation that there was great uncertainty around the issue of cost. The question whether it's 4% or 20% or somewhere in between is very difficult to assess at this point. Our assessment through our actuarial firm is that it is in the order of 12%. However, we recognize that the minister has announced a task force to study rehabilitation which is one of the big areas of cost pressure in the system, so nobody knows what the eventual cost is going to be, but obviously, if the costs go up, so will the prices.


Mr Tilson: He's not going to allow you to raise your rates.

Mr Harnick: May I have 30 seconds to ask a question?

The Chair: I'm sorry; your time's up. Maybe some of the other presenters would make it a little bit shorter, because this will go on the record, if you can condense it so that members of the committee can ask a question. I stated that at two o'clock. I'm sorry, but this is the group that wants to present. It's up to them whether they want to present for 30 minutes or present for 20 minutes and give 10 minutes to the committee. They are the presenters. We're listening to them. Sorry.

Mr Mancini: I want to thank the bureau for its presentation this morning, which is quite comprehensive, very clear and very user-friendly and easy to understand, which I think is important. I have one specific question.

The Chair: Just one short one.

Mr Mancini: This morning when I was questioning Mr Tully, I asked him very clearly on several occasions how many more employees the Ontario Insurance Commission would need, how many more government staff it would need to administer the new 68-page document of regulations. Mr Tully evaded my questions and concluded by saying, "I wouldn't have a response." I want to ask the presenters, how is it that the deputy minister wouldn't have a response, but on page 5 you can tell us that, "The government's own regulatory body, the Ontario Insurance Commission (OIC), estimates it will need 100 more staff and a $5-million increase in its budget to administer the new system"?

Mr Griffin: Yes, Mr Mancini. We understand that a member of this committee, Mr Tilson, asked that question to the minister in the House and in his question stated that he understood the commission had said it would need 100 more staff and up to $1 million more dollars a year, and that is the source of our information.

Mr Mancini: From the minister's own lips.

Mr Griffin: Yes.

Mr Mancini: I have great difficulty then with the testimony that we heard this morning. Surely, the deputy minister knows what the minister has or has not said in the Legislature. For a deputy minister to come to this committee, refuse to answer a question and say, "I wouldn't have a response," when the actual response was actually quoted in the Legislature, says a great deal about the testimony we heard this morning.

The Chair: Okay, fine. I'm sorry; the time's up. I'd like to thank you for appearing before this committee.


The Chair: The next group we have coming forward is ARCH, the Advocacy Resource Centre for the Handicapped. Gentlemen, would you please identify yourselves for the purposes of Hansard. I'd like to welcome you before the committee. We have until 3 o'clock. I don't know if you heard what I said earlier: Perhaps you can cut some out and answer more questions, because what you have here will go into the record. But yours doesn't look quite as long.

Mr David Baker: My name is David Baker. I'm the executive director of the Advocacy Resource Centre for the Handicapped. With me is Ron McInnes, who is our vice-president, and Harry Beatty, who is the director of policy and research at ARCH.

ARCH is a non-profit community legal centre. It was established in 1980. Currently, we have representation from 41 disability organizations on our board. As the brief makes clear, we have been involved virtually from the beginning in the auto insurance discussions, and I should say that we're proud to be one of the few groups that's still saying the same thing now that we were saying back at the beginning.

Throughout our involvement in the automobile insurance reform debate, ARCH has acted independently of both lawyers and insurer organizations. We have been pleased to cooperate from time to time with the consumers' association, which is certainly another organization that should be listened to by this committee, because it is that organization which will have something to say about concern about rates.

Our basic position in relation to automobile insurance is derived from our representation of the disabled community. We believe that people who are injured in motor vehicle accidents should be compensated fairly and adequately. We believe it's important that people who are disabled as a result of accidents are reintegrated into society and that they have the opportunity to live, work and otherwise participate fully in the life of that society. We believe this goal is justifiable both in human and, as you'll hear, economic terms.

ARCH has not championed one particular model of automobile compensation. We have tried to respond to the various proposals which have been brought forward from time to time by various commissions and governments of the day. We acknowledge that there are competing objectives in automobile insurance reform, and at this point in time we're prepared to support a mixed model which combines the best features of no-fault and tort compensation.

At this point, I'd like to turn matters over to Harry Beatty.

Mr Harry Beatty: I'd like to address two items, beginning on page 2 with our position with respect to the OMPP.

In looking at the OMPP or at any reform proposals, perhaps our primary concern has been those who are most seriously injured in motor vehicle accidents, because many compensation systems in auto insurance and elsewhere tend to undercompensate those who are the most seriously injured. From this perspective, we found OMPP to be inadequate for three reasons, which we presented to this Legislature at the time.

(1) The total lack of inflation protection of course works very much to the detriment of those most seriously injured for the longest time, especially children and young people. If you assume a 5% inflation rate, the value of all benefits is cut in half approximately every 14 years.

(2) We are strongly opposed to the caps in OMPP on rehabilitation and long-term care; those are listed at the bottom of page 2. At the top of page 3, we point out that the $3,000 cap, which remains in the current plan and which we'll come to in a minute, is only adequate to purchase about six to eight hours of basic attendant care in the current market. That is much less than is required for those who are most seriously injured. As well, in the OMPP with the $500,000 lifetime limit, in the most serious cases, even disregarding inflation, again in about 14 years the money would run out.

(3) Like other disability groups, we were opposed to the particular wording of the threshold in that we felt it was discriminatory against people with psychological disabilities.

We note that since OMPP has come in, insurers have recognized increased profits but the people who are injured and who have not had a tort claim or who have not been fully compensated in tort are left with unindexed and capped benefits. If the insurers do not pay the costs of significant and long-term disabilities, then those costs are borne by the disabled people themselves, who do without care or services or are put into an institutional setting rather than in the community; or their families, who may wind up delivering care uncompensated or who have to purchase necessary disability-related items and services out of their own pockets; or of course the general public. Those are the only three options.

If insurance does not pay rehabilitation and long-term care costs, then the costs are effectively either borne by the individual, his or her family or the taxpayer, because people will wind up being supported by the ministries of Health and Community and Social Services.


That brings us to our position with regard to the current Bill 164 proposals. In overview, we think that the mixed package, as David indicated, could be made to work fairly if it were amended appropriately, but, as you no doubt will have gathered, we are still very strongly opposed to the $3,000 monthly cap on long-term care.

It is part of the task force recently announced by the minister that this cap will be re-examined, that the task force will have in its mandate to look at alternatives. We are pleased to participate with this task force. We believe, however, that it is essential that the final result be that the $3,000 cap come out of the statutory accident benefits regulation.

Secondly, while indexation has been introduced for the benefits in Bill 164, it excludes those outside the labour force, and we think this is unfair to people who may be outside the labour force through no fault of their own. It sort of penalizes again those who may have already been penalized by the lack of opportunity and lack of employment equity that has existed in the past in our society. So we also advocate the indexation of the $185.

It is especially important that these items be addressed now, because the right to sue for any economic loss is being taken away altogether and, in the case of long-term care, those who were compensated in tort and would have been allowed to remain in the community as a result, will now be at risk of institutionalization against their will.

I'm not going to address the costing in detail, although it's in the report, but our essential point with regard to the costing prepared by Mercer is that if you look at the table, which is the appendix, essentially Mercer says that the total of injury coverages in dollars per car per year, which was $424 pre-OMPP, has gone down to $240 under OMPP and under The Road Ahead is slightly increased to $271.

In the overall reform process, we still have a picture where dollars have been taken away from total compensation. Some of this is no doubt due to the greater efficiency of having more no-fault benefits and less reliance on the courts. Nevertheless, we believe that the savings in premiums, which have resulted in insurers' profits, have to a significant extent been achieved so far by cutting compensation, and Bill 164, without the improvements, we are suggesting, doesn't go far enough to redress that balance.

There has been a strong public perception created, I think, that the current package is spending so much on compensation that it will drive rates way up. At the same time, in the Bill 164 package, something that is not taken account of very much, if at all, in the Mercer costing is that it's a secondary coverage provided by auto insurance. Every improvement in CPP, long-term disability and workers' compensation will be reflected in decreased costs to insurers in cases where people can claim from both systems. As our society becomes more accessible to persons with disabilities, as there is progress in employment equity and human rights, we will find more and more people being integrated into society, being accommodated by employers and by public services and, accordingly, given that auto insurance is a secondary payor, the costs are going to go down. So we would like that taken into account.

Finally, if you look again at the Mercer costing, the reductions and savings in auto insurance have all come from the personal injury side. There really have not been any reforms at all to make a significant reduction in costs on the property side, and that is something that might be considered as well.

I'll now turn it over to Ron to address long-term care issues.

Mr Ron McInnes: Just before getting into long-term care, to follow up on what Harry has said, it would appear that under all three systems, disabled vehicles seem to be getting a better deal than disabled people.

Long-term care is the major issue we're concerned with. We have always stated our strong opposition to the $3,000 monthly limit in that area. We are going to be participating in the task force, as Harry mentioned, and we hope the task force will lead to a resolution of that issue that we can support. Without anticipating all the issues that will be addressed at the task force, we would like to summarize the reasons why that limit can and should be removed.

As Harry has mentioned, the limit is going to force significantly injured people to accept institutional care when their wishes and the wishes of their families are that they remain in community settings. I think this is something that not only this government but previous administrations have been opposed to. Deinstitutionalization has been a policy of government in Ontario for some time now. This would seem to be moving us away, at least in part, from that policy.

As Harry mentioned, $3,000 a month purchases only six to eight hours' basic care a day, and those with significant injuries will require more. This could lead, and probably in many cases will lead, to them being forced into institutions, and there are a number of undesired consequences to that.

There's loss of independence and enjoyment of life, which should be a major concern to all of us, apart from the monetary considerations which seem to be taking up so much time at these hearings.

When people with disabilities are not part of the community, when they're in institutions, their prospects for employment are greatly reduced. Accordingly, the chances that they'll achieve financial independence and no longer receive income replacement payments are reduced. This adds cost to the system as a whole. This is a poor long-term strategy at a time when increasing awareness of the employment capabilities of persons with disabilities and enhanced supports to their training and employment are being emphasized.

