Ontario changing auto insurance system; aiming to tackle fraud, lower rates

Ontario is cracking down on what it calls rampant auto insurance fraud, saying it will lead to rate cuts for the province’s 10 million drivers.

Auto insurance rates are a thorny issue for the Liberal government, which is still trying to deliver on a promise it made to cut rates by 15 per cent on average from 2013 levels.

The government said Tuesday, December 5, 2017 that it will develop standard treatment plans for common collision injuries such as sprains and whiplash, create independent and neutral examination centres to provide medical assessments for more serious injuries, and ensure that contingency fees set by lawyers are fair and transparent.

The plan would also establish a Serious Fraud Office, staffed in part by officers from the Ontario Provincial Police, to tackle abuse in the system.

Finance Minister Charles Sousa, who announced the measures with Attorney General Yasir Naqvi, said the cost of auto insurance fraud is estimated to be as high as $1.6 billion a year. By cracking down on abuse, and holding people accountable, the government can achieve a “substantive rate reduction,” he said.

“Auto insurance fraud has become an industry,” Sousa said. “It’s time to stop it. If you know someone who has been engaged in this crime let the Serious Fraud Office know. They will pursue and investigate these fraudsters and bring them to justice.”

Sousa said the new measures will ensure accident victims receive appropriate care and are assessed independently by health professionals with no ties to an insurer. He could not immediately say what the plan will cost taxpayers or if it sets a specific rate reduction target.

Sousa also urged insurance firms to take action against fraudsters.

“If an insurance company, if the industry is telling us that there’s abuse, there’s fraud in the system, then stop settling,” he said. “Stop settling fraud cases and let’s start attacking the fraud and prosecuting the crime.”

A government-commissioned report earlier this year found that Ontario has the most expensive auto insurance premiums in Canada despite also having one of the lowest levels of accidents and fatalities.

The average auto insurance premium in Ontario is $1,458, which is almost 55 per cent higher than the average of all other Canadian jurisdictions, the report found. If Ontario’s premiums were closer to the Canadian average of about $930, it would save Ontario drivers almost 40 per cent _ or about $4 billion a year, it said.

Tuesday’s announcement comes as the Liberal government is still trying to fulfill a promise to reduce rates by 15 per cent on average from 2013 levels _ rates have now decreased on average by about eight per cent since then. The government missed its self-imposed deadline of August 2015 to hit that target and Premier Kathleen Wynne has admitted that was a “stretch goal.”

Insurance company Aviva Canada said if the government implements its new measures, it will help lower rates. The company estimates fraud costs the insurance system $2 billion a year, nearly half a million more than the government estimates, said vice-president Gord Rasbach.

“If you address the fraud piece you will make an impact on rates,” he said. “Fraud, at the end of the day, someone has to pay for it. It really comes down to people who are milking the system (at the expense) of a lot more people who are paying and are honest.”

The opposition Progressive Conservatives said the Liberals are only acting on insurance rates now because an election is less than six months away.

“Auto insurance premiums are still 55 per cent higher than other Canadian jurisdictions,” PC finance critic Vic Fedeli said. “Four years ago this government promised a 15 per cent cut … They have completely bungled this file.”

NDP finance critic John Vanthof, who noted the government plan to cut rates doesn’t set a target, was doubtful the plan will result in a reduction of costs for Ontario drivers.

“They actually haven’t talked about how much their new stretch goal for insurance going down (is),” he said. “They’ve talked about measures they want to take but there is no back-up documentation for that.”

 

B.C. sets minimum age of 19 to consume marijuana, plans mix of retail sales

British Columbia has become the latest province to lay out its plan for regulating recreational marijuana, announcing that pot sales will be allowed through both public and private stores to buyers who are at least 19 years old.

B.C. is following other provinces in keeping the age of consumption, purchase and possession of marijuana consistent with alcohol and tobacco laws, which Solicitor General Mike Farnworth said Tuesday will more effectively protect young people and eliminate the black market.

