This class action involves a harmonized sales tax (HST) payable on various products and services. From the inception of the HST, the financial services commission of the province advised all auto insurers that the HST was not a benefit. When insurers were adjusting claims, the HST was to be paid over and above the benefit. The property and casualty industry determined that in the first year, the HST would cost insurers approximately $250 million, but thereafter the costs of the HST would get passed on to the consumer. Auto insurance legislation prescribes minimum limits be included in every auto insurance policy in the province, including medical, rehabilitation, and attendant care benefits. Some of these benefits did attract HST and others did not. Despite FSCO publicly issuing bulletins to the industry that any HST payable was not to be included in the benefits, as policy auto insurers continued to deduct any HST payable from benefit limits. The class action was brought against both the province and virtually all auto insurers in the province. An expert actuary with expertise in underwriting property and casualty insurance, specifically auto insurance in no-fault auto jurisdiction, was sought to opine on the case.
Question(s) For Expert Witness
- 1. Please describe your experience as an actuary and your experience underwriting automotive insurance in a no-fault jurisdiction.
- 2. What has been the impact of the HST on the quantum of premiums charged to motorists?
- 3. What is the economic benefit to the auto insurer paying the HST as a claims loss versus a claims expense?
Expert Witness Response E-049020
I have experience as an actuary with automotive insurance, and I have assisted the company with the underwriting for auto insurance. I have 6 years of direct experience in no-fault auto insurance systems. After that, I worked for a malpractice insurance company, so I was exposed to these issues there to the extent that attorneys would get sued if they did not put a proper claim together. Currently, I am chair of an actuarial evidence committee. Issues we deliberate on regularly have to do with auto insurance. I am familiar with the impact of the HST on the quantum of premiums charged to motorists.
It seems that the new sales tax is eroding policy limits in a way that was not intended. It is interesting that the government is a defendant here as well. HST is not really a new tax. There was a similar federal tax that was smaller. If the auto insurer can say the policyholder has reached their limit because of the amount paid for HST, they can enforce the limit before they normally would have. This might only affect claims that reached the limit (there are a few different limits in place). For this review, I would ideally, have a survey of claims that have reached the limit and how much has been paid on them. I would also like to see whatever information you have that indicates that this conduct is occurring.