Ontario’s Liberal government will take two years to cut auto insurance rates by 15 per cent – double the time demanded by the New Democratic Party in its budget deal with the Liberals.
The NDP supported the minority Liberals’ budget this spring, allowing their administration to survive, in part because the Grits agreed to the left-wing party’s demand for lower auto insurance premiums. New Democrats repeatedly stipulated that the 15 per cent cut take effect within a year.
But on Friday, Finance Minister Charles Sousa said it will take longer than that.
At a press conference in a Mississauga industrial park near Pearson International Airport, Mr. Sousa said the two-year timeline was necessary to implement reforms to save the industry money, with those dollars eventually used to cut rates.
“This is a very balanced and practical approach, recognizing that if we don’t take the steps we are taking…[the savings] won’t happen,” he said. “This is a much more practical approach. We have to fight for the consumer, but we have to make sure those savings can be passed on.”
Mr. Sousa’s plan is a concession to insurance industry fears that an immediate cut to rates would make their companies lose money. He outlined several steps aimed at making the industry more profitable.
The government will crack down on insurance fraud by licensing clinics that invoice insurance companies, and put in place stricter accident benefit guidelines. Mr. Sousa also appointed former judge J. Douglas Cunningham, a mediation expert, to study reforms to the insurance dispute resolution system, which suffers from long backlogs that make insurers’ profits unpredictable. Despite frequent talk of bringing in tougher provincial controls for the tow-truck industry, Mr. Sousa said he would not act immediately. Instead, he referred the matter for further study.
To make sure the savings are passed on to drivers, the government will give the Superintendent of Financial Services the power to force companies to cut their rates. It will also appoint a group of watchdogs to make sure rate cuts are implemented, Mr. Sousa said.
Under the government’s plan, the first cut to insurance premiums will happen early next year, climbing to 8 per cent by August, 2014, then to 15 per cent a year later. The 15 per cent target is an average figure, Mr. Sousa said. Those with good driving records will reap larger rewards; those with worse records will not.
The NDP said Mr. Sousa’s timeline is too long and accused him of letting insurance companies “pad their profits” before drivers see rate reductions.
“Drivers in Ontario deserve a break on their auto insurance premiums now, not in two years,” House Leader Gilles Bisson said in a statement. “The Liberals know that it’s perfectly reasonable to get drivers relief a lot faster.”
New Democrats are planning to bring the insurance matter up at committee this fall, where they will pressure the government to accelerate the cut to premiums.
Whether the Progressive Conservatives will help the NDP get its way is unclear. Asked whether his party would support the New Democrats at committee, Tory MPP Jeff Yurek said the matter should instead be raised in the legislature and made into a confidence vote.
“I think the NDP should bring it up on the floor of the legislature. Let’s have a discussion, make it a confidence matter and see if the Liberals will follow through on their promise with the NDP, or if the NDP will stand up for the people of Ontario and call these Liberals out,” said Mr. Yurek, his party’s critic for auto insurance reform.
The NDP dismissed the Tory stance out of hand, pointing out that only the government can make a routine matter a confidence vote. The Tories previously failed to have a confidence motion voted on in the house this spring for exactly that reason.
The insurance industry, meanwhile, argued that Mr. Sousa’s plan doesn’t do enough to increase their profits. Without further reforms, industry members said, they simply cannot afford a big cut to premiums.
“We don’t believe that what’s in the budget alone will get you to a 15 per cent reduction in a responsible way. It just isn’t there,” said Ralph Palumbo, vice-president, Ontario of the Insurance Bureau of Canada. “For example, the licensing of clinics is going to take some time, the assault on fraud is going to take some time, the review of the tow-truck industry is going to take some time.”
Other, however, argued that the insurance industry is doing well enough as it is, and has the money to help out drivers.
“The insurance companies have made billions of dollars over the last two years from the last cuts in 2010 -- they need to take a chunk of that profit and put it towards the consumers,” said Sandra Zisckind, a Toronto personal injury lawyer.