Insurance Fraud

With the new Accident Benefits regulation in effect for 2 years, have these changes had an effect on fraud? Is the amount of fraud reduced or have the culprits gotten better at hiding it?  It seems like we’re always two steps behind!

Time will tell, if the amount of fraud is being reduced, especially with the drastic increase in the amount of mediations being scheduled through FSCO.  Hopefully, less fraud will equal lower claim payouts AND lower premiums.

We’ve attached 2 videos from the Insurance Bureau of Canada that demonstrate the implications and financial cost of fraud.

Try here if you can’t view the videos below:

Insurance Bureau of Canada – Fraud on the Rise in Ontario

IBC Organized Insurance Fraud



AB Mediation Backlog: When the Dam Bursts

This article was recently published in Canadian Underwriter Magazine.

It is an expansion on Jim’s previous blog post.

Feedback on the articles and blog posts is always appreciated!

A PDF copy of the article is available here: When the Dam Bursts Jim Cameron.


By Jim Cameron, FCIP, CRM, C.Arb, President, Cameron & Associates Insurance Consultants

Thirty-five thousand cases and counting: What happens when the dam bursts?

Currently, under Ontario’s Insurance Act[1], if you have a dispute with an insurer involving the payment of accident benefits under the SABS (Statutory Accident Benefits Schedule), you must file for mediation with the Dispute Resolution Practice Group (DRPG) at FSCO (Financial Services Commission Of Ontario).

The mandate of FSCO’s DRPG is to provide a fair, timely, accessible and cost effective process for resolving claimant disputes over entitlement to accident benefits. This mediation must have taken place and failed before you can proceed to the courts through a lawsuit or by arbitration (again to be filed with the DRP).

The act provides that such mediation shall take place within 60 days of the filing date with FSCO. FSCO has found itself facing a marked increase in the number of mediation requests filed, coupled with Government imposed staff freezes. The result is a backlog of about 35,000 mediations. The auditor general observed that in the 2010-11 fiscal year, no mediations were completed within the 60 days required by law.

The number of mediations pending at the end of the FSCO fiscal year increased from about 3,000 in 2007 to 27,000 in 2011, a 645% increase.

The situation is only getting worse: the latest figures show 3,000 new cases per month. Estimates suggest the current backlog is about 36,000 cases. If nothing were to be done, the backlog could reach 48,000 cases by the end of this year.


0                 Number of mediations completed within 60 days

3,000        Number of new cases per month

35,000      Number of cases in backlog

Ontario auditor general Jim McCarter commented on this situation in December 2011. Citing increased demands and constraints on resources, he noted it is taking between 10 and 12 months to resolve mediated disputes instead of the legislated requirement of 60 days. He also commented that FSCO does not capture information to allow it to assess the reasons why the number of mediations has sharply increased over the past five years.

Surprisingly, his report stated about half of all injury claims end up in mediation. In addition, 80% of all mediations originate in the Greater Toronto Area, even though only 45% of the injured auto accidents victims live there.

The Vicious Circle

The report openly questioned FSCO activities in ensuring that insurance companies apply standard due diligence in adjusting or questioning benefits claims under the SABS.  In response, FSCO indicated it had issued bulletins to companies to respond to the September 2010 changes by more proactively challenging questionable claims.[2] The problem is, however, that when insurers challenge payments, more disputes over payment of benefits arise — and therefore claimants seek mediation more often.

The Response

FSCO implemented a procedure in which the insurer and claimants could consent to fail a mediation and then move on to the next step — litigation or arbitration. This was unpopular with both claimants and insurers. Insurers pay $500 for each mediation; they felt this money might be wasted if mediation could be bypassed without any chance to talk to the claimant and discuss or offer settlement.  Claimants, who are not charged for the cost of mediation but have to pay their representative, often want to mediate and obtain a settlement without going through the next very expensive steps of litigating or arbitrating.