Also, once people who've been injured go into an institutional setting, the government ends up paying 100% of the cost through the ministries of Health and Community Services. This adds significantly to the cost of those particular systems at a time when they're already overburdened. At the same time, it means the insurer no longer has to pay any long-term care costs at all. It would be less expensive for government to cost-share with insurers in the long-term care costs over the $3,000 monthly rather than keeping the $3,000 cap and winding up paying the entire cost itself in these serious cases. This is an option we have presented to the government.

In other cases, faced with the option of placing family members in an institution, many families may make heroic sacrifices rather than do so. Usually, this will be a situation where you have a mother, a wife or a daughter providing care for many years on an uncompensated basis. The Bill 164 proposals do not address adequately this problem, in our opinion, because of the $3,000 cap.

There are a number of reasonable alternatives. If additional funding is required for long-term care, this could be achieved through a modest reduction in property coverages, as Harry mentioned, or premiums could be increased slightly to higher-income earners or those who require business interruption coverage. These are options we will be presenting in the task force, but either option we consider fairer than simply putting an arbitrary cap on long-term care. Thank you.

The Chair: Ready for questions? Okay, Mr Tilson, five minutes.


Mr Tilson: Mr Harnick.

The Chair: Or Mr Harnick.

Mr Harnick: I understand you have had some reservations with respect to the setting of the deductible at $15,000 and you've had some discussions about that. I wonder if you can tell us what your reservations are about a $15,000 deductible.

Mr Beatty: I'm not sure what information you've had. We have not specifically opposed the idea of the $15,000 deductible. Of course, it adds to our concerns about long-term care and these other costs, because in those serious cases, it would come off the total amount of funding people have. But we have not specifically objected to the $15,000 deductible.

Mr Harnick: Is $15,000 too high, too low or the right amount as far as you're concerned in terms of a starting position for a system based on a deductible threshold?

Mr Beatty: I think it's approximately in the right area. The real problem that existed in tort, in the pre-OMPP period, was that there tended to be a lot of smaller cases that seemed to be somewhat inflated in terms of the administrative cost they imposed on the system and lawyers' fees and so on. They were getting a disproportionate amount of the funding. So if you're going to have access to the courts and tort, some mechanism is needed to remove those smaller cases. Now, there are pros and cons to every approach, but the $15,000 deductible is one way of achieving it.

Mr Harnick: If a $15,000 deductible had the impact of eliminating $20,000 or $25,000 claims, would that cause you some reservation as to the level of deductible, if it had an impact on more serious claims?

Mr Baker: I think our basic position is that the system has to be looked at as a package. It's costed as a package and it needs to be examined as a package. We've taken the position that this approximates a fair balance between the various approaches. We've also indicated that we would be prepared to sit down and discuss what a total no-fault package would look like.

Mr Harnick: That's not my question.

Mr Baker: I understand that, but I think it is the answer to the question. The point I'm making is that we have to look at how we are allocating scarce resources between people who are injured in automobile accidents. In our view, while we feel insurance profits will remain excessive under the proposal and there is room to remove the cap, the emphasis should be placed in that area rather than in the area of pain and suffering.

Mr Harnick: In terms of eliminating cases that are not the minor cases your colleague indicated, if the $15,000 deductible had the effect of eliminating those claims that are more serious as opposed to the minor claims, would that cause you some concern? That's what I'm driving at.

Mr Baker: We would like to see the maximum amount flow through the system into the hands of people who are injured in auto accidents. That's where we're coming from. The question is also one of efficiency. As we've said, what has happened in the past is that people with less severe disabilities have tended to be overcompensated because of the transaction cost. A mechanism had to be found to keep those claims out of the court system. Whether the cases in excess of $15,000 would be deterred I think has a lot to do with the way in which lawyers handle negotiations and representation of clients.

It concerns us of course if people are not being fully compensated for their losses. Our view is that the emphasis should be on the no-fault benefits, however, in terms of addressing those losses.

Mr Harnick: One thing you just said that struck me is that you're concerned about people not being compensated for their losses. What is your position in terms of your concern about not being compensated for the losses of a scheme such as Bill 164, which does not compensate victims for their actual economic loss sustained?

Mr Baker: Our position has been that there needs to be consideration given to supplementary types of insurance. We haven't been opposed to looking at ways in which people can purchase additional types of insurance to cover those kinds of losses.

Mr Harnick: That would not be something you're upset with?

The Chair: I'm sorry, Mr Harnick. I've got to go on to Ms Haeck.

Ms Haeck: Actually, I believe Mr Owens had a question. Did you want to raise it at this point or shall I continue?

Mr Owens: Go ahead.

Ms Haeck: Okay. I do appreciate your comments. In my riding the Ontario Head Injury Association has a rehabilitation facility. I've had a chance to tour that. So your comments really are quite timely, I think, with those visits.

You've raised the concern of the immediacy of rehabilitation and basically the need of rehabilitation, and I think there's a recognition, at least by some around this room, that the tort system really doesn't address that or allow for that at all. What is your experience with regard to the importance of immediate access to rehabilitation?

Mr Beatty: Clearly, all of the evidence shows that rehabilitation is more effective the earlier it begins in the process. If someone has been injured and there is a big gap between the time that he's stabilized medically or whatever, when the treatment phase is over, and when rehabilitation begins, the person becomes discouraged. They become less part of the workforce. Ron may want to add to this, but I think there's a consensus that rehabilitation should start at the earliest possible time.

Mr McInnes: Yes, and I think certainly as well as that it's not only going to be more successful beginning at the earliest possible time, but it's probably also going to cost less in the long run.

Ms Haeck: Very good.

The Chair: Mr Owens has got a question here.

Ms Haeck: Oh, he does. Okay.

Mr Owens: I'd like to thank you for your presentation. You've posed some tough questions to the government on the issue of rehabilitation.

As you're aware, we will, should the legislation pass, remove the caps that have been placed on rehabilitation with a task force set up to look at the $3,000-monthly cap on rehabilitation. I'm curious to know. In terms of the kind of role ARCH will play on the task force, what recommendations will you be looking at with respect to psychological rehabilitation and physical rehabilitation of accident victims?

Mr Beatty: I think a lot of those issues are quite difficult, and I think it's important to have the deliberations of the task force. We have felt throughout the auto reform process that there should be this kind of detailed look at the whole area.

Basic objectives for rehabilitation are that it is readily available, as we've already indicated, that the injured person be an active participant in deciding the future of the rehabilitation process and that a whole range of rehabilitation options be available which will meet individual needs. What people need is quite different in, say, the area of education and training that follows the period of medical rehabilitation, and we will want to see that a range of options is available that is appropriate for the individual.

The Chair: Okay, I'd like to thank you for appearing before the committee. The information that you've given to us here is very important.



The Chair: Will the next group, the Advocates' Society, come forward, please. We're on until 3:30. We all have your brief up here. Looking at 21 pages, you can read it all into the record, but there will be no time for the committee members to ask any questions after. You are the witnesses, so it's up to you whether you want to give 30 minutes of speech or give 15 or 20 minutes of an oral presentation and then leave some time for the members of the committee to ask questions. I'd like to welcome you to the committee. You may begin by identifying yourself for the purposes of Hansard, and then you can start into your brief.

Mr John Soule: My name is John Soule. I am the chair of the insurance committee for the Advocates' Society. With me is Duncan Read, the executive director of the society. I appreciate your comments, Mr Chairman, and I do not intend to read all of the papers that we've produced. I will, however, highlight, and I hope to leave about 10 minutes for questioning.

First of all, I'd like to comment that I didn't realize I had such a great future in front of me. Most of the lawyers I speak to don't believe there will be that much litigation out of the legislation that is arising, but I'll leave that aside.

The Advocates' Society is a group of 1,800 Ontario trial lawyers whose practice is primarily restricted to the courts and administrative tribunals. A significant portion of our members practise in the automobile insurance field, both for injured victims and for insurance companies, and because of that experience we feel that we bring to the committee some understanding of what the pragmatic results and the end results of the legislation may well be.

The Advocates' Society wishes to point out that the government campaigned on the automobile insurance issue and promised the electorate that, if elected, it would create a publicly owned insurance scheme and restore the right of all innocent victims to seek compensation through the traditional tort system. The government has not been able to keep its first promise, and in our view the provisions of Bill 164 and the regulations that have been made pursuant to it suggest that the government may not be keeping its second promise.

Although the society is philosophically opposed to the nature of the legislation by reason of the fact that many victims are being asked to forgo their right to potential recovery of full economic loss, particularly their right to recover their actual loss of income or wages, the fact remains that we appreciate that the government has put forth legislation, and we hope that our comments today will be made within the framework of that philosophical point of view.

We hope to cover areas that we feel require correction or amendment in order to provide reasonable coverage and reasonable rights of recovery to those significant and large groups of the population whose compensation we believe to be glaringly inadequate. So in essence, this paper is from a victim's point of view. I propose to first talk briefly about the bill and then the statutory accident benefits that the regulations provide for.

We have three concerns about the bill. The first and most major concern, and the concern upon which I will comment later, is the fact that it does not allow victims to recover their economic losses, and that's both from an income point of view and from a care point of view. I also wish to speak on the $15,000 deductible and the issue of contributory negligence and how that may affect the working of the $15,000 deductible.

I propose referring to an example. I was recently involved in a matter in Milton. It's not an automobile accident but it involved a woman in her mid-30s who had fallen, while walking out of her home, on a concrete step which was wobbly. She fell and put her right hand out to break her fall. She broke her fall but she also broke her wrist. She suffered what is called a Colles' fracture, both bones at the bottom of the wrist. She was casted and off work. The fracture did not heal properly and she had to have a further operation. There were still difficulties with range of movement and some nerve problems in her hand. She is now going to have a third operation and that's scheduled for next week.

The pre-trial judge assessed her general damages at between $15,000 and $20,000. Now, by reason of the operation of the deductible that the government proposes, which is a $15,000 deductible, her recovery at most, on the judge's figures, would be $5,000. If I was advising her from a plaintiff's point of view, I would tell her that she should not risk going to court because of the probable level of recovery, weighing that against not only the cost of her own lawyer, but the risk of having to pay the defence lawyer something as well should she not get over a certain level.

