Denis Olorenshaw v. Western Assurance Company, 2013 HRTO 280

HUMAN RIGHTS TRIBUNAL OF ONTARIO

B E T W E E N:

Denis Olorenshaw

Applicant

-and-

Western Assurance Company

Respondent

DECISION

Adjudicator: David Muir

Date: February 19, 2013

Citation: 2013 HRTO 280

Indexed as: Olorenshaw v. Western Assurance Company

APPEARANCES

Denis Olorenshaw, Applicant

Self-represented

Western Assurance Company, Respondent

Jeff Galway and Catherine Powell, Counsel

Introduction

1This is an Application filed under section 34 of Part IV of the Human Rights Code, R.S.O. 1990, c. H.19, as amended (the “Code”), alleging discrimination with respect to goods and services because of age.

2The applicant is 92 years of age and has been a licensed driver for decades. Although his recollections may be imperfect he believes that his driving record has been blemish free for many years. He wants to continue to drive his car and does so, although not as often or over as great distances as he once did. Most of his driving is local in the city and he does not often use any of the 400 series highways. The respondent took no issue with any of this evidence; indeed, the pricing quote complained of by the applicant includes discounts for the applicant’s experience and safe driving record.

3In the course of securing automobile insurance coverage for himself in 2009 he discovered that some insurers appeared to be charging him more than his daughter who is younger than he. In fact the only reason for the difference in the premium rate offered by this respondent for the applicant, as compared to his daughter, was the fact that he was over 80 years of age at the time and his daughter was not.

4Under this insurer’s rate classification scheme the applicant was no longer entitled to a discount offered to drivers over 45 years of age which increases from age 45 to age 70 then gradually reduces until there is no discount for drivers over 80 years of age. In this case the difference was approximately $250 because at the time the applicant’s daughter received the maximum discount for her category of drivers. There is no dispute that the applicant was only required to pay more for automobile insurance than his daughter because he was over 80 at the time and she was not.

5The applicant suggested in his submissions that Western Assurance was the only insurer where there was a differential premium as between him and his daughter. There is no evidence before me that this is the case and in his Application the applicant alleged that there was an even greater differential in a quote he obtained from another insurer, suggesting that this is not the case. In any event, whether there are differences in the insurance premium rates offered by different insurance companies for similar groups of drivers, the issue at the heart of this case relates to the undisputed fact that the applicant was charged a higher premium because he was over 80 years of age at the time of the quote.

The Legal Framework

6Section 1 of the Code prohibits discrimination in the area of services on, amongst other grounds, age.

7The Code allows the respondent to use age as a factor in how it sets insurance rates. Section 22 of the Code provides as follows:

22. The right under sections 1 and 3 to equal treatment with respect to services and to contract on equal terms, without discrimination because of age, sex, marital status, family status or disability, is not infringed where a contract of automobile, life, accident or sickness or disability insurance or a contract of group insurance between an insurer and an association or person other than an employer, or a life annuity, differentiates or makes a distinction, exclusion or preference on reasonable and bona fide grounds because of age, sex, marital status, family status or disability.

8Accordingly, the question for determination here is whether or not the use of age in the risk classification schedule used by the respondent is protected by section 22 of the Code. This question has been litigated in the past. In Zurich Insurance Co. v. Ontario (Human Rights Commission (“Zurich”), 1992 CanLII 67 (SCC), [1992] S.C.J. No. 63 (QL) the Supreme Court of Canada dealt with a claim that a premium rate scheme that resulted in higher premiums for unmarried males under the age of 25 was discriminatory on the basis of age, as well as sex and marital status. Both parties relied on this decision and the court’s reasoning in advancing their positions before me.

