John McArthur shares his thoughts on Ontario’s Auto Reforms

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John McArthur, the chairman of AMAC Consultants, Inc. shares his thoughts on the pending Ontario auto reforms.

John McArthur: I chaired the Claims Committee for the Insurance Bureau of Canada in 1990 or thereabouts when the first auto reform legislation was implemented in Ontario, and there have been two iterations since then and now this.

The pattern is always the same. After the implementation of the legislation the companies appear to be making money; they either reduce their rates or hold their rates. And then over a period of two to five years the service providers and the legal profession, and the other pariahs hanging around the periphery of the business, figure out how to take advantage of loop holes in the new legislation. Companies suddenly come alive to the fact that they have not properly provided for their claims. There is stir-step reserve increasing on previous year’s claims, and all of a sudden the loss ratios go through the roof. Then they go off to the government asking for more auto reform.

I’ve long held the view that it isn’t the system, it’s how the system is managed. The two most stable environments in the country are British Columbia and Quebec. One is virtually a full tort system, British Columbia, that hasn’t changed very much in the last 30 years. The Quebec model is really a full no-tort system. And they’ve both been very, very stable over time. Now the common denominator is that they both have a monopoly on the basic coverage and they’re government owned, and they’re on both sides of the equation when it comes to settling claims. But I think the insurance companies in Ontario, and Alberta for that matter and the Maritimes, could take a lesson from the large Worker’s Compensation carriers in the United States, who don’t adjust claims on the telephone with people who’ve been three months in the business, they have experts who go out in the field and make early contact, early intervention. They take control of the claim and they get the injured party into the hands of their medical providers.  And that doesn’t happen here.

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