The second aspect that relates to the $15,000 deductible that we feel requires comment relates to the issue of contributory negligence. Mr Charlton briefly referred to that in his remarks this afternoon, but I don't believe the impact of this particular section has been brought home to either the public or those actually working in the industry.

The rules that have been proposed as to how contributory negligence is to be dealt with suggest that in an automobile accident situation, the owner's liability or responsibility must be determined first. If we're dealing with a 50-50 situation, then if the driver of the car or the owner of the offending car is only 50% responsible, it's only at that stage that the deductible kicks in.

If, in the example of the woman that I have used, she even received an assessment of $30,000, she was found 50% at fault for not fixing her step even if her landlord did not, she would only be allowed the first $15,000 -- that's after contributory negligence is taken into account -- and then the deductible is taken off. So if she has a $30,000 injury, she gets nothing if she's 50% at fault. In our opinion, this will have significant effects upon people with injuries of even greater monetary worth and greater severity.

It is the position of the Advocates' Society that the $15,000 deductible is too high. Persons with significant injuries, including fractures and nerve damage, are restricted from seeking recovery because of the financial risks involved. It is the position of the society that the deductible should be halved.

In addition, we feel strongly that if there is to be a deductible, it should be applied before a court considers the issue of contributory negligence. In the 50-50 situation, people will likely receive advice from a lawyer to the effect that they should not take the chance of proceeding to court unless it is clear that their injuries are worth in excess of at least $50,000, and more likely $75,000. None of you would like to suffer from the nature of the injuries necessary to achieve such an assessment.

I wish now to deal with certain of the provisions of the statutory accident benefits schedule which deal with specific categories of people and their ability to recover their economic loss through this system. As I've indicated, it's the only recourse people have for recovery of economic loss.

We believe that the regulations, as presently drawn, contain large cracks through which significant and important groups of the population will fall. These include, and they aren't limited to, children and students, the self-employed, surviving members of a family where the major breadwinner has been killed and those requiring round-the-clock care because of catastrophic injuries.


I'd like to deal first, briefly, with children and students and the effect the legislation has on them. There are two types of benefits that are available to a student. The first is a weekly benefit of $185 per week and the second is an annual lump sum benefit of anywhere from $2,000 to $8,000 per year if the student misses a year of school.

Until I read the regulations, I was under the impression initially that the $185 a week was available to any student. In fact it's clear it's not. It's not available to anyone under 16 years of age. The only benefit they receive under this regulation is an allowance of $2,000 per year if they're in elementary school or $4,000 per year if they're in high school. After they reach 16 years of age, they then become entitled to the $185 per week.

Unfortunately, that only runs for a maximum for two years, regardless of how long the person would have been in school. At the two-year point, or at 18 years of age or two years after the accident, if the person is still severely injured and unable to continue with schooling or work, he or she is entitled to receive loss-of-earning capacity benefits, which I'll go into later. They also, in addition to that two years of $185, get a lump sum payment, but only one. So if a person was in grade 12 and intended to go through a four-year degree and could not complete any of that, that person only gets one $4,000 lump sum payment.

For students who are catastrophically injured -- not even catastrophically injured, but those with significant injuries that prevent them from continuing with their education and from entering the workforce, the society believes that the level of benefits that are being made available under this particular regulation is totally inadequate. If a student is injured in a car accident to such an extent that he or she is unable to complete his or her education and unable to obtain employment because of the injuries sustained in this accident, then he or she is entitled to receive anywhere from 55% to 90% of the average net income of an industrial worker in Ontario.

In June 1992 the average gross weekly income was $578. After standard deductions, the net income is $431, and by reason of the sliding scale the government has put in place in the regulations, if that student can't continue with his employment and if the accident happened when he was 16 or 18 years of age, he or she receives the grand sum of $237 per week to age 65, and then it reduces after that.

Mr Harnick: That's right.

Mr Soule: If they're 30 years of age when the accident happens and it prevents them from working -- I'm sorry, Mr. Endicott; I disagree with you -- they get $388 a week. If, for example, it's a university student who attempts to enter into the job market at 24 to 26 years of age and is married, he gets $325 a week if he can't continue to work.

Another group that we feel will suffer significantly is the self-employed and small business persons. These people, in our opinion, form a strong backbone of our population and they create many jobs. The government describes its legislation as The Road Ahead. In the case of the self-employed and small business persons, it is anything but.

What the regulation does is it looks to the historical past in gauging what a self-employed person or a small business person is entitled to receive. It refuses to look to the future. In other words, regardless of whether I can show you that I am going to go out and my business will improve over the next two or three years or if I am just entering into the commencement of a professional practice, in the self-employed person's case there's no provision in the legislation to look to the future. There's no provision for productivity to permit the benefit level to reflect what this person's future would be. It is simply pegged to what the person was earning at the time of the accident or before the accident. It doesn't take into account artificially low incomes by reason of putting capital back into work or such things as a recession.

The third example I wish to deal with briefly is the fatality, and essentially the regulation provides that the minimum recovery for a fatality is $50,000 for the surviving spouse and $10,000 for each dependant. The maximum benefit is $200,000.

If we take an example and assume a 35-year-old married father of two children under 10 years of age is killed in an automobile accident, and assume that he earned $45,000 per year, then his gross weekly income is $865, or $625 a week net, assuming standard deductions. Under the government's proposed treatment of fatalities, the unemployed wife and the surviving children would receive a total of $117,000.

If the spouse had not been working and is now forced to enter the workforce, the interest earned on the lump sum payment would not even cover the cost of child care. If the family owned its own home and, like most of us, had a mortgage, then the spouse might choose to pay off the mortgage. She would still have to seek employment, find day care assistance and attempt to maintain the house. It is not unrealistic to think that the house will eventually be lost, that reasonably remunerable employment might not be found and that this family will end up on welfare.

Mr Harnick: The Endicott solution. Great. You ought to be ashamed.

Mr Soule: Now what has happened, what the government does in its formula --

Mr Harnick: It would never have happened --

The Chair: Mr Harnick, I know when some of us get a little bit older we talk out loud after a while. I just want to remind you that I can hear you. Would you carry on, please?

Mr Soule: Thank you.

Mr Harnick: The intention was that you would hear me.

Mr Soule: What the government has done is used a formula of net income times 187.2 weeks. In other words, what the government is doing is suggesting that the value of the worker's death to his family is three-and-a-half years of that person's net weekly income. Support awards made under the Family Law Act following marriage breakup almost always contemplate periods of support well beyond this. We fail to see why the government now feels that separation by death should be treated differently.

Under the OMPP and the previous tort system, that family likely would have recovered in excess of $700,000 on account of its economic loss to get it through, and that door is now being shut.

I don't propose to comment on care costs, as ARCH has commented upon the inadequacy of the $3,000 per month ceiling on attendant care. Two very recent medical malpractice cases found that the in-home care required for two infants was $11,600 per month for one and the other $6,700 per month. As ARCH has indicated, the level proposed by the government is low.

Accordingly, we, the Advocates' Society, suggest that the government must look to those inadequacies and correct them either in the legislation or in the regulations. If they don't want to, we are suggesting that there should be optional coverage that the industry must provide to cover the income, and I'm not speaking of care costs here, I'm speaking only of income: wages, productivity, salaries.

We're suggesting that there be some type of income protection endorsement made available by the insurers to all drivers in Ontario. As I say, that would cover the situation of students, it would cover the situation of fatalities and it would also cover the cost of people who receive, in income or wages, more than $52,000 a year.

We don't believe the coverage will be excessively expensive in that there is presently an SEF 44 available that most drivers have. It's called the family protection endorsement, and it covers the various losses that I've just been talking about if the offending party has inadequate liability insurance. We're suggesting that a similar product be made available, and if the government wishes, it may make a second endorsement available with regard to medical, rehab and care costs.

The income protection endorsement would cover net income losses over and above a maximum weekly benefit. It would be available to all drivers, but we propose that only those not at fault have access to it, on a 100% basis if there is no contributory negligence, and on a reduced basis to reflect contributory negligence if a victim is only contributorily negligent.

I have heard Mr Charlton argue in the past that there is insurance coverage available to cover these types of losses. With respect, I must disagree. He is referring, in my belief, to disability insurance. This is the most expensive form of insurance that is available on the market. It doesn't provide full income replacement, even if you can afford to purchase it. Generally, it will only permit someone to purchase coverage to the extent of 65% to 70% of his income.

One must have an income to be able to purchase it. The product is not available to students, as they do not have any income. The industry will not sell insurance of this type for future speculative losses that a student or a businessperson might suffer. It offers no protection in the fatality example. It is dependent on a number of factors, including age, health, occupation, benefit level and the waiting period.


I phoned an acquaintance of mine in the insurance industry on Friday and asked him to quote me the cost of disability insurance for an early-40s, non-smoking executive who wished to protect $150,000 worth of income. Of the two leading national companies that sold the product, one would provide coverage to the extent of $5,600 a month, and the other to $5,300 a month. The maximum coverage that executive could purchase would be $67,200 a year. With a 31-day waiting period, which is 3.5 weeks longer than that proposed in this particular legislation, the cost per $100 per month of that coverage is $78.24. For that person to attempt to protect his income costs $4,381 for a premium.

In addition, by purchasing that, the statutory accident benefits available to him are worthless, because the government has directed that you must seek recourse from all other insurance before you have recourse to the accident benefits under your automobile policy.

If the government wishes to truly refer to Bill 164 as The Road Ahead, and if the government wishes to keep its promise to the electorate to restore the right to sue and tort for traditional losses, then it must either amend the act and the regulations as suggested or, alternatively, provide optional coverage to the motorist in the form of an income protection endorsement. If the government fails to do so, then it removes the right of innocent victims to full recovery of wages and salary.

It also takes away a further and much more disconcerting right in our society. It actually prohibits innocent victims from attempting to protect themselves from economic loss over and above a level the government deems appropriate. This government is effectively saying that no one in this province is entitled to make more than $1,000 per week net, and that in the case of students and small business persons in particular, no one can hope for a brighter future, a more productive future from employment, than they had at the time of the accident which disabled them.

