Disproportionate amounts spent on Independent Medical Examinations drive claim costs

doctor types at laptop computer

This month, the Insurance Bureau of Canada (IBC) released the Ontario Health Claims Database (HCDB) Standard Report.

The Report analyzes data collected through the Health Claims for Auto Insurance (HCAI) system. Since February 2011, HCAI has been the mandatory system that Ontario health care facilities are required to use when submitting auto insurance claim forms to insurance companies. The insurers respond to the claims through the HCAI system as well. As the Report states, data is collected to “…better understand the medical and rehabilitation costs involved in Ontario automobile insurance health claims and the recovery process.”

While the HCDB Report offers an abundance of statistical information from 2011 through to June 2014, some numbers are particularly concerning, namely, the cost of Insurer Medical Examinations (IMEs).

As Alan Shanoff highlights in his article for the Toronto Sun, insurers spent $64,945,218 on IMEs in 2013. Although the total amounts paid for health claims expenses appear to have declined since 2011, we can expect those numbers to rise as claims-related expenses for 2012 and 2013 develop more fully. Despite these apparent reductions, insurers continued to order IMEs on roughly one-third of their claims and IME costs remained high; accounting for roughly 25% of total health claims expenses.

Adding to this cost is the expense for missed or cancelled appointments where insurers were found to pay their experts in excess of $1,000 per occurrence.  From my experience, many IMEs are scheduled without notice and / or proper compliance with the SABS. When claimants do not attend, this adds unnecessarily to the total claim expense.

This is not the first time the value of IMEs have been scrutinized. They were a live topic earlier this year with the review of the Dispute Resolution System (DRS) for Ontario automobile claims. The DRS was reviewed with the intent of discovering ways to reduce claim costs and make the process more efficient and assessable. The DRS Review Final Report was released in February and proposed a number of changes.

With respect to IMEs, the Honourable J. Douglas Cunningham wrote in the DRS Review Final Report that, …today’s insurer examination (IE) reports appear to have little credibility with claimants and only serve to trigger disputes.” He goes on to write that, “…IE assessors are not accountable to FSCO, have no standard assessment protocols, report formats or timelines and are not insulated from outside influence.”

In their written submissions on the Interim Report, OTLA also called for greater transparency and accountability on medicals experts who were found to be biased or lacked qualification.

The DRS Final Report recommends that experts should be required to certify their duty to provide fair, objective and non-partisan evidence. In addition, Arbitrators should ignore evidence that is biased, and in such instances, the expert should not receive compensation for appearing as a witness.

With the questionable value of IMEs to the dispute process and with IBC’s intense focus on reducing claim costs, why do insurers continue to spend such significant amounts on IMEs?

Mr. Cunningham may have indirectly answered this question when he explained in his Final Report, that “…their reports and testimony are often used by insurers in the DRS to support benefit denials… [and] the IE assessor is selected because he or she might support the insurer’s position.”

Without doubt, medical experts find a substantial source of revenue in conducting medical assessments for insurance companies. However, is the expense justified? Are IMEs a valuable resource for insurers to effectively evaluate claims or are IMEs biased, over-utilized, and simply cause delay at the expense of accident victims? Certainly, there is a need for ongoing reform with these questions in mind.

Transparency is always a good start. Mr. Shanoff concludes his article by suggesting that Ontario implement similar disclosure requirements to British Columbia where experts are listed in an annual report along with the amount paid to that expert in that year. Considering the DRS Review recommendations, there appears to be a call for further disclosure and accountability in the use of IMEs and the medical experts involved.

The cost of automobile insurance should reflect the risk to insurers, the underlying claims and adjustment expenses, as well as the profitability of insurers. Ontario has the highest premiums for auto insurance in the country. The reason for this seems to depend on who you ask. In May of 2012, Ralph Palumbo, Vice-President of the IBC, stated that despite the September 2010 reforms, the benefits package continued to be “rich”, claims costs were still “out of control”, and insurers could not depend on investment returns to cancel out underwriting losses.  He further attributed increasing premiums to the prominence of insurance fraud. The press release can be found here.

Conversely, data released by the General Insurance Statistical Agency suggests a dramatic reduction in AB claims from $3.8 billion in 2009 to a low of $1.9 billion in 2012. While claims over the past year are projected to rise to $2.2 billion they are still down overall. In addition, the data revealed an overall loss ratio decline from 94% in 2009 to 69% last year and average earned premiums on the rise from $1,344 in 2009 to $1,545 in 2013. These numbers indicate that insurer profits have actually increased since 2010.

Clearly, the industry’s own numbers show that claims costs, which have dropped over the last four years, are not driving higher premiums. That said, insurers should be prudent with expenses that are directly within their discretion on behalf of all policyholders who ultimately pay the price.


Written by

Michael Giordano is a founding partner of Avanessy Giordano LLP. Prior to establishing his own practice, he was a partner of a prominent personal injury firm.

He completed his law degree at the University of Ottawa. Prior to law school, Michael studied English and Law & Society at York University.

Michael is an active member of the Ontario Trial Lawyers Association (OTLA). He was elected Chair of OTLA’s New Lawyers’ Division in 2017 and previously held the Vice-Chair position in 2014 and 2016. Michael was also the 2017 recipient of the Martin Wunder, Q.C. Outstanding New Lawyer Award. In 2018, he was voted onto OTLA’s Board of Directors.

He is a regular contributor to the OTLA blog and has also written articles for The Litigator.