SAULT STE MARIE AND DISTRICT LABOUR COUNCIL
SAULT AND DISTRICT SOCIAL JUSTICE COALITION
BIKERS RIGHTS ORGANIZATION, ONTARIO
GERALD WILLIAMS
CAROL WILLIAMS
SAULT INSURANCE BROKERS ASSOCIATION
CANADIAN COALITION AGAINST INSURANCE FRAUD
CONTENTS
Tuesday 27 February 1996
Auto insurance
Sault Ste Marie and District Labour Council
Ron Bouliane, delegate
Tracey Roetman
Sault and District Social Justice Coalition
Gail Broad, acting chair
Arthur Day
Bikers Rights Organization, Ontario
Gerry Rhodes, member
Niko Marinovich
Gerald and Carol Williams
Sault Insurance Brokers Association
Robert Walz, president
James Busch
Glen Yates
David Tier
Canadian Coalition Against Insurance Fraud
Marc-André Charlebois, executive director
STANDING COMMITTEE ON FINANCE AND ECONOMIC AFFAIRS
Chair / Président: Chudleigh, Ted (Halton North / -Nord PC)
Vice-Chair / Vice-Président: Hudak, Tim (Niagara South / -Sud PC)
*Arnott, Ted (Wellington PC)
*Brown, Jim (Scarborough West / -Ouest PC)
*Castrilli, Annamarie (Downsview L)
*Chudleigh, Ted (Halton North / -Nord PC)
*Ford, Douglas B. (Etobicoke-Humber PC)
*Hudak, Tim (Niagara South / -Sud PC)
Kwinter, Monte (Wilson Heights L)
Lankin, Frances (Beaches-Woodbine ND)
Martiniuk, Gerry (Cambridge PC)
Phillips, Gerry (Scarborough-Agincourt L)
*Sampson, Rob (Mississauga West / -Ouest PC)
Silipo, Tony (Dovercourt ND)
*Spina, Joseph (Brampton North / -Nord PC)
*Wettlaufer, Wayne (Kitchener PC)
*In attendance / présents
Substitutions present / Membres remplaçants présents:
Crozier, Bruce (Essex South / -Sud L) for Mr Phillips
Marland, Margaret (Mississauga South / -Sud PC) for Mr Martiniuk
Martin, Tony (Sault Ste Marie ND) for Ms Lankin
Wildman, Bud (Algoma ND) for Mr Silipo
Clerk / Greffier: Franco Carrozza
Staff / Personnel: Andrew McNaught, research officer, Legislative Research Service
The committee met at 0954 in the Holiday Inn, Sault Ste Marie.
AUTO INSURANCE
The Chair (Mr Ted Chudleigh): I call the meeting to order. Is there any business to come before the committee?
Mr Wayne Wettlaufer (Kitchener): I have two letters here, one from Allan Johnson, secretary of the Motorcyclists' Coalition, in response to a question I asked him at a meeting last week, and I have another letter from Grant, Jones and Stuart Insurance Brokers of Markham.
The Chair: You can deliver those to the clerk. We'll have them copied and distributed to the committee. Thank you very much.
SAULT STE MARIE AND DISTRICT LABOUR COUNCIL
The Chair: We have with us today the Sault Ste Marie and District Labour Council, Mr Ron Bouliane. We have 20 minutes together, and if you would like to present us with a brief, we'll fill any remaining time with questions.
Mr Ron Bouliane: As was mentioned, my name is Ron Bouliane. I am a delegate to the Sault Ste Marie and District Labour Council, and I was allotted the task of putting together a presentation for the finance committee.
We would like to preface our remarks with the observation that although the present government was elected by an overwhelming majority, very little of its support came from that area considered, geographically and politically, to be northern Ontario. What support you did receive, therefore, we thought might be considered an abberation and may not, and probably will not, be repeated in the future if this government continues in the dictatorial manner it has adopted. You will note that there is only one sitting PC from northern Ontario, and I believe that is because most of the electorate seem to have examined the Common Sense Revolution and found it sadly lacking in just that.
In northern Ontario people try to find ways of helping each other and their communities to survive and continue. We tend to reject ideas and philosophies which we believe will harm us or our neighbours. We try instead to find ways to live and work that are beneficial, to a greater or lesser extent, to all concerned. The experience of many people from northern Ontario is that people from southern Ontario -- and here the reference is to government officials, agencies and the corporate and financial sectors, which includes the automobile insurance industry -- have no concept of, understanding of or sympathy for the problems or conditions that occur up here, and no assurances to the contrary will convince many of us otherwise. Actions speak louder than words.
Auto insurance is a major problem. Many of us do not believe that the rate structure takes into account the reality of living and working in northern Ontario. For some this can mean travelling long distances to and from the work site. For others it involves having to drive long distances for medical services, schooling or any of the other situations that may arise on a daily basis. Distances driven is one of the rate determinants and can have a negative impact on an individual's premium. I went through the material and I didn't see any reference made to reforming this aspect. It's something that we do believe should be looked at.
The maximum award of up to $400 per week for loss of earnings is also unacceptably low. In northern Ontario our living expenses are considerably higher than those of the south. For instance, we heat our homes for up to eight months of the year and in some cases -- not all that uncommon -- we're heating for even longer periods. With the current cost of electricity, oil and natural gas, heating alone can consume a large portion of a family's income. If you consider all the other costs incurred in operating a household, then add another 10% to 20% to that cost and you begin to see why we consider the proposed maximum award as being too low.
Allowing for the purchasing of additional topping-up coverage to bring the loss of earnings coverage back up to the present standards is a bad joke. It reminds one of a cartoon that appeared in a major magazine within the last two years. I wish I knew the cartoonist who did it because I thought it was absolutely appropriate. In this cartoon, the CEO of an insurance company was exhorting his board of directors to find a way to help regain the respect and confidence of the public and polish their tarnished image. The unanimous suggestion was to sell the public more insurance. This appears to be the path this government has chosen.
Restoring the right to sue for pain and suffering is also controversial. Even insurance companies recognize that the tort process vastly increases the overall cost of insurance; also, on the other side, 42% of awards go to cover legal costs, so if you do sue you're not going to get the full amount anyway.
At a replacement income of $400 per week and severe restrictions on the availability of legal aid, the right to sue becomes an option that is not economically viable or satisfying when you're trying to feed and house yourself and your family. One would have to question whether we want to encourage ambulance chasing as well -- I'm referring to the legal profession.
Ms Annamarie Castrilli (Downsview): Again.
Mr Wettlaufer: There's only one lawyer here.
Ms Castrilli: I feel decidedly outnumbered in the circumstances.
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Mr Bouliane: I have not mentioned the restrictions that apply to non-wage-earner claimants who are also affected by the decreased availability of benefits. This, I believe, has been mentioned by others; I think it was mentioned in the OFL's brief.
What this proposed legislation is all about, I believe, is reduced benefits and higher costs to the consumer, and reduced liability and higher profits for insurance companies -- in short, a dream come true for the insurance companies. The insurance companies can't even agree that this package will guarantee rate stability. The insurance bureau has publicly stated that the rates will probably increase by up to 40% over the next five years, and I consider that really unacceptable up here.
In addition to all the faults that have been tabled, there are some that may not have been considered. The approximately six million licensed drivers in the province pay an average of $880 per year for insurance coverage. Some simple arithmetic: This works out to about $5.28 billion in premiums collected annually by the more than 150 companies engaged in delivering auto insurance. I wonder if anyone has tried to determine how much of the profits derived from these premiums go to finance industrial development offshore. Are we in fact financing our own employment and economic instability?
In 1993 it was estimated that about 11% of the premiums collected went to US-based companies while 17% of the premiums collected went to foreign-based insurance companies. That total of about 28% of the premiums collected by non-Canadian-based insurance companies accounts for roughly $1.48 billion. Although a certain percentage of this, and indeed of all premiums collected by Canadian and non-Canadian insurance firms, must stay within the province to cover their liabilities, nothing, to my knowledge, would prevent an insurance company from investing part of its profit in offshore ventures or in stock-market-based funds that develop industries or enterprises which are in direct competition with Ontario-based industries. We may in fact be helping to create our own problems.
Another situation that comes to mind is the use of these potential investment dollars to finance operations within national or corporate jurisdictions which routinely are cited for human rights violations. An interesting fact to note is that the insurance companies themselves are exempted from the Human Rights Code. When assigning risk, they are allowed to discriminate by age, gender and area of residence. The point I'm trying to make is that giving the insurance industry what is effectively free rein is not going to guarantee it will act in the best interests of Ontarians.
With that, actually, my printer crapped out on me, so I will ad lib the rest.
What I'm concerned about is, are we shooting ourselves in the foot? If we examine what is available in Manitoba, British Columbia, Saskatchewan and Quebec, these four provinces have put together public automobile insurance plans. They seem to be operating effectively, and the fact that insurance companies can operate in Ontario on a profitable basis indicates that we should be able to do the same thing with a public automobile insurance plan. Our expectations might be somewhat lower, but I think it can be done.
One of the things I didn't see in Mr Sampson's notes -- something very near and dear to me and something I worked on in conjunction with the previous Minister of Finance -- was the enabling clauses for group auto insurance. Have they been deleted from your proposed act? The reason we had these clauses inserted was so groups of people or organizations could provide a better service than was currently available to their members, to go out and form their own insurance corporations.
The present package, we feel, is unacceptable. It needs too much tinkering. It should go directly back to the drawing-board. Something has to be done with it. As I said, there are too many problems with it as such.
Mr Bruce Crozier (Essex South): Thank you, and good morning. Just so we're sure we're talking about the same things, you said this has a maximum of $400. To get the term right, that's the minimum weekly benefit. You can, as you mentioned, buy up to a maximum of $1,000. That's fine. I just wanted to make sure.
You also mentioned that there's the restoration of pain and suffering. That's already in the act. It was the previous government that removed the right to sue for economic loss, and it's being brought back. It's economic loss that's being brought back, not pain and suffering.
What it boils down to is that you're concerned about rates. I think that's part of why we're revisiting this legislation; it is, in the terms of the government, to stabilize rates. We've run into a bit of an interpretation problem when it comes to "stabilized" rates. Perhaps you could tell me, from your perspective and perhaps from a public perspective, what you're looking for with stabilized rates.
Mr Bouliane: I'm looking at rates that perhaps may increase but increase at the same level as the cost of living. What I've seen in the press leads me to believe that it's far in excess of what the cost of living would be. For northern Ontario, with the vast distances we have to cover, insurance for an automobile is an absolute necessity. We have very little access to public transport or anything like that which, if you chose not to use a vehicle, would otherwise be available in an urban area. We would like some stability. We would like to see something that you would know year to year; provided you weren't involved in some kind of situation that would require your rates to be increased, we would like to know what our rates would be on an annual basis, not guess them.
Ms Castrilli: I wonder if you could elaborate a little on the northern factor. I don't consider Sault Ste Marie the north; maybe the gateway to the north. You talked about the distances. You didn't talk about the weather conditions and the remoteness of some communities and how that impacts. Let me just ask a corollary question, and maybe you can deal with both of them. What would you see as appropriate benefits, given those considerations?
Mr Bouliane: For a lot of these communities, the remoteness is an absolute detriment to movement at all in the winter. One of the villages in Mr Wildman's riding, Dubreuilville, is at some points in the year virtually inaccessible. Public transport is basically not available, so people resort to using their own vehicles. Living in northern Ontario, I believe we have one of the higher rate classes, in this part of northern Ontario anyway, so it becomes a necessity.
If they want to do shopping -- and I'm referring to going to a place like Wawa or Marathon or Thunder Bay or Timmins or the Sault -- this requires that these people travel at least 140 and in some cases over 200 miles.
Ms Castrilli: We were told in Thunder Bay that the incidence of accidents in the north is quite a bit higher than elsewhere because of those conditions. Would you agree with that?
Mr Bouliane: I witnessed a rollover on the way to this hearing. Yes, I would say our road conditions tend to be a lot more harsh, a lot more unforgiving, and therefore perhaps some consideration should be made to the road conditions we have to endure.
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Ms Castrilli: What do you think the draft legislation should say with respect to the north? Not in specifics, but do you think there ought to be a section that says the north should be treated in some special way?
Mr Bouliane: Yes. I think some special consideration should be given to residents of northern Ontario specifically because of, as I mentioned, the inaccessibility of public transport, the road conditions. If you wanted to refer back to your maximum allowable loss of wage award, I think some consideration should be given to that too, because our cost of living up here -- and Tony can bear this out and so can Bud -- are far higher than living in southern Ontario. All you have to do is drive down the street and check out the gas prices. If you go to a place like Chapleau, it's 175 miles from Sudbury and roughly the same distance from here. We're paying a very high premium for living and working up here, so we think some consideration should be given to that.
Ms Castrilli: So equality requires different treatment in this particular case, is what you're saying?
Mr Bouliane: Absolutely, yes.
Mr Bud Wildman (Algoma): Ron, it is true that in northern Ontario we're one of the higher-rate areas, for a number of reasons that you've dealt with, the first being probably the distances driven. In my constituency, anything less than an hour's drive is a short drive. The distance from one end of my riding to the other is the same distance by road as it is from Sault Ste Marie to Toronto. The distances here are significant.
The other issue you've mentioned and that has been raised by my colleagues is weather conditions. Just the fact that we have winter conditions for a lot longer than most other parts of the province -- and I can understand why the private insurance companies put us in a higher rate category, because the records show and the studies have demonstrated that there are more accidents in northern Ontario and that accidents tend to be more serious in this part of the province, involving more personal injury and death, partly because of the distances to health institutions, hospitals as well. So there is a greater risk for the insurance industry.
But I'm interested in what you've said about rate stability. Are you suggesting that the industry should be held to a cost-of-living increase, on average, unless they can show they are experiencing significant losses province-wide or in particular geographic regions?
Mr Bouliane: That would be my thought, yes. I would like to see something like that addressed. For many of us who work in the private sector, involved with trade union organizations and such, we have clauses within our contracts that tie wages to cost-of-living increases. I'm not averse to an insurance company getting some extra, providing they can show they have actually incurred some significant loss in their earnings with regard to cost of living, or if they've run into some kind of financial difficulties.
Mr Wildman: If the government were to take that approach, would you see that as a province-wide average or would you do it on a geographic basis, taking into account the different risks in different parts of the province?
Mr Bouliane: If you were going to do it fairly, you would have to do it geographically, area by area; however, that would tend to put northern Ontario at a disadvantage, so you would have to average it out province-wide to arrive at a structure that might be viable for northern Ontario.
Mr Wildman: Just one other question for the committee, because I'm new to the committee. I read a press report in the Financial Post, I believe it was, which indicated that earnings for auto insurance and house insurance firms Canada-wide were up substantially; that is, there was, year over year, a 56% increase in profit last year. They indicated that the figures weren't available for Ontario, which I find rather odd. How could you come up with a Canada-wide average unless you included the one province that has 40% of the economy? Are those figures available to the committee and have you sought them from the industry? They must be available if you are going to be able to come up with a Canada-wide average.
Mr Rob Sampson (Mississauga West): Yes, we've asked for those data to be available and produced for Ontario. We don't have it yet.
Mr Wildman: Has the industry indicated when they would provide it to the committee and to the Legislature? Will it be available before the end of these hearings?
Mr Sampson: They have not given us a date by which it will be available.
Mr Wildman: Have they given a reason they haven't been able to give you the figures if the Canada-wide figures are available?
Mr Sampson: No, they haven't given us a reason.
Mr Wildman: I suspect it may have to do with timing. I wouldn't suggest that the committee is being held in the dark by the industry, but it seems rather odd that they can't give us the information we need.
Mr Tony Martin (Sault Ste Marie): I want to take this opportunity to thank everybody for coming to Sault Ste Marie and to welcome you to our wonderful city. I think it's important, when we look at legislation such as the package in front of us now, that you get out and about and see just exactly what people are dealing with in their everyday life and how that contributes to some of the complication that often occurs re paying for insurance, getting coverage etc. Certainly, as the deputant has said, because we use our vehicles so much in the north for everyday work and getting around, it is a really important issue.
I also want to congratulate the parliamentary assistant on talking his government into actually taking a piece of legislation out to the public even before it is fully drafted into a real bill. That's different from anything you've done so far as a government re the consultation process and hearing from people and actually getting a sense of what complications might accrue. It seems to me so far in my reading of the discussion -- because I haven't been with the committee -- that you've been learning quite a bit, that it's been quite an eye-opener for you. I hope your stance in front of all this will continue to be as open as it has been.
I know that at one point you had suggested that if the insurance industry did not come into line, you might consider the possibility of moving to public auto. The deputant here this morning suggested that as something you might consider too. Mr Bouliane, is there anything you can share with the parliamentary assistant re at what point does all of this become unsustainable and at what point should he actually be seriously considering the possibility of public auto insurance?
Mr Bouliane: I haven't got an answer for that, but given the present rate increase and the number of companies involved in the sale of automobile insurance -- the last time I talked with Brian Charlton, when he was minister, there were approximately 157 providers. When you have that number of companies vying for essentially the same pot, to maintain their economic viability, and not necessarily viability only but their profitability or whatever growth margin their owners would expect, you have to go back to the government and say, "Son of a gun, we have to increase our rates to meet our expectations." At some point, you have to draw the line. You have to say, "This is no longer a concept that is saleable in northern Ontario" -- and not just northern Ontario, all Ontario. What we need is something that is effective, fair and affordable, and I don't see anything in here that leads me to believe that this package would be. I'm glad that this is an ongoing process so that it can be tinkered with and perhaps made a little bit more fair or affordable.
As far as efficiency of delivery, if you have that number of companies involved in this type of situation, then just by the sheer number, it's inefficient. If you have the same number of people grabbing for some existing number of dollars --
The Chair: Thank you very much. If we could move to the government side.
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Mr Sampson: Thank you for your presentation. Thank you, Mr Martin, for the welcome to the Sault and for the opening comment about the process. I knew I was getting set up for something, though, when you brought that public auto question out. I dare say that, with our experience with workers' comp, the last thing we'll do is set up a public auto system.
I do want to bring the deputant's attention to a couple of items that are in the Insurance Bureau of Canada's report that actually had appended to it their summary of the cost of this product vis-à-vis the current system.
Mr Bouliane: I don't believe I have that one.
Mr Sampson: If you have a chance to take a look at it, you'll see a good driver of the rate increase going forward is something called medical rehabilitation expenses, which they are projecting year over year will go up 15% per annum as opposed to the 25% to 30% per annum now, although there are some companies that are effectively even in the existing 164 arrangement managing that number well below 15% and if you were to put those numbers in the actuarial equation you'll see rate projections very near cost-of-living increases going forward.
The second item I think I need to draw your attention to is that one of the fundamental costs of delivering a product such as auto insurance is called the loss cost, what you have to pay out on claims before management expenses and before that terrible word "profit."
Mr Wildman: It's not terrible. At 56% it's pretty good.
Mr Sampson: The loss cost for this particular product is approximately $120 to $150 less than the current system. I would put to you that in any competitive environment where the cost of the product is reduced that dramatically, there should through competition be a benefit to Ontario drivers, a lot of which will be up here in northern Ontario.
Mr Bouliane: Normally I might say it sounds good, but after seeing what the industry had to say about rate stability themselves, I have to question that.
Mr Sampson: Right, but their comment on rate stability was they said medical rehabilitation expenses will trend at a 15% per annum increase year over year. My point to you is, there are some companies right now that are managing below that number.
Mrs Margaret Marland (Mississauga South): I too want to thank Tony Martin for his gracious welcome and his comments, but particularly his welcome.
I've been travelling on committees for 11 years, Mr Bouliane, and I've never heard a deputation open with the kind of comments that you opened your presentation with this morning. You referred to the situation in Manitoba, Saskatchewan, Quebec and British Columbia in terms of government-run automobile insurance. I wonder if you'd like to tell this committee what the rate comparison is in those provinces compared to -- if you wish to comment on the last 10 years under two different governments and now a third government, the rate comparison in Ontario.
Mr Bouliane: I can tell you from personal experience, and this was after the previous government had rescinded their commitment to public automobile insurance, I called an insurance agency out in south Winnipeg to get a comparable coverage for my car. I explained to him why I was doing it, and at that time for both the vehicles I told him that I had -- years, models, number of miles driven -- he quoted me a price that was, if I remember correctly, about $450 lower than what my existing premium was in Ontario. That was from Winnipeg.
I also called a BC Autopac office out in Vancouver. Their rates were slightly higher but they were still approximately $200 less than what I was currently paying at that time. Now this goes back to about 1991. What changes there have been out there to this point, I don't know. Their rates, like everyone else's, have probably gone up, but how they are in respect to our rates I couldn't tell you at this point.
Mrs Marland: Did you get the rates for Quebec?
Mr Bouliane: No, I didn't call Quebec.
Mrs Marland: Or Saskatchewan?
Mr Bouliane: No, I just called Manitoba and British Columbia. I checked with Manitoba because they were the more recent entry into the public automobile insurance field, and I had experience with BC when my brother was stationed out there with the armed forces. We compared rates in years previous to that and his rates were always substantially lower than mine.
Mrs Marland: So your research into the matter of government automobile insurance involves two telephone calls, one referring to a situation in 1991 in British Columbia.
Mr Bouliane: Essentially, yes. Given that they had the information I provided them with, I felt that was a fair comparison. Whether their costs are partly subsidized by topping up by the government is another thing, and that I would not agree with. But I do think we can provide public automobile insurance here at a reasonable cost and not at a cost to the motoring public.
Mrs Marland: Could I ask you another question, because I don't wish to debate you about the fact that you quoted four provinces and you have information only on two of those. The other question I have for you is, why do you think that the previous government in Ontario, which campaigned on public automobile insurance, did not implement it in five years?
Mr Bouliane: In my conversations with the minister, he mentioned two reasons: One, he was afraid that the implementation would cause a drastic job loss within the greater Metro area. He quoted somewhere in the order of 13,000 possible jobs being lost.
Mrs Marland: Did he say how?
Mr Bouliane: No, he did not say how at that time. I think what he was referring to -- and I can only assume he was referring to that -- was if we went to a public automobile insurance plan, private carriers would have to either decrease their size levels or they would halve their staffing or they would have to shut down.
The other thing he mentioned was the threat of a suit under the free trade agreement. It wasn't the NAFTA at that point, it was the FTA. The implied threat was that if that government proceeded with publicly funded automobile insurance, then American-based companies could seek legal remedy under the free trade agreement. I believe the legal remedies would have permitted them to claim five years forward from the time of implementation and I believe with the legal fees and the cost to the government it was a very considerable sum they were talking about, in the billions of dollars.
The Chair: I would like to thank the Sault Ste Marie and District Labour Council for their presentation this morning. Thank you for coming.
Mr Bouliane: Thank you. We enjoyed having you here. It's kind of a novelty. For Mr Spina it's kind of a return to home turf I guess. This thing, coming to outlying areas to have committee meetings, can only be a benefit to the process.
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TRACEY ROETMAN
The Chair: We now welcome Tracey Roetman. We have 20 minutes together, more or less, and we're pleased to be hearing your presentation. Then perhaps we could fill any time remaining with questions.
Ms Tracey Roetman: Thank you for letting me be here. I have never spoken in front of a speaker before. The reason I chose to come and speak is because I've been and my family has been affected by an automobile accident. Actually, I didn't even know I was coming until Friday and I didn't receive a copy of the summary draft up until Sunday.