The Chair: Are we ready for questions?

Ms Haeck: I believe Mr Owens will have some useful comments on this, and I'll defer my questions till later.

Mr Owens: The issue with respect to the education benefit, I think, has not been stated as clearly as we have set out in the regulation. I'd like Mr Endicott to correct some of the perceptions that may have been left.

Mr Soule: You see, Mr Owens, lawyers are here because there are different interpretations of legislation. The government has one interpretation of its legislation. I've only made comments as to what I think a lawyer might interpret the legislation as. I don't know if it's --

Mr Harnick: Or a court or a judge.

Mr Endicott: First of all, I'm here to clarify the policy intent of what was there, and there may be disputes about what the regulation is, although I should add that regulations are drafted with the assistance of legislative council. In that respect, the intent of the regulation is to have the ramp increase with age so that everybody who has a disability will actually see an increased amount of the average industrial wage. Anybody, by the time he is 30 years old, will get 90% and will not be pegged at the amount at the date of his accident.

Mr Harnick: That's 90% of the average industrial wage?

The Chair: I'm sorry.

Mr Harnick: If you're going to let him answer, let him clarify it.

Mr Endicott: Weekly wage.

Mr Harnick: Ninety per cent of the average industrial weekly wage?

Mr Endicott: Weekly wage; there's no "industrial" in it. That was my mistake.

Mr Harnick: What is the average weekly wage, then? What are you pegging it against? The average weekly wage of everybody in society?

Mr Endicott: In the province.

Mr Harnick: I didn't know that statistic was published. How are you going to find that out?

Mr Endicott: It's Statistics Canada.

Mr Harnick: What is the average weekly wage right now?

Mr Soule: In June 1992, it's $578 per week gross.

Mr Harnick: The net of that is $460, and you're going to say that everybody gets 90% of $460?

Mr Soule: No, $416.

Mr Harnick: That's about $360 a week, and you're going to justify your position by saying that somebody who will never work again and is a student can live on $360 a week? You're going to stand here and justify that in front of this committee? You should be positively ashamed.

Mr Endicott: No, I think you're under a misapprehension, Mr Harnick. I'm not here to justify anything. I'm here to explain what is in the bill and what the intent is.

Mr Harnick: Is that what's in the bill?

Mr Endicott: It is 90% of average weekly wage and it is indexed as well. I would point that out.

Mr Harnick: So it's $360 a week indexed.

Mr Endicott: No, it isn't $360.

Mr Harnick: Well, if the average weekly -- we'd better sort this out right now. You're the guy who wrote this stuff. I would think you'd know the answers.

The Chair: Mr Harnick, he's not on trial here. He's just giving you facts.

Mr Mancini: The legislation is on trial.

Mr Harnick: He wrote the legislation.

Mr Tilson: You people should be embarrassed.

The Chair: Okay, let him answer.

Mr Endicott: The information we have is that 90% net of the average weekly wage would pay $391 a week.

Mr Harnick: I'm sorry; pardon me. That person, then, that student will be relegated to an income for the rest of his life of less than $20,000, indexed.

Mr Endicott: Remember, it's non-taxable as well.

Mr Harnick: Okay, but it's $20,000. Assuming that it's non-taxable, it's probably the equivalent of a taxable income of about $26,000 for the rest of their life. Am I right about that?

Mr Endicott: I don't believe it's $26,000.

Mr Harnick: It's the equivalent of $26,000 because you don't pay tax until you get --

Mr Endicott: It's a little over $30,000.

Mr Harnick: A little over $30,000, so that student -- I think you're wrong, by the way, because $17,000 is the minimum tax rate, which is virtually nil. But the fact of the matter is that you're saying a student is going to make $20,000 net for the rest of his life. That's what you're --

Mr Endicott: No, I'm not saying that. The benefit is indexed.

Mr Harnick: I'm sorry; indexed at whatever inflation is. Let's assume there's no inflation. That student, who's injured for ever, is going to make $20,000.

The Chair: Wait a minute, Mr Harnick.

Mr Harnick: It's very important, sir, that we clarify this.

The Chair: Mr Kwinter is on here until 3:30. He has an opportunity. He can carry on where you left off or he can give you his time.

Mr Harnick: You should be ashamed if you wrote that piece of legislation, let me tell you: $20,000 for a student for the rest of your life.

Mr Kwinter: Do I still only have a minute?

The Chair: No, you've got until 3:30; you've got a couple of minutes there.

Mr Kwinter: I've been sitting here since this morning and I get the feeling that somehow or other the wrong problem is being addressed. If you'll go back to the mid-1980s, to 1985 or 1986, when this insurance problem came upon us, the major problem we had was that the courts were reinterpreting what was liability, and the actuaries couldn't deal with it because the insurance companies thought their liability was limited to certain things and the courts were reinterpreting that.

As a result, they wouldn't write liability insurance, there wasn't availability, people weren't doing anything and the rates went sky-high. It was that which brought on this crisis in insurance. Up until that point, everybody was relatively happy. The problem was that suddenly insurance wasn't available, and if it was, the cost was prohibitive.

What has happened is that the political decision was, "We've got to come up with a plan that will make insurance affordable, whatever that number happens to be." That's all we're dealing with here. In order to do that, everybody had to compromise and come up with what they felt was the least expensive for the most acceptable coverage, and everybody had to give up something. That was the number that came up.

Now we have a situation where under Bill 164, depending on what actuarial consultant you believe in, it will either go up 4.4% or 20%. But in the presentation by the Advocates' Society, I read through the whole thing that really your major thrust is that there isn't enough compensation for various segments of the society that are going to be affected by an accident. I admit that and we agree with that, but there has to be a realization that this is all a factor of premium costs. There is no such thing as a free lunch. Money isn't going to come out of the air. Whatever increases you give have to be recovered through increased premiums. What is the reaction of the Advocates' Society about that particular problem, which is the major problem that we're dealing with?

Mr Soule: That is the reason we're suggesting the optional income protection endorsement. It costs the government nothing; no one has to buy it. The legislation can stay as it is or you can go back to the OMPP and have it as the Liberals wanted it, but the fact remains that no one would be forced to purchase anything he did not want to. They are only being given the opportunity to protect themselves and their families from real economic losses that may come about as a result of an accident.

I'm here primarily from the victim's point of view, Mr Kwinter, because I feel that the legislation has shortcomings in that fashion, but in so far as the cost factor is concerned, and we agree it's a legitimate concern, we believe that the way around it is to offer optional coverage to motorists, which is provided by the insurers to avoid any further increases, be it 4% or 20%, on that particular issue.

The Chair: Okay, gentlemen, I'd like to thank you for coming before this committee. Your information has added quite a bit to this process.

Mr Duncan Read: Thank you, Mr Chairman. May I just ask one quick procedural question? Do I understand correctly that we would have up until the time you start clause-by-clause to submit more complete written documents?

The Chair: You have until February 11.



The Chair: The next group is the Consumers' Association of Canada (Ontario). I'd like to welcome you to the standing committee on finance and economic affairs. We have until 4 o'clock. If you can leave some time, as you can see, all the members of the committee are desperate to ask questions. Mr Harnick took a little bit more time last time with the questions he had taken --

Mr Harnick: No, no.

The Chair: Yes, it was.

Mr Harnick: Point of order, please.

The Chair: Yes?

Mr Harnick: When Mr Endicott is going to clarify something, I think, as a member of this committee, I have the right to make sure I understand what he's clarifying. That's all I did, and with due respect, I think we should take all the time we need so that we understand this legislation.

The Chair: It depends on the time. After 6 o'clock if you want to come back and ask Mr Endicott --

Mr Harnick: I'd be delighted to sit here around the clock.

The Chair: Okay, I'm carrying on with these people. You're cutting into their time.

Mr Tilson: On that point of order, Mr Chairman: On at least two occasions -- it appears it's going to be a pattern that's going to be set -- the government members of this committee are referring their comments to Mr Endicott. The difficulty I have, and it gets back to the point that I left this morning, is that we're not appearing to have an opportunity to question Mr Endicott, who was here this morning, on matters of administration and how the process works, yet you're denying us that opportunity as he speaks. It creates a great deal of difficulty.

It's one thing questioning Mr Owens or yelling at Mr Owens, but Mr Endicott is putting forth how the process is working. We, as members of this committee, must be given an opportunity to question Mr Endicott as to how that process is going to work.

The Chair: Can we take that up at the subcommittee meeting?

I'd like to welcome you again to the standing committee on finance and economic affairs. I believe there was some mixup with your other two associations in Windsor and Ottawa phoning the clerk. Maybe you can just tell us a little bit about that. There are two other groups that didn't get on the list because of the confusion with the other two branches.

Mr Chris Ballard: Very briefly, what happened was just through some miscommunication between the Toronto office and our locals in Windsor and Ottawa. They had requested that they be allowed to speak before this committee when it visits those two cities and they missed the deadline. That's basically what's happened.

The Chair: Okay, fine. I just wanted to make sure that I had it straight too, as the Chair.

If you don't mind identifying yourselves for the purposes of Hansard, you may begin. We're on till 4 o'clock.

Mrs Audrey Verge: Mr Chairman and committee members, on behalf of the consumers' association of Ontario, I am Audrey Verge, and I have with me today Mrs Helen Anderson, former chair of the insurance committee, and Mr Chris Ballard, executive director. Both of these persons have made a major contribution to this submission.

The Consumers' Association of Canada (Ontario) is an independent, non-profit, voluntary organization that represents and informs consumers and advocates action on their behalf to improve the quality of life. It is the largest organized consumer group in Canada. The Ontario branch of CAC has over 40,000 members. Consumer advocacy, consumer representation and consumer education have been major activities of CAC and of its local association throughout its 45-year history.

CAC (Ontario) has been involved in the issue of automobile insurance reform for some time. As an interested group we appreciate the opportunity, before this legislation is passed, to comment on the draft regulations under the Insurance Act statutory accident benefits schedule respecting Bill 164. For the record, we wish the committee to note that this volunteer organization has had only four working days since receiving the most recent draft regulations in which to prepare this submission. For the most part, we will limit our input to comments on the statutory accident benefits schedule, because we believe this area to be of great importance to consumers.

