Wednesday 27 January 1993

Insurance Statute Law Amendment Act, 1993

Fair Action Insurance Reform Committee

Richard Bogoroch, member

Dr Jack Carr, professor of economics, University of Toronto

Progressive Casualty Insurance Co of Canada

Andy Rogacki, president

William J. Conner, assistant vice-president and product manager

Mothers Against Drunk Driving

John Bates, founder

Markel Insurance Company of Canada

William Grant, president

David Gaskin, loss prevention consultant

Actuarial Consultants of Canada

J.B. Patterson, life insurance actuary

Mel Swart

Ontario Psychiatric Association

Dr R.I. Hector, representative and past president

Reinsurance Research Council

Angus H. Ross, president

David Wilmot, chairman, technical underwriting committee

Ontario Chiropractic Association

Dr Robert Haig, board member and past president

David Chapman-Smith, general counsel

Dr Deborah Kopansky-Giles, board member

Insurance Brokers Association of Ontario

Bob Carter, executive director

Frank Sytsma, president

Bob Stuart, president-elect


*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 Mr Kwinter

Owens, Stephen (Scarborough Centre ND) for Mr Sutherland

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

Also taking part / Autres participants et participantes:

Bass, Julia, executive coordinator, automobile insurance review, Ministry of Financial Institutions

Owens, Stephen, parliamentary assistant to the Minister of Financial Institutions

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 1037 in room 151.


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): Good morning, or just about good afternoon. We're getting close to that. Sorry for the inconvenience. This is the standing committee on finance and economic affairs. This is day 2, Bill 164, An Act to amend the Insurance Act and certain other Acts in respect of Automobile Insurance and other Insurance Matters. Starting off a new day, I see we have quite a few people sitting in the audience and I'd like to start off on who the committee is and what ministry you're with, starting off with Mr Ward.

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

Mr Paul Klopp (Huron): Paul Klopp, MPP for Huron.

Mr Paul R. Johnson (Prince Edward-Lennox-South Hastings): Paul Johnson, MPP for Prince Edward-Lennox-South Hastings and parliamentary assistant to the Treasurer, Floyd Laughren.

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

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

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

Mr Chairman, I think it's unnecessary for the members to say who they are parliamentary assistants for. I would hope that we're here representing the Legislature. We're not here representing ministries. If they need it for their own ego, that's fine, but as a matter of principle --

Mr Dadamo: Speaking of ego.

Mr Phillips: As a matter of principle, Mr Chairman, these committees seem to be turning into government and opposition and we are losing the role that we're supposed to be playing. If Mr Kormos chooses to come in this afternoon and you won't let him sit with his colleagues and he has to go on "the opposition side," that's a further indication these committees are losing their role.

I raise that, Mr Chairman, because you said "what ministries they're with." If they're here representing ministries, I'd like to know that.

The Chair: I thought that Mr Mancini would say he's the auto critic. Okay, fine. We won't do that any more then, Mr Phillips.

Mr Phillips: Well, they can do it if they want.

The Chair: Mr Tilson.

Mr David Tilson (Dufferin-Peel): My name is Mr Tilson.

Mr Stephen Owens (Scarborough Centre): And he represents no one.

Mr Phillips: I hope he represents the public.

Mr Tilson: I represent Dufferin-Peel and I'm in opposition to Bill 164.

Mr Charles Harnick (Willowdale): Charles Harnick, Willowdale, and I hope we can get this going now that the NDP's decided that we can sit in this room and have this televised, and we're only about half an hour late.

The Chair: And finally, the people at the front here.

Ms Pat Girouard: Pat Girouard with Hansard.

Mr Robert Nishman: Rob Nishman with legislative research.

Mr Harnick: And you were the people who wanted these introductions.

Clerk Pro Tem (Mr Franco Carrozza): Franco Carrozza, the clerk.

Mr Owens: Steve Owens, MPP, Scarborough Centre, as well as being the parliamentary assistant to the Minister of Financial Institutions.

Ms Julia Bass: I'm Julia Bass. I'm with auto insurance review.


The Chair: Okay, since we've introduced, we'd like to find out who our first presenters are. They're the Fair Action Insurance Reform Committee, known as FAIR, and we have a Mr John Scott and his associate. If you don't mind, identify yourselves for the purposes of Hansard. Since we started late, you still have one half-hour and we'll be running about 40 minutes behind all morning. Okay, if you don't mind starting, and if you can leave some time at the end for questions from the members of the committee here.

Mr Richard Bogoroch: Let me just correct something: My name is Richard Bogoroch. I appear on behalf of FAIR, and with me is Professor Carr, who'll be here to answer whatever questions members of the committee have.

Let me state at the outset that FAIR is very much opposed to Bill 164. In our submission, copies of which have been provided to you, we have outlined our objections to it. I've been informed of what other people who have testified before this committee have said, and I will not repeat what's been said yesterday. I'm going to try and do what many lawyers have difficulty in doing: I'm going to be brief and I'm going to confine my comments to the parts of the bill which we have deep difficulty with.

Let me state at the outset that the law is unfair, it's unjust and it's cruel. I'm going to tell you why it's cruel. I'm going to also tell you what solutions FAIR has.

Fundamentally, what this law does is strip away the rights of innocent accident victims to sue for economic loss. Economic loss is fundamental. No jurisdiction in North America which has either a threshold or a partial no-fault scheme has ever stripped away economic loss. In fact, how fundamental it is and how important it is to innocent accident victims has been underscored by the comments of ARCH, which appeared yesterday, by the Metro chamber of commerce and the Advocates' Society. Diverse groups with different political objectives and agendas and different views on this legislation all condemned the legislation for stripping away the right to sue for economic loss.

What is so important about economic loss? Let me give you an example, and this may have been discussed yesterday before the committee. You have a breadwinner who's 35 years of age with two young children and a spouse. He's earning $35,000 a year. He has no other insurance, and he is killed by a drunk driver. All that his spouse and children will get under this legislation is $120,000; $120,000 for ever to compensate them for the loss of lifelong support.

What's going to happen after three or four years when that money is used up? More than likely, that family in the example I've given will be required to take social assistance. The effect of the bill in the example I've given will force young families to be supported by the taxpayers because the law does not provide for economic loss. That example is in our brief, and I invite you to look at our brief.

That's the effect of Bill 164. Is this government intending to shift the responsibility from the insurance industry to the taxpayers of this province? Are families that have a father or mother who's a breadwinner and is killed in a traffic accident going to be reduced to public assistance because of this inadequacy and their inability to obtain compensation for economic loss? No one anywhere in North America, no Legislature has ever done that.

Let me give you another example, and we heard this yesterday too from the representative of the Advocates' Society. You have a student who is 16 or 17. He wants to be somebody. He's interested in a trade, a career. He wants to be a plumber. If he meets the apprenticeship requirements, he should be guaranteed a good and decent living for his family. If at the age of 17 he's badly brain-damaged in a car accident such that his career, his dream, is taken away from him, this legislation will, by the time he's 30 years of age, start paying him approximately $381 a week, $20,000 a year, to somebody who had a good career taken away because of a car accident.

Mr Mancini: Is that $320?

Mr Bogoroch: That's $380 a week. This is the effect of the legislation: to destroy the hopes and aspirations of young people, to destroy families, because they do not want to allow for economic loss. It's unbelievable that this government, which stood shoulder to shoulder with injured persons while it was in opposition and which railed against the Liberals' plan, now is trying to strip away the right to economic loss.

Many of us will recall that Bob Rae attended a rally at the Sheraton Centre with members of the disabled community condemning bitterly and in the strongest possible terms the OMPP, the current plan.

Mr Ward: The Liberal plan.

Mr Bogoroch: The Liberal plan. Thank you. "If we're elected, we'd give back the right to sue. We care about injured people." Now we see what he's doing. It's a dreadful, dreadful turn of events.

But there is a solution to it; there's a solution, if this government wants to listen. FAIR Committee is proposing an add-on: that people be given the right to purchase excess coverage for economic loss. This was discussed yesterday, but it's fundamentally important and would involve a simple amendment to the legislation to allow people, to allow families, to make sure that in the event the worst scenario happens -- the breadwinner or loved one is killed in an accident and the means of support is taken away -- a simple add-on, the right to purchase excess coverage for economic loss, will be available. It's not mandatory. The legislation would simply allow that if people want it they can purchase it from the insurers.

We have today what is known as standard endorsement form 44, which provides for underinsured coverage or excess coverage. It's about $10 or $15 a year. It ensures people that in the event they are injured or killed by a person who doesn't have adequate insurance, their own insurance company will provide the difference. It's called excess coverage. It's simply an additional layer; it's very modest. FAIR feels very strongly that if this government wants to restore its promise to the people of Ontario, one of the ways it can do that is by providing this add-on.

Now, economic loss is not the only objection we have, and I have a very brief time to talk about FAIR's position. Let me say another thing which we're concerned about: We're concerned about the deductible. The deductible of $15,000 is simply too high. As a trial lawyer and as a group of trial lawyers, we know that a $15,000 deductible in effect will scare away, frighten, dissuade people with cases worth $20,000 to $30,000. Here's why:

A 12-year-old boy is injured in a car accident and breaks his arm. He has to have an operation. He has to have some plates and hardware put in. It's called an open reduction. He's left with a scar, but he's got a good result, he's got good function. That case, any trial lawyer will tell you, could be worth anywhere from $15,000 to, say, $25,000. Let's say it's worth $20,000. Does this family want to take the risk of going to court for $5,000, when a judge or a jury can say, "Maybe it's $15,000," and get nothing and then have to pay all the costs? No. So instead of being compensated by this scheme, they won't, because they'll be out of court. They won't be able to take the risk of going to court. That's the effect of a $15,000 deductible.

Let me give you another example. These are examples which lawyers who practise in the field will tell you are a fair assessment of a person's damages. A 58-year-old man injures his ankle in a car accident. The ankle is broken. He has an operation and a good result obtains. He's left with a scar and he's left with the hardware in his ankle. Because he's older and he's not an athlete, he decides not to have the hardware removed and he puts up with the hardware in his ankle. He's got some moderate pain while running or walking long distances but, all in all, a fairly good recovery. The courts might very well assess that claim at anywhere from $15,000 to $22,000. Again, in that example, would that person take the risk of going to court for maybe $5,000 or $7,000 when it's open for a court to award $15,000, $17,000, $20,000? Of course not. No one's going to take a case for $2,000 or $3,000 when they could end up being out of court, losing and being forced to pay the costs.


A $15,000 deductible is not going to have its intended effect. Let me state what the deputy minister said yesterday: "The reason for 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." In our respectful submission, a $15,000 deductible will not do that. It will eliminate more significant and serious claims.

If they want to eliminate minor claims, then we submit that a $7,500 deductible will accomplish that, because that will dissuade the minor claims which the system does not want to have before the courts. The three- and four-year were known as whiplash cases, soft tissue injuries to the neck or back. Those cases will be removed, because those cases range anywhere from $7,500 to $13,000 or $14,000. Those people with those injuries, if that's what the system wants, won't be able to sue.

But by having a deductible which is too high, serious injuries will not meet the deductible, and people with serious injuries will be shut out of the system. To borrow a phrase used in libel law, it will have a "chilling effect" on those injured people, on those men, women and children throughout the province who have injuries such as broken arms, broken legs, fractured kneecaps and a wide variety of other fractures. If that's the intention of the Legislature, it is not going to be accomplishing that. If its intention is to get rid of minor claims, it will be getting rid of serious claims.

I've gone on about the problems which FAIR has. It is fundamentally important that government be reminded of its promise it made to injured victims. What Bill 164 does, in our opinion, is far worse than the Liberal plan, and there are no more vociferous critics of that plan than FAIR. At least with the Liberal plan, with all its problems -- and it is a bad, flawed plan -- people who were seriously injured had rights to economic loss: the quadriplegic, the brain-damaged person; if it wasn't their fault, they knew they would have a measure of dignity provided to them because of the rights to sue for economic loss.

This plan, if implemented without any change, is far worse than the Liberal plan. Members of the committee I hope will be aware of that, because this is the government which has always sided with the innocent victim. This is the government which was in favour of rights for innocent victims, which looks after the little people. This plan will not accomplish that. You may criticize us as lawyers with self-interests, but hear us out. We've been marginalized, defined and delegitimized by every political group, but what we say is right and what we've had to say about the threshold, the Liberal plan, has been right.

Those conclude the comments I have. I know Professor Carr has some comments he wishes to make before the committee.

Dr Jack Carr: I'm going to be very brief. We want to leave time for questions, and I've actually appeared in front of a similar committee, in front of the OMPP.

Let me just state my particular biases in this particular matter. I'm an economist and I've taught at the law school at the University of Toronto, and I've done research since 1972 on this issue. In 1972 I published an article called The Shaky Case of No-Fault Automobile Insurance. No-fault automobile insurance just came into North America in 1971 in the state of Massachusetts; that was the first time it was introduced, and I was interested in it right away. I was against no-fault then and I'm against it now. Let me state my biases.

But having said that, when I talk to colleagues in the law school -- and there are some colleagues who in fact are in favour of no-fault. If you talk to people in favour of no-fault -- and there are people in favour of pure no-fault or threshold systems or partial no-fault -- the people in favour of partial or threshold no-fault will tell you that an inviolate principle is that you always allow people to sue for economic loss, you always allow people to sue for excess economic loss.

And that's been history: Every US jurisdiction allows suits for economic loss. In Michigan, which was sort of what the OMPP was modeled after, which is probably the most stringent of no-fault systems in the United States, whether you pass the threshold or not, everyone has a right to sue for economic loss. It makes no sense to take away the rights of people to claim full recovery. Why should innocent people injured in an accident be out of pocket?

If you're injured in a boat accident, if a drunk hits you on Lake Simcoe in a boating accident, you have rights to sue that individual and get full recovery for economic loss. If you put that same drunk on Highway 401 going to Lake Simcoe and he hits you there, you're out of luck, because then you no longer have rights to sue for economic loss. To put it mildly, it makes no sense.

The argument is that we're going to save on legal fees: We don't have to prove fault; we're going to give statutory accident benefits. The reason I say it makes no sense in the context of Bill 164 is that Bill 164 restores the right to sue for pain and suffering, so you're already going to have a court case where you have to establish fault, you're going to have to hire a lawyer, you're going to have to have fault just for pain and suffering. If you're going to have that court case anyway, why not allow suits for excess economic loss?

In fact, my colleagues in the law school favouring no-fault say, "Maybe pain and suffering isn't as real a cost as economic loss." I don't agree with them, but that's their argument, and the argument in the law and economics literature is that if you're going to take away, if you want to save costs in the system, if that's the argument, then you take it away from pain and suffering, you don't take it away from economic loss.

I urge you to read our brief and look at a number of examples. These are just a few of a large number of people: infants, students, senior citizens, young workers starting out in their career. There's a whole slew of people who are left out, who fall between the cracks. The government tried to fill in as much as possible, but you really can't fill in all the cracks.

You really need to give people the right to recovery for full economic loss. If you're going to do one thing, allow recovery for full economic loss. That's the most important thing. There are jurisdictions which take away the right to sue for pain and suffering. There are no jurisdictions that take away the right to sue for economic loss.

This is something which should be dear to the NDP. The argument is that you want to look after innocent accident victims, that people should not be out of pocket. There are some cynical commentators who claim that the reason you have this system which doesn't seem to make sense, a system which gives rights to sue for pain and suffering but not for economic loss, is because the NDP made a pledge to restore the right to sue and didn't know how to keep its pledge, and what it did is it put a fig leaf on. After the government came into being, it decided to abandon its pledge, abandon its promise and put on this fig leaf, this minor fig leaf, of suing for pain and suffering, with a deductible. It's so the government can claim it fulfilled the pledge.

If you look at it in terms of cost, not in terms of the number of people but in terms of taking away the right to sue from quadriplegics and paraplegics -- something the Liberals wouldn't do -- if you look at how much cost you take out of the system by taking away the right to sue for economic loss and adding in the right to sue for pain and suffering, on net you're still taking away 15% of total cost. You're still reducing total cost.

That means that as far as economics go, the NDP has really not fulfilled its promise, an important promise and a promise which goes to the heart of NDP constituencies: to the worker, to the student, to the senior citizen. They're the people who in fact are going to lose.

I urge you to consider the aspects of the bill, to consider who's hurt and to at least restore in some measure the rights of accident victims to claim full compensation for economic loss. Let's open that up for questions.


The Chair: Mr Mancini, three minutes.

Mr Mancini: Three minutes. You're very generous today, Mr Chairman.

First of all, I thank both gentlemen for their brief. I want especially to thank you for highlighting how important economic loss is. While I understand that you did not support the Ontario motorist protection plan, I do believe you have articulated very clearly this morning why the Ontario motorist protection plan included economic loss and what it means to factory workers and other wage earners, what it means to students and to other people.

I've done some calculations here. Based on the government's own statistics, Mercer's own statistics, which have been challenged as being on the low side, we have concluded that Mercer's plan -- the government's plan, the parliamentary assistant's plan -- will increase rates in Ontario to the consumer by 4.4%. That's the low. That means Ontario consumers will pay $200 million more in insurance rates, more money than the government has given to all of the hospitals in this province. Do you think the consumers are getting any value for that $200 million?

Dr Jack Carr: The consumers are going to pay more. How much depends on which actuary you believe.

Mr Mancini: I'm using the government's actuary. That way, the members on the government side can't howl.

Dr Jack Carr: The problem is that people are paying more but innocent accident victims are getting less. If you were a quadriplegic or a paraplegic as a result of an accident, you wouldn't want to have that accident occur under this bill. Before, you had the right for full economic loss, and economic loss included the cost of future care, if you needed attendant care. If you are quadriplegic, a $3,000-a-month limit for attendant care is not enough if you're going to be cared for at home. If you're going to be cared for in an institution, it's okay, but if you're going to be cared for at home it is not enough. If you were a plumber, you would not get full compensation. If you were just starting out in your career, you would not get full compensation. A large number of people in fact would be hurt.

Also hurt would be the low-income worker. It's interesting that there's a part of the plan which somehow gets ignored. The rules of the income replacement plan have been changed. It used to be 80% of gross; it's now going to 90% of net. That means that the low-income worker, if disabled for a year and an innocent accident victim, will get less. A worker earning $20,000 a year will receive 11.8% less under this proposed bill than under the Ontario motorist protection plan. A $30,000 worker will receive 15.9% less and a $40,000 worker will receive 18.4% less.

The few people who gain happen to be negligent people who are high income. An $80,000-a-year victim receives 46.1% more. It hardly seems that this would appeal to the NDP constituency, to hurt low-income workers and help high-income workers, but the plan does exactly that. You're paying more and getting less.

The Chair: Mr Tilson.

Mr Mancini: They claim to be experts on the plan, so they must know what they're doing.

The Chair: Sorry, Mr Mancini. Mr Tilson.

Mrs Elinor Caplan (Oriole): I don't think they know what they're doing.

The Chair: Mr Tilson, you have the floor.


The Chair: Excuse me. Mr Tilson has the floor. Somebody took my hammer away. Mr Tilson, go ahead. We're starting over again.

Mr Tilson: Thank you, Mr Chairman. I'm interested in your apparent compromise to lower the deductible to $7,500. I must confess that I have a lot of problem with the whole principle of the deductible, probably for many of the reasons you speak of. Whether you're talking about the serious and/or permanent injuries, whatever test we're going to use or contemplate, the fact is that no matter what deductible you're talking about, whether it's $15,000 or $7,500, that's still coming off the top of those serious injuries.

The second concern I have with the deductible, as I'm sure you have, is that no matter where you are, the courts are going to lean over backwards to increase that amount. At least, I believe they will. You in your wisdom may think not, but I believe they will. The $15,000 -- to get over that amount, the courts will lean over backwards to increase that amount.

Thirdly, it does not make any sense to sue for $20,000; with all the legal costs, you'd probably lose. So I'd like your comments as to what your apparent reasons are. What you appear to be doing is supporting the deductible principle.

Mr Bogoroch: FAIR's position has been well known. We were against any type of deductible. Unrestricted right to sue has always been the benchmark of FAIR. In fact, for a time we thought it was the benchmark of the NDP. That's not the case. But in terms of the deductible, we feel no deductible is necessary. However, to assist the committee, we wanted to highlight just how onerous a $15,000 deductible is, because, in practice, for those out in the trenches dealing with the cases, dealing with the rank and file who've been injured and need compensation, a $15,000 deductible is really a $20,000 to $22,000 deductible, and it will stop those seriously injured victims from going to court. We have a great deal of problem with that deductible; it's much too high.

We would prefer there be no deductible, but if there is going to be a deductible, $7,500 accomplishes what the deputy minister said. It would eliminate the smallest claims, which are seen to burden the system. Any higher deductible, a $15,000 deductible, does not accomplish what the deputy minister said before the committee.

Mr Tilson: Having said that, and listening to the rates of the four groups, the four consultants or whatever they're called, that presented the potential for possible rates --

Mr Owens: On a point of order, Mr Chair.

The Chair: Okay, Mr Owens.

Mr Owens: Mr Tilson has referred to four consultants. In my understanding, there have only been two actuarial studies.

Mr Tilson: That's not a point of order.

Mr Mancini: That's not a point of order, Mr Chair.

Mr Tilson: Tell him to sit down.

The Chair: Carry on, Mr Tilson.

Mr Tilson: The fact of the matter is that there are four reports; the latest one of course is Mercer. That's based on this current proposal of Bill 164. Professor Carr, listening to your $7,500 proposal, what effect would that have as far as increasing rates?

Dr Jack Carr: We haven't gone and examined exactly how much more that would cost, but if you do that, it will in fact cost more; there's no doubt if you give more benefits to people. But that's a question and a basic fact this committee has to understand: One of the ways the Ontario motorist protection plan at least prevented rates from going up and put huge profits in the pocket of the insurance industry is that it reduced benefits by almost half. You can get rates down to nothing if you have benefits down to nothing, and that's okay as long as you don't have an accident. You always need to have a balance. If you put more benefits in the system, it's clearly going to cost, but you want a system that is fair. You don't want to take out the serious claims, and that's the problem here.

Ms Christel Haeck (St Catharines-Brock): Thank you for your comments. Obviously, I don't agree with a lot of them.

Mr Mancini: Which ones?

Ms Haeck: They were very clear where they stood, and I felt I should be clear with the same.

The Chair: Ms Haeck, through the Chair.

Ms Haeck: I have a document here. It's called Database Reports, which in fact is from the Insurance Information Institute, and it's dated May 1992. On page 6 of that, partway down the page, it says, "Under the traditional system, claimants with minor injuries tend to receive compensation that averages two to three times their economic loss, while those who are severely injured receive much less, just over half on average." Any comments on that?

Dr Jack Carr: There are a number of studies of tort, and there are a number of claims like that. You have to understand that the insurance industry would, if it had its choice, go to pure no-fault and lower benefits, because in fact if it doesn't pay out benefits, things are fine.

I don't know how you get two to three times your economic loss. I don't know why an insurer would pay it, because if you went to court, the court only gives you your full economic loss. It doesn't give you double or triple compensation. I don't know from where you're reading. Well, I know from where you're reading, but there were cases of double recovery when you could collect both from your disability insurer and from your automobile accident insurer. That's been changed, and we're in favour of that, that there's no double recovery.


Ms Haeck: What you're proposing with this additional policy, this option to top up basically for economic loss: I think you were saying to Mr Tilson you haven't done any particular study as to the financial impacts or economic impacts, so there's really no way of costing that out either.

Dr Jack Carr: No, no, but I should say --

The Chair: I'm sorry --

Mr Harnick: Let him answer the question.

The Chair: I can't hear what the member's saying.

Dr Jack Carr: If the NDP is right, if they covered most of the cracks, that very few people fall through the cracks and most people are covered --

Ms Haeck: Which is over 90%.

The Chair: I'm sorry, Miss Haeck, let him answer.

Dr Jack Carr: -- then this is only recovery for excess loss, for over and above. It's only the difference of what your economic loss is and what your accident benefits are. If the claim is right that you're getting most of your benefits anyway, the coverage should come fairly cheaply, and since it's an option, people can decide whether to buy it or not.

Ms Haeck: Well --

The Chair: I'm sorry, Miss Haeck. Time has run out. I'd like to thank you for appearing before this committee.


The Chair: The next group we're to hear from is the Progressive Casualty Insurance Co of Canada. Would the two gentlemen come forward, please? I'd like to welcome you to the standing committee on finance and economic affairs. You'll have half an hour. In that half an hour, if you could leave some time at the end for questions -- you can see the members try to get as many in as possible. Identify yourselves for the purposes of Hansard also. Do you have a brief there? Okay. Go ahead.

Mr Andy Rogacki: Good morning. My name's Andy Rogacki and I'm president of Progressive Canada. With me is Chip Conner, who's also a Progressive executive.

Let me begin by thanking you for the opportunity to express our views regarding Bill 164. Bill 164 was introduced some six months before the minister tabled his review of the performance of the OMPP. Clearly, the legislative cart was in front of the analytic horse.

When Minister Charlton introduced Ontario's strategy for automobile insurance reform, he described a five-part strategy to give Ontario's motorists another insurance system that is affordable, accessible and, above all, fair.

The reason for our presence here today is that after our careful review of Bill 164 and of the revised draft regulation which accompanies the bill, we believe that the affordability will be adversely affected, that accessibility will be in no way enhanced and that, above all, fairness is not served. The proposed system is not consistent with the minister's policy objective and it will not work. The legislation and regulation have not been put together in a way that properly balances the interests of all parties.

First, let me talk about Bill 164 and the legislative amendments. Over the last few years the Ontario automobile insurance system has been in constant turmoil. As you know, insurers can sell any product, but the public must be willing to pay the cost. The trick is to balance the cost of the insurance product with people's ability and willingness to pay.

OMPP has worked well and consumer satisfaction is high. But costs are escalating rapidly because there are few cost controls, a failing which also afflicts the proposed system. The industry recognized that the OMPP needs change and has proposed a number of amendments. However, the government has chosen to build a new system rather than to amend the OMPP. The government is missing a historic opportunity to learn from the experience obtained under OMPP and to craft in Bill 164 a system that is fair and that would provide a more stable insurance cost.

Under Bill 164 all Ontario motorists would be covered by the highest level of accident benefits in North America irrespective of fault. In addition, those Ontario motorists who are not at fault in an automobile accident would also have an opportunity to recover their non-economic losses through use of the tort system. In effect, this design means that all drivers must pay more, both for higher basic benefit levels and for the higher transaction costs associated with the tort system.

The unfairness of this design is that even the seriously injured who are awarded compensation under the tort system have their compensable damages reduced by the deductible under Bill 164; therefore, compensation will no longer reflect the full value of the loss. At the same time, compensation for economic damages for those most seriously injured is also reduced. The deductible is simply an attempt to control the high cost of tort.