9In Zurich, the Supreme Court describes the difficulties in considering insurance practices in the context of human rights at para. 17:

The determination of insurance rates and benefits does not fit easily within traditional human rights concepts. The underlying philosophy of human rights legislation is that an individual has a right to be dealt with on his or her own merits and not on the basis of group characteristics. Conversely, insurance rates are set based on statistics relating to the degree of risk associated with a class or group of persons. Although not all persons in the class share the same risk characteristics, no one would suggest that each insured be assessed individually. That would be wholly impractical. Sometimes the class or group classification chosen will coincide with a prohibited ground of discrimination, bringing the rating scheme into conflict with human rights legislation. The Code, in s. 21 [section 22 in the current Code] and other sections, has recognized the special problem of insurance. It exempts an insurer from liability for discrimination if based on reasonable and bona fide grounds. …

10The court went on to further discuss the difference between insurance risk classification and employment situations and articulated the test for determining when insurance rates that appear to be prima facie discriminatory can be considered to be reasonable and bona fide at paras. 22 - 24:

…It is an important principle of insurance practice that premiums charged to individual policy holders vary as much as possible in accordance with the degree of risk posed by the policy holder. In view of the fact that individualized assessment cannot be done, it is necessary to classify the degree of risk on the basis of groups who share characteristics which are material to the risk. It is inevitable that some will be placed in a group who do not share the average characteristics of that group. Rates developed on the basis of the average characteristics of this group will thus discriminate against them. The basic human rights principles referred to above, and applied in the employment cases, must take into account these differences when applied in the context of insurance.

In my opinion, a discriminatory practice is "reasonable" within the meaning of s. 21 of the Code if (a) it is based on a sound and accepted insurance practice; and (b) there is no practical alternative. Under (a), a practice is sound if it is one which it is desirable to adopt for the purpose of achieving the legitimate business objective of charging premiums that are commensurate with risk. Under (b), the availability of a practical alternative is a question of fact to be determined having regard to all of the facts of the case.

In order to meet the test of "bona fides", the practice must be one that was adopted honestly, in the interests of sound and accepted business practice and not for the purpose of defeating the rights protected under the Code.

11A hearing to consider this Application was held on November 22 and 23, 2012 in Toronto. I heard the applicant’s brief evidence although given the nature of the dispute the initial burden on the applicant was easily met and as indicated above the essential facts the applicant relied on were not disputed by the respondent. I also received a number of documents from the applicant which went to rebutting the respondent’s position that its approach to setting premiums was permitted under section 22 of the Code as interpreted in Zurich, above.

12However the evidentiary burden in this case rested largely with the respondent which acknowledged that this was the case and agreed to lead their evidence and allow the applicant to respond to the extent that he wished to. I heard then from three witnesses for the insurer. Two of these were expert witnesses: Michael Gordon, a physician who spoke to the risk factors associated with elderly drivers and Professor Mary Kelly, an expert in insurance rating who spoke primarily to the existence of a practical alternative to a risk rating system that did not use age as a factor to assess risk for drivers over 80 years of age. I also heard the evidence of Drew Lloyd, a senior actuary employed by the respondent who spoke to how the risk classification is done by this insurer. The respondent also filed a number of documents which were referred to by its witnesses.

13At the end of the first day of hearing, the respondent indicated that it would be fling a factum outlining its argument. At the conclusion of the evidence and after the applicant made his submissions the respondent filed a factum and case book. The applicant objected to what he understood to be new evidence being introduced. I ruled at the time that this material was not evidence and was properly tendered but that if the applicant needed to time to review it before responding he could do so. This offer was extended again after the respondent’s submissions were completed but the applicant indicated that he did not need further time and made no further submissions.

14The applicant raised the same issue in an email exchange with counsel for the respondent after the hearing and indicated that if there were no objection he would file written submissions. On December 18, 2012 the applicant delivered to the respondent and filed with the Tribunal a letter addressed to Mr. Short, a Vice-President of the respondent, which appears to be a written version of the submissions the applicant made at the hearing. I have reviewed this material prior to final release of this Decision.

The Positions of the Parties

15The applicant argues that the rate classification used by this respondent is unfair and discriminatory. In his view, the years of experience of elderly drivers and the fact that generally they drive less often and over shorter distances should result in lower insurance premiums not higher insurance premiums for people in his age group. The applicant also takes issue with what could be characterized as technical requirements imposed on auto insurers by the decision in Zurich. Finally, and in respect of the quite narrow issue before me as it was ultimately framed at the hearing, the applicant argues that there are pay as you drive (PAYD) insurance rating schemes that are a practical alternative to the use of age as a risk classification tool. The applicant argues that it is common sense that the fewer kilometers an individual drives the lower risk they are exposed to or pose on the road.