In general, CAC (Ontario) approves the proposed regulations, especially those pertaining to the indexing of benefits. Not to index benefits has been a grave error in the past. We approve of setting maximums or limits to various benefits, since to award higher amounts, especially in higher-income replacements to higher-income persons, would weigh more heavily on all premium payers, especially those with lower incomes.

CAC (Ontario) concurs with the government on the proposal to provide better rehabilitation benefits. The sooner injured persons commence proper therapy and rehabilitation, the sooner they will be returned to society and be able to resume their former occupations. Everyone benefits: injured persons, their families, insurance companies, government and all premium payers.

We welcome the provisions of no monetary limits on reasonable medical expenses or reasonable rehabilitation expenses. Seriously injured persons must be supported and aided until either they recover from their injuries or are returned as far as possible to their former condition.

Affordability is one of the prime concerns of CAC (Ontario). We are cognizant, of course, of the needs of the injured persons and believe that they must be cared for and helped back to health as soon as possible. However, approximately 80% of all Ontario drivers at any one time are considered accident-free. In other words, they have not had an at-fault accident during the previous five or six years.

Those drivers, as insurance consumers, are anxious to keep premium levels as low as possible. Many drivers have not had an accident for 10 or 20 years, or even for their entire driving career. It is necessary to try to keep premiums as affordable as possible, while maintaining adequate benefits for those unfortunate ones who suffer injury on the road.

We wish to make one very strong recommendation: that as much documentation as possible be written in plain and clear language to make it user-friendly.


On to the specific sections. Part II, income replacement benefits, the responsibility to seek employment in disputes: Under this section, where a person received a notice from the insurer that the amount of weekly benefit is to be reduced and the person disputes the reduction, the insurer shall continue to pay the full amount of benefit until the dispute is resolved.

We recommend that before proceeding to the formal mediation-arbitration procedure, an informal procedure be established to deal with the concerns of the parties.

Part II, income replacement benefits, amount of benefit: "The weekly amount paid to a person under this part shall not exceed $1,000." Under the present Ontario motorist protection plan, a person wishing to provide income replacement higher than $600 weekly is entitled to buy extra layers of income replacement to a weekly maximum of $1,050. CAC (Ontario) believes the $600 limit plus the privilege of buying further protection should be left in place. We do not believe it is fair to ask lower-income wage earners to pay increased premiums to support high income earners.

Part II, income replacement benefits for care givers: This section appears to have answered the concerns of CAC (Ontario) by phasing out the benefits for injured care givers over the age of 65 rather than abruptly discontinuing them.

Part III, education disability benefits, lump sum benefits: Subsection 15(3) states, "If the accident occurred before the person attained the age of sixteen years, only one lump sum education disability benefit is payable under this section after the person attains the age of sixteen years." Yet the amount of the education disability benefit under clauses 15(1)(a), (b) and (c) is $2,000 for each year of elementary education that the person is unable to attend or successfully complete as a result of the accident, $4,000 for each year of secondary education and $4,000 for each semester of post-secondary education to a maximum of $8,000 in any one year. This regulation has some ambiguity, and we recommend that the wording be reviewed.

Subsection 15(2) states, "A person who was sixteen years of age or more at the time of the accident, is entitled to lump sum education disability benefits of not more than (a) one year...(b) one year...(c) one year."

This appears totally unfair. The weekly benefit will of course provide for a minimum standard of living while a student is disabled but in no way will provide compensation for the years of lost income he would have received had graduation taken place on schedule. CAC (Ontario) recommends that this limitation be re-examined.

Temporary return to education: This is a provision that will be of great benefit to injured persons.

Part IV, care giver benefits, entitlement to benefits: This section states, "No weekly care giver benefit is payable to a person under this section for the first week of disability." CAC (Ontario) finds this unacceptable. When a care giver is unable to care for a child or incapacitated adult, care for these people must be replaced immediately, not one week later.

As Mr Justice Coulter Osborne insisted in his report: "This benefit will acknowledge the need for immediate compensation for those responsible for children. When a person having responsibility for child care in particular is injured, the system must respond quickly. For this benefit there should be no waiting period."

CAC (Ontario) has stressed this in previous submissions and continues to see it as vitally important.

Part V, other disability benefits: CAC (Ontario) has made reference earlier in this submission to the first week of disability and would reiterate the same concerns with respect to this section.

Part VII, supplementary medical benefits and rehabilitation benefits: We note transportation to and from treatment sessions is to be provided for, including transportation for an aide or attendant. This is a good provision.

We presume that the expense for an attendant's transportation would only be reimbursed if a proper receipt is submitted. In the case of a friend, neighbour or family member driving the injured person to and from the sessions and perhaps staying with them during the treatment, a receipt such as that given by a taxi driver or an ambulance driver would not be available.

Regulations must be designed in such a way that these volunteer drivers can be reimbursed for their out-of-pocket expenses in a manner that does not invite abuse. This could result in two things: better public relations and, most likely, decreased transportation costs as well as paperwork.

On to part X, the death benefits: We note that these have been raised to the levels CAC (Ontario) approved at hearings on no-fault insurance held by the Ontario Automobile Insurance Board. CAC (Ontario) supports this.

Part XII, compensation for other pecuniary losses, housekeeping and home maintenance expenses and expenses of visitors: CAC (Ontario) feels that this is too open-ended and will be subject to abuse.

Part XIV, election of benefits: This is a good provision that spells out, "If a person does not elect which benefit he or she wishes to receive...the person shall be deemed to have elected the highest weekly benefit." This provision will be of great assistance to consumers and should foster a positive response.

Part XVI, collateral benefits: This section in effect makes the auto insurer the payer of excess insurance, while a claimant's individual accident and disability insurance becomes primary. It continues the same inequities that have existed under previous regulations.

As stated in previous submissions, CAC (Ontario) believes that automobile insurance policies should be made primary payers. If a consumer has taken the precaution and gone to the expense of providing for replacement of their own income, or whose employer has provided for income continuation or sick leave, perhaps in lieu of a higher wage, the insurance consumer should be entitled to receive the same benefits from their automobile insurance policy as any other person.

Part XVII, indexation, the weekly benefits: We recommend that benefits now set at $185 weekly be indexed in relation to the yearly cost-of-living index to avoid this amount becoming outdated and unrealistic. We believe this is particularly important for persons over 65 receiving their retirement benefit because they have few opportunities to increase their income.

This concludes our remarks on the draft regulations. We would just like to comment briefly on the right to sue for non-pecuniary damages, as outlined in subsections 267(1) and (2).

It has been the official position of CAC (Ontario) to support no-fault, government-run insurance which precludes an individual's right to sue for non-pecuniary damages. As of this date that position has not changed.

On behalf of CAC (Ontario) we thank this committee for allowing us to make this submission.


The Chair: Mr Mancini, three minutes.

Mr Mancini: I want to thank the Consumers' Association of Canada, Ontario branch, for its very thoughtful presentation this afternoon. I believe you made a couple of points I've been trying to make over the course of the debate regarding this particular legislation, Bill 164, which I consider to be regressive.

You stated in your brief on page 2, "It is necessary to try to keep premiums as affordable as possible, while maintaining adequate benefits for those unfortunate ones who suffer injury on the road." I think and I believe that sentence in itself explains what insurance should and ought to be: as much benefits as possible for the buying public at an affordable price.

I think you might agree with me if I said consumers today have maxed out on affordability as far as insurance is concerned and I would hope you would agree with me when I will say that any unnecessary increase in premium is going to have an adverse affect on families, on individuals and on the economy generally.

I was wondering if you were aware that the increase that the government has already acknowledged will take place because of this bill, using its own statistics, the Mercer statistics -- those statistics tell us that globally a 4.5% increase in rates turns out to be $185 million, if I'm not mistaken, taken right out of the pocketbooks of Ontario families and individuals. That is more money than all of the hospitals got last year.

I was wondering if you thought, since you represent consumers, if you believe -- using the government's statistics, not the others, which indicate it could be $568 million -- that the exchange is in fact fair and balanced. Do you think Bill 164 is worth the $185 million that will be extracted from the consumers?

Mrs Helen Anderson: It's pretty hard for us to say yes or no to that because we don't have the research capability to look at the figures or estimate what the insurance companies are going to make, but we agree with you that affordability is one of the main purposes of any legislation for insurance for consumers.

When they mentioned that 80% of the people on the roads have no accidents, and a lot of them have never had an accident, like my husband in 50 years of driving, it comes hard every year to shell out more and more and more for presumably no benefit. Mind you, we're glad that we don't have to take one of those benefits, but it still comes hard to pay an increase. That's why we recommended in here two things.

We recommended going back to the $600-a-week income protection, with the option of buying from an insurance company extra layers. The reason we say extra layers rather than buying disability income is because the disability, as someone also noted, as well as we do, is taken first, so that your own disability insurance would be first payer and then the auto insurance would be second payer or excess payer. So we recommend that you can buy, as the OMPP policy did provide for; people could buy extras over the $50,000 if they wanted to.

The Chair: Mr Mancini's got a 10-second question here. This'll be a first.

Mr Mancini: Was your organization consulted by the government prior to the introduction of Bill 164?

Mrs Anderson: I'm sorry. "Insulted"?

Mr Mancini: Was your organization consulted by the government before it introduced Bill 164?

Mrs Anderson: I don't believe so.

The Chair: Mr Tilson.

Mr Tilson: Different groups seem to be advocating the acquisition of extra insurance. I guess it can be said that not all of us can afford to purchase add-on insurance and that we look at the principle of innocent accident victims who are driving along, minding their own business, and all of a sudden they get into these terrible situations.

OMPP took a lot of their rights away. The rates did not go down; they stayed the same, although some insurance companies are saying they're going down slightly. Now we have an even worse system that's coming along in which the insurance companies are guaranteeing rates are going up because of these increased benefits. I guess it's fine to say that it would be nice to buy added insurance but, really, can we all afford that?