This is extremely unattractive public policy and bad insurance. The biggest winners will be at-fault claimants entitled to richer accident benefits and lawyers.

Let me deal more specifically with some elements in the bill. The withdrawal provisions should be made more reasonable by means of the following two changes:

(1) In the course of day-to-day business a company take actions which, according to the language within the bill, could be construed as withdrawal, even though no withdrawal is contemplated. A threshold percentage needs to be defined below which cancellations or broker terminations do not constitute withdrawal from the marketplace. We suggest at least a 25% threshold.

(2) When a company applies for withdrawal, it should be permitted to stop writing new business effective immediately. The applying company would still have to offer renewals for the period stipulated in the legislation, after which the company would simply run off its business.

These two provisions would permit flexibility for insurers, impose no hardship on consumers and do not adversely affect availability.

The deductible: Much has been said about the application of a deductible to tort awards. From a fairness standpoint, we oppose the deductible and believe that the current verbal threshold works much better. If the government were, however, to impose a deductible, it can be made to work with the following modifications:

(1) A specific cap for non-economic damage awards should be provided. The existing trilogy cap is contingent upon the full recovery of economic loss. While Bill 164 attempts to address this issue, since such a cap is critical to the quantum of benefits and their cost, we believe that it should be addressed clearly and explicitly in the legislation by setting a maximum amount for pain and suffering awards. Alternatively, the government could seek a judicial ruling from the Court of Appeal before Bill 164 receives third reading.

(2) Pain and suffering awards should be scaled relative to severity so that even if there is a cap in place for serious injury awards, awards for minor injuries do not escalate out of proportion. One solution is a schedule of awards which would assign a value to each injury or combination of injuries.

(3) We are concerned about erosion of the $15,000 deductible. We believe that a combination of deductible, such as proposed in Bill 164, and a verbal threshold would do a markedly better job of preventing deductible erosion and consequent rapid cost escalation.

If the trilogy cap were not to hold or the deductible were not to work as intended, the public can expect enormous increases in costs and an insurance system that would be out of control.

Let me address graduated licensing. An important piece of auto insurance reform is simply not contained in Bill 164, and that piece is graduated licensing. To reduce the senseless tragedy and human trauma associated with automobile accidents involving new drivers, graduated licensing is needed urgently. Also, graduated licensing will have a positive impact on the cost of insurance by reducing the number of accidents. There is absolutely no excuse for not implementing graduated licensing immediately.

Let me now turn to my colleague, Chip, to address the draft regulations.


Mr William J. Conner: In its present form, the draft regulation will lead to significant cost increases and ultimately to a failure of the auto insurance system. There's simply not time in this forum today to highlight with sufficient detail the many concerns we have regarding the draft regulation, so I will simply address a few of the more glaring problems.

Medical and rehabilitation expenses: We applaud the government's recent initiative to create a committee to deal with cost control in the rehabilitation, medical and long-term care areas. This development is long overdue. We hope the expertise of this new group will be incorporated into the final design of the regulation. In addition to this, the following areas need to be addressed:

(1) The regulation does not contain any restrictions on medical or rehabilitation expenses such as limitations upon who may treat, how long they may treat and by what means they may treat accident victims. La Société d'assurance automobile du Québec has demonstrated that such controls are highly effective and reduce the cost to the insurance system. Unless there are very rigorous, objective controls in place, we will witness the birth of an entire new industry of paramedical practitioners preying upon innocent accident victims and doing so at the public's insurance dollar expense.

(2) The regulation creates for insurers unlimited financial exposure to catastrophic claims. We do not believe that seriously injured people should be denied access to adequate resources to permit their recovery, but we do believe that because such catastrophic losses are much less predictable, have extremely long payout times and are unusually susceptible to technological change and the winds of politics, the only suitable way to address catastrophic injuries is through a catastrophic claims fund. This type of fund exists in several North American jurisdictions and could be implemented also in Ontario. We suggest that a catastrophic claims fund be created and operated by the industry with mandatory participation by all Ontario automobile insurers. So far there's no enabling legislation for it.

In the area of income replacement, we view this as the area that probably needs the most work within the draft regulation:

(1) The definition of "activities of daily living" is imprecise and will contribute to overcompensation relative to economic losses. As an example, consider that a very minor event could be an activity of daily living in accordance with the definition. The disability test makes even a game of chess an activity of daily living because of its requirement for cognitive skills. We suggest that activities of daily living be redefined to refer to "activities of independent living."

(2) Extrapolations of gross annual income lead to the highest possible payments rather than to compensation which is fair and commensurate with the loss. For example, seasonal workers could receive a benefit based upon the extrapolation of four weeks of seasonal income into an annual salary. We suggest that income should be calculated solely on the basis of a single, objective metric; for example, the last consecutive 12 months of income immediately preceding the accident.

The loss of earning capacity benefit is especially susceptible to abuse:

(1) The reassessment provisions in their present form are absurdly loose. Reassessment after three years, after eight years and subsequently almost on demand guarantee that costs will escalate rapidly over time, that loss adjustment expense will be high and that an insurer can never close a claim once and for all. This long-term uncertainty will affect the cost of insurance to consumers.

(2) Establishing assessment centres which are the only organizations permitted to assess certain injuries, recommend treatment regimens and evaluate earnings opportunities is unnecessary and redundant. There are practitioners already in place who could deliver these services without creating any new infrastructure. It would be more efficient simply to regulate practitioners and to stipulate the qualifications for them to practise.

Completely missing from the draft regulation is any reference to loss transfer. Without loss transfer, the cost of motorcycle insurance is destined to skyrocket as a result of the newly enriched accident benefits, while the cost of insurance for heavy commercial vehicles would decrease. Absent loss transfer motorcycle insurance will be less readily available, and even with loss transfer the cost of motorcycle insurance will increase even more significantly than it will for private passenger automobiles. Loss transfer should be introduced. It should operate from the first dollar of loss rather than from above $2,000 and it should be subject to a time limitation on the transference demand.

Let me also address the concept of entitlement versus indemnity which is embodied in the draft regulation.

The proposed draft regulation structures compensation in the form of entitlements through extensive categorization of claimants. The result of this approach is frequent overcompensation with respect to actual losses, particularly with respect to relatively minor injuries. A fundamental principle of insurance, of matching compensation to loss, is abandoned in favour of the principle of entitlement. It would appear that the crafters of the draft regulation adhered to a very simple philosophy in making the various determinations which give rise to the regulation: When in doubt, pay it out.

The resulting bias for overcompensation will in turn result in socially unbeneficial illness behaviour and will incent some people to take unfair advantage of the insurance system. This will result in all Ontario drivers paying for these undesirable behaviours. The solution, particularly for seriously injured claimants, includes moving away from a categorization-based system and towards individual assessment rather than compensation by formula. Our position is that accident victims are entitled to be compensated fully for everything that they lost, no more and no less.

Let me also talk about complexity. The draft regulation is very complex and it spans some 60 pages. It is almost unintelligible to anyone, even to a seasoned claims adjuster. The public is not likely to understand the proposed accident benefits regardless of the number of pamphlets or other attempts made by insurers or the government to explain them.

Lastly, and in some ways as important as anything else, I'd like to address cost. The government's own actuarial report on the cost of Bill 164, notwithstanding the fact that it uses some old outside-of-Ontario data and a variety of problematic assumptions in deriving its estimate, indicates that the bill and its draft regulations would drive up the cost of auto insurance.

The Insurance Bureau of Canada commissioned an actuarial analysis using more relevant data and assumptions, and the IBC's study indicates that the incremental cost of Bill 164 is closer to 13%, and that increase is over and above any increase needed to bring the current OMPP product to price adequacy.

In fairness, I should state that all of these cost estimates are very imprecise as both the legislation and the attendant regulations are not yet in final form. But it is clearly creating a potential for very significant cost increases which would be onerous to consumers. No one really knows what this bill is going to cost.

Mr Rogacki: In conclusion, until the government demonstrates its ability to create a workable, cost-effective regulation that implements the automobile insurance compensation system created by Bill 164, Bill 164 should be withheld from further consideration. At a minimum, Bill 164 should be amended to increase confidence in the number and cost of tort cases by adopting a verbal threshold together with the deductible; improve the withdrawal provisions so as not to unintentionally penalize ordinary business operations; and integrate road safety, in particular graduated licensing, into the package of reforms. The draft regulations need to be overhauled to provide for better cost control and ease of implementation. Without addressing these critical components of the draft regulations, it will be impossible to guarantee an affordable, accessible and, most importantly, fair insurance product. Thank you, and we'll be glad to answer any questions you may have.

The Chair: We'll start off with Mr Tilson first. You've got four minutes.

Mr Tilson: One of the major issues, of course, for the consumer is the issue of costs. You have commented as to what Mercer says and what FAIR says. The fact of the matter is that rates will go up, no question about it, at a time when we're still not out of this recession. Notwithstanding what the government is saying, this government's broke, jobs are being lost, we're all having more and more costs, and now we're going to have more rates simply because the NDP wants to be different from the Liberals. That appears to be the sole reason for this particular bill. There's no other logical reason.

In your experience in the insurance industry, in your view, if the average citizen goes out and buys the minimum amount of coverage, what do you believe his rates will increase by with the implementation of Bill 164? This is notwithstanding the uncertainties that you've talked about, and you're quite right, with the regulations, who knows what it's really going to cost us when we suddenly realize and start understanding the effect of some of these regulations and the benefits? But at this particular point in time, you must have some idea, speaking in general terms, as to what you believe the rates will go to for that minimum coverage.

Mr Rogacki: Again, it's very difficult to price it because the regulations are really not well defined and the regulations are really the hidden cost driver behind the legislation, so until the regulations are very well put in place and very well defined, it's almost impossible to precisely say what the coverage will cost. With that caveat, if you were to take Bill 164 and implement it, it would cost us roughly in the neighbourhood of 10% to 15% above fully priced OMPP.


Mr Harnick: On page 9 of your brief, I'm captivated by what you say. I think it's probably why you're described as the Progressive Casualty. You state: "The solution, particularly for seriously injured claimants, includes moving away from a categorization-based system and towards individual assessment rather than compensation by formula. Our position is that accident victims are entitled to be compensated, fully, for everything that they lost, no more and no less."

I think that shows you're a whole lot more progressive than the NDP government, because what that says to me is that if somebody suffers an economic loss beyond what the government wants to pay them under its categorization system, they should be able to do that, so that no one is suffering an economic loss and no one is out of pocket their actual losses. Correct?

Mr Conner: That would make for a better system design, in my view.

Mr Ward: I'd like to thank you gentlemen for coming out this morning and giving your views on Bill 164. Shortly after our election as the government -- it was common knowledge we disagreed with the Liberal OMPP plan in its form -- when we realized that it was a bad time for public auto, the insurance industry met with myself and my colleagues and said: "Look, you can modify the existing plan to change it, to improve it. You don't need public auto." We said, "It's bad timing for public auto," so we moved ahead with Bill 164.

It's my understanding that over the last two years there's been approximately $1.3 billion in profits garnered by the auto insurance companies in Ontario. We recognize, as a government, that to make things fairer, to improve the benefits, there's a cost to that and the Mercer actuarial study that was done for our government estimates that cost to be around 4%.

There are approximately 150 companies in Ontario which shared in that $1.3-billion profit. My understanding is that cost is going to be directly flowed through to the driving public in higher premiums. Is there not a competitive nature in the insurance industry in Ontario? Perhaps one company is going to say, "Sure, we're going to have to absorb a little bit of that cost and perhaps not all of that cost will go into our premium, but we may lower some of our profit levels of that $1.3 billion." Is there not a competitive edge in the insurance industry in Ontario?

Mr Rogacki: First, let's address the $1.3 billion a little bit, and that is, it's irrelevant. It's apples and oranges to what we're trying to talk about.

Historical profits are no more than tombstones, and actuarial rate-making looks at what an insurance company will need to charge now to be able to pay for claims later. The actuarial studies that were done simply say that in order to be able to pay for the cost of loss, its administrative expenses and some profit, the insurance system -- not any particular company -- must charge approximately 10% to 15% -- 13%, if you wish -- above its fully priced OMPP rates. You're right: Some companies may choose to charge less and some companies may choose to charge more.

Mr Ward: Depending on business decisions.

Mr Rogacki: Depending on business decisions. However, the cost of the system, as a whole, will increase by approximately 10% to 15%.

Mr Ward: Or 4%. That's still debatable.

Mr Rogacki: As I said before, that's debatable because of the caveats and the rules.

Mr Ward: One last question: The IBC, the Insurance Bureau of Canada, supports the creation of a task force to look at the rehab and long-term care. As a member of the IBC, do you support that initiative?

Mr Rogacki: Looking at the rehab and long-term care? Absolutely, it's a great idea.

Mr Mancini: Mr Rogacki, I made about seven points for questions, but with the very limited time, I'll narrow my questions down to two. First of all, I'd like to ask you about the draft regulations. You said on page 9 of your brief that the draft regs are "almost unintelligible to anyone, even a seasoned claims adjuster." The Ontario motorist protection plan contained all its draft regs on 18 pages. The NDP government's draft regs on Bill 164 are 68 pages of gobbledegook that not even people like yourself are able to understand, let alone the buying public.

I made the allegation in yesterday's committee hearings that the draft regulations are going to turn the Ontario Insurance Commission into a new Workers' Compensation Board, and I'd like your opinion on that.

Mr Conner: In principle, I see two responses to that. The first one is to say yes, it creates more mechanical complexity and steps and procedures and follow-ups to procedures, so it becomes a very much more systematized, bureaucratic approach to handling what are fundamentally human, personal, variable situations.

The other response is to say that the draft regulation, because of its design, almost has to have all these little rabbit warrens into which to stick a case, because of the categorization-based approach that's been taken to paying for claims. It's a necessary fallout from the system. That's part of what leads us to the conclusion that, because the draft regulation is in such poor condition at this late stage in the legislative life of the bill, it's imprudent to proceed with the bill until we can demonstrate that the draft regulation can be made such that it will support the legislation out in the real world.

Mr Mancini: Are you aware that the chairperson of the Ontario Insurance Commission has asked the government for $5 million and 100 more staff persons?

Mr Conner: I read that in this morning's paper.

Mr Mancini: My second question is in regard to your comments on page 10 of your brief, where you emphasize the point I made yesterday, that the government's own actuarial report used old, extrajurisdictional data, mainly from Quebec; I made the allegation yesterday. You further go on to say that these data are problematic. I'm assuming you mean that the 4.4% increase that Mercer and the government want to impose on the people could be significantly higher. You further go on to say that your own figures indicate that it could be 13%.

At 4.4%, the Ontario public will pay nearly $200 million more in insurance rates because of Bill 164. If we believe you instead of the government, and there's great reason why we should, then that $200-million figure is very, very low. It could go up to $400 million. If we believe the Coopers and Lybrand people, it could go as high as 20%, meaning a $565-million increase from the Ontario public for its insurance rates.

I want to ask you, sir, do you think the people of Ontario are getting a bargain when they're being asked to pay $565 million more, over and above what they're actually paying for Bill 164, which strips people of the opportunity to regain economic loss?

Mr Conner: My customers would generally rather pay less than pay more, and it's difficult to see how, with the exception of people who are at fault or people who are at very high earning levels, anyone's going to do much better under this bill.

The Chair: Thank you for appearing before this committee. The time has run out.



The Chair: The next group we've got coming forward is Mothers Against Drunk Driving, MADD. We have Mr John Bates. Welcome to the standing committee on finance and economic affairs. You have one half-hour. In that half-hour, please leave some time at the end for the members of the committee to ask questions on your presentation. We'll be starting off with questioning from the government side first, after your brief.

Mr John Bates: I certainly welcome the opportunity. First of all, let me make one thing perfectly clear. We're the end users of insurance. We're not in the lawyers' camp, we're not in the insurance camp or the government's camp or anybody else. It's our contention that the only people who really know if an insurance system works or not are the end users: the victims of automobile crashes. If insurance doesn't work when you need it, if it doesn't work for the victims, then it doesn't work, period. If victims don't get fair, adequate and fast compensation, then something is radically wrong.

Our position on no-fault is well known. It hasn't changed one bit since then. The main objection we had to Bill 68 applies to Bill 164 in equal measure. While it's probably academic to talk about this at this point, we still believe the right to sue, the right to have full access to the courts, is a very basic right. It should be the very underpinning of our insurance system. It's the only way we can ensure that justice is done for all. That's what courts are for.

No-fault insurance discriminates against one class of victims, and one class only. Why is it, as Professor Carr said, that if you're hit by a boat in the water you can sue, but if you're hit by an automobile on the road you can't? Why? Can anybody answer that? I'd just love to have it. In fact, if you're hit by anything other than a car -- a snowmobile, a tractor, an aircraft, even a power lawnmower or anything else -- you can seek redress in the courts. Crash victims alone are denied that very basic right, and it doesn't make sense. It just doesn't.

This government promised to reinstate their right to sue with Bill 164, and in one sense, it did keep that promise by allowing car crash victims to sue for pain and suffering. But at the same time, it eliminated the real reason people were going to court in the first place, and that was for lost income.

At least Bill 68 allowed us access to the courts if the threshold was satisfied. Now even that's been taken away. Can somebody tell me why there is a $15,000 deductible for pain and suffering? Why a deductible at all? How on earth can anyone with less than the wisdom of Solomon himself decide if a person has had $15,000 worth of pain and suffering? Think about that for a minute. The very concept's just plain silly. You go to court and you say: "No, you've had $14,500 worth of pain and suffering. You can't sue. You've had $15,500. You can sue for $500." It's crazy. It's certainly, from the victim's point of view, absurd.

And how does the government propose to determine that a lost leg is worth $1,000 a week tops, and only then if you're making something like $60,000 or $70,000 a year? Again, that's just blue-skying something. Surely we should have a two-tiered system, if the government insists on going ahead with this, to allow people access, to allow them to sue for that amount they don't get over their regular payment schedules.

But I don't really want to get into all the intricacies of the insurance thing, as I'm not qualified to do so. All I want to do is make sure the victims are taken care of.

Let me focus on what we're really talking about here and what these consultations are really about: It's about keeping costs down. However, forgotten in all the rhetoric about thresholds, deductibles and tort, in the end there is now, and always has been, one significant way of reducing premiums, and that's to reduce the number of crashes. Insurance premiums are a function of the crash rate, not the type of insurance. That's such an obvious statement, it seems silly to say it out loud.

There are some 980,000 automobile crashes in Ontario every year, which costs the insurance companies about $3 billion. It's elementary to point out that if we prevent just 10% of the crashes, we would save $300 million a year. The major saving to be made has little, if anything, to do with diddling around endlessly with the kind of insurance system, until we have come to grips with the underlying problem, which this government flatly refuses to do.

The attitude of this government seems to be that the high costs are the result of inefficiencies in the system. It's like saying the huge cost of health care is a result of inefficiency in the health care system, when the real cause is because people get sick. But we seem to be unable to transfer that logic to automobile insurance, because this government has done less than nothing to reduce the crash rate. I'll get into that later, on how they have done less than nothing.

For example, even though we know that the only effective deterrent to the tragedy of impaired driving is the roadside sobriety spot check, this government has withdrawn funding to the degree that the RIDE program is no longer effective. In fact, it doesn't even exist in smaller centres any more. It is not there, so impaired drivers have pretty much a free rein. It's been drastically cut back in Toronto: It's only about half the size it was a few years ago. It's no wonder insurance costs are going up.

There is only one way to reduce insurance premiums significantly, and that is to implement measures that will make certain that only those people who will drive safely in this province are allowed to drive at all. I'd like to drill that in, because there are people driving cars in this province on our roads and highways right now who ought not to be driving anything, anywhere, let alone a car; they shouldn't even be driving a bicycle.

MADD, previously known as PRIDE, has made endless proposals to governments on initiatives that will dramatically reduce the crash rate, but all to no avail. Many of these proposals have been put into effect in other jurisdictions with positive results, but this province remains mired in the backwaters of highway safety; it really is. I get embarrassed when I speak out west and so forth and hear what they're doing out there.

Some of these proposals are:

(1) Raise the legal drinking age to 21. While time does not permit me to go into the full rationale for raising the drinking age, the fact remains that it is the key to winning the battle against substance abuse and the battle against impaired driving. Inexperienced drinkers and inexperienced drivers have proven to be a deadly and tragic combination. Incidentally, the insurance bureau does back us up on this one. Obviously, if we can delay the onset of drinking, we also delay the onset of impaired driving. If alcohol is more difficult to obtain, then driving after drinking is more difficult to accomplish.

We should note that moving to 21 is supported by virtually every highway safety group, parents' group and health care agency in North America. The US has taken the move and experienced positive effects, a some 17% drop in crash rates. That's what they did. The young people in the US did not become unhinged because they did it.

All we are asking is that the government form a task force to study the possibility. The government's refusal to even form a task force to examine the question simply means it is more afraid of the light than the dark. All we are asking is that the government look at this tragedy of endless killing of our young people on our highways. Think about it: The automobile kills more of our young people than all other causes of death combined. A full 40% of the people killed on our roads and highways in this province are under the age of 25. As a compassionate society, we have to do something about that. But what are we going to do? What? Don't we care? It's madness to allow this to go on. It's a little bit like the bishops who refused to look through Galileo's telescope because they were afraid he might be right. That's why we can't get a task force.

We have to take some draconian measures to get insurance rates down and start saving lives.

(2) The graduated licence: We first made our presentation to Ed Fulton, who was then Minister of Transportation, in November 1986, and to every Minister of Transportation since that time. I first wrote about it many years ago when I was editor of a transportation magazine for Maclean Hunter. It works because we know that an inexperienced driver of any age is far more likely to get into a crash than any seasoned driver is.

At present, for example, it is possible or even likely to get a driver's licence in this province without ever having driven on a road. A relative or a friend can teach you how to stop and start in a parking lot somewhere, drive you to the local testing area where you do a three-point turn and parallel park -- and hardly anybody gets killed parallel parking as far as I know -- answer a few questions, get a licence on the spot and then drive a high-powered car on a superhighway in rush hour. That is madness. No wonder so many kids, who make up the majority of new drivers, get killed every year.

Wringing our hands and viewing with alarm won't help these kids. A graduated licence would allow new drivers to gain experience in an atmosphere of greatly reduced risk. It would limit the number of passengers, and that would avoid kids piling a bunch of others into a car and slamming into the side of a train in Milton, which happens all too often. It would limit them only to daylight hours, and they would have a zero BAC, blood-alcohol concentration, limit. As they develop their confidence and driving skills, they would proceed to the next level and so forth, until they've earned full driving privileges.


I'll leave a presentation we made to the government in 1986. Its reasoning still stands, and please don't tell me the government is looking at it, because one level or one form of government down here's been looking at it for seven years now and does nothing. Seven years mired in some bureaucratic ooze somewhere and they have done nothing about it and people are dying.

(3) Increase roadside sobriety spot checks: As mentioned, it doesn't matter what else you do to reduce the carnage caused by impaired driving. Nothing, absolutely nothing, will result in a decrease in the incidence of impaired driving crashes unless you have a well-publicized spot check program. However, this government has a policy of fewer spot checks, not more, and there are a lot of people in convalescent homes and hospitals and funeral homes who want to know why. So do I.

(4) Administrative licence suspension: When a driver has a BAC of over 0.08 following a properly administered breath test, his licence should be revoked on the spot. At present drivers retain their licence until they come to trial. Often they run up their second and third offence while awaiting trial for their first offence. All too often they kill somebody in that period.

Such a program is in effect in Manitoba, and it's gone all the way up to the Supreme Court and proven to be perfectly constitutional, and at least 29 states in the United States.

Manitoba's taken the step of suspending the licence of impaired drivers for 90 days -- that's when they blew in a Borkenstein breathalyser -- and reported a 50% drop in impaired driving offences in the first six months. Right there is the 10% drop you're looking for, in that one thing. Why not?

It also experienced a reduction in the court case load because more drivers are pleading guilty because they want their case to come to trial quickly.

This suggestion, incidentally, is simply an extension of the Ontario 12-hour suspension for drivers who blow over 0.05 on a roadside screening device, the little orange breathalyser the police use.

(5) A permanent licence suspension on a second offence: It's a sticky point. Anyone who would chance a mandatory two-year suspension and a 14-day jail term obviously has a drinking problem. Further, we know that most of the serious injuries and killings are done by drivers who have a BAC of 0.165. That's more than double the legal limit. These people have had a case of beer before they got behind the wheel of a car. This is the hard-core drinking driver who will not respond to reason. They are the ones who are most likely to cause serious injury or fatal crashes. If somebody kills you on the road this weekend, it's likely to be somebody who's been in the system before. It's somebody we should have taken out of the system a long time ago.

If these people can prove after two years or so that they no longer are a menace on our roads, then they can get a probationary licence back again. But if they do it again, if they trip up once more, then they no longer have the privilege of driving an automobile anywhere in this province, period.

So how do we stop them from driving while they're under suspension? Easy.

(6) Automobile confiscation: Anyone caught driving while under suspension should have their car seized by the crown and sold at auction, regardless of who owns the car. Whether it's a rental car or their Aunt Minnie's car or whoever's, they lose the car right there on the spot. We'd have to phase this thing in, but we'd be awfully careful who we lent our car to. In other words, you'd make it illegal to lend your car to an unlicensed driver, knowing full well your car would be forfeited if that unlicensed driver was caught driving it. It's a pretty simple thing to do.

(7) Licence endorsements: The insurance history and the serious crash rate of the so-called muscle cars clearly demonstrate that drivers should have special training and a special endorsement to own and drive one. I'm talking about cars like the Taurus SHO, which has an incredible torque on its front-wheel drive, and you know what happens when its wheels spin; it shoots the car into the other traffic lane. The Corvette, the LX7, the five-litre Mustang and similar overpowered cars have proven to be deadly in the wrong hands.

Not only are these cars inherently dangerous in inexperienced hands, but only too often the people who purchase them are exactly the ones who shouldn't. Probably some people around here own Corvettes or something, and I don't think much of them.

The Chair: We know one.

Mr Bates: There's one guy who talked about insurance a lot who has a red one, I understand. A big tall guy with cowboy boots.

A quick look at the insurance stats on these cars will prove the point. In fact, we should seriously question the logic of even producing these cars for general use on our roads. I mean, there's no reason people should be driving a five-litre Mustang. The place for that thing's on the Indianapolis Speedway.

(8) Leaving the scene: The penalty for failing to remain at the scene of a serious crash should be the same as it would be if the person had been convicted. In other words, right now it's more advantageous to flee because you'll get a slap on the wrist, rather than stay and chance a second offence. So when you catch them finally, you simply nail them for something a lot more stringent than it is now.