“We know that the largest consumers of cannabis are young people,” Farnworth said when asked about evidence from health experts on the danger of cannabis on the developing brains of people older than 19.

“If you set it too high, for example at 25, you’re not going to get rid of the black market because they’re going to go and get it elsewhere.”

The federal government intends to legalize non-medical cannabis in July. B.C.’s announcement follows a public consultation period that received submissions from nearly 50,000 residents and 141 local and Indigenous governments.

The B.C. Liberals pressed the government to act quickly on the questions that remain about how pot will be sold and where.

“This should not be seen as a profit centre for government and any extra revenue should be redirected to enforcement and addiction services,” Liberal legislature member Mike Morris said in a statement,

Farnworth released few details about retail sales, beyond saying both public and private vendors will be allowed. He was unable to comment on online sales or whether current marijuana dispensaries would be able to apply for licences to continue operating after legalization.

The government expects to release details of its retail model towards the end January or the beginning of February, he said.

Work also remains to be done on whether people will be allowed to grow plants at home for personal use, a practice that has been banned by Manitoba over concerns about enforcement. Manitoba also released its plans for overseeing marijuana sales on Tuesday.

B.C.’s public consultation produced a report that was released alongside its announcement Tuesday. It revealed polarized views on drug-impaired driving, showing that some want zero tolerance while others said cannabis doesn’t impact the ability to drive.

The report also says there was some confusion among consultation participants on the distribution and retails sales of marijuana, but many opposed Ontario’s model. Ontario intends to sell the drug in up to 150 stores run by the Liquor Control Board of Ontario and ban consumption in public spaces or workplaces.

“Most of these individuals preferred to see the existing dispensaries and their supply chain legitimized, licensed and regulated,” the report says.

It also says two points emerged on public consumption: People don’t want to be subjected to second-hand smoke in public places and they want cannabis consumption limited to indoor use at a private residence or a designated space.

 

47% decrease in mortgage loan insurance business ‘new normal’: CMHC

Canada’s national housing agency said Wednesday that the 47 per cent decline in the country’s insured mortgage market year-over-year in the third quarter is the “new normal level.”

The Canada Mortgage and Housing Corp. said in its latest financial report that it provided mortgage loan insurance to 67,915 units for the three-month period ended Sept. 30 compared to 127,991 units during the same period a year ago.

Steve Mennill, CMHC’s senior vice-president of insurance, said decreased volumes have been steady throughout the year as a result of the new mortgage rules announced by the federal government in the fourth quarter of 2016.

The rules require all home buyers with less than a 20 per cent down payment to undergo a stress test to ensure the borrower can still service their loan should interest rates rise, or their personal finances fall. This cut into the purchasing power of some first-time homebuyers.

“We think we’ve found the new kind of level following those changes that were made close to a year ago,” Mennill said during a conference call Wednesday, November 29, 2017.

“So we’re fairly confident that the level of volume that we’re seeing now is the new normal level.”

CMHC said the 47 per cent drop in total insured volumes in the third quarter was primarily due to decreases in transactional homeowner and portfolio volumes. The agency reported that transactional homeowner volumes decreased by 13,966 units, or 30 per cent, due to lower purchase and refinance volumes, while portfolio volumes decreased by 50,388 units, or 90 per cent, mainly due to the market adjusting to new pricing as a result of the increased capital requirements.

Partially offsetting those decreases was an increase in multi-unit residential volumes of 4,278 units, or 17 per cent, primarily due to an increase in multi-unit residential refinance transactions mainly resulting from a continued low interest rate environment.

In the first three quarters of 2017, total insured mortgage volumes were 211,891 compared to 345,716 in the third quarter last year.

As a result of the lower volumes, CMHC said its total insurance-in-force decreased to $484 billion as of Sept. 30 of this year, a decrease of $28 billion from the end of 2016.