16The applicant also asserts that he is in good health. He asserts that he has had his vision tested and he meets Ministry of Transportation requirements. As he is 92 the applicant has taken the seminars required of over 80 drivers and in every respect meets Ministry requirements. The applicant asserts that as the Ministry of Transportation continued to licence him to drive it is unfair and discriminatory for the respondent to charge him more for insurance solely because he is over 80 years of age.

17The respondent argues that the risk classification system it employs meets the test articulated in Zurich, above. The respondent argues that its system was developed for legitimate economic and business reasons. The respondent also argues that while various alternatives to age as a rating variable have been examined since the Zurich decision, as of yet no practical alternatives have been identified for this category of driver.

18The respondent argues further that if it were prohibited from using age as a variable the result would be that younger and less risky drivers would be required to pay more to subsidize the older and as a class more risky drivers. Finally, the respondent argued that the use of a pure PAYD approach in risk classification of this category of driver would very likely result in higher premiums for this group because of their markedly higher collision rate per kilometre driven when compared to every other category of driver over age 25.

19I agree with the respondent. I am satisfied based on all of the evidence that the distinction made between drivers who are more than 80 years of age and those who have not turned 80 is reasonable and bone fide and therefore not discriminatory pursuant to section 22 of the Code. On the more narrow point raised by this particular case I find based on the evidence called in this case that there is as of yet no practical alternative to the use of age in assessing risk for drivers over the age of 80. In coming to these conclusions I observe that the applicant had no evidence upon which I could safely rely to rebut the respondent’s position that their approach to rate setting was reasonable and bone fide. Similarly although the applicant pointed to other methods used in setting insurance rates in other jurisdictions there was no evidence led by the applicant that there is a practical alternative to the use of age as a factor in rate setting for drivers over the age of 80. My reasons for this conclusion follow.

20There is no real dispute that the use of age as one among many variables for risk rating has been done for bone fide business reasons. That is not really the dispute raised in this case. I am satisfied based on the evidence presented by the respondent that its rating classification including the use of age for drivers over 80 years of age was done for bona fide business reasons based on sound industry practice and utilizing statistics from its own as well as industry experience. Despite the applicant’s questions about what he understood to be the technical requirements imposed by Zurich, above, the evidence makes clear that the respondent complied with its obligations under the Zurich test and in terms of the considerations the Court discussed regarding the process of developing a rate classification system, has adhered to those requirements.

21The evidence establishes the following facts on this aspect of the dispute, and despite the applicant’s expressions of doubt they were essentially unchallenged,:

a. The respondent along with all automobile insurers in Ontario compile and report statistics and other data in the form required by the statistical plan (ASP) prescribed by the Superintendent of Financial Services (the Superintendent) ;

b. The Insurance Bureau of Canada collects and reports this data under the ASP on behalf of the agent appointed to collect this information for 8 regulatory agencies across the country, including the Superintendent in Ontario. The IBC reports are the only publicly available aggregated information on insurance company loss costs.

c. This data is used by insurers and this respondent with their own data to create their risk classification system.

d. Insurers including the respondent report the age of their policy holders in the data to be submitted under the ASP.

e. For the purpose of setting premium rates it is not possible to conduct individual assessments of each individual driver and accordingly rate classification systems are developed that group drivers together according to risk and consequent loss cost.

f. In Ontario insurers are required to apply to the Superintendent for approval of the rate classification system and the rates associated with it. The respondent has met this requirement and the submission to the Superintendent was entered into evidence.

g. Section 412(6) of the Insurance Act R.S.O. 1990, c. I. 8 provides that the Superintendent shall refuse to approve an application if he or she considers that (1) the proposed risk classification system or rates are not just and reasonable or (ii) the proposed risk classification system is not reasonably predictive of risk or does not distinguish fairly between risks.

h. The respondent’s risk classification system material to this case was submitted for approval and was approved. It did then and still does allocate risk on the basis of age, amongst several other factors.