Unless and until you are prepared to take some very strong measures to make our highways safer for all road users, it's futile and probably hypocritical to even talk about lowering premiums by fine-tuning the insurance system.

The much-touted Ontario Road Safety Corp is yet another example of organization of style over substance. It allows the government to look like it is actually doing something, when in fact it's doing nothing at all. Just why it's being considered escapes me completely. There are a number of non-governmental groups like the Traffic Injury Research Foundation that have been doing this work for years at no cost to the taxpayers. Just what this new organization can contribute to the well of knowledge in this field is rather obscure.

All the aforementioned initiatives can be implemented within the MOT without reference to another level of government spending. As I said before, we're already slugging through some bureaucratic ooze trying to get some of these things before government, and let's not let another level set in.

In summary, we would ask the government to withdraw consideration of Bill 164 until you've addressed the real, underlying problem, and that is quite clearly to implement measures which will lower the crash rate and start saving lives. We've waited long enough. Someone once said that what MADD does with victims is that we help them to survive, to start living, and to dare to dream again. We aren't going to do that with no-fault insurance. We've waited long enough. We're tired of answering our phones to the anguished cries of victims asking us to answer unanswerable questions.

You don't refuse to raise the drinking age because you think it's politically unpopular; you raise it because it's morally correct. You don't delay bringing in the graduated licence because it might be unpopular; you bring it in because it will save lives. You don't turn your back on the police RIDE program because you think there are more important priorities; you maintain it because it stops the killing -- and it does.

And mostly, you implement these safety measures because you believe that the people of Ontario have a right to use their roads and highways in safety. Do you know, when you're driving up to your cottage some night, one out of every eight drivers has been drinking that you meet in the road? What are you going to do about it? You won't get the insurance premiums down until you've done all in your power to make sure that only those who drive safely can drive at all. This is, and must be, this government's first and most pressing priority. You owe that much to the people of Ontario.

Thank you. If I sound angry, I am.

The Chair: I think a lot has to do with the drivers and the way they drive and pass on the right. I was driving in Europe on the autobahn at about 180 kilometres an hour, but it depends on the other drivers and how well they drive, and you never pass on the right in Europe.

Mr Bates: That's right, you don't.

Mr Phillips: Except in England.

The Chair: Well, yes, okay. That's different. We'll go to Mr Dadamo. You have four minutes each.

Mr Dadamo: Mr Bates, thank you very much. I wanted to say in the onset that I spent a couple of years in transportation as parliamentary assistant and we spent much time talking about graduated licensing, ad nauseam at times --

Mr Harnick: Talking.

Mr Dadamo: Thank you. I can hear you.

You've said it verbally and I can see it's written all over your face that you're very sceptical on graduated licensing and the idea, but I believe the time has come to implement. The Minister of Transportation certainly is committed to seeing this through.

But there are some problems in legislating anything, sir, and one that the government seems to have a problem with is with northern Ontario. Some people in that part of this province argue that they should be treated differently under a graduated licensing system. For example, they would say that given the lack of public transit there should be a different set of rules for people in northern Ontario and rural Ontario. Could you comment on that idea?

Mr Bates: The whole idea of a graduated licence and the various kinds of graduated licensing are not etched in stone. For example, we say that people should not be allowed to drive on high-speed roads. What about somebody whose driveway backs out on to a 100-kilometre road? All he could do is drive up and down his driveway. So obviously you have to have that kind of thing built into the system. It would not apply throughout the entire province. For example, students or somebody may require their car to drive at night to go to work. That's okay. They get an endorsement on their licences saying it's okay for them to drive from here to here. The same thing would apply to northern Ontario. You could set a line north of Minaki, where, say, different rules apply. That's perfectly logical. The whole thing is not engraved in stone. It varies, and it would be up to the local MOT person to do that.


Mr Klopp: That was basically my question, too. I think you've given a very good brief. I understand where you're coming from. In fact, I've talked to students, because they're the ones -- you talk about the political realities and I guess I've come around. I think I like to try to work on things because they're right and then work back. If it's right to me, I'll take the political hit. I've been around here for 10 years and it doesn't bother me that much.

One of the things you've talked about: You've been involved with MTO on these discussions since --

Mr Bates: Since 1986, that's right, and I wrote about it -- I used to be the editor and publisher of Bus and Truck Transport. I used to have Arthur Hailey's old job.

Mr Klopp: Okay. I do know, because I've been pushing some of these things. I talked to students and hit them head-on with this question. You joke about it when you run into them at the corner store in town: "I hope you guys don't do this; I'm going to be 16 next month and I want to get my licence." But I've come to realize the numbers, and on other committees -- in fact I think I've been on a committee where you've come before -- and it does sober you up, and there is a bigger picture. I would just like to say that the students -- there were about 75 in the room -- I didn't pull any punches with them and I was surprised. I heard after from their parents, because they were here in this building, that they were quite impressed and they thought it was something that it is more and more to do. Unfortunately, we've had a couple of bad accidents in our area and of course, like anything -- we're all guilty of it -- when it hits home then you see the other side so very clearly. So I commend you for that work.

Mr Bates: What it does is put a very important tool in the hands of the parents. They can say, "No, you have a night-time endorsement on your licence; therefore, no, you can't have the car." I can think of several hundred young lives that that one endorsement would have saved because their parents said, "No, it's not me; you don't have the licence to do it."

Mr Phillips: I appreciate the presentation. You can be helpful, I think, to the committee just in terms of helping us a little bit, perhaps, on the financial side of things, because I think your brief may raise some opportunities for us. The bill we have before us right now is going to represent, for the people of Ontario, about a $200-million increase in insurance premiums. That's the minimum. That's the lowest estimate we've had. The lowest is $200 million, going up to $500 million. The government just this morning announced that the social assistance rates will go up about $60 million. That's all that can be afforded, 1%. But we're going to ask the people of Ontario to fork over another minimum $200 million, perhaps up to $500 million, for increased insurance premiums, just because of the bill, in addition to any other rate increases. My question to you really is, have you any feeling on what might happen if we implemented your recommendations? You've got an estimate of 10% in here, I think.

Mr Bates: It's not an estimate. If it did that I think we'd get far greater than that; I think it'd be far more than 10%. For example, the States got a 17% reduction in impaired driving crashes among teenagers when they put in the age 21 alone.

You see, there's one group of people who are causing all the trouble. It's 10%, basically, of the so-called alcohol abusers. The people who abuse alcohol -- I won't get into all this -- abuse alcohol largely because they're carrying a lot of bad baggage. They're very aggressive people. They transfer their aggression to their cars. They're people who are socially immobile, but put some alcohol into them and they're deadly. If we can put in a system we'll simply pull those people out of the system like the graduated licence will and the permanent licence suspension/confiscation of automobiles will do. Ultimately, we'll get these people out. The roads will be a heck of a lot safer; we'll save a lot more than 10%; a lot more.

The Chair: You've got two minutes left, Mr Phillips.

Mr Phillips: In terms of the graduated licence, would you see that for all people applying for the first time for a licence in Ontario, so that if you moved here from the States and applied for a licence you would see that?

Mr Bates: You'd have to start right back at the beginning, but at the discretion of the examiner; he would decide what level you'd reached. The graduated licence has another great example. For example, we now take licences away from people when they get to be advanced seniors, but with the graduated licence you take them back down again so they can still drive to the doctor, still drive to the bridge game, still drive to the store, but they can't drive on superhighways at night.

Mr Phillips: Right, and in terms of the RIDE program, again, I'm just trying to get a feeling of what savings -- I hate to put this in financial terms because it's the human side we're more worried about, but just what savings might you see as a result of that stepped-up RIDE program?

Mr Bates: They would be huge. When the RIDE program goes into effect at the end of the year, the crash rate just goes down like so because of the perception of it. Out in rural Ontario, the perception doesn't exist because it doesn't; there is no such thing.

Mr Phillips: So there are statistics where you show that in the last two weeks in December?

Mr Bates: Absolutely.

Mr Tilson: Thank you very much for your thoughts, Mr Bates. I think you've put your finger on the real issue. I've got the impression from this government that it's saying, "Our proposal is better than the OMPP, and that's that." That's what they're doing. We've listened to the statistics they've been putting forward, which are very minimal, and if anything, rates are going to go up. In other words, they're putting forward a plan that's going to give us fewer rights, but it's going to cost us more.

I think the statement that jumped out from your presentation was, "Unless and until you are prepared to take some very strong measures to make our highways safer for all road users, it is futile and probably hypocritical to even talk about lowering premiums by fine-tuning the insurance system." In other words, the real issue in this whole exercise is, how are we going to stop accidents? How are we going to stop the carnage?

Mr Bates: That is the issue.

Mr Tilson: We've been pushing the graduated licensing proposal since this government came into office. We've gone through different Transportation ministers. For the life of me, it's baffling why they can't put it forward, because as you say, you did start to talk about it many years ago.

My question, Mr Bates, is with respect to the threshold test. I know we've all heard it and I'm going to read it out again, and it will be read over many times, Bob Rae said when he was opposition leader and when he was appearing before the Osborne commission:

"Nor do we consider it necessary or appropriate to impose any kind of `threshold' requirement, limiting the right to sue to those whose loss exceeds a specified dollar amount or stated degree of injury.

"New Democrats are opposed to the loss of individual legal rights entailed by such thresholds."

It's a rather astounding position that we're in.

Mr Bates: I stood right beside Bob Rae on platforms. What has happened here now is they're picking on the weakest members of society and taking the rights away from the crash victims, people lying in hospital beds and so forth. I just wish some of these people could come and answer our phones just for a day and try to answer the unanswerable questions we try to answer.

Mr Tilson: The very people the NDP people over here are trying to protect -- I don't know what they're receiving, but I'll tell you about the letters and criticisms I'm receiving already about the existing system, the OMPP. Whether you're for or against it is one thing, but this system is far worse. I appreciate your comment that the real issue is how we're going to stop the carnage.

Mr Bates: We're apolitical. I don't care what government's in.

The Chair: A few minutes, Mr Harnick.

Mr Harnick: Mr Bates, does it grate on you that someone who is at fault for causing an accident ends up, under this scheme and under the OMPP, basically receiving the same amount as the innocent accident victim?

Mr Bates: What do you mean "the same as"? Take someone like me. I don't get a nickel for doing what I do. I'm a total volunteer. I don't have any salary coming in at all. I live on a pension. If a high-priced lawyer hits me, he gets all sorts of money and I get $165 a week. What do you mean "the same as"? It infuriates me about that.

Mr Harnick: In terms of a determination of fault, why is that something that is so important to you as the person who looks after Mothers Against Drunk Driving and also PRIDE, People to Reduce Impaired Driving Everywhere?

Mr Bates: Victims have no rights; impaired drivers have all kinds of rights. The victim is going to be thrown out of court if the defence thinks it may jeopardize the case. Victims don't have any rights. The only chance they ever have of gaining any rights at all is in effect to take their tormentors before a court and get some kind of retribution. That's the basic thing that's so angering about no-fault.


The Chair: Mr Harnick, your time has run out. Mr Owens, you have a comment?

Mr Owens: In terms of a statement of fact that was made by Mr Harnick that an impaired person who is the cause of an accident gets the same benefits as the injured, that is not true. A person who is convicted of impaired driving gets absolutely no weekly benefits.

Mr Harnick: If he's convicted. What about the person who's drinking and isn't convicted? What about the person who speeds? What about the person who's charged with careless driving because he made an improper left-hand turn and didn't look? What about the person who deliberately speeds? As parliamentary assistant, I think you better go back to the drawing board and learn what this is all about, because you absolutely have no clue about what happens in a motor vehicle accident. Your ignorance is appalling.

Mr Owens: I think, sir, that you should go back to law school to learn decorum, because if you pulled this kind of stuff in a courtroom, you'd be summarily tossed out on your head.

Mr Harnick: I beg your pardon? I'll go to court any time with you, any day, any week, anyplace, and I'll tell you, you'll be the one tossed out of court, not me.

The Chair: Mr Harnick --

Mr Owens: I don't think so.

The Chair: Mr Bates, I'm sorry for this outburst. I thought we were all gentlemen in here.

Mr Bates: I am anyway.

The Chair: Thanks, Mr Bates. It's a pleasure having you here. Thank you for presenting. I know you don't get paid, as you said, but you're out there for everybody's interest.


The Chair: The next group is the Markel Insurance Co of Canada. Would you come forward please. Mr William Grant, president, I presume?

Mr William Grant: That's right.

The Chair: Welcome to the standing committee on finance and economic affairs. Do you have some associates with you?

Mr Grant: Yes, I do.

The Chair: Come forward and take a seat. We're studying Bill 164. I believe you've got a brief to present. If you don't mind starting, we have one half-hour. Before you get going, would you mind identifying yourself and your colleagues for the purposes of Hansard. You may begin.

Mr Grant: My name is William Grant. I'm president of Markel Insurance Co. On my right is David Gaskin, who is one of our loss prevention consultants, and Nora Hillyer, who is our underwriting manager.

By way of introduction, Markel Insurance Co is a Canadian-owned and operated insurance company which has specialized in providing trucking insurance since 1951 and I think is widely recognized as the expert in this field. Indeed, I think we're the only insurance company that specializes totally in trucking insurance.

Not only are we in the insurance business, but part of that business we feel is a partnership with the trucking industry and a partnership in safety. Markel has long been known for its commitment to safety and loss prevention.

Currently, we have a staff of five loss prevention experts who do a variety of functions which are listed in a paper attached to the back of the report. These functions vary between developing and evaluating safety programs for our fleet operators. We visit our clients at least every 90 days. We conduct facility audits in accordance with the National Safety Code and the US federal motor carrier safety regulations.

We conduct seminars for management personnel and conduct driver seminars on safe driving techniques, logbook-keeping, hours-of-service compliance, air brake systems, load security and handling and transportation of dangerous and hazardous goods. We assist with safety meetings with our insureds and participate in the Markel Safe Driver Awards program, which consists of annual presentations of yearly safe-driver pins for accident-free driving. We also make available our driver evaluation and upgrading and road tests for pre- and post-employment at our school of transport training.

In 1988, we created a transport training school or truck driver training school in Guelph, Ontario, to elevate the level of transport driver training in Ontario. This was brought about basically from our insureds, who told us that while there were lots of drivers out there with class A licences, they were not qualified drivers, ie, the level of training was not adequate. We established the school to improve on the level of expertise in the driving area.

We work closely with government and industry groups on matters of safety. Our staff wrote the air brake handbook for the Ministry of Transportation. We have been pro-active on the issue of drug testing for transport training and are currently working with the Ministry of Transportation on the system it is looking at of evaluating the safety levels of various fleet operators in Ontario.

We're active members of the Ontario Trucking Association, the Ontario Safety League, the Transportation Safety Association and the Canada Safety Council.

In terms of the trucking industry, unlike most other businesses, insurance costs are very significant for the trucking business. They represent about 3% to 4% of the cost of a trucking operation, which is very significant compared to most other industries.

Trucking employs over 200,000 people directly in Ontario and represents 4% of the gross provincial product. Much of the trucking business is the independent small business that our economy needs to encourage.

The trucking business is in trouble trying to compete. I think we're all aware of the protests etc over the last few years by the trucking industry as it tries to deal with the issues of deregulation and free trade. Surprisingly enough, as has been noted by the OTA, insurance is one area where we have been competitive. Obviously, we want to protect that system.

A trucking business cannot operate without insurance, and significant insurance facilities have gone from the market. United Canada went into receivership in the mid-1980s. Transit Insurance Co withdrew last year. We feel reasonable insurance rates stem from stable claims costs and a stable market. This exists today, but Bill 164 could change this. The OMPP overlooked the problems of the trucking industry and added to the problems. We ask that you don't do it again.

In general, we want to state that we share the concerns of the remainder of the insurance industry over the issue of the deductible, which we think will also be difficult or expensive to administer in that we will now have to investigate every claim because we will not be sure whether it will exceed the deductible at the time we reported the loss. So our internal claims-handling costs will increase significantly.

We believe complex and very expensive first-party benefits will increase the costs, again in accordance with the Insurance Bureau of Canada. This impact will also be directly on the trucking insurance industry and it will pass the costs through.

We are happy to see the motions to amend the bill with respect to withdrawal and other issues presented by the minister.

We refer to specific problems for Markel, the trucking industry -- I should say the other insurers who provide trucking insurance -- and ultimately consumers and the people who depend on the trucking industry. We must remember that it's the consumer who ultimately pays in commercial trucking insurance if costs go up. They pay increased costs for their consumer goods. Or if the company cannot compete and goes out of business, the people who work there lose their jobs.

One issue that was part of the OMPP was the issue of loss transfer. Section 275 of the Insurance Act prescribes a procedure of transfer of losses from "such class or classes of automobiles as may be named in the regulations." The insurer of a prescribed class of vehicle is required to indemnify the insurer of the victim of the accident for no-fault benefits paid based on fault. A regulation has been issued which applies this section to vehicles with a weight of more than 4,500 kilograms.

Notwithstanding the importance of the trucking industry and our role in the support of that industry, we are unable to offer any rationale for this provision, and we were not consulted in the first place. Basically, the OTA and ourselves believe this is a strictly discriminatory view of the trucking industry, which is viewed as the bad guy on the road. We think statistics show that in actual fact the truck driver is the safer man on the road.

The effect of the provisions is to require trucking insurers to provide no-fault benefits -- statutory accident benefits -- and to pay huge tort losses as well. Trucking insurers are required to operate in two systems and do not see the benefits of any tradeoffs to offset the increased accident benefits. There are no reciprocal provisions that would allow recovery of the accident benefits paid to a trucker from the insurer of a private passenger vehicle. In essence, the transfers are one-sided.

Also, the potential for a large catastrophic claim is much greater under this loss transfer provision with the enhanced benefits of Bill 164. Essentially, the scenario can be given where a truck could be involved in an accident involving a bus or multiple cars, all of which transfer the loss back to the truck operator and his insurer, who has really no protection from policy limits, because they're all accident benefits.

That exposure is virtually unlimited. It requires us as an insurance company to carry significantly large reinsurance protection, but even then we are unsure at what level to buy this protection. These costs again are transferred into the trucking sector.

The issue of inverse property damage: Section 263 of the Insurance Act provides for direct compensation for property damage. This means that each insurer pays for its policyholder's physical damage when the vehicle is in an accident and is damaged by someone else's negligent conduct.

This is a reversal of traditional liability. For private passenger insurers, this seems to be a satisfactory system. The additional amounts they pay for damage to policyholder vehicles is offset by the amounts they don't have to pay for damage to other vehicles involved in accidents with the policyholder.

For truckers and their insurers, this balance doesn't exist. The costs for damage to trucks is very much greater than the loss to private passenger trucks. This change was imported by the OMPP and didn't take into account the special needs of the trucking industry.


With specific reference to the draft regulations, they contain many provisions that are of particular concern to the trucking industry and its insurers.

The definition in section 1 of the regulations includes as insured persons "any person specified in the policy." We are uncertain as to the meaning or intent of this provision. However, commercial automobile insurance does consider that insured automobiles will be operated by many people, and often those people are identified for underwriting and other purposes. If they are all specified, then the insurer of the business vehicle becomes the insurer of these persons, their spouses and the dependants of either. We often have schedules of drivers attached to a policy or part of the application.

The insurer of the truck will be providing an expensive coverage for a large number of people. While most of these individuals will have personal policies to approach in the case of loss, we cannot know that at the time of underwriting and we cannot predict which policy will be selected by the individuals for a claim. A commercial trucking policy is potentially converted to broad personal, portable coverage for a very large number of people. Again, we don't think the trucking industry was considered when this provision was put in. In essence, cost is added, but there are no perceptible benefits resulting.

Section 69 of the regulations provides that a person for whom "an automobile is made available for...regular use" is treated as if a named insured. This section entails providing the additional coverage for the spouse and dependents as well. The concept of regular use is difficult. This will multiply costs with respect to vehicles that have many regular users. No additional benefit is provided in exchange for these costs. The individuals involved will continue to have full coverage under their personal vehicles.

Section 56 of the regulations offers a claimant an option of receiving statutory accident benefits instead of workers' compensation simply by filing a form with the Workers' Compensation Board. The drafters seem to contemplate this option for victims who are pursuing tort remedies, but do not provide any safeguard against nominal elections that are pursued or that result in a dismissal of a tort claim. The claimant appears to be entitled to artificially opt out of workers' compensation. This will add costs to the insurance system and we don't think a great deal of savings for workers' compensation towards insureds.

Our recommendations:

Alterations to the automobile insurance system must take into account the ramifications for the trucking industry and the insurers of that industry. It should not undertake fundamental changes without regard to the brutal impact on a fragile sector of this economy.

In addition to the concerns of the other sectors of the insurance industry, we urge government to dampen the adverse effect on the trucking industry by the following measures:

(a) preclude loss transfer against heavy commercial vehicles under section 275 of the act;

(b) exempt accidents involving heavy commercial vehicles from inverse property damage by amending section 263 of the act, or enact a regulation to allow subrogation for these losses pursuant to clause 263(5)(b) of the act;

(c) revive the draft regulations as follows:

-- Eliminate the reference in section 1 of of the regulations to "specified persons." Alternatively, restrict this extension of coverage to private passenger automobiles.

-- Eliminate the extension of coverage in section 69. Alternatively, restrict the extension to private passenger vehicles provided for the person's regular use.

-- Eliminate the option of automobile accident benefits for individuals injured during the course of employment. Alternatively, allow recourse to accident benefits only where a tort remedy is actively and successfully pursued. In other cases, the workers' compensation scheme should deal with the case, provide benefits to the worker and reimburse the automobile insurer.

As we have shown, Markel has made a commitment and investment in loss prevention and safety in the trucking industry through our loss prevention department and driver training school. We know it works to reduce losses and save lives, and we are extremely disappointed that Bill 164 will add to the cost of insurance but that road safety is not addressed. Along with the Ontario Trucking Association, we urge that safety issues be made a major focus of this government.

Bill 164 as it presently stands will have a very negative impact on the trucking industry. We urge the government to listen to the concerns expressed by the Ontario Trucking Association and ourselves. The OTA has provided a letter to Mr Brian Charlton. I'd like to read that, if I may. This is from David Bradley, the president of the OTA.

"Dear Minister:

"During each of the past few rounds of insurance reform, the focus has been upon private automobiles. This is also true of Bill 164. However, a significant commercial automobile insurance market also exists, which must be taken fully into account. The trucking industry is a major consumer of commercial automobile insurance and is, as a result, interested in the impacts which Bill 164 could visit upon our industry.

"Bill 164 has, in places, either not addressed some of the concerns that exist in trucking over the present act, or it raises the prospect of unintentionally impacting upon the industry, where certain measures designed to address the private automobile sector are applied to commercial trucking.

"Moreover, we are very concerned that the changes to the threshold provisions contained in the bill will lead to a return to the costly litigious environment which had existed prior to the introduction of no-fault insurance. We fear this will unnecessarily put upward pressure on premiums once again.

"The Ontario trucking industry is an essential component of the Ontario manufacturing process. It is Ontario's most preferred mode of freight transportation. Trucks haul 80% to 90% of all consumer products and foodstuffs produced and consumed in the province. It is also an industry that crosses borders. Trucks haul 75% of Ontario's exports to the United States and deliver 80% of the province's imports from the United States. The industry," as mentioned, "employs approximately 200,000 people.

"To survive, our industry must be competitive. Insurance costs -- both claims and coverage -- can represent 3% to 4% of total costs. Consequently, we are concerned over any measures which could raise the costs of the Ontario trucking industry, further impairing our ability to compete. Commercial insurance has been one area of cost where Ontario carriers have been competitive with US carriers. Obviously, we want and need to sustain that situation.

"The Ontario trucking industry also has an enviable safety record. This often does not appear to be clearly recognized by the public and policymakers. Data for 1990, compiled in the Ministry of Transportation's road safety annual report, show that tractor/semi-trailer units were involved in only about 1.5% of all highway accidents. In terms of the type of accident, these units were involved in 1.6% of all accidents where there was property damage, 1.1% of personal injury accidents, and 7% of fatal accidents.

"Moreover, the above numbers reflect the proportion of these trucks involved in accidents, not whether the truck was at fault or not. But, the same Ontario road safety report also shows that trucks are not at fault most of the time. The data indicate that for fatal accidents involving trucks, drivers with a class A licence -- the kind needed to drive a tractor-trailer unit -- were driving properly in 76.8% of the accidents. The incidence of alcohol as a factor in fatal accidents was 4% among class A drivers, compared to 19% for all drivers (including truck drivers).

"While the industry constantly works to improve its record even further -- safety is good business -- I believe these numbers are often a surprise to many people who have, for whatever reason, developed a misconception of the industry and its safety record.

"The industry's safety record certainly indicates that it is not a loss causer, as implied by the loss transfer provisions contained in section 275 of the Insurance Act. Under the loss transfer provisions," as we mentioned, "automobile insurers can subrogate no-fault payments in excess of $2,000 from a truck insurer, where an accident between a car and a truck has occurred and the truck has been found to be at fault. No similar right to subrogate is available to the truck insurer. And the cost of a truck is significantly higher than that of an automobile.

"This is blatantly discriminatory. The decision by the former government to introduce the loss transfer provision was not founded on sound actuarial analysis. The perception of trucks as loss causers is at best perceived, but more likely erroneous.

"In our view, Bill 164 should address this issue by deleting the loss transfer provisions as they relate to trucks, unless and until any inequities arise in the system that are revealed through actual claims experience.

"OTA has long been concerned over the potential impact upon a carrier's workers' compensation experience rating for benefits paid to a truck driver injured in an accident, but not at fault. We have proposed that the Workers' Compensation Board be allowed to subrogate from at-fault third parties.

"We do not feel that the option proposed under section 56 of the draft regulations resolves this problem appropriately. Providing a choice between WCB benefits and statutory accident benefits does not remove the WCB experience rating impacts and merely transfers the costs to the insurer. In the end, it all comes out of the same pocket, as companies would have to pay either higher insurance premiums or higher WCB assessment rates.

"We are also concerned that sections 1(a) (insured persons) and 69 (regular use/company automobiles) of the draft regulations may have some unintended consequences for purchasers of commercial insurance. Our concern is that these regulations might be interpreted in such a broad way that a truck driver might be able to claim for family members or other regular drivers of his/her personal vehicle -- for which he/she has personal coverage -- under the commercial policy of his/her employer. We need either an assurance that our interpretation of what may be possible under the above sections is wrong, or a specific exemption/amendment for commercial trucks.


"Finally, it is our opinion that the persistent focus on premiums that seems to dominate policy initiatives and discussions relating to automobile insurance is not necessarily the most effective approach. It is our belief that the key to lower insurance premiums is improved safety.