I'm 35 years old. I have four kids and a husband. This accident I've been in has affected my life and the lives of all the people around me. I'm thankful for this opportunity to contribute in what I hope is an informative point of view. I didn't even watch this on TV beforehand, so I'm not totally sure what the process is. Often in my journey through this I've been frustrated by the fact that I am a claim number and not a person. This gives me an opportunity not only to be a person but to speak for people and hopefully make a difference.
In the past 10 years the insurance law has been changed several times. Change is good and I believe it's necessary, and I'm impressed with this process. I think it's great that people get an opportunity to speak and to be heard. I often think that the insurance laws are made up by lawyers and insurance companies. If they're not made up by lawyers and insurance companies, they're greatly influenced by them.
In 1992 I was very naïve. I would love to remain innocent. I'm no longer innocent and I'm no longer naïve. I am told that my case is an exception and I don't believe it. What I've been through was a nightmare and what my family has been through has just been awful. I have also been entrusted to speak for a countless number of other people who can't speak for themselves. I've met these people in doctors' offices. I've met them in group meetings. They're trying to put their lives back together. They don't know where to turn, and all they want to know is where they can go to get well. You don't get an opportunity to see this side of it.
I'm all for punishing fraudulent claims, but I think the numbers we hear on fraudulent claims are nonsense. In the four years that I've been dealing with this I've only seen one person I would consider fraudulent. The media and the insurance industry has made that whole issue bigger than it is. To go through what you go through, it would take an incredibly stupid person to bring this on themselves.
My husband told me once when I was at a job and I was frustrated with some of the personnel on the job that in life there's a 5% moron ratio -- those aren't exactly the words he used -- and in most of life I have run into this 5%. It's usually not more than 5%, and I don't believe in this that it's a higher per cent than 5%. I know the money the insurance companies spend on checking out the truth will probably not change however you decide to change the insurance legislation, and I know that in most cases the truth will come out. There'll be a neighbour who wants to tell the truth; there'll be a family member who sees the truth and wants to tell it, and then the dollars they spend on investigating these things -- it'll just come out if there's a fraudulent case, and I'm all for it. I think the fraudulent cases should be prosecuted to the maximum.
My life before the accident: I was an active mother. I went camping with my kids. I was involved in parent groups. I was on boards of directors. I did sports with my kids. I went to school meetings. I did volunteer work at the school a couple of days a week. My house was always full of kids and people. As a friend, I had dinner parties. We went dancing. I was always organizing stuff. As a wife, I worked with my husband in his business. He had a construction business. Our life was pretty much the all-American life.
As a homemaker, I probably did what most women do. I did everything from split wood to pour cement in the garage; when they'd come to do the garage, I got involved in that. I was a great cook. I did what women do. I did painting. I did wallpapering. As a neighbour and citizen, I canvassed for Alzheimer's and the cancer society. I've got a senior who lives next door to me; I cut his grass. On the other side there's a guy who isn't there much; I cut his grass.
My life now: Right now, I'm over my limit; I'm allowed to be up 20 minutes a day. The reason I came and agreed to speak here is because I think what I have to say needs to be said. At 8 am a Red Cross worker comes in and she gets me out of bed and she takes me to a shower, which is a big plus because for three years now they've been doing bed baths. At 9 am a homemaker arrives and spends the next three hours taking care of my house. At 12 noon the Red Cross attendant comes back and gets me back into the bathroom and puts me back to bed and makes me something for lunch. At 3:30 she comes and, if I'm up to it at all, she lifts me into the whirlpool and I get some physiotherapy. At 4:30 my kids come home and all the energy I have left of the day goes from getting from 4:30 to 8:30, when they go to bed.
You can tell I'm emotional about it. At 8:30, when my two younger ones go to bed, my daughter or my husband gets me into the bathroom. I do my toiletry, and that's it, I'm done. I spend my life in my bed.
My first problem -- and I've only had a day to look at this -- is with the word "catastrophic." I don't know what "catastrophic" means. Webster's dictionary defines it as complete destruction. I need to know what's meant by "catastrophic" and I'd really like to know who came up with this word. It's irresponsible to leave this word undefined. It would affect the lives of thousands of Canadians.
Easter Seals defines "handicap" as everything that affects mobility, usually neurological misfunction. Group health defines it as not being able to do normal duties or occupation. The March of Dimes defines it as your life is hindered to a disadvantage by a mental or physical problem which hinders life tasks. Disability allowance leaves it up to the individual's physicians to assess and define. The general hospital defines it as a restriction or lack, resolving from impairment, of ability to perform activity in a manner where the range is considered normal for a human being.
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To qualify for long-term care, you need to be able to turn in bed, position or transfer. You need assistance in bathing, showering, shaving, personal grooming, dressing and undressing. You need assistance in using the toilet, assistance in breathing, assistance in eating, assistance in meal preparation, dish washing or household tasks, assistance in essential communication.
As we can see from the above definitions, "catastrophic" needs to be defined. The reason I know this information is because I have to deal directly with these organizations. I fall under different legislation. I fall under legislation where if it's deemed medical, they are supposed to pay up front and fight later. The "they" is the insurance industry. It is very unfair that the government of Ontario is paying for my health care, especially when the law states otherwise. Even when it is in black and white, my insurer refuses to obey the law. You need to be very clear in defining "catastrophic." From what I understand, I wouldn't be considered catastrophic.
The next problem I have is with the $75,000 basic benefits. I don't think you have any idea how fast $75,000 can be eaten up. It cost $10,000 each time they flew me to Toronto by air ambulance; that was four trips. It cost $7,000 for my hospital bed, $350 for my walker, $2,500 for my wheelchair, $4,500 for my power chair, $7,000 for a lift, $20,000 for a bathroom, $5,000 for a ramp, and the list just goes on and on and on. We haven't touched nursing care, which is $33 an hour. We haven't touched the $3,000 it costs me to be in the hospital in Toronto. I don't think you understand how expensive this can be.
The other thing that I would like to say at this point is that I fall under the legislation where they were supposed to pay now and fight later. They haven't paid for this stuff. We've had to borrow money and beg for health care. You really need to be careful when you're defining this. The other question I have, which will lead me into the next, is, does that $75,000 include DAC and does it include rehabilitation? Because if it does, they can eat up $75,000 like nothing.
DAC and rehabilitation consultant: What I want to say is, wake up and smell the coffee. I'm not here to offend anybody. I don't think we need them. If they want to save money in the insurance company, they can be eliminated. They're not impartial. Ten years ago you didn't hear of them. Where did they come from and who pays them?
Can I think of a better idea? Yes, I can think of a lot of better ideas. The Ontario compensation board could be doing these assessments. The VON nurses, who have a high rate of compensation cases and they don't know what to do with their nurses, could be going in and doing these assessments. They would be independent. The same money, if you're going to pay $7,000 for an assessment by a DAC or by a doctor in Toronto, could be used and given to the compensation board. The same money that they're spending for rehabilitation people to come in and supposedly give an unbiased opinion, you could take the nurses from the VON and they could be making these assessments, and fairly, and we would be giving them money.
The other suggestion I have is that the mediator, who you have to go to lots, can make some of these decisions. If the insurance company and the health caregivers of the insured gave seven names to the mediator, and you want an independent medical, it could be done that way. It could be done through a mediator, where they pay $7,000. I don't have $7,000 to come up with for another independent medical. And it's not non-biased.
All my health caregivers who are being paid nothing can have all their opinions, and all of a sudden they don't mean anything, the people who have to take care of me. These people who do these medicals, they never have another thing to do with you. They're not there to see you through when you have a problem with what's going on. You can't go back to them and say, "Hey, this isn't working."
I don't think OHIP should be paying for my doctors' visits, my home care, my air ambulance trips to Toronto, my chair. I don't think OHIP should be paying for -- it's just so much -- my VON. I think this should fall back on the insurer; I don't think it's fair that the Ontario taxpayer has to pay for it.
The other problem that I have, that I've read through, is the level of benefits. When it was typed up it was 85% and they put "of gross." I thought, "That's a typo," but it's not a typo; 85% of gross is not fair. In my case, what if I stayed home with my kids, what if I work for my husband, like I did? How can you come up with this 85%? What if I was in the process of going back to school or if I was in university? What if I just started out in business? You can't tell me that I wouldn't have gone to the top in five years. You can't tell me that my business wouldn't have doubled in five years. I don't think it's a responsible call to say 85% of the gross. We need to consider economic advantage and competitive advantage.
Because my husband was in business, I can think of a lot of other businesses where it's just the family running it, where wives put in hours. If the main person in that business -- and in my case I was the back; when I went, the business dissolved. But in other businesses that I know of, and I know lots of them -- I can think of a plumbing group, I can think of another guy who was doing construction. If he's in a car accident, his business no longer is. In 15 years my husband never had to advertise after the first year because everything came from word of mouth. You can't say where we would be at in another 15 years. At that time we were able to take care of ourselves. I could afford the clothes that I'm wearing, which I now can't. Now I'm dependent on a disability pension, which is glorified welfare. The Ontario taxpayers are taking care of me, and I don't think this 85% is fair.
Non-economic loss and pain and suffering: I looked at that and my suggestion is, if somebody is injured $20,000 worth, which I don't know what that is -- they get migraine headaches, they can't think -- I think they should be awarded the $5,000 and I think the $15,000 they cannot claim should go either into OHIP or the injured head association, donated to local schools. I think there's a better way of doing that and I don't think the person who was injured would feel bad knowing that that $15,000 went to something positive.
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My closing: I've heard it said that the insurance companies want to be called the gatekeepers, that if we just trust them, they'll take care of everything. I'm really trying not to be cynical, but this would be a serious error. They can't be trusted to take care of everything. We can't leave things in their hands. The Ontario citizens deserve better.
In my case, it's been four years and it's still ongoing. I'm hoping there will be some justice at the end of this. I'm hoping that by talking about making new laws for the insurance industry, people listen and really look at it. The person who spoke before me: I don't know all the ins and outs of it, but I don't think that government-run insurance is a bad idea. If you people had any idea what it's like to go up against these people, it would be a whole lot easier to just have it cut and dried, because they're going to argue every angle of it, every word. They want to know about my births when I had my kids. You just really don't have any idea and it really needs some consideration. If you have any questions, I can probably tell you lots.
The Chair: Thank you very much for your very passionate presentation. It means a great deal to us.
Mr Wildman: Ms Roetman, on behalf of the committee, I thank you very much for coming and making this presentation. We certainly felt the emotion with which you presented your views and your experience.
I want to ask one specific question in relation to your presentation, and that is on the disability assessment consultants. Could you give us some idea of the experience you've had with these consultants, how often you've been assessed, who appointed the consultants and what the results were of the examinations and discussions you've had with the consultants.
Ms Roetman: Oh, I'm really glad you asked that question. They can send you for a consultant -- if I lose track, you'll have to get me back on -- and they can send you as often as they deem necessary. It can be every couple of months, it can be every other week; as long as they feel it's necessary, they can send you for a consultant. The rest of the question was?
Mr Wildman: How often you've actually been assessed.
Ms Roetman: I've been for at least 20 of them. The last two I had, the people they sent me to to do the consulting, said: "You're killing this lady. Don't send her for any more. We don't see any need." You know what? They want me to do more.
Mr Wildman: When you say "they," was it your physicians who said that?
Ms Roetman: No. My physicians fought it tooth and nail, but I figured the best thing to do would be what was right. My personal physicians didn't think it was a good idea or would serve any purpose or would contribute any more to my case. If you don't go for these, you're considered non-cooperative. They can do as many as they see right -- I'm sorry, but I'm going to go into the last one. I wasn't going to do this.
I've been on bed rest for over a year, and they told me for at least another year before I could do anything. The last time they decided to send me for an assessment, they wrote me a letter and said, "You have to go for an assessment." They wanted me to bring running shoes and sweatpants. I'm on bed rest. It's just outrageous. They also state that you can't bring a tape recorder, you can't bring video cameras, and I couldn't bring a caregiver.
They were going to come and get me by air ambulance at my house with a nurse and take me to Toronto and do these assessments for three days, which all of my caregivers, doctors, nurses said was just outrageous, and fly me back by air ambulance and put me in the bed. I had said: "I will be cooperative if you let me take my nurse with me. I will go for this. I think it's outrageous. I think it's going to set me back. I think some of the things you're asking me to do are right off the wall. If you had read any of what the doctor's report said, you'd know that I'm not capable of this, but I will do this to be cooperative."
My doctors sent letters, my therapist sent letters, everybody sent letters to these people and they didn't respond. This was three weeks beforehand. Three days beforehand, I said, "You know, I can't live like this." There was no response. It was quiet. I had called my lawyer and I said would you send them a fax and say if they can't send my caregiver with me, I will not go. Never heard nothing.
The day I was supposed to go, an ambulance pulled into my drive, came into my house and said, "We're here to take Mrs Roetman to Toronto." My husband and my kids were there, they were upset. My husband called the lady in Toronto and said, "Did you not get any of the doctors' letters?" They said, "We don't have to reply to that." He said, "Did you not get the lawyer's letter?" "We don't have to respond to that; if your wife is not on that air ambulance I want a cheque from you tomorrow for $10,000." My nurse wasn't even around. My kids were hysterical. I couldn't even talk. My homemaker was just sobbing. Next, air ambulance arrives at my house: "We're here to take Mrs Roetman to Toronto."
My husband -- they deem my husband as non-cooperative and maybe a little bit crazy, but from all he's been through that could be true -- argued with these people for an hour that they couldn't do this, that you just can't come in and take me, that you wouldn't send a kid to Toronto without a caregiver. At one point they had even hired her to go with me but changed their mind. You really don't have any idea of what goes on.
Mr Wildman: So did you eventually go?
Ms Roetman: I said I would go to Toronto -- they sent another letter -- if they could send my caregiver with me. I have never heard a response.
Mr Wildman: But they say they don't need to respond.
Ms Roetman: Yes, I know.
Mrs Marland: Tracey, on your effort, your physical and psychological effort to be here today, we cannot express adequately our appreciation for the fact that you have done this. I'm sitting here frankly wanting you to put on the record the name of your insurance company, but I suppose, as a legislator, it mightn't be --
Ms Roetman: I'll tell you this, they're the richest insurance company in Canada and they have a commercial on right now about a snake, where you can trust these people, you're in their hands, they're the "good hands" people. They also have a new TV show --
Mr Crozier: Traders.
Ms Roetman: Traders, that's it, which seems to be very appropriate.
If you really want to know, I'll tell you.
Mrs Marland: I'm not asking you, but if you feel you want to tell us, it's up to you.
Mr Joseph Spina (Brampton North): We know who it is.
Mrs Marland: Apparently we do know who it is. We spent all last week in Toronto, and I think the thing that upsets me -- up to now the thing that has upset me about what's going on in automobile insurance in Ontario has been the fact that my constituents, and you know this through your own families, are complaining about the insurance rates, the money side of it.
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But what I've learned in the last week and again yesterday is that, on the human side, it's devastating how the staff who work for these companies obviously have no training in how to deal with people in a humane way. One of the things that came out time and time again last week in Toronto was simply three words: "We aren't believed." In some of those cases, they were talking about head injuries, which are difficult for an untrained person to see. So you'd have to question why untrained people are involved. In your case, you've got so many manifestations of the results of your accident that I think that you're marvellous in terms of you must be very strong and very capable to still be able to cope.
Ms Roetman: It's the grace of God. That's all it is, the grace of God, because it is way beyond me.
Mrs Marland: Thank goodness you have that. Is there anything you could tell us -- is it that these people have to be better trained? What message can we take to the insurance industry?
Ms Roetman: There are a few things. One, I don't know if it's better training, because I know of a person who was at one of their meetings; it was put on by the insurance company but there were physical therapists there and there was a bunch of people. The insurance company, the mentality you're dealing with, you see one side of it. The insurance company was there, and they were talking about the DAC. They literally sat there and they quoted, "DAC is my friend, because we pay for them and they say what we want."
I think there's a little bit of naïveté in that you need to involve outside parties. That's why I suggested VON. I think 90% of the people that have minor injuries, if you give them one year without being involved with the insurance company and made a law, the majority of them would get better. They wouldn't be bombarded two days after with phone calls, with people showing up at their house with assessments. If you left them alone for one year, I think the majority of them would get better, if you made that restriction.
As for the assessments, I think you need to say there can only be two a year or one a year. Compensation: How many do they have? I know somebody who is on compensation and it's been twice in eight years. There have to be limitations. You need to involve people who are not getting paid for it -- not directly anyway; whether it goes to OHIP and then it gets paid back -- who are independent and can make these assessments. Until you separate that -- if my friend here who is a nurse is going to assess somebody and she's not getting paid by the insurance company -- that does taint things. These people do feel like they're not being heard.
Mr Sampson: I thank you for coming today. I would suggest that you forward the comments you've given us here with respect to your history -- maybe you can get an extract from Hansard -- to the market contact section of the Ontario Insurance Commission, where you can mention the insurance company's name, and ask them to inquire into that practice, because that's what they're set up to do, to deal with those items. They record those and then they deal with them. They deal with items where it's either apparent or implied that there is some practice that's not appropriate. I think it would be worthwhile for you to do that, to make that mentioned.
Ms Roetman: I've sent them a letter. I haven't got a response yet.
Mr Sampson: When did you send the letter?
Ms Roetman: It went out in the last couple of weeks.
The Chair: We'll make sure you get a copy of Hansard for this presentation.
Mr Crozier: Tracey, if you're comfortable with it, what was the nature of the accident and the extent of your injury?
Ms Roetman: I have no problem with it. When you've been bed-bathed for two years with people coming and going, you can ask me whatever you want.
The nature of my accident? I was picking up my kids from swimming. I had four kids and my sister in my car. I had stopped to make a left-hand turn and I was waiting for traffic to clear. A lady in a Cadillac, who was talking to her kids and had to be speeding, hit our car from behind, my car, a big car -- I was in an LTD; it wasn't a little car -- and drove the car 70 feet forward and broke the seat I was in right off the hinges.
I have nerve damage to my left leg; it's non-functional. I have a lot of lower-back pain. I do have muscle spasms in my body, and since we're not in court I can use the word "fibromyalgia." Some people don't like that word, but basically it means muscle spasms.
Mr Wildman: You ache all over.
Ms Roetman: Oh, I'm in constant pain. The nerve damage to my leg and my lower back is just -- you can't comprehend it.
Ms Castrilli: Mrs Roetman, thank you for coming in. I think all of us here are very moved by your story. You've painted a very poignant picture of what it's like to be at the other end in this issue. I'd like to touch for a minute on the issue of catastrophic. We've had a number of deputations come to us and say what should or shouldn't be catastrophic and how it should be handled, and I wonder from a victim's perspective what you think is catastrophic and what should be the consequences.
Ms Roetman: I know of a nurse who had a head injury. She works with the group health here. She has to take a phone with her, because she can't find her appointments. She literally has to call and say, "Where am I going and what am I doing?" because she can't remember that. Her memory has been affected. To her, that's catastrophic. The fact that I can't get out of my bed and be a productive wife or mother, to me, that's catastrophic. There are just so many. If you were a brain surgeon and you could still be a doctor but couldn't do brain surgery, that would be catastrophic.
If you don't define it, I think you should leave it up to one or several physicians to define, because what's going to happen is the Ontario government is going to end up paying again, for disability pensions, for -- they have no problem with defining "handicapped" or "immobility." We literally have to put it in black and white, because I think the gatekeepers are going to have a ball with it, unless it's really defined clearly.
Ms Castrilli: Who would determine that?
Ms Roetman: Like I said, this overwhelms me too, because the Ontario government will trust my physicians to assess it but the insurance company won't. But if you're not going to trust them to say, pick four physicians to decide.
Ms Castrilli: Four physicians?
Ms Roetman: Well, you have to get four different opinions that decide whether this is catastrophic or not.
Ms Castrilli: And you'd be comfortable with that?
Ms Roetman: I would be comfortable with that.
Ms Castrilli: It certainly sounds to me, from the kind of day you have and the way your productive life has been curtailed, you're pretty close to catastrophic.
Ms Roetman: Yes, but would my insurance company fight that?
The Chair: Thank you very much. We've gone well over time on this presentation, but this speaks of the seriousness of it.
Mr Wildman: Chair, I don't want to prolong it, but you are receiving a provincial disability pension?
Ms Roetman: I think it's by the city. It's glorified welfare. I don't know what it is.
Mr Wildman: In other words, you're getting social assistance?
Ms Roetman: Yes.
Mr Wildman: Okay.
Ms Roetman: But it's deemed a disability.
Mr Wildman: And they took your physician's assessment of your condition to determine whether or not you qualify?
Ms Roetman: Yes. But the same four, March of Dimes, VON, all that stuff.
The Chair: Thank you, Tracey, for coming in today.
Ms Roetman: Thank you. I hope that this makes a difference.
The Chair: It certainly does.
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SAULT AND DISTRICT SOCIAL JUSTICE COALITION
The Chair: We now welcome the Sault and District Social Justice Coalition, Gail Broad. Welcome
Ms Gail Broad: Okay. I'm going to be brief and I'm not going to stick completely to the written notes. I'll try to make my presentation a bit shorter than the written notes, but I think the written copy has been distributed to everyone, so you'll have that to refer to later.
In the comments that I'm going to make, I'll make reference to just a couple of statistics. If you are interested in pursuing the source or taking a look at the information, basically, most of the information that I will be mentioning about northern Ontario comes from the district health council study, which was conducted by Ernst and Young in 1993, I believe, for a health systems review. It's basically just a summary of the demographics of Algoma district.
I just want to begin by telling you the Sault and District Social Justice Coalition is part of the Ontario Social Justice Coalition network. We belong to that and we also belong to the National Anti-Poverty Organization, NAPO. We are composed of approximately 125 people locally from both Sault Ste Marie proper and the Algoma district, and we represent a fairly wide range of individuals. Some of us have interests in church organizations or labour organizations. Approximately 50% of the coalition are themselves low-income people and thus have a strong interest in social justice.
I'd like to address first of all some conditions in northern Ontario which I think make auto insurance a particularly important factor in the lives of many of us who have chosen to live in the north.
Northern Ontario is a fairly sparsely populated area, with some urban centres, such as Sault Ste Marie. Unfortunately, this committee is only in Sault Ste Marie. I think it would be very helpful if you spent some time outside of Sault Ste Marie travelling to some very small towns and villages to see what it is like to live in northern Ontario for most of us.
Most of us do not have access to any form of public transportation whatsoever. Most of us do not live on Greyhound routes or any other means of travel, and therefore cars are particularly important to us. It is our only way of accessing medical services, social services, grocery stores and every other type of shopping that we need to do. So in fact, for us, cars are essential. They aren't a luxury item, as they might be in a larger urban centre. Therefore, the effects of a car accident have dramatic implications for a family, as Mrs Roetman mentioned earlier, not only in terms of their ability to continue on with their day-to-day life but also in terms of their ability just to travel to medical appointments and the costs of travelling to medical appointments and the costs of participating in the kinds of assessments that are currently required.
The other thing about northern Ontario that I think it's very important for you to recognize is the types of employment that are available to people in northern Ontario. Northern Ontario is primarily based on primary industry. Logging, some tourism and mining are the main industries in northern Ontario, and therefore the ability to perform heavy labouring type of duties is a very important part of living in the north and the inability to participate in the construction or logging or mining industry means a very reduced income for people.
If you look at northern Ontario, in the demographics of northern Ontario you will discover that we have a much higher rate of injuries than southern Ontario, accident injuries, not only car accidents but also work-related injuries, and much lower educational levels, and of course our employment, as I stated earlier, is much more in the primary industries, where an inability to work at a heavy labouring job often means an inability to find any type of employment and an obligation to depend on social assistance for income. Because of I guess the demographics of northern Ontario, it's therefore, as I said earlier, very important that people be able to have a car, operate a car and participate in the workforce in that way.
