Ontario auditor general criticizes auto insurance, electricity costs, lack of oversight

Ontarians pay significantly more for auto insurance than any other Canadians, in part because the average cost of accident injury claims is five times higher than any other province, auditor general Jim McCarter reported this week.

But the commission that oversees the auto insurance sector does not know whether insurers are handling claims judiciously and paying out the proper amounts, he explained in his 2011 annual report.

Ontario does not have measures in place to combat insurance fraud, he said, despite the fact it costs the industry about $1.3 billion. In addition, the total cost of injury claims in Ontario rose by 150 per cent between 2005 and 2010, even though the actual number of injury claims rose only 30 per cent over the same period.

Last week, the government announced it would be "cracking down" on auto insurance fraud, following the release of an interim report by the Auto Insurance Anti-Fraud Task Force.

The task force, announced in the 2011 budget, builds on recent provincial initiatives to combat fraud, including an attempt at stabilizing rates in September 2010 and using the Health Claims for Auto Insurance database to detect potentially fraudulent activity.

Despite these initiatives, the task force's report has identified issues it says need to be examined, such as the licensing and/or regulation of health clinics and other possible gaps in regulation, the establishment of a dedicated fraud investigation unit, the development of a consumer engagement and education strategy, and the creation of a single web portal for Ontario auto insurance claimants.

According to McCarter, auto insurance is but one of several cases in which provincial ministries and agencies must do a better job of collecting meaningful and reliable information about their programs. He also noted that he's flagged this very issue in his eight previous annual reports.

The Green Energy and Green Economy Act: McCarter said it authorized the government to fast-track the development of wind and solar power projects without many of the usual planning, regulatory, and oversight processes.

"On a go-forward basis, it will be important that government decision-makers are provided with information to assist them in striking the appropriate balance between promoting green energy and the higher electricity prices that households and business enterprises will be paying for such energy," reads the summary report.

The debt-retirement charge: Since 2002, consumers have paid a special debt retirement charge on their monthly electricity bill that was intended to pay off $7.8 billion in what is called the "residual stranded debt" of the old Ontario Hydro. Since then, consumers have paid $8 billion, but McCarter said the Minister of Finance has never provided a public update on how much of the debt remains - even though the Electricity Act requires the Minister to do this "from time to time."

The interests of electricity consumers: The Ontario Energy Board's powers to protect the interests of Ontario's 4.7 million electricity consumers are more limited than they were a decade ago, says McCarter. "Because we all use electricity, and because the sector operates in a near monopoly, effective oversight by the Ontario Energy Board has historically been crucial."

Electricity prices for the average Ontario consumer have risen about 65 per cent since the restructuring of the electricity sector in 1999, and they are projected to rise another 46 per cent in the next five years. In light of this, the role of the OEB to pro­tect consumers while setting rates that provide a reasonable rate of return to the industry "is all the more important," said the report.

The report also noted the OEB is responsible to ensure that electricity bills are just and reasonable, but it only has jurisdiction over half of the total charges for electricity on a typical bill.

The state of Ontario forests: The Ministry of Natural Resources needs more reliable information about whether Ontario forests are being successfully regenerated by private-sector forestry companies. McCarter's department believes the MNR can accomplish this by exercising more diligence in its oversight activities.

Legal aid for low-income residents: On a per capita basis, Ontario spends more on legal aid than any other province but provides the fewest number of low-income residents with dedicated legal representation. As a result, the report highlights, more people have to rely on Legal Aid Ontario's website and courtroom duty counsel.

The Ontario Trillium Foundation grants: The OTF provides more than $100 million a year in grants to not-for-profit and charitable groups. While it has a well-defined grant review and approval process, the supporting documentation often could not demonstrate that the most worthy projects were funded for reasonable amounts and that the funds were spent for the intended purpose.

The LCBO: As a matter of policy, the Liquor Commission Board of Ontario pays suppliers a percentage of the retail price it wants to charge for products. However, if it took advantage of its purchasing power to obtain lower wholesale prices - as one of the biggest buyers of alcohol in the world - it could then assess whether paying those lower prices would still allow it to meet its retail-pricing objectives and increase profit margins.

To read more details or consult the entire report, visit www.auditor.on.ca.