Why Are We Paying Higher Auto-Insurance Premiums?

Why should a few rotten apples on the roads ruin it for the bunch?

Written by Luis Fernando Arce, Chief Interviewer

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If you drive a car, be weary, because your next renewal date will bring with it higher premium rates. My father is paying around $40 dollars more per month, and chances are that that figure is rather conservative.

In 2009, the average insurance premium in Ontario was $1281, higher than in B.C., Saskatchewan, Manitoba or Quebec, all five of which offer consumers the option of Public Auto Insurance. But since the Ontario government’s passing of new regulations in 2010, consumers have repeatedly complained that they are basically paying more for fewer benefits.

Compensation for catastrophic injuries has remained at $1 million, though this group of people only comprises about one percent of the 65,000 annual injuries. Retribution for non-catastrophic but serious injuries was cut by half to $50,000; and benefits for minor injuries like whiplash and strains were brought down to $3500 from the previous $100,000.

The provincial government’s decision stems in large part from the consensus among themselves, the Financial Services Commission of Ontario (FSCO) and the Insurance Bureau of Canada (IBC), which considers insurance fraud the main culprit. As a result, they claim, insurance premiums must rise to make up for the huge monetary losses they incur.

[pullquote]The reality is that we continue to pay higher and higher premiums for what seem like lesser and lesser benefits every year. [/pullquote]Indeed, on Thursday February 23, 2012 an auto-insurance fraud ring was busted in Toronto thanks to an operation called “Project Whiplash”, a joint effort between the police, the FSCO and the IBC. Among the 130 charges laid, 77 were for false collision reports, and others included fraud, forgery and falsification of books and documents.

These types of activities – where car accidents are staged, either among knowing parties or using unsuspecting individuals as bait in order to process claims through the insurance – cost Ontarians about $1.3 billion per year, or about 15% of our premiums. Statefarm alone reported losing about $4 million in fraudulent payouts. Car insurance claim costs are said to have risen by $3 billion in Ontario between 2006 and 2010 – around $450 per car!

And all this is due to those bad apples who decide to cheat the honourable insurance industry….right?

Well, the matter is not so black and white. Sure, there are a lot of insurance scammers out there, but we must remember those tactics we learned in high-school math and thought we would never use: you know, the ones that said that what is done to one side of the equation must be done to the other as well.

Although consumers have been put under the lens for close investigations regarding fraud, insurance companies are also coming under the fire for an increasing number of claims being denied based on flimsy and unprofessional reasons.

Deidre Sperry, a Toronto speech therapist, told the CBC that she has seen five recommended cases denied since September 2010, more than she has seen in the last 11 years; where the cases were approved, she continued, they were only “partially approved”.

Dr. Donna Ouchterlony also told the CBC that as many as 40% of her recommendations are being turned down after adjusters with no medical training chose to revoke the doctors’ recommendations. In an editorial in the Toronto Sun, columnist Alan Shanoff also mentions an increasing number of cases of doctored reports, where the actual doctors are only writing up a portion of the report, allowing the rest to be filled out by nurses or other staff with little medical training. He also mentions many cases where the physicians that work with the insurance companies deny victims’ claims after only doing “paper reviews” – that is, without ever even physically seeing or examining the patient.