Mennill said during the conference call that lower mortgage loan volumes have impacted staffing requirements within CMHC’s homeowner underwriting group but that increased volumes in multi-unit residential have offset these impacts.

Charlie MacArthur, CMHC’s senior vice-president of regional operations and assisted housing, added that the National Housing Strategy will also require homeowner underwriters at the agency to work in assisted housing.

“There will be similar skills required in the assisted housing side of the business as that business grows with the announcement of the National Housing Strategy,” he said.

Prime Minister Justin Trudeau unveiled the $40-billion plan on Nov. 22, which includes a promise to introduce legislation to make housing a fundamental right. He also promised a new, portable housing benefit for low-income households, and to prioritize funding for the most vulnerable populations like women fleeing domestic violence.

CMHC said that Budget 2017 proposes new federal investments in excess of $11.2 billion over 11 years, as well as preservation of funding for social housing and new low-cost loans to support affordable housing under the new plan. The agency said these figures will build on additional federal funding of $5 billion made available through Budget 2016, a portion of which is reflected in CMHC’s 2017 expenditures for housing programs. CMHC said it will deliver $9.1 billion of this incremental federal funding investment.

In its quarterly report the agency also said that it has seen an improvement in the quality of its mortgage loan insurance portfolio compared to a year ago.

The agency said its overall arrears rate was 0.30 per cent in the third quarter, which is down from 0.32 per cent a year ago.

 

Canadian and American companies clearly want to do more business together

Despite continued geopolitical risks to global trade seemingly at every turn, Canadian export performance has grown at a rate higher than expected – 8 per cent this year over the projected 6 per cent, according to Export Development Canada’s (EDC) latest semi-annual Global Export Forecast released today.

In particular, stronger demand from US companies and consumers for Canadian products and services is playing a big part in that increase, just as NAFTA negotiations reach a critical juncture.

The energy sector’s return to growth is the main reason that Canada’s exports are picking up, as the oil patch rebounds from devastating forest fires and an ongoing lower price environment. The major buyer of that energy? You guessed it: the US. As the US economy perks up and industry begins to churn, energy demands have followed suit.

At the same time, ores and metals will see a big jump as the US and global industrial sectors begin to slowly increase production. That resurgence in production is also driving up Canadian exports of Canadian machinery and equipment in the strengthening U.S. market.

Canada’s export engine is revved up and firing on all cylinders,” says Peter Hall, EDC Vice President and Chief Economist. “Despite the political signals coming out of the U.S., Canadian and US companies are clear: they want to do more business together. We are seeing more Canadian companies making new business investments in the US and we’re already measuring its impact on boosting demand for Canadian exports, specifically machinery and equipment.”

Highlights: 

Sectors posting double-digit growth include:

  • Energy 31%
  • Ores & Metals 14%
  • Industrial Machinery & Equipment 11%
  • Energy exports stand at $77 billion and are forecast to grow by an astounding 31 per cent in 2017. However, the intense growth will be short-lived as gains flat line in 2018.
  • Services, a key driver in the Canadian export story, will post a positive gain of almost 6 per cent this year and maintain that level of momentum in the longer-term outlook.
  • The forestry sector remains in positive territory with gains of 4 per cent, but growth will slow due to the ongoing softwood lumber dispute between Canada and the US.

Overall, Canadian export growth is expected to level out to 4 per cent in 2018 after its 8 per cent gain this year, pushing export growth above the pre-recession high water mark. “We might very well have finally put our feet on the bottom of this long export stagnancy period,” added Hall.

Globally, EDC is projecting world growth to rise from 3.6 per cent this year to 3.8 per cent in 2018, fuelled by robust growth in emerging markets, specifically ChinaIndia and Brazil. However, developed markets have turned a corner with major economies recording stronger performances this year.

Developed markets are also providing growth opportunities in the long-term, particularly in the EU as a result of the new Canada-EU Comprehensive Economic and Trade Agreement (CETA). The free trade agreement opens up a market of approximately 500 million people worth $20 trillion to Canadian exporters.

