Loss ratio improves for Desjardins General, Ontario auto still a concern

Desjardins General Insurance Group announced Thursday its direct written premiums increased 8.2% year-over-year from 2011 to 2012, but suggested Ontario auto continues to be a concern.

In a press release, the Levis, Que.-based carrier said in 2012, it recorded net income of $185.9 million on direct written premiums of $1.98 billion.

Its net income was $128.2 million in 2011. The company said “all business areas” contributed to its 8.2% growth in direct written premiums.

“The combined ratio improved by 4.3 percentage points to 94.3%, compared to 98.6% in 2011,” Desjardins General stated. “This was largely due to the 4.0 percentage point improvement in loss ratio.”

President and chief operating officer Sylvie Paquette stated in the release that she “sees some challenges on the horizon with the continuing low interest rate environment, the uncertainties in the Ontario auto insurance market, and the consolidation trend in the industry.”

The press release did not go into specifics on auto results but the company did say changes to regulations governing auto insurance in 2010 resulted in improvement at Desjardins.

In September 2010, the Ontario Liberal government introduced a $3,500 cap on payments for accident benefits classified under the minor injury guideline. It also reduced medical, rehabilitation and attendant care benefits in the standard auto policy (SAP) for non catastrophic injuries, meaning policyholders could purchase additional coverage.

Until the reforms took effect, Ontario’s standard auto policy required carriers to cover up to $100,000 in medical and rehabilitation expenses and up to $72,000 for attendant care. Now the standard auto policy requires only $50,000 coverage for medical and rehab and $36,000 for attendant care. The income replacement under a policy with the minimum mandatory coverage was reduced, from 80% to 70% of income, with the maximum remaining at $400 a week.

Industry-wide, the changes were attributed by Ontario’s New Democratic Party (which is demanding a 15% reduction in auto premiums) to a $2-billion reduction in annual Ontario auto accident benefit payments.

The Insurance Bureau of Canada has said carriers lost a combined total, per year, on average, of nearly $1 billion per year between 2008 and 2010 on auto in Ontario, and the combined loss of all carriers on auto was $1.7 billion in 2010. The following year, carriers earned a combined total of $233.2 million in profits on auto in Ontario.

In its 2010 financial review, Desjardins General stated the effects that year of Ontario auto benefits reductions were “positive so far” but additional steps would be needed to address fraud and abuse. In November of 2012, the Auto Insurance Anti-Fraud Task Force released its report, which contained 38 recommendations, including giving the Financial Services Commission of Ontario the power to regulate health clinics that treat and assess auto insurance claimants.

In the meantime, Desjardin is using computer software to detect possible indications of fraud. At a meeting March 6 of the Canadian Insurance Claims Managers’ Association (CICMA) Ontario chapter, a Desjardins claims and investigations executive said the company uses data from Health Claims for Auto Insurance (HCAI) to identify patterns in services proposed and billed by clinics and health professionals.

Elizabeth Kepes, Desjardins’ section manager for claims and investigations, said at the meeting the software lets Desjardins determine which clinics a chiropractor is working for and to view which health professionals are registered to one clinic.

Desjardins General has 3,700 employees across Canada, more than 2.1 million policies and assets of more than $4.3 billion.