Although our presentation is very brief, I'm sure that you're hearing from lots of other people. Our presentation is only going to address two or three of the changes that are being proposed.
The first one is the benefit rate reduction. Again, if you look at the kind of employment that many people in the north have, the benefit rate reduction is a vital concern to people in the north.
People in the north tend to be employed in seasonal employment very often. Logging is seasonal employment, as is the construction industry, as is the tourist industry. Therefore, people in northern Ontario may have very high income levels for a short period of time throughout the year. If you're logging, it is not at all unusual to earn $4,000 a month or $5,000 a month, but you might only earn that for five months out of the year. While you're earning it, it seems like you've got a lot of money coming in, but it's for a very brief period of time. Most people who work in the logging industry also have some other types of part-time work in the summertime, or they may have small farms to help subsidize that income. However, their primary income comes from a very short period of employment.
Also, most people employed within the logging industry do not quality for something like unemployment insurance benefits, as an example, because they are self-employed within that industry.
Therefore, the proposed reduction, and the cap that is being proposed on income, is going to have severe effects on that group of people. If you're earning $1,000 a week every week of the year, that's one thing. However, if you are earning $1,000 a week for four months out of the year, that obviously has a very significant impact, and the reduction of it will be very significant for that group of people.
The rate reduction from 90% to 85% is another major issue for people in the north, again for many of the same reasons. If you look at the wages in northern Ontario, you find that more people work part-time or work at low incomes than the rest of the province. So, again, reducing it by another 5% is going to have severe consequences for many people. As again was clearly articulated by the person presenting before me, the increased costs to a family of transporting an injured member from outside an urban centre in for doctors' appointments, having the increased cost of care and so on, does not allow people the luxury of accommodating a further 5% reduction in benefits, particularly since this doesn't seem to be going to result in any reduction in insurance premiums. If there was going to be a significant reduction in costs for people for insurance, it might be offset, but there certainly doesn't seem to be any appearance at the moment that this will happen.
The final item that I wanted to bring to your attention, and I think this was reflected very poignantly by the previous speaker, is based on fraudulent claims. According to the summary of the changes, there is to be an increased diligence in prosecuting fraudulent claims. Now, on the basis of this, most of us would say: "Well, this is as it should be. We want to eliminate fraud." However, many of the things that the previous speaker has gone through are simply because the insurance company does not believe she is as injured as she obviously is. According to the insurance company, they are trying to eliminate fraud by being very diligent in their assessment process of the victims. However, you can see the results of that on the victim of accidents. It is financially damaging. It is incredibly emotionally damaging for the individual and for their families.
In my work outside of the social justice coalition, I've had an opportunity to be involved with a number of people who have been investigated for fraudulent claims, not with regard to insurance but with regard to other issues, and these investigations are incredibly intrusive into the person's life. They examine all kinds of things that are obviously not related to the injury for which compensation is being claimed. One of the comments that the previous speaker mentioned was how they wanted to know the details of the birth of her children. Now, what relevance does that possibly have to the claim she has made for benefits resulting from her car accident? Obviously nothing, and yet all of a sudden these become important issues.
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The people who are doing the assessments have no relationship to the victim. They have not examined her on a day-to-day basis. Frequently, individuals I have been in contact with in the past are sent to Sudbury for an assessment, which is approximately a three-and-a-half-hour drive from Sault Ste Marie. If you are a back-injured or a neck-injured person, travelling that distance in a car is very uncomfortable, to say the least. The appointments are frequently made at 9 o'clock in the morning, therefore the person has to take care of his accommodations overnight. Sometimes they are reimbursed for these things weeks or months after the assessment has taken place. People do not necessarily have an extra $500 or so to make a trip to Sudbury and stay in a hotel overnight and pay for their food and their child care and so on, and perhaps have to take an attendant or a family member with them to help them during the course of this for a two-hour assessment, where they look at X-rays that have already been looked at by three specialists and make a pronouncement on whether the person is disabled or not or the extent of their disablement.
The assessments are at the very least suspect, and I think at the worst are incredibly damaging to people's lives. Often what happens in the process is that you go along with whatever assessment it is because if you don't, you are considered to be non-cooperative, and if you don't cooperate, your benefits are cancelled. Eventually, they might be restored -- sometimes two years down the road benefits are restored -- but in the meantime, how do you survive?
Those are the issues that the social justice coalition wants to present before the committee today. If you have any questions, I'll be happy to answer them. Thank you for the opportunity to be here.
Mr Spina: Gail, thanks for the presentation. Looking at the comments you've made in your presentation regarding the caps, I can understand your concern in that regard. We're trying to grapple with two issues here. One is we have a number of innocent victims, like Tracey Roetman who has been severely injured. Under Bill 164 she's entitled to sue for pain and suffering, perhaps, but that's the extent of it. Under the proposals now we're trying to reintroduce some tort where not only could she sue for pain and suffering but also some other loss of income or income replacement to a certain degree.
The thing that we're grappling with is that higher costs to the insurance company with larger claims could potentially drive premiums up. On the other hand, we want to be concerned and essentially I guess have some social justice for the victims where they are able to get compensation for more than just pain and suffering.
I'm trying to understand, I correct in assuming that you're more or less in support of the additional recourse that the victim would have as a social justice concept?
Ms Broad: I think if you take a look at insurance claims, there are two things that happen under a tort system. One is that a great deal of the dollars allocated wind up being allocated towards lawyers, and some of my friends in the law profession wouldn't thank me for saying that, but I think that the presentation made by ARCH, if I recall correctly, pointed out the exact dollar figures. I think it was something like $400 million from the insurance companies and $300 million from the accident victim; that was the ratio of the way that it's divided up.
Out of that, I think you'll find that the percentage that goes to victims from a tort system is quite small. There are a number of changes that need to be made to the current status in order to improve money flowing to victims, but I don't think that reintroducing the tort system is necessarily the way to go.
Ms Castrilli: Thank you very much for coming here. If I could just clarify, the point that ARCH made before us was that those figures of $400 million and $300 million were pre-1989, so prior to the insurance systems that have been brought in. I don't think there is a tally of the exact figures, and you should probably know that the Canadian Bar Association has taken the position that if contingency fees come in, for instance, that won't have any kind of impact on rates.
I want to focus on a couple of things that you said. Your second point is that there is a rate reduction from 90% to 85% of gross earnings. In fact, that's being proposed as 85% of net earnings. That is a change.
Ms Broad: So it's from 90% of gross to 85% of net?
Ms Castrilli: That's right.
Ms Broad: So it's even less.
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Ms Castrilli: That is to a maximum figure of $400 a week. That may change your views or it may not, but I wondered whether you were aware that the insurance companies that appeared before us said that for those decreased benefits that we will be having under the proposed legislation, they in fact expect to charge higher rates, something in the nature of anywhere from 7% to 8% to as much as 12% a year over the next four or five years. I wondered if you might comment on what you think that will do for people in the north when you're paying higher rates and you have lower benefits.
Ms Broad: That was the point I was trying to make earlier. Because many people in northern Ontario do have high earning rates for a short part of the year, for a portion of the year, by capping those to $400 a week, that's going to mean they will not have that money they would normally have to help subsidize them for the remainder of the year. Additionally, if it's 85% of net earnings as opposed to 85% of gross earnings, then it's going to obviously be even less income coming in, so it's going to make it only more difficult, not easier.
The other issue with regard to the increase in insurance rates -- already in my workplace I have seen a number of people, particularly people who had been employed in jobs such as taxi driving, delivery, services, that kind of thing, who are unable to pay the cost of insurance in order to keep that job. A 12% increase is going to mean that more people who are at the bottom end -- obviously, driving delivery is an entry-level position in most places. They make minimum wage. If you increase insurance costs, it's only going to make it more difficult for them, if not impossible, to keep that job.
Ms Castrilli: Do you think people in general will accept those increases?
The Vice-Chair (Mr Tim Hudak): To the third party.
Ms Castrilli: You can answer it there.
Mr Martin: I just want to thank you, as everybody else has said, for coming forward today. I think it's important that people like yourself and Tracey come before this committee because there's a lot of educating that needs to be done around the whole question of insurance and who it works for and who it doesn't.
The story that Tracey told earlier is one I've heard a number of times in my office over the last six years as people who have become so frustrated with trying to work their way through a system that's supposed to be working for them, if they get hurt in an accident, and in fact doesn't.
You're spelling out some of the concerns of those who are at the lower end of the income scale in this community, and I'm sure across the province, and the difficulty they're having now with a system that's supposed to be simpler and more straightforward. To introduce a newer system that will put greater pressure on victims to prove that they are in fact hurt as much as they are and to get the benefits they need in order to keep body and soul together as they get better and get back into the workforce and become gainfully involved again is something that I'm hoping Mr Sampson and his colleagues are listening to very loudly and clearly.
Certainly, tort and the need to involve oneself with lawyers in order to achieve some justice is one that those who are at the lower end of the income scale have a very difficult time accessing unless they have access to a legal clinic or to legal aid, which is now under review by this government.
Tracey Roetman mentioned needing a lawyer to help her through this process. The new system that is being proposed here is suggesting that we allow more tort, that people be allowed to buy more insurance as well in order to cover some of the areas that aren't going to be covered under this system.
How accessible is the legal system going to be to those whom you speak of very eloquently here this morning re this piece of legislation?
Ms Broad: To give you an example, in Chapleau, which is a community located on the border between Algoma and Sudbury districts, there are no legal services at all. In order for them to access a lawyer, they have to travel to Sudbury, which is over two hours' drive away, or Wawa, which is an hour and a half away but is in a different court district. You can get information from a lawyer there but you can't initiate any court action from that location. So basically, Sudbury is where you're going to have to go.
For a person who is living on a low income, knowing that he might be able to get benefits at the end of a two- or three- or four-year process is really not very helpful. People who are living on a low income have to worry about this month's rent, not next year's and not somewhere down the road. You're concerned about making your payments today, about feeding your family today, and if you do not have any income in the meantime or your income is severely reduced and you have to wait, you're talking about again putting people back on to social assistance. I think this government particularly has already decided that most people should be off social assistance and have initiated a number of actions to indicate to people on social assistance that they should be seeking some other means of support.
The two things don't go together. If people are going to be forced to rely on social assistance, then on social assistance they have to have a decent level of income. If you want them off of social assistance, then you have to ensure that other things are in place to meet their day-to-day needs.
The Vice-Chair: Ms Broad, on behalf of the standing committee, thank you very much for your presentation.
ARTHUR DAY
The Vice-Chair: Our next deputation is Dawson and Keenan Insurance Ltd; Mr Arthur Day. Welcome.
Mr Arthur Day: My name is Arthur Day. I am a retired insurance broker working for Dawson and Keenan, or I was working for Dawson and Keenan before I decided to retire. I've spent the last 35 years arranging insurance for the citizens of this city, across the desk, eyeball to eyeball. I certainly support and understand the concerns of the previous two speakers.
I just work the system as given to us by the insurance companies, and I can tell you that I am dismayed by yet another change. I represent no other association or no other person other than myself. I experience frustration at the attempts of our elected representatives to keep on trying to fix this system. I don't think it's broken. It just needs amendments in the way that Revenue Canada from time to time issues interpretation bulletins. I understand now, talking, that this Bill 164 cannot be amended. It is enshrined in legislation. The only way it can be changed is by a new act.
I would just like to have your indulgence for a little while and go through a standard automobile insurance policy. It consists of eight different types of coverage. I've picked a 1992 Chevrolet driven by a mature person -- that is, a person over 25 years of age -- married, driving to and from work. The first portion then would be the liability. That's what you buy to cover you for the threshold coverage. The second would be property damage where you may drive your vehicle into a house or you hit an unlicensed vehicle such as a tractor. The third one is accident benefits, and that's really what we're here for today. And there are four others. If you break these premiums down, you will see that almost 50% of the cost of this particular insurance policy is based upon property damage. I don't know whether this subject has been mentioned during these hearings.
I believe that this insurance policy is the most luxurious package sold in North America and, for the coverages that are given, I think it's a fair deal because you have cars valued all the way up to $50,000, $1 million liability, all kinds of benefits. I think $1,000 for what this policy provides is a fair deal.
If we are going to achieve or attempt to achieve any kind of premium savings in the future, we've got to look at both sections of the policy: the property damage section and the bodily injury section.
The price of a new automobile is getting to be out of the reach of many, many people. In fact, I believe in the year 1995 was the least number of new cars sold for the past 20 years.
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So here we have all kinds of worn-out old wrecks on the road, and I understand that the average age of a car on the highways in Ontario is somewhere around about 8 to 10 years. Most insurers have a loose rule asking for safety inspections on vehicles that reach 10 years, but it is an extremely competitive industry. In our office we're losing business on a regular basis every day and we're gaining business. There is a constant runaround. I liken it to a bathtub with the tap running and the plug out at the bottom. It's always going down the drain and it's always coming into the tap.
What I would like to do is recommend that we follow some of the principles of what is done in England or the United Kingdom and, now I find out, in Germany. All vehicles that exceed an age of three years are required to have a safety inspection before licence renewal. The insurance industry will not do it by itself because it's too competitive, but I do believe that the government should slowly introduce such a system of requiring safety inspections. I have no statistics to prove what I'm saying, but it might be of interest to inquire of the licensing authorities in Germany and the UK to see if they have any statistics that might be of use to the licensing authorities in Ontario -- for that matter, in Canada.
There are many more cars on the road in Britain than here in Ontario, and Britain will fit into Ontario four times. So why did they do that over there? Maybe they have a point. As far as commercial vehicles are concerned in Ontario, there are strict rules. We may have read in the paper of some of the vehicles being held together with string and baling wire. I don't want to bore you with reading out what I have written, except to say that commercial vehicles are very strictly controlled as far as the safety of the vehicle itself is concerned.
Driving habits are atrocious. In this city, on the weekend of February 2 to 4 there were 47 police-reported accidents. I'm pretty sure that the health providers will be having lots of income and a field day from that weekend.
I urge government to get into the business of vehicle safety and promote safe driving habits. It would be politically neutral, and who could dare complain or challenge any government or any political party about measures to save lives and possibly contain rising insurance premiums?
The ministry keeps track of driving infractions for three years. Two at-fault accidents which could easily be computerized into the system should require a new licence or a retest of licence and a driver training program.
Turning to the accident benefits section, the premium that I have described represents just 32% of the premium you pay. We have workers' compensation, unemployment insurance, private health plans and auto accident benefits all competing with one another all over the place to provide us with protection. There is duplication everywhere. A lot of people -- professionals who have an advantage -- buy group insurance which would protect them for all their automobile accidents, and they don't need to use their automobile accident benefits because they already have sufficient private insurance. So what I'm saying is, automobile accident benefits coverage should be scaled down to those people who particularly need the coverage and then they can buy an add-on to protect them, the people who need it, but the people who do not need it should not have to pay for it because that is an added income tax.
With computerization there is the ability to track drivers more accurately. There needs to be more communication between insurers, the ministry that supplies drivers' licences, the people who license vehicles and the police.
We often see a conviction for failure to produce an insurance certificate when the truth is, there's no insurance in force. It happens on a regular basis.
It is my suggestion that the new legislation set fees for rehab and assessments as health care providers seem to charge what they can get away with, what the traffic will bear. Also, I would like to have some kind of time limit on the number of visits. This doesn't probably go very well with the two previous speakers, but I would like to put a limit on the amount you can receive for pain and suffering because all the pressure on me as an insurance broker is, "What's the cheapest I can get the insurance for?" Price, price, price is the number one consideration for the person buying the insurance policy.
I would also like to restore the principle of indemnity. If you're not earning money at the time you have an accident, why should you receive money after the accident? Is that not rewarding people for having an accident? Does that not encourage people to have a minor fender-bender and then claim what we loosely call insurance neck?
Whatever you do, would you please set a system and leave it alone. Keep it going for sufficient time so we can all get to understand it.
We have had three governments in the last six or seven years of different philosophies. This government will introduce plan number 4 and the people working with the public, that's me, the insurance adjuster, we have to try and keep in our minds the four different plans. It's difficult when you're talking to a person, like I'm talking to Mr Chudleigh here: "When did you have your accident? What plan was in effect at the time?" and trying to remember whether it was OMPP, Bill Davis's policy, Bob Rae's policy or now Mike Harris's policy. We've got to try and segment and divide, and we are the people who have to deal with the insuring public.
I would like you to stop using automobile insurance as a political football. Please set a plan that can stay around for a while so we can all get to understand it. We can all build up experience, rating experience, claims experience, and then it may be possible to be able to set a fair price and contain that price for a reasonable amount of time before we have to go back to the drawing board again.
It is said that people are very unhappy with automobile insurance. I also suggest that people are extremely unhappy with the Workers' Compensation Board, which is entirely government administered. So before you mess around too much with the automobile program, put your own house in order and look after the Workers' Compensation Board, which is in far greater stress than the automobile plan.
From a perusal of the Toronto Star and the Globe and Mail as of last Saturday, it was reported that home and automobile insurers had their best year in 10 years. On Canada-wide premiums of $17.7 billion there was a surplus of $1.5 billion, which works out to 8.5%. That was the best year in 10 years. Is 8.5% excessive? I really don't know. I don't know how it compares with a car manufacturer or any other major industry. Maybe people in this room could tell me that.
My final comment is, please, whatever you do, whatever you decide, once you have decided, leave it alone for a few years and let it settle down and work its way through the system. That is my urgent plea to all our elected representatives.
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Mr Crozier: Good morning, Mr Day. It's good to see you again. I wonder if you might help me clarify your remarks here in that you have said that the present system is not broken, that it may require some amendments, but then you go on to say that you seem to agree, or maybe you feel it's just a fait accompli, that we are going to move to system number 4, so you're saying give it a chance to work.
Let's step back a bit. You're saying Bill 164 is not broken and you want governments to give insurance an opportunity to work. Would you have said OMPP was not broken and it needed some amendments?
Mr Day: I think OMPP was working quite well when it was changed and so was Bill Davis's policy. All the pressure that politicians or elected representatives receive is on the price of the product. Their constituents complain about the price of the product, so the elected representatives, seeking to please their constituents, seek to carry out the changes that are constantly being made in an endeavour to contain or to lower premiums.
Mr Crozier: It is one of either relativity or perception because you're saying that for what we're getting, the price that you've outlined for an accident-free driver is not really a bad insurance premium.
Mr Day: I think it's reasonable. For example, for workers' compensation, the rate for a construction worker earning, shall we say, $40,000 a year, the premium his employer pays is somewhere around about $3,500 a year, 7.5%. So automobile insurance is high, but so is the cover provided high.
Mr Crozier: Do you feel then that perhaps if premium is a problem, and we have one of the better ones in North America, our coverages are simply too high?
Mr Day: They're very, shall we say, luxurious, the finest in North America.
Mr Martin: Thank you, Mr Day, and thank you for coming today. I want to tell the committee that you have in front of you here a gentleman who has been in the auto insurance business for a long time in this community. It's a family-owned brokerage firm that has been quite successful, and so when he speaks, he speaks from much experience, having been there through all the policies he's talking about and having experienced the ups and downs of it all and has somehow been able to keep his head above water. So when I hear from somebody like Mr Day, I certainly am called to pay attention and to listen with a careful ear.
You make some interesting points this morning, not the least of which is, if the system ain't broke, why are we trying to fix it in such a major way? The question I have is, obviously the industry itself is beginning to come out of what some might suggest was a low period of profit-making to now a relatively healthy period of profit-making, and so something obviously was coming together and working.
I know that the Liberal government, when they changed the system, were responding to an industry request to lower the costs to them, particularly in the area of tort and the suits and all that kind of thing that was happening. I think none of us could sit back in that period of time and not be somewhat impressed by the continuing growth in the level of suit that people were able to win in the courts, and certainly there was a red flag went up and people were trying to respond to that. When we came into power, our concern was for the consumer, who in some instances was not getting what he or she needed to maintain a certain life support system and to be able to keep family together in those times.
I know that the industry itself -- because you said so here in your report and we've read those reports too -- is doing okay. I guess the question is, for me, how is the broker in a community like Sault Ste Marie doing in all of this? How are you doing? If you're not asking for the change -- we worked hard at trying to put a system in place that was a bit more generous to the consumer, and the actual rate of premium is the big problem at this particular point in time, but the industry itself is actually making money -- who is asking for the change?
Mr Day: When I said that the industry had an 8.5% return, that of course would be Canada-wide. That would also of course include the premiums that are paid to insure houses, that are paid to insure bridges, and all kinds of other endeavours that people engage in. I do not know the level of automobile insurance premiums in Ontario. I believe it's around about $4-5 billion. I do not know the profitability of the automobile system now in Ontario. But if you are an insurance company endeavouring to do business in Canada, you have to be in all branches of it. You cannot just say I will insure houses and nothing else. You have to have a full line. Automobile insurance is just one of the many products.
In due course, maybe next summer or in the fall, statistics will come out that will identify and clearly zero in on the profitability or otherwise of automobile insurance in Ontario. I want to reinforce that if you are an insurance company selling in Canada, you have to take a full line to be able to transact business. I do believe that, as has happened in prior years to some degree, automobile insurance in Ontario, which is maybe 35-40% of the total premiums paid in Canada, is being subsidized by the other branches of insurance that is sold. When I talk about profitability, it is for all endeavours of the insurance industry.
Mr Wettlaufer: Mr Day, 8.5% profit for a risk-type industry: Given that the average return on equity for all businesses in 1994 was 7.5%, 8.5% for a risk-based industry wouldn't seem to be too rich a profit, would you think?
Mr Day: I don't think it's too rich a profit. I really don't know what other industries seek to achieve, say the banking system or the trust company system, but it seems to me that 8.5% is not really out of line.
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Mr Wettlaufer: From your experience, there seem to be other suggestions from around Ontario that there is a severe shortage of market for automobile insurance in the independent brokerage system for the broker's clients. What do you find in the Sault?
Mr Day: I can only speak for my office. We have too much capacity. We have companies visiting us and calling us, criticizing us and threatening to pull out of our office unless we send them more business. So our problem is the reverse of what you've just mentioned.
Mr Wettlaufer: So the companies are demanding greater volumes of business from you.
Mr Day: Correct, and they're prepared to take what I would call their cross-section and their fair share of all the business we send them.
Mr Wettlaufer: Is this a recent development within the last six months to a year, or was it prior to that?
Mr Day: It's been my experience in my office way back to Bill Davis's time.
Mr Wettlaufer: Okay, so that is probably because you are producing business which is making a profit for the insurance companies.
Mr Day: That's probably the case. I also brought along with me a list of all the insurance companies with which we do business, 18 in total. That number would include the Facility, and in 1995, 2.1% of our premiums went into business in the Facility. It is not nearly as bad, the market is not nearly as restricted as some people would tell you.
Mr Wettlaufer: If your business suddenly turned unprofitable for the insurance companies for whatever reason -- number of claims perhaps or amount of claims -- would you tell us what has been happening elsewhere, for the record?
Mr Day: I guess if our business turned sour it would be a reflection of the marketplace, and if our business turned sour because we write an average cross-section across the community, then if the marketplace turned sour, then of course premiums would rapidly escalate.
Mr Wettlaufer: But there would also be cancellation of some of your contracts.
Mr Day: Yes, it would be for the most part on volume, on the lack of business going into that carrier.
The Chair: I'm afraid we've expended our time limit. Thank you very much, Mr Day, for joining us today. We appreciate your input into this committee.
