Anti-Fraud Task Proposes Regulating the Towing Industry

The Task Force observed that oversight and enforcement activities around tow truck operations in Ontario are inconsistent across the province, creating opportunities for fraud organizers, and for tow-truck operators themselves, to exploit. Issues raised include the participation of some tow truck operators in the creation or manufacture of false claims, exorbitant towing fees, and inappropriate referral practices (such as paid referral fees for directing consumers to particular health care, automotive body shop, or legal service providers).

The Task Force asked the Regulatory Practices Working Group (RPWG) to examine options that would reduce the potential for practices that may fraudulently inflate insurance costs without impairing quick removal of damaged vehicles from roadways.

The RPWG established an ad-hoc inter-ministerial committee to help gather information and conduct analysis on the towing industry. Their focus has included:

• options to address practices that may fraudulently inflate insurance costs;
• broader regulatory options that also address road safety and consumer protection; and
• market-based options.

Here are the options that the Task Force would like feedback on from stakeholders and the public:

1. Give consumers better information, including information about personal rights and responsibilities, as well as existing protection from potentially unfair or deceptive acts or practices.

The objective would be to alert consumers — and provide a signal to members of the towing industry potentially involved in fraudulent or abusive activities — that these activities are prohibited.

2. Strengthen existing bans on paid referrals to other services.

Bans on accepting referral fees already exist in some municipal bylaws and UDAP regulations — however, these are not consistent. For example, they do not apply to every tow and are limited to municipalities where bans exist and/or where auto insurers pay. Creating a province-wide ban on referral fees for other services could provide greater clarity and consistency.

3. Harmonized municipal business licensing.

This option would require municipal business licensing based on provincially-set standards/requirements — potentially including fees, codes of conduct, and bans on paid referrals. This would have the objective of creating greater consistency in municipal licensing.

4. Provincial business licensing through a Designated Administrative Authority (DAA).

Under this option, the province could create a new regulatory regime through a third-party Designated Administrative Authority (DAA, a non-Crown and non-profit entity) that would oversee provincewide requirements. A DAA model establishes an accountability and governance framework between a Ministry and a not-for-profit corporation that administers legislation on behalf of the government.

5. Roster system similar to what has been established by Halton Regional Police Services.

Halton Regional Police Service maintains a list of pre-selected towing operators to recommend to consumers requiring towing services. Consumers are directed to the first available towing operator based on a rotating list of eligible businesses.

My thoughts...

The DAA model is appropriate where the government determines a well-regulated industry has the maturity and sophistication to take over regulatory responsibility. An example is the travel industry. The towing sector is not currently regulated by the province and certainly isn't sophisticated enough to develop a DAA. This is not a workable model.

It makes sense to build on the existing network of municipal licensing regimes and develop provincial-wide standards and rules. This will also prevent the confusion what currently exists when towed vehicles cross municipal borders. There is also a lot of merit to a roster system that is used in Halton. A similar system exists in a number of U.S. jurisdictions and eliminates chasers from the system. I understand that in these jurisdictions the police provide the first towing firm called a limited amount of time to make it to the scene and then contact the next company of the roster.

Bans of referral fees are well intentioned but difficult to enforce. These payments are "under the table" and difficult to uncover. I believe the best way to combat referral fees is to control fees charged by towing companies, body shops and rehabilitation facilities. Controlling fees reduces the ability to pay for referrals and then pad bills to cover the payments.

Auto insurance and diminished value

Scenario: Your car is struck by another driver, who is at fault. His insurer pays for the repairs, but you believe that your vehicle -- since it has been in a wreck -- is worth less than it was before the crash.

Can you demand that the insurer compensates you for that diminished value?

Yes, but it can be difficult to prove. Diminished value can be part of a claim, but it is up to the claimant -- that's you, in the scenario above -- to prove that the value of the vehicle is diminished after the repairs have been completed.

Doing that may mean getting dealer testimony or an appraisal showing the value of the vehicle before the accident and after the repairs.

Our office, unfortunately, cannot force insurers to pay diminished value claims. You may need to seek legal advice to negotiate a settlement.

Insurance News - Friday, August 2, 2013

Here are the leading auto insurance headlines from ONTARIO AUTO INSURANCE TOPICS ON TWITTER for Friday, August 2, 2013:

• The Federal government is taking another run at removing the HST exemption for independent medical evaluations or assessments. A tax lawyer suggests they may the proposed amending language may fail.
• Driving to the beat of the music may lead to higher auto insurance rates. Here are some infographics which demonstrates how the music drivers listen to in the car has an impact on driving behaviours, from accidents to speeding tickets.
•  If you think driverless cars are just a pipe dream, well four U.S. jurisdictions are setting ground rules for self-driving cars on the roads.
• An interesting articles about the ethics of saving lives with driverless cars.  Things get murky when you factor in that some people might actually be killed by a robot car.

WA Supreme Court: Insurer can be held liable for agent's actions

In a case that’s been closely watched by the insurance industry, Washington’s State Supreme Court on Thursday affirmedthat insurers are liable for the illegal actions of their agents.

