Actuarial analysis calls for 3% decrease in basic auto rates in Alberta

An actuarial analysis presented to the Alberta Automobile Insurance Rate Board (AIRB) has suggested a 3% decrease in rates, assuming a cap on minor injury remains in place.
This is in contrast to Insurance Bureau of Canada’s request for a 7.8% rate increase (also assuming a cap).
Had the cap not been restored on June 12 by the Alberta Court of Appeal, then Oliver Wyman, the company that prepared the analysis, had called for a 14.5% increase in rates. This compares to the IBC’s call for a 40.2% increase had the cap remained off, according to Ted Zubulake’s presentation to the Alberta AIRB on June 17, 2009.
In 2007, the industry-wide adjustment in Alberta was a 0% change; in 2008, it increased 5%, including a 10% “cap adjustment.”
Oliver Wyman noted the cap’s impact in 2008 was unclear, in part because it does not have an effect on claims frequency.
In a submission to the AIRB, Oliver Wyman noted that: “while we believe the minor injury cap has had an impact on the average cost of bodily injury claims (i.e., claim severity), we are of the opinion that it has not had a material impact on bodily injury claim frequency (incidence rate).”
Claims that occurred in 2008 — and which are therefore, for the most part, subject to the Alberta Court of the Queen’s Bench no-cap ruling — are too immature to serve as a basis for estimating the impact of the cap’s elimination, the written submission reads.
“Only about 25% of the claims that occurred in 2008 were closed as of the end of 2008, representing less than 10% of the amounts ultimately expected to be paid for all 2008 claims,” according to the submission. “Put simply, in our opinion it is too early to determine from the claim experience published by GISA what the actual impact of the elimination of the cap will be on claims that occurred in 2008.”