BIKERS RIGHTS ORGANIZATION, ONTARIO
The Chair: We have one deputation left prior to the lunch hour. It's Mr Gerry Rhodes with the Bikers Rights Organization, Ontario. Welcome to the committee.
Mr Gerry Rhodes: First of all, Mr Dave Howson was supposed to make a submission. Unfortunately, work schedules prevented him from being here today. I'm not used to speaking in public, so I'll be a little bit nervous.
Good morning, ladies and gentlemen. On behalf of the Bikers Rights Organization, I would like to thank you for the opportunity to make this presentation before this committee.
Briefly, BRO Ontario has been in existence since 1978 and became incorporated as a non-profit organization in 1984. BRO's aims and objectives are:
(1) To foster and develop improved understanding and awareness of motorcycles and their riders.
(2) To foster and promote motorcycle safety and responsible riding practices in the motorcycling community.
(3) To promote friendship and understanding among all motorcyclists.
(4) To promote legislation affecting motorcycles generally and to oppose or support, as the case may be, any contemplated legislation by provincial, municipal or other authorities in so far as the same may affect the motorcycling community.
(5) To endeavour to achieve a closer relationship and better understanding between motorcycle owners and operators and law enforcement officers with a goal to identifying and solving problems of mutual concern.
Our members over the past years have worked hard in areas that other motorcycle organizations bypassed in favour of other interests; to note, lifting bans on motorcycles in provincial parks, upgrades to the drivers' handbook, promotion of motorcycle awareness month, and hosting the first national safety conference for motorcyclists.
Our members firmly believe in freedom of choice and education, not legislation. This is what brings us before this committee today.
Freedom of choice: I'm not sure what that phrase may mean to you, but to us it means responsibility. The motorcyclists of Ontario have in the past five years seen their freedom of choice for insurance eroded to almost extinction. Their choice of insurance options has been reduced to the point that many riders have either given up motorcycling or chosen to continue riding without insurance. Neither of these are acceptable, either for the industry or for the general public.
Problems: We have read and agree with the MMIC submission -- the MMIC is the Motorcycle and Moped Industry Council; you people have already listened to them -- and support their priority issues for motorcyclists, to wit: (1) reducing insurance premiums, (2) maintaining the loss cost transfer system, and (3) non-reduction of verbal threshold and $15,000 deductible for non-economic loss.
We also have concerns to add to these issues: (1) the practice of tied selling, (2) bicyclists and pedestrians are excluded from the uninsured motorist plan, and (3) penalties.
When insurance becomes unaffordable, those riders who stop riding cost the insurance industry revenue and lost premiums, and the government of Ontario revenue in lost licence fees, lost sales taxes for vehicles, parts, accessories and repairs. Obviously the private sector also loses revenue with the resultant manpower layoffs placing individuals on the unemployed or welfare rolls.
There are 400,000 licensed motorcycle operators in Ontario, but there are only 111,000 stickered motorcycles legally in use. There are approximately 220,000 plated, not in use motorcycles languishing in storage, due in part to unaffordable insurance. This represents a significant number of dollars which are not circulating in our economy. From personal experience, my motorcycle insurance is one and a half times my car insurance.
We have some suggested solutions. These are long-term; these are not overnight solutions.
Reducing insurance premiums: The major way to reduce insurance premiums is to reduce the insurers' costs by firstly reducing accidents. Education of the riders and the general public has been demonstrated to reduce accidents.
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This is suggested solution 1: Declare May as motorcycle awareness month in the province of Ontario. It is in the best interests of the insurance companies, the motorcycle industry and motorcycle riders to promote this. The motorcycle industry and the motorcycle organizations of Ontario presently do this. It is time for the insurance companies and the government to become actively involved.
Suggested solution 2: Offer new riders incentive for participation in rider safety training courses. Level 1 of the graduated licensing should last a minimum of 180 days. Level 2 should last a minimum of 24 months. With participation in a rider training program, these periods would be reduced to 90 days and 12 months, respectively, with this course also accrediting 24 months of safe riding time for insurance purposes. You have to give them an incentive to take these courses to reduce the number of accidents. It's been proven to save lives, reduce accidents.
(3): Educate automobile drivers. Two thirds of motorcycle accidents are caused by automobile drivers violating the motorcyclist's right of way. This is of great concern to insurance companies as it could directly reduce costs all around. Revisions to the automobile drivers handbook and inclusion of motorcycle-related questions to the drivers written test would be an aid to this endeavour. For example, two-lane street, motorcycle at a stop light; can you pull up beside the bike and make a right-hand turn? Yes or no? The answer is no, of course.
Loss cost transfer: The lost cost transfer must be retained as this would justifiably penalize the guilty and prevent unfair premium increases to the innocent parties. As previously stated, a large percentage of motorcycle accidents are the fault of the other driver. It is grossly unfairly to saddle motorcyclists and their insurers with the costs of an at-fault driver and allow that individual and their insurer to walk away from their responsibilities. However, there are provisions of the loss cost transfer that duplicate services in insurance in general. For example, death and funeral benefits could remain as no-fault. Those persons with death and funeral expense insurance coverages should be able to opt out with a corresponding reduction in premiums so there's not a duplication of services already in their possession -- private insurance, employer insurance. If the consumer does not already have life insurance, their insurer could still offer them a competitive product. This is a realistic way to reduce premiums. In fact, I think the gentleman before me touched on that very subject.
Verbal threshold and the deductible: The MMIC has spent considerable resources and effort to research and comment on this subject. We fully agree with their statement on this matter and we quote: "For the long-term stability of insurance costs and premiums it is imperative that the verbal threshold and $15,000 deductible for non-economic loss for catastrophic impairments not be lessened. In our opinion, the proposed definition is broad enough and flexible enough to adequately and compassionately serve any person who suffers a catastrophic impairment. If the verbal threshold was broadened it would, in our opinion, undermine the long-term sustainability of benefits and stability of insurance costs and prices."
In the Bikers Rights Organization's opinion, reducing these limits would increase the numbers and opportunities for frivolous and fraudulent lawsuits. The point we're trying to make with this is that we endorse what the business end of the motorcycle situation is asking you from the point of the consumer and the motorcycle enthusiast. We agree with them.
Tied selling: Currently in the province of Ontario there is only one company that offers standalone motorcycle insurance at normal, competitive rates. All other firms offer standalone at Facility rates, which for riders with good records is unaffordable. It's also completely unfair. Unfortunately, the only standalone firm has a blacklist of motorcycle models which they will not insure irrespective of the rider's record or skill level. The motorcycle is not the problem. Those crashing these machines perhaps do not possess the skills required to operate any motorcycle safely. Please refer to our statements on rider training. Tied selling is illegal and the dissuasion of such practice should be pursued aggressively. Quite simply, I challenge any of you to go out there and try to find standalone motorcycle insurance at a competitive rate. I'll give you my driver's licence number, the serial number off my Harley. You go try to find it at a competitive rate from anybody other than Jevco without buying some other form of insurance.
Uninsured motorists plan: Bicyclists and pedestrians must be included in the uninsured motorists plan for at least one good reason: Paul Sweete. This motorcyclist was catastrophically injured in an accident caused by an irresponsible bicyclist. As a result, this individual is no longer entitled to accident benefits nor is he employable in the trade he was working in at the time of the accident.
Penalties: We agree to the raising of the penalties for not obtaining insurance when riding. However, we would feel it would encourage people to obtain insurance if the fine structure was $1,000, as you have proposed, or the equivalent to the Facility rate premium for the vehicle -- car or motorcycle -- that they were operating when they were caught, whichever is greater. The irony of what the fine amount is to be based upon may prevail upon people to purchase the insurance in the first place. This is respectfully submitted by this rights organization.
On the last page that is attached, you will find a copy of the prohibited list, the blacklist. You can't get insurance on those motorcycles from one particular company. If you want insurance on these motorcycles, you're buying Facility rate irrespective of your driving record.
Mr Martin: Just a couple of things. One, I think any of us who have been representing communities in the government of Ontario for the last two or three years know of the tremendous challenge motorcyclists face to get insurance because you've been in to see us and we've heard the stories and we know of the challenges there. One question I want to ask -- I'm going to ask you two questions and I'm not going to get a chance for a second, so if you can remember them -- I'll see if I can remember them first.
Is this package that's on the table today going to be helpful to you? The new package that the government is proposing to bring in or has presented for discussion at this point in time -- will that be helpful? The second question I want to ask you is -- and it's tied to, you're right, Mr Day's presentation -- the question of, why fix the whole thing if it isn't broken? If there's pieces of it that can be worked with to make insurance more accessible and less costly to people, why not do that?
You mentioned the overlap of various insurance policies and how, if somebody was able to disentangle that somehow, that we might find ways, then, to make insurance less expensive. Has your organization, or any organization that you know, done a costing of that or gone into that in any detail so that we have some clear idea of how this could be helpful and how it might affect the cost of premiums if we were able to sort that out? So there's two questions there.
Mr Rhodes: I think you may find that insurance company actuarial studies may have that information. I couldn't tell you for certain. No, I can't tell you whether or not someone has specifically sat down and said, "Okay, X number of dollars could be removed from this policy or that policy because it's overlapped by somebody else's package." That premium has to be based on some sort of an actuarial study compilation of actual costs that the insurance companies have to pay out in claims. Based on their formula that they used to come up with that premium amount, they should be able to break that cost out for you. They had to come up with it in the first place, so they should be able to come back to you and say, "Yes, this many dollars in these premiums is due to the death benefit, this many dollars is for collision, this many dollars is for injuries." They should be able to break that out for you. They had to come up with it in the first place to produce the premium.
Mr Martin: Okay. Is this package going to be helpful to you?
Mr Rhodes: We believe it could be if the recommendations that the MMIC have come up with are also included. You have to put a ceiling on costs paid out. Extremely high payouts for ridiculous reasons, fringe lawsuits that you sometimes see, people receiving what might seem to be small amounts of money -- $15,000, $20,000, $30,000 at a time -- for loss of enjoyment or loss of companionship because they were in the hospital for a few weeks, this sort of thing -- it doesn't seem to make a whole lot of sense.
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Mr Sampson: Thank you for your presentation. I would put to you that moving from a heavy no-fault component to what's more of a tort component will actually benefit the bike drivers of Ontario because you won't have to rely upon the loss transfer mechanism to put the loss on where it should be. As you've pointed out so rightly, in the majority of cases it's not the biker who is at fault in an incident, and so the package we have in front of you -- and I think this is the message we got from the moped and motorcycle coalition -- to the extent there's more tort in it does in fact help.
My question to you, very quickly since we don't have a lot of time: Apart from the fact that it does shorten the pool, so to speak, that one has to access to charge the premiums and allocate the expenses associated with loss cost, would a particular program specific for motorcycle drivers in your mind be appropriate?
Mr Rhodes: Certainly, if there was a program that was specific to motorcyclists that understood the concerns of motorcyclists -- because we are a unique vehicle. When we go down in a minor collision, we get hurt. A minor collision in a car, you get out and holler at the other driver. Something that was put together with motorcyclists and the motorcycle industry, the insurers and the government, working together, would be a good idea.
Mr Sampson: The message I've heard from the motorcycle owners is: "We don't need the death benefit. If I did that I'd buy life insurance. Give us the access to tort." Maybe the first-tier injury level doesn't make sense because, as you said, either you have a very minor injury or it's a catastrophic injury. There are very, very few motorcycle incidents that cause that sort of first tier of injuries, so why bother having it and why do I pay for it?
Mr Rhodes: Yes.
Ms Castrilli: Thanks very much for coming in. I like some of your proposals and I wonder why we haven't thought of them before, the notion of you riders being offered an incentive. As a parent of a teenage daughter, I know that I pay a reduced premium because she's been through the driver education course. It just makes sense to me that you want to do it in other areas as well.
I wonder if you might put some flesh on the things that you have told us. I have a question first about all these bikes. What's left after -- if you can't insure these except through Facility Association, do you have a wide range to pick from?
Mr Rhodes: No, you don't.
Ms Castrilli: Is it as many as this that's left, or a third of this or --
Mr Rhodes: Oh, yes. There are as many motorcycle models left as that, plus. You'll find that the majority of the motorcycles listed here are referred to as a sport type of motorcycle.
Ms Castrilli: Right. So your Harley is okay. It's not on this list.
Mr Rhodes: It's not on this blacklist.
Ms Castrilli: Okay.
Mr Rhodes: However, it's certainly right up there. In spite of its displacement, it's actually rated higher for insurance premiums than a Japanese motorcycle of the same displacement.
Ms Castrilli: Tell me a little bit about the cost. You said your insurance on your motorbike is about one and a half times, and you're not on any tied selling policy. Even though it's illegal, it still is the practice.
Mr Rhodes: No, I am with Jevco.
Ms Castrilli: So you pay Facility rates.
Mr Rhodes: No, not for this one.
Ms Castrilli: Because it's not a prohibited --
Mr Rhodes: That's right. It's not a prohibited vehicle or a listed vehicle with them. But I have an older model luxury car, a three-quarter-ton truck and a 1947 Plymouth insured for about the same amount of money as it would take to insure two motorcycles.
Ms Castrilli: If you were to have one policy, could you have one policy for all of them together and would there be any benefit?
Mr Rhodes: No, I can't right now. If I could purchase fleet insurance, I could add another motorcycle right now.
Ms Castrilli: Yes. You must have two motorcycles in order to do that.
Mr Rhodes: Yes. In order to get fleet insurance, you probably would have to have a business. You cannot get bulk insurance -- my wife and I are the only two people driving. We have four vehicles registered, insured at all times. We can't drive them all the time and we don't lend them out.
Ms Castrilli: But you basically have no choice. You can't go to different packages --
Mr Rhodes: We have no choice. I have to buy a full package for every vehicle, regardless.
The Chair: Thank you, Mr Rhodes, for presenting to us today. As a father who has a daughter who rides a Harley, I appreciate your presentation.
Mr Rhodes: Okay. Thank you.
Mrs Marland: Does the father get to ride the Harley?
The Chair: The daughter won't let the father ride the Harley.
Mr Rhodes: I don't blame her.
Mr Sampson: Is there a reason, Mr Chair?
The Chair: Yes. She's seen me ride motorcycles before, I guess.
I do apologize to the committee. We ran late today and we are late for lunch. However, our 1:20 has been cancelled and so we will reconvene at 1:40. The checkout time, I remind you, is 1 o'clock. Our travel arrangements for the airport will leave at 5 pm. That is different than it is on your schedules, so I would ask you to be aware of that.
Mrs Marland: Are we getting an earlier flight?
The Chair: It's anticipated it might take us a little bit longer to get to the airport. As the final point, I would point out to the committee that Mr Ford is celebrating a birthday and I've been unable to find out which birthday it is, but happy birthday, Mr Ford.
Did you have a statement to make before the committee, sir? Excuse me, can we have your attention for just a moment, please?
Mr John Walker: Mr Chair, my name is John Walker and I was slated to appear before the committee today at 1:40. That is my information.
The Chair: Yes. That's true, sir.
Mr Walker: I had a past motor vehicle accident victim come to see me. He is not now my client. I assisted him in putting together a brief submission for the committee. I know that he called in, but no one has called him to say when his time is. So I'm asking the committee to entertain that person in my slot at 1:40. His name is Niko Marinovich and so, by your leave, he will appear in my time slot at 1:40. I have made some copies of what he has to say that I would leave with the clerk.
The Chair: Does this meet with the committee's approval? That will be great.
Mr Walker: Thank you.
The Chair: Thank you very much. The committee is in recess until 1:40 this afternoon.
The committee recessed from 1227 to 1341
NIKO MARINOVICH
The Chair: You heard before lunch that we've had a switch in the presenter for 1:40 pm. We now welcome Niko Marinovich to the committee. We have 20 minutes together.
Mr Niko Marinovich: Good afternoon, everyone. My name is Niko Marinovich. I am 26 years old. I was involved in an accident on November 23, 1993. In the accident, my car was struck head-on by the other car. I was not at fault. I was wearing a seatbelt. As a result of the accident, I sustained a closed head injury. As a result of the closed head injury, I have cognitive problems. I receive physiotherapy and occupational therapy now.
At the time of the accident, I had been working for four years at a labour job at the Algoma Central Railway. I have not been able to return to that job. My doctors tell me I will never be able to return to that job in the future. I was earning about $460 per week.
In about May 1993, before my accident, I purchased a franchise called Alvin Siding Cleaners. We cleaned the vinyl siding of homes and could do industrial siding year-round. At the time of the accident, my business was just starting to grow and at that time I had not really earned a real profit because of initial amounts which I spent to start up the business. I expected to earn much more in the future.
Under the OMPP statute, I am paid accident benefits but there's no limitation on what I can seek from the other driver and his insurers towards my past and future income losses. If I had been injured while the new proposed insurance plan was in place, I would not be able to collect all of my actual past and future losses.
By limiting my rights to seek compensation to 85% of my net pay, I would be losing 15% of my net pay and the loss of gross pay against which I could have written off any losses which I sustained during the startup period of my new cleaning business. Even the loss of 15% is very important to me because of my relatively low wages.
While I commend the government for its new amendments, I urge you not to limit in any way the amount of the past and future income losses, which I would actually lose as a result of my accident if my claim had been governed by the new proposed amendments. It is just not fair to victims that they should be penalized for trying to start up a business which would hopefully provide employment to persons in this province in the future.
I am told that there is a proposal that in some cases there may be a mandatory use of structured settlements for lost income. I understand that to mean that the insurer who is called upon to pay any money to a person who is injured may be able to purchase an annuity which would pay the anticipated loss of future income to the victim over a period of years and that the victim would not be allowed the right to make his or her own investment decisions about how they would invest their money.
I urge the committee to recommend that structured settlements not be made mandatory. I am told that the rules of court leave that to a judge at present. I am also concerned because long-term interest rates are low and better investments can be made in other places for higher rates of return. I also wonder who will guarantee that the money will be paid. Thank you for listening to me.
Mr Sampson: Thank you for your presentation. Your paper here talks mostly about the income loss component and so maybe we could focus on that for a second. You indicated that you had purchased a franchise just before your accident. One of the difficulties we had in dealing with looking at the auto insurance legislation was: How do we deal with small business owners and the fact that during a large part of their life as owners of small businesses they are not taking home a lot of pay but generally building up the worth and the successful nature of the business? So how does one accommodate for that in the event of an auto accident where the individual is unable to attend to the business any more?
We felt it was probably more important, or as important, that the small business owner and the insurance company come to grips with what that value is that you're bringing to a business when you buy your policy as opposed to under the current arrangement where you come to that discussion and negotiation after an accident has occurred. So one of the provisions of the proposal that we have in front of us is that an insurer and a small business owner will come to grips with what the loss of income would be if he or she were unable to attend to the business, and that's the level to which you would buy auto insurance and that's the level to which an underwriter would underwrite the risks associated with your particular auto policy.
In that scenario I think you'd find, especially since you were not at fault, the draft legislation that we've brought forward would provide for the loss of income you appear to have had as a result of not being able to attend to your siding business. How do you feel about that arrangement? Would that, in your view, have helped solve some of the problems that relate to your siding business and the fact that you can't attend to that business like you used to before the accident?
Mr Marinovich: I do not really understand the question.
Mr Sampson: Right now you're saying that you don't have time or you can't attend to your siding business. Is that true?
Mr Marinovich: I cannot work it.
Mr Sampson: So it's not being worked at all?
Mr Marinovich: No.
Mr Sampson: And you'd spent a considerable amount of time and money prior to the accident getting that siding business up and running. Is that right?
Mr Marinovich: Yes.
Mr Sampson: So as a result of the accident you would expect somebody to compensate you for what you invested and what you lost.
Mr Marinovich: Yes.
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Mr Sampson: I guess what I'm telling you is that what we're proposing in the draft legislation would deal with that, especially in the situation where you were not at fault in the accident. Do you think that is a far better situation than what currently is facing you?
Mr Marinovich: It sounds all right.
Mr Sampson: On your comment about 85% of net income and that you would lose 15% of your net pay, are there any costs associated with being employed that you had prior to your accident that you don't have now; for instance, cost of clothing, cost of transportation to and from your workplace? You worked where? At Algoma Central? Is that where it was?
Mr Marinovich: Yes.
Mr Sampson: Were there costs associated with working at Algoma Central that you're not paying for now?
Mr Marinovich: There would just be work wear, as well as union dues and whatever else would come off my cheque for medical, prescriptions, glasses.
Mr Sampson: What would be the ballpark percentage of that? Do you have any idea?
Mr Marinovich: I do not know.
Mr Crozier: Thank you, Niko. On the second page of your presentation you said that you are paid accident benefits and "there is no limitation on what I can seek from the other driver and his insurers towards my past and future income losses." Can you give us some sense of the ease with which you have been able to go to the other insurer and get these future income losses, or have you had any difficulty in doing that? You don't have to tell us how much or anything, but I just wondered about the process. Have you had any difficulty with it?
Mr Marinovich: I really do not know that particular question. That work is done more above my head.
Mr Crozier: So you have a lawyer who is taking care of that.
Mr Marinovich: Yes.
Mr Crozier: Can you tell me, the accident occurred in 1993?
Mr Marinovich: Yes.
Mr Crozier: So a little more than two years ago. It's not settled yet, though.
Mr Marinovich: Oh, no.
Mr Crozier: So you probably would hope that these kinds of things could be settled in less time.
Mr Marinovich: I don't really know about that. Mind you, for other people, they may like that. Myself, I was so badly banged up and I'm still having problems. Money is not going to fix that for me right now.
Mr Crozier: Absolutely. I can understand that.
Mr Marinovich: Just like the weekly benefits that I do receive, or biweekly, whatever they are, they help me get through -- just get through.
Mr Martin: Thanks for coming today. I know it takes a fair bit of courage and preparation to come before a committee such as our own. I recognize it isn't always the easiest of things to do. I thank you for coming, because for me you present an excellent example of where what is being proposed here by way of changes to the auto insurance act is not going to work for everybody. What we're trying to determine here, though, is whom it's going to work for.
We're trying to point out to the government and to those who would have influence on this government by way of support or non-support or ability to influence the decisions they will make ultimately -- because they have a mandate as government to make major changes, they claim, on behalf of the people of Ontario. Our concern is that those changes so far have been targeted at a group of people who are less able to deal with them than others, and that concerns me, as a New Democrat, greatly.
The previous Liberal government brought in a set of governance re auto insurance that we call no-fault. If somebody gets into an accident, whether they're at fault or not, there's a recognition that if they've been hurt, if damages have been caused, they get paid. There was a way of sorting that out between the two companies and we stayed away from the courts and we stayed away from lengthy legal battles in other venues so that you could get on with your life.
There was a sense that there was still some injustice in that system in that we felt there should be some limited ability to go a little farther to claim through the courts for loss, for pain and suffering and a few other things. That was certainly seen by the industry as something that was going to cost them, because court cases generally cost. Regardless of who wins, they cost both sides, and ultimately in the end, if you as the claimant win, they cost the industry some dollars above and beyond what was in the no-fault package.
Now this government is coming along and bringing in a system that's going to allow for even more legal activity. You'll have to get yourself a lawyer and pay for him. They'll have to get lawyers. We'll be into the courts and we'll have long-drawn-out battles over who did what to whom and who owes what to whom.
At the same time, they've reduced the amount of money that just automatically -- you've had an accident, you've had some damages done to your car and you've obviously had some damages done to your person which are going to have long-term consequences for you. You said a few minutes ago, money is not going to buy you what you need.