“The ruling is a big win for consumers,” said Insurance Commissioner Mike Kreidler, whose decision the case was challenging. “If you allow someone to do business on your behalf, it only stands to reason that you can be held responsible for what they do.”

The case involved violations of the state’s insurance laws in 2006 and 2007 by an insurance agency appointed by Chicago Title Insurance Company. That agency, Land Title Co. of Kitsap County, Inc. repeatedly offered illegal inducements to get business. The violations included illegally “wining and dining” real estate agents, builders and mortgage lenders with free meals, donations for a golf tournament, monthly advertising, and Seattle Seahawks playoff game tickets.

Although Land Title was Chicago Title’s exclusive agent in the Washington counties at issue in the case, Chicago Title argued that it was not responsible for its agent’s actions. In a consent order signed in 2009, the company agreed to pay a $48,334 fine if it did not prevail in court.

“Chicago Title’s arguments were contrary to a century of insurance law,” said Kreidler. “In order to effectively regulate insurers and protect consumers, it’s important to hold insurers responsible for the actions of their agents.”

Title insurance practices have long been a concern to Kreidler, whose office in 2005 scrutinized 18 months of employee expense reports and ledgers for the largest title companies in King, Pierce and Snohomish counties. The examination found many cases in which the companies were providing gifts, golf tournament sponsorships, parties, ski trips, sports tickets, meals and other inducements to get business.

“Few people shop for title insurance, although they certainly can,” said Kreidler. “It tends to be included in the large stack of documents that homeowners are handed to sign. So title companies and others in the industry are positioned to steer business to particular insurers.”

New rules took effect in March 2009, clearly outlining what can be given. There are limits on advertising, donations to trade associations, meals, training, leasing workspace and gifts.

2013 insurance data notes Group Health as market leader in health

Each year, OIC releases a report that contains financial and market information about companies that sell insurance to Washington consumers. We are required by state law to publish the information, which we collect from the National Association of Insurance Commissioners. 

We collect information about the companies’ financial statements—assets, liabilities, income—a summary of their loss ratios and an accounting of how much money they charge consumers, which is called a premium. We also rank the top companies in Washington by market share, which is the number of policies they sell in comparison to the other companies.

While there is quite a lot of dry financial information in the report, there are some interesting facts about the state’s insurance market.

First, here’s some background:

In 2013, we regulated nearly 2,300 insurance companies and more than 140,000 insurance agents and brokers. Our job is to make sure they follow state insurance laws, which are set up to protect consumers. Why do we protect consumers? Because Washington consumers paid insurance companies $34 billion in 2013 to cover losses they may incur on their homes, cars, valuables and other possessions and to pay for their medical expenses.

Many of the statistics are organized by lines of business, which essentially means the type of insurance they sell. The top three health insurance groups by market share are:

• Group Health Cooperative Group, with 20 percent of the market and $3.3 billion in written premiums.
• Cambia Health Solutions, Inc., which includes Regence Blue Shield, with 16 percent of the market and $2.6 billion in written premiums. 
• Premera Blue Cross Group, with 15 percent of the market and $2.5 billion in written premiums.

The top five property and casualty groups—they write policies to cover your home, auto, RV, boat, etc.—are:

• Liberty Mutual Group, with 11.4 percent of the market and just over $1 billion in written premiums.
• State Farm Group, with 10.8 percent of the market and over $980 million in written premiums.
• Farmers Insurance Group, with 7.6 percent of the market and over $691 million in written premiums.
• Allstate Insurance Group, with 7 percent of the market and over $635 million in written premiums.
• United Service Automobile Association Group, with 5 percent of the market and over $454 million in written premium.

We also have a list of all the insurance companies that have headquarters in Washington state, which we call domestic insurance companies, with an overview of their earnings, market share and enrollment numbers. The top three domestic health insurers are:

• Group Health Cooperative, with 13.8 percent of the market and $2.2 billion in written premiums.
• Regence BlueShield, with 13.5 percent of the market and over $2.1 billion in written premiums.
• Premera Blue Cross, with 12.5 percent of the market and over $2 billion in written premiums.

The top three domestic property and casualty insurers are:

• Farmers Insurance with 4.5 percent of the market and over $412 million in written premiums.
• Pemco with 3.8 percent of the market and over $345 million in written premiums.
• Mutual of Enumclaw with 1.9 percent of the market and over $177 million in written premiums.

View the 2013 annual report on our website.

Anti-Fraud Task Force Considering SABS and UDAP Changes

Ontario auto insurance stakeholders may be tired of SABS reforms still the Auto Insurance Anti-Fraud Task Force in their status report is suggesting consideration of a number of SABS changes put forward by the insurance industry to assist in deterring and dealing with fraud. These related to relationships between insurers and claimants.

1. Require claimants to confirm attendance at treatment facilities

Insurers have reported being billed for treatments that never took place. In some circumstances the claimant or injured person was unaware this occurred. The Statutory Accident Benefit regulation could be amended to require health care providers and assessment facilities to ask claimants to sign a form each time they receive a treatment. Copies of the forms would have to be kept on file and made available for inspection by a representative of the insurer at the time of audit.

