Ontario Liberals plan to cut auto insurance rates 15% in 2 years
Published Friday, August 23, 2013 11:03AM EDT Last Updated Friday, August 23, 2013 3:33PM EDT
MISSISSAUGA, Ont. -- Ontario will order auto insurance companies to cut premiums by an average of eight per cent by next August, and by a total of 15 per cent within two years, Finance Minister Charles Sousa announced Friday.
The NDP had demanded a 15-per-cent cut in one year in exchange for supporting the minority government's budget, but Sousa defended his plan as more practical and achievable.
"We are compelling these insurance companies to reduce their rates," he said.
Regulatory changes in 2010 reduced benefits in some areas, saving the industry hundreds of millions of dollars, and the province will appoint a watchdog to make sure customers see some of those savings in the form of lower rates, added Sousa.
"We believe there are cost savings in the system right now for immediate reductions," he said. "We have to make certain that those savings can be passed on."
However, the Insurance Bureau of Canada said it will need to see more steps taken by the government to reduce costs for the industry before premiums can be chopped by 15 per cent.
"We're hoping they quickly introduce a new definition of catastrophic impairment," said IBC spokesman Ralph Palumbo.
"If you want to see some rate reductions, that's the place to start, to make sure that unnecessary costs in the system related to catastrophic injuries are taken out so that money goes to people who really need it."
Lawyers who work with car accident victims were not impressed to hear the Insurance Bureau talk about redefining catastrophic injuries after pay outs for that category were reduced three years ago.
"They already cut (catastrophic coverage) rates in 2010 down from $100,000 to $3,500, saving billions of dollars over the last two years, and now they're talking about cutting yet again," said Sanda Zisckind of the Diamond and Diamond law firm.
"I'm concerned that the dialogue between the IBC and the government keeps coming back to the same thing: how are we going to cut victims' rights as opposed to how are we going to cut profit for the insurance companies."
The New Democrats said drivers deserve a break on their auto insurance premiums now, not in two years.
"(Premier) Kathleen Wynne can't be trusted to put drivers first," said NDP house leader Gilles Bisson. "She's telling drivers they need to wait two years for relief, but she's helping auto insurance companies pad their profit margins right away."
The Progressive Conservatives called Sousa's announcement "another empty promise" from the Liberal government, and said their plan to cut bureaucracy would be the best way to lower premiums for motorists.
"Ontario's drivers have been lied to yet again," said PC critic Jeff Yurek.
"The Liberals promised the NDP the moon so that Andrea Horwath would prop up the Wynne government."
Sousa said the government would keep looking at issues such as provincial oversight of the tow truck industry to try and lower industry costs, which he noted are 10 times higher in Ontario than other provinces.
The Financial Services Commission of Ontario will issue directives to insurers to lower automotive premiums an average of 15 per cent based on today's rates, he added.
"If we don't give FSCO and an independent watchdog the powers to ensure that the rate reductions are taking place, that the savings are being passed on, then they won't happen," said Sousa.
The first approvals for cuts to insurance premiums would come in January 2014, which the government expects would be between three to five per cent.
Officials predict a 15 per cent cut to premiums would mean an average annual savings of $200 for Ontario drivers.