Mrs Anderson: May I comment on that? A person getting $1,000 a week out of this plan would have to have an income, we've estimated, of roughly $90,000 in order to have a net income of $50,000. Persons between, say, $50,000 and $90,000 I don't consider poor. I think they're quite able to buy extra amounts and I don't believe that it would be very costly. I think the insurance companies would be able to figure that out and it wouldn't be a lot of money. I'm afraid I can't agree with you on that one.

Mr Tilson: I guess the difficulty is, of course, that's assuming that no one is going to improve himself, that a young person or a person who's changing jobs is not going to change his income, that he's going to stay at the same level for the rest of his life. I think we could debate that issue, and you're the first of the groups that are talking about that, and I anxiously look forward to hearing more thoughts on it, because I have reservations.

Mrs Anderson: Can I just mention that the average weekly wage -- I don't know what that equates to in an annual income, but Statistics Canada did say that the average annual net income in 1991, I believe, was around $27,000. If that's average, that means there's an awful lot of people earning a lot less than that, and we'd hate to see them having to pay premiums to support people who are earning from $50,000 to $90,000 a year.

The Chair: I've got to go on to Mr Owens.

Mr Owens: I just very quickly want to gently correct the record. Mr Mancini asked the presenters whether the consumers' association was consulted during the preparation of the bill, and according to our records the consumers' association was consulted.

Mrs Anderson: I'm sorry. I thought Mr Mancini said "insulted."

Mr Mancini: You know something? I could believe both.

Mr Owens: We also appreciate the fact that you're not insulted as well.

Mrs Anderson: Mr Chairman, may I correct the record then? We were definitely consulted.

Mr Ward: You weren't insulted?

Mrs Anderson: We were not insulted, not at all.

The Chair: Okay, fine. Mr Klopp.

Mr Mancini: Do you think you were insulted now?

Mrs Anderson: No, not yet.

The Chair: Mr Klopp, did you lose your voice?

Mr Klopp: Yes, sort of. Thank you for being here today. Your opening comments struck me too, trying to get a balance between premiums, and you mentioned even yourself personally that you're lucky you haven't been in an accident for a number of years and, knock on wood, I hope you won't be.

One of the things I guess that I as a younger person with a family -- it seems I'm taxed and insured to death. If I wouldn't have any insurance premiums, I'd probably have a lot of money, but at the same time tomorrow morning I might run into something.

Under the numbers that I've been told in our own government study -- and we had a consultant who consulted with the insurance companies, plus advocates and groups that wanted their cake, and the insurance company wants its cake too, and then associations like yourself that try to make a balance also, and I think we did a fair align.

We increased some things but some things had to give, and we've even said that premiums could go up somewhere in the neighbourhood of 4.5%, although we're increasing benefits a lot more in a lot of areas. In fact, the number that I was told we're comparing -- and this is my question -- was 4.5%, and we'll assume that, but on the whole we're getting about a 13% increase in total benefits. My question to you is, is that a reasonable fairness in your mind, to pay a 4.5% increase in premium maybe and get the 13% increase in benefits?

Mrs Anderson: I think so, yes.

The Chair: You made a statement then, Mr Klopp.

Mr Klopp: I asked the question, did she think it was fair? She said yes.

The Chair: Oh, I didn't hear it. Did you nod?

Mrs Anderson: I did say I thought that probably --

The Chair: Okay, fine. I didn't hear it.

Mrs Anderson: I don't think anyone here would object to paying injured people what they need. We'd all say: "Thank you very much. There but for the grace of God go I." I would like not to have to be in that position and I would be willing to pay 4.5% more if it would help that person out. I don't think everybody, though, would be willing to pay enormous sums every year.

The Chair: I'd like to thank you for coming before this committee with your advice.

This committee will recess until 4:30. The subcommittee members will meet in the clerk's office for a subcommittee meeting. Also, the members will notice that the Ontario Medical Association, which was to appear today, cancelled out but has a written brief that has been handed out to all the members.

Mr Mancini: We'll be convening at 4:30?

The Chair: At 4:30 we'll reconvene here.

Mr Mancini: For whom?

The Chair: We've got the Board of Trade of Metropolitan Toronto on at 4:30.

The committee recessed at 1602 and resumed at 1629.

The Chair: We've just finished our subcommittee meeting. We've come to an agreement that we'll be in the Amethyst Room, 151, on Wednesday and Thursday and we'll be going by the schedule. There have been some different slots filled. Some presenters have cancelled, so we've filled all the slots and there'll be a new list from the clerk tomorrow. The day we're going to be hearing for the day we missed will be on February 9 here in Toronto, plus there were a few more slots that were filled in by the subcommittee. I think that's everything, so all business has been looked after.

I know Mr Mancini just can't wait to drive up here on Sunday night to hop a plane for Thunder Bay. He better have running shoes on between planes, because we just fly in for one hour and back out again, and you should get a good night's sleep before we get into committee. I guess on Thursday night, you should get well rested because we'll be here until 10 o'clock in the Amethyst Room. So if people have schedules back home, maybe they better cancel.

Mr Tilson: Mr Chairman, on a point of order: I've noticed that Mr Kormos's name has appeared at this committee. He's not a member of this committee.

Ms Haeck: He appeared.

Mr Tilson: I also know he's sitting as Chair of the committee considering OTAB, but he seems to drop into this committee periodically. I guess I'm just looking at the rules of this committee. As I understand the rules, any member of the House can appear at a committee and if recognized by the Chair, can speak. I have a little trouble with the impression that Mr Kormos has joined the Progressive Conservative Party. I can assure you he hasn't.

The Chair: Maybe I can make some clarification here. If you remember the last night of the House sitting, I was very insistent that I ask a question which I'd been waiting four weeks to ask. I went over and asked Mr Bradley if I could sit in his chair and ask a question from the Liberal side. Mr Elston said, "Sure, it's all right with me, being the House leader," and Mr Bradley stepped out of his seat. I sat in his seat and when it came time for the Liberals to ask a question, I stood up. At that time, the Speaker was a little bit flabbergasted as to what I was doing on that side, but the thing was that I wasn't in my seat and I don't belong to the Liberal Party. The Speaker did not recognize me. This would be the same thing. Whether Peter Kormos has his name down there really doesn't mean a damn thing.

Mr Tilson: I don't want to start recognizing how this place works. It probably would be best that I don't. I will say, though, that I have a problem with the impression that Mr Kormos is sitting next to the Progressive Conservative caucus. He's a member of the New Democratic Party. The government party is on that side and that is where he should sit. Mr Chairman, I have no problem with him addressing this committee or speaking to this committee as a member of the government and the New Democratic Party, if so recognized by you. I do have a problem with him being identified with the Progressive Conservative caucus.

The Chair: Mr Harnick, would you turn it over? Mr Kormos isn't here. I'll have to tell him where to shove his name, maybe shove it to the other side. Just flip it over right now.

I think it's important also, because if he is sitting, he should be sitting on the other side. He's welcome to sit on the other side. These are the normal procedures that go on here in committee. Maybe the clerk can do an explanation -- he had the book here with all the rules and regulations and he had a little tab on it for me -- that Mr Kormos, being recognized by the Chair, can sit on the government side.

If I can get to Mr Kormos to ask a question, I will. The thing is that I haven't even got to half the committee members who are sitting here. As you know, with the length of time we wind up getting for questions, we're lucky if we get one question. Someone who is not a member of the committee I don't think should be above the committee members, but if there is enough time, I will recognize Mr Kormos and let him ask a question.

Mr Harnick: With respect, Mr Chair, I think you would be advised to read what the standing orders say. It's my understanding that the standing orders say any member of the Legislature is considered a member of the committee and is able to participate in the committee except to the extent that he can vote on any matter. Quite frankly, I'm concerned that you're going to try to set a precedent here that could be detrimental for many members.

The Chair: I'm reading standing order 126. What we'll do is run over a little past five, since we're eating a little bit of time here. It says, "Any member of the House who is not a member of a standing or select committee may, unless the House or the committee concerned otherwise orders, take part in the public proceedings of the committee, but may not vote or move any motion nor be part of any quorum." I think we all understand that quite clearly.

The other part of Mr Kormos sitting is that the Conservative Party give him its time. I would like to wind up getting a ruling from the Speaker on that, if you don't mind.

Mr Tilson: Wait a minute. I don't even want Mr Kormos sitting with the Progressive Conservatives, let alone having our time. If he's going to have time on this committee, he has the time of the government; he doesn't have the time of the Progressive Conservative Party.

The Chair: I just wanted to find that out.

Mr Tilson: Well, it's been clarified.

The Chair: Okay, fine.

Mr Harnick: Mr Chair, on a point of order as well: He is a member of your caucus. I would think that if he's sitting here, you would afford him the opportunities that any other member here should have, unless there's some particular reason you don't like what he's saying and unless there's some particular reason your caucus has decided to muzzle him. But the fact of the matter is --

The Chair: I don't take that -- but Mr Harnick --


The Chair: Maybe the other thing, and Mr Tilson --

Mr Harnick: May I finish, Mr Chair?

The Chair: Okay; go ahead.

Mr Harnick: It would seem to me that if Mr Kormos is a member of the Legislature, which he is, and he's a member of your caucus, which he is --

The Chair: Correct.

Mr Harnick: -- he should be sitting here with your caucus and you should afford him the rights that any one of your caucus colleagues should have in this place.

The Chair: But the one thing, Mr Harnick, is that every chair was filled here. I know he went over and sat there, but the two of you were arm in arm, so I took it that you gave him permission to sit on that side.

Mr Harnick: I had no objection to Mr Kormos sitting beside me and I still have no objection to him sitting beside me, but I think it's passing strange that Mr Kormos is being muzzled by his own colleagues, and I think --

The Chair: I'm sorry --

Mr Harnick: May I finish, please?

The Chair: Go ahead.

Mr Harnick: I think --

Ms Haeck: Point of order.

Mr Harnick: No, I'm speaking on a point of order.

The Chair: No, wait. Let Mr Harnick finish.

Mr Harnick: I'm speaking on a point of order right now.

Ms Haeck: You've been known to interrupt others.

Mr Harnick: If you read the standing order you just read, it said the committee may permit that particular individual to participate, and if you're concerned about that and you don't want him to participate, then I invite you to force the committee to a vote to say that Mr Kormos can't participate. As far as I'm concerned, I will vote in favour of Mr Kormos participating and you, his colleagues, can vote against it. It just shows what kind of caucus you people have.