"The trucking industry invests in safety and is also subject to a significant degree of government regulation (eg, mandatory vehicle inspections, maintenance programs, driver retesting, hours of service, regulations etc). We are seeking continuous improvement in our safety performance, and often feel that if the average motorist were subjected to some of the same type of vehicle and driver requirements that the trucking industry is, our roads and highways would be much safer. Moreover, we have long advocated a mandatory reduction in the allowable level of blood alcohol content, but have yet to find a government that is prepared to give this proposal serious consideration. These are just suggestions, but we feel there would be merit in your exploring them further."

Again, I would make the point that I think ourselves and the OTA feel that the truck drivers are either forgotten or perceived as the bad guy on the road when these insurance regulations are redrafted, and we would ask again that our considerations be taken into account and that safety be a focus for this.

The Chair: We know Mr Bradley quite well. He's appeared before this committee on budget consultations, and Mr Phillips knows him quite well too. I think for many years we saw him there. Mr Phillips, you're on first, for about three minutes.

Mr Phillips: I appreciate the presentation. I have a general question for you, to do with costs. Based on everything we've heard to date, the minimum that this new bill will cost the people of Ontario is $200 million. That's going to be the minimum increase in premiums. That will be on top of the normal increases. Just by passing the bill, the increased costs will be $200 million. That's what the government estimates. I think other people in the insurance industry feel it could be as high as $500 million. We've questioned the priorities of the government saying, "We're prepared to put a burden of $200 million to $500 million on the taxpayers to fund this, but we can't afford to do a whole bunch of other things." It's just a question of priorities.

Knowing the trucking industry as well as you do and having a fair idea of this bill, I have two questions. One is, do you have any estimates yourselves of by what the premiums might go up? And if the insurance premiums were to go up by these 5% up to 20% increases on top of your regular ones, do you have any feeling of the impact that might have on our Ontario trucking industry?

Mr Grant: Again, it's difficult to judge this, but we tend to support the IBC view of the increased costs, and we think they are going to tend to be higher for the trucking industry as opposed to private passenger because of loss transfer. We cannot put a dollar figure on it, but I would certainly think that if the IBC is looking at 20%, then we should be looking at something in excess of that.

As you may be aware, when you come to the rating of commercial trucking vehicles, they're not like private passenger vehicles, on a fleet-rated basis. They're usually judged or rated on their experience. So whatever the costs go up is what we will see in our claims, and that's reflected automatically as we develop those.

Mr Tilson: I have two questions. The message you have expressed, which certainly concerns me, is something I think the committee needs to look at. Given that there are increases in insurance, you're warning us that the trucking business, which is probably on a very fine thread as it is, particularly since this government has taken office, the concerns you've had in dealing with competition in the United States and firms going out of business and loss of jobs -- how serious is that fear, if these rates go up, as being predicted by such groups as the IBC?

Mr Grant: I can only comment that we visit many of our insureds -- maybe I'll ask David to make his comment, because he's closer with the industry directly, but many of them are on the edge. A number of these companies have gone out of business in the last number of years. Unfortunately, I didn't get a chance to get the details of the number, but we certainly have seen the loss of jobs, the loss of small businesses in the trucking sector, and companies tell me they're really on the edge. I would think a slight push is going to hurt a number of these companies. If availability of insurance becomes difficult, it could be -- David, do you have anything?

Mr David Gaskin: Some of the standard figures that are being used in the industry in assessing the profitability or the viability of the trucking industry are something in the neighbourhood of 98%-plus for an operating ratio, so profits of under 2%. If insurance costs go up another 1% of revenue, that means these companies literally are operating with no margin. Consequently, any upward movement in insurance costs is going to have a dramatic effect on the trucking industry, and the trucking industry literally is the connecting link that enables all our employers to operate efficiently.

Mr Tilson: I have one further question in your capacity as an insurance company, aside from your comments with respect to the trucking industry. I'd like you to respond to the minister's comments that were reported in the press, in this morning's papers at least, where he simply said the insurance companies are making all kinds of money, that notwithstanding the fact that costs are going to be going up substantially, you people are making all kinds of money and rates simply will not go up.

Just as an example from the Toronto Sun, he reiterated his indication that in fact the government really supports a government-run system, which is kind of scary. However, he then continues by saying:

"He said insurance companies make enough profit to absorb any increase resulting from the proposed NDP overhaul. The province will get tough" -- the iron fist is going to come down on you people, according to the minister, at least -- "with any insurance company which tries to pass on unjustified premium hikes, he said. He dismissed insurance industry studies which indicate that rates will jump an average $200 under the NDP plan."

What's your reaction to those comments?

Mr Grant: My reaction is twofold. One, a major writer, especially a writer of trucking insurance, was the Transit Insurance Co. They ceased writing business in the middle of last year, so if they're making tons of profit, it certainly didn't get to them.

Ourselves, we are operating on an underwrite loss position. It produced profit, but that's fine: We're entitled to a profit. The fact that the OTA states that its insurance rates are competitive is I think an interesting factor, where the buyer of the insurance product is actually saying he's satisfied with the insurance environment that exists. So we don't have a case where the consumer, in this case the trucking industry, is complaining about the cost of insurance. They're saying the cost of insurance is adequate and reasonable and makes them competitive against their US competitors. So if your customer isn't complaining, I don't know --

The Chair: I'm going to go to Mr Phillips again. I cut him off a little short. That's why he was looking at this watch. You have another minute, Mr Phillips, for a question.

Mr Tilson: Did you cut me off too, Mr Chair?

The Chair: No, I gave you an extra minute.

Mr Phillips: I'd just pursue those comments, because I'm preoccupied, almost, with the financial problems of all this. I do believe that the economy continues to struggle very much. As I said earlier, it's really strange to me that the government's prepared to increase the premiums to the taxpayers in Ontario by at least $200 million to $500 million and then today, for example, it can't find any more money for social assistance. It's just a strange priority.

But I want to get to your point on the trucking industry, that the industry feels this is one area where, currently at least, it's satisfied. Why in the world would a government then want to impose another cost? Mr Tilson's right. It'll increase the cost to you by about 20% on your premiums. You're saying here that 4% of your expenses go to insurance. The companies are making perhaps, at best, 2% before taxes. It's going to wipe out their profits, essentially. I think that's what you're saying here. What is driving the government to head in this direction, in your opinion?

Mr Grant: I think the government has not considered the trucking industry whatsoever in this legislation. I don't think it has addressed it and thought about it.

Mr Ward: Thank you for coming forth and giving your views on Bill 164 as it pertains to your particular company. You may not have heard some of the proceedings, but it's my impression that the Conservative Party feels that the pre-no-fault insurance system for motor vehicles was the preferable one, which had an open-ended right to sue. The Liberals, who brought in the OMPP, are now saying that there should be the ability to sue for economic loss.

In the letter from the Ontario Trucking Association, it states, "A return to the costly litigious environment...will unnecessarily put upward pressure on premiums once again." Do you agree with that point of view that the OTA has expressed?

Mr Grant: Yes. We do not wish to return to, as you say, an open-ended litigious situation. We think that's not fruitful for anyone. I'm not here to speak on behalf of the OTA, but I think it's been stated on public record that it's in favour of full no-fault insurance. We basically are supporters of that position.

Mr Ward: Which in essence takes away the ability to sue.

Mr Grant: We are quite happy, and so is the industry, living with the present OMPP.

Mr Ward: You also mention that you support the views of the Insurance Bureau of Canada. I believe you stated they perceive a 20% increase. I'd just like to correct you that their actuary report, conducted by Wyatt, estimated around a 13%, 14% increase. Beyond that, the large portion of their cost concern is with the long-term care, rehab part of insurance.

Now that the government has created the task force to examine that particular issue and look at costs and cost containment, the IBC yesterday said that because of this, until this task force can evaluate, it doesn't even think the Wyatt report and the percentage increase can be fairly accurately stated because of the uncertainties. Do you share that view of the IBC? You said on record you support them.

Mr Grant: All I'm saying with IBC is that we support its position that claims will be higher. Actuaries will get together, hopefully, and put a number on this, but I'm saying we feel it will have a greater impact on the trucking industry.

The Chair: I'm sorry, Mr Ward, I'm going to have to cut you off.

Mr Ward: Mr Phillips got longer than I did, Mr Chair.

The Chair: No, I've been watching real close.

Mr Grant, I'd like to thank you for coming before this committee. This is something new, because we've heard from Mr Bradley quite a few times, and it was fuel, road taxes, roads and depreciation. This is a new one. Thanks for coming before this committee.

Mr Ward: Before we adjourn, I have a question for legislative research. Mr Tilson made reference to four reports based on costs of Bill 164. I know of two actuaries, Mercer, which is the government, Wyatt, which was commissioned by IBC, and a study that's not actually an actuarial report, by Coopers and Lybrand on behalf of either State Farm or Allstate. But I don't know what the fourth one is. Could legislative research obtain a copy and let us know what that fourth report is?

The Chair: I think there was an article in the paper that stated four. I think that's where some people are getting the information. This will be available to the whole committee?

Mr Nishman: Yes.

The Chair: I've got good news. We'll be back here in room 151 at 2 o'clock sharp.

Ms Haeck: With more heat, hopefully.

The Chair: Some of the members want a little more heat in here. This committee is recessed until 2 o'clock sharp.

The committee recessed at 1244.


The committee resumed at 1401.

The Chair: We're going to resume the hearings on the standing committee of finance and economic affairs on Bill 164, An Act to amend the Insurance Act and certain other Acts in respect of Automobile Insurance and other Insurance Matters. This is the second day, the afternoon of our hearings.


The Chair: The first gentleman coming forward at 2 o'clock here is from the Actuarial Consultants of Canada. Mr Patterson, welcome to the committee. We have until 2:30. In that period of time, when you make your presentation, please leave some time at the end for questions from the committee. You may begin.

Mr J. B. Patterson: I'm a life insurance actuary, by the way. It is important for everyone to be aware of the potential risk of insolvency under certain circumstances once Bill 164 becomes law and to take appropriate action to avoid the potential pitfalls before serious problems develop.

My main submission is in two parts. There's a 30-page submission to the Automotive Insurance Review that I sent a few months ago, and there's a four-page article to appear in the next issue of the Canadian Underwriter. I have highlighted both of these and made a summary, and this brief presentation -- and it's on the pink set of papers so you can distinguish them from the rest. I hope I can stimulate your interest to read the others, but I'm only going to cover the five pink pages.

Let us examine some of the possible, serious repercussions. What new problems are the automobile insurers about to face? Under the old adversarial system, claims incurred in a given year were paid by lump sum mostly in that year or, at most, over the next few years. Under the no-fault system, most of the premiums received each year are held in reserve to provide annual claim payments for many years in the future. For the first time, automobile insurers will develop large portfolios of investments. A typical insurer's assets might grow in time to $100 million. Automobile insurers aren't used to large portfolios.

It is important for this committee to have input from life insurance actuaries and other life executives as automobile insurers have no experience with the problems created by large-asset portfolios. What problems will these large-asset portfolios produce? The automobile insurers are being asked to tread in an entirely new direction. To my knowledge, no insurer in Canada has ever been involved with a product fully indexed for inflation. This will create new, uncharted problems for which there is no experience.

For example, automobile insurers cannot afford to invest in long-term securities of 10, 15 and 20 years. If inflation and related interest rates were to suddenly grow rapidly, large capital losses would be experienced, converting long-term, low-interest securities to required high-interest-bearing securities. Therefore, it will be essential to confine investments to short-term securities. This is a new concept altogether for the insurance industry.

What is the source of money that is going to provide for future full inflation indexing of claims? Obviously, we must depend on the interest yield being in excess of inflation. A typical investor would not invest funds in securities which yielded only enough to cover inflation. Investors insist on earning a real interest rate of 2.5% more than inflation in order to increase their purchasing power. Real interest rates in Canada have been very close to 2.5% for most of the time such rates have been recorded.

Under the adversarial system, awards were calculated on the assumption that the claimant would only earn 2.5% real interest, the rest of his investment yield on his portfolio being needed to cover inflation. Under the no-fault system, if we could depend on maintaining 2.5% real interest every year in the future, the initial reserves to be held for future claim payments would be equal to the old lump sum payments under the adversarial system.

An actuary must be retained to establish a level of actuarial reserves for future claim payments and certify that they are adequate to avoid any risk of potential insolvency. Remember that the reserve is the only source of money to pay future claims.

Can we depend on earning 2.5% every year in the future? In the case of short-term securities issued in 1972 to 1975, yields to maturity were 2.5% less than inflation, rather than 2.5% more than inflation. In 1971 to 1978, yields were less than inflation for issues of the entire eight years.

If an insurer's investment return were 5% short -- that's the excess of 2.5% over minus 2.5% -- each year for four years, it could suffer losses of 20% of $100 million or $20 million. With four further years still 2.5% short, the loss in an eight-year period could grow to $30 million or more.

Such losses would exceed the entire surplus funds of many automobile insurers. Since there is no certainty that this history will not be repeated in the future, the actuary is forced to establish claim reserves at a significantly higher level than lump sum payments under the old adversarial system.

Will this affect premium rates? In my opinion, with fully indexed, no-fault claim payments, it will probably be necessary to raise automobile insurance premiums by 20% to 25%. A full development of the required rate increases can be found in the main submission to the automobile insurance review that we prepared. This is in opposition to one of the main reasons for adopting no-fault originally, which was to cut insurance premiums.

Are there any investments which can solve these problems? Recently, the Canadian government issued $700 million of special bonds maturing in 30 years, December 2021, but with the principal at maturity adjusted by full indexing for inflation and with 4.5% coupons in the meantime. This issue was completely sold, so there are no further bonds to be sold by the government. To handle further trading of these bonds, a secondary market has developed, because the government is not prepared to redeem them until after 30 years.

Some automobile insurers with no experience in handling asset portfolios have embraced the idea that these bonds will solve the problem of indexing for inflation. However, this reasoning is fallacious for two reasons. Firstly, since the bulk of the principal and the inflationary effect are deferred for 30 years, the current cash flow arising from the 4.5% coupons will be inadequate to meet the required claim payments each year.

Secondly, if all automobile insurers wanted to acquire such bonds, the large demand would temporarily force bond prices up, perhaps by 50%. Then, as they found the necessity to sell these bonds to meet cash flow requirements, the prices would likely fall, leading to significant capital losses.


How are profits from insurance company annuities taxed? Revenue Canada has a history of accelerating taxes on life annuity products by requiring tax reserves to be set at a lower level than statutory reserves, thus creating higher taxable profits. This is in regulations 1401 and 1403 of the Income Tax Act. However, this prematurely taxes part of the full investment income. For annuity products fully indexed with inflation, the insurer can only afford taxation of the small real investment return as the inflationary aspects of the investment return are required to meet the demands of annual indexing for inflation.

The automobile insurers must negotiate new regulations appropriate to fully indexed annuities; otherwise, the resulting taxes could be devastating. If this is not done prior to the introduction of Bill 164, premiums must be increased still further to meet the uncertain tax atmosphere.

How does all this affect the general public? For starters, widows losing spouses in fatal automobile accidents will receive much lower claims. The $200,000 limit to the widow of the at-fault driver will be a boon to her. However, the adversarial system, which will still be applicable to accidents other than automobile, attempts to restore the widow to the same standard of living enjoyed prior to the accident, and this involves claims usually of $400,000 and more, compared to the $200,000 that will be available to the widow whose husband died in an automobile accident. Also, pain and suffering benefits have been reduced to such a level that they will not be applicable for 97% of the claims.

If a child runs between two parked cars directly into an oncoming car and becomes disabled as a result, the adversarial system would usually find that child to be largely responsible for the accident, and very little, if anything, would be assessed against the driver. Under the no-fault system, the child will receive the scheduled benefits. In a situation such as this, no-fault is the choice to be recommended. It would be hard to find anyone who would disagree with this.

However, if a car stopped at an intersection for a red light is hit in the rear by an intoxicated driver with previous driving convictions who was driving well in excess of the speed limit, and if as a result both drivers receive serious spinal injuries, the public would find it abhorrent if both the innocent driver and the at-fault driver were to receive the same level of benefits, the initial reserve for which would be $2 million for each driver.

Suppose the average man in the street were asked if he agreed that benefits should be paid without any consideration of fault, regardless of the circumstances, even though it meant that his automobile insurance premiums were going to increase 20%, that he would probably forfeit all pain and suffering benefits, and further that if he happened to die in a fatal automobile accident, his widow would receive only 50% or less of the benefit that would be paid to a widow whose husband had died in another fatal accident not involving an automobile. Such a man in the street would probably be repelled at the idea of giving up so much in order to pay substantial claims to a person who could've easily avoided the accident in the first place.

In the Report of Inquiry into Motor Vehicle Accident Compensation in Ontario, the Honourable Mr Justice Coulter A. Osborne stated on page 545:

"The idea that both the innocent and the drunken driver should be compensated equally tends to offend many people's sense of justice. The moral issue raised by this example becomes even more difficult when no-fault benefits are increased. Cases of this kind are few in number, but they do serve to emphasize the importance of the idea of fairness in our society's system of values.

"It is the public's sense of fairness which has caused the no-fault movement in the United States to stall, if not stop."

I now have three suggestions to ease the initial burden on the automobile insurers and to reduce or eliminate the need for increases in premiums.

First, delay the introduction of Bill 164 until actuarial reserve standards have been adopted by the Canadian Institute of Actuaries and the automobile insurers have reached a satisfactory agreement with Revenue Canada on appropriate tax levels for this product. This will reduce the need for conservatism and the potential increase in premium rates.

Second, consider a modified definition of no-fault, with the compensation varying with the type of fault and with lower benefits for the at-fault driver who could clearly have avoided the accident. This is developed more fully at page 26 of our submission to the automotive review.

Finally, introduce Bill 164 in two stages and continue the right to sue for serious, permanent physical injury, disfigurement or death for two years, until the system is functioning smoothly for less serious cases. These claims tend to magnify the difference between the no-fault approach for automobile claims and the adversarial approach applicable to other types of claims. There are relatively few cases of this severity, and since they will all involve pain and suffering in excess of the $15,000 deductible, reference to the adversarial tort system will be made anyway.

In the enormous changeover to fully inflated claim payments, many problems will have to be solved. It might be better to tackle the 94% of cases that are relatively simple and solve all these problems before attempting the far more complex problems of the remaining 6%.

Health care professionals will tend to recommend extensive rehabilitation procedures designed to restore enjoyment of life even though there is no hope of a return to the workforce.

Technology in the field of rehabilitation is developing rapidly. It is now customary, in the case of serious spinal cord injuries, for the rehabilitation professional to strongly recommend voice-activated computer and environment control equipment. A few years ago, such equipment did not exist. As such technology develops in all areas of disability, greater and greater demands will be placed on the insurers by the rehabilitation industry, creating future costs for disabilities arising from automobile accidents that would never have applied in similar disabilities from non-automobile accidents settled by lump sum payments.

No-fault insurance is an open invitation for the development of innovative technology in the rehabilitation field. This of course is a boon to the disabled person, but a significant proportion of the cost will be borne by the automobile insurers.

Such development will also lead to the possibility of incurring more costs for strongly contested assessment and arbitration proceedings to settle on the necessity of adopting these techniques.

As well as the fact that these cases will have a disproportional effect on automobile insurance costs, it is also a fact that they are the ones which receive the greatest publicity. The practice of making lifetime provision for a person who created his own disability by impaired driving will be open to scrutiny and debate in the press. The comparison between a widow from an automobile accident and a widow from another type of accident is also bound to be reported.

It might be prudent to apply the no-fault legislation first to the simpler disability cases and develop smooth-running systems before tackling the more complex disabilities, where there is not only a risk of substantially increasing the insurer's liability in the case of some types of disabilities but also of leaving claimants with other types of disabilities, such as those in comas, in hopeless situations.

That's the end of my presentation. I'll be glad to answer any questions you might have.

The Chair: We'll start off with Mr Harnick. Four minutes per caucus.

Mr Harnick: I'm interested in your comment on page 4, where you state, "It is the public's sense of fairness which has caused the no-fault movement in the United States to stall, if not stop." My research into US jurisdictions indicates that, to a very large degree, no-fault schemes and threshold schemes in the United States have not been, in the long run, money savers for the insurance industry or for the premiums people have to pay. Do you have any comment to make about that?

Mr Patterson: I didn't study the US situation myself. I did get a copy of this Report of Inquiry into Motor Vehicle Accident Compensation in Ontario, from 1988. This is a summary, and there are two volumes of main report. I just simply quoted Mr Justice Coulter Osborne.

Mr Harnick: You see, on page 11 in your longer report you state, "Once additional costs to the automobile insurers created by the statutory accident benefits schedule become known, it may well be found that such costs are in excess of the savings in court and other legal costs."

Mr Patterson: I'm talking about administrative costs there.

Mr Harnick: Exactly. The cost of processing a claim, correct?

Mr Patterson: Yes. In this brief presentation, I didn't have a point to cover it.

Mr Harnick: I know that Mr Justice Osborne stated that as far as he was concerned, over the long term the administrative costs in a no-fault system would be greater than the administrative costs in a tort-based system.

Mr Patterson: I think greater than all the legal costs.

Mr Harnick: Yes, and that would be your conclusion as well.

Mr Patterson: Nobody can be sure until you try it and you put it into effect and see how it works.


Mr Harnick: But as an actuary, and based on your experience -- and I know of your reputation in this field for a long time -- would that be a conclusion that would be an unreasonable conclusion to make at this time?

Mr Patterson: No, I don't think so. I think it's reasonable to assume that it's going to be very expensive to administer.

Mr Harnick: Yes, particularly when we get into a scheme of very much enhanced benefits between the OMPP and Bill 164. Would you agree with that?

Mr Patterson: Yes. Also, the schedule has various stages of income replacement: It isn't set for life; it's reviewed from time to time.

Mr Harnick: Yes, so the costs are going to continue, under Bill 164, to escalate rapidly. Would you agree with that?

Mr Patterson: Yes. I don't know for sure until we have actual experience, though.

Mr Harnick: But ultimately the premium costs under Bill 164 are going to go up.

Mr Patterson: In my opinion, yes.

Mr Harnick: And the rights that innocent victims have are going to accordingly become less and less, because innocent victims are essentially paying for the wrongdoers as well. Correct?

Mr Patterson: Yes. You're going to double the number of claims because you're bringing the at-fault drivers in with the not-at-fault drivers.

Mr Harnick: There's just one other issue I want to deal with, just so we all understand this. In terms of the tort-based system, reserves are set and carried by the insurers from year to year, and then ultimately the payout is made.

Mr Patterson: Yes, but that's just a few years after the year of the premium.

Mr Harnick: Exactly. But under this scheme, particularly when we're talking about Bill 164 and the enhanced benefits that might be payable, that is something that administratively, an insurance company is going to have to reserve from year to year, and in some cases for ever.

Mr Patterson: Yes.

Mr Harnick: And the administrative cost, I would think, of insurers carrying on their books these kinds of claims indefinitely would be very costly. Am I right in that?

Mr Patterson: They will be costly. I think the actual payment of the claims will be equally costly.

Mr Harnick: In a sense, by going to an enhanced benefit system such as we're going to, it would seem to me that from an insurer's point of view, these cases never end, do they, some of them?

Mr Patterson: They end.

Mr Harnick: But the payments continue.

Mr Patterson: They go down when the person reaches age 65.

The Chair: Mr Harnick, I've got to go on to Mr Owens.

Mr Owens: I'd like to thank you for your presentation, Mr Patterson. I have a couple of questions for you.

Mr Harnick referenced a comment on page 4 with respect to the public's sense of fairness. I don't read that in isolation. Above that, you talk about the issue around the innocent being hit by a drunken driver and that the public's sense of fairness is offended by the fact that there appears to be a payment for the intoxicated driver. I'm wondering if you're aware that under our proposed accident benefit regulation, a person who's convicted of drinking and driving and any other indictable offence will not be eligible for income benefits.

Mr Harnick: On a point of order, Mr Chairman: You know, I thought I made myself clear this morning.

Mr Owens: That's not a point of order.

Mr Harnick: Well, no, it is a point of order.

The Chair: Wait a minute. I just want to hear him out.

Mr Harnick: You're misstating what was said. What I said -- and if the member is going to quote me, as he is doing, he'd better be accurate. The fact of the matter is, what I said was that people will drink and they will drive and they will cause accidents, but they may not be convicted, for a myriad --

The Chair: That's not really a point of order.

Mr Harnick: Well, it is a point of order, because he's misquoting me. The fact of the matter is, people can still have alcohol in their blood and be the cause of accidents without being convicted --

The Chair: I'm sorry. It's not a point of order. Mr Owens.

Mr Harnick: -- and for some reason, Mr Owens doesn't want to accept that, because it points out a major defect in Bill 164.

The Chair: It's a difference of opinion. I'm sorry, Mr Harnick. Mr Owens.

Mr Owens: Just in terms of your report, it doesn't appear to be a complete actuarial study in the manner that was conducted by Mercer for the auto insurance review. You have formed an opinion that there's going to be an increase in premiums as a result of Bill 164 being instituted.

On page 5, you talk about "No-fault insurance is an open invitation for the development of innovative technology in the rehabilitation field." I'm wondering if you could express your view on the task force that was announced by our minister, Brian Charlton; how it's going to affect your opinion in terms of price increase when standards are set for rehabilitation and standards of care. Do you see that as having a positive effect in terms of controlling cost?

Mr Patterson: As I read the schedule, there's a great deal of decision-making left up to rehabilitation experts and doctors. They will be listened to and their opinion will have some weight in paying claims. The rehabilitation people are, of course, interested in maximum rehabilitation, and the technology is going to increase. They're going to try to introduce that technology, and I think it might increase claims.

Mr Owens: We agree that at this point there's cause for some concern, which is why the task force was set up in terms of developing standards to look at exactly what kind of attendant care is required for the person. I think that demonstrates very clearly that we've listened to the concerns of people like yourself, the Insurance Bureau of Canada and other intervenors in this process.

The Chair: Mr Phillips.

Mr Phillips: I appreciate the presentation. What I'm interested in is what this is going to cost the people of Ontario because, in effect, whatever costs are associated with this, they'll have to bear, as they have to carry the coverage. Based on what we've heard so far from the government testimony, the minimum this is going to cost is $200 million. That's what's going to result in increased cost to the people of Ontario. Your estimates are considerably higher than that: Your estimates, I think, would take it up to probably $500 million.

The reason I raise this is that the government earlier this morning said: "We're sorry, but the social assistance people in this province will not get the 2% we promised them. We can't afford it." That saved the taxpayers $60 million, but the bill we're dealing with this afternoon will cost the people of Ontario 10 times that amount of money, if your numbers are correct. In my opinion, it's a strange set of priorities that the government's pursuing and saying, "We're going to pursue this, that will every year take out of the people of Ontario anywhere from $200 million to" -- your estimate I think would be $500 million to $600 million.

