The Moral Hazard of Automobile Insurance

The Moral Hazard of Automobile Insurance

Handler’s What the Ontario Party Platforms Say About Automobile Insurance showed how the three dominant parties’ plans to lower the automobile insurance for the general public during the 2014 general election in Ontario, none of them, with the exception of the Liberals had any concrete plans to implement the rate reduction. The Liberals, who were in power at the time of election, had the capacity to introduce concrete plans for rate reduction.


  • Legislative Effort

The Liberal’s effort demonstrated its legitimacy in reducing auto insurance rate from Automobile Insurance Transparency and Accountability Report.  The goal is to reduce the rate by 8% in August 2014 and by 15% in August 2015. They went further in introducing Bill 171  to amend the Fighting Fraud and Reducing Automobile Insurance Rates Act, 2014 and Bill 189 to amend the Roadside Assistance Protection Act, 2014:

  • Setting limits on vehicle impoundment fees by towing companies and a new tribunal for insurance rates arbitration for the insured and insurer
  • Setting guidelines for towing companies in billing and in offering estimates to users

The Bill advocated reasonable rates for vehicle impoundment by towing companies and introduced new conflict resolution system for auto insurance companies and their clients.   The focus is a shift from the system of mediation from Financial Services Commission of Ontario to arbitration by government appointees. The ultimate goal is to offer a decision to the parties in dispute within six months of application through one of the following arbitration methods:

  • Paper review for medical reimbursement claim under $10,000
  • In-person review for serious physical trauma
  • Expedite in-person-review for medical reimbursement claim between $10,000 and mild physical harm
  • Review through video conferencing (excluding the use of telephone mediation)
  • An appeal to the decision is only possible when there is a question of law and it will be heard by a Superior Court Judge


According to Willie Handler, the NDP did not have any substantial legislative plan to reduce auto insurance rate for the general public. The NDP, nevertheless, had the goal of auto insurance reduction by 15% within one year should they come to power. The NDP believed the granting of a say in the rate implementation process for the general public will keep the rate in check.

Progressive Conservative

At the end of his article, Willie Handler introduced the PC’s plan for auto insurance reduction. The PC’s goal is to limit insurance rate hike by the following four means:

  • Stress senior executive’s accountability for making insurance rate change decision and for any other major decisions
  • Reduction of red tape by introducing a market run mediation service
  • A streamlined medical assessment plan that has uniform standard
  • Establish a special investigative unit from the Attorney General office to combat unusual billing practice of health care service providers for claimants

The Progressive Conservative, like their NDP counterpart, did not have any substantive plan to combat the upward trend of auto insurance through introduction of legislative Bills.


Leo Tam is a Paralegal student at Centennial College in Toronto studying professional communications with Omar Ha-Redeye.