Ontario auto insurers are feeling a bit helpless after the announced target of a 15 per cent reduction in premiums, with the country’s leading brokerages stating that the initiative has been handed over to politicians, and political promises that will reward bad drivers.
“We’ve got into this situation through politics,” said Brigid Murphy, president and chief executive officer of The Dominion. “What one really smart broker said to me, ‘One of the things we’ve done is hand the dialogue to others.’ And I agree with that.”
Even worse, said the president and CEO of Economical Karen Gavan, is that bad drivers will actually benefit from rate reductions.
“We’ve been ordered to reduce rates for bad drivers,” she said. “So tell me if that is an indication of being fiscally responsible.”
Murphy’s comments, part of the CEO Panel at the recent Insurance Brokers of Ontario Association conference, struck a chord among brokers inside the jam-packed ball room. Brokers and affiliated associations cried foul back in August when the Ontario government announced the 15 per cent premium target cut in August.
And those targets – which auto insurers feel were set by the provincial NDP as part of a deal with the Devil to keep the minority Ontario Liberals in power – have turned a coverage issue into a political one.
And worse, created an expectation among the public of lower auto insurance, said Murphy. (continued.)
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“Unfortunately we’re not in control of the dialogue,” Murphy repeated. “The fact is, we’re providing a very rich product to Ontarians, and we haven’t really made a case for the coverage… they (clients) don’t see they are getting value. Our industry needs to take hold of the topic. It’s politics. It is hugely problematic, no question about it.”
What did draw gales of laughter from the audience was a request from Murphy for the other major insurers onstage to step up and meet the provincial target.
“I am looking forward to Maurice, Karen and Jean Francois contributing greatly to the 15 per cent,” joked Murphy.
But the 15 per cent target – of which the first target of 8 per cent is set for August 2014 – has placed the industry between a rock and a hard place.
“I think the government is trying to be responsible, they are in the same situation, trying to be responsible, FSCO (Financial Services Commission of Ontario) is trying to be responsible,” admitted Murphy. “But we’re in a situation where somebody else is controlling the dialogue. We’re stuck. So, it’s not about being responsible, it is about dealing with it, and trying to keep pace with what needs to be done.” (continued.)
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Economical’s Gavan cannot see any rate reduction being feasible without a cut to costs.
“Without changes to the cost structure, it’s not reasonable,” said Gavan. “We’re being asked to reduce rates on a promise.”
That promise Gavan speaks of is the government’s Anti-Fraud Task Force, that has presented recommendations on reducing auto insurance fraud – and theoretically the cost of insurance – particularly in the Greater Toronto Area.
“There are a lot of things – the anti-fraud task force, the work on the CAT definition – that stuff’s old, and they haven’t implemented it,” said Gavan. “There’s a problem there. So it’s not reasonable to reduce rates by 15 per cent. And even with the measures that they’ve got in place, I don’t think – and there are those in the IBC (Insurance Bureau of Canada) who don’t think, that you can realize a cost saving of 15 per cent.”
When asked by the moderator what can be expected between now and next year from auto insurers, Murphy made no bones about the divergence of reality from political promise.
“I think you can expect companies to be calling FSCO and telling them they can’t make 8 per cent,” she said “And FSCO operates on a basis that rates must be fair. And so, it’s not a very simple situation.”
