Last week's report on auto insurance supervision by Ontario Auditor Jim McCarter presents a convincing argument for placing Ontario's auto insurance industry under the microscope. Here are the highlights, because I see them.
• In order to determine insurance premiums by the Financial Services Commission Ontario - Ministry of Finance of the Agency authority to regulate insurance companies - the factors which it considers a reasonable rate of profit. This interest rate is tied to 12% return on equity. But this was set in 1996, when the long-term Canada bond rate was 10%. Long-term interest rates are now around 2.6%. Prices have been low for a long time and is expected to remain low, so why insurance companies charge fees based on an out-of-date information?
• Although the commission approvals FSCO reports on a quarterly basis, it is impossible for consumers to correlate with an approved insurance premiums, the insurance companies to charge illegal rates. AG, the insurer of over-billing errors between the 1000000 dollars and $ 11 million. Since most of the illegal were self-reported, we do not have the means to know the full extent of over-billing. As AG pointed out, FSCO did not have a method to determine if the insurance companies charge the approved rates.
• FSCO is a policy of approving the insurer's proposed rates, even though it is up to 3% higher than the calculated rate of FSCO. AG mentioned one case where the number of FSCO allowed to grow 8% higher than justified by FSCO's determination, which could lead to an extra $ 25 million in bonuses the insurer.
• When 10% of the total rate increase announcements between 2006 and 2010, FSCO approved a rate higher than initially requested. Worse was inadequate documentation to support these decisions.
• FSCO is responsible for timely dispute resolution process between insurers and casualty carriers, yet most of the 2010-11 fiscal year mediations dealt with 10-12 months in response to calls. Worse, the number of requests for mediation is growing rapidly, and at the same time AG does not point this out, there may be a delay of two years or more before delivery, and procedures performed. Apparently, FSCO did not capture any information on the reasons for increasing the conciliation / arbitration case load. It is clear that victims of accidents are not satisfied with the processing of their claims, and for good reason, which is based on the arbitration decisions I've read.
• Insurance fraud is rampant ... or is it? Attempt to have any real analysis, AG, listed on the insurance industry estimate of $ 1.3 billion fraud per year. Do not worry, that this figure seems to have remained for 20 years. Do not worry about Ontario Auto Insurance Anti-Fraud Office Task Force Interim Report was released earlier this month announced $ 1.3 billion figure "can not be verified to measure the extent of fraud." Alliance of Community Medicine and Rehabilitation providers calls to $ 1.3 figure "baseless" and calls for an independent investigation to determine the extent of fraud. As the saying goes, "the insurance industry has an incentive to over-report the problem, in order to move forward as the government owns the resources in this matter, and thus eliminates the cost and responsibility for them."
• Insurance companies are required to compensate for the Ontario health care system costs for accident victims. But the amount paid by insurance companies has not increased since 2006, even though health care spending has risen by about 25%.
• FSCO reviews did not do anything to check if the insurance companies handle claims with care or pay the correct amount of applicants.
Knowing the Ontario car insurance premiums are the highest in the country, while at the same time Ontario has the lowest limit provision of services shall be deemed to have suffered "minor injuries," AG's report is conclusive evidence of why the independent inquiry into the car insurance is a necessity. Indeed, it is long overdue.
Article Source:- http://www.torontosun.com/2011/12/09/insurance-inquiry-needed
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