On April 11, 2017, David Marshall, Special Advisor to the Minister of Finance, released his final 103-page report regarding Ontario's auto insurance system. The report was entitled: Fair Benefits Fairly Delivered (the "Report").
The Report's introduction outlines the purpose of David Marshall's role as Special Advisor and the purpose of his appointment, by Order in Council, to review and make recommendations for improvements in the auto insurance system in Ontario. Marshall explains that Ontario is often criticized as having the most expensive auto insurance in Canada.
Marshall's report was written to examine Ontario's auto insurance marketplace and provide recommendations for improvement. Marshall states that since Ontario drivers are required to purchase auto insurance, there is a corresponding responsibility imposed on the government to "create a marketplace where fair benefits are fairly delivered, at a reasonable cost."1
Marshall notes that the government has made commitments to reduce the rates and has been taking steps towards meeting these commitments. These steps include the request to have Marshall provide guidance to the Minister of Finance on the development and implementation of further initiatives to diminish claims costs and ambiguity in Ontario's auto insurance system. He was asked to focus on improving the efficiency and effectiveness of claims management in the system by reviewing the best practices in Ontario and other jurisdictions. Specifically, Marshall states that he was asked to focus on: coverage options, comparable auto insurance systems, common traffic injuries, medical examinations and assessments, legal costs, dispute prevention, engagement and education, and evidence-based treatment protocol.2
Based on his findings, Marshall discovered that Ontario has one of the lowest rates of auto accidents and auto related deaths in the country. Yet, he also found that Ontario has the most expensive auto insurance premiums. Even with the lowest and steadily declining auto accident rates, there has been an increase in claims.
Marshall also stated that Ontario's auto insurance system is filled with disputes and ineffectiveness, and a high percentage of premiums are being used to pay experts instead of going to those who are injured in auto accidents. According to Marshall, these factors have contributed to making Ontario's auto insurance system one of the least effective in Canada.
Marshall notes that Ontario's auto insurance structure is flawed; claims costs are rising and yet auto accident rates are declining. He makes the point that the main cause is not: inefficiency; excess profits by insurers; or the behaviour of providers, lawyers and claimants. Instead, the faults in the system are created by the structure of the system.
Marshall comments that the government's objective is to provide guaranteed protection or a safety net to people who are injured in auto accidents. In Marshall's view, guaranteed protection or safety nets are most effective if they are managed by a government agency with the authority to interpret the legislation and create policy and practices. However, Ontario has developed a safety net for auto accident victims and then contracted it out to private insurers, without giving them any authority to decide how to distribute it.3
He notes that the legislation on this topic is, on the one hand, broad and open to interpretation and yet, on the other, regulations are very strict as to how insurers can provide the safety net. Marshall argues that this creates room for disputes about policy interpretation and limits efficiency. Marshall labels this as a structural flaw in the system.
Marshall outlines a five-part action plan:
- The government should fix the structural flaw in the system by setting up an arms-length regulator with a skills-based board. Thankfully this is already underway through the creation of the new Financial Services Regulatory Authority in Ontario. The legislation should set broad policy goals for auto insurance in the province and give the regulator powers to enact policies and procedures. The regulator must substantially overhaul existing Regulations to make them simpler to understand and easier to apply. The regulator will need to be very much more involved and proactive in the functioning of the auto insurance marketplace than it is today.
- The system of compensation for a catastrophically injured person needs to be changed substantially. Cash settlements are being drained by having to pay legal fees and, in any case, cash settlements often do not adequately meet the needs of a catastrophically injured person. They need lifetime care as their needs and available treatments will change over time. This must be actively explored with the Ministry of Health and Long-Term Care.
- The system needs to adopt a care
not cash approach. The solution lies in focusing on timely,
appropriate medical care, not cash settlements. All the other
expenses such as wage replacement, attendant care, pain, and
suffering build from the basis of the extent of recovery from an
accident. The regulator must create programs of care –
evidence-based treatment protocols used extensively in several
Canadian jurisdictions – that cover most common injuries. The
programs of care need to be kept up to date and new ones introduced
where necessary. Investment needs to be made on research into the
diagnosis and treatment of mental stress and other neurological
This will help avoid disputes about what care is appropriate and will help deliver immediate care to the majority of injured parties. Where the programs of care don't apply or don't work, a roster of hospital-based independent examination centres should be established by the regulator to provide diagnoses and future treatment plans. Insurers must provide the treatments prescribed in the programs of care or those that are stipulated by the independent examination centre without dispute. Injured persons should be required to seek advice from the independent examination centres and the courts should defer to the opinions of the independent examination centres.
Where the legislation provides for care, care should be provided and not cash. This shifts the focus to the needs of the patient rather than the amount of the settlement.
- Contingency fees for lawyers should be made much more transparent. The need for accident victims to hire lawyers to access benefits needs to be greatly reduced by simplifying the benefits and making them more readily available. And lawyers need to be held accountable for much more transparency in how they advertise and how they charge their fees.