I'm not so sure this is really needed. On July 1, 2011 section 46.2 was added the SABS to provide insurers with the ability to request information from providers to verify that treatment had been provided. That could include clinical notes and other records. Verification of treatment provided already exists and, in fact the clinical record even specifies the type of treatment provided as well as the date.

2. Require claimants to confirm receipt of goods and services billed to insurers

Insurers have reported being billed for goods and services that were never provided. In some circumstances the claimant or injured person was unaware this occurred. The Statutory Accident Benefits regulation could be amended to require providers of goods and services to ask claimants to sign a form when they receive goods. Copies of the forms would have to be kept on file and made available for inspection by a representative of the insurer at the time of audit.

There is some merit to this proposed provision. However, this information should also be in the clinical records. An additional requirement would suggest that clinicians are falsifying clinical records which may be occurring though I don't recall anyone ever raising it as a problem.

3. Require claimants to attend up to two examinations under oath upon request of insurer

Insurers sometimes have difficulty substantiating a claim without additional information that only the claimant could provide. The current regulatory regime requires only one examination under oath and in many cases this examination takes place very early and is directed at establishing which insurer is the responsible insurer where there is more than one company involved and doubt about the facts. Insurers have suggested that once treatment has commenced it would be desirable to allow for a second examination under oath if an issue arises that could not have been anticipated at the time of the first examination, or where the first examination had to wholly be used to establish which insurer was responsible for a claim. As a matter of due process, it is important that additional criteria be established around this proposal to ensure that claimants are treated fairly during the administration of these examinations under oath.

I agree with this proposed provision.

4. Require a claimant to pay their insurer a $500 fee for missing a medical examination as requested

Insurers are billed when claimants fail to attend a medical examination arranged by the insurer at an agreed time and place. It has been reported that some legal representatives have told their clients not to attend, and to not give notice. The SABS could be amended to require the claimant to pay a fee of $500 toward the cost of the missed appointment when the person has missed an appointment, without giving reasonable notice or without offering a reasonable explanation for failing to give notice in time. It would be up to the insurer, not FSCO, to give the claimant timely and adequate warning of the potential charge, and to collect the money.

I agree with this proposed provision. However, I'm not so sure it will reduce non-attendance at medical examinations. I predict that many of those legal representatives that advise their clients not to attend will dispute indicating that reasonable notice was given. In some cases I could see a legal representative paying the $500 charge in order to avoid the exam.

5. Strengthen enforceability of the Cost of Goods Guideline by making direct reference to its application in the Statutory Accident Benefits Schedule (SABS)

The current SABS does not include a direct reference to the Cost of Goods Guideline. For enforceability and as a technical matter, the SABS should refer directly to the Cost of Goods Guideline.

I agree with this proposed provision.

6. Make it an unfair or deceptive act or practice to request a claimant or injured person to sign a claim form that has been left blank or incomplete

Insurers report that claimants are at times asked to sign claim forms before the items to be billed to the insurer have been entered. The claimants are often unaware that it is against the rules for them sign what amounts to a blank form. When they do sign, it is easier to exaggerate, misrepresent or fraudulently bill for treatments or for goods and other services without their knowledge. A change in rules would make it a violation under rules governing unfair or deceptive acts or practices to present a blank or incomplete form for signature.

I agree with this proposed provision though I can see it being very difficult to enforce. Let's face it there is no one looking over the shoulder of the facility at the time these forms are completed.

7. Require insurers to include an itemized list of expenses in the benefit statement sent to claimants every two months

The SABS requires insurers to send claimants a benefit statement every two months. Adding an itemized list of expenses to the benefit statement would allow claimants to review specific expenses incurred under their claim and identify any suspicious information. Insurers could also include information about how a claimant can report suspicious activity so that they stop the misuse of their benefits by fraudsters.

I strongly support this proposed provision. I was disappointed to see insurers not properly use section 50 of the SABS when it was introduced on September 1, 2010. The current benefit statements may comply with the SABS but insurers made no effort to use them as a fraud detection tool which was intent of the section 50.

You can also read about the proposed regulatory model for treatment and assessment facilities in Ontario and the amount of fraud in Ontario.

What does personal injury protection cover?

Here in Washington state, auto insurance policies commonly offer personal injury protection, widely known as PIP. You can opt to add it your auto coverage. If you're in an auto accident, it will help pay for certain costs, up to certain limits.

Like what? It helps pay for:

• Medical expenses
• Lost wages
• Lost services
• and funeral expenses.

But there are some things that it won't cover. For example, PIP coverage doesn't cover injuries caused when using:

• Farm equipment
• Off-road vehicles
• Mopeds
• Injuries sustained while racing
• Or injuries sustained while committing a felony.

Also -- and this is important -- PIP coverage does not cover services that your insurer decides:

• Are not reasonable
• Are not necessary
• Are not related to the accident
• or are not incurred within three years of the accident.