“It’s been a long time coming, but global growth is back,” Hall adds. “Canada’s exporters are poised to gain from this growth throughout 2017 and 2018.”

For the full report, visit EDC’s Global Export Forecast: Fall 2017

EDC helps Canadian companies go, grow, and succeed in their international business. As a financial Crown corporation, EDC provides financing, insurance, bonding, trade knowledge, and matchmaking connections to help Canadian companies sell and invest abroad. EDC can also provide financial solutions to foreign buyers to facilitate and grow purchases from Canadian companies.

For more information about how we can help your company, call us at 1-888-434-8508 or visit www.edc.ca.

SOURCE Export Development Canada

If NAFTA dies, old Canada U.S. FTA would live on, right? Not so fast, Canada

By Alexander Panetta

THE CANADIAN PRESS

WASHINGTON _ It’s a refrain frequently heard in Canada: That ending NAFTA wouldn’t change much in economic relations with the United States, because the countries could simply pull their older agreement off the shelf, dust it off, and persist in trade without tariffs.

It’s also wrong, some analysts say.

A few people interviewed this week disputed the idea that the original Canada-U.S. Free Trade Agreement of 1987 would automatically snap back into place if NAFTA disappears, an increasingly relevant topic as hostilities mount in the trilateral trade talks.

“That’s so naive,” said Sarah Goldfeder, a former U.S. diplomat in Mexico and Canada who is following the trade negotiations at Earnscliffe Strategy Group in Ottawa, on the idea of an automatic snap-back.

“You’d have to re-implement (the original agreement).”

That would raise new challenges, she said. First of all, she said the current American political climate would not make for an easy re-implementation. She said there would be demands for a renegotiation within the U.S., and the parties would soon be back at the table struggling with many of the same sticking points.

“There’s no way this (Trump) administration would do this (re-implementation) without negotiating a new agreement,” she said.

“So you’re still going to have to negotiate all the same irritants.”

The current talks have become bogged down amid huge gaps between the countries and not only in material things like dairy, automobiles, and public works’ Buy American rules, but in basic philosophical differences on the architecture of a trade deal.

The Trump administration’s proposals would make it easy to cancel the agreement within five years, and hard for countries to count on stable long-term access to each other’s markets.

The president says he’ll cancel NAFTA if he can’t get a deal.

Insiders now view termination as a real possibility, raising unprecedented procedural questions _ like what the rules are for cancelling a trade deal and, of particular importance to Canadians, what the rules are for reviving an old one.

The suspension of the old agreement was signalled in diplomatic notes exchanged between the countries. The 1993 notes were brief and vaguely worded. The countries complimented each other on their new deal with Mexico, and confirmed that each would make separate arrangements to suspend the old deal.

The American suspension is laid out in Section 107 of the law implementing NAFTA in that country in 1994. The earlier deal negotiated by Brian Mulroney and Ronald Reagan was to be suspended, and, according to the law, it would remain suspended until such time as that suspension might be “terminated.”

It doesn’t define how you “terminate” a suspension. But a trade consultant who two decades ago advised Canada’s parliamentary committee on NAFTA implementation said it obviously requires someone to do something.

“It’s been suspended. Somebody has to un-suspend it,” Peter Clark said.

That someone could be Congress. And even if Congress does successfully vote to re-introduce the old FTA, its vote would either require the approval of President Donald Trump, or an overwhelming, two-thirds majority vote in Congress to overcome a presidential veto.

A Washington trade expert says lawmakers could also try sneaking bits of trade legislation into larger bills it’s a common practice in American lawmaking to tack on unrelated items to a bill.

But Eric Miller says his own congressional sources have already told him: American lawmakers would expect a vote on any FTA re-implementation. He’s warning Canadians now _ over what he calls a dangerous complacency that there’s some insurance policy if NAFTA dies.