22I also find based on the evidence before me that the respondent has established that the decision at issue here, that their older driver discount not be offered to drivers over 80, was based on sound and accepted insurance practice. The uncontradicted evidence of Michael Gordon, a physician specializing in geriatric care, was that as we age, particularly after 75 years of age, there is an increasing incidence in the prevalence of impairments of cognitive, sensory, motor coordination and other functions which can have a significant negative impact on the ability to drive safely. These conditions are unpredictable both in terms of if they will occur, but as well when they might occur and how quickly they can progress. The implication of these facts is that, particularly after 75 years of age, individualized assessment of a driver’s cognitive, sensory and motor coordination functions relating to the ability to drive safely would only be valid for short and decreasing periods of time as we get older. Dr. Gordon also testified that as we get older our ability to withstand trauma and similarly to recover from trauma are compromised leading to increased fatality rates and treatment costs.

23The uncontradicted evidence of Professor Mary Kelly, Associate Professor of Insurance and Chair of Insurance at Wilfred Laurier University was that drivers over 80 pose an elevated road safety risk and are overrepresented, notwithstanding the fact that they often drive less, in fatalities resulting from collision. In short, the evidence establishes that the cost of losses per kilometre driven not to mention the attendant social costs are disproportionately higher for drivers over 80 when compared to drivers between age 65 and 80. This pattern is cross-cultural and has been in observed over many years in many different parts of the world, according to Professor Kelly.

24Mr. Lloyd, a Vice-President and actuary for the respondent, confirmed the evidence of Dr. Gordon and Professor Kelly. He testified that, based on the experience of the respondent, the loss costs associated with over 80 drivers were significantly higher than any other category of driver other than those under age 25. He testified that this has consistently been the case over decades of experience. Mr. Lloyd also testified that industry-wide statistics confirmed that this was the apparent experience of the industry as a whole. Mr. Lloyd also testified that loss costs as a function of premiums charged were higher for this category of driver when compared to any other category of driver over the age of 25. The applicant did not contradict this evidence.

25The applicant could not challenge any of this evidence in any substantial way, but he did suggest that common sense suggests that older drivers are more experienced, drive less and are more cautious than other drivers. The applicant suggested that all of this made them safer and less of a risk. While the applicant’s suggestions have a certain intuitive appeal, the evidence before me does not bear them out. On the contrary the evidence before me establishes clearly that over 80 drivers are more likely to be involved in collisions and have higher attendant costs than any other category of driver over the age of 25. The common sense the applicant appeals to, and that may generally apply to progressively more experienced drivers over the age of 25, does not obtain for drivers over 80 years of age on the evidence tendered in this case.

26The applicant relied on the fact that most Canadian jurisdictions prohibit the use of age as a risk classification factor. Although this is important evidence it is not clear how it impacts on the interpretation of section 22 of the Code. I have no evidence about why these other jurisdictions have enacted these prohibitions.

27The applicant also relies on the fact that he is a licenced driver in Ontario and has met all of the Ministry of Transportation’s requirements. As was noted by the Supreme Court in Zurich, above, section 22 of the Code is a legislative recognition that the individual rights approach of the Code generally does not fit neatly with the provision of insurance for losses of various kinds which often requires the grouping of categories of insurance purchasers by risk. These categories can sometimes coincide with protected grounds in the Code such as age and sex, etc. This was the issue in the Zurich case and is evidently the case here where the risk categorization at issue is age.

28Although the applicant led no evidence in support of any alternative to the use of age, other than the so called PAYD type scheme, I will consider the evidence of the respondent on some of the proposed alternatives currently or potentially available in the marketplace.

29Professor Kelly testified that the alternative of number of years licensed is used as a factor in Ontario and in many other jurisdictions. In Professor Kelly’s view it is used because it captures both the lack of information about the risk profile of a novice driver and the increased crash risks which are associated with novice drivers. As a driver gains experience their crash risk tends to decrease and their actual driving record (at-fault collisions and highway traffic violations) can be used to differentiate between individual drivers. However once a driver become a competent driver, years licenced no longer accurately reflect expected losses across all groups of drivers, particularly for older drivers, because it does not capture the increased risks associated with age related decline in physical and cognitive capacities which are independent of years licensed.

30Driving records including the number of moving violations and accidents incurred by either the insured person or the vehicle are used in many jurisdictions to assess driver risk according to Professor Kelly. Professor Kelly testified that beyond the novice driver stage, accident records are actuarially relevant because over much of the typical driver’s life they are a good predictor of future risk. So, for example, for a non-novice driver under the age of 60 a good driving record is a good predictor of the future according to Professor Kelly. After the age of 60 however a prior clean record begins to lose it predictive value as a consequence of the medical issues related to both cognitive capacity and treatment costs described earlier.

