The changes that were wrought on the Ontario Automobile Insurance product effective September 1, 2010 were the result of an honest attempt to deal with a very real problem. A crisis was looming; the rapidly expanding costs of settling Accident Benefits claims threatened to either push auto insurance premiums completely out of reach of the majority of Ontarians, or to cause insurance providers to either pull out of Ontario or face losses that showed no sign of turning around.

Accident Benefits was - and is - a complex coverage structure that is very difficult to mould into something newer, cleaner, and more efficient. To completely gut the coverage and start from scratch wasn't practically or politically feasible, since that would mean the tort system of settlement by lawsuit would come roaring back, and the ensuing chaos would be undesirable for all parties involved. An evolutionary change was required, one that would lead in the direction of lower claims costs and, therefore, lower premiums.

Coverages had to be reconsidered in order to limit the amount that insurance companies have to hold in reserve against a potential claim. Also, incidental costs such as the assessment costs by rehabilitation providers were bleeding insurers dry; there was no limit to the amount that could be paid in an endless round of medical back-and-forth.

The resultant Accident Benefit structure has a shell game quality to it, since the insured person is told he or she can choose to buy back or enhance the basic coverage now offered. The emphasis is on choice, not on the fact that failing to choose to buy back coverage leaves the insured person in a precarious situation if he or she is severely injured in an auto accident.

An adequate package of Accident Benefits coverage is available, but for additional cost to the purchaser, and with a degree of complexity built into the decision-making process that really shouldn't be necessary. It is very difficult for a client to make an informed decision on the multiple elements of coverage without a great deal of time and effort. The new Accident Benefit grid has eight options to consider, with overlapping coverage possibilities and incidental consequences to various choices. Most importantly, the consequences of choosing inappropriate or inadequate coverage due to misunderstanding, confusion, impatience, or frugality can be severe.

There are a couple of significant problems with the new reality, problems that cry out to be fixed. First, the limit on Attendant Care under the basic coverage can potentially leave non-Catastrophic claimants with a one year gap in coverage. The buy back cost to this is, for most insurance companies, negligible. The potential for the claimant to realize a serious financial setback if he or she doesn't listen to the advice of his or her broker is very real. The $36,000 limit should be spread over the entire two years, or the "Option" should be entirely removed. This change made no sense; it looks like an incomplete piece of a puzzle that was ignored.

The unfortunate larger picture issue is that the reforms have not been effective to any significant degree when it comes to the motorcycle side of things. Everyone is still hoping that costs will go down in the long term. In the meantime, insurance companies are not getting the percentage rate increases that they are asking for from the Financial Services Commission of Ontario. The public is, of course, more than happy not to see large rate increases. However, the question is this: do the insurance companies really need these increases, and if so will they be in trouble without them? And will the public see large rate increases approved after the Ontario election in October?

Another very serious problem, perhaps the core of the entire issue, is the fact that the frequency and severity of losses has continued to be high, especially in motorcycles. There is lots of blame to be spread around on that issue, lots of explanations that are perfectly valid, but the inescapable fact is that losses must go down if we are to have any hope of a better premium environment without losing significant coverages and limits beyond what we have already lost.

With the current, complex Ontario automobile insurance product, one point needs to be emphasized over all of the others. Anyone with an automobile insurance policy must really and truly understand their coverage and coverage options to a greater degree than ever before. Like any complex product, they must choose their advisors carefully and diligently in this process, their advisors being their insurance brokers or agents. Knowing precisely what is on the insurance contract, and what should be on the insurance contract, is more critical than ever before. Do not be content with partial, vague explanations or blanket assurances; get to the bottom of every question you have, and demand nothing less than excellent communication and absolute clarity and disclosure.

There never was a quick fix to the intractable problems with the Ontario Auto Insurance structure, but absolutely everyone involved hopes that we are on the road toward a more amenable situation. Insurance companies need to be vigilant in employing best business practices and careful actuarial practices. Brokers need to continue to advise the public accurately and with great deliberation to ensure that the public is fully aware of the consequences of all of their insurance decisions. The public must continue to be fully engaged in the process at all levels, questioning their brokers and their politicians without hesitation if any part of the issue lacks clarity for them. The public must also understand that responsible driving practices will go a long way towards resolving the issue of claims costs and, by extension, premium costs.