April 16, 2013
Cutting auto insurance rates without addressing the root problems in the auto insurance system will negatively affect drivers, insurers and the Ontario economy, says a new report from the Insurance Bureau of Canada (IBC).
According to the IBC Submission to the Standing Committee on General Government on the Study Related to the Auto Insurance Industry in Ontario, one problem that needs to be addressed is the rising cost of bodily injury claims.
For collisions that occurred in 2011, the average cost of a no-fault accident benefits claim in Ontario was $28,978, compared to $3,568 in Alberta and $7,377 in Atlantic Canada. Although Ontario has only double the number of claims for accident benefits and bodily injury than does Alberta, the costs to manage these claims are more than six times higher, states the report.
Similarly, Ontario has six times more of these claims than does Atlantic Canada but the costs are more than 12 times higher. Overall, the total cost for accident benefits and bodily injury tort claims was $4.1 billion in Ontario for collisions that occurred in 2011, compared to $638 million in Alberta and $333 million in Atlantic Canada.
High costs in the system are driven by a number of problems – fraud, abuse, high legal fees, dispute resolution delays, lack of flexibility in the Financial Services Commission of Ontario’s (FSCO’s) rate regulation system, etc.
“Indeed, cutting premiums without addressing the cost of the product is not only imprudent, it is irresponsible,” the IBC report states.
To achieve affordability and sustainability, IBC recommends the following reforms:
This story was originally published by Canadian Insurance Top Broker.