How old Ontario auto cat claims affect Intact’s bottom line

Canada’s largest P&C insurer has been taken by surprise by the number of old Ontario auto claims in which accident victims are trying to get benefits for catastrophic impairment.

Ontario changed its catastrophic impairment definition for accidents occurring on or after June of 2016.

Intact Financial Corp. still has claims open from before the changes took effect, company officials said Wednesday during an earnings call.

“The activity we are seeing is increased [legal] representation on open claims, trying to take what was seen as a basic claim – claiming psychological injury, which was really the centre of the reforms in 2016 – and trying to get the Cat designation,” Intact CEO Charles Brindamour said in reply to a question from a stock market analyst. “This has led to more activity than we had anticipated. That’s what our adjusters are seeing in the field.”

Intact reported Tuesday it set aside more than $90 million during the quarter ending June 30 for prior-year reserve development in personal auto. Most of that was for Ontario while some was for Alberta.

This does not mean that Intact is actually spending more money on accident benefits claims. Rather, there is concern about the risk that some prior-year claims, which are still open, may end up falling into the catastrophic impairment definition.

Under the current system, Ontario motorists must buy accident benefits that provide $65,000 for medical, rehab and attendant care for non-catastrophic injuries. The coverage is $1 million for catastrophic impairment.

Effective 2016, there is a new process for combining physical with mental and behavioural impairments. In order to have a mental or behavioural impairment that qualifies as a catastrophic impairment, a claimant would have to have a Class 4 (marked) impairment in three or more areas of functioning, or a Class 5 (extreme) impairment in at least one functional area.

Under the old system, a claimant can be considered catastrophically impaired if he or she has a Class 4 impairment in only one functional area.

During Wednesday’s Intact earnings call, an analyst asked Brindamour whether he foresees a stage where the government puts in new regulations that would make it harder for a claimant to be considered catastrophically impaired. “Reforms took place in 2016 to deal with that activity,” he replied. “We are seeing people going back on the older years because the gravy train is over.”

Intact reported Tuesday its combined ratio in personal auto, Canada wide, was 99.5% in Q2 2019, up from 95.6% during the same period in 2018.

Direct premiums written for Intact Financial were $3.15 billion in the latest quarter, up 8% from $2.908 billion during the same period in 2018.

Company wide, Intact’s combined ratio was 97.4% in Q2 2019, up from 96.6% in Q2 2018.