You and your document, I think, suggest premiums could go up as much as 20%. What would be your most conservative estimate of the increase? That's your most accurate one, but what would be your most conservative estimate of the increased cost?

Mr Patterson: There are two kinds of actuaries. There are life insurance actuaries and there are casualty actuaries. What I've attempted to do is interject into this picture certain questions and points which the life actuary would introduce, to do with portfolios of assets and taxation and so on. But when it comes to actually formulating the premium rates, once the reserves that the life actuary would require are known, the casualty actuary is far more qualified to answer than I am. I explained my reason for 20% in my paper, but I'm not a casualty actuary.

Mr Phillips: But it's helpful to have your numbers on the record; I appreciate it. Thank you.

The Chair: Mr Mancini.

Mr Mancini: Sir, on page 20 of your brief you state that rates may increase "by amounts ranging upwards from at least" -- and I underline "at least" -- "22.5%." Is that correct?

Mr Patterson: That's in my opinion.

Mr Mancini: On page 6, you state that the total loss of income and future care claims for bodily injury will at least double in cost. Is that correct?


Mr Patterson: On page 6? Which paragraph?

Mr Mancini: You stated, "The total loss of income and future care claims for bodily injury would double," in cost.

Mr Patterson: What paragraph are you in?

Mr Mancini: I made notations. I don't have the document in front of me now.

Mr Patterson: I think the point I was trying to make is that we're adding all the at-fault drivers to the no-fault drivers. That's all I was saying.

Mr Mancini: I appreciate that. We're just trying to re-establish the fact that Bill 164 is going to cause greater administration, greater cost and is going to in fact punish many people because it takes away the right to tort for economic loss.

Mr Patterson: Yes.

Mr Mancini: Would you agree that the $15,000 deductible for pain and suffering does not eliminate the insurer's cost of investigating and handling potential claims, as this system has no historical or actuarial precedent?

Mr Patterson: If the bill is passed, all the economic losses will be eliminated from the tort system, and there will only be the pain and suffering left.

Mr Mancini: Exactly what I said.

Mr Patterson: If there's a $15,000 deductible, I think most insurance companies, without any investigation whatsoever, will recognize that most of the cases will just not fall in that limit.

Mr Mancini: But don't you believe that they will have to investigate these claims none the less?

The Chair: I've got to cut off here. Mr Patterson, I appreciate you coming before this committee with the information you've given. As you see, the members had a lot of questions. I imagine we could spend another half hour or so. Thank you very much.


The Chair: The next presenter we have is Mr Mel Swart. I'd like to recognize Thelma in the audience also. Do you need your right-hand person to give you a hand? I bet she's done a lot of filing and picked up a lot of telephone calls for you in her day. Mel Swart, the former MPP for Welland-Thorold. Welcome, Mel. I think you know some of the rules around here.

Mr Mel Swart: I'd just say to you, Mr Chairman and members here, that Thelma thought it was a pretty tough life being the wife of an MPP, but once she had me home all the time, she found it was worse.

The Chair: Welcome, Mel, to the committee. You may begin. We have 20 minutes.

Mr Swart: Thank you. Just a few preliminary remarks, if I may, Mr Chairman. First of all, I want to thank the subcommittee for adjusting time so that I could be here this afternoon.

Second, I want to say a friendly hello to some of the colleagues I sat with here at Queen's Park and some of the people I've met on various trips across the province.

I also want to say that I won't be reading from the brief, because it will be too long. I'll be reading from a summary of the brief, but I think you'll be able to follow it okay in the brief. But the brief is the important document. It provides elaboration, it provides explanation, it provides documentation on where the figures came from.

I want to admit immediately that there are certain improvements under Bill 164, such as indexing, removing caps, improved rehabilitation etc, but I must say that on balance, Bill 164 is little more than a costly and a counterfeit imitation of the real thing promised to the people of Ontario on that public auto insurance.

Technically, I'm presenting this brief on my own behalf, but in reality, I'm representing the great majority of the 35,000 NDP members in this province who are upset and disillusioned with Premier Rae for discarding public auto insurance. Some 90% of the delegates at a 1992 convention in Hamilton rebuked him by voting in support of a resolution declaring that public auto insurance was still NDP policy and calling on him and his government to introduce it at the earliest appropriate time.

In addition, I am speaking for hundreds of thousands of motorists in the province who voted for the NDP to get lower premiums and fairer treatment under the promised public non-profit auto insurance system.

Everyone here knows that for more than six years, and particularly in the last two general elections, the Ontario NDP made public auto insurance the overriding issue and promised its implementation when we came to power in this province. Hansard is full of comments by our NDP leader, Mr Rae, promoting public auto insurance and ridiculing Liberals and Conservatives for proposing Band-Aid alternatives instead of introducing a public plan such as they have in Manitoba, Saskatchewan and British Columbia.

I have here more than 100 pages of questions and comments the Honourable Bob Rae made when he was Leader of the Opposition. I think I'll take time to quote one. This is from Hansard, January 17, 1986. It's part of a question Mr Rae asked Mr Kwinter, who was then the minister.

"Why has he not recognized that there is better service, better value for the dollar, better value for the consumer and better protection for car drivers in those provinces that have public insurance plans than there is in Ontario? Why does he not have the courage to stand up to the insurance companies in this province and say to the people of this province, `You are being ripped off'?"

That's from Hansard, and that's the kind of thing that was said in this House for five or six years.

As everyone knows, just one year after forming a government, that same leader, as Premier, announced that he wasn't proceeding with a public system, and said, "We don't intend to revisit this question or return to it or relive it, believe me, over time." That decision to kill rather than postpone the public plan was made by Premier Rae alone, without discussion with or approval of the NDP, his caucus or even his cabinet. Simply, it was a personal and massive breaking of faith with the New Democratic Party and the public of this province, and the reasons he gave for doing it won't stand up under any in-depth scrutiny.

All of the NDP governments in the western provinces, since first coming to power, have meticulously kept their pre-election promises and other promises they made while they've been in power. Unlike them, the current Premier of this province, through auto insurance and other subsequent reversals, has broken an array of substantive promises to a degree unacceptable by any responsible political standards.

I raise this issue right at the beginning because I'm concerned that it has not only damaged NDP credibility but has heightened public cynicism towards politicians. I say this not as a platitude; I say this with real concern. There may well be a problem for any party to govern if the level of cynicism among the public continues to increase. I think we must recognize that democracy is fragile. We certainly see that around the world.

I want to come to Bill 164 now. I see three main faults in Bill 164. There are other things I'd like to talk on, but time doesn't permit.

(1) The first is with the proposal to eliminate the right to sue for economic damages but permit suit for pain and suffering. Incidentally, I should preface that by saying that over and over again the minister said three times as many people are going to be able to sue; they are, but the pot the money comes out of is going to be smaller than it was under the former legislation we had.

According to the consultant to the government, William Mercer, this new NDP legislation will reduce total court awards, to the few injured persons who can sue, by another 15%. To provide fairness, the right to sue needs to be expanded, not further restricted. In my view, it is wholly inappropriate for guilty drivers to get as much or even more than the innocent victims in claim settlements. Determination of compensation for both serious residual physical injury and major ongoing pain and suffering are the very minimum conditions where tort action should be permitted. I recommend that Bill 164 or its regulations be expanded accordingly.


(2) The main result of abolishing the right to sue for 95% of accident victims, or 85% under the Liberal legislation of 1990, was to reduce -- and this was the main result; it cannot be denied -- the claims paid out to accident victims, in 1991, by $323 million and increase the profits to the insurers by $454 million. That was the net result.

Now the insurance companies say they will require another 19% increase in premiums, $100 to $200 per car, due to the provisions of Bill 164. And they will get it. I've heard the minister say that there won't be any increase or only a minor increase. I suggest that's not what will happen, from experience.

Shortly after Premier Rae said he was killing public auto insurance, the minister in charge, Brian Charlton, said the private insurers were cooperating and that premiums would be reduced by 10%. It didn't happen, and that angered the minister. According to the Toronto Star, he said on March 26, 1992, that the province may resurrect public insurance if companies didn't give drivers a break on benefits and premiums. Specifically, he was quoted as saying, "Either they're going to play ball with us to make a fair and affordable system work in the private sector or they're going to end up talking about their own funeral."

But the Honourable Bob Rae quickly pulled the rug out from under the minister on that threat. The next day, the Premier went public and said, "His government has no plans to resurrect public auto insurance." The minister backed off with these words. "It was an analogy that I was making which has nothing to do with what I'm promoting." The government, he said, "has taken public auto insurance off the agenda."

I ask you, does anyone really believe that this government is going to legislate or fight on behalf of the motorists, against the insurance industry, when the Premier has lost the will to do so and has in fact disarmed his own minister? Simply, motorists are going to pay increases based on what the insurance companies want.

(3) The third main fault I find in Bill 164 is that this NDP legislation provides that no-fault income replacements and death benefits be tied to income. A person making $90,000 a year can get his total net income replaced the same as someone making $25,000 a year. The death benefits for the high-income earner would be $200,000, compared to $50,000 for the low-income earner. The availability of these higher limits may be desirable in themselves, though I really question whether the life of one person is worth four times the life of another person.

But the real question is, who is going to pay for it? The two persons in the above example, with the same car, the same driving record and in the same area, will pay the same insurance premiums. Thus, in a very substantial way, the low-income earners will be subsidizing the high-income earners. That proposal of the Rae government has to be the most unjust policy that any social democratic government could design. Surely the reasonable way to deal with this situation would be to leave those no-fault benefits at the medium-income level and offer an optional purchase of higher benefits for the high-income earners. That seems to be a sensible way to go.

Yes, I say highway robbery is alive and well in Ontario, and will continue to be under the Rae government's Bill 164. Simply, Bill 164 is a grotesque perversion of what the NDP have long advocated and what the party stands for.

Now I want to talk a little bit about the benefits of public auto insurance. Saskatchewan, Manitoba and British Columbia have had public auto insurance plans initiated by the NDP government for from two to more than four decades. The 1991 average insurance rates were: Saskatchewan, $368; Manitoba, $412; British Columbia, $624. By contrast, Ontario drivers paid an average of $735. That is research done for the Honourable Mr Peter Kormos by the legislative research branch of this Legislature.

The BC system offers the best overall comparison with Ontario's, even though its premiums are lower, its payouts are higher, its benefits are better and it has eliminated the great unfairness and discriminatory practices of the Ontario system. Higher payouts by the Insurance Corp of British Columbia are documented here. There's full right of suit, which gives a higher payout. They pay 4% premium tax and pay hospital costs to the BC government. Here, the right to sue is and will be almost non-existent, and insurance companies pay nothing towards hospital costs and only 3% tax to the government.

Also, the rates of accidents, injuries and death in BC -- which has, of course, an almost 100% urban population -- are substantially higher than Ontario's; of course this requires payout of benefits proportionally to more people.

There is no secret why BC settlements are higher and their rates are cheaper. ICBC is far more efficient and operates on a non-profit basis. Their total brokers' commissions and administrative expenses in 1991 were 10.5% of total revenue; that's premium plus interest on investment. In Ontario, with private insurers, it was 17.3%, almost 70% higher. ICBC skimmed off nothing in profits. The private insurers here skimmed off 14.6%. Put another way, BC paid out 79 cents of every revenue dollar received in claims for accident victims. Ontario insurers paid out only 58%. That's in 1991, the last year for which you can get figures.

Simply, if ICBC -- and this is the significance of what I'm saying -- had been operating Ontario's benefit system in 1991, the savings would have been $335 million in expenses and $705 million in profits, for a total of $1.04 billion in savings in one year. With total premiums of $4.222 billion, the Ontario motorists would have realized savings of almost 25%. I say to you that the only real difference in the situation between now and the time that Premier Rae and I coauthored Highway Robbery in 1987 is that then he fought for the motorists' interests; now he appeases the insurance industry.

Unlike the system in BC, Bill 164 keeps most of the old injustices and discriminations here intact. In BC, higher rates are charged only for bad driving records and are assessed against the driver, not the car. In Ontario, age, sex, marital and family status have a major bearing on rates regardless of driving record; there are charts in the brief to show this. In Toronto, an 18-year-old male pays four times as much and an 18-year-old female pays twice as much as a 38-year-old, whether male or female, all of them having a clear driving record. New drivers of any age are charged excessive premiums. If there is a break in coverage for a year or two, rates rise, and on and on and on.

Under Ontario's system, there are, according to best estimates, 200,000 or more people driving without insurance; as a study was done in 1984 shows, they are young people generally. There's a loss of at least $200 million in premiums and a real danger to society. This doesn't happen in BC, because no one can buy plates or stickers for their automobile without buying their insurance at the same time. The two are sold as an indivisible package, in force for the same length of time.

The minister has indicated that down the road he intends to use a permitting section of Bill 164 to eliminate discriminatory rate-setting practices. I say it won't happen, for several reasons. First, if he is really serious about it, that kind of stuff would be in the bill or in the draft regulations. Second, the insurance companies are vigorously opposed to this, as everyone knows. Third, Bill 164 will substantially increase rates. Dramatically lowering premiums for good young drivers and eliminating other discriminations under the private system will cause another increase in rates for other drivers; I think that's very natural. The only way the elimination of discrimination can be effected without passing more costs on to other drivers is through the great savings of a public system.

I say again, the ICBC type of plan was what the Honourable Bob Rae promised. The abysmal Bill 164 is what he delivered. I say, for shame, for shame.


Similar to our public health system, public auto insurance was first initiated by an NDP government in Saskatchewan many decades ago. Despite great opposition, it was undertaken and implemented by persons with great vision and courage, like Tommy Douglas. Later it was put in place in Manitoba and BC when the NDP won those provinces. Again, there was great opposition from the insurance industry, the Liberals and the Conservatives, but the NDP went ahead.

As with health insurance, those public auto insurance plans have been so successful that no Liberal, Conservative or Social Credit government dared dismantle them. Even the brokers in British Columbia, who receive less commission than Ontario brokers, find the system so much simpler and better for the public that four years ago 94% of them registered their opposition to a $1-million bid by Ontario-based private insurers to have ICBC dismantled and the auto insurance given back to the private sector. Poll after poll in all provinces demonstrate that the public feels the same way.

However, the Honourable Bob Rae has arbitrarily declared that the NDP will never provide the people of Ontario with a public plan, not because it's not good for them but because he hasn't the will to proceed. I want to say that's not NDP policy and it cannot be accepted.

I'll just interrupt myself here to say that I notice in today's paper that the Honourable Brian Charlton, perhaps in sincerity, says that the public plan isn't off the NDP programs yet. I want to say, with all due respect to Mr Charlton, that it is Mr Rae who speaks for the NDP government of this province, and Mr Rae has said that it will never be.

I conclude by saying, recognizing that this all-party committee is dominated by NDP members, I urge you to recommend that Bill 164 not be reported but instead be replaced by the public auto insurance system promised so often and so sincerely by the Ontario NDP.

Thank you, Mr Chairman. Glad to answer any questions if I'm able to.

The Chair: We've only time for one question from each caucus. Mr Owens.

Mr Owens: I feel a little like an adolescent about to question his father's authority for the first time. In terms of some of the comments you made with respect to the bill, I'm pleased that you don't hate it totally. You do mention that there have been some improvements over the gift the Liberals gave to the insurance industry.

I'd like to ask you a question, especially around the right for individuals to sue for pain and suffering, those who were left out of the OMPP plan, those with psychological or cognitive injuries. Do you not feel that's an appropriate route to take to allow those individuals access to the courts?

Mr Swart: Yes, I do, Mr Owens. If you followed my brief, you would know that I suggested that the compensation for lost income, as already in the OMPP, be retained and that this be added to it. That's the minimum, I suggest, that should be done.

The Chair: Mr Mancini.

Mr Mancini: First of all, I would like to welcome Mr Swart back to the Legislative Building, where he served with great distinction for many, many years and had great public support from the people of Welland-Thorold and elsewhere across the province.

As I said yesterday, I may have disagreed with Mr Swart philosophically on whether or not government-owned automobile insurance was the right way to go, but what you heard from Mr Swart was certainly what you got.

I am surprised, actually, that many of the things you have said today have in fact been said earlier by a wide variety of groups. You've chastised Mr Rae for his broken promises. You've mentioned very clearly that the proposals in Bill 164 will cost the Ontario public a great deal of money, and they may in fact be getting less money because, as you said, the pie is smaller. Other people have said that. You've agreed that disruption is being caused in the industry. You've also given us a new bit of information that I wasn't aware of.

The Chair: Mr Mancini, could you get to the question?

Mr Mancini: From reading public reports, I thought Bob Rae and the NDP government broke their promise on government-owned automobile insurance after a cabinet meeting at the Honey Harbour retreat, but you tell us today that this promise was broken without consultation with members of the caucus or the cabinet, so that's a new bit of information.

Mr Owens: That's a question?

Mr Mancini: Are you the Chair, or is Mr Hansen the Chair?

The Chair: Just ask the question, please.

Mr Mancini: Is he your sidekick, or what's going on here?

The Chair: He's the parliamentary assistant; that's it.

Mr Mancini: We have been maintaining, Mr Swart, that it is possible for Bill 164 to cost the Ontario public anywhere from almost $200 million to upwards of $565 million to implement; that money coming right from the hardworking taxpayers of this province. I want to know from you, Mr Swart, whether or not, in your opinion, we are better off with the Ontario motorist protection plan as compared to Bill 164 and its 68 unintelligible pages of regulations.

The Chair: Okay, that's the question. Let Mr Swart answer it.

Mr Swart: I think perhaps I covered that in the brief. I believe that, on balance, there are benefits in Bill 164 which don't exist under the OMPP; there are some things, of course, which I feel detract from the OMPP. On balance, I doubt that the improvements in Bill 164 are going to be worth the money it's going to cost the taxpayers.

Mr Mancini: Did the Chair hear the answer?

The Chair: Yes. Mr Tilson, one question.

Mr Tilson: Mr Swart, thank you very much for coming to the committee and giving your thoughts. As a new member to this Legislature and as critic for the Progressive Conservative Party, I must say that whenever the subject of auto insurance comes to the House, your name somehow seems to be mentioned. You obviously have a great deal of respect from all three parties, so it's a pleasure to see you coming to his committee.

I must say, sir, that I obviously do not agree with some of your thoughts and I agree with other of your thoughts. I'm sure you can appreciate that. The one thing that shocks me is the new piece of information you have brought to us today. We realize that when a man of your stature, a member of this House for so many years, has come to this committee, obviously in frustration after listening to what Mr Rae has been given through instructions by his party and possibly even his caucus -- we don't know what goes on in that place. The way you're speaking, I suspect it is a one-man show. That arrogance you have painted of the Premier of this province -- you have painted a very serious picture, an undemocratic picture, of a Premier of this province concerning the whole subject of auto insurance and the philosophy of the New Democratic Party.

The Chair: Have you got a question?

Mr Tilson: Well, if you give me a chance. I know you people are nervous about this, but give me a chance. The fact that you have come to this committee and have painted this picture of the Premier: Are these facts serious enough that the Premier should resign?

Mr Swart: I don't think it's up to me to answer that question. As you know, I have some very strong reservations about his performance to date. I'm not sure it was arrogance that made him make that statement. I want to make it perfectly clear that I am not here saying that the decision to postpone or the decision not to bring in auto insurance now wasn't approved by cabinet. What I am saying is that his statement that it would never be revisited was made by him and him alone.

Mr Tilson: He is the Premier.

The Chair: Mr Swart, we're out of time; we've actually gone over. We'd like to thank you for coming before this committee.


Mr Harnick: I see that the next item on the agenda is recess. Can I ask for unanimous consent that we forgo our recess and maybe have some extra questions for Mr Swart, if he doesn't mind staying?

The Chair: That's no problem. I've got no problem with that, but we're right at 3 o'clock now. We went through recess. You didn't realize that?

Mr Harnick: I wouldn't mind staying for another half an hour, then, if we could have unanimous consent, because it's not often we get someone of Mr Swart's knowledge and stature to have the opportunity to question on an issue so important as this.

The Chair: I'm sorry.

Mr Harnick: Wait. Just hear me out, because I'm entitled, as a member, to bring a point of order forward. What I would like to ask for is the unanimous consent of my colleagues here to maybe spend a few more minutes so that we all might have an opportunity to go around the table again and ask Mr Swart some questions. I would like to ask for unanimous consent, if that's possible.

Interjections: Agreed.

The Chair: Is it unanimous?

Interjections: No.

The Chair: It's not unanimous. Sorry.

Mr Harnick: Could we have a recorded vote? I would like a recorded vote.

Mr Tilson: Mr Chairman, I would make a motion, as worded by Mr Harnick.

The Chair: You want a recorded vote? The motion made by Mr Tilson, how many in favour?


Harnick, Mancini, Phillips, Tilson.

The Chair: Opposed?


Dadamo, Haeck, Johnson, Klopp, Owens, Ward.

The Chair: Thank you for coming before the committee, Mel.


The Chair: I would say that Mel will be out in the hallway and will answer a lot of questions there.


The Chair: Would the Ontario Psychiatric Association come forward, please? Dr Hector, I believe? We have a half-hour, until 3:30. In that half-hour, could you make your presentation and leave some time at the end? As you can see, the members get very excited if they can't ask more than one question. You may begin.

Dr R.I. Hector: Thank you very much indeed. With respect, I doubt that I shall generate the enthusiasm or excitement of the former member, but I do represent the Ontario Psychiatric Association, and perhaps I could just introduce myself.

The Chair: Maybe we should just wait 30 seconds until everybody's out the door. Sir, do you have a brief?

Dr Hector: No, I don't.

The Chair: That's fine. I just wanted to know.

Dr Hector: We have a short submission.

The Chair: Fine. I'm a little hard of hearing, so if you can speak up a little, it would help me.

Dr Hector: I will do my best. Perhaps I might introduce myself, simply to state my own background in respect to this --

Mr Johnson: On a point of order: I think it would be appropriate, Mr Chair, if we wait until there is a semblance of order in this room so we don't offend this presenter. I think what he has to say is as important as anyone who comes before this committee.

The Chair: Okay, it's quiet now. Dr Hector, carry on.

Dr Hector: Thank you. Perhaps I might just introduce myself. I am representing the Ontario Psychiatric Association. I am a psychiatrist in private practice now in Toronto. I was, for 23 years, the senior staff psychiatrist at the Wellesley Hospital and for 11 years its psychiatrist in chief. I was, during that time, associate professor with the department of psychiatry at the University of Toronto and had, as a result of that, cross-appointments to the Clarke Institute of Psychiatry and to the Princess Margaret Hospital. I have been president of the Ontario Psychiatric Association and of the Medico-Legal Society of Toronto. With that background, I'd like to express our thoughts about Bill 164.

First of all, I would like to and we would like to applaud the government for recognizing what we too felt was a serious injustice with respect to the psychologically injured person under the previous insurance plan. We think that permitting the individual suffering pain and suffering psychological injury to sue for damages is an appropriate and proper introduction under the new act.

However, we still have two concerns about the act as it's currently written. The first has to do a bit with the history of psychiatry as a medical specialty. In a sense, and for practical purposes, psychiatry came into its own during the Second World War, when it was recognized broadly that psychological and social issues were significant issues in terms of wartime disability and the assessment of wartime injury. Psychiatry gained recognition as a medical specialty during those years and in the years subsequent to the Second World War. It's ironic, I think, that it was in the context of that assessment of the injured soldier that psychiatry gained a respect and a credibility within medicine as a whole.

One concern with this bill is that it appears to retreat from that integration of psychological medicine and general medicine, if you will, into a situation where physical injury will be recognized, but we're concerned that the psychological aspects of injury and the disability resolving from that will not be recognized.

After all, physicians are basically in the business of assisting their patients. What we're concerned about is that physicians, recognizing the fact that physical injury is a compensable benefit, potentially, but that psychological injury is not, may tend to overrepresent physical injury in their patterns of diagnosis and therefore underrepresent the recognition of psychiatric, psychological and social issues, both in the assessment of the injury and in the assessment of the disability, which, after all, is a social issue, not a medical issue, in respect to those injuries.

If they do that, then of course our capacity to participate in the care of the patient will be appreciably diminished, because we do recognize the fact that a psychiatric diagnosis does carry, in spite of all of the awareness of psychological medicine today, its own stigma. So we would like to suggest that you review or rethink the issue of the exclusion of psychiatric diagnosis in respect of the assessment of the injured person.

Second, we have a concern that a relatively large group of individuals who do not have the resources to pursue legal action, who do not have the capacity to enlist the services of a lawyer to pursue action before the courts, will not be recognized. At the Medico-Legal Society, I recall very strongly one member once putting forward the position that the great burden of the old tort system was that commonly a lawyer was required to give the individual the advice that whatever benefit might arise from the action, it would not be sufficient to cover the costs of that action, and he would therefore advise the individual not to pursue that particular matter. That situation appears to exist under the current writing of Bill 164. It is obvious that, in relative terms, the psychiatrically disabled population might well be much less able to afford the costs of initiating such an action and so not receive benefits in the context of injury in motor vehicle accidents.

It also overlooks the reality of discrete psychiatric diagnosis. That is, I presume and we presume that the exclusion of psychiatric illness from consideration under the act has to do with the difficulty in validly and reliably forming a psychiatric diagnosis. Recognizing that, we still think there are a number of syndromes, such as the post-traumatic stress disorder or major depression, that can be defined with appropriate validity, both in terms of common clinical criteria, and that these do represent illnesses that are appropriately compensable under any system of compensation for injury.

Indeed, the Workers' Compensation Board, as you know, has set up a task force that is examining the whole assessment of stress and stress-related illness because it does recognize that psychological and social stress is an important origin of illness and of disability. I don't see why we can't take that same initiative and apply it in the context of the assessment of the patient injured in a motor vehicle accident.

In summary, I think we applaud the introduction of the opportunity to recover damages through action before the courts as it is contained in this act, but we do have these two concerns: the potential split, again, between physical and psychological medicine, and second, that large group of patients who may well not have the resources to pursue a private action to recover damages.


The Acting Chair (Mr George Dadamo): Thank you very much. We'd like to start off this round of questioning with the Liberal Party. According to the clock, we have about six and a half minutes per party; we'll start with Mr Phillips.

Mr Phillips: I look at this in a slightly broader context perhaps; that is, that we in Ontario are faced with an enormous fiscal challenge. I know this isn't exactly your field, but I think it is relevant here. The bill, as we see it, is going to put a fairly substantial burden on the people of Ontario in terms of extra costs.

