Individual insurance brokers are slamming a 15% auto insurance rate decrease that the opposition NDP party is demanding as a condition for propping up Ontario’s current minority government.
The NDP has not publicly indicated how the rate cut might be achieved. The Insurance Brokers Association of Ontario (IBAO) is expecting to meet with representatives of the opposition party on March 20 for more information.
Brokers believe the demand for a 15% rate cut is nothing more than a political ploy to force an election.
“It’s probably pure politics on the part of the NDP,” said Paul Whitley of Whitley Insurance. “Clearly the industry and the carriers all have teams of actuaries that determine how much premium they need to cover costs and make a buck. And just to say there should be 15% rate cut across the board is a pretty simplistic view of the issue.”
Brokers are particularly worried that an across-the-board rate cut could create availability issues later down the road. (continued)#pb#
“My concern as a broker is that if they are successful in that, and they mandate the 15%, are insurance companies going to say: ‘Sorry, we’re not going to write auto insurance in Ontario anymore.’”? said Owen Wallace of Dorchester Insurance Group. “[Carriers] are going to be losing money, so are they going to close up shop? I could be way off about that, but to me, that could be a definite possibility and then what are we left with?”
IBAO CEO Randy Carroll said brokers across the province are worried about potential availability issues attached to a 15% rate cut.
“What we could almost guarantee is an availability issue like we see now with taxi and motorcycle Insurance,” he said. “If forced to reduce premiums on a blanket basis, would insurers withdraw? There is a good chance that some would.
“If they did not withdraw, then rates in unprofitable areas would get worse. Rates in profitable areas would improve in order to achieve the 15%, making the issue worse.
“Politicians need stop talking about the issues and work together to achieve the suggested changes that are already in front of them include in the Fraud Task force review.”
Brokers throughout the province have been pressing the current government to pass recommendations contained in the final report of the Ontario Auto Insurance Anti-fraud Task Force. The report contains 38 recommendations for reducing auto insurance fraud, which is estimated to cost $1.6 billion annually.
Passing legislation to curb auto fraud alone might generate the 15% rate cut the NDP seeks, Carroll said.
“There are still items from the 2010 auto reforms that still haven’t gone through, and one of the major ones that could help with insurance premiums is insurance fraud,” said Whitley. “Let’s get through the legislature some of the outstanding items from the 2010 auto reforms and see what impact those have.”