But you also have to recognize, and I think you said this as well, that you need to be able to take care of yourself. You need to be able to pay the rent and feed yourself and live a dignified quality of life that's reflective of the community within which you live. This package of reforms will take away from your being able to do that, and anything you will get by way of improvement or increase will be after a long-drawn-out battle with the courts. So lawyers in the end will win.
I'm not sure where the industry sits on all of this. I know the brokers we've heard from so far are having some difficulty with it. They don't see the system that's in place now as being that totally broke. They figure some time for adjustment would be appropriate, and I think they're saying that quite loudly and clearly to the government. The industry, though, or some parts of the industry are supporting the changes that are in here.
If you were given a choice, now that you've had this accident, between being given an adequate amount of money to compensate somewhat for your losses and also to keep you looked after in terms of housing, clothing, shelter and your ability to participate in the community, without having to go through major court action, or the ability to go through major court action and perhaps get something in the end or not, which one would you choose, as a victim and somebody who has experience and is in the middle of all that right now? Which way would you be leaning?
Mr Marinovich: Leaning towards -- I don't know what you mean.
Mr Martin: If the choice was, you had an accident and somebody sits down with you and works out what you need to get better, to take care of some financial cost that was incurred because of the accident and then to get on with your life, a package that automatically found a place that was adequate, that wasn't 85% of your net but perhaps 85% of your gross or 95% of your net or whatever, but that more adequately reflected the reality of today's cost of living in the community, or you had to go through major court proceedings, with the cost of a lawyer and all that brings, which one would you choose?
Mr Marinovich: I would choose getting 85% of my gross in that same setup. I can get along. People don't just die off without any money. It's something that, "Give me a little bit, and I'll do whatever I can with this and I will try to get myself better with whatever they do." I'm lost at that question. I don't know.
Mr Martin: Thanks anyway.
The Chair: Mr Marinovich, It's seeing people like you that brings the realities of the insurance business home to us, and we thank you very much for making your presentation today.
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GERALD WILLIAMS
CAROL WILLIAMS
The Chair: We next welcome Carol and Gerald Williams. We have 20 minutes together.
Mr Gerald Williams: I wish to thank the committee for the opportunity of doing this this afternoon. My name is Gerald Williams. Let me start by thanking the government for their attempts to improve the present state of the automobile insurance law in this province. I know it is part of your campaign program for the PCs and I hope, on behalf of the accident victims in this province, that the Harris government will make things right.
I was involved in an accident on May 31, 1995. I was a pedestrian and I was run over by a runaway car. I was not at fault. As a result of my accident, I sustained injuries to my pelvis, hips and both femurs. I receive physiotherapy now. I am presently confined to a wheelchair but I am hopeful that I will become more mobile with time.
At the time of the accident I had been working for McKevitt Truck Lines since March 1995 as a mechanic. I have not been able to return to that job. I am not certain if I will ever return to work as a mechanic. I was earning about $640 a week. Under Bill 164, I am paid accident benefits of 90% of my net income and I cannot recover any economic benefits from the person who caused my injuries.
Other economic expenses: At my place of employment at the time of my accident, there was a benefit package to which I would have become entitled after 12 months of service. The benefit package to which I would have become entitled included dental, drugs and major medical coverage. My wife is not covered for any drug expense under the motor vehicle policy as she was not the injured person. Her drug expenses are presently about $200 a month. Starting on March 27, 1996, we will have an average cost of $2,400 per year, which arises because of the accident and for which I cannot seek compensation from anyone. There are also dental expenses which I have to pay for myself and my family, which would have been covered after March 27, 1996, had the accident not occurred.
There does not appear to be any provisions in Bill 164 amendments by which I can recover that loss from my own accident benefit insurers and there does not appear to be any provisions in the new proposed amendments which would allow me to recover those expenses either. I urge the committee to make a recommendation to change the provisions of the Insurance Act to allow me and other victims to recover this type of loss from either my own auto insurer or the person who caused the accident on a fault basis.
General damage assessment deduction: Under Bill 164, my claim for pain and suffering and loss of enjoyment of life are subject to a deductible of $10,000. This amount, in my view, is too high. I ask why victims who sustain a major injury should have their legitimate claim reduced in any way.
The proposed increase in the deductible amount to $15,000 for me and from $5,000 to $7,500 for each of my Family Law Act claimants seems even more unfair. I know that the purpose of the deductible is to keep claims for modest injuries out of court, but where it is established that the claim is substantial, I ask why there should be any deductible at all.
Notice of intent: I have been watching some of your committee hearings on television. I saw where the new proposed amendments required that notice had to be given within 120 days of the accident in order to be able to claim, unless a judge orders otherwise. While I understand that this may assist insurers to plan for potential claims, I think that it imposes too much upon the accident victims to make sure that they have given the notice within the time limits, and I suggest this provision be deleted.
Mr Crozier: Did you have your own auto insurance at the time?
Mr Williams: Yes, I did.
Mr Crozier: So it's your auto insurance that's responding?
Mr Williams: Accident benefits that are paying me now.
Mr Crozier: You brought up something that's very interesting, and I guess I'd like your comments on it further, but it's more for our information than anything. The question is often asked, why can't it be 85% of net or 90% of net or 80% of gross, because it costs you less. You stay at home, you don't have travel expenses to work, you don't have to buy clothes to work in. But you've brought up a very good point, that even if you have a benefit plan -- and what you brought up is that you would have been eligible for one shortly. I think that's valid. Isn't that what you said?
Mr Williams: Yes.
Mr Crozier: There may be those who are employed who have a benefit plan. In fact it brings to mind a case where an employee was considered no longer to be employed when they were on long-term benefits. They weren't under a contract that would have provided for it and they were no longer considered an employee because they were on long-term sickness benefits and lost their benefit program. Do you have any idea, even a ballpark figure, what that might have cost, what the benefit plan may have cost that was available to you at your place of employment after 12 months?
Mr Williams: For just the dental plan would have been $10 a month; everything else was free at the place of employment.
Mr Crozier: But there would have been, these days, probably some significant premiums attached to that.
Mr Williams: I did not have to pay those premiums; that was paid by my employer.
Mr Crozier: But the plan was worth X number of dollars, and presumably even though you don't have to pay it, it's part of your considered total remuneration.
Mr Williams: Yes.
Mr Crozier: Can you even get a benefit plan now, a drug plan, a dental plan? Could you even buy one on your own that you know of?
Mr Williams: Yes, I could get Blue Cross or Blue Shield, which is going to cost around $175 a month -- I looked into that one time -- for my family, which would have to come out of my pocket.
Mr Crozier: I think you've raised a valid point, that there's an employment expense, be it one that you paid off your paycheque or one that was considered part of your overall remuneration, that you no longer have and/or would have to go to that expense to get. I thank you for bringing that to our attention. I'm not aware of anything in the legislation either that allows for that, but there may be. But I think it's a good employment expense point that you've made.
Mr Martin: I'm going to ask you the same question I asked the previous presenter, because I'm not sure if I'm even understanding it fully, but as a person who is caught up in the system at this point in time you may.
It seems to me that what this legislation is about is tradeoff. It's a tradeoff between people who have been hurt by way of accident and the amount of money that they get almost automatically now if they can't go back to work or if they've acquired a certain amount of damage to themselves or to their ability to provide for themselves. There's an established sort of formula that kicks in that doesn't require a whole lot of legal wrangling and high anxiety around whether you're going to get this much or this much or anything at all.
This government is proposing that we should reduce that, that somehow that's too high, that the amounts of money that people who have been hurt are getting are too much and it's costing the system. Obviously, somebody is telling them that. It's costing the system in a way that is causing premiums for insurance to go up, and that's creating a bit of a hue and cry out there in the general public.
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The tradeoff, then, is an ability to go to the courts and use the courts more, have more access to the courts, which of course has with it all kinds of questions, in my mind: a person's ability to hire a lawyer in the first place and to keep a lawyer on for the length of time that it often takes for the system to work its way through some of these very complicated and difficult law cases, particularly as you try to prove some of the things that you know in your mind and your heart are the truth about what you had in front of you by way of your future that now is no more. Given that tradeoff, those options that are being put on the table today as things that we perhaps should be looking at in order to keep premiums at a level that everybody can afford and yet at the same time provide support for people who have been hurt in an accident, what's your feeling about that?
Mr Williams: I'm not really sure. I know that I have extensive scarring. They had to surgically rebuild both my legs. My back is burnt from being dragged underneath the car 40 yards up the road. So I don't know how you put a price on that. I was underneath that car, hanging on for my life, as it dragged me up that road wide open. It was the car manufacturer's fault for designing something into a car when they had no idea what they were doing. So it would be interesting how it finally turns out. But I don't care what anybody says: they operated on me three times to put my legs back together where they were crushed. I literally had both my femurs shattered for six inches. They had to take pieces out of my one leg to put my other leg back together to save it.
So it's not a point of how they want to lower these premiums; it's how you want to compensate a person who went through a major trauma. Anybody who gets whiplash, it's very hard to prove. A person like me, literally, my legs were within almost amputation, and I had them saved due to some brilliant doctors putting everything back together and lots of steel. I don't believe the $10,000 deductible should even apply to me, because I was not in another motor vehicle at the time. I was a pedestrian. If I go after the car manufacturer, I will have a legal fight that will be outrageous.
I'm just saying that for the victims that are not at fault it should be an easier time to take care of them and their families. I have to pay all my bills at my other residence. I cannot go to my house because my house isn't anyway near wheelchair accessible. They had to move me. So I have to pay for all those bills at that house plus live in a new residence for however long.
Mr Sampson: Thank you very much, Mr and Mrs Williams, for coming here. I'll tell you, your case raises one of the most bizarre things that came to me very shortly after being asked to take a look at the auto insurance plan, which is that under the current program, if you're walking across the street, which I think was your situation, and somebody runs a light or goes through a Stop sign or does something and hits you, it's your company that pays: not his or hers, but yours. In fact, they may not have significant damage at all. They were on the inside of the vehicle. You were outside, you were the pedestrian, and it's your company that pays. That, to me, was absolutely bizarre.
I think that's one of the fundamental flaws in the design of the current product, because it in no way penalizes the person who did you harm. That's what we're trying to get back to, a situation where you can go after that individual and his or her insurance company to try to right the wrong that they clearly caused. We're not talking about somebody slipping on black ice in this situation, I don't think, and in many of the cases that's not the situation. So I'm pleased that you're here for a number of reasons, not the least of which is that you raised that what I call rather bizarre situation where you've been wronged but you're the one who is paying for it. I don't think that's fair. That's not right. So that's one of the things we're going to try to change with our legislation.
The other question I want to ask you is with respect to the intent to claim, the notice. I know there was no particular requirement, but how long after your accident did you actually notify your insurance company that there was going to be a claim?
Mr Williams: My insurance knew within 24 hours or 48 hours.
Mrs Carol Williams: They contacted me.
Mr Sampson: They contacted you?
Mrs Williams: Yes, they did.
Mr Sampson: The particular notice I think you're focusing on here is a notice with respect to suing the other party. I gather you have a suit in process. I don't want to know the details of it but would ask you, when did you file notice of that suit or when did you approach a lawyer?
Mr Williams: The lawyer was notified within the first seven days too.
Mr Sampson: So within 120 days, it would be quite possible for your lawyer --
Mr Williams: I did not notify the lawyer; my wife did the first week after the accident.
Mrs Williams: The next morning.
Mr Williams: I didn't know who I was.
Mr Sampson: But it would be quite possible for the lawyer to send a notice to that insurance company saying: "Listen, I'm going to sue you. Don't know what for, what amount, but I want to put you on notice that sooner or later we're going to be talking to each other either on the courtroom steps or in the courtroom." You could have hit the 120 days, it sounds to me, well within the time --
Mr Williams: The owner of the vehicle that hit me also notified his insurance company to give me anything I wanted. He was my next-door neighbour.
Mr Sampson: Really? That's even tougher.
The Chair: Thank you very much. We appreciate your presentation today in front of the committee.
Mr Crozier: On a point of order or information, Mr Chair: Mr Sampson made a comment that this legislation is going to correct that, where a pedestrian is struck by a vehicle. So the vehicle owner's insurance is going to pay under this legislation?
Mr Sampson: For the tort side of it. The no-fault benefits will still be covered under the insured's plan; that's right. But right now it's 100% --
Mr Crozier: But they would have paid under the tort side anyway.
Mr Sampson: For general damages, not for economic loss.
Mr Crozier: I'm just curious, but why is that so bizarre? When a vehicle hits another vehicle, limited damage to mine, you suffer a great deal of injury, damage to your vehicle, maybe it took you off the road or whatever -- will the same apply there? I just need your help, because that's a detail of the draft I'm not aware of.
Mr Sampson: Right now the only access to the courts under 164 is with respect to general damages, the pain and suffering category. Under our proposal, there are three accesses to tort: general damages; economic loss and future economic loss, which would include future promotions, future income stream of the claimant, over and above the no-fault benefit; and thirdly, medical and rehabilitation expenses over the no-fault benefit. The claimant would have the right to sue the at-fault party should the medical expenses exceed any one of the categories, either in the catastrophic or the non-catastrophic category.
So there are three accesses to tort, where I suppose there's now only one in the general damages side, and there's actually a fourth category to the extent that there is another party at fault. There was some reference here that there might be an auto insurance company at fault. There would be an ability to sue, and because of the way we've structured the arrangement, the suit to that auto insurance company or town or municipality or whatever, the deductible on the general damages would not apply. So they don't get benefit from that, so to speak.
Mr Crozier: Thanks for the indulgence, Mr Chair.
SAULT INSURANCE BROKERS ASSOCIATION
The Chair: Mr Walz, Algoma Insurance. Thank you for joining us. We have 20 minutes. Please proceed.
Mr Robert Walz: The Sault Insurance Brokers Association of Sault Ste Marie wishes to thank the standing committee on finance and economic affairs for this process of reviewing the draft legislation to amend the Insurance Act and other acts related to automobile insurance.
I come to you as the president of the local Sault Ste Marie insurance brokers association, and I'm also a partner of Algoma Insurance Brokers here in the Sault. Our insurance brokerage firm has been established for over 75 years in the Sault and currently has a staff of 32 people. We sell in excess of $16 million of insurance, with about $8.7 million in personal automobile insurance business. This represents 55% of our volume of sales.
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I must compliment this committee for allowing this matter of automobile insurance to be brought to a public forum. You've had a barrage of people before you in the past week. I watched with interest some of the comments made, and what a week. You've had the rehab people claiming that lawyers have discouraged their clients from participating in meaningful rehabilitation prior to trial in order to augment the size of future income. Then you've had the lawyers indicating that the chiropractors who once charged $26 per treatment are now submitting bills to auto insurers for $35 to $60 per session. You've had groups both in favour of and not supporting the current automobile insurance system. There have been the medical associations, the fraud associations, the law associations before you.
People who work within the confines of the system have all had their say and each strand of the insurance web is being unspun. But basically what is the origin of this process?
Who is there first and foremost for the consumer? Who is the person who initiates the insurance policy, who brings the claims process and assists throughout the claims process and deals with the concerns of the public year after year?
It starts here with people like myself, the insurance broker, and I am in the trenches. Brokers like myself work with our clients. We, as brokers, can allow a choice in selection of coverage. When the claim call comes in, we're in the front line, and we're there to assist.
The committee before me has heard different points of view, different concerns and several recommendations. And as you well know, what has the press reported? "Little Relief Seen for Car Premiums," Toronto Star; "Costs to Soar for Car Owners," Toronto Sun; "Drivers Face Big Jumps in Insurance Rates," Ottawa Citizen; and "Drivers Pay More Under PC Plan," courtesy the Windsor Star.
The number one concern voiced by the press and actually echoed by our clients is affordability. The current auto insurance plan offers an extensive benefits package, but it's just too costly, and this cost is increasing.
With the costs of claims soaring, market availability has diminished. It has been a struggle and has caused frustration with both our consumers and our associates. This has been a second area of concern for our clients: availability.
Thirdly, understandability: The current auto insurance plan is most difficult. The consumer cannot readily understand the insurance system that has manifested itself since the introduction of Bill 164.
I therefore request that you keep in mind three key words: affordability, availability, understandability. The new changes in the current auto insurance system must address the matters of affordability, availability and understandability.
After reviewing the information provided on the proposed auto reform, I must indicate that I am pleased about the changes. There are several great changes in this plan that should help to stabilize the cost of auto insurance. I must admit that there are other areas that can be modified.
I am pleased to see the limit for income replacement has been reduced to $400 a week. Apparently, records indicate that the $400 will satisfy about 60% to 75% of income earners. As a broker, I will advise my clients that this plan has also allowed the option for top-up limits for those who have earnings in excess of the $400 limit. I am certain the availability of this coverage will be appreciated.
The death benefit in the current plan allowed up to $200,000 plus $10,000 per dependant. I really don't believe it was the intention of the auto insurer to become a major source of life insurance. The new proposed limit of $25,000 plus $10,000 per dependant appears to be much more reasonable. Again, there will be optional benefits for those who wish to purchase higher limits. This will also enable those who really need the extra limits to purchase same.
This new plan does distinguish benefits between caregivers and non-earners. In respect to non-earner benefits, I do have reservations that the policy will provide weekly payments for someone who has not earned a wage prior to the accident. The auto insurance policy should not attempt to provide incentive. The policy should be one of indemnity, not entitlement. I am, however, pleased to see that the non-earner benefit is not payable for the first 26 weeks after an accident. It will therefore only apply to more serious cases.
Tort for economic loss will be introduced under this new plan. The ability to sue for economic loss is acceptable and the 85% of net earnings and future income seems reasonable.
The pain and suffering access threshold deductible of $15,000 is good, but I do question the fact that "impairment of a mental or psychological function" is included. I think this has been said before, but this will open up the floodgates. The committee should consider deleting the psychological impairment terminology. I would suggest "psychological function due to a physical injury sustained to the brain or nervous system." In other words, if the injured has brain damage that causes psychological impairment, a tort action can be considered, as there would be physical proof to confirm same. The statement of physical injury causing psychological impairment can easily qualify this type of claim.
In tort cases, it must also be stressed in this system that any rehabilitation costs awarded to a claimant did provide some benefit either by reducing the length of the expected recovery period or by returning a claimant back to work sooner.
Should lawyers be allowed to work on a contingency fee basis, an enticement for larger rewards would be implemented. This would drive up the claims costs and would also roadblock any attempt to keep auto insurance affordable.
Raising the fine for driving without insurance is most commendable. However, the maximum fine of $1,000 may be seen by some drivers as an amount that is cheaper than their insurance costs. This is in relation to the current system. I therefore support the $5,000 maximum limit suggested under the new plan.
Before I proceed further with information on the rehabilitation issue, I must indicate to this committee that I was also an insurance adjuster for seven years before being an insurance broker. I am also currently completing a risk management designation from the American Insurance Institute.
In the questions-and-answers this committee has endured during the past week, there seems to have been a problem in defining the barriers of rehabilitation. There are a number of barriers that impede this process:
(1) Extended hospitalization due to a lack of coordination of medical care and/or poor discharge planning.
(2) We find that there is uncoordinated medical treatment. As opposed to the haphazard application of health care services -- we've had people here today who say they've been bounced around from doctor to doctor and there seems to be no ready plan laid out for them when this rehabilitation issue takes place -- the injured should receive scheduling services, such as physicians, nurses, the therapists, the chiropractors, so that the timing of each service will be most effective. There should be a joint treatment goal among all health care providers, including discharge or return for work planning. There seem to be no goals among everybody that seem to help these people during the rehab process.
(3) There are other uncoordinated medical treatments that include duplicate diagnostic tests because health care personnel are not sharing information; conflicting treatment programs and medications, as the injured does not have a doctor who coordinates the many specialists who often contribute to the case; doctor shopping by the injured because they may not be satisfied with the results of the treatment.
Rehabilitation should be seen as a cost-saving measure. The cost of rehabilitation should be less than the cost of future funds that would have been paid for medical treatment had the rehabilitation procedure not been done, and/or the savings experienced due to the fact that the injured person has returned to work sooner as a result of the rehabilitation. The current auto insurance product does not look at rehabilitation process in this manner. Hopefully the future one will.
Reducing the cost of health care services and medical expenses: The cost of some health care services can be drastically reduced. Under the current plan, the policy can provide for the cost of 100% of health care services and medical expenses prescribed.
There is such a simple solution in reducing these costs. I request that this committee consider placing a small user fee on these out-of-pocket medical expenses. A user fee will add a financial stake on behalf of the user. I recommend a nominal fee of $5 or $10 for each health care treatment or medication prescribed. This fee could be reduced for the non-employed, the caregivers, the students and the seniors. This fee could also be waived for those severe cases that pass the threshold.
A fee would act as a safeguard. It is human nature to accept all that is offered free of charge. When we are asked to participate in the expense, no matter how small our participation, we question the effectiveness of this medical cost.Even myself, I go to chiropractors and what not, and I know that if I'm scheduled for five or 10 meetings within two weeks, I'm looking at $70 out of my pocket. Right away I'll question, should I see my physician and get some medication? I'm saying that a lot of these costs involved could be drastically reduced if we look at a system that includes a small user fee.
With a small financial stake in these expenditures, the injured person would also ensure that rehabilitation people are efficient in keeping the true interest of returning the injured person back to their pre-accident condition.
It is now commonplace for the users of health insurance services to pay a user fee, and the public has grown to accept this. I believe this user fee would dramatically lower the medical expenses to the point that it would reflect a substantial savings in relation to the unnecessary medical treatments.
In conclusion I would just like to restate some of my points:
Other than principal caregivers and students, don't give weekly payments to injured non-earners.
Delete "psychological impairment" and add "psychological injury due to a physical injury sustained to the brain and/or nervous system."
For tort cases, rehabilitation costs should only be paid to a claimant if it is evident that the rehab was effective in reducing the length of the expected recovery.
I request that this committee consider placing a small user fee on those out-of-pocket medical expenses. I recommend a nominal $5 or $10 for each health care treatment or medication prescribed.
Please exclude contingency fees to lawyers in insurance litigation.
I truly believe that this new plan proposed will produce a product that will stabilize the cost of auto insurance. Thank you for listening to my views on this subject.
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Mr Martin: Thank you very much. You certainly gave the committee and Mr Sampson lots of food for thought here. I suppose I can't disagree with you on the principles of affordability, availability and understandability. I think that's crucial to any insurance system we have in place, particularly in today's society where we expect that people will have access to these vehicles.
However, in the area of affordability, through a presenter this morning and in reading the papers just in the last couple of days, I guess, it's become clear to us that under the present system the insurance industry is making a reasonable return on their investment. I think the figure this morning was 8.5%, and we had some discussion about that with Mr Day, who was here.
I know that some of the discussion, or I guess a good part of the engine driving this discussion, is the question of affordability, both from the industry side and from the consumer side, and how we find a balance there, how we find a place that doesn't give everybody everything they want but gets us to a place where everybody can stay in the game. I would suggest to you, as Mr Day actually said this morning, that under the area of affordability we have something now that is getting us there. The struggle has been getting us there, and why at this point, as he said, do we need to throw the baby out with the bathwater and change the whole thing completely again for a third time? So I would ask you to maybe comment on that.
Mr Walz: Firstly, the percentage indicated in the profit margin also included the property insurance and all the other insurances tied in across the country, not just auto insurance. I understand from the records shown -- I read something about two months ago where it actually costs approximately $860 per vehicle just in claims costs. That for every vehicle, every private passenger vehicle, and that's not administration and all the other costs.
The only time I've seen rates come down actually was just near the end of OMPP, when for whatever reasons claims costs did come down and then we had a change shortly after that. That's the only time I've seen it come down.
