Its going to take two years for Ontario drivers to see the full benefit of the provincial governments promise to reduce auto insurance premiums by 15 per cent.
Minister of Finance Charles Sousa announced Friday the auto insurance industry must cut premiums eight per cent by next August and by another seven per cent a year later.
Sousa also said he wants to see a schedule for a three to five per cent reduction by January.
We have worked hard to reduce costs in the system and we continue to take further action to help ensure that those savings are being passed onto consumers, Sousa said.
The government estimates the average driver will save $225 annually when the announced reforms are fully implemented.
Ontario has the highest auto premium rates in Canada.
The minority Liberals were pushed into addressing the insurance premium issue in return for the NDP's support of the budget last spring.
Newly elected MPP Percy Hatfield (NDP Windsor-Tecumseh) said the Liberal plan has crashed before its got off the starting line.
Im extremely disappointed, Hatfield said. We thought the premier would look after Ontario families. Clearly making people wait one or two years to make life a little more affordable, shows the Premier cant be trusted to protect Ontario families.
Hatfield said the premiums issue will be on the front burner for the NDP when the legislature resumes sitting Sept. 9. He suggested the issue needs to be sent immediately to the general standing committee on government in search of ways to speed things up.
Its going to be a big issue, Hatfield said. If it doesn't get immediately sent to committee, a lot of time is going to be eaten up in the legislature by this.
Hatfield added theres no excuse that the industry cant afford a quicker premier reduction plan after reforms three years ago capped some benefits for drivers.
Previous cutbacks resulted in $2 billion in savings for the industry, Hatfield said.
Hatfield said Insurance companies are paying out 62 cents for every dollar in premiums they collect.
Among the other highlights Sousa outlined were:
- The superintendent of financial services will have the authority to require insurers to re-file rates.
- The province will crack down on fraud, including licensing health clinics which bill auto insurance companies
- Cost reduction efforts such as provincial oversight of the towing and collision repair industries will be studied.
- SFG guidelines on accident benefits will become binding.
- The province will take steps to ensure all areas of Ontario enjoy fair premiums.
- Motorists with superior driving records will see that reflected in their premiums.
In addition, Sousa announced that retired Ontario Superior Court chief justice J. Douglas Cunningham has been appointed to review how to improve the insurance dispute resolution system.
Randy Carroll, CEO of the Insurance Brokers Association of Ontario, cautioned if the rates are brought down too quickly that could pose problems for some insurers.
He also disputed Hatfields 62 cent figure and said for some companies the 15 per cent rollback may give them pause when they consider whether they'd continue to offer the product.
"We welcome lower premiums, but we have to achieve that in a responsible fashion," Carroll said.
They're mandating a 15 per cent decrease in advance of making changes to help with expense reduction. We've heard a lot of promises about change, but how do we take more costs out of the system?
Carroll said the key from the industry's perspective is in reducing the $1.6-billion of fraud insurance companies face annually.
He said the moves by the province to consider overseeing the towing and collision repair centres industries is a good step.
I see some costs being taken out, Carroll said.
Im somewhat comfortable with the three to five per cent reduction by January. Beyond that, theres a need for more regulatory change.
Carroll said he expected it would be 12 to 18 months before consumers would see any savings.
Windsor lawyer Greg Monforton, past president of the Ontario Trial Lawyers Association, said his overriding fear is lower premiums will be accompanied by less insurance coverage.
We need to be careful the government doesn't allow the industry to reduce protection for individuals, Monforton said.
Thats whats been happening the last 20 years.
He also supported any moves to weed out fraud, which he said is largely a Greater Toronto Area problem, and give the superintendent of financial services more clout and independence.
However, he dismissed any suggestion the 15 per cent premium cut will be responsible for some companies exiting Ontario's auto insurance market.
Insurance companies have been threatening to pull out since 1972, Monforton said.
If all auto insurers are required to offer the identical product, as they are in Ontario, why are some hugely profitable and some less so?
It has everything to do with running in an efficient and productive manner.