- The auto insurance industry is likely to undergo major changes over the next ten years as innovation and competition from non-traditional sources come into the picture. The current regime of heavy regulation and price controls is poorly suited to adapt to the future. More open systems should be explored including changes to allow insurers to introduce new consumer products and to compete more freely on price and service in the marketplace.4
Marshall also advances a number of other recommendations which aim to improve care for injured people in auto accidents and reduce disputes concerning diagnosis and treatment amongst many others.5
The Ontario Bar Association made their submissions6 with respect to the Report on September 15, 2017. These submissions were prepared by an OBA Working Group which was established for the purpose of addressing issues raised in the Report as well as challenges within the auto insurance system. The OBA notes that the first part of their submissions involves responses to the Report addressing comments that the OBA believes are unsupported by empirical evidence. The second part of the OBA submissions addresses what the OBA calls broader issues regarding the Report's recommendations. These involve the need to simplify the system, proposed care programs, suggested Independent Examination Centres, and advertising, referral and contingency fee issues.7 The OBA in their submissions focused on the fact that the Report proposes the Independent Examination Centre's opinion be binding in any claim for no-fault benefits and be given deference in a tort claim.8 The OBA found this particular proposal to be problematic.
In response to the Report's plan of action and recommendations, Ontario's Ministry of Finance released a Backgrounder on December 5, 2017. The Backgrounder states that the Ontario government is taking action to make auto insurance less expensive for its drivers. To accomplish this, the government introduced the Fair Auto Insurance Plan, which they indicated will include reforms that address fraud in the system, strengthening consumer protection and provide better access to care for those injured in auto accidents.9
The Backgrounder states that the Fair Auto Insurance Plan will assist with the necessary structural reforms implemented to address the issues outlined by Marshall in his report. The highlights of the plan were stated to include:
- Implementing standard treatment plans for common collision injuries such as sprains, strains, and whiplash to help people receive the treatment they need after an accident, changing the emphasis from cash payouts to ensuring appropriate care for victims;
- Reducing diagnosis and treatment disputes between insurance companies and people injured in collisions by instituting independent examination centres to assess more serious auto collision injuries;
- Ensuring that lawyers' contingency fees are fair, reasonable and more transparent;
- Directing the Financial Services Commission of Ontario (FSCO) to review risk factors used by insurers to calculate premiums with the goal of ensuring drivers in certain parts of the province are not subject to unfairly high rates; and
- Cracking down on fraud by launching the province's first Serious Fraud Office in the spring of 2018. The office will use an integrated and dedicated approach to combat serious fraud, with a focus on auto insurance fraud, which has been identified as one of the factors contributing to higher premiums.10
The Backgrounder also mentioned that the province of Ontario plans on establishing a panel to guide the enactment of reforms mentioned in the Fair Auto Insurance Plan.
On April 13, 2018, the Minister of Finance, Charles Sousa, stated that the priority is to make auto insurance more affordable, to address fraud in the insurance system, and to provide better access to care for auto accident victims.11
He acknowledges Marshall's point that insurance rates in Ontario are still too high even though rates have been declining over the past five years. Sousa states that high rates are the reason why the Ministry of Finance has taken action through policies to lower rates. These include introducing a mandatory discount for drivers who use winter tires, and clarifying towing and storage costs after an accident. He further states that high insurance rates are a reason the Fair Auto Insurance Plan was launched.12
Sousa notes that the Fair Auto Insurance Plan is one that was implemented to reduce costs by making structural changes to the insurance system to better deal with fraud and better address the needs of auto accident victims. Sousa notes that the structural changes that are contained in the Fair Auto Insurance Plan are intended to permanently lower insurance rates over time.13
Sousa also announced that progress has been made since the introduction of the Fair Auto Insurance Plan in December 2017. He stated that the Serious Fraud Office is expected to open in the fall of 2018 and now has senior leadership on board. He also noted that the Ministry of Finance is developing standard treatment plans for lower back pain, and working to ensure Ontario drivers are not discriminated against based on the location of their residence. He also mentioned that the implementation team will be helping to carry out the remainder of the rate lowering measures.14 In his statement, the Minister concluded with the comment that the Ministry remains committed to following through with their plan.
In summary, the information provided in the Backgrounder and the Minister's April 2018 statement indicates that, at this stage, the government has only acted on a few of the numerous recommendations made by Marshall in his report. Uniformity of rates amongst all drivers and lowering insurance rates have been emphasized as key issues that the government is currently working toward changing. We do not anticipate that the government will move forward with implementing the Independent Examination Centres referred to in the Report. We will continue to follow developments with respect to the implementation of the Report with interest.
1. Marshall, David. Marshall Report: Fair Benefits Fairly Delivered, (April 2017), p. 8.
2. Ibid at page 6.
3. Marshall, David. Marshall Report: Fair Benefits Fairly Delivered (April 2017), p. 9.
4. Marshall, David. Marshall Report: Fair Benefits Fairly Delivered (April 2017), p. 10.
6. Ontario Bar Association, OBA Submission on the Final Report of David Marshall (September 15, 2017).
7. Ontario Bar Association, OBA Submission on the Final Report of David Marshall (September 15, 2017), p. 5-6.
8. Ibid at page 15; The Marshall Report page 52.
9. Ministry of Finance, Making Auto Insurance More Affordable: Province Introduces Fair Auto Insurance Plan to Promote Better Care for Victims and Affordable Rates for Drivers, Backgrounder (December 5, 2017).
11. Ministry of Finance, Statement from the Minister of Finance on Auto Insurance (April 13, 2018).
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