I still think the current plan is too costly right now in that when we see the costs of each individual, the severity of each claim, the amount that we pay out per claim, especially under accident benefits, has gone up 30% to 40% or so in respect to prior cases.
I can't comment as far as profitability of the insurance markets. I'd like to see the figure. I do understand that it's actually a loss for auto, from the records I've been shown. I think, ballpark, about $1.06 is paid out for every dollar taken in. That was probably about a year ago, and I realize we've had increases since then. So as far as auto insurance in Ontario, actually we're at a loss figure.
Mr Wettlaufer: Mr Walz, welcome to the committee. Thank you for coming here. As a former insurance adjuster, you've seen the best of both worlds, I guess. Were you an independent adjuster or a company adjuster?
Mr Walz: An independent adjuster.
Mr Wettlaufer: You were an independent adjuster. Good, because that relates to the question I want to ask.
On the medical treatment, the problems that you've brought out here are something that we've heard for the last two weeks: the uncoordinated medical treatment, the scheduling of services, the lack of joint treatment goal, duplicate diagnostic tests, conflicting treatment programs, doctor shopping. We also have case managers. Do you see that we have replaced what was considered to be an inefficient system of independent adjusters with perhaps an inefficient system of medical treatment?
Mr Walz: Again, speaking for adjusters in this area, I wouldn't say that they're inefficient. Actually, we have some very good people.
Mr Wettlaufer: I said perceived as.
Mr Walz: Okay. I think the problem right now is we have basically too many fingers in the pie. It seems that there are the rehab people, the chiropractors. Somebody gets injured and it's a free-for-all because there are so many services available for them and then we get this overlap. Somebody needs to coordinate it, maybe from the claim source.
Mr Wettlaufer: An adjuster could serve.
Mr Walz: An adjuster could do that. Exactly.
Ms Castrilli: You have put a great deal in front of us. Unfortunately, I don't have the time that I would want to ask you all the questions. I will ask two quick questions. I seek the indulgence of the Chair on this. The first is that I totally agree that the main issue is affordability, and I wonder how you reconcile that with your statement that you think this draft legislation, should it be enacted, would stabilize rates when in fact the interpretation of stabilization of rates, according to the Insurance Bureau of Canada and Zurich, was somewhere between 7% and 12% a year.
Mr Walz: The way I see it, the current draft that we have before us would cut down claims costs in relation to the Bill 164 that we have now, so in that, and in our office -- and again we're a large brokerage office -- we have seen rates stabilize.
Ms Castrilli: But do you define stabilizing in the same way?
Mr Walz: I mean within 2% or 3% or 4%, as opposed to anything higher.
Ms Castrilli: So you disagree.
Mr Walz: Yes. We're looking for them to go down, but we haven't seen that.
Ms Castrilli: Explain to me why you think contingency fees would add anything to rates. I'm a lawyer and I don't understand why you think that would add anything to rates. It's not something that an insurer would pay, and if a person loses, in fact the lawyers get nothing.
Mr Walz: I just question the fact that if it was being settled out of court as opposed to going to court and the settlement is for what possibly the legal system finds to be low but the claimant wants to accept that -- I'm not saying all lawyers; my brother's a lawyer as well, so he'll slap my hands for that -- but there's a question of, what is the incentive there? Is it to get the utmost highest award? Because we do work in a system that if someone has an excessively high award, all of a sudden that becomes the norm and it just seems to climb and climb.
Ms Castrilli: I don't see how that affects rates, though, because that's payable by the individual, not the insurance company.
The Vice-Chair: Thank you, Mr Walz, for your presentation today.
JAMES BUSCH
The Vice-Chair: Our next deputation is Mr Jim Busch. Good afternoon. Welcome to the committee. Would you mind introducing yourself for the record, please, and then begin when you're ready.
Mr James Busch: Thank you, Mr Chairman. My name is James Busch. I'm a physiotherapist from Sudbury. My wife and I opened the first private practice north of Barrie some 10 years ago. Our facilities are all private physiotherapy, and approximately 12% of our caseload is made up by motor vehicle accident cases. I apologize for the shortage in numbers of my topic today. I only brought 10 papers. I didn't realize there were going to be so many people here.
I really appreciate the opportunity to speak to this committee. There are several things that I believe I could go over in the proposed changes to the legislation. Many of them have been gone over and over again, as to some degree my topic. I'm going to spend my time on referral for profit in rehabilitation. I believe it's a large topic and becoming larger every day for both cost containment, accessibility and, unfortunately, fraud.
Referral for profit, whether it is by a health care provider -- and I think another area that has been missed by some of the previous presenters, and that is our lawyers, and insurance companies are also involved in referral for profit -- really takes advantage of the public's trust in them as people they look up to, whether it's their physician or the lawyer they're paying for, their physiotherapist or chiropractor, what have you.
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I really don't believe anyone should have to wonder why they're being referred for either a service or a product, and unfortunately, in today's system that occurs on a daily basis. For example, why should a patient have to wonder why they're being referred for medication, X-rays, labs or rehabilitation? Is it because the physician owns a facility or is it because they really have a problem? Conversely, if I treat a patient and I refer them for a back brace, they should never have to wonder whether or not they really need a back brace or if it's just because I told them to go down to the retail office or the store next door that I own that sells back braces and Obus Forme chairs and TENS machines and what have you.
Lawyers are getting into the business every day now, not quite as quickly as physicians, but one really wonders, does the lawyer really have the best interests of their client at heart or are they just trying to cash in on some major oversights over the last bit of legislation?
Insurance companies of late, especially those that have been coming up from the United States, some of the multinationals, are quickly getting into the field of rehabilitation, and interestingly enough, one of the largest firms, one that purports to be a medical management company to contain costs, is one of the highest billers of rehabilitation services under the current plan.
I really wonder why we continue to make the same mistakes over and over again that other jurisdictions have made. The United States has gone up and down and sideways with the problem of referral for profit. They've produced countless studies that show that in rehabilitation, which I'm going to veer off into now, the problems are, in the shortest way I can describe them, a decrease in the public's choice of facilities.
As I talk around the province to various people, they say, "How can bringing more people in, physicians opening up practices in your community, decrease the choice of the patient?" It's quite simple. The patients have, by and large, a tremendous amount of trust in their physician. Their physician tells them that this is a referral for a facility they own, and they think it's got to be the best place to go. If they don't think that, then they're worried if they don't go there, the physician may not continue to give them the same type of care they had previously.
Given the unfair playing ground that creates, since many insurers still require referrals even though physiotherapists don't need to have a referral from a patient and they can walk in off the street, still 88% of the patients that we see in our facility come in from family physicians, and very quickly when a family physician opens up a facility, the physio-owned facility goes out of business. We're seeing that now, not yet on a daily basis but certainly on a monthly basis over the last couple of years.
We're not really worried about what happens to the other individuals, the other professionals in this legislation. However, one of the problems or one of the things that is of concern is accessibility, and certainly that will decrease accessibility.
The studies have also shown that there are decreases in patient care when we have referral-for-profit situations. The decreases in care occur largely in the most recent studies out of Florida, in that there are fewer registered physiotherapists treating the clients per patient in the facilities. The studies also show less time is spent per treatment with the physiotherapist.
The third thing is increased costs, and this committee is supposed to be -- we hear a tremendous amount about costs in all phases of government, and certainly we're all getting real sick and tired of paying the insurance fees we're paying and we're wondering what we can possibly do to decrease those fees. Costs in a referral-for-profit situation have been shown in virtually every jurisdiction to do nothing but increase. The costs, of course, increase for various reasons, one of which is the decreased competition and the compliancy with the physician's wishes to go to the facility that they're referred to, that the physician owns.
Inappropriate referral or overreferral: Cases that really don't have to go for treatment are being sent for treatment. There are numerous examples of this in the literature. The state of California did a study showing that when physicians didn't have ownership in rehab facilities, they referred 30% of people with soft tissue injuries for treatment. That is almost exactly the same percentage we find in Ontario for the Workers' Compensation Board with the acute clinics, where no physicians have ownership -- within a couple of per cent -- 27% to 32% over the last six years of people who are off work with soft tissue injuries are referred for treatment. We would expect that would be about right when we look at normal healing graphs.
In the state of California, when they reviewed this and found that treatments were increased by such a high percentage, they instituted a state law that said physicians were not allowed to bill workers' compensation insurers if they had ownership in rehab facilities. We also see increased numbers of treatments when we have referral for profit, and I really can't tell you why and neither can the researchers, but for some reason, if a physician owns a rehab facility, they seem to take longer to get better than if they don't own it.
Since many referral-for-profit facilities in Ontario only look at what we could call the cream of the crop, in other words, they only look at treating extended health care patients or motor vehicle accident victims, and they don't look at treating workers' compensation, which is a much higher debtor and low fixed costs for treatment -- not that I would advocate looking at some of the board's things as gospel -- this drives the price up for both the Ministry of Health in the hospital system, increases the waiting lists and harms the injured worker, and drives the price up for employers.
If I might show you something that you've all seen over the last couple of days, and probably wish you wouldn't and certainly we would hope we'd never see them again, in every major paper across the province of Ontario -- I know you've been to Thunder Bay; I'm sure they had it there as well -- physicians are cited for fraud. CPSO has just told us that 100 physicians have been cited for fraud, most of which come from referral-for-profit facilities or in some way are linked to physiotherapy clinics that they have ownership in and/or get kickbacks from and/or charge excessive fees to.
In spite of the several ways the American physicians have found to increase fees and the cry and complaint from CPSO and OMA that physicians in Ontario, for God's sake, would never be like their brothers in the United States -- and before this gets right out of hand, let me say that this is a very small percentage. CPSO tells us that 200 out of 25,000 physicians are the only ones who have registered to declare they have ownership, and they've cited 100 of them. So we find that the physicians who want to take advantage of this system, and according to CPSO are doing so in the hundreds of millions of dollars per year, are somehow managing to find a way under the current CPSO regulations.
If we look at referral for profit and we say it's causing increased prices, decreasing patients' choice and decreasing the care people are given, and we say what can we do about it -- I see Mr Sampson has already answered this question to some of my colleagues earlier and I would like to take him somewhat to task on this. I think you're really sidestepping the issue, sir. To wait for the Ministry of Health, or more particularly, for CPSO to tell the Ministry of Health what they think they ought to do, I think is really irresponsible.
CPSO has decided that what they're going to do is they're going to let the few physicians who really are making a mess out of things, making all physicians look bad and really hurting the whole state of rehabilitation as we know it in the delivery system in this province, decide for themselves what they think the CPSO ought to do. I think the only thing we can do is stop referral for profit. I really think that if the minister is serious about decreasing costs, increasing availability and stopping fraud, referral for profit can't be left to the colleges, my college included.
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Perhaps I might take the time to read you what CPSO has decided they should ask next month to all their members and ask them to mark on a ballot:
"Current regulations permit physicians to refer their patients to diagnostic or therapeutic facilities in which the physician has an interest, as long as the physician discloses this interest to the patient and the college before the service is performed. This is known as self-referral. Do you favour:
"(a) A new conflict-of-interest regulation banning self-referral in all circumstances.
"(b) A new conflict-of-interest regulation permitting self-referral based, as now, on disclosure, but also on medical necessity, quality assurance and outcomes."
By stuffing the ballot box with (b), the only possible answer anyone with half a brain would put down, CPSO really is setting the stage so that they can announce something that they've been saying privately for months and months over this issue, that we now have new conflict-of-interest guidelines that consist of both declaration and appropriateness of treatment. Right now, they can only get 200 physicians across the entire province to admit they've got something to do with rehabilitation, half of which are just under investigation.
CPSO claims that it's impossible to police prohibition on conflict of interest, and I submit to you that if it's impossible to police prohibition on conflict of interest, it sure as hell is impossible to police appropriateness of referral, when they can't even get the people to declare at this point in time.
I think the minister has a large problem on his hands and I believe the example that was put forth by the federal legislation in the United States may have some help for him.
First of all, we do not have to wait for the Minister of Health to make any declaration. I've been dealing with the Ministry of Health now for months and months and there's nothing going to come out of the Ministry of Health. The auto insurance act has every right, has certainly as much right to decide who they're going to pay for service as they do to tell us that they're going to accredit us. There should be no problem in stopping physicians from owning rehabilitation facilities -- not from owning, but from accepting fees for motor vehicle accident insurance from facilities that they own.
This is what the Americans did in their federal legislation where they have said that physicians may not own and bill medicare for physiotherapy, occupational therapy, X-rays, medication and five or six other medical treatments. They didn't tell them they can't own them, they just can't bill medicare. If third-party payors want to continue to pay them, that's up to them.
Other things that can be done are outcome-based accreditation. I think you're well within the bounds of the ministry to do that. I would caution you to say that's certainly an area where the various colleges should be involved, but peer review should be taking place. Most insurance companies that are really active and working on this process today are already using some form of peer review when they review cases before they send them to DACs.
I think that allowing for earlier challenges by insurance companies, keeping in mind that we have to have the whole arbitration system to protect myself, a carrier of auto insurance, in case I get in an accident -- but the insurance companies are paying for the treatment. If we're going to put any onus on them to do any monitoring to keep the fees down, then we've got to let them get involved at the beginning.
As a practitioner, I have no problem at all with an insurance company wanting to get from me an assessment and an individual written plan as to what I'm planning to do with that individual and to be able to look at that as I'm treating them and make sure that what I'm doing is appropriate and that I'm not forever treating someone who isn't showing any progress. Why shouldn't they be able to have a look at that? They're the ones paying. You, sir, as an individual would want that if you were paying out of your pocket. You'd want to see progress. Certainly anyone who's paying should have the same right.
Lastly, I would say that I do believe, as CPSO so clearly stated in the paper it released to the press, that a large part of the fraud problem, which seems to be growing, arises from and exists partly as a result of the way the provincial no-fault auto insurance scheme has been established and administered. There's too damn much money out there for rehabilitation. When people need it, there should be a process in place that they get all the treatment that is required to help them out, to get as close as they can to the state they were at pre-accident, but when you start to put these absolutely absurd numbers out there and make them available, it just sets the stage for people to take advantage of the system.
In Sudbury, our average fee in 1995 for some 239 motor vehicle accident cases was $1,503. We have currently a physician group that wants to come in. Their pro forma calls for between $4,000 and $5,000 for the same cases and they're saying that they have a terrific service and that they're very cost-effective and very well received by insurers in southern Ontario where they have similar facilities. The research that I've done through the private practice association shows that in fact most insurers aren't even going to shake their head at between $4,000 and $5,000. I think it's absurd. We had two cases out of 238 cases last year that went over $4,000. Both people had their spleens removed and had multiple injuries in a car accident. Thank you.
Mr Spina: Mr Busch, thanks for the presentation. It was interesting to note that a number of the quotes that you gave us were right out of the analysis of some of the discussions that went on. I guess what you're getting at is that even though the College of Physicians and Surgeons right now claims they can control the abuse of the system through that self-referral, it is not really happening to the extent that it could. Did I understand that correctly?
Mr Busch: Absolutely.
Mr Spina: Your approach and your method of addressing this is that the Ministry of Health should not be addressing it but we should be addressing it under the Insurance Act?
Mr Busch: That's correct. I think the Ministry of Health, as in my college, CPSO and all the other colleges under RHPA, is responsible to set firm guidelines on referral for profit, self-referral, conflict-of-interest guidelines. However, the Insurance Act is not bound by the Ministry of Health or any of the colleges when they write their act.
Mr Spina: But if we change the Insurance Act, are they bound by the Insurance Act?
Mr Busch: They're bound by the Insurance Act if you're the payor and you're just not going to pay for facilities that are self-referring -- end of discussion. WCB currently has different rules and regulations than the Ministry of Health governing health.
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Mr Spina: If we took it a step further, if we have a victim who has been in a motor vehicle accident and we need someone, an individual, a body, whatever, to take the responsibility for treatment intervention, for a treatment plan, where do you see that source fitting in?
Mr Busch: Where's your question?
Mr Spina: Who would make that decision? Who would do that assessment, in your opinion? Right now, it seems to be the insurance adjuster or the doctor who seems to be making the decision as to the amount of rehab that the patient has, that the victim has, and we're seeing that a lot of the rehab costs are out of control, as you indicated. So how can we control that? Who would make that decision? Who should be making the recommendations?
Mr Busch: First of all, let's get a couple of things straight: By stopping physicians from owning and referring to rehabilitation clinics, you don't change any part of the process except referral for profit. Physicians would still continue to refer. I expect next year 88% of my patients will still come from physicians; 10% will come from employers and insurers, as they do this year; and about 2% of the people will be walk-ins.
Currently, the way the system works is that when physicians refer someone to you, they also get to act as one of the buffers, as their patient advocate, if you will, but also as a check in the system to make sure what I'm doing works. But what I'm saying is that if we got rid of referral for profit, you still have to make sure that what I do works. The patient went in. He's not going to the physician clinic now that we could have seen and are seeing, by the way, multiple. This is two years they've been in this game, and what we've seen to date in the process is that we still require an accreditation system, an auditing system, a peer review system that goes in place and lets insurers decide and put lists together, if you will, and decide whether or not I'm effective. If the guy across the street is more effective, he's going to get the work.
Mr Spina: But if you and I are each physicians and we each have a clinic, what's to stop us from my referring to you and your referring to me?
Mr Busch: Referring to each other. This is an argument that CPSO uses and there are some examples of this system. I believe that the auto insurance act probably oversteps their bounds when they start to look at, or do overstep their bounds if they want to look at, types of penalties that they can put on me or on a physician in regard to conflict of interest or not fulfilling the duties of my regulatory board.
However, if we make laws, all of our laws, for the few individuals who are going to screw the system, who are going to take advantage and go underground in the system, then all of us should walk around with flak jackets on. The majority of individuals do not set out to take advantage of the system, and if we encourage laws and severe penalties to take place through the Minister of Health -- which we do not hold much hope for -- then maybe we can catch some of those people as well.
But the majority of individuals, the majority of physicians are very dedicated health care providers. Right now, they feel that they're being squeezed and, any chance they can, they're trying to make some more money. Stop paying them. Very few of them are going to play games with you.
Ms Castrilli: Thank you very much, Mr Busch. You certainly make your points very clearly. I want to make sure I understand. I don't think there's any quibble that conflict of interest is a huge problem, but in many professions conflict of interest is handled by disclosure rather than outright prohibition. Why do you think that a disclosure provision with stiff penalties might not work?
Mr Busch: The reason I think it won't work is because it hasn't worked. If we continue to try to make the same mistakes that everyone else has made -- it has never worked in the United States. The first thing they tried was disclosure. Where they tried disclosure in the States, they had a decreasing choice for the patients, an increase in costs and a decrease in patient care. It hasn't worked. Disclosure in the province of Ontario has been the law since January 1, 1994; 200 out of 25,000 physicians have disclosed that they have ownership. Yesterday it was declared by CPSO that 50% of those physicians are under investigation. I don't think it's working.
Ms Castrilli: I suppose the fact that they're under investigation is a good thing in any event. But obviously you don't think the stiff penalties will do it; it hasn't worked. The studies you cite, are they studies that you could share with the committee?
Mr Busch: Certainly. If the committee would like copies of studies, they can be made available.
Ms Castrilli: I think that would be very helpful to us.
Mr Busch: The ministry has them. I keep calling him Minister Sampson, but the parliamentary assistant --
Ms Castrilli: I'm sure he loved it.
Mr Sampson: Thank you for the promotion.
Mr Busch: I saw you smiling and I got going on it and couldn't get it turned off. Do you have the studies?
Mr Sampson: We have some of the studies and we've got a copy of the news release of yesterday from the college.
Mr Busch: Yes, it's a seven- or eight-page release.
Mr Sampson: it's discouraging.
Ms Castrilli: I wonder if that could be circulated, because I have not seen that release.
Mr Sampson: We'll table it.
Ms Castrilli: That would be useful.
You mention two other recommendations at the end that we really haven't talked about. One is "an outcome-based accreditation system." I wondered what you really meant by that. The other point is "earlier challenges by insurance companies." We've had evidence that said that insurance companies now challenge anywhere from two to six weeks from the accident. That's not your experience, I take it.
Mr Busch: In fact, they haven't. In the current legislation they can challenge -- I forget a time frame, but at $2,000 worth of billings. Under the prosed legislation, they can challenge at six weeks or 15 treatments. They don't have to, but they can. I applaud any earlier challenge. I think that they're paying the bill, and everyone that is supplying service ought to know that from day one -- not from the 15th treatment, not from the sixth week, but from day one -- someone's actually watching.
Ms Castrilli: How early is early? How early would you say?
Mr Busch: Day one. Why shouldn't they? If I'm treating you and you have no insurance and you're paying me cash, you want to know day one what I'm doing to you, don't you? I certainly do. That's the way I spend my money. Why shouldn't the insurance company be able to know day one? If it's okay to have a look or to challenge after 15 treatments, why isn't it at the beginning? If I could bring someone in and assess them and start them on a treatment program and really there's not a damn thing wrong with them and they can't challenge me for 15 days, and probably they're not even going to see it at that point in time, what good does that do? If they're trying to make a living as insurers and trying to keep the costs down so my auto insurance doesn't increase again next year, why shouldn't they look at day one?
Ms Castrilli: Other professionals have told us that in fact the efficacy of a treatment can't be determined until further down the line.
Mr Busch: No, but treatment protocol can. If I was reviewing your case, if I was an insurer and reviewing your case, I want to say: "What did that physiotherapist found? What did he find in his examination? Did he do one, to start with? What did he find in the examination? What treatment protocol did he put out and how long did he say it was going to take?"
Mr Martin: Thank you for coming today and challenging us in the way you have. Certainly this is an issue that needs to be dealt with and I'm not sure whether this piece of legislation in fact does that. I know that there is tremendous emphasis put by this government on catching those who would defraud the system on every level, most particularly, though, at the level of the victim and the consumer. It seems to me from what you've said here, and backed up by statements by others around this issue, where it's suggested that the frequency of treatment is about 40% higher and costs 30% to 40% more for patients at a clinic owned by the referring physician, and that patients were also 50% more likely to be referred for therapy if the referring physician has a financial interest in the therapy clinic -- my concern is that patients get the treatment they need and that they get it in a way that allows the larger system to continue to be able to provide for that treatment.
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I don't know; maybe I'm getting it wrong. This is my only day on the committee so far, but it seems to me that everything I read is about capping stuff, that if you do that, somehow you'll do away with the fraud, somehow you'll change the system so it becomes more affordable and available and all those kinds of things. I think you have taken the lid off a Pandora's box here and suggested that maybe there are more sophisticated, complicated things that need to be dealt with and that legislation that simply puts caps on things isn't going to do it.
Mr Busch: I'd like to respond that my concern is that patients get the care they need too, and if I don't do a good job as a private practitioner they're going to the facility that is currently across the street from me -- and rightly so; they should.
What I believe is that the more-than-generous caps in the current Bill 164 as well as the more-than-generous provision made in the revision of 164 just aren't necessary. Most soft tissue injury can be dealt with for a lot less money. My concern really is that people do get the treatment they need. If I were to say, "Our experience, guys, is $1500; limit it to $1,500" -- quite frankly, that's pretty good. I don't have any problem, with what I'm charging, let me tell you. The fellows that are moving in right now and are charging 300% more than me are going to do real well. They've already told all their investors that they're going to make 185% in the first year.