The reason I raise this is that I think there's a completely changed feeling in the Ontario public now that they are really up against it financially; they just are struggling. What I find with the government is that it has two messages. One is that this is a period of restraint and therefore we can't afford to give the hospitals any increase. Hospitals will get 0% increase this year, 0% next year. You see that in your hospital field, I'm sure. There's a one-time-only grant that's clawed back next year. Zero grant, nothing, they live with the same dollars, which means, with inflation, lower levels of service. I understand why the government says that. They feel they're up against it, and they can't afford the $140 million that would be required to provide the hospitals what was promised them, a 2% increase.

But we see here a plan that, even using the government's figures, is going to cost the people of Ontario a minimum -- minimum -- $170 million a year. If you believe, as Mr Swart believes, that the cost is going to be substantially higher, it's going to cost the taxpayers of Ontario, the public of Ontario, perhaps $600 million.

So we have this strange set of priorities. We can't afford to fund the health care system, as had been promised by the government, but we can afford to tell the taxpayers of Ontario, "You're going to have to fork out another minimum $160 million, perhaps up to $500 million, for increased premiums."

Do you have any sense of the priorities of that? As I say, you are commenting on the auto bill but you have the perspective also of the health care field. Where should the government be putting its priorities? Is this the place to spend three times as much money as it would have cost to fund the hospitals as they had promised?

Dr Hector: That's a very interesting question. After my years with the Wellesley Hospital, particularly as chief of the department of psychiatry there, I'm moved to say that clearly the priority must be hospital support and hospital resources.

The problem is that I've been a consultant practising in psychiatry for a long time, and because of my position with the Medico-Legal Society, obviously I have had an interest in the injured person and in medical-legal issues concerning the relationship between physicians and solicitors and so on. In all of that, I've become keenly aware of the issue of illness and of disability following injury, and very much aware of the sustained burden, symptom impairment and impaired function because of that. So I'm moved to respond with the affirmative in the second case. The problem is that there really is an end to our public resource. Someone has to draw a line.

I suppose I can only speak from the interest of what I necessarily must view as my primary objective, and that is my patient. Certainly, I want to see the psychiatrically disabled person advantaged as much as the physically disabled person. I wouldn't like to say one is more important than the other, but I would like to see them share in the benefits of this particular plan or any similar plan.

Mr Phillips: The reason I raise this is that this is the choice, in many respects, because if you are a driver in Ontario, you have to purchase this level of insurance. It isn't as if, if they don't want it, they don't have to do it. Everybody out there, all those people who are at home watching this right now, have to be aware that the government is sending out one message with the money that it has to have the authority to directly tax and spend -- there isn't any -- but then it's saying to the people of Ontario, "We're sorry, but we're going to pass a bill that is going to at least $160 million take out of the people of Ontario." As I say, if you take the figures that the government itself uses, and it's about the only one who agrees with those numbers, it's at least $160 million, more than the hospitals have been promised this year and will not get.

I'm just saying to people like yourself -- you're in a unique position -- for the hard-pressed people of Ontario, I think the government has to get its act together and cannot be saying two messages. We're quite prepared to take the price of your insurance. By the way, when we talk about this, there's the normal increase that has to take place. This is just the extra increase over and above the normal premiums that would take place. I realize you're in a bit of difficult spot because you can't be saying, "Well, it should be one or the other."

I want to share with you the dilemma that at least we in the opposition find ourselves in. There's no magical pot of money out there. People don't have all sorts of money to throw around. The government's choosing, right at this time, to take a minimum of $160 million, and up to $500 million, out of the pockets of the people of Ontario. If it's $500 million, that's like raising the retail sales tax from 8% to almost 9%; that's what we're talking about. That's the amount of money we're taking out with this bill. I think all the people who are watching this, and people like yourself who are influential, have to realize it.

The Chair: Could you wrap up there?

Mr Phillips: The challenge for our witness is that I think he's in a difficult spot to try to pick and choose. I wanted to share with him the challenge we're facing.

The Chair: I didn't hear a question there.

Mr Phillips: I think he answered the question.

Mr Tilson: Dr Hector, thank you for your thoughts. You mentioned the Workers' Compensation Board. If I understand correctly what you're saying, you know what compensation people received pre-OMPP. We now are moving into certainly an interesting no-fault type of -- I was going to say "adventure," but it's far from that; it's a tragedy.

You did mention the Workers' Compensation Board. I don't know how much experience you've had with that. The consultant that the government appears to be relying on for all of this, which recently just surfaced, certainly after the bill came into being, was, as you know, William M. Mercer Ltd, also known as the Mercer report. Mercer puts out a bulletin called the Mercer Bulletin. An interesting bulletin came out in December 1992 by William M. Mercer Ltd. I guess it gets into the whole issue that Bill 164 may create another Workers' Compensation Board and the problems that resulted from it.


This bulletin concludes that a similar expansion of the benefits for Workers' Compensation Board is to blame for a deficit of about $11 billion, and the liabilities are understated, according to Mercer, by as much as 30% to 50%. Mercer suggests benefit reductions such as a freeze on indexing -- that could save $1 billion -- reducing the level of wage compensation, tightening the conditions for entitlement, and says, "The expansion of benefits in the 1980s has caused serious financial deterioration of the programs of Ontario." I'm going to read one other paragraph and then ask for your comment:

"For workers' compensation programs there's a lack of direct fiscal responsibility by governments. There was no lack of political input during the 1980s in the liberalization of benefits. Now governments seem much less inclined to take corrective action when the changes legislated in the past simply do not work in the intended manner and create instead serious financial problems."

It is interesting, of course, watching what Mercer is saying about the WCB and then the company has the gall to come to this government and this committee and simply say that a similar expansion of benefits would increase costs by only 4.4%. Of course, the question is, how can Mercer conclude one thing for the Workers' Compensation Board and the complete opposite on Bill 164?

My question to you, Dr Hector, is that knowing what your patients or people you've assisted prior to OMPP received, and what they appear to be going to receive or not receive under this particular piece of legislation, what are your real fears?

Dr Hector: Certainly, as I take a look at my own notes and the triangle I've created to describe it, the large portion of the triangle that we're suggesting benefits be provided for under the act would be very costly.

Mr Tilson: Probably couldn't be done.

Dr Hector: I have no idea whether it could be done, but it would mean, certainly, considerable costs and I suppose necessarily considerable reduction in the overall mean benefits, however they might be provided. We're keenly aware of the issue of cost and yet of course we're speaking of a population that we do think are genuine, are disabled in a real medical sense and who are as entitled to recognition for that as any other group of individuals might be.

But the Workers' Compensation Board has become -- again, I'm aware that the introduction of stress-related illness and some consideration of benefits for those purposes significantly increases costs, potentially greatly increases costs, particularly during times of social stress, economic recession and so on, all of those issues. Every time we turn around we have seen larger and larger dollars being spoken about in terms of the costs of these programs.

Mr Tilson: One other area which really hasn't come forward to the committee -- and I don't know whether you're in a position to comment on it -- is that with this Bill 164, the pressures are going to be put on OHIP, and there is the fear that OHIP as an institution might completely erode as a result of the unbelievable burden it will bear as the result of the requirements of the benefits of Bill 164. Have you analysed that issue at all and are you able to inform the committee of any thoughts on that area?

Dr Hector: There's no doubt that in the common convention of practice, where you're seeing a person for purposes of maintaining a medical record for purposes of ensuring continuance of disability income from whatever source, government or private or whatever, you do see your patient both more regularly and probably more frequently, because of the necessity of maintaining that record and of completing and submitting the appropriate forms. So I have no doubt that that patient population would be relatively more frequently medically serviced than the population at large.

Mr Tilson: Would it be --

The Chair: I'm sorry; I've got to go on to Mr Johnson.

Mr Johnson: Thank you, Dr Hector, for your presentation today. I've got to say I'm somewhat perplexed by your comments. You indicated that you thought the changes in Bill 164, the proposal, made it somewhat fairer than what the OMPP was with regard to some of the problems you mentioned. I just want to comment that the accident benefits schedule fully recognizes -- and I repeat, fully recognizes -- mental and psychological injuries just as for physical injuries. As well, the discrimination present in the OMPP threshold has been removed. I was just wondering if you could elaborate on what exactly your concerns are with regard to that.

Dr Hector: I hope I have not read and misunderstood the act in terms of our reading of it, but as I have read it, the issue of compensable benefit has to do with very strictly defined physical illness and that issues of pain and suffering and psychological injury have been assigned the other route of action before the court. Is that not correct?

Mr Johnson: I think it's just clear that they're both fully recognized and that they're both compensable. I think that has to be stated. I think yesterday the member for Wilson Heights stated it so clearly when he said that we could have absolutely the best -- this is taken out of context but this is what he meant, I'm sure, given that --

Mr Mancini: How do you know if he took it out of context?

Interjection: That's what he really meant.

Mr Mancini: That's NDP policy.

Mr Johnson: I can't quote what Mr Kwinter said. He did indicate that if we wanted to pay as much as we could conceivably pay, we could have without a doubt the best insurance system, in Ontario. What we in fact have is a cost-benefit relationship, and I think what we're trying to do with this bill is maximize the return for the cost of the product.

My colleagues on the other side would suggest, in fact they have suggested that the OMPP is fine as it is with regard to the concerns you've raised. I want to know if you could suggest, by comparison, that in fact there are improvements for your clients with regard to the changes in Bill 164.

Dr Hector: As I said in my introduction, I do think Bill 164 is a very substantial improvement in respect to the psychologically injured person.

Mr Johnson: Okay. Thank you very much.

The Chair: No more questions. Doctor, I would like to thank you for coming before this committee today.

Dr Hector: Thank you very much for your attention.

The Chair: Could Rob, the researcher here, make a report.

Mr Nishman: My name's Rob Nishman, from the legislative research service. Between sessions this morning, I attempted to find out more about a fourth report on the cost of Bill 164. I phoned Stan Griffin, vice-president of the Ontario division of the Insurance Bureau of Canada. He was aware of a Mercer study, a Wyatt study and a Coopers and Lybrand study, but he was not aware of a fourth study on this particular topic.

I also phoned Rob Pegoraro, the senior policy analyst with the automobile insurance review of the Ministry of Financial Institutions. He basically gave me the same answer as Mr Griffin. I also phoned State Farm and I was referred to a person named Sharon. She mentioned that there was no fourth report that she was aware of. She wouldn't give me her last name and she hung up on me, so if anyone has any extra information --

Mr Mancini: How would you know that piece of information?

The Chair: I guess Mr Ward was asking for it.

Mr Ward: I'm curious. The Conservative Party made reference to a fourth report. Perhaps they could advise this committee of where and what it is.

Mr Phillips: It was probably a summary of the other three.

Mr Harnick: I think it's probably by inadvertence that a fourth report was referred to. There are so many and they're coming so fast and furiously. I think probably you're concerned about the fourth report because that's the level of paranoia that's set in.

Mr Ward: No. I just make reference to it.

The Chair: That's your opinion. Okay.

Mr Phillips: The case is closed.

Mr Ward: There is no fourth report.

Mr Phillips: Exactly.

The Chair: There is no fourth one.


The Chair: It might have been Mr Phillips's fourth one.



The Chair: We'll carry on with the next group, the Reinsurance Research Council. Would you come forward, please? I'd like to welcome you to the standing committee on finance and economic affairs. We have half an hour for the presentation. In that half-hour, as you can see at the very end, all the members are very eager to ask questions on your brief. So if you don't mind identifying yourselves for the purposes of Hansard, you may begin.

Mr Angus H. Ross: Angus Ross, president of the Reinsurance Research Council. Thank you for the opportunity to address the standing committee on finance and economic affairs. We are speaking on behalf of the Reinsurance Research Council, an organization representing the majority of professional property and casualty reinsurers registered in Canada, and writing over $1 billion in Canadian reinsurance premium each year.

Reinsurers are very much a part of the Canadian insurance industry, and to the extent that we share in the premiums and exposures of Ontario automobile insurance, we also share the concerns expressed by insurance companies and industry organizations such as the Insurance Bureau of Canada.

However, the greatest contribution of reinsurers to Ontario automobile insurance is not sharing at all, but rather assuming the financial responsibility for the largest losses, the shock losses and the catastrophic losses that rise above the normal day-to-day loss experience of insurers. The accident benefits proposed by Bill 164 will have a profound effect on these larger automobile losses, and for that reason we wish to address concerns unique to, or with a disproportionate impact on, reinsurers.

Excess-of-loss reinsurance is widespread. Most, if not all, automobile business written in Ontario is protected by excess reinsurance which does not reflect the experience of the primary insurance company. Rather, the excess-of-loss reinsurer assumes only liability for the amount by which large losses exceed an agreed insurer retention. To put this in a Canadian perspective, the majority of Canadian insurers tend to retain something like the first $500,000 to $2 million of larger losses depending on their financial strength. The bulk of Ontario automobile business is reinsured above a retention of about $1 million.

Reinsurers play an important role in the protection of Ontario residents and businesses. Excess reinsurance provides capacity and spread of experience. It allows smaller, niche insurers to compete for business and to offer other important lines of personal and commercial insurance to Ontario residents and business people. Most important, it extends the "spread of risk" function of insurance by assuming the infrequent but large shock losses and spreading their cost among all insurers. Even the largest Canadian insurers seek excess protection from very large claims or from a frequency of large losses. In turn, reinsurance is a competitive business and reinsurance capacity comes not only from Canada, but from many other parts of the world as well.

Under OMPP, and to a much greater extent under the accident benefit proposals of Bill 164, excess-of-loss reinsurers find it increasingly difficult to measure their exposures and their costs. Reinsurers face unique concerns resulting from the extended periods of care, rehabilitation and disability income that are likely to stretch 20, 40 or even 60 or more years into the future. For your information, we attach a copy of an article on workers' compensation claims in the United States which highlights the long-term problems faced by reinsurers of coverages such as proposed under Bill 164.

We are obliged to raise the concerns of reinsurers with you. The cost of reinsurance claims experience must ultimately be passed back to the insurer, and thus to the insured. If reinsurers cannot measure their costs or cannot satisfy themselves that these costs are controllable, they will charge considerably more money for the unknown, try to direct the more intangible exposures back to the insurer, or withdraw from the market and allow other less knowledgeable and less stable reinsurers to take their place.

Here it is important to note that excess-of-loss automobile insurance is not written in isolation. This same reinsurance community protects home owners' property and liability, commercial property and other commercial exposures such as products liability, machinery breakdown and business interruption. If Ontario automobile insurance disrupts the Canadian reinsurance market, then it may also disrupt that market's capacity to support other lines of personal and commercial insurance.

The chief concerns of reinsurers relate to those proposals contained in Bill 164 as they will affect losses of the 1990s that will remain active throughout the first half of the 21st century and beyond. These concerns can be summarized as the absence of cost controls, the unchecked influence of inflation and the exposure to changing social expectations and political expedients.

Looking at these in order, control of costs: We are pleased to note that a task force is being set up to review cost containment and we view this as a very positive move. Nevertheless, we have specific concerns over the absence of controls and the blurring of benefits as claims of the 1990s continue into the coming decades.

The absence of specific controls over the degree and duration of care, medical and rehabilitation procedures may make Ontario automobile insurance prohibitively expensive. We are told that controls, such as those applied to the Quebec automobile plan, will be put in place as experience dictates. This philosophy may be acceptable for the vast majority of claims that can be resolved in a matter of months. Problems or abuses can be corrected and premiums adjusted within a relatively harmless period of time. But for larger losses, any shortcomings in the new auto insurance plan will have to be borne by reinsurers for decades.

Normally, reinsurers set a price for a full year's exposure in respect of accidents occurring during that year. They then have no opportunity to review, reprice or terminate that business until the end of the year. Therefore, claims developments 20 or 40 years down the road must be paid by reinsurers without the possibility of correction or future repricing. Nor can reinsurers roll the problems of one year into the pricing of the next, as several years will have passed before the impact of broadly defined benefits becomes clear.

Therefore, we ask that you urgently address the need for clearly defined standards of medical and rehabilitation care and duration, such as those applied in the province of Quebec.

We ask that the proposed benefits address and clearly define "medical" and "rehabilitation" so that 10 years down the road we do not find unlimited rehabilitation expenses spilling over to replace or supplement limited care expenses.

We ask that the intent of certain benefits be set out in such a way as to preclude reinterpretation of coverage some time in the future. For example, as the population ages, there will be very thin lines between accident-related degeneration and the natural onset of age-related disabilities. Without clear definitions, we fear that the auto policy will be called on to act as a long-term care provider for age-related, not accident-related, infirmity.

We ask that greater control be placed on the open-ended opportunity of accident victims to review earning capacity. For example, will some future changes in the economy prompt hundreds of claimants to reopen their benefits?

Any system with benefits as generous as those proposed for Ontario will become a target for fraud. Of particular concern would be expenses incurred by injured parties after their return to their own country, where medical certificates can easily be bought or forged and where follow-ups are expensive. It is noted that under the definition of "accidents" in Quebec there is a limitation that it applies solely to persons legally in Canada. We ask that this apply to all accidents in Canada.


Indexation: You have indicated an indexation factor for certain quantified benefits such as income replacement and long-term care. We have a minor concern regarding the linkage to CPI. If accident benefits are to be tied to CPI, there must be the possibility for deflation as well as inflation. The alternative can create a situation where the increase in benefits substantially outstrips the CPI. An example of this is attached to our brief. At the very least, should deflation occur and then be followed by inflation, the indexed benefit should only rise when the CPI-adjusted benefit exceeds the benefit currently available.

Our major concern involves the true inflation of certain costs at a rate unrelated to the CPI and well above the real rate of return available to reinsurers on any investment instruments. We have grave misgivings on the ability to predict this inflation over long periods of time, particularly when it is limited to a few specific components. Examples of these are medical and drug costs -- with the unknown of Bill C-91 -- rehabilitation and renovation, and advances in prosthetic devices and treatment.

Without some form of limitation or cap, this inflation must be viewed as an open-ended exposure of unlimited potential. Such an exposure cannot be priced. We ask that a finite amount, which can be indexed at CPI, be attached to the headings of medical and rehabilitation expenses as has already been done for long-term care, where the government acknowledged the unacceptable economic impact of unlimited costs.

Legislative: We have concerns at the prospect of limits and benefits being handled by regulation and not by legislation. If there is no retroactivity or change on existing claims envisioned in Bill 164, our concerns would be lessened, but we nevertheless are disturbed by the possibility of short-term political imperatives creating economically unsound conditions for reinsurers of Ontario automobile reinsurance. We simply cannot price against the possibility of claims from the 1990s being increased by regulation some time in the 21st century.

We also wish to express concern at the impact of possible future changes to OHIP on the cost of medical and rehabilitation claims. As OHIP seeks to reduce costs, we fear that many of them will fall under automobile policies. This cannot be envisioned in reinsurers' current rates, nor is there any opportunity for retroactive rating adjustments should this occur. In order to provide for rate stability, there must be some form of guarantee of continuing OHIP participation at existing levels.

Conclusion: We appreciate that it is your intention to develop an Ontario automobile insurance plan that is both comprehensive and affordable. However, in your deliberations, we urge you to address the long-term implications of each accident benefit. Our concerns are the absence of cost controls, unchecked inflation, and exposure to changing social factors and political imperatives. Without these being addressed, we may end up with a plan that is comprehensive but unaffordable by private insurers, by government, and most importantly, by the insuring public.

Mr Tilson: You've alarmed me even more after your presentation, specifically with the issue of cost. We have heard evidence in this committee as to what the immediate cost would be. Some of those facts are some distance apart, but the fact is that rates are going to go up immediately.

I think the facts you are now putting to us are saying there's going to be inflation and perhaps when the regulations are better understood -- you've used the words "changing social expectations" and "political expedience" -- rates will increase even more beyond that.

The minister has said many times in the House, and as recently as yesterday, that rates are not going to go up, that they are just simply not going to go up, and that the insurance companies are making lots of money. There was a press story this morning, of course, that said much the same thing, and he's given the people of this province a guarantee that rates are not going to go up.

We hear all these facts coming forward that say that, with the issue of costs, with the issue of benefits, the uncertainty of things, costs are going to go up. If costs are going to go up, someone's got to pay for it.

I guess we're getting to the real question. I've indicated in this committee that my observation is that he has two choices: He can put a puppet or puppets on the insurance commission who will simply say, "That's it," or he can do this provision that's in the bill, that by cabinet decree will say rates will not go up. I don't know. Maybe you can shed some light as to your theories on that, but that's what he's going to do.

Having listened to what you've said, and when we've heard what the minister has said, as described in the press this morning and since this whole issue has developed, that rates are not going to go up, what's going to happen? What's going to happen to the insurance industry? Are we being led down the path, that really Mr Swart is going to get his way and there is going to be public auto insurance in this province? Do you foresee that that's the plan of this group of people?

Mr David Wilmot: David Wilmot, chairman of the technical underwriting committee of the Reinsurance Research Council. I have to repeat something that was said at the beginning of this presentation: that we are, as excess loss reinsurers, concerned with only the largest losses; in fact, it is often determined that we will assume liability just above the normal loss expectation that the companies have had to date. So if you see something like a bit of inflation or further development in losses and how losses are settled, then that could shoot up into our area of responsibility.

After all, if we're in excess of $1 million, and you have a $1.1-million claim that inflates by another 10%, that is not a 10% inflation to us; that is, I believe, about 110% inflation for our involvement. That is the nature of excess reinsurance, to sit above what has happened in the past. I've done one study of my own, but I'd rather defer to the IAO study, which seems to be in the same line as our figures. For a layer in excess of that $1 million, we're looking at an increase of maybe 1000%.

Mr Tilson: The question is, what's going to happen to reinsurance companies?

Mr Wilmot: Reinsurers will do their own numbers and decide whether or not they can afford to continue in the Canadian market. Some will decide not to. Others, using those same numbers, will put their price forward. I would have to say that if the cost of reinsurance goes up by 1000%, we only have a small share of the premium initially, but that becomes a significant amount. That would have to flow back through the cost of insurance to individual insureds.

Mr Tilson: Notwithstanding the proposed amendment of the NDP, Mr Charlton isn't going to let you out. He won't let you stop.

Mr Wilmot: There is indeed a question whether the reinsurers are intended to be included within that fold.

Mr Tilson: I wish you luck.

One more question: the issue of OHIP. There has been some expression, and I'd like to get some thought from you as well; I've been asking this of a number of delegations. You indicate, on page 6 of your brief, that you wish some form of guarantee continuing OHIP participation at existing levels. If OHIP is being obliged to pay for more and more of these benefits that may or may not be expanded, then the question is, of course, the survival of OHIP, and that issue has been raised. Having heard that, what are your thoughts?


Mr Ross: The question really boils down to whose pocket the money comes from. Whether it comes from OHIP or whether it comes from insurance companies, it comes out of the same pocket: It comes out of the public pocket. If both sides are sharing in the costs of medical and rehabilitation and the share of one party goes down, then it's a simple economic fact that the share of the other party has to go up. If the costs overall go up, then either one or both of the parties have to increase their costs. We cannot get away from that.

It boils down to the fact that the public will either pay through the increased costs which come back, once the employer health tax works its way through the system to go to the consumer, or they pay in their automobile insurance premiums. Somewhere it has to be balanced, otherwise you have a deficit on the public side with OHIP, which is not acceptable under current government desires, or on the private side under the insurance companies, which is also not acceptable, because we are not charitable organizations.

The Chair: I'm going to go on to Mr Klopp.

Mr Klopp: Thank you very much for bringing your brief here today. It's something we are always concerned about too. You mentioned OHIP and the balance, and I think that is important. That's something that we as a government are coming to grips with, and indeed I think you tie in with this, and our committee needs to hear this.

There has been a problem with caps under the present OMPP system for accident victims. We've seen that. People have told us. That's one of the reasons we've looked at a bill such as 164.

You've mentioned the task force. We appreciate that you feel it is a good sign that this government does want to get serious about what we can find. That's why we set up this task force, because we believe we can get guidelines that strike that balance. I just want to have your comments on anything regarding that, on these benefits and where the task force should be going.

Mr Wilmot: I think you want reasonable settlement for injured parties. If they're reasonable, if they are measured in today's standards and those standards, although indexed, flow into the future unchanged, then this is a priceable product: We can come up with a price and deal with it at face value. If we don't know what the rules are down the road, if we can have a claim next year but then have the rules change on us in the year 2005 for the subsequent 30 years of somebody's life, we can't price that. Our solution to being unable to price that is to charge an extra loading, if you will, for the risk of the unknown. If you can clarify these matters, then we do not have to charge the additional loading needed for the unknown.

We're very aware of what's happened with workers' compensation in the United States. The awards that some of these people are receiving now are very fair. They're very out of line with the numbers that were contemplated in the 1930s and the 1940s, but that is fine as long as the standards and measurements can be guaranteed into the future.

For example, you use the expression "reasonable" medical cost, "reasonable" rehabilitation. Can you define the public's view of what is reasonable in the year 2015, the year 2040? We don't know what those are, but we do know that if you had internal caps that were themselves indexed, then it would be pitched so that it would deal fairly with people in 1993 and, theoretically, if indexed, should deal fairly with them in the year 2020.

Mr Klopp: That's why the minister asked all the major players to sit on this task force. I'm sure you will be giving your input in that. I certainly want that to happen. You and I may get hit by a car tomorrow; under the present plan, I would not want to get into an accident tomorrow and be caught with a $25,000 cap or whatever. I think we can resolve those issues, because any one of us might get into an accident tomorrow.

The Chair: Mr Mancini.

Mr Mancini: I have to say that your presentation to this committee has probably been the most frightening in that it clearly shows the potential for the entire system to break down. We know how upset consumers were in the late 1980s when large numbers of consumers were put in the Facility Association, some unfairly, and premiums, the rates they had to pay, went through the roof. I'm afraid, based on the information you've provided to the committee, that you foresee some type of extraordinary event, whether it's economic or political, which might put all of us in something like the Facility Association. Am I reading too much into what you've told us, or should I be as worried as I think I am?

Mr Wilmot: I'd like to answer that. The pricing and the structure, as it's been discussed up to this point, deals with the 93% of accident victims who can resolve their injuries and difficulties in a short period of time. Again, we're only looking at a very thin slice, where we are dramatically impacted by the changes proposed.

The role of excess reinsurance, of course -- the spreading of risk, allowing smaller companies to compete with the large companies, or to provide protection in a niche market -- we think is very important. If the reinsurers found it uneconomic to provide those layers of coverage or they had to provide something quite different -- for example, they all had to move up to, say, excess of $2 million -- this would hurt the competitiveness of some of the smaller companies. The opportunity to control costs on the efficiencies of some of the smaller niche insurers would disappear because of the lack of reinsurance. The large companies I'm sure would find a way to continue and insurance would remain available.

Mr Mancini: Are you familiar with the 68 pages of draft regulations that accompany Bill 164?

