While calling out the legal and health care community for rising insurance costs, the
Insurance Bureau of Canada’s Barb Taylor opened fire on the Ontario government’s premium target for auto insurers.
“The government wants premiums to come down an average of 15 per cent by August. They’ve already dropped by 6.5 per cent, but the government is expecting 8.5 per cent more in order to keep its public commitment,” said Taylor, the director of policy at IBC. “You don’t have to be a math whiz to know this does not compute. Cost increases put more pressure on premiums, not less."
Taylor told an audience of brokers and insurance executives at the Crystal Ball in Toronto, Ont. that the industry is facing a situation where Accident Benefits and Bodily Injury costs have been rising.
“The passage of Bill 15 was good news, and should help control some costs,” said Taylor. “ But there’s still more work to be done.”
The solution to the Ontario Auto problem lies in government relations, said Taylor, adding that it is “up to us” to show the government that to achieve the lower premiums that consumers deserve, even more change to the product and the system will be needed.
“When I say ‘us,’ I mean everyone in this room,” she said. “Everyone in the industry can – and should – play a role in helping fix Ontario auto.
The problem affecting Ontario auto insurance is rising claims costs – which had been tackled back in 2010 through reforms that managed to stabilize costs for a while.
According to data from GISA – the General Insurance Statistical Agency – total claims costs per vehicle have increased almost 12 per cent between 2012 and 2013. They had been declining from their peak of over $1,200 in 2009, but have recently been creeping back up and are now at 2008 levels.
Claims cost per vehicle for almost every type of coverage was up in 2013, with the sole exception being Comprehensive. But Accident Benefits, Bodily Injury, Property Damage, Collision and Uninsured Motorist – all rose.
“As you all know, the most problematic of these are AB and BI, so, let’s look at those specifically,” said Taylor. “AB claims cost per vehicle is up 10.5 per cent from 2012. BI claims cost per vehicle have gone up 19 per cent since 2011 and 37 per cent since 2008. They are currently at their highest levels since 1989.” (continued.)
#pb#
Comparisons to other regions of the country really highlight that something is out of whack in Ontario, added Taylor.
“For example, in Ontario average AB costs were over $31,000. Compare this with Alberta and Atlantic Canada, where average AB Claims were around $8,600 and $3,700, respectively,” she said. “Clearly, there is something wrong with the Ontario system.”
The rising costs in AB and BI show that those in the ‘car accident business’ – such as personal injury lawyers and med-rehab providers – are doing what they have done many times before: working around the latest reforms to find new ways to maximize pay-outs, said Taylor.
What do these rising claims costs mean for overall industry results? The latest figures from GISA tell us that the industry loss ratio for Ontario auto insurance is now at 69 per cent.
“This is interesting,” said Taylor, “because the Transparency and Accountability Report KPMG recently prepared for the Ministry of Finance made the point that a 69 per cent loss ratio is the cut-off point for a reasonable rate of return.”