But if we leave it at that level, what happens to those people who did get better but it cost $4,000, the two people who did go over the $4,000 mark? What about the people who did get better and go back who were included in that $1,500 average, who were at $3,000 or $2,500? What we have to look at is saying: "Well, Mr Busch, if you're going to treat people, we're going to put on a very reasonable cap that's going to cover the majority of people you see for soft tissue injury, and if someone does need more treatment, prove it to us. Show us objective signs of what's wrong with the individual and show us objective signs that they are in fact getting better." It's very possible to have someone in the facility who truly has something physically wrong with them, and you can have them there for five years and they're not going to get any better because they've already plateaued.
Mr Martin: Is there anything in this bill at this point that will get us there?
Mr Busch: No.
Mr Martin: And will what you've suggested by way of change, if accepted and implemented, get us there?
Mr Busch: I think it needs more work to get us there, but peer review and earlier monitoring will go a long way to getting us there. If I know someone's watching me from day one, I'm going to certainly make sure I don't get my hand slapped.
Mr Martin: Mr Chair, can I put a question on the table for the parliamentary assistant and perhaps his staff? What efforts have been made to date to get a handle on the reference of this morning that a whole lot of insurance policies, including OHIP, are crossing over each other and that in some instances we as a government insurance industry are getting hit maybe two or three times, when if you could determine there was one appropriate place to do it that would cut back on the cost to a whole lot of people? Is there anything being done to disentangle all that so we can figure out where the most appropriate place is for people to go and what the most appropriate vehicle is to be paying for that, and in that way maybe get a handle on the cost of insurance? Could you also tell me if anything's being done at this point to deal with the issue that's been raised by the presenter in front of us now, and can we expect that something will come at us in the not too distant future to respond to some of that?
Mr Sampson: I'll table the first question because I think it needs some clarification, and I don't want to delay subsequent presenters. Perhaps we can deal with that during some of our down time so as to be going forward, because I'm not exactly certain you understand who pays what and the sequence of events and --
Mr Martin: No, I'm not.
Mr Sampson: So let's table that one, if I can. The second one, as it relates to the conflict of interest and the profit from referral -- we're not finished our hearings yet, but we've heard things like outcome-based accreditation processes etc. That could well be under the authority of this DAC committee that's been established and reports to the minister, not to the OIC, under the proposed legislation. There are other things we think that DAC committee can do to deal with making sure, as the deputant before us was saying, that dollars are spent effectively and efficiently and not just spent for the sake of spending them. That goes to the point of establishing fee schedules, establishing treatment protocols for various injuries, and that committee could also be empowered to limit the 15 visits to two or three or six or whatever the research says is appropriate for various injuries, by the way, which I think would go a long way to deal with the item raised by the deputant. We could also have that committee perform such things as peer reviews or outcome accreditation or whatever form to deal with this issue of, is the person performing the service, providing a service for the dollars being spent?
Mr Busch: I would just make one caution. I read James Daw's article on Sunday where you made mention of accreditation. Be very careful when you start to get into looking at best treatment guidelines. In the perfect world, that would be lovely. They haven't been made. The current studies out there are very deficient. Enough studies in the health care field, especially in rehabilitation, just have not occurred. If we start to look at setting guidelines from information currently out there, you're going to very much restrict the treatment. However, if you start to look at objective findings and changes during treatment, and that when changes during treatment quit, you're done, then you're on much stronger ground for the majority of people today. Hopefully, 10 years from now we'll have those better guidelines.
The Chair: Thank you very much, Mr Busch. We appreciate your presentation to the committee today.
GLEN YATES
The Chair: We now welcome Dr Glen Yates. We have 20 minutes to spend together.
Dr Glen Yates: I apologize to the honourable members. Unfortunately, I didn't hear I was supposed to bring 30 copies of things. I've left a full copy, with appendices, with Mr Carrozza, and hopefully you'll be getting that very shortly. Bear with me. I'll try to make it understandable for everyone.
I am a duly qualified chiropractor in private practice in Sault Ste Marie. I practise in partnership with my wife, who is also a chiropractor. We have excellent relationships with other health practitioners in our community, and we find there's frequent referral of patients between us and our medical colleagues. I see patients who have been injured in an automobile accident every day, and they represent approximately 20% of my practice. This is my sixth year in practice.
I'm a little disturbed by news accounts of evidence from insurers and their experts saying the present draft legislation would produce unacceptable medical and rehabilitation costs. I'd like to give some simple, real figures to encourage clear thinking on the issues. These come from a May 1995 report from Canada Life Casualty Insurance Co entitled A Review of Fees Charged by Health Care Practitioners, a copy of which I've left with the standing committee.
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My second topic is, are current costs the problem, and if so, what costs? The study by Canada Life relates to data on auto accident victims insured by that company and seen in the greater Metropolitan area in March-April 1995 by chiropractors, physiotherapists, massage therapists, and family physicians and/or psychiatrists-psychologists. It was a random sample of 250 files studied. Attached in my package is a summary of the chiropractic treatments, which is in appendix A. Roughly 43%, or 108 patients of the sample group of 250, chose chiropractic care. As can be seen -- I just bought a brand-new colour cartridge for my computer so I can make colour things. I'll pass this around, if you'll bear with me. Pardon the protocol, people. It just gives a little highlight to what I'm saying.
As you can see on the chart, 23.1% received less than 10 treatments; 57.4% received less than 20 treatments; 73.1% received less than 30 treatments. All other treatment frequencies are less than 5%. These cases with longer-term care will involve more serious injuries, reinjuries, and in some instances, I suspect, overtreatment.
The Canada Life report lists an average initial consultation fee of $65 and an average treatment fee of $28. There are no data collected on the costs of X-ray examinations, which would have been ordered in some cases. Assume the following total cost for the patient who received 29 treatments, remembering that most patients received less than 20 treatments: initial examination $65; diagnostic X-rays, for argument's sake, we'll say $35; treatments, 29 times $28, would be $812; the report fee is $75 for a standard report. That brings the total to $987. In summary, chiropractic care generally costs less than $1,000. This compares with, for example, management in large rehabilitation multi-disciplinary clinics, with several concurrent providers, which will often costs in excess of $5,000. Common fees are approximately $3,000 for a case manager, and costs of $1,500 to $2,500 when a case is reviewed in a designated assessment centre.
I submit that this is not sufficient to say that runaway medical and rehabilitation costs are an unacceptable problem. Different areas must be seen separately for what they are. Amendments to the law now should encourage effective and cost-effective management. The Quebec task force report and the new insurance commission guideline dated February 15, 1996, affirm the effectiveness of chiropractic management based on activation and treatment of manipulation, mobilization, postural advice and simple exercise. The above figures demonstrate cost-effectiveness, I daresay along with such studies as the Menga report with the Ministry of Health, which I believe most are familiar with.
I now turn to the legislation. Does the proposed current legislation generate unacceptable costs, as alleged by the insurance industry?
(a) With respect to medical and rehabilitation benefits under the proposed draft legislation, I note that "medical benefits" refers to health care, including what health professionals commonly would call rehabilitation. "Rehabilitation" refers to social and vocational rehabilitation.
(b) Within the first term, "medical or health care benefits," everything is subject to a treatment plan. The one limited exception is that relating to chiropractic and physiotherapy services, found in subsection 42(6) of the proposed SABS.
(c) That exception provides for a maximum of 15 treatments. The approximate cost of chiropractic services, using the data from the Canada Life summary and extrapolated to this case would be initial exam, including X-rays, of approximately $100; the 15 treatments times $28, $420; and a treatment plan and reporting fees of, say, $100. That would bring the total to $620 under the new proposed legislation. And in my office currently in northern Ontario, we don't have the option of charging as much -- our patients won't pay that -- so my fees would be less; in our office, $500 would be the more accurate cost.
(d) I think everyone can agree that there is nothing in subsection 42(6) that is going to drive up insurance costs. As I understand it, with the various new controls being introduced by the government, including treatment plans and streamlined DAC systems, there us nothing in the draft legislation that provides real cause for concern.
The Ontario Chiropractic Association, of which I'm an executive officer, the secretary-treasurer, has suggested in its submission an eight-week period, as is common in chiropractic practice for, say, a grade 2 or grade 3 whiplash injury. This would involve three treatments per week for the first four weeks and two treatments a week for the second four weeks, a total of 20 visits. That represents a total cost of $660. Isn't that an acceptable cost for a generally effective treatment protocol? How significant is this cost to insurers and how does it compare with the costs of other providers of case managers, of adminstration, of legal advice?
In summary, for myself, (1) it is appropriate that the draft legislation provides for acute chiropractic care without the insurer having the right to veto or challenge this. Such care is the most effective and cost-effective on the evidence and is not a source of significant cost to the insurance company.
(2) The acute care period specified in subsection 42(6) of SABS should be changed from six weeks from the time of accident to eight weeks from the commencement of care. The figure of 15 treatments should be deleted. This would allow for a period of care, as shown in the Canada Life study, which is consistent with my clinical experience and in which most mild to moderate soft-tissue injuries will have resolved to the satisfaction of all parties. The various provisions in the draft legislation, including treatment plans, modified DACs, give appropriate cost protection for other health care benefits.
If the insurance industry needs further cost controls, it is certainly not in the area of chiropractic care. Thank you very much for your time. I appreciate your time.
Mr Crozier: Thank you, Dr Yates. Just two things, I think, that you can help me be more clear on. I didn't have your presentation in front of me. You said something to the effect -- and I will paraphrase it and then perhaps you can explain it for me. You gave an explanation of chiropractors as compared to concurrent providers.
Dr Yates: Correct.
Mr Crozier: Was the context that it cost less money, and were you also saying that, in your opinion, it's better and, if so, how can you make a general statement to that effect?
Dr Yates: Fair enough. Better? I'm not going to make any comment on. That's opening a nasty can of worms and in far too little time here.
Mr Crozier: Those are my words.
Dr Yates: What I was comparing to is a single practitioner out in a chiropractic practice. When we are lumped into this big rehabilitation world, I as a chiropractic practitioner here in the Sault -- if someone comes in to see me with, say, a class 2, class 3, via the Quebec study, whiplash injury, this is what my protocol would be, here's what my expected fees would be in the $600, $500 range.
In comparison, when we look at the fees, if that same patient had gone to a large, multidisciplinary, multiconcurrent practitioner setting where you're seeing a whole broad range of practitioners all at the same time, I think the effectiveness of the two clinics is probably extremely good, but I'm just looking at the cost if someone walks into my office and I treat them and someone walks into a huge, multidisciplinary centre and they're treated, and that's all I'm comparing.
Mr Crozier: If you, as a chiropractor, would not be able to provide the health care that someone in the large, multidisciplinary setting would be, you'd refer them?
Dr Yates: Certainly.
Mr Crozier: I was interested in your comparison of costs of treatments and when you made the comment that in, say, Sault Ste Marie, for example, where you may not be able to charge the fees that they can in the big city, does that mean you would charge the same lower fee for insurers as you would for an individual? Like there wouldn't be a two-tier --
Dr Yates: No, we charge the exact same -- whether that comes in.
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Mr Crozier: That's very honourable and reasonable.
Dr Yates: As an aside, I guess that's the second part of that Canada Life study. You might want to go through the study. It does look at the differing cost factors that way and chiropractors came out as -- if you walked into a chiropractic office, they come out very similarly; it's almost identical. Were there a few who were maybe bad apples in the crowd? Sure. You probably get them in every profession, but the chiropractors came out very, very favourably in that.
Mr Martin: Thank you for an informative and interesting presentation. I don't see the difficulty around this table being whether the proper place for people to go is the doctor or the chiropractor or the physiotherapist. I think the concern here is that when people get hurt in an accident, they get to somebody who's going to help them get over their injuries and get back to as normal a life pattern as is absolutely possible. I think it's been documented by enough people to have us believe that there's some difficulty that the system doesn't always work the way it should, it doesn't flow the way we'd like it to.
I spoke to a young man here not so long ago who sat and watched for a bit today and who was somewhat chagrined by the lack of discussion around the question of how we in fact get somebody from the accident to your table: like the very difficult process of determining, first of all, what the real injuries are; are they real or imagined? Who's going to pay for them and how much? Is there a cap on that? and all of that kind of thing. I guess for me, each of the groups that comes forward, I think, makes a very valid case around the question of the principle here being accessibility and affordability and all those kinds of things.
Given your own experience with having people come to your office out of an accident situation and some of the frustration that they've obviously experienced on the way to your office and afterwards, to make sure they get all they need to get to the point where they are now able to participate again, will this piece of legislation help? Will it be helpful, will it just do nothing or will it be in some way a deterrent to that in fact happening?
Dr Yates: I can only speak to that myself as a chiropractic physician. From that point of view, when a patient walks into my office, as I've stated already in my brief, the issue of eight weeks of care, a commencement of care, is a big issue for us in the sense that if someone who has an accessibility problem -- they've already utilized their 15 weeks and they sat at home with a heat pack on their neck and nothing happened and then they decided, "Look, I've got to do something here," and so they show up at my office, yet most of that within those 15 visits, if it's past a point of say so many weeks down the road, if it's past six weeks, suddenly they no longer have as accessible a time to my office. As long as it's commencement of care, once they walk into my office and they say: "Glen, I really need you to help me with my problem. I haven't done anything," I say: "Yes, you do need some treatment on your neck or on your back or on whatever. Yes, let's set up a treatment plan. Let's send that off to the insurance people right away." So we'll send the treatment plan off, but I need that eight-week time where I can show some cost-effective outcome-based goal, time-limited plans --
Mr Martin: Will you be able to do that within the context of this package here?
Dr Yates: If those changes I've suggested come in, yes, very much so.
The Chair: Thank you, Dr Yates, for your presentation to us today. We appreciate your input.
Mr Tim Hudak (Niagara South): Does the government not get to ask a question?
The Chair: Oh, wait a minute. I'm sorry. My apologies. I tend to glide over those who give me the most problems. Could we move to the government side, please, Mr Arnott. If you wouldn't mind answering a few very simple questions.
Mr Ted Arnott (Wellington): I thought it was pretty quiet here today. There haven't been too many problems.
Thank you, Dr Yates, for your presentation, for extending the benefit of your expertise to this committee. It's very helpful in our deliberations, not only your perspective as a chiropractor in Sault Ste Marie, but also your involvement with the Ontario Chiropractic Association.
What this committee of course is grappling with is trying to find an appropriate balance to change the rules of auto insurance which will allow a reasonable level of premiums that people can afford, and also ensure that the victims of auto accidents are fairly compensated. I wondered about your final sentence and I thought I heard you say that there's absolutely no need for any containment of the cost of chiropractic service relative to auto insurance. Did I hear you correctly on that?
Dr Yates: No.
Mr Arnott: Your final statement in your presentation. I'm sorry, I guess you don't have a written brief.
Dr Yates: Let me just make sure. Yes, I was just saying, if the insurance industry needs further cost controls, it is certainly not in the area of chiropractic care. As you can see, if you have the brief in front of you yet, on the last page I've included a much fancier table, a graph that you can see that certainly our costs are not -- if you add it up, 75% of the chiropractors. Are there a few who need their wrists slapped? I'm sure there are. I'm sure all practitioners have theirs that need a little extra payment on the Benz that month or something, so yes.
Mr Arnott: Okay. Thank you.
The Chair: And again, Dr Yates, thank you very much for your presentation to us.
DAVID TIER
The Chair: If we could now move to our next deputant, David Tier. Welcome to the committee.
Mr David Tier: Thank you very much for the opportunity to speak to you today regarding proposed legislation for automobile insurance. In gratitude for the opportunity, I promise to be very brief.
My name is David Tier. I have been a resident of Sault Ste Marie for 53 years and I'm currently employed at Algoma Steel as a senior -- with emphasis on the senior -- programmer analyst. This past January marked my 34th year with Algoma where I've spent all but one year of my working life.
On August 21, 1994, I was involved in a vehicle accident that resulted in severe injuries to my left leg. For a period of three to four weeks, doctors tried to reconstruct and save the damaged limb. However, tissue examination and reconstructive surgery caused doctors to recommend consultation at Toronto Western and there doctors confirmed that the chances for saving the limb, even part of the limb below the knee, would involve operations and many of them over the next several years and the chances were still slim. Therefore, I underwent an above-the-knee amputation on September 16.
After returning to the Sault, I underwent a minor adjustment of the limb before returning to work at Algoma Steel. In December 1994, I received a temporary gait-training prosthetic which I wore until June 1995, when I travelled to Sunnybrook and was fitted for the prosthetic I wear today. I offer this to you as possible reasons why I may be here today.
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I am a consumer. You are here today because you are considering changes to the legislation governing automobile insurance for Ontario, the fourth change to car insurance, as I understand it, in six years. I am here today because I have experienced injuries in an automobile collision and would like to offer for your consideration my perspective on some of the proposed changes.
First of all, I'd like to assure you that I have no grievance here. I have been extremely fortunate in that my employer and my line of work have afforded me the opportunity to return to work with no loss of income. In addition, my insurance company, the Co-operators, has been very helpful in settling any bills or problems that I may have had following from my amputation. However, since the accident, I find myself with a new-found interest in the effects of legislation such as this on people injured in vehicle accidents. I would like to offer you the following five points for your consideration:
(1) Loss-of-income restriction: I have been advised that I was injured under Bill 164. Actually, that's incorrect. My lawyer keeps telling me I was injured under Bill 164; I say I was injured under a car. Bill 164 was the legislation in effect when I was injured. I understand that this bill limits a person's right to compensation for loss of income should he return to work and subsequently find that he cannot continue due to injury sustained from the original accident.
I must stress again, this is not my case. One of the surgeons who worked on my leg feels that I may develop spinal or back problems due to the uneven gait of walking on a prosthetic, but even if that occurs, I will be eligible for a full pension in a matter of a year. However, if I were under 50 and had returned to work before I found out I couldn't continue due to back problems, the loss of income could be substantial. Early retirement could impose a severe financial loss. In our society today, finding employment for anyone, let alone a middle-aged man with a prosthetic and back problems, would be difficult.
So why should I not be able to litigate the loss if there was shown to be one? This type of rule, it seems to me, discourages a person from returning to work if there is any chance that he may later have problems from the original event. Better he should not return at all and sue for damages for loss of wages to begin with than return to work and risk loss later. Surely we can devise a rule that encourages people to return to work. It's better for the employer, it's better for the insurance company and, most of all, it's better for me.
(2) The deductible: I understand that a ceiling is being considered for a deductible limit which your total claim must exceed before proceeding with litigation. I assume this would be to discourage nuisance suits. This is understandable, but when a claim exceeds that limit and can be proven in court, why not waive the limit? From the point of view of one who has been there, I can assure you that the costs are real. There are things that you can plan for and things that you cannot foresee. If a claim is made in excess of the limit and is substantiated in court, then it should be allowed in full. The value of the deductible was fulfilled when it screened out the lesser suits.
(3) Net income restriction: I understand that the new law will restrict compensation to 85% of net income. I'm not sure that I fully understand the thrust of this restriction. If the intent is to simplify by having one rule to cover everything, that's a worthy goal. But people are individuals and individual circumstances may not mesh with the simplicity of 85% of net. Consider that a person may be self-employed and attempting to build a business and have little net, or a student who may possibly have no net. This restriction could be excessively harsh on such an individual. The amount should be for potential income and adjudicated by the courts. If I have a case that can be sustained in court, why should there be a lowering of the amount that the court has accepted? It seems like a hidden tax after net income.
(4) Mandatory structured payments: I was told that the committee is considering a mandatory structured payment schedule of any settlement claim. I'm going to ask you why. The trauma involved in the aftermath of a serious car accident can be life-altering. A person can find themselves having to completely change their lifestyle and their choices. While structured payments may be perfectly appropriate for some, the ability to choose a lump sum payment may be completely appropriate for others.
I offer as an example the commutations that are acceptable for the Workers' Compensation Board. While they go for structured payments, you can obtain a commutation. Possibly a person is choosing a new line of work and wishes to establish the business and it's enough to get him off the ground. The monies involved in a settlement may be the financial vehicle for that person to make the transition from dependency to a productive person in society again. To take away the right to choose lump sum payments demeans the injured Ontarian, making the choice for him as though he cannot select what is best for him. The legislation should help, not hinder, his transition.
(5) Designated assessment centres: I haven't seen much of the new legislation, I've just seen it in point form a couple of places, and I read with interest that a new, independent committee will be set up to oversee the designated assessment centres or DACs. I applaud the effort to ensure that the DACs remain independent. It is important that they provide neutral, third-party opinions in cases of benefit disputes between insurers and claimants. But it must be difficult for the DACs to remain independent when they receive their funding directly from the insurer. As I understand it, if the insurer does not ask for them, they are out of a job. Therefore, there must be pressure on the DAC to satisfy the customer -- the insurer, not necessarily the injured. Therefore, there may be some difficulty in accepting this as a completely neutral, independent, third-party opinion. I suggest that this new committee examine ways of moving the funding from individual insurers to arm's length with the DACs, some method of removing it one step.
In conclusion -- I told you I'd be brief -- I'd like to leave you with one central thought. I appreciate and I applaud your efforts to achieve stabilization of premiums for automobile insurance in Ontario. However, I urge you to remember that the reason for the premiums is the protection of the injured parties and, as an injured party, I urge you to please test your decisions against that central mission.
Once again, I'd like to thank the members of the committee for listening to what I have to say. I appreciate the opportunity to give you input from someone who learned a little more than he ever wished to know about automobile insurance. I am going to assure you once again that I've been fortunate with my employer and with my insurance company and I have no beef. I only offer my observations in an attempt to make good legislation. Thank you.
The Chair: Mr Tier, we thank you for a most thoughtful and well-organized presentation.
Mr Tier: Mr Martin, I apologize for wearing my most conservative tie today.
Mr Martin: That's okay; no offence taken.
Mr Spina: You don't have to apologize; we don't mind.
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Mr Martin: There are more of them.
I want to thank you for coming today and making what was indeed a very focused and helpful presentation. You certainly present an interesting perspective and one that I hope will be helpful to Mr Sampson as he struggles in his role of taking the lead on this new attempt to make insurance available to all, affordable by all, but in the end -- and you stressed this at the end of your presentation and it certainly is my biggest concern -- helpful to those who find themselves in the unfortunate circumstance of having had an accident, where they need to be made better and in turn rehabilitated so that they can get back to work or get on with their life and contribute and participate in the communities in the way we know all of them do.
I'm a little anxious and nervous around this, given that a lot of the discussion seems to be more on the issue of fraud and people abusing the system and not using the system appropriately and perhaps maybe taking advantage of the system as opposed to how we put in place a system that actually in fact in the end works. There seems to be on a very simple level, so that I can understand it, a bit of a tradeoff happening here. We've seen, in the last five to 10 years, two new systems rolled out to try to manage a ballooning premium cost in the insurance industry and to work with the industry itself to get a handle on the cost to it and to somehow find a balance in the middle. Certainly, one of the factors initially was the question of lawsuits and the cost of lawsuits and the size of awards that were made in some instances that impacted then on the whole system.
At one point we took that away altogether and then we introduced partial opportunity, and now it seems this government is wanting to open that up a bit more and allow for more opportunity for people to go to the courts and get some satisfaction there. But they're trading that off because they know that it's going to cost and that the industry itself is not going to be really happy about that, because it affects its bottom line. They're trading that off against the levels of compensation that were being afforded under the previous two attempts to reform the system and to bring it down so that those who in the end either can't afford to or choose not to go to the courts, this is what you will -- particularly if you've been damaged in a way that does not allow you to get back into the work force again and become gainfully employed. So it limits you to a certain level that --
The Chair: Was there a question, Mr Martin?
Mr Martin: Yes. The question is, if you had the choice to make re those two realities, from your experience which one would you choose?