Mr Wilmot: Yes.

Mr Mancini: Does it remind you of the Workers' Compensation Board system of settlement?

Mr Wilmot: Very much so.

Mr Mancini: The government's own actuaries, the Mercer group, came to this committee only a day or two ago to defend their report and defend their assessment that rates would only go up 4.5%, meaning that just under $200 million being taken out of the pocketbooks of Ontario residents because of Bill 164. At the same time, the same consultants and experts giving the government advice on everything to do with automobile insurance were sending out a bulletin dated December 1992 in which they're railing against the government about the lack of cost control at the Workers' Compensation Board and they make some recommendations such as perhaps freezing the indexing of benefits for a few years to save $1 billion etc. Do you find that somewhat surprising?

Mr Wilmot: I'm not familiar with the Workers' Compensation Bulletin you have in your hands, but I do have a great deal of difficulty with the suggested percentage increase of --

Mr Mancini: So you don't buy Mercer's 4.5% increase?

Mr Wilmot: I'm afraid I do not.


Mrs Caplan: Could I have one question? Earlier this morning, we heard from some people who were looking at the impact of the removal of the ability to sue for economic loss. From your experience, I'd like to know whether you agree with them that the effect of this bill, by removing the ability of those most vulnerable to sue for economic loss, the removal of that component and allowing in its place a greater number to sue for pain and suffering with a threshold, that the impact of that really shifts from support for the lowest income and most in need to those who perhaps are higher income. In your experience as reinsurers, is that something you've had any contact with evaluating?

Mr Ross: The impact on reinsurers of that change is not particularly great. Our main concern in this bill, as we have addressed in our brief, are the unquantifiable costs and future costs of medical rehabilitation and the other areas where there is no monetary limit and where the inflationary aspects are not tied to CPI but are free to run wild.

Mrs Caplan: So it's that uncertainty.

Mr Ross: It is the uncertainty within those areas. As far as the economic loss goes, although we don't know how much it is going to be, it is a quantifiable amount. Under tort, when you've paid the claim, you've paid the claim; if circumstances change for the better or the worse, that's it, it's paid. Under the medical and rehabilitation, you've paid the claim, and you pay the claim and you pay the claim and you just keep on paying for 50 or 60 years.

Mrs Caplan: Could I have one small question, Mr Chairman? No?

The Chair: Gentlemen, I'd like to thank you for appearing before this committee. I know the conversation has just got going well. Mrs Caplan, they'll be out in the hall for a few minutes if there's something you'd like to talk to them about. I'd like to thank you for appearing before this committee.

Mr Tilson: Mr Chairman, I'd like to speak to you with respect to a point of order. We have had, on a number of occasions, as recently as Mr Klopp's comments -- and the parliamentary assistant, of course, has referred to this task force. The government has made great boasts that this is something the government is going to get into to review this whole subject.

The whole thought occurs to me, and it arose while I was listening to Mr Klopp ask questions of this delegation: Is this committee premature in its deliberations, in its investigations, when we're going to have a government task force review, presumably, many of the matters coming forward to this committee? If I am correct, it would seem to me to be more appropriate that these proceedings should be delayed until after the task force has submitted its report.

The Chair: I might have the parliamentary assistant respond to that.

Mr Owens: Just to respond to Mr Tilson, it is Bill 164, the piece of legislation before this committee, and not the regulation. The accident benefits will be set out under the regulation, and standards of care that will be developed as a result of this task force will be set out in the regulation.

Mr Tilson: The regulations are part of the bill, and we have every right to deal with that. If the task force is going to be dealing with those regulations --

Mr Owens: It's not part of the bill, sir.

Mr Tilson: The regulations are part of the bill. Every bill has regulations, and we have every right to know what those regulations are. Some of those regulations have come to us; presumably there are going to be more. Mr Mancini and I have been spending a great deal of time showing how incomprehensible they are to understand, and you have the gall to say they're not part of the bill. If they're part of the bill -- and they are part of the bill -- and you in turn are having a task force to study those regulations, then the proceedings of this committee are premature. There's no reason we should be wasting the taxpayers' money to proceed with all of this matter when the government is going ahead on a task force that's going to be duplicating all the work we're doing.

The Chair: Can I go on to Mr Mancini? You had a point of order?

Mr Mancini: Well, I want to speak to Mr Tilson's point --

The Chair: Or just a clarification.

Mr Mancini: No, there's no clarification needed. Mr Tilson has raised a point of order, and I want to speak to Mr Tilson's point of order because I find what he says to make good sense. We have for the last number of days been hearing testimony in regard to Bill 164. Bill 164 is accompanied by 68 pages of unintelligible, unreadable regulations.

The Chair: That's a difference of opinion. I'm sorry.

Mr Mancini: No, I haven't finished my point yet. We have heard from the government members that there are going to be some type of government hearings in regard to some of these regulations or other regulations after 164 is passed. That is doing the government's business in reverse. It is important, Mr Chair --

The Chair: I'm not going to make a judgement, Mr Mancini, but usually some task forces are ongoing; they're always looking at better ways to do things. I'm not familiar in that particular area --

Mr Tilson: The picture that has been painted by the parliamentary assistant and other members of this committee is a new venture. It was only put forward --

The Chair: I'm sorry, but we've got another group coming on and I would like to get them on. Maybe some of these things can be addressed tomorrow.

Mr Tilson: Mr Chairman, if you're going to go away and reserve on the comment, that's fine, but I'm simply saying that these hearings are very expensive to the taxpayer, very expensive to the people who are appearing before us. Yet the government is boasting of this wonderful task force it has just called. I will say to you that it's duplication. It's a high sign of a bureaucratic plan that this government --

The Chair: I think a lot of it isn't a point of order but a difference of opinion.

Ms Haeck: On a point of order, Mr Chair: I would just like to get on with the agenda. We do have other deputants here.

Mr Mancini: The government members never care about process or policy or rules or anything. All they want to do is shove whatever they table down everybody's throat. That's the point we've reached.

The Chair: I'm sorry. The next group is here and they're ready to go. I think they've been waiting for over an hour to come before this committee.


The Chair: Would the Ontario Chiropractic Association come forward. I'd like to welcome you to the standing committee on on Bill 164. I see most of you aren't strangers here. I'd like to note that my friend from Fonthill, Dr Lloyd Taylor, is here also. We have a half-hour; in that half-hour, can you make your presentation and leave some time at the end for questions? As you can see, the members of the committee are sitting on the edge of their chairs just waiting to ask questions. You may begin, but first, please identify yourselves for the purposes of Hansard.

Dr Robert Haig: My name is Bob Haig; I'm a board member and a past president of the Ontario Chiropractic Association. Dr Lloyd Taylor is our representative to Queen's Park; Dr Kopansky-Giles is a member of our board and practises in a multi-disciplinary setting; Mr David Chapman-Smith is our general counsel, and Mr Peter Waite is the association's executive director.

The Ontario Chiropractic Association represents members who see the auto insurance system from two different perspectives. First of all, they are drivers seeking insurance with reasonable benefits and costs and, second, they are health care providers who see the practicalities of the system on a day-to-day basis.

The present automobile system in Ontario has major problems, both in principle and in practice. This association supports the proposed reform in Bill 164 and the draft statutory accidents benefit schedule as producing a fairer and comprehensive system of compensation. Appropriate balances have been drawn between compensation and cost and between the rights of insurers and those insured.

With respect to some general principles, the association particularly supports a uniform and fairer rating system for drivers; the emphasis on safety and prevention through a new road safety agency; appropriate recognition of the importance of and compensation for non-economic loss; the amendment to the threshold for resort to the courts found in the current OMPP; the continuation of the existing private insurance industry.

I am at this point reading from the executive summary, which is the second page in. The rest of the executive summary is dealt with in more detail in the main body of the brief. I'm going to skip to the third page in, which is part A, the introduction.

The Ontario Chiropractic Association has about 1,400 members. There are over 1,500 chiropractors licensed to practise in Ontario, and approximately 50,000 in North America.

There is legislation recognizing and regulating the practice of chiropractic in every province in Canada. The profession plays a major role in the treatment of accident victims, because its scope of practice focuses on soft-tissue injuries, including joint and muscle disorders in the neck, low back and extremities.


For many reasons, there has been dramatic new acceptance and growth of the chiropractic profession, both internationally and here in Ontario, during the last 10 years. In Ontario, for example:

(a) A 1990 survey from the faculty of medicine at the University of Toronto reported that a majority of medical family doctors in Ontario, 63%, now refer patients to chiropractors; in fact, one in 10 doctors are themselves chiropractic patients.

(b) WCB records show that over the last few years, the number of injured workers with back sprain/strain types of injuries that choose or are referred to a chiropractor has risen from 33% up to 50%.

(c) Under the new Regulated Health Professions Act, 1991, and the Chiropractic Act, 1991, chiropractors are one of the five health care professions recognized as having the ability, right and duty to perform a diagnosis and use the title "doctor." Those five professions -- chiropractic, dentistry, medicine, optometry and psychology -- are therefore the ones authorized to provide certificates under Bill 164.

The new spirit of cooperation between chiropractors, medical doctors and other health professionals, which is greatly in the interest of the patients and which also promotes an efficient auto accident benefits program, will be enhanced by the new legislation.

In the brief time the association has today, we wish to focus on the scheme for the provision of supplementary and medical rehabilitation benefits found in the schedule. This is the area where the association and its members have expertise and can provide the most informed comment on the improvements found in the legislation.

First of all, with respect to disability certificates: For over 50 years in Ontario, the workers' compensation law has allowed patients to choose chiropractic or medical care and have all of their claim and disability certificates signed by their chosen practitioner. However, when chiropractic services were brought under the standard auto policy in 1979, the right to certify disability for disability payment benefit purposes was still restricted to medical doctors. That situation provided unbelievable conflict and unbelievable difficulty for many accident victims who chose to attend a chiropractor, who elected chiropractic care.

The OCA placed many graphic examples of these difficulties before the Osborne inquiry into motor vehicle accident compensation, and that inquiry expressly ruled, in its 1988 report, that in order to avoid unacceptable delay, expense and patient inconvenience, chiropractors should be able to provide disability certificates for their patients. The relevant parts of that report are attached as appendix A.

The previous reform of the auto insurance law failed to adopt the Osborne inquiry's recommendations, and there are major problems that still continue. I am going to give you two specific examples here. I'm on page 2; this is point 3(a).

In June 1992, Miss C. of Waterloo had an auto accident and chose chiropractic care, but was told by her insurer that she had to have her medical authorization completed by a family physician. The OCA discussed it with Alpina, failed to get it to take a reasonable approach and resolved the issue only through the insistence of the Ontario Insurance Commission. This patient was put under great stress and difficulty at a time when she was in great pain from an auto accident injury. Alpina's response was conditioned by the confusing legal picture for the insurance industry. The law says a chiropractor can treat and certify what amounts to reasonable and necessary treatment, but a certificate as to the cause and nature of the injury and disability can only be given by a medical doctor. It's an incredibly confusing situation.

The second example is that of Mr P. of Kitchener, who had an injury just in September 1992. He elected chiropractic care and did very well, but the adjuster in the company in this case challenged his right to see a chiropractor and pressured him to be examined in a medical doctor's office in order to have payment for his chiropractic expenses.

I'm going to ask you to turn for a minute to appendix C, which is the documentation relative to that. Appendix C-1 is the letter the association received from its member. This is a member writing to the association and saying, "This patient is undergoing blatant harassment, and is there anything that you can do about it?"

The second letter, which is C-2, is the letter the patient received from the insurer and you can scan the underlined parts there, "We were simply went to this chiropractor on the suggestion of a fellow employee." Well, that's not inherently a bad thing. It is demanding that he be assessed by his family physician in order that the payment be made. The lack of clarity in the legislation allowed this insurer to use it inappropriately to restrict this patient's ability to access chiropractic services.

Section 44 of the proposed standard accidents benefit schedule will finally resolve this long-standing problem for patients, not just of chiropractors but of dentists, optometrists and psychologists. The top of page 3 is the provisions of subsection 44(1), and you can see clearly that the certification of disability is permitted by all of those five professions which, under the Regulated Health Professions Act, have the right and duty to diagnose.

Secondly, with respect to rehabilitation benefits: Section 33 of the schedule -- now, this brief says it's attached as Appendix D; I apologize that it is not. I assume you all will have it, but if you don't, we have copies. This section comprises an important reform with a major new emphasis on rehabilitation. It's worthwhile if we can pause for a minute to summarize the clinical and scientific background to this reform.

One factor that has led to the greater use of chiropractic and multidisciplinary services in soft tissue injuries to the spine, the kinds of injuries which are most common in whiplash and other automobile accidents, is a radical change in the understanding and management of these kinds of injuries.

Health professionals and researchers acknowledge that it is currently impossible to provide a precise diagnosis of the source of pain in most neck and back soft tissue injuries. They also agree that the traditional approach to management, passive care consisting of medication, immobilization, bed rest, physical therapy modalities -- it's acknowledged that this passive care approach is inappropriate, that it promotes deconditioning, psychological overlay and disability.

These kinds of injuries require early active care: physical treatment such as mobilization and manipulation to restore muscle and joint function combined with the earliest possible return to activities of daily living and entry into rehab programs involving education, counselling, exercise and work hardening in order to empower the patient.

With neck pain, no standard medical treatment -- immobilization, use of a collar, injections, medications -- none of these has scientific evidence of effectiveness. The only treatment approach with acceptable scientific support is manual treatment aimed at muscle and joint function: mobilization, manipulation, trigger point therapy.

With back pain, the treatment approach with the most scientific evidence of effectiveness is joint manipulation as used in chiropractic practice. It's important to understand that with both neck and back soft tissue injuries, early aggressive intervention, the type of intervention that's traditional in sports medicine and in chiropractic practices, is the key. This must include exercise, patient education and responsibility, counselling and work simulation.

Very often there needs to be multidisciplinary assessment and management at the outset. Currently, patients will frequently go from a trial of this therapy to a trial of that therapy to a trial of this therapy, without an overall management of their problem and it may take many months before they get appropriate treatment.

Section 33, which provides a legislative basis for early effective rehab programs, is an important reform. Clause 33(3)(c) contemplates professional case management and we can predict with some confidence that it will result in reduced levels of chronic injury and disability.


Section III on page 4 addresses the appropriate controls and balances that are in place here. I'm going to leave that part for now. If there are specific questions on that, we'll be happy to go to it. But I want to deal with the one minor recommendation for amendment we have on page 5, and that's with respect to attendant care benefits.

As previously mentioned, five primary independent health care professions -- chiropractic, dentistry, medicine, optometry and psychology -- are recognized by the Regulated Health Professions Act as having the right and duty to perform and communicate a diagnosis. An important practical principle found in Bill 164 and in the schedule is that an insured who elects to see any of these professionals may receive any certificate he or she may require from them. Of course, this is appropriately, and as recommended by the Osborne inquiry, subject to the insurer's right to obtain a second opinion from another health professional.

Section 34 deals with attendant care benefits. This relates to the costs or losses of those assisting a disabled person, and there are two categories of this. There's the cost of qualified attendants and/or long-term care facilities, and there is the cost of lay persons, such as a spouse, who lose income because of the need to care for the insured. The former is not really relevant to chiropractic practice, but the latter is.

As drafted, all attendant care benefits require a certificate from the insured's physician or psychologist. Chiropractors should be able to certify for lay persons. Point 10 on page 5 is our recommendation that a new subsection 34(6) should be inserted, reading:

"In respect of benefits under subsection (4) a certificate required under subsection (5) may be from a chiropractor if the injury is one that a chiropractor is qualified to treat."

That wording is consistent with the provisions for other certificates.

For consistency and in principle, such an amendment should also apply for dentists and optometrists, but this association is unsure of whether or not that is a practical problem for them and whether that needs to take place.

That concludes the remarks we wish to make to the committee and we're happy to answer any questions you might have.

The Chair: Okay. We have five minutes per caucus, and we will start off with Mr Owens.

Mr Owens: Thank you for your presentation this afternoon. We appreciate your suggested amendment and we will certainly take that into consideration.

I'd like to read a quote from yesterday's Hansard by the member for Windsor and Essex that talks about the Liberal legislation. He says, "This Liberal legislation is fair and has stood the test of time." I'd like to ask your association how it views the current legislation, and in terms of how the current legislation doesn't take care of those who are psychologically injured and doesn't recognize the --

Mr Tilson: Mr Chair, on a point of order: The legislation this committee is reviewing is not the OMPP or Bill 68; the issue before us is Bill 164. I think it's a completely irrelevant --

The Chair: He's wasting his time asking that particular question then. Let him --


Mr Tilson: Is it a valid issue or not? It has nothing to do with Bill 164.

The Chair: Sometimes it happens it comes the same way.

Mr Tilson: I'm asking the Chair to rule that out of order and let's proceed on another question.

The Chair: He's taking up his five minutes.

Mr Owens: And you're taking up my time.

Mr Tilson: He can ask anything under the sun. Is that what your position is?

The Chair: Correct. Go ahead, Mr Owens.

Mr Owens: Just to complete my question, again, how does your association view the current legislation and its impact on your patients?

Mr David Chapman-Smith: I've had quite a lot to do with the current legislation and was involved during the last legislative round. There was, I think, an honest attempt then made to improve the situation and there was something done as to certificates, but basically the problem wasn't solved because it wasn't dealt with comprehensively.

To move on to the element of your question which deals with psychological problems, a point made in the current presentation quite strongly is that a lot of this develops from an inappropriate treatment regime where, instead of things being dealt with in a timely fashion and in an interdisciplinary manner, under a system which really doesn't foster interdisciplinary cooperation you get disability and you get a delay in recovery, which leads to psychological overlay and psychological problems. A system which facilitates all the relevant services getting to an accident victim straight away and dealing with something in a timely fashion and empowering him to act certainly will have an impact on that.

Mr Owens: So again, moving from the political to the practical, your association would view Bill 164 and its implementation as being helpful from a practical perspective in terms of getting an accident victim back on his or her feet and back into the workplace.

Mr Chapman-Smith: I think that's so and we've given some evidence of the patient difficulties today, but the real body of evidence, including signed statements on the issue, was given to the Osborne inquiry some years ago, which went in some depth into the fact that this is a major problem for patients. So it's good to see that cleaned up.

The Chair: Any other time over here? Anybody have other questions?

Mr Owens: We'll hold our minute.

The Chair: Mr Mancini.

Mr Mancini: I'd like to ask the solicitor a question. Do you agree that people should have the right to sue for economic loss?

Mr Chapman-Smith: The right to sue for economic loss?

Mr Mancini: Yes.

Mr Chapman-Smith: As a solicitor, I'd like for them to have the right to sue for most things.

The Chair: There's your answer.

Mr Mancini: I appreciate that, but I want to be clear on the record and I would like a clear answer. We heard testimony this morning from the Fair Action Insurance Reform Committee, FAIR, and when they reaffirmed some of the things we had heard as to what effects losing the right to sue for economic loss has on families, I don't think it's very funny. My question to you is, do you think people should have the right to sue for economic loss?

Mr Chapman-Smith: Well, I'm going to be obliged to pass on that because I'm here representing the association.

Mr Mancini: You're here speaking to Bill 164?

Mr Chapman-Smith: Yes.

Mr Mancini: Bill 164 takes away the right to sue for economic loss, and I ask you again, do you believe that people should lose the right to sue for economic loss?

Mr Chapman-Smith: I've got a personal view on that, but I don't feel at liberty to express that here.

The Chair: I think maybe that's an inappropriate question to this particular group. In other words, they're here --

Mr Mancini: Are you kidding?

Mr Tilson: Some questions are appropriate and some questions are inappropriate.

The Chair: Criticize the parliamentary assistant for the kind of question -- we left it right open.


Mr Mancini: Are you serious, Ronnie?

The Chair: They most likely haven't taken a stand on that.

Mr Mancini: They're here making a presentation on Bill 164. Bill 164 takes away the right to sue for economic loss. What's the association's view?

Dr Haig: We have strong views on the part of this legislation that we understand the best. If this legislation is going to result in a system that fairly compensates people, then it's a good idea.

Mr Mancini: With all due respect --

Dr Haig: The part of it that we know the most about is the rehabilitative and the medical expenses part.

Mr Mancini: With all due respect, all groups that have come before us have spoken to the bill in its entirety and have tried to answer questions on the entire scope that the bill is dealing with. I understand where you're coming from and why you zeroed in on the area you did. However, you did say at the beginning of your statement, "The Ontario Chiropractic Association represents 1,400 members who see the automobile insurance system from two perspectives -- they are drivers seeking insurance with reasonable benefits and cost." "Benefits and cost" were your own words. Your members are losing the benefits that they would have been able to undertake under the existing legislation that's being changed, and you have no comment to make on that. It's very surprising.

The other point I want to make is as follows. You are now limited by the Ontario government, present and past, as to how much you could -- there's a cap on your billings; let me put it briefly. Is that correct?

Dr Haig: Yes, that's right.


Mr Mancini: What is the cap?

Dr Haig: There is a cap per patient through OHIP.

Mr Mancini: What is the cap per patient through OHIP?

Dr Haig: Right now it's $220.

Mr Mancini: It's $220. Over and above $220 the patient has to pay. Is that correct?

Dr Haig: It's more complicated than that, but yes.

Mr Mancini: If the patient is not insured, if the patient has not been referred to you by any other agency, if the patient walks in off the street -- I come to your office tomorrow, I have a bad back, I can't claim it against anyone, I want to see you for six months and after my $220 is expired, I've got to reach into my pocketbook and pay you, correct?

Dr Haig: Essentially, yes.

Mr Mancini: Thank you. Now, this legislation, by the government's own admission, is going to raise the cost to Ontario drivers by just under $200 million.

Mr Owens: That's not an admission.

Mr Mancini: It's the Mercer admission.

The Chair: I'm sorry that he interfered in your question.

Mr Mancini: Is he saying that Mercer is off?

The Chair: Don't listen, Mr Mancini. Just carry on with the question over there.

Mr Harnick: Nobody listens to him anyway, Remo.

Mr Mancini: I just want to make sure that our guests here have the facts. Mercer, hired by the government, said in these committee hearings in front of the committee that rates will go up 4.5% across the province. You factor that out; that's almost $200 million.

Last year, or this year, as my colleague has been saying, hospitals in this province will not get $200 million. Don't you think it's a little bit ironic that we don't have money to give to chiropractors who would give me and millions of other people services that we might need without having to reach into our own pockets, but are willing to change the automobile insurance system where we as a group have to pay a minimum of $200 million more and the possibility of paying up to $565 million more? Doesn't that concern you?

Dr Haig: We know that there have been a variety of estimates as to the cost.

Mr Mancini: Let's use the government's estimates.

The Chair: Mr Mancini, can you let him answer, because we're ready to go on to the next one as soon as he gives the answer.

Ms Haeck: Just be nice to my constituent.

Dr Haig: This is fine. Mr Mancini, I really wish that I could give you an answer that would keep you happy.

Mr Mancini: You don't have to keep me happy. Keep the viewing public happy that has to pay all this money. Not all of them are NDP ministers, you know.

Mr Phillips: Through regressive tax.

Dr Haig: I can assure you that this association has things to say about the financing of the health care system as a separate issue. Of course there's concern relative to the costs to the system of anything. I simply go back to the point that our members deal with a lot of individual people on a day-to-day basis who have individual problems. We're quite convinced that the parts of this legislation we've addressed are going to be of major benefit to them.

Mr Mancini: It's obvious you don't want to answer any questions other than when they pertain to your own industry.

The Chair: Mr Harnick, go ahead.

Mr Harnick: Is this five minutes?

The Chair: Yes.

Mr Harnick: Sir, just to help you out with what Mr Mancini was asking you, let's assume that you as a chiropractor were involved in a car accident yourself. You make a certain amount of income, and under Bill 164 you're going to get compensation for a portion of your income. But let's assume that you're going to lose something beyond what the accident benefits are going to pay you. Do you think that, if you're the innocent victim of the accident, it's right for you to have your right to sue for that differential taken away?

Mrs Caplan: Especially if you can never work again.

Mr Harnick: What I'm saying is that the benefits pay you a certain amount of money, your income was really more and Bill 164 says you can't claim for that differential. Really, I think what Mr Mancini was asking you was, do you think it's right to have your economic rights taken away from you if you are the innocent victim?

Mrs Caplan: And you could never work again.

Dr Haig: I do understand what you're saying.

Mr Harnick: I don't want to pressure you to hurry up but my time is fleeing.

The Chair: Put the question a little bit differently, Mr Harnick.

Dr Haig: We'll eat up your five minutes here.

Mr Harnick: And you don't know how much that upsets me.

Mrs Caplan: I think it's fair to point out that deputants are permitted to take a couple of minutes and think about the answer.

Dr Haig: I'm not really trying to eat up your five minutes, but --

Mr Harnick: No, I know, because I have a better question for you next. I was just trying to bail you out.

Dr Haig: With respect to chiropractors, the reality is that all chiropractors have disability insurance as well.

Mr Harnick: Let me jump in here. Disability insurance is your first insurer. Auto insurance tops you up. There's still a differential at the end of the day, and all I'm saying is, do you think it's right to lose the opportunity to sue for that differential as an individual?

Dr Haig: The association hasn't for sure arrived at a conclusion to that.

Mr Harnick: Okay, that's fine.

Dr Haig: That's the reality of it.

Mr Harnick: I was just pursuing Mr Mancini's line, but the question I really wanted to ask you deals with neck injuries. From my experience of seeing numerous individuals who have been involved in car accidents, I have learned over the last many years that neck injuries can be very serious injuries and can have a very devastating effect on an individual and that injuries to the neck, and perhaps to the low back often don't get better or they last for several years and gradually people learn to live with the pain.

Under this bill, people will be permitted to sue for pain and suffering but there's a $15,000 deductible. My experience says if you've had an injury or you've had a neck pain for three or four years, you finally learn to live with the pain and carry on and do most of the daily things you want to do even though you still have some residual pain.

Your claim might be worth $15,000 to $20,000. Under Bill 164 there's a $15,000 deductible, which essentially, for a person who has had an injury for three or four years and still has some residual pain, renders the claim absolutely valueless, because the deductible is set at a high level.

The deputy minister yesterday said --

The Chair: I'm sorry, Mr Harnick. Can you get to the question, because your time has run out.

Mr Harnick: I'm getting to the question.

The Chair: Yes, but we're not going to have a history story.

Mr Harnick: The deputy minister yesterday said he wanted to eliminate small claims. Unfortunately, in my eyes anyway, a person who's had pain and suffering for three or four years and his claim is worth $15,000 and has it eliminated by a deductible of $15,000 is eliminating more than a small claim. What I want you to do for my friends across the way is explain to them, if you can and if you agree with my proposition, what pain and suffering a person goes through when he or she has a soft-tissue injury: whether those injuries are real and whether they're significant.

