Ontario is one of the safest places to drive in North America — safer, per person and per kilometre, than almost every province and U.S. state. Yet car insurance costs more in Ontario than it does anywhere else in Canada. This has been the case for years, but the government has mostly just tinkered with the insurance system, even as drivers and opposition parties have screamed for more sweeping changes.

A report commissioned in 2016 by the Ministry of Finance and published last week goes a long way toward explaining why Ontario’s insurance system is so expensive and dysfunctional. Written by former WSIB head David Marshall, the report says the perverse incentives of the market encourage insurers to offer large cash settlements that cover injured drivers’ medical treatment — and the lawyers those drivers retain — which is more costly than simply delivering the care they need.

Of the $4 billion companies pay out annually in injury and accident benefits, more than a third goes to the lawyers and doctors who determine how much money injured drivers should be awarded. Ontario consumers, who spend a whopping $10 billion on insurance annually, could each save $600 a year if the cost of insurance were closer to the national average.

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Problem is, although big cash settlements are painful for the industry, individual insurers are nevertheless encouraged to clear cases from their ledgers as quickly as possible — because a big payout that makes a patient go away is preferable to the liability a lingering patient represents. This should be reason enough for the government to step in and make some changes.

So, too, should the fact that the industry’s preference for cash settlements creates a target-rich environment for fraud, as Marshall notes in his report. He calls for Ontario to move the industry away from cash settlements altogether and compel insurers to actually (gasp) manage people’s medical needs instead of just writing cheques. When Saskatchewan adopted a similar “care not cash” policy, Marshall notes, whiplash claims decreased 28 per cent, and the time it took to close a case went from 433 days to about 200.

But whiplash claims aren’t a big problem for the industry. It’s the million-dollar cases — serious injuries requiring long-term medical care and resulting in years of lost potential income — that cause insurers headaches. Marshall points to the obvious fact that paying for health care is something government does a lot of; he recommends Ontario explore creating a service through which it could deliver treatment via the Ministry of Health and Long-term Care.

Marshall doesn’t recommend auto insurance be totally government-run — he notes that premiums in British Columbia’s public system are high — but instead advocates a better-structured private industry.

But it’s worth pointing out that even if every one of those $4 billion insurance companies currently pay out (including lawyers’ and consultants’ fees) were instead covered by taxpayers, the cost would still be manageable: government program spending increased nearly as much over two relatively lean years, from $118 billion to $122 billion between 2014 to 2016.

In Quebec, the province handles all medical care and guarantees lost wages from car collisions, leaving private insurance to handle property damage. Combined, public and private premiums in Quebec are half what they are in Ontario.

Even if the government were simply to cover the 1 per cent of cases that require intensive, long-term medical care, the insurance industry would be on a more solid footing with more stable costs.

Now, perhaps Ontario doesn’t want to make driving cheaper. After all, driving harms the environment and clogs already-congested roads. But the fact that driving is bad for the Earth doesn’t justify maintaining an inefficient and wasteful system — one that benefits lawyers and consultants at the expense of Ontario drivers. If the province does want to make driving expensive (which is hardly clear, given recent events), it should do so publicly and transparently, through gas taxes or road tolls.

For now, the government won’t say what, if anything, it will do with Marshall’s report. Finance Minister Charles Sousa’s press secretary, Jessica Martin, told TVO.org, “We will be conducting extensive consultations on the recommendations before determining our next steps.” But implementing the report’s recommendations could be an easy win for a government that’s repeatedly been stung by affordability issues in the past year. It’s a surefire way to keep hundreds of dollars in voters’ pockets.

What the report doesn’t offer is any roadmap involving less work for the government. From legislative changes restricting cash settlements to socializing the costs of catastrophic coverage, Marshall’s report suggests there’s no way for the government to fix Ontario’s broken insurance system without wading farther into it. It’s now up to the Liberals to decide whether the political benefit is worth the inevitable policy headache.

Photo courtesy of Michael Gil and licensed for commercial use under a Creative Commons licence. (See the uncropped version.)