Mr Tier: I'd have to go back to work. If that was the question.
Mr Martin: No, the question is whether you would support higher amounts of money for those who maybe can't go back to work because they're not well enough to go back to work, or allowing for more opportunity to go to the courts and sue for more.
Mr Tier: One of the problems with making rules, Mr Martin, is that the rules won't encompass everyone. People are individuals out there. So when we try to put all the rules into the legislation, what happens is people get cut out of the process, people get left to the side. The rule fits the majority or the rule fits down the middle. I feel that by going back to the courts you have a place there for adjudication. It's not easy. It's not as though you're going to go in there and say, "This is what I want," and you are going to receive that. You have to prove the case in court. I feel that when it comes to individual cases, it's a good place to go to have them adjudicated rather than rely on rules that never performed beforehand.
Mr Wettlaufer: Mr Tier, thank you very much for your presentation. You raised a couple of interesting points, one of which is the waiving of the deductible. It's interesting; it really is. Another one you talk about is the commutations of the Workers' Compensation Board pension plan. I was just wondering if you knew what percentage of workers' comp pensions are commutated.
Mr Tier: No, I do not. I just know of one or two cases where the lawyer operating for the person -- one case was a man who ended up being a double amputee. He lost the one leg and then they couldn't save the other and he lost that too. There was no hope for him going back to his original place of employment. Workers' compensation was willing to pay him X amount a month, which meant that basically he stayed in the same state. His lawyer applied and won a commutation. The commutation allowed that man to open a woodworking shop and it changed that man's lifestyle. It changed his whole approach in that he then felt productive. I think most of us, given the opportunity, would like to have a job where we feel productive. I certainly do.
From my own experience, when I got back from the hospital and approached Algoma to return to work, they were a little nervous about a man with one leg coming back inside the plant. So they arranged to have a computer fixed up in the loft of my house and I could then proceed to do my stuff from there, but they wouldn't give me anything meaningful to do. It wasn't until I went to the plant and sort of got in their face and convinced their doctors that I could do it that I was allowed to go back inside the plant. The difference it made for me was that at home I still felt -- you have to imagine I couldn't even get a cup of coffee and move from the kitchen to the living room or take something up to the computer loft without having someone carry it for me. But at work now, I was on one floor, I could go in, sit down at my terminal, have the phone ring and someone ask me to make a program change and I could tell them, "No damn way," and feel completely productive.
The idea was that you were back at work and you were doing something you knew how to do and something that people looked to you for, whereas at home you were still reliant on other people. Getting away from that dependency was great; it was just great.
Mr Wettlaufer: There is a danger in commutation, however, and that is first of all that the party who is injured could spend the lump sum payment in a few short years and then be left in a poverty-induced state for a number of years after. The second danger, of course, is that there is that element of fraud which insurance companies have been guarding against. We don't know what the element is, how large it is, but it is there. It does exist.
I sympathize with you because I was involved in an accident four and a half years ago and it is probably a permanent injury. We think, judging from the last X-ray, that I now have arthritis in my back as a result of the accident. So I understand where you're coming from, but I also look at it from the standpoint that what we are trying to do here is to devise a plan that will balance the needs of the majority of people against what is an affordable cost. There is no doubt that some people are going to fall through the cracks of any type of insurance plan.
Mr Tier: I agree, and I know that you are going to do your utmost to make sure that as many people as possible don't, and when in doubt, I would ask you people to err on the side of the injured, please.
Ms Castrilli: Thank you very much, Mr Tier. I can't remember where I've seen a clearer presentation. I commend you for making your points clearly and altruistically because, as you point out, it doesn't affect you specifically in this particular case. I'm intrigued by a number of things that you say. Your discussion on net income restriction, for instance, the notion that you should be able to sue for potential income and the return to tort for that of course is a problem with this legislation. Were you aware that the legislation does not allow, for instance, for dependent spouses and children of someone who is deceased as a result of an accident to be able to sue for that as well?
Mr Tier: No, I wasn't.
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Ms Castrilli: What would you think of that? You must have a family.
Mr Tier: I do have a family. My family, however, is grown and I don't see that as a problem for me. I see it as a problem for others. People in Ontario these days -- I watch my son in Toronto struggling, with him and his wife working, to make ends meet. Those aren't my circumstances, so therefore that particular thing would not affect me or my family. But if he were to, it would be just chaos for his family. So I have mixed feelings on it.
I understand what you're trying to do here, please; I understand that you're trying to stabilize the cost of premiums. But what I fear is that when people chase one goal and get completely focused on it, they'll lose sight of the original thing. If you'll pardon me, the old expression is, "When you're up to your ass in alligators, it is difficult to remember that your original objective was to drain the swamp."
The problem here is that if we focus on that money that is going out for the premiums, and with that forget that the reason for the premiums is to protect the injured parties, then what we are really doing is setting up some sort of licence fee to drive a car that's a hell of a lot higher than the one we pay now. So again pardon my language, but I feel very strongly about that. I know you people are going to work very hard at it, because you're going to have a lot of people like me out there banging on your committee door as you go from place to place.
Ms Castrilli: You heard the previous presenter talk about how medical and rehab costs could be reduced. We've had evidence from insurance companies that say that is the big component, along with some other things, but that's the biggest. Their definition of stabilization of rates is a significant increase over what we now have. I'm sure you heard the figures that were quoted before: anywhere between 7% and 12% a year.
I'm just wondering because you mention that -- I think it's good for us to remember that there is a balance between rates and what we're trying to achieve -- what do you think would be a reasonable rate? I'm not asking for a percentage but just some kind of sense of what you think the public would bear.
Mr Tier: If I were not injured and I were before you now, I'd be banging on you to keep the rates as low as possible, and I don't care; I'm sure I would, because I hadn't been injured before, and all I saw were the rates going up. But I've been through it now and I understand the value of having people in the trauma clinics who will run you through the exercises, get you going and show you the options that are out there for you to find a prosthesis and get you back to work and get you doing those things. So I'd pay fairly highly for them. Because I've used it now, it think it's a valuable thing to have. The problem is that you only use insurance when you have the accident. Up until then, it's a pain, but after you have the accident it's worth a lot of money. So for me personally it's worth a lot of money.
Ms Castrilli: Insurance companies, of course, would say that you are part of a very small group that benefits from this, in effect.
Mr Tier: That's possible, but that's why we pay the money. Why else would they take my money if they were not going to do that? They would be taking it under false circumstances, wouldn't they?
The Chair: Thank you very much, Mr Tier. Your input to the committee has been most valuable to us, since it's a unique and very valuable perspective.
CANADIAN COALITION AGAINST INSURANCE FRAUD
The Chair: We now welcome the Canadian Coalition Against Insurance Fraud. Mr Charlebois, welcome.
Mr Marc-André Charlebois: Mr Chairman, members of the committee, I'd like to say for the record I was here on time, but I thank you for granting me 20 minutes to cool my heels. I had quite a bumpy ride in the plane, and the taxi driver who brought me here used to own a driving school that was put out of business by graduated licensing. Now, that I fail to understand, but anyway.
My name is Marc-André Charlebois. I'm the executive director of the Canadian Coalition Against Insurance Fraud. I should mention that I'm also vice-president, public affairs, for the Insurance Bureau of Canada, but today I'm wearing my coalition hat.
I'd like to take a few minutes to talk about insurance fraud and the coalition, and then I will go right to the heart of the matter, that is, share with you some measures which, if adopted, would contribute significantly to the reduction of insurance fraud and in turn the cost of insurance.
In the course of these hearings you've heard several representations on insurance fraud, therefore you're already familiar with some of the facts. The cost of fraud in Canada has been estimated at $1.3 billion a year, a very lucrative business indeed. Between 12% and 15% of the insurance premiums we pay cover the cost of fraud. So on an average auto premium of, say, $1,200, about $160 goes to pay for fraud. Here in the Sault, with premiums between $800 and $900 a year, that works out to about $120 going to pay for fraud. If we want to talk about actually reducing the cost of auto insurance, cutting fraud is one way of doing it.
Our research indicates that Canadians don't think that insurance fraud is criminal. Those we polled admit that insurance fraud is unacceptable, but they also find it understandable. Sadly, half of all Canadians think it is common practice. This attitude largely stems from misconceptions about the insurance product itself. The product is intangible. Its purchase is rarely an option. Insurance is sometimes seen as an investment. For these and other reasons, consumers don't always feel they get value for money, especially for those who never submit a claim.
Insurance fraud is of two broad categories: opportunistic fraud and professional fraud perpetrated by hardened criminals. They both require different solutions. Criminals will not be deterred easily, but the occasional opportunistic fraudster, who's asleep in most of us, I might add, can be reformed.
The Canadian Coalition Against Insurance Fraud came to be in June 1994. Its mandate was to assess the magnitude of the problem, determine its causes and take some concrete actions to curb fraud. The CCAIF is far more than an insurance industry effort. It's very much a partnership of all of those who are affected by insurance fraud. We have succeeded in bringing together 70 organizations and companies which all have a direct stake in this issue.
Among our directors we have consumer advocates, police chiefs, fire marshals, regulators, insurance industry executives and representatives from companies like KPMG Peat Marwick Thorne and IBM Canada, companies which have all developed a keen interest in forensic and information-management-related activities. After some 20-odd months of activity we've made some headway on a number of fronts, including our own industry's business practices, detection and enforcement and public awareness. More than 100 volunteers from our member organizations have been active in analysing the problem and formulating solutions.
Here are a few samples of our achievements to date.
We've partnered with Crime Stoppers to make insurance fraud reportable through this well-known crime reporting service. This alliance serves two purposes. It makes it abundantly clear that insurance fraud is a crime, because you would be amazed at the number of people who don't see it this way. It also enables Canadians to play an active role in detecting fraud and preventing the settlement of fraudulent claims.
Canadians now have a practical channel for doing something about insurance fraud, and from the success of the program across the country, it's clear Canadians are getting the message. In fact, after my appearance here today I fly to St John's, God permitting, where I will launch tomorrow the coalition-Crime Stoppers alliance in Newfoundland.
Under the auspices of the CCAIF, insurance industry investigators and loss adjusters are working with police and fire investigators to share information techniques. A week-long advanced fraud and fire investigation techniques seminar has been held in two different Ontario regions and a third one is planned for June in Alberta. We also make regular presentations to our coalition members to keep them informed of the nature of our work and our progress.
In terms of public awareness, we've been airing messages on insurance fraud on 30 radio stations across the country for more than two years now. This campaign, part of a larger program on loss prevention run by the IBC, has served to sensitize Canadians to this issue and publicize some of our anti-fraud activities.
In partnership with the CBC, we developed an episode for the popular youth program called Street Cents, which was dedicated to insurance fraud. From this program, which was viewed by approximately one million youngsters across the country, we had one of our partners, the Insurance Institute of Canada, design and produce a special teacher's binder for use in classrooms across the country. That's because we believe in prevention, and we believe that to prevent this kind of fraud we should start with kids.
The coalition has made every effort to make its endeavours known to Canadian through active media relations. Our slogan, "They Cheat You Pay," has been displayed in shopping malls everywhere in Canada, and insurance policyholders are constantly reminded that fraud costs them a lot of money.
The insurance industry itself has responded to public opinion that believes the answer to the problem rests with industry-led initiatives. CCAIF committee members have scrutinized the business relationship which exists among customers, brokers, agents and underwriters in order to determine which measures could be instituted to better deter fraud without making the process more cumbersome for consumers. Many insurers have established special investigative units to detect and investigate fraudulent claims, but we believe that the process to stem fraud must surface as early as the application for insurance. The coalition has identified a number of best business practices. These will be updated on a yearly basis.
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Other activities are being carried out with some of our non-industry stakeholders, such as doctors, lawyers and rehabilitation specialists. I don't have to remind this group that a huge source of fraud is bodily injury claims resulting from automobile accidents. I'm sure you've read with interest the news about the Ontario College of Physicians and Surgeons report on alleged fraud committed by a number of their members. The coalition has been supportive of the college's efforts on this front. In fact another one of our partners, the Insurance Crime Prevention Bureau, has been closely involved in the inquiry. We're looking at further cooperation with these stakeholders. While we recognize that physicians are not investigators and are not trained to detect fraud, in some cases it is likely that, as with any other group, there are those who become willing participants in fraudulent activities for personal gain. This is, we feel, unacceptable.
We share the government's commitment to control the cost of insurance wherever possible. We congratulate the government for including in the draft legislation stiffer fines for uninsured motorists, requiring sworn statements and proof of identification for settling claims, tightening notice periods to 30 days and making it an offence to provide false information.
We're of the view that the government of Ontario, through its new auto insurance legislation, has an opportunity to further address the serious problem of fraud and join in the battle against it. It is in this spirit that the Canadian Coalition Against Insurance Fraud would like to make the following concrete proposals to government.
Insurance fraud is a crime which is difficult to investigate and whose perpetrators are rarely prosecuted. There are reasons for this. There are bottlenecks in our courts and a lack of police resources to investigate what is still perceived as an innocuous white-collar crime. We believe that government and the private sector can join forces and take the necessary steps to address these shortcomings.
In that regard, we propose the institution of a fine-levying system similar to the one which has been adopted first in New Jersey and subsequently by other states including New York and North Carolina. Of course, we realize that such a system would have to be adapted to our own legal environment. In the states where this approach has been adopted, a government-run organization is vested with the quasi-judicial power to levy fines on people who have been caught committing insurance fraud. The fines are hefty, ranging from $5,000 for a first offence to as much as $15,000 for a third offence, and serve both as a deterrent to fraud and as a means to unclutter the judicial system. We would gladly provide this committee or government with more details about this fine-levying system.
Another means of further addressing the problem is the appointment of one or two special insurance fraud prosecutors in the crown attorney's office. These prosecutors would ensure that properly documented cases are processed expeditiously. Not only would this system encourage insurers to prosecute fraudsters, it would also send a strong message to would-be fraudsters. One source of funding for these additional resources could be the proceeds from the fine-levying system. I also believe that the P&C insurance industry would welcome such initiatives and be ready to consider contributing to the early financing of this key measure.
You've already heard from the Insurance Crime Prevention Bureau. Mr Jean-Claude Cloutier addressed this group earlier last week, talking about research on pre-inspection of automobiles. The coalition committee which spearheaded this research was chaired by Mr Bernie Webber, who some of you may remember in his previous incarnation as a senior government executive. He's now the CEO of the Facility Association. Insurers would inspect cars before issuing a policy. The experience with such a scheme in the US indicates that only mandated programs can be effective so our recommendation would be for this particular piece of legislation to provide for future regulations on this matter.
The cost of implementing such a program would be more than recouped through the reduction in the number of phantom cars reported as stolen and the identification of previous damages to automobiles being insured. The rate of return on these programs in the US have ranged from $4 to $8 per $1 invested. Here in Canada our research indicates a return of $4 to $1 at a minimum. We've included in the kit that we circulated some more information on this system.
Finally, the CCAIF believes that something has to be done about pink slips. It is now much too easy to obtain this proof of insurance illegally and to drive without proper insurance coverage. The government could join forces with the industry to devise a proof of insurance system which would be simple, effective and fail-safe. A simple coding of the existing forms might do for now, but if the government contemplates, as has been advertised, the introduction of a multi-use, magnetically coded card, information about insurance status could easily be included on the card, making it easy to identify uninsured drivers.
Fraud is certainly not a problem which is unique to automobile insurance. However, if some or all of the proposed measures could be implemented, we at the coalition feel that our fight against insurance fraud would be enhanced. Again, I would like to thank you for accepting to provide us with an opportunity to present our ideas. I would be happy to take your questions.
The Chair: Thank you very much. We have about three minutes per question.
Mr Jim Brown (Scarborough West): If we implemented the anti-fraud suggestions that you put forward, would that mean that we could expect a 15% drop in premiums?
Mr Charlebois: As our research has indicated, the analysis of 500 closed claims files 18 months ago gave us the $1.3-billion figure which allowed us to arrive at between 12% and 15% of your premium going to cover for fraud. I don't think that we can ever, ever expect to obliterate fraud completely. I think we will have to accept that fraud is going to be with us whether we try to curb it or not. But I think with some of the measures we've proposed, we could bring that rate of fraud down and it might have an impact on premiums to the tune of 8%, 9% or 10%.
Mr Jim Brown: What did the fine-levying system in New Jersey do to the premiums, and what would it do here to the premiums?
Mr Charlebois: I don't have numbers or percentages to provide to you, but I have a document that tells me that in one year they've amassed more than $500-million worth of denied claims, and that goes along with the fines. The fines serve to pay this fraud bureau that they've established. I can't really tell you what percentage of the premium has been brought down by this exercise.
Mr Jim Brown: But one could expect at least a 10% reduction if you could get a handle on fraud.
Mr Charlebois: I would venture that this is the kind of saving we could make.
Mr Douglas B. Ford (Etobicoke-Humber): When you mention $5,000 for a first offence or $15,000 for a third offence, I believe this would be a deterrent in the fact that it might frighten some people not to commit fraud. But the courts right now are overcrowded with all kinds of fraud: welfare fraud, unemployment insurance fraud, workers' comp fraud. The courts are cluttered with people doing this type of thing.
Mr Charlebois: That's exactly what our proposal is trying to avoid.
Mr Ford: And this is what I'm saying here. If we did put these measures into effect, we would have to make sure that the laws were carried out, and that's not happening. Then we get people that we do charge and they get legal aid and we have to pay them from the other end.
Mr Charlebois: With respect, Mr Ford, those fines are imposed outside the court system.
Mr Ford: Outside the court system?
Mr Charlebois: Yes. It's a bit like cities have the right to impose parking fines without taking you to court. You go to court if you want to challenge the fine. This is what is happening in New Jersey. People get fined: 98% of the people that were fined paid the fine and 2% went to court to contest the fine. So this is, we feel, a way to unclutter the courts.
Mr Ford: So you have positive proof that they just pay the fine rather than go to court.
Mr Charlebois: Yes.
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Mr Crozier: One form of fraud, or some might call it misrepresentation, is driving without insurance, and of course there has been some suggestion that the fines for that be even higher than proposed in the draft legislation, that it be at least equal to what the premium would have cost the person. Have you found in your work that those who may try and misrepresent themselves by not having insurance -- and I don't know whether you get into this area -- the main reason may be that they can't afford it? So then you think, what's the point in fining them because they probably can't pay the fine, and thirdly, that they're probably going to drive without insurance anyway.
Mr Charlebois: The approach there would be to remove their right to drive a car, remove their driver's licence. In this fashion, if they drive without a licence and they're arrested, it's quite obvious that they're committing a felony. The problem with insurance is that policemen cannot readily determine if the pink slip is valid or not on the spot, and this is what we would like to see changed.
Mr Crozier: Exactly, and I support that. Your suggestion about the multi-use, magnetically coded card, I certainly appreciate what you're driving at and the technology may be there. I merely state for the record from my point of view, and you may wish to comment on it, I'm concerned that we're getting to the point that my whole life history will be on this little card and that any mere bit of privacy I have as a citizen is gone. It's just unfortunate that we have to get to that point.
Mr Charlebois: I guess this case will have to be made in government. We're just saying if it's going to be a decision of this government to go ahead with this card, we would like to piggyback on it.
The Chair: It's appropriate, I suppose, that we move to Mr Martin whose riding we sit in, the riding of Sault Ste Marie, for the last question. I would put the emphasis on "question" as opposed to "preamble." Mr Martin is, after all, the master of the preamble. I say that with respect, sir.
Mr Martin: I'm very disturbed actually by what I read into this and what I sense, by way of your presentation and the fact that not only are you leading this coalition against insurance fraud but you're also vice-president of public affairs at the Insurance Bureau of Canada and the connection there, the fact that you -- it seems anyway, and maybe you can enlighten me here -- you don't have any consumers on your advisory group --
Mr Charlebois: We do, sir.
Mr Martin: -- or at least you haven't referenced them here in the presentation that you've given me. I would be concerned that --
Mr Charlebois: May I just interrupt you, sir? We do have the Consumers' Association of Canada as a member, and not only them but other advocacy groups made up of consumers.
Mr Martin: Okay. I don't think anybody would disagree that fraud of any sort is just not acceptable. It's not always, though, as simple as some would present it. To be making wholesale changes to a system by way of legislation based on an understanding or a perception of fraud and how we get rid of fraud as opposed to try to put in place an insurance system that actually works for people, in my mind, are two different questions. Has any work been done at all, Mr Charlebois, to determine how much fraud goes on in the other direction?
For example, I was talking to a young man here this afternoon who told me what I considered to be a real horror story of the hoops that he had to jump through to try and get what he needed to make himself better so that he could get back to work and get on with his life, the fraud that's perpetrated by insurance companies in frustrating people as they try to recoup what they've paid in by way of service over a number of years.
We all have our own individual stories. My wife scraped the side of our car about two years ago and I chose to pay the $1,600 myself, out of my pocket, to get that fixed because if I didn't, my premiums were going to go up and my deductible was going to change such that it was a net benefit to me to actually pay the bill instead of going to my insurance company.
I know people in this town who have been broken into who have paid insurance for 10 or 15 years, and because they've been broken into a second time, they've decided it's best that they just replace the tools etc that were lost and replace the damage that was done themselves rather than go to the insurance company and have them pay the cost, have them honour an agreement that was made when they bought insurance in the first place.
I'm wondering if any effort is being made by your organization to try to balance this question and to try to find out if the reason so many people may be starting to defraud this system is that they've themselves have been abused by the system in the first place, not that that, in my mind, ever justifies doing fraud.
Mr Charlebois: As I say in my presentation, I think a lot of the fraud occurring right now is because of a misunderstanding of what insurance is all about. The basic problem with the consumers is that it is not something they can touch and feel and park in the laneway and show to their neighbours, and it's something they have to pay every year. A certain level of frustration develops, and when they have a chance to claim, they see their accumulated costs as an investment and they want to recoup not only the investment but some kind of interest as well.
Mr Martin: That's a generalization to make, of course. There are people who have a contract to honour --
Mr Charlebois: But what you call fraud perpetrated by companies, I wouldn't call fraud; I would call it something else. We haven't looked into that, but I wouldn't call it fraud.
Mr Martin: Of course you wouldn't, because you work for the industry.
Mr Charlebois: I would venture to say that the coalition is at arm's length from the industry. We have made sure that in the 70 organizations which make up the coalition we have strong a consumer representation. They're on committees and they have a voice in the course of the research we do and on the measures that are suggested.
In Ontario there are about 80 companies offering automobile insurance, so there's a very competitive environment. Companies don't want to lose their customers. The customer base does not increase, and the only way of making more money is to carve more of a market out of a very fixed market. It is in companies' interests to treat their customers properly, and they go out of their way to make sure that when there's a claim, the claim is settled fast and the law provides for very short terms for payment of claims.
As well, at the insurance bureau there is a consumer office where people who feel they have not been treated properly by their insurer or broker come to our consumer specialists and sometimes we act as the third party for those insured and appeal to insurers. Many times we get cases resolved without having to go to court, making sure that both parties are happy. So there is an effort on the part of the industry to make sure that consumers and customers are treated fairly, for sure.
The Chair: Mr Charlebois, I thank you for appearing before the committee and the Canadian Coalition Against Insurance Fraud for their presentation today.
Mr Charlebois: It's been a pleasure.
The Chair: There being no more business to bring before the committee today, we'll adjourn and reconvene in Ottawa, God willing, at 9 am tomorrow. The bus will be departing at 5 o'clock or shortly before that, if you would be ready to leave as soon as possible.
The committee adjourned at 1629.