Canadian Underwriter
News

Auto reforms bring some relief, challenges remain


March 31, 2011   by Canadian Underwriter


Print this page Share

Increasing loss ratios in auto liability and other signs indicate  Ontario’s auto insurance reforms have not yet eliminated abuses in the auto accident benefits side of the business.
Gregor Robinson, senior vice president and chief economist at the Insurance Bureau of Canada (IBC), tackled the question ‘Are the Ontario auto reforms working?’ in a speech he presented to the Swiss Re 2011 Canadian Insurance Outlook 26th Annual Breakfast meeting held in Toronto on Mar. 31.
Ontario auto insurance premiums represent about 25% of the total premium collected by Canadian property and casualty insurers across the country. After worsening financial results in Ontario auto over the past three years (IBC estimated Ontario auto losses totaled $1.7 billion in 2010), Ontario implemented auto insurance reforms on Sept. 1, 2010 to help bring insurers’ claims costs under control.
It is still early in the reforms, but already insurers are starting to see worrying trends, Robinson said at the breakfast. First among them, the Ontario auto loss ratio went up from 97% in 2009 Q4 to 107% in 2010 Q4.
“On first glance, the results don’t look good, with a 10% increase over the last quarter of 2009 for the total Ontario auto loss ratio,” said Robinson. “But this result is deceiving, because it hides a significant decline in the no fault injury benefit loss ratio over the period. Although [the Ontario auto personal accident loss ratio is] still bad at 155%, the decline provides evidence that the reforms are bringing savings. “
By way of comparison, the Ontario auto personal accident ratio in 2009 Q4 was 172%.
But the gains on the accident benefits side have been accompanied by deteriorating liability results. The Ontario auto loss ratio for liability increased from 64% in 2009 Q4 to 90% in 2010 Q4.
“More worrying is the news that, throughout the year, liability results were eroding dramatically in Ontario,” Robinson said. “This raises the possibility that a new threat may be emerging on the tort side of the auto product.”
Robinson also highlighted one trend in the data that suggests the reforms haven’t fully curbed abuses in the accident benefits system.
Ontario’s insurance regulator, the Financial Services Commission of Ontario (FSCO), stated after the reforms were implemented that 55% of all minor injuries would have to fit within the new Minor Injury Guideline (MIG) introduced in the reforms for insurers to make a profit.
IBC stats show 69% of minor injuries receiving treatment are within the MIG. But there is a wide discrepancy between the MIG numbers for claimants outside the Greater Toronto Area (where 81.5% of minor injury claimants are within the MIG) and within the GTA, where only 57.3% of minor injury claimants are within the MIG.
“A much higher proportion of minor injury claimants outside the GTA is getting guideline treatment, suggesting that the reforms have not eliminated the excesses and abuses of no-fault benefits in the GTA,” Robinson said.
Robinson noted insurers with preferred health care provider networks have a much higher percentage (80.8%) of claimants falling within the MIG guidelines.


Print this page Share

Have your say:

Your email address will not be published. Required fields are marked *

*