IBC denounces Ontario NDP auto insurance statements as ‘irresponsible’

While the Ontario New Democratic Party complains some vehicle owners are seeing their premiums rise by as much as 30%, the Insurance Bureau of Canada denies carriers are raising rates in anticipation of mandated decreases.

The minority Liberal government’s budget for the 2013-14 fiscal year, which passed this week with the support of the NDP, included measures aimed at reducing the average consumer’s premium by 15%.

The Financial Services Commission of Ontario (FSCO) will get the authority to require insurers to file rates, to require insurers to offer lower rates for consumers with save driving records and to reduce the return on equity benchmark for rate filings, which is now 12%. The timeline will be prescribed “by regulation,” according to the budget documents. 

But in the legislature Tuesday, NDP leader Andrea Horwath said one driver from Bramalea, northwest of Toronto, got a notice that her auto premiums are going up by 30%.

“Her driving record has not changed,” Horwath said. “She hasn’t had sudden accidents or claims on her insurance policy. She’s one of several people who have contacted us about premiums that suddenly seem to be rising.”

Horwath made her remarks before asking Premier Kathleen Wynne why the government is “approving massive increases at the same time as they’re promising to provide a cut in rates.”

NDP: Insurance companies hike rates ahead of mandatory rate reduction: Is this happening to you? youtu.be/OcstX1KXU2Y via @youtube

— Jagmeet Singh (@jagmeetNDP) May 28, 2013

Finance Minister Charles Sousa, who answered Tuesday on behalf of Wynne, noted the Liberals are “committed” to reducing auto premiums and the government needs to “go after root causes .. of fraud.”

Meanwhile, the Insurance Bureau of Canada (IBC) stated Wednesday that some NDP members’ statements “deflect attention from the real issue” of auto reform.

“We categorically reject any suggestion that rate increases represent an attempt to raise premiums in anticipation of proposed rate decreases as part of the Liberal government’s sensible cost reduction strategy,” IBC’s vice president for Ontario, Ralph Palumbo, stated in a press release.

“The reality is that any current rate increase is based on rate filings made by insurers and approved by the provincial regulator well before the NDP demanded an arbitrary rate cut. To suggest otherwise is irresponsible.”

IBC noted that FSCO approves rates quarterly and, when based on the entire market, the rates dropped an average of 0.03% during the first quarter of 2013.

“An individual’s rates may change for a number of reasons: if they have moved, bought a new car or had a change in driving record,” Palumbo stated. “This is why we ask insurance representatives to work closely with consumers to help them better understand their policy, as well as any change in rates.”

However, this week several NDP members have made reference to what they say is $2 billion in “extra profits” made in Ontario auto.

“We heard from our constituency that with the auto insurance companies making an extra $2 billion in profits while cutting disability benefits and upping rates, something had to be done,” said Cheri Cheri DiNovo, NDP MPP for Parkdale-High Park (a section of Toronto bordered on the south by Lake Ontario and on the west by the Humber River) on Wednesday. “We listened and we acted. We asked for a 15% decrease.”

Last February, IBC told Canadian Underwriter that the carriers lost a total of $1.7 billion on Ontario auto in 2010. Out of $10.3 billion in premiums written in Ontario auto in 2011, IBC said at the time, their combined profit was $233.2 million.

In 2010, the 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, though policyholders have the option to buy additional coverage.

In the legislature Wednesday, Wynne the Liberals believe there should be an “overall” reduction in premiums.

“The way averages work is that some go up and some go down and some stay the same” she said. “The reality is that we could come up with lists of people who have had reductions in auto insurance, we could come up with lists of people who have had some increases in auto insurance and some for whom their premiums have stayed the same.”

But one NDP member who is a former broker, Teresa Armstrong, said in the legislature Tuesday that people who make a living from their vehicles are “counting on the NDP” to make the system fair.

“When insurance companies are posting record profits, a time to seek relief is evident,” said Armstrong, MPP for London-Fanshawe. “We have all heard the claims of fraud and all the other reasons why insurance companies need to line their pockets.

All we ask for is reasonability and fairness. This is why it is very concerning for New Democrats to watch this government claim to negotiate in good faith and then allow insurance companies to immediately jack up rates by the very amount of the discount that is being negotiated.”