Liberals vote to support 15% cut in auto insurance rates

Liberal MPPs backed NDP motion for gradual industry-wide reduction

Ontario’s Liberal government has agreed to support an NDP motion calling for a gradual, industry-wide 15% cut in auto insurance premiums.

“We’re supporting that motion because the underlying principle is we need lower rates for drivers in Ontario, and that’s what we’re working on,” Premier Kathleen Wynne said Wednesday.

Read: Industry and NDP Leader Horwath to meet

However, Wynne repeatedly refused to say if the Liberals would commit to the NDP’s demand that the government order the Financial Services Commission of Ontario (FSCO) to mandate the premium cut by the private companies.

“My support for this motion is an acknowledgment that this is an issue that needs to be addressed, it is something that we are working on in the lead up to the budget,” Wynne told reporters.

“The specific mechanisms may not be exactly the ones that are in the NDP’s motion, but this is something of great concern to me, and we are working on it.”

The Liberals have maintained the best way to reduce insurance premiums is to combat fraud, a position supported by the Insurance Bureau of Canada (IBC).

“Implementing the recommendations of the anti-fraud task force is a very important aspect of how we’re going to get auto insurance rates down,” she said.

“It’s something that we can work with the NDP on.”

Read: We need to talk about auto insurance 

Though the Insurance Brokers Association of Ontario (IBAO) supports anti-fraud measures, it recently met with members of the NDP government to discuss their bid to lower auto rates.

“Last week we met with the NDP and told them that we support lower rates for our customers if it is done responsibly. They appear to have listened and moderated their demand as their motion calls for a ‘gradual reduction of 15%’ with no specified time limit to achieve this,” said Randy Carroll, in an email to Canadian Insurance Top Broker. 

“That is why we believe the Liberals are able to support it at this time,” he continued. “We will await the budget and the ultimate outcome before we pass judgment on any deal. In the meantime, we will continue to encourage the implementation of the anti-fraud recommendations as part of a responsible approach to lower rates.”

The NDP agreed there could be savings from implementing anti-fraud measures, but said the industry has realized huge savings in the past couple of years since the Liberals redrew coverage rules in 2010 that lowered benefits for most drivers.

The NDP argue premiums went up in 2011 despite the fact that industry payouts for accident claims dropped by up to 50% after the regulatory changes.

The Insurance Bureau of Canada (IBC) has commissioned an actuarial study to look at the profit margin for Ontario auto insurance in recent years, including 2012.  “This is important because of wild speculation recently in the marketplace, perpetrated in part by the Ontario Trial Lawyers Association,” said Ralph Palumbo, vice-president, Ontario, IBC, in a press release. “They’ve claimed the industry has made billions off the backs of consumers and it’s just not so. So we’ve asked an independent expert to do an analysis.  We expect the results of this review in a week.”

On the government’s support of the NDP motion, Palumbo commented: “We support any move that links key reforms to meaningful premium reductions.

“We know that auto insurance costs too much in Ontario. This can only be achieved with a commitment to real reforms that address costs and create a better system for drivers.”

The move by the Liberals to vote for the motion shows the minority government is willing to respond to New Democrat demands in exchange for getting NDP support for the upcoming budget, which would avoid triggering a provincial election.

The NDP voted to support the minority government on two confidence votes Wednesday, a routine supply bill and the throne speech bill, while the Tories voted against both measures.

With files from The Canadian Press 

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