Dr Haig: How long do we have here?

Mr Harnick: Take all the time you need, because it's a very serious matter when people are going to lose their right to claim.

Dr Deborah Kopansky-Giles: I can maybe help answer that question. As I understand it, what you're asking is to clarify that soft-tissue injuries, first of all, can be significantly disabling injuries, and yes, in fact they can be very disabling. Even though we don't have our concrete signs and symptoms, like a fracture on an X-ray or a dislocation, soft-tissue injuries can be very disabling in many ways.

The way we've looked at it, and as we commented in our brief here, is that we are confident that the new bill will help improve the patient's access to rehabilitation and expedite recovery so that many patients who do have relatively minor soft-tissue injuries may not have the pain and suffering for three years, which would take care of those patients and those $15,000 claims that won't receive anything because of the deductible. We won't run into that longevity of symptoms. People who go beyond that usually settle for a significantly larger claim, so maybe their considerations would be addressed.


The Chair: Mr Owens, one minute. That's all you've got left. You didn't use it all up at the beginning.

Mr Owens: I just ask you to quickly comment on your views of our proposal with respect to immediate rehabilitation benefits after a one-week waiting period, indexed income levels, versus the potential of no benefits and no rehabilitation under the tort system.

Mr Chapman-Smith: I think it's partially covered in our brief. Whether you're talking about an auto accident system or workers' compensation or general treatment, as was mentioned in the submission, there has been a major understanding which is reflected in the science and in practice worldwide in recent years that in traditional practice, with the sort of injuries you get, certainly in whiplash and soft-tissue spinal strain injuries, the chief evil has been that it has actually created disability. You can describe that by saying for every day you lie in bed, there is definitive demineralization of bone, weakening of muscles etc, and at a physical and psychological level, you deteriorate rapidly from day one.

Therefore, the major new emphasis is to early multidisciplinary management, and luckily there are a lot of external things which are making that feasible in the 1990s. What that means in the current context is a system that encourages and allows someone to get into early multidisciplinary management with the best rehab services available. Dr Kopansky-Giles and her partner run a major clinic in Toronto which has psychologists, physiotherapists and all of these people who should be brought in at week one rather than one at a time over a period of 18 months.

The Chair: I'd like to thank you and your association for appearing before this committee. Thank you.


The Chair: The next group is the Insurance Brokers Association of Ontario. I'd like to explain to the committee that they were scheduled for Tuesday. Our meeting for the presenters was cancelled on Tuesday; they were rescheduled and they were able to make it today to present because of another cancellation. I'd like to thank you, gentlemen, that you've been able to make it here tonight. I know we're 10 minutes behind.

Welcome. If you don't mind introducing yourselves for the purposes of Hansard and the audience here in Ontario so they know who you are, you may proceed. We have one half-hour and please leave some time at the end. As you can see, the question part seems to be a very important part of this consultation.

Mr Bob Carter: Thank you. My name is Bob Carter. I'm the executive director of the Insurance Brokers Association of Ontario.

Mr Frank Sytsma: I'm Frank Sytsma, president of the Insurance Brokers Association of Ontario.

Mr Bob Stuart: I'm Bob Stuart, president-elect of the Insurance Brokers Association of Ontario.

Mr Bob Carter: What we'd like to do is briefly tell you a little bit about ourselves, where we come from, our association and what our interests are in your hearings.

Briefly, the role of the independent insurance broker in Ontario and the role of our association: Insurance brokers act on behalf of their clients, the insurance consumers of Ontario. Brokers purchase insurance protection for their clients from various insurance companies. Here we're pointing out the distinction between an insurance agent and an insurance broker: Insurance agents act for one company; we act for several.

The Insurance Brokers Association of Ontario: More than 12,000 active individual insurance brokers currently distribute property and casualty insurance products in the large and small communities of Ontario. The Insurance Brokers Association of Ontario represents over 7,400 insurance brokers employed in approximately 1,300 offices contributing to the province's economy. In that number, we're only dealing with the licensed personnel. We also have secretaries, accountants and people like that in those offices.

Our members, as small independent business people, are the first to hear from consumers when an insurance product is not working. Therefore, we look at the design and content of an insurance product primarily in relation to its impact on the insurance consumers. Whether an automobile product is no-fault, tort or a combination of the two does not really concern us, unless the consumer will be adversely affected. We are therefore here today to express our views on how Bill 164 will affect our clients: the insurance consumer.

Since the introduction of the Ontario motorist protection plan, consumer complaints in connection with both claims and premiums have dropped dramatically. We agree that improvements are needed and we note that Bill 164 takes some positive steps towards further protecting and enhancing the interests of our clients. However, in the areas where we believe the consumer will be adversely affected, we will suggest some viable alternatives.

We strongly believe that Bill 164 should be considered in the broader context of the initiatives proposed in The Road Ahead: Ontario's Strategy for Automobile Insurance Reform. The Road Ahead document placed significant emphasis on the need for safer roads as a key to containing both monetary and social costs.

As we all know, affordability is an important concern for Ontario consumers. The cost of the auto insurance product is based, for the most part, on the cost of claims. The cost of claims in turn is driven by the level of benefits the policy provides and the frequency and severity of accidents. The implementation of a graduated licensing scheme is one lifesaving measure that could contribute to road safety and help control insurance costs.

One of the goals of the road safety agency created by Bill 39 is to influence public opinion to convince motorists that it is no longer socially acceptable to drive in a dangerous manner. We believe that a road safety agency could be a very successful instrument of social policy. After all, this approach has already proven successful in changing attitudes on drinking and driving, a campaign in which the Insurance Brokers Association of Ontario played an active role.

It appears to us that the road safety corporation has been delayed. We have provided a list of volunteers from our membership to serve on both the board and the five subcommittees. To date, it is our understanding that only two of the committees are active and the board has not been struck. This is a source of serious concern to us.

As we mentioned, the price of the automobile insurance product is important to the consumer. While we are not able to evaluate Bill 164's proposed changes in specific actuarial terms, we do have serious concerns about the affordability of this new product.

When improvements are made to benefits, the average cost per claim rises. Bill 164 also raises the possibility of increased adjustment costs because a higher percentage of accidents involving bodily injury will be investigated now that there will be increased access to the courts. We further believe that the potential exists for increased costs as wording changes are tested in the courts.

One must never lose sight of the fact that the cost of insurance is directly related to the cost of claims, and any improvement in benefits must be weighed very carefully against these increased costs. We sincerely believe that the Ontario consumer will protest strongly if the proposed reforms lead to anything more than modest premium increases. We must be wary of consumer backlash directed at both the insurance industry and the government.

As affordability is a major concern, so too is the question of availability. Since the mid-1980s, the automobile insurance market has been under political scrutiny. It has been the subject of many inquiries, legislation and change. If market forces are not allowed to operate and if competition is not fostered, then the consumer will suffer. The current legislative climate has resulted in the withdrawal from the Ontario market of one major automobile insurer, the cancellation of significant expansion plans of another insurer and uncertainty for the rest.

We agree that there must be regulations in place to protect the interests of the consumer. Market forces and good business practices and principles must be also be permitted and encouraged.

I'll skip over the next part. What we deal with there really is that on the original withdrawal provisions we were very concerned. You've addressed them to a certain extent and we hope that will minimize the impact on market disruption.

We have serious concern that Bill 164 gives excessive powers to the cabinet. The insurance industry is a multibillion-dollar business and employs thousands of hardworking Ontario residents. While no one questions the rights of the elected representatives to govern and to regulate, we are concerned that by moving this power from the Ontario Insurance Commission to cabinet, auto insurance will become more of a political issue as opposed to a business issue.

Auto insurance is a highly technical product that should be kept out of the political arena. Technical expertise exists at the Ontario Insurance Commission, and we believe that the consumer's needs are best served by regulation, on a consultative basis, by the OIC. There are proposed changes to the classification system, and we believe that the implementation of a uniform rating system will limit competition among the insurance companies. The insurers use the rating grid to implement a series of highly specialized discounts. These discounts benefit a variety of consumers. A number of them are especially beneficial to Ontario's seniors, and we comment on that throughout our presentation.

The situation on tort: Bill 164 restores the right to sue for pain and suffering, subject to the $15,000 deductible, or $5,000 under the Family Law Reform Act. We believe there should be adequate compensation for pain and suffering. We also believe that Ontario's consumers would be disadvantaged if they had the right to sue completely removed. However, we must not lose sight of the fact that generous increases in no-fault accident benefits under the original OMPP were introduced as a measure to control claims costs by reducing access to courts and still providing compensation to all accident victims, regardless of fault. Bill 164 further enhances these no-fault benefits.


Earlier, we expressed our concern on the issue of affordability. Anything that affects claims costs ultimately affects insurance premiums. We believe that the $15,000 -- $5,000 under the Family Law Reform Act -- threshold, while increasing consumer access to the courts, will not necessarily increase claims payments to the consumers. It will, however, increase claims costs and ultimately premiums, as insurers will once again have to fully investigate all claims in order to prove fault or protect their position; I think that's a key element in that low threshold. We cannot emphasize too strongly that Ontario's consumers will not accept anything more than a very modest premium adjustment.

The statutory accident benefits are another issue. Our comments are based on a thorough review of the draft regulations dated March 1992, but a more limited review of the revised regulations released January 18, 1993, due to obvious time constraints. When we originally reviewed the March 1992 regulations, we had some concerns regarding "the activities of daily living," and under the January 1993 revised draft regulations, many of these have been addressed. It is our feeling, however, that some of the definitions may be too vague and, once again, may require legal interpretation. Under the section headed "insured person," our original concerns regarding non-dependent family members have been addressed in the revisions.

We feel that the inclusion of temporary supplemental benefits to protect those who are legitimately trying to get back into the workforce, but are temporarily unable to do so or do so at reduced earnings, is a very positive step towards assisting the rehabilitation of those who have been injured.

On income replacement, part II, we notice there's been a change in the qualifications applying to a person claiming weekly benefits under which the existing subparagraph (ii), "on temporary layoff" has been replaced by subparagraph 6(1)4i, reading, "to be recalled" to an employment "pursuant to a collective agreement." It would appear that this may be too limiting in that not all layoffs apply only to those under collective agreements. We recommend that the proposed new clause be extended to include the previously mentioned wording.

We believe that unemployment insurance benefits should be included in calculating the amount of benefits, thereby treating, from an income point of view, employed and unemployed persons equally. Under section 8, we remain confused as to the methodology proposed on when unemployment insurance is included or excluded and its impact on benefits payable to consumers.

While we appreciate the need to be fair with respect to the benefits, we are concerned that in current economic conditions a benefit could be calculated based partly on employment which may have ceased three years prior to the accident. This section appears to ignore the reality that the province's economy has changed to the point that some positions have disappeared with no likelihood of reappearing in the future. One solution might be to use the Ontario average industrial wage, as referred to within the regulations.

Many Ontario workers who have been displaced under the current worldwide economic restructuring have unfortunately been faced with reduced incomes compared to one, two or three years previous. We do not believe the silent majority of automobile insurance consumers in Ontario should have to pay for income benefits which exceed current and future income expectations and realities.

Part III: The introduction of yearly benefits for loss of an academic year is, in our opinion, quite worthwhile. We have a concern, however, that if the accident were to occur in the final year of a student's education, the need to stay in school for an additional year, with the resulting lack of income, could well be worth more than $8,000. Perhaps a more equitable solution in this situation would be replacing the benefit of $8,000 with payment for actual tuition costs plus the benefits set out in subsection 14(4).

With respect to the benefit payable to care givers, we feel that going back three years within the employment history again does not reflect today's conditions.

We refer to previously stated concerns that interpretations of "activities of daily living" may result in insureds and insurers being unable to reach consensus, especially with respect to part II, clauses (b), (c) and (d).

Other disability benefits: This section is a catch-all to pick up those who do not fit in any of the previous categories. We are not bothered or troubled by the concept; however, we feel it important to point out that many of those who would be covered under this section are retired persons. It should be noted that for those persons who are retired, the limit on benefits is $185 per week, not indexed.

There is currently no provision within the rating structure of the accident benefits section to reflect this obvious limitation of benefit. It seems inequitable that seniors are required to pay premiums based on a limit of $1,000 per week but are themselves limited to receiving only $185 per week. We suggest that this be addressed in the rating of the section and that a discount be allowed to reflect the reduced exposure under clause (b) benefits for those persons who are retired.

With respect to loss-of-earning-capacity benefits, we agree with the provision that insurers must make a formal offer to pay benefits after 104 weeks of disability.

In connection with the assessment provisions, care will need to be taken that the assessment facility has local representation from the area where the claimant resides.

There is a further potential problem with factors involving wages for those who have been receiving an education benefit. We suggest that this section be reviewed to take into account students who may have been involved in a recognized apprenticeship program. Students in their final year of apprenticeship could reasonably expect to reach the full wage rate applied to their trades significantly before the age of 30. We recommend that in such cases they receive full benefits from the date they would have completed the apprenticeship.

The conditions regarding mandatory review of benefits and deterioration in condition are positive and give both parties an opportunity to adjust to changing circumstances.

Supplementary medical benefits and rehabilitation benefits: We're pleased to note that the caps on these important coverages have been removed. It is our feeling that those who have been seriously injured in an automobile accident should not have to be concerned about the possibility of their benefit running out while they still need either medical or rehabilitation benefits.

On part IX, attendant care benefits, we're concerned that the $3,000 monthly limit may not be adequate for those who have been seriously injured. The establishment, however, of the minister's task force on rehabilitation and long-term care benefits is a positive initiative to clarify benefits for the protection of the consumer.

We are in agreement with the increase in death benefits and revised definition of spouse.

We are concerned that the maximum amount stated under funeral benefits is actually a reduction in amount for most insured persons. The current policy permits an increase from the $3,000 base to $7,500 for funeral benefits, and most policies written through the 1,300 independent broker offices we represent automatically reflect this higher limit. We recommend that this increased amount be carried forward under the new proposal to avoid coverage reductions.

Other pecuniary loss: Changes here reflect today's society by permitting visitation expenses for a person who was living with the insured, in addition to the traditional family members.

The extension for dependent care to wage earners and the increase for non-wage-earners further reflect the reality of today's society.

Payment for housekeeping and home maintenance expense reflects a realistic approach to actual loss by the insured person. Damage to personal items further reflects actual loss, which is not recoverable under the current plan.

Under exclusions, clause 2 recognizes that some consumers have been unaware of licence suspensions due to unpaid fines and therefore, under the previous plan, have been operating their automobiles without insurance protection. This has been one of the major problems with OMPP since its inception. We cannot understand, however, why this improvement has been made only to the statutory accident benefits and not to Bill 164 so that it can apply to all coverages. We believe this change should be made so that the many motorists who are unaware of suspensions for unpaid fines will continue to receive the full benefit of their policy. What we've found is that, if you haven't paid a ticket or something, the notice does not get to the consumer for a number of months and he or she is technically unlicensed. We believe, under the "procedure" section, that this is a solid attempt to clarify the rights and responsibilities of the insured and the insurer.


We believe the responsibility to participate in rehabilitation is a positive initiative and will encourage participation.

We believe that social assistance payments should be treated as income in the calculation of benefits to avoid excess benefit payments.

Removing the onus to provide a certificate, unless waived by the insurer, will allow insurers to show compassion for seriously injured persons. The tying of psychologists, dentists and chiropractors to their specialized areas removes potential areas of misunderstanding.

Under the reduction or stoppage of benefits: This addition clearly establishes the condition under which insured persons must be notified. It establishes the mechanism to reinstate the benefits.

With respect to repayment to insurers: The amendments in this section clarify responsibility for repayment and set out fair treatment of the consumer in establishing repayment terms.

The inclusion of "wilful misrepresentation" again clarifies the intent and limits the rights of those who should not have received a benefit.

We are concerned that the minimum benefits are not indexed. This section, especially for seniors, should be indexed.

In conclusion, Bill 164, when considered in the context of The Road Ahead initiatives, contains some very positive changes for our clients, Ontario's automobile insurance consumers.

We believe that Bill 39 must be implemented along with Bill 164 in order to bring in graduated licensing and other initiatives from The Road Ahead which offer concrete and proven methods of containing insurance costs which ultimately control insurance premiums.

May we suggest that another area that is not adequately addressed in OMPP, and subsequently in Bill 164, is arbitration to settle disputes for direct property damage or collision total loss. These amendments should be made to this bill.

In part VI, loss of earning capacity benefits, reference is made to apprenticeship. We believe that apprenticeship should include other professional training programs which, when completed in the business world, result in increased income, as happens in the trades.

We have attempted to assist you by outlining our concerns in connection with affordability, availability, the classification system, tort and statutory accident benefits. Our volunteer group has put many hours into this review.

The complexity of the statutory accident benefits schedule leaves us with concerns over future interpretation, implementation and costs to the Ontario motorist. We recognize that improvements we have suggested in this presentation may have to be tempered due to cost factors. We reiterate that the Ontario insurance consumer is not prepared to accept substantial increases in automobile premiums.

We commend you for your revisions in the regulations that were published on January 18, but as previously noted, it's been extremely difficult to conduct the same in-depth review that we had completed on the original draft regulations.

We, the Insurance Brokers Association of Ontario, remain committed to serving the Ontario insurance consumer and to working with your ministry in simplifying, streamlining and controlling the costs of automobile insurance.

Thank you very much.

The Chair: We haven't got too much time, but one question from each caucus. Mr Phillips?

Mr Mancini: Can we have two, since this is the end of the day?

The Chair: It's not Christmas. Mr Phillips.

Mr Phillips: My colleague has a question as well. I'll ask mine quickly.

The Chair: We'll see if we can get around to it.

Mr Phillips: Okay. Our concern is heavily around what this is going to do to the people of Ontario in terms of costs. We've heard estimates of up to $200 per driver as incremental costs. Even the government says it's going to cost a minimum of about $190 million extra, almost like a tax, if you will, a regressive tax, because no matter how much money you make, you've got to buy the insurance. So even if you are low income or not working at all, you've got to buy this. You've got to pay the extra premium. You have no choice.

I guess you people are as close to the consumer on this as anybody. If the costs were up to $200 of premium, and I'm talking about incremental costs, because the regular costs are going to go up -- this is just for the extra benefits provided in this bill -- if they were $200 per driver, would your response still be the same? Is this worth $200 per driver and is it worth, to the people in Ontario, spending more money on this? The government says, "We can't afford to give the hospitals anything but we can afford to tax the taxpayers of this province somewhere near, depending on what estimates you use, either $190 million or $500 million." That's the range. Is this package worth $200 a driver, in your mind?

Mr Stuart: I think our clients are very interested in bottom-line costs. In many cases, the benefits they would like to receive they're not able to afford. We have tried to put this through our submission here that many of the ideas expressed are worthwhile, but the question is, will the insuring public accept the increase in cost?

Mr Phillips: They have no choice. If it goes through, they've got to. This is zero choice.

The Chair: I'm sorry. Mr Tilson.

Mr Tilson: I've a brief question, as has Mr Harnick. The issue is with respect to the regulations. We've had complaints from almost every group as to the myriad of regulations and how we're going to understand them. There's going to be, in my view, considerable cost in educating the public, in educating brokers, in educating the claims adjusters, in educating, I suppose, everyone, in educating the politicians, because they're going to be coming to our office, just like they do for workers' compensation.

My question to you is, has your group sat down and given any estimate as to what it might cost to spend money to educate the brokers of this province to properly understand how this system's going to work, because it's very, very complicated, even understanding words.

Mr Bob Carter: I'll take that one. I can tell you, based on the hours we've spent going through it, we are still not up to speed, and any change will cost money. We will be able to deal with our members, and we represent about 55% to 60% of the insurance brokers in Ontario. We are unable to deal with non-members, and this type of change takes a long time to go out. I can tell you right now there are people in this province who aren't fully up to speed on Bill 68, the original one. We still run training sessions on them now.

The Chair: Mr Dadamo.

Mr Dadamo: Thank you, Mr Chair.


The Chair: I'm sorry, Mr Dadamo's got the floor.

Mr Tilson: To be fair, Mr Chair, our time has not gone as far as the previous Liberals, and surely we're allowed the same amount of time.

Mr Harnick: Don't we get five minutes for questions? That couldn't have taken more than a minute and a half.

Mr Tilson: I tried to make my question very brief.

The Chair: If you're going to waste time --

Mr Tilson: You're just ignoring us.

Mr Harnick: I thought there was going to be --

The Chair: Five minutes every 15, plus what was it, 25 minutes for the presentation?

Mr Tilson: How are you adding, Mr Chairman? The fact is that our time was not the same as the Liberals, and we're entitled to equal time.

The Chair: I said one question from each caucus. We had time. I know Mr Mancini had his hand up. He had a 10-second question, short, sweet and quick, and I was going to go back to see if we had enough time. But if we argue about it, we're not going to have much time left. Okay, Mr Dadamo.

Mr Dadamo: It's unfortunate that the opposition is never happy.

My geographical friend Mr Mancini claims continually throughout these hearings that OMPP is a great system and needs absolutely no changes at all. Your organization has criticized the OMPP's exclusion of the head-injured, the psychologically injured, the lack of adequate benefits for students and also the self-employed. You've also been very vocal on the need for indexation. The previous government chose to ignore your concerns. To address the issue of cost, the government has now established a task force on rehabilitation and long-term care. Would you agree with Mr Mancini's assertion that the current OMPP system is a wonderful system and does not need to be changed?

Mr Harnick: Did Mr Endicott write this question? Where is Mr Endicott?


The Chair: Would you let them answer.

Mr Bob Carter: I think in our statement we said very clearly that OMPP was much better than the previous system and there are a number of additions in here that we agree with, if the public can afford them.

The Chair: Mr Mancini, 10-second question, okay?

Mr Mancini: First of all, I want to thank the association for what I consider to be a well-thought-out brief. You've touched on many aspects of the legislation. I can tell you spent a lot of time.

Being front-line workers and preparing other brokers and other people in offices and all these people to give a product to the customer, of course you're going to be the first group to hear as to whether or not people are either happy with the product or can afford the product. You mentioned it in the brief, but could you give me your assessment as to how many complaints per month or per year or however you calculated them you were receiving on the OMPP prior to the introduction of Bill 164, or around the time of the introduction of 164? If you don't have specific numbers, were they a lot or a few?


Mr Stuart: I can comment. In my own office, we have had one problem, which we note has been addressed, and that was in the area of definition of "insured person" where you have someone who is not a dependent but a family member.

The Chair: Okay, Mr Harnick, a quick one.

Mr Harnick: We have heard from a number of groups, very diverse in nature: the ARCH group -- the Advocacy Resource Centre for the Handicapped -- the Insurance Bureau of Canada, Progressive Casualty, FAIR, the Advocates' Society. One of the things they all note is the fact that you're not able, under Bill 164, to claim your economic loss beyond what the accident benefits might pay you. Each of those groups was very critical of that particular omission.

It has been suggested that the act be amended so people have the option to purchase supplementary or, by way of endorsement, some form of income protection to pay them the difference between what accident benefits pay and what their actual loss might be. As brokers, do you envision anything wrong with selling that kind of a product to ensure that people, at the end of the day, are at least receiving their actual loss of income?

Mr Sytsma: Are you talking as an add-on to the existing policy?

Mr Harnick: Exactly.

Mr Sytsma: The experience of the brokers' association and its members has been, though, that under the current OMPP you had the option to increase your coverage from $600 to $1,050 and it wasn't being done.

Mr Harnick: What I'm saying is, if people had the option to protect their income, just as they have the option to purchase underinsured coverage, is that a product you would have a problem selling or would object to selling for any principled reason?

Mr Sytsma: We wouldn't have any objection to selling it, but would they buy it and what price would it be? We get back to cost.

Mr Harnick: Depends how the insurers market it, right?

Mr Ward: Just a quick question, and I guess we're allowed. I understand from your brief and your presentation that generally you feel the expanded benefits we're bringing forth in Bill 164 -- you generally support them in that they bring in people who perhaps were excluded out of the present OMPP. You're aware also that, as the benefits are expanded, there's a cost to the system. We recognize that as well and we think we've struck a fine balance. We can't satisfy everyone, but we think we've done a good juggling act.

When it comes to cost, there are 150 insurance companies in Ontario -- around that number. Our actuary, Mercer associates, which did an actuarial report for the government, estimates the costs of these expanded benefits, which generally you support, will bring a cost to the industry of around 4%. Even that is in a state of flux because of this task force that has been formed that's going to look at long-term care and the costs of that aspect.


Mr Ward: If I may now, Mr Chair.

The Chair: Mr Ward, could you get to the question.

Mr Ward: You've been in the industry a long time. You have a wealth of experience. We're led to believe by the opposition that this cost -- it could be around 4% -- to the industry is simply going to flow through the insurance companies directly on to the premiums of the driving public. I find that hard to believe.

The Chair: Okay, Mr Ward, get to the question.

Mr Ward: My question is, would it be your experience that this would occur or in fact would the competitive nature of the insurance industry absorb some if not all of that cost?

Mr Bob Carter: From what we are aware at the present time, I do not believe the insurance industry would absorb it, because their claim is -- and we're only the sales force -- that with the drop in interest rates etc, they're running pretty close to the wire now. So I would think they would be forced to pass it on.

The Chair: Okay, thank you. Thank you, Mr Ward.

Mr Owens: On a point of order, Mr Chair: Maybe we can excuse the guests if they don't want to be delayed by this procedural point.

The Chair: I'd like to thank you. As I said at the very beginning, how flexible you were to come before this committee. Again, thanks for appearing.

Mr Owens, your point of order. Could you speak up a little louder?

Mr Owens: I wish I could grab this microphone and bring it closer.

In the interest of accuracy, I'd like to take the opportunity to correct the record in terms of a response or more appropriately an exchange that took place between Mr Griffin from the Insurance Bureau of Canada and Mr Mancini.

In response to --

Mr Tilson: You can only correct your own record.

Mr Mancini: You can't correct my record. On a point of order, Mr Chairman: Mr Owens has no privilege --

Mr Owens: May I finish my point? I have the floor.

Mr Mancini: You can't correct my record.

The Chair: Wait a minute, let him just finish.

Mr Tilson: I may want to correct your record.

Mr Owens: Mr Mancini indicated that the minister had, in fact, made a response --

Mr Mancini: On a point of order, Mr Chairman. I have a point of order. Mr Owens does not have the privilege to rise on a point of order to correct someone else's record. Mr Owens's point of order is out of order.

The Chair: I agree with you, Mr Mancini.

This committee will be adjourned and will resume hearings at 10 o'clock tomorrow morning and will be running till 10 o'clock tomorrow night in room 151.

The committee adjourned at 1717.