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New Legislation to Protect Ontario Drivers, Improve the Auto Insurance System and Continue to Reduce Rates

Archived Backgrounder

New Legislation to Protect Ontario Drivers, Improve the Auto Insurance System and Continue to Reduce Rates

Ministry of Finance

Ontario is introducing new initiatives to protect the nine million drivers in the province and reduce costs and uncertainty in the auto insurance system. Reducing costs will help lower rates for Ontario drivers.

Transforming the Dispute Resolution System

The government is proposing changes to the Dispute Resolution System that, if passed, would help those injured in motor vehicle collisions settle disputed auto insurance claims faster.

The Auto Insurance Anti-Fraud Task Force recommended the creation of a more robust system in its final report in November 2012. The government appointed J. Douglas Cunningham to lead a review of the current system in August 2013. Mr. Cunningham received input from 35 stakeholders including written submissions and in-person meetings. He delivered an interim report in November 2013 and subsequently consulted on a possible framework for legislation.

The final report was released on February 18, 2014 and contained 28 recommendations to transform the system.

The proposed changes would create a new framework for the Dispute Resolution System by moving responsibility from the Financial Services Commission of Ontario (FSCO) to an existing tribunal administered by the Ministry of the Attorney General (the Licence Appeal Tribunal). This proposed move would make the system more effective and efficient, while ensuring it remains accessible for accident victims. Having the system operate as an administrative tribunal was a key recommendation of the review.

The current system has created considerable uncertainty in the auto insurance system. If passed, the proposed changes would expedite the dispute resolution process as well as curb financial and administrative stress on the system, which can increase costs and cause rates to go up. Transforming the system will help reduce uncertainty and create long-term stability in claims costs.

Updating the Prejudgment Interest Rate

The government is proposing changes that would align the prejudgment interest rate on pain and suffering damages due to motor vehicle collisions with market conditions. If passed, the proposed changes would update the current rate of five per cent by linking it to the prejudgment interest rate for other damages (currently 1.3 per cent and updated quarterly).

Aligning the rate with market conditions would help reduce claims costs.

Providing Regulation-Making Authority to Address Vehicle Storage Issues

The government is proposing legislative amendments to the Repair and Storage Liens Act that would provide authority to reduce the number of days a vehicle can be stored after an accident without giving notice to the driver where required, as well as the authority to determine the fair value of storage that can be charged.

Currently, a storer is required to give written notice of a lien for storage charges to the owner within 60 days after the day it receives the vehicle. The Auto Insurance Anti-Fraud Task Force noted that storers can maximize their lien by delaying notice until the 60-day period has almost expired, and the vehicle's owner or insurer may be liable for inflated costs.

If passed, the proposed amendments would help the government address the task force's recommendation and reduce abusive storage practices and remove associated costs from the auto insurance system.

A consultation report containing recommendations for next steps will be released for public comment in March 2014. The Ministry of Consumer Services hopes to introduce further legislation and regulations in spring and summer 2014.

Reducing abuse and related costs within the auto insurance system is a key element of the government's Cost and Rate Reduction Strategy.

Modernizing the Insurance Agent and Adjuster Discipline Process

The government proposes to modernize the system for insurance agent and adjuster disciplinary hearings to ensure the process is streamlined, efficient and fair.

This proposed change would help protect consumers by allowing for immediate suspension of an insurance agent or adjuster's licence if the public is at risk. It would help combat fraud and build on previous changes the government has made to improve consumer protection, and expand and modernize FSCO's investigation and enforcement authority, particularly in the area of fraud prevention.

If passed, the modernized licensing and disciplinary processes would be implemented by FSCO in spring and summer 2014.

Establishing a Transition Strategy for Health Service Provider Licensing

The government is proposing legislation to establish a transition strategy for the licensing of health service providers in the auto insurance system.

The proposed amendments build on previous legislative changes made to create a framework for health service provider licensing based on key Auto Insurance Anti-Fraud Task Force recommendations.

If passed and implemented, the licensing model will ensure that only licensed providers get paid directly by insurers. The first set of regulations required for implementing the licensing model was announced in December 2013. The government is developing the second set of regulations required for implementation and is targeting spring 2014 for the start of the transition to licensing.

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