The Chair: I would say, Mr Harnick, that if we had the vote right now, all the government members would not change anything, but he would be able to sit down with our caucus, because there's been no evidence to the effect that Mr Kormos could not participate. It's just that he came in here and sat down beside you. You're arm in arm with him. I just took it that you said: "Sit beside me. There's an empty chair. There are no chairs on that side." I'll go to Ms Haeck.

Ms Haeck: Thank you, Mr Chair. I am just somewhat concerned that this is a discussion that in reality should have occurred at the subcommittee hearing and we're taking away from some good testimony that the board of trade has to offer us.

The Chair: They'll get their extra time. They'll get their half an hour.

Ms Haeck: Thank you, Mr Chair. May I suggest we move ahead since time is a-wasting.

The Chair: Okay, we'll carry on.

Mr Owens: All this for the price of a subway token.


The Chair: Okay. I'm sorry, gentlemen, that I didn't welcome you first, but I wanted to get some family business done here first before we got into more witnesses. I'd like to welcome the Board of Trade of Metropolitan Toronto. We will start and we will have one half-hour; you didn't lose any time at all. We're waiting for your presentation. Before you start, would you identify yourself for the purposes of Hansard.

In the presentation, if you can leave some time at the end for the committee members, as you can see, they want to ask questions. If you can leave at least 10 minutes, at least three minutes per caucus, they would appreciate it. But it's up to you; you're the presenter. You can use your whole 30 minutes on your presentation. The one thing about your presentation is that what you don't cover will be part of your brief and will be included, so it's not that if you don't read it into the record, it doesn't get published. Okay? You may begin.

Mr Robert P. Hutchison: My name is Bob Hutchison. I'm the vice-chairman of the insurance committee of the Metropolitan Toronto board of trade. With me is Mr Lloyd Hackett, who is a past chair of that committee. He is currently risk manager at the T. Eaton Co. I am a partner at the law firm of Borden and Elliot.

We are representing the board of trade. We have tabled a submission, which I gather has been distributed. There is a brief summary of the board and its constituency attached to it. Just to remind the members of the committee, the board is a representative organization of businesses and individuals engaged in business in the Metropolitan Toronto area. It's the largest organization of its kind in North America, and the submissions of the insurance committee are made from the point of view of the board membership itself.

The insurance committee, just so you will understand, is made up of persons who are familiar with the affairs of the insurance industry, representing brokers, buyers or insureds of insurance products, professionals, intermediaries, as well as underwriters themselves. I'd also like to emphasize for the committee the fact that the membership of the board is primarily buyers of insurance products and, for the context of this hearing, auto insurance coverages, and not necessarily sellers, although we do represent insurance companies that are board members.


I referred to the fact that a submission was tabled which contains a summary of most of our submissions. I'd also like to point out that the board has taken a long interest in this subject, since the subject of auto insurance I guess raised its head most recently in 1984 and the adventures we've had since. We have met with government since that time, with the ministers responsible for this area, including recent meetings with the current minister and his staff.

I'd also like to point out, just by way of a general comment, that our comments are general. We are not insurance technicians and we will not be of much assistance to the committee in the in-depth, technical aspects of it. We are not actuaries and our comments, because of that, are necessarily general.

I'd like also like to make it clear that my understanding is that this committee's mandate is to review Bill 164. Our position -- and I think other people commenting and I hope the committee accepts it -- includes general comments on the regulation itself, the benefits schedule. It's impossible to look at Bill 164 without considering the effects of the schedule.

With that introduction, I can summarize the board's position briefly. We are not in favour of the scheme proposed by Bill 164 or the benefits schedule from the point of view that we don't consider it's in the interests of the Ontario public in general. That conclusion is based on the aspect of cost, that this scheme will cost Ontario in general, and we're talking in general there. On the complexities of the proposals and their workability, the inequities -- I use that generally and I can come back to that -- of the proposals, and the general negative implications for Ontario as seen from beyond the borders of Ontario, we're concerned that Ontario is out of step with other jurisdictions, not only in North America but elsewhere, and that fact in itself will not be of benefit to Ontario and will hurt us in the long run in different and general ways.

This isn't to say that the board doesn't consider that amendments to the current auto insurance scheme in Ontario are not necessary, because we believe they are, and some of the particulars of that have been drawn to the attention of the minister's staff. But we do not believe that the scheme in general that's in force is fundamentally flawed and that it warrants a wholesale change of the kind that's proposed here, which has, apart from the negative aspects I referred to earlier, entailed what we consider to be a wholesale and disruptive change to auto coverages in Ontario.

That is, I guess, a summary of our position. What I'd like to do is refer to some of the main aspects of Bill 164 that this conclusion is based on, as well as some of the aspects of the schedule as we have it.

The whole subject of third-party liability is a concern. We are concerned with the introduction of the right to sue for non-pecuniary losses. The feeling is that this proposal will necessarily increase costs, which aren't necessarily costs that ought to be incurred in an auto scheme in Ontario at this time. On the other side, the economic losses which the board considers are very important to address and have not been dealt with satisfactorily under the proposals are restricted and are inequitable for persons engaged in businesses. On the latter aspect, our suggestion is to go back to the verbal threshold of a permanent serious disfigurement or impairment that's in the current legislation.

We have raised a point with the minister's staff that in some respects may be technical, but I think it's important that it be dealt with, and that is the cap on non-economic loss. To an extent, this is a drafting matter, but we are not satisfied that proposed section 261.1 satisfactorily codifies the cap on non-pecuniary losses currently in force by the courts, pursuant to the Supreme Court of Canada's judgements in 1978, the trilogy cases.

Another aspect of the bill that is of concern, not only in this legislation but frankly in other legislation that the board has commented on, is the fact that the guts of this proposal are included in the schedule and are not included in the legislation, where we think they ought to be. Obviously, certain matters are appropriate for the legislation itself and certain matters are appropriate for only the regulations; they're too detailed and subject to change.

When you stand back and look at this legislation as a package, our concern is that the government is continuing -- it's not just this government, but governments in general -- putting the substance of policies as important as this in the regulations, where it's beyond the review of the Legislature, if you will, and also, in effect, beyond suitable in-depth public comment.

The bill, as it was first presented, contained the withdrawal-from-the-insurance-market provisions for all classes of insurance. We're pleased that the government has proposed amendments to that provision, and we urge that those amendments be supported and adopted.

This particular point was very important for the board of trade as a representative of businesses which are sensitive to how Ontario businesses and Ontario in general in any constituency is observed from beyond our borders. Again, I referred to that point earlier. The negative implications of that kind of legislation, of not permitting entities to leave a jurisdiction -- it's one thing not to let them in, but not to let them out is completely unnecessary. It may seem like a minor point, and I think the minister almost indicated that in a previous meeting with us, but from a philosophical point of view and from the point of view of Ontario in an international community, it's critical. We're pleased to see that changes are proposed for that, and we urge that they be supported.

I'm going to turn briefly to the benefits schedule now. My first comment is one that has been voiced by a number of interest groups. The fact is that it's hopelessly complex and very difficult to follow. If it's difficult for people knowledgeable in the insurance industry to follow it and make sense of it and make decisions on it, it can hardly be expected that the public is going to be able to deal with this scheme on a user-friendly basis. We consider that the decisions they have to make and ensure the victim has to make in terms of selecting options and coverages will be very difficult. Instead of making the product more accessible and understandable -- it may be in a well-intentioned sense -- I think the result is that we've made it less accessible and less understandable. That is another reason why our general approach is to amend and tinker with, to the extent necessary, the existing legislation and format of auto insurance, rather than introducing wholesale something that's unfamiliar and difficult.


If there's one single aspect of the proposals that we're concerned about, it's cost. As I indicated, we're not actuaries; we can barely make head or tail of the fat actuarial reports that have been prepared by the various interested parties, including the government, the IBC and others. But all you have to do is read the conclusion to understand that the costs are going to be that way -- up -- rather than down or sideways. In our view, an increase of cost of coverage for this kind of a program is simply unsupportable and unnecessary at this time.

There shouldn't be any illusions that the cost will be borne by only one segment of the industry or the economy. It won't simply come out of the pockets of the insurance companies or the insured. The Ontario economy in general will bear these costs. Frankly, we don't think they can be justified in this economic climate, particularly for the product that's being proposed.

A further aspect of cost apart from the proposed benefits themselves is what we anticipate to be increased indirect costs in terms of the bureaucracy and administration required to administer legislation as complex as this. Experience has indicated time and time again that whenever something like this is introduced it's difficult. It's all-encompassing, because millions of Ontario people drive. The cost of that invariably will go up and will contribute to overall cost-inefficiency of delivering the product.

I mentioned the inequitable aspect earlier, and by that I didn't mean that things aren't fair. Providing greater benefits to people is fair in one sense. What we mean by "inequitable" is the fact that this kind of legislation allocates risks and benefits on an arbitrary basis rather than on commercial experience or underwriting insurance principles. To the extent it does that, it's not only inefficient but it's therefore inequitable to the economic interests of people who are affected by auto insurance, and that's a very wide range of the public.

We are concerned -- and this is a point that is perhaps of interest to a segment of the insurance industry itself -- that our information is that the reception by reinsurers, most of whom are offshore, out of Canada, is negative. The treaties that are being rewritten currently contain the opportunity to amend the coverages or terminate them in the event that this legislation comes into force. We can't predict what can happen, but the message that we are receiving is that the scheme will reflect negatively and, at the very minimum, result in increased reinsurance premiums which, in turn, will have to be borne somewhere in Ontario. We don't think it's necessary. We also think that community, being an international community, again will reflect negatively on Ontario as an economy that ought now to be participating more, rather than less, in international commerce.

The last point we hope is a positive comment. The board, for a number of years, has advocated and encouraged other means of making auto insurance a safer, fairer product. The road safety initiatives announced by the government are supported by the board. We have reviewed them and encourage the government to proceed with them sooner rather than later. The beneficial effects in terms of cost recovery and reduction of costs in the auto insurance markets will be immediate. We'd encourage the government to pursue those.