FSCO also recently implemented eCalender, to help the parties schedule mediations electronically and conduct settlement “blitz” days for certain cases. The backlog, however, continued to mount.

After a consultation process to determine the availability of external private sector dispute resolution services with the requisite capacity and expertise, FSCO posted a Request for Proposal (RFP) on MERX, the province’s electronic tendering system. In its Jan. 13, 2012 update, FSCO announced it was seeking up to four outside firms to attack the backlog of mediations and the expected increased demand in arbitrations.

FSCO originally expected to have contracts with qualified service providers by May 2012. At the time of writing, no awards of contracts have been announced and a May date seems unlikely.

Justice Delayed is Justice Denied

In the interim, the judicial and arbitral systems have recently addressed the rights of claimants stymied by the backlog. Two court decisions and an arbitration decision found that the FSCO Dispute Resolution Group did not comply with the requirement of completing mediation within 60 days of the date of filing.

In Leone and State Farm, FSCO arbitrator Jeffrey Rogers concluded on a preliminary motion that the case could proceed to arbitration without mediation. He reasoned that Nicholas Leone faced the potential of irreparable harm as a result of delay in recovery of benefits to which he is entitled. “The erosion of statutory rights to a speedy dispute resolution process can have serious consequences for both sides,” Rogers wrote. “My ruling brings little comfort to applicants as a group, since it potentially moves the backlog from mediation to arbitration.”

In Cornie v. Security National, Ontario Superior Court Justice James W. Sloan heard four cases on the issue of whether or not a mediation is deemed to have failed if not heard within 60 days of filing. He concluded: “The SABS are for the benefit of injured motor vehicle victims and are often required in a timely fashion. It makes perfect sense that the legislation ….refer to a 60-day time limit to deal with such disputes. The insurance companies take the position that the accident victims must simply wait…. I find that submission preposterous.”

In Younis v State Farm, the insurer sought a stay of proceedings because the plaintiff had not completed a mediation as required by Section 280 (1) (2) and (8) of the Insurance Act and Section 19(1) of the DRPC. The action started more that seven months after the submission of the application for mediation. Ontario Superior Court Justice Guy DiTomaso found that the mediation had failed both on an interpretation of the Code, ss. 280(4), 280(7) of the act and s. 10 of O.Reg. 664.

The arbitration and all of the decisions above are under appeal. The first of the appeals is expected to be heard this summer.

The Effect if the Appeals are Upheld

Let’s assume claimants with mediations pending can bring either a court or an arbitration case more than 60 days after filing for mediation. Using the number of 35,000 to estimate the backlog, this means insurers would be billed $500 per mediation (deemed failed) for a total of $17.5 million. The cases would then have to either be arbitrated or tried.

Arbitration cases automatically cost the insurer $3,000. If half of the above cases end up in arbitration, that would result in $52.5 million in FSCO costs, plus most likely $5,000 in counsel fees (another $87.5 million), and these numbers completely ignore any settlement or benefit loss payment costs.

If half the cases proceed to court, there would be no FSCO costs, but the defence costs per file would most likely exceed the figures noted above. Since a large number of these disputes involve sums of less than $25,000, insurers may find themselves in Small Claims Court, a scenario with which insurers have dreaded over the years due to the unpredictability of results and the significant costs of defending there.

The bigger problem is how either the arbitration system or the court system, both of which are already stretched, will find the resources to deal with this huge influx of cases.

Practical Problems

Should the appeals succeed, or be further appealed or delayed, huge issues still arise out of FSCO’s attack on the backlog. Some industry sources suggest a large portion of the current backlog consists mainly of cases in which treatment providers are seeking the costs of their exams, and insurers consider those costs to be exorbitant and not reasonable and necessary. These disputes are not likely to settle at mediation.

Similarly, any cases involving the new changes to “incurred expenses” definition or the Minor Injury Guideline, or other novel issues, are not going to be settled at mediation. Insurers will demand a decision by a court or arbitrator on the critical issues affecting entitlement going forward.

