Law Times

Page 10 January 12, 2015 • Law Times www.lawtimesnews.com FOCUS Lawyers criticize new transparency, accountability report Conflict of interest among concerns by personal injury bar about industry analysis By JuDy vAN rhiJN For Law Times here was another pre- Christmas release of a controversial report on the auto insurance re- gime by the Ministry of Finance. The year before saw the Dec. 17 release of the regulations that substantially reduced attendant- care benefits. This past Decem- ber saw the release of the auto- mobile insurance transparency and accountability expert report by KPMG. Steve Rastin, president of the Ontario Trial Lawyers As- sociation, sees the timing as an attempt to stif le debate. "They know we have concerns about the author," he says. "They know we have con- cerns about the methodology. This will be a hot topic this year." In the report, KPMG provid- ed figures that show that before the 2010 reforms, claims costs were on track to increase on average by 8.1 per cent per year. Since the reforms, claims costs have been increasing on average by 1.7 per cent per year, bringing the trend closer to the general in- f lation level. KPMG also found that the average claim cost level had decreased by approximately 25 per cent for total compulsory coverages and 21.6 per cent for total all coverages. It's the information that's ab- sent in the report that's creating angst in the legal community. And the controversy over the use of the Insurance Bureau of Canada's accountant to prepare a transparency report hasn't gone away. "There is a massive con- f lict of interest," says Rastin. "Not only has KPMG re- tained a similar actuarial analysis to the one it did for the IBC in April 2013, but when you look at the authors of the report, it seems that they have used the same per- sonnel. If this is not a clear conf lict of interest, we don't know what is." The association has brought its concerns to KP- MG's attention. The firm has replied that the arrangement is within industry standards. The ministry, meanwhile, has taken no action to ad- dress the issue. According to Rastin, there's not just the ap- pearance of bias but also proof of it in that the interim report only included the views of the insurance industry executives with whom KPMG had a pre- existing relationship. "There is a belated attempt to get input from stakeholders for the annual report," says Rastin. "But we were not invited to meet with them, nor were other stakeholders. We were not invit- ed to comment on the interim report. They sent out a survey that asked us to comment on how our membership could help us to achieve further sav- ings as opposed to dealing with substantive issues. It is pretty clear in both reports that they are predominantly concerned with insurance industry per- spectives." According to Rastin, KPMG is asking the wrong question altogether. "They are asking what more can we do when they should be asking why can't they already deliver the 15-per-cent reduction given the massive cuts. With a 90-per-cent cut in benefits, why haven't they got to their profit goals already?" Rastin notes that before the report and the recent legisla- tive changes, the Co-operators Group Ltd. issued a circular say- ing it had cut its rates by 15 per cent. "Why didn't the report ask why the rest of the industry can't do that?" In relation to premiums, the report stressed the inadequacy of pre-reform rates. It found that reductions in claims costs means that the premium in- creases needed to return to prof- itable levels are "significantly re- duced." It quoted the minister of finance's statement that Ontario drivers had seen a six-per-cent reduction in insurance rates be- tween August 2013 and August 2014 and concluded that addi- tional efforts will be necessary in order to sustain the targeted average cut. "We would have thought that in a transparency report, there would be an analysis of the per- formance of the insurance mod- el in Ontario," says Rastin. "Are the premiums fair? Are they charging too much? Are they making profits? How much money could actually be saved by fighting fraud?" The association had made a specific request to KPMG to examine how much money is going towards assessments. But the report ignored the issue apart from a statement that the complexity of the claim process often results in the need to perform addi- tional medical examinations and assessments. "They are spending $65 to $70 on assessments for every $100 paid in damages," says Rastin. "Given that half the claims are rejected, they are spend- ing more fighting claims than they are paying out. There is no analysis on that. And if 83 per cent of cases are limited to $3,500, how can the average cost of claims be $20,000? You do the math." Also attracting comments of bias is KPMG's choice to disre- gard the General Insurance Sta- tistical Agency accounting data that shows the industry is mak- ing a profit while instead apply- ing its own accounting system to show that it isn't. "One government account- ing body is criticizing another government accounting body. It comes back to the conf lict of interest," says Rastin. Rastin is unhappy with many of KPMG's recommendations, most notably the suggestion to remove lawyers from the sys- tem. "We understand their col- leagues at the IBC would be thrilled with that, but it is not in the public interest. There are many serious findings where the insurance companies have en- gaged in poor conduct, includ- ing a recent [Financial Services Commission of Ontario] case that is under appeal. The reality is that if insurance companies were fair, there would be no law- suits and no lawyers. We exist because the insurance compa- nies don't always pay what they should." The association also decries the call for the creation of new bodies to represent accident vic- tims and motorists in general. "We are the group that speaks for accident victims and we weren't consulted. The group that rep- resents everybody who drives a car is the legislature. There are 50,000 accident victims out of nine million drivers who think they are never going to have an accident. If it was put to a plebi- scite, the motorists would be willing to sacrifice benefits. It is up to the government to balance those interests in Ontario." Rastin believes the Ministry of Finance wants to do the right thing but feels that's almost im- possible if it doesn't have good information. "Hiring industry insiders is like getting the fox to guard the henhouse. How can you hold the industry to account when you have a warm and cozy relationship with them?" The association is now pre- paring to engage its own experts to do a meaningful analysis. "If the right people take a look at this report, there are holes you could drive a bus through. Our job, before we go to the minis- try, is to prove that the industry is not being straight with them and to provide the proof. We will give them the tools to say there is more than one way of looking at this. There is more than one perspective." Audrey Ramsay, chairwom- an of the insurance law section of the Ontario Bar Association, says it's an area that organiza- tion will be monitoring as well. "The Ontario Bar Association supports a broad consultation process in developing any new policy," she says. "Certainly, transparency, reporting on statistics, and es- tablishing benchmarks is im- portant in understanding the impact of legislative and other measures on the system. The KPMG report is one way to help establish useful benchmarks. Additional input on bench- marks and their uses will also be important considerations for the future. The OBA will be monitoring the work in this area and will be consulting its mem- bers for their input." LT Lexpert DealsWire is a new way to keep abreast of the significant M&A deals that are making news right now. It will examine and analyze key developments and trends as they happen and will report on the key players as deals are announced and closed both in Canada and around the world. Sign up today for bi-weekly email alerts at www.CarswellMedia.com/newswire/Dealswire GET THE LATEST NEWS AND VIEWS ON M&A Untitled-1 1 2014-09-11 1:13 PM E. V. Litigation & Financial Services Inc. Elaine G. Vegotsky, CMA, CFE, CFI Assisting you in Litigation & Forensic Accounting, Financial Investigations x a F r o e n o h p e l e T 0 0 9 e t i u S 0 7 3 1 - 0 3 9 ) 6 1 4 ( , t s a E e u n e v A d r a p p e h S 5 4 Willowdale, Ontario M2N 5W9 (905) 731-5812 evlitigation@rogers.com E. V. Litigation & Financial Services Inc. Elaine G. Vegotsky, CMA, CFE, CFI Assisting you in Litigation & Forensic Accounting, Financial Investigations x a F r o e n o h p e l e T 0 0 9 e t i u S 0 7 3 1 - 0 3 9 ) 6 1 4 ( , t s a E e u n e v A d r a p p e h S 5 4 evlitigation@rogers.com Toronto, Ontario M2N 5W9 (905) 731-5812 CFA, CPA, Vlit_LT_Mar10_14.indd 1 14-03-04 10:18 AM T 'Hiring industry insiders is like getting the fox to guard the henhouse,' says Steve Rastin.

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