Those, Mr Chair, are our comments. We'd be happy to answer questions to the extent we can, within our --

The Chair: Okay. We have five minutes for each caucus, starting off with Mr Tilson.

Mr Tilson: I was interested in your comments about trying to work with the existing system and I hope to hear more of that. I know our party certainly has never supported the threshold test that's put forward by Bill 68 or the Liberal test, the OMPP. But I guess it's a concern that we look at how long it took to establish the rules, the tort law, the pre-OMPP. We now see cases like Myer and Dalgliesh, who, incidentally, are coming to this committee; I understand Myer's solicitor is speaking in Windsor and Mrs Dalgliesh herself, I believe, is speaking on Thursday night. It'll be interesting hearing their thoughts.

But if nothing happens to Bill 68 there's certainly going to be some litigation. The insurance people are saying there may be a whole slew of cases which any new piece of legislation, particularly something like this that's changing the whole system of the law -- in other words, Myer and Dalgliesh are probably the start, and the insurance companies are saying, "Give it a chance." I'd like their thoughts on that as opposed to simply saying that the words that are used in the current threshold test are not adequate. You talked about amending that test.

Mr Hutchison: We think we should amend it in the sense of leaving it as proposed in OMPP, as it exists now, because we think that if there's going to be recourse to tort that's where it ought to be, and frankly, that threshold is as good as any that we've been able to identify.

Mr Tilson: So you're agreeing with some of the insurance companies that are saying that the courts will ultimately tell us what that test means.

Mr Hutchison: Yes. They will anyway. No matter what test you write, it'll end up before the courts and we'll be going through the same exercise. As a general answer, though, to your question as to the existing system and whether we should be tinkering, our feeling is that the insurance industry and the Ontario public can't take any more of this footballing with insurance.

Mr Tilson: It'll take six years to define that test.

Mr Hutchison: It's just going on and on and on. Business -- and we're representing general business constituencies -- is cynical of the process, and it's time to put a halt to it. I'll also be frank with you that the board of trade did not take a position on fault or no-fault per se, and has not.

Mr Tilson: I have one other question, Mr Chairman.

The Chair: You've still got three minutes to go.

Mr Tilson: Thank you. And then Mr Harnick, I think, has a question.

There has been some mention of the erosion of the institution of OHIP, that Bill 164, because of the benefits and the way it's going to be set up, will erode the institution of OHIP, and then indeed OHIP could go bankrupt because of some of the provisions. Has your organization looked at that subject? Are you able to --

Mr Hutchison: No, we haven't.

Mr Tilson: Mr Harnick.

Mr Harnick: I was interested in your categorization of the board of trade as being primarily a business-oriented organization -- correct?

Mr Hutchison: That's correct.

Mr Harnick: As opposed to a consumers' protection group or anything of that nature.

Mr Hutchison: As opposed to consumer protection. But just to clarify that, a good deal of our members are individuals, and business people are individuals who drive cars and have families and live in houses.

Mr Harnick: That's why I was struck -- and really, I think you stated it very nicely -- when, under the aspect of "inequitable," you stated that "benefits are defined by classification of the insured rather than loss incurred, actual circumstances or the desire or ability of the insured to have greater or lesser coverage." I think what you're saying there is that if people have income to protect they should be allowed to protect that income. Is that correct?

Mr Hutchison: That is correct.


Mr Harnick: In other words, you don't subscribe to this idea of the government taking away economic rights or economic loss.

Mr Hutchison: Absolutely not. We recognize that there have to be some legislative parameters but they should be as flexible as possible to protect those economic interests.

Mr Harnick: I see. I don't know if you were here earlier, but we had an interesting discussion with one of the people who is the author of this. As a businessperson yourself representing a business --

Mr Hutchison: Author of which?

Mr Harnick: Of this Bill 164.

Mr Hutchison: Oh, I see. Okay.

Mr Harnick: We were told that someone who would be a student and rendered unable to complete his education and ever work because of his injuries would be entitled to, I think, $391 a week for the rest of his life, indexed. Is that, in your estimation, an adequate amount of money to represent the loss of someone who could be productive in the workforce?

Mr Hutchison: I don't know whether the numbers are right, but probably not. We have had other examples raised to us, and I can't comment on the particulars of them, but a high-earning professional who gets knocked out suffers as does any high-earning individual.

The Chair: I'm sorry. We'll have to go on to Mr Phillips. I know I skipped you at first and went to the Tories.

Mr Phillips: Why are you going that way?

The Chair: Okay. You were supposed to be first but --

Mr Tilson: They always go backwards here.

Mr Phillips: I appreciate the comments on the costs and what not because that's one of my focuses, in that I have no idea where the NDP's priorities are now, none at all. They've said that hospitals can get no increased money: zero this year, next year, none at all. They've said they're going to have to raise taxes.

But here, even the most conservative estimate of increased cost to the taxpayers, this thing is going to cost a minimum extra $160 million. In addition to the normal increases, this will be an incremental $160 million, which is frankly a lot of money. If you look at some of the other estimates of people who've looked at it, they say it could be up to $500 million of incremental premiums, so that's the range. They got the most conservative -- the smallest number is $160 million plus overheads up to $500 million, and $500 million, by the way, is like taking the sales tax up one half of 1%.

The reason I go through all of this is that somehow or other the NDP think this is in isolation, that somebody out there who doesn't pay taxes and that sort of thing is going to pay this. I guess my question to the board of trade is: In the environment that you see out there right now in terms of the public and what it's trying to deal with -- I think normally we're looking at 1% increases in income, that sort of thing -- do you see an incremental minimum $160 million -- by the way, I keep stressing that this is in addition to regular raises; this is just what this adds to it -- having any impact on the economy of Toronto or Ontario?

Mr Hutchison: Any increased non-productive cost, which these costs are, will have a negative effect on our economy. It has to come from somewhere. It won't come out of the air. We're sitting in the middle, in view of your earlier discussion of who's on what kind of table. I don't know who to blame for it, but any proposal that increases the cost of a non-productive nature such as this is going to have a negative impact for business and what runs our economy.

Mr Phillips: It's going to be very interesting in the budget debate, as we head to it, that the government feels it can take, as I say, a minimum $160 million out of the pockets of people to fund this. They said, "No, the hospitals aren't going to get any extra moneys." They're fascinating priorities for me to watch.

The second question I have is just your comment about the image this gives Ontario in the international investment community. Again I'd be interested in the board's perspective of how things are right now in terms of investment coming to -- I know you're Metro Toronto focused -- but what the current impression of Ontario is. Is this something that we as a committee should weigh heavily or is it a relatively minor thing?

Mr Hutchison: We think it's very important from a kind of macroeconomic point of view from Ontario. We rely on foreign capital, and every other jurisdiction is venturing out and trading with the world. We see this kind of expensive legislation that's possibly out of step and unaffordable as negative to the economic prospects of Metro to the extent it reflects Ontario in general.

The Chair: Time's run out; it's five after. Mr Owens.

Mr Owens: I have a quick question, then I'll turn it over to my colleagues. I wanted to thank you for your presentation as well as for your support on our proposed withdrawal amendment. While it was our view that the initial legislation may not have been as draconian as the industry felt, we want to demonstrate that we are listening and have gone forward with an amendment.

I'm pleased that you raised the issue of costs in your presentation. This afternoon George Cooke from the Insurance Bureau of Canada indicated in his presentation that we've set up a task force to deal with some of those cost issues and that in an interview that Mr Cooke did earlier in the week it was his view that our government again was hearing some of the concerns that you've raised with respect to cost.

Could you comment on our task force, and are you as a board of trade encouraged by the multiple partners that are on this task force and the role that they have to work through?

Mr Hutchison: A simple answer to that is yes, provided it's effective and provided that what's proposed or presented or submitted, whatever their mandate is, is taken into consideration and weighed in government policy.

Mr Owens: Thank you. Christel?

Ms Haeck: I was interested in hearing your comments about how this proposed legislation is going to affect Ontario in the broader marketplace. As part of my personal research for this committee -- and I don't pretend to have it all memorized -- I did in fact request and get details about other jurisdictions within a reasonable distance of the province of Ontario. I'm wondering, have you investigated the whole insurance industry to that extent yourself?

Mr Hutchison: Are you talking about other models like Quebec and BC?

Ms Haeck: Yes. Even the OMPP uses some models that were taken from Michigan, which we all have obviously a range of concerns or accolades for, but there is a range of things that are available within a number of states not too far from us which you make mention of, the fact that this would affect our market standing with the United States.

Mr Hutchison: I can answer that generally. I can't compare the systems, but from our point of view, the economy of Ontario is quite distinct from the economy of the Prairies, where they have programs, and BC, and even Quebec, for that matter, which is for various reasons isolated and isn't the international player Ontario is. Ontario's economy has been diverse, as opposed to the primarily resource-based economies of those jurisdictions, and we depend far more and we're far more in the view of other jurisdictions. You only have to watch Ontario's credit rating. Nobody hears about the credit rating of other provinces. Ontario is the economic guts of Canada and it's more important in context.

Ms Haeck: I won't in any way disagree with that, but I live in St Catharines, which is 10 miles away from the border, and New York is obviously the other side of it.

Then you have: "In New York a law capping physicians' services at 100% of the medical fee schedule for workers' compensation has produced overall premium savings of 10% to 12%. New York regulators are also investigating the cause of cost increases, such as overuse of new technologies," which raises the whole thing about medical fees, "the growing use of chiropractor services, which now account for 15% of personal injury protection."

You can go into New Jersey. Massachusetts is dropping its verbal threshold system and in fact coming into a bill for reduction of the amount accident victims can win in court.

The Chair: Question?

Ms Haeck: Have you looked at this and would you be prepared to look at what we're doing and really judge it in the context of what's happening in North America?

Mr Hutchison: We'd certainly be prepared to look at it. I think the caution is you can't look at those kinds of specific benefits in a vacuum. What we're looking at here is what this proposal is going to cost Ontario, and that's our concern.

The Chair: I'd like to thank you for coming before this committee. I'm sorry that you got detained 10 minutes to get started, but things happen like that the odd time.

This committee will be adjourned until 10 o'clock tomorrow.

The committee adjourned at 1711.