Statistics cited in the auditor general’s report suggest that 70% of the cases have settled historically. Maintaining that rate going forward will be unrealistic. If it drops to 50%, an additional 12,000 new cases would appear annually before the courts or at arbitration starting as early as this fall.

FSCO, has cautioned insurers, law firms and paralegals to being planning to ensure adequate staffing levels so that there are no scheduling delays due to unavailability of the parties.

Of course, nothing in the legislation precludes an insurer from settling the case at any time. No requirement exists for a claimant filing for mediation to notify or copy the insurer; indeed, the insurer’s first official notice may be when the mediator is finally appointed. Adjusters should, however, be aware of files denied when their position led to the dispute.

FSCO CEO and Superintendent of Financial Services, in response to a question posed at the CIP Symposium on April 26, 2012, stated that it was clear that the current DRG is not working.   He refused to speculate on what is next.

One question remains: With claims counts down and staffing levels rationalizing, are insurers ready?



[1] Section 281 (2) of the Insurance Act

[2] See FSCO Bulletin A 02/11, issued 22 March 2011


Medical Rehabilitation Limits after September 1, 2010 (Part I)

This entry is by Nick White, AB Consultant with Cameron & Associates.

Nick began his career in insurance in 2007 and quickly moved into Accident Benefits where he continues to handle all levels of injury claims. He has championed settlement and dispute resolution projects as well as many training initiatives.

Medical Rehabilitation Limits after September 1, 2010 (Part I)

With the reforms to Bill 198 now comfortably (so to speak) in place both insurers and plaintiffs have developed their own strategies and styles for handling medical rehabilitation limits and the Minor Injury Guideline.   It was no surprise that plaintiff lawyers were quick to chime in on the pitfalls of the new regulations – and that insurers were quick to point out the need for reform to control exploding premiums – but what about claim handlers?

We have all heard and (if you drive in Ontario) experienced your standard policy non-catastrophic medical rehabilitation limit lower from $100,000.00 to $50,000.00 with your premium remaining the same or increasing.  This disparity is the first battle cry of any plaintiff lawyer arguing the reform is flawed, and frankly if you pay premium in this province, you may be inclined to bang the drum with them.

The second complaint regarding medical rehabilitation from any plaintiff lawyer (and possibly claimant) is likely going to be the combining of the insured’s cost of examinations with their scheduled medical rehabilitation limits.  Cost of examinations prior to the reform were not capped, and became a huge bone of contention between insurers, lawyers and other stake holders because of escalating out of control costs and insurance fraud.  Clinics could in essence propose anything and ultimately it was no threat to the claimant’s medical rehabilitation or other scheduled limits.  It also allowed for the tort file to be built on the backs of accident benefits so to speak.  I’m not a litigator, but clearly there is a trend of some plaintiffs (and defence) to simply amass mountains of medical reports in an attempt to sway an arbitrator, judge, jury and so on.

What is a claimant to do?  How does a claimant manage their medical rehabilitation and substantiate their on going disability?

Carefully.   Not only does the plaintiff lawyer or claimant have to monitor these limits, but the insurer too needs to look at the facts of every file and do something that has been lost in recent years: Call claimant, call the lawyer, call the doctor.

If Mrs. Insured has had a severe accident, and right now has to wait two years to determine she may or may not have sustained a catastrophic impairment. Mrs. Insured (and her lawyer) must work with the insurer and visa versa.  The lawyer cannot send her to a gamut of assessments only to find that $20,000.00 in medical rehabilitation limits have been squandered.

The adjuster cannot blanket approve all treatment only to be left with a badly impaired claimant collecting specified benefits, such are IRB or CareGiver, long after her treatment dollars are gone.  The two need to call each other. The adjuster must always keep in mind that we are seeking to lessen the effects of disability to help the claimant recover and reduce the duration of the claim.   It cannot be done by aggressively denying treatment nor can it be done by blindly approving every proposal that crosses the desk.