31Professor Kelly testified as well about a recent innovation to measure risk – insurance score that includes elements of one’s credit rating and insurance purchasing history. This measure of risk is used in the United States and based on that experience is highly correlated with risk and loss. This potential alternative is prohibited in Ontario. See O. Reg. 7/00 Unfair or Deceptive Acts or Practices and O. Reg. 664. The applicant has not challenged the Regulations and did not advance this kind of scheme as an alternative to the use of age as a risk classification tool for older drivers.

32As indicated above, the central claim of the applicant and what this case is really about is his view that there is a practical alternative to the use of age as a factor in rate classification – PAYD - wherein drivers are assessed for risk based on the number of kilometers they actually drive. The applicant’s evidence in support of this kind of scheme was quite limited and establishes only that some people believe that the use of PAYD may be a more fair and equitable method of assessing risk for some categories of drivers because of a common sense link between kilometres driven and risk of collision. The evidence of the applicant also established that some version of PAYD is used as a factor, amongst others, in risk assessment in a number of American states. A PAYD type of scheme has also been introduced in Quebec for drivers under the age of 25. There is no evidence that it is used as the only risk assessment factor in any jurisdiction in the United States or Canada.

33Professor Kelly testified that when a risk classification variable is removed the cost attributable to higher risk drivers is shared by lower risk drives. This amounts to a subsidy of the higher risk by the lower risk drivers and violates principles of fairness as defined by actuaries. Professor Kelly testified that in addition to the fairness problem, higher risk drivers do not receive the correct signals as to the risk their driving imposes on other road users. In Professor Kelly’s opinion risk based pricing that reflects the difference in anticipated claims cost of different groups of drivers provides more accurate safety incentives for drivers to take care and improves road safety for all users of the road.

34Mr. Lloyd testified that taking account of the mileage driven by over 80 drivers would likely result in higher premiums for these drivers based on the substantially higher crash rate per kilometre driven for this category of driver when compared to those between 65 and 80. I accept his evidence. It was unchallenged by any other evidence and there was no reason to question it on its face.

35However whether or not a PAYD scheme might result in higher premiums for the applicant, I am not sure that this entirely answers the question posed by the Zurich test: is it a practical alternative to the use of age as a risk classification factor in setting insurance rates? The respondent argues that it is not. The applicant states that it is although as indicated he was unable to produce any substantial evidence to support his claim.

36Professor Kelly testified that a pure PAYD scheme would not be appropriate on the basis of actuarial factors, such as the expense of implementing such a system. Professor Kelly also testified that if the scheme was based on self-reporting there would be a considerable risk of data manipulation by longer distance drivers to lower their rates which could result in unfairness for those who did not cheat. She also testified that if some kind of electronic monitoring system were employed, such as a GPS or other tracking system, significant privacy concerns would arise.

37Moreover Professor Kelly endorsed the views of Dr. Gordon and indicated that his medical conclusions are borne out by the experience across the western world. Professor Kelly further testified that because of these medical factors, the variability in driving competence amongst elderly drivers is greater than for younger drivers and is apparently unconnected to distances driven for this group of drivers.

38I find that for this category of drivers, i.e. drivers over the age of 80 and in particular for a driver of the applicant’s age, there is not at present a practical alternative to the use of age as a factor in the risk classification system. The evidence before me establishes that for the category of drivers over 80 the risk per kilometre driven is higher than any other category of driver over the age of 25. The evidence also establishes that the variability in driving ability and attendant risk is greater for drivers over 80 than for drivers in other age groups. Moreover the evidence establishes that the ability to predict future risk based on prior experience begins to decline after the age of 60 and becomes considerably less for those over 75 compared to any other group of non-novice drivers because sensory, motor coordination and cognitive decline is highly variable and unpredictable in terms of onset and progression for this category of drivers. Consequently even if regular individualized assessments of elderly drivers were a practical alternative, and there is no evidence that this is a practical solution, the predictive value of such assessments would be more limited for this group of drivers than younger drivers.

39For all of these reasons I find that the use of age as a factor in the risk classification scheme of this insurer for drivers over 80 is reasonable and bone fide as required by section 22 of the Code and for these reasons the Application is dismissed.