“I think it’s highly questionable that this insurance policy will pay out, and pay out in full, in the case of an accident,” he said.

“I’m highly doubtful the agreement would come back into place and everyone would be fine with it… If Congress believes they’re going to have to vote on it, then they’re going to have to vote on it.”

The U.S. Constitution, after all, gives Congress the power over international commercial agreements. Historically, Congress has merely lent that power to the president, and worked out a compromise set of rules known as fast-track legislation.

Now some analysts suggest the Congress could try wresting back its rightful power, block any Trump effort to cancel NAFTA, and avoid all this uncertainty over the 1993 deal, the 1987 deal, and trade in general.

But a former U.S. trade czar expresses some doubt this will happen.

Barack Obama’s trade representative Michael Froman points to the track record of this current Congress which has failed to pass a single piece of policy legislation of any significance.

“I think it would require a lot of action, a lot of consensus in Congress. And that may emerge,” Froman told the Council on Foreign Relations this week.

“But so far, there haven’t been a lot of profiles in courage.”

The end of free trade in North America would leave new tariffs averaging 3.5 per cent in the U.S., 4.2 in Canada, and 7.1 in Mexico. Some analysts say that would reduce Canada’s GDP by about 2.5 per cent on a long-term basis.

Government and business not keeping up with speed of technology

By David Hodges

THE CANADIAN PRESS

TORONTO _ A new report suggests the speed of technological advances has become so rapid that it’s outpacing the rate at which large Canadian businesses and government institutions can adapt, with the number of jobs threatened by automation ranging from 35 to 42 per cent.

The co-authored report, by Deloitte and the Human Resources Professionals Association, calls upon policy-makers and business leaders to prepare Canadian workers for the disruption that artificial intelligence, machine learning and other technologies are having on the economy.

“The changes we are seeing are nothing less than historic and governments and educators need to take a skills-first, not a job-first approach,” said Scott Allinson, vice-president of public affairs at the HRPA.

“Technology just seems to be outpacing the current business model,” added Allinson, pointing to last week’s announcement by Sears Canada that the retailer was shutting down its 130 remaining stores, leaving about 12,000 employees without a job.

“We’ve seen with the brick-and-mortar stores that they’re not keeping up with the change of what people are looking for, thanks to technology.”

Reforming education to ensure Canadians enter the workforce with the future-proofed skills they need to succeed in a digital world are among the key recommendations in the joint report.

It says this would require re-examining how schools are organized, with greater emphasis placed on interdisciplinary work, mental agility, critical thinking, teamwork, relationship management, and the capacity to learn itself “in other words, coaching the integrated capabilities needed for the future instead of teaching individual subjects.”

With workers today needing to upgrade their capabilities constantly, the report also calls upon businesses to take a leadership role in promoting “future-proofed capabilities” by replacing static learning and development programs with dynamic, continuous learning opportunities.

Among the ways this could be achieved would include making learning available on-demand, 24/7 to all employees on any digital platform: computer, tablet or smartphone. Employers that don’t offer these off-site, virtual learning opportunities will find it increasingly difficult to recruit and retain top talent, the report says.

Another key recommendation is modernizing provincial labour laws and the social safety net to reflect the realities of the “gig economy” _ which has turned the traditional one job/one employee/one employer model on its head, with pioneers like Uber and Airbnb doing away with large, hierarchical organizational structures altogether.

The report says that since 1997, Canada’s contingent workforce has grown from 4.8 million to 6.1 million and now accounts for about one-third of all jobs and is likely to keep growing.

While Ontario has been debating reforms to raise the minimum wage and improve the labour market, Allinson says that policy-makers across the country need to design solutions that reflect both the opportunities and the challenges facing gig-economy workers as well as free-agent employees in traditional companies. This includes significant reform to the way Canadian public policy approaches retirement planning, income taxes and unemployment insurance.

“We need to get down to the urgent work of assessing not just how work will change in Canada but how Canadian workers should prepare,” said Allinson.

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