October 31, 2001 by Canadian Underwriter
The Insurance Bureau of Canada (IBC) has lashed out at the Ontario government and provincial regulator Financial Services Commission of Ontario (FSCO) with regard to the latest legislative discussion document released on auto insurance regulation. The IBC says the latest government offering predates discussions which occurred between the insurance industry and FSCO, and in this respect does not reflect the true cost scenario facing insurers under the existing legislation.
With Ontario auto accounting for roughly 50% of total private insurance premiums in Canada, combined with the extreme competition that exists within the province with over 150 licensed insurers, the IBC charges that immediate cost-control action has to be taken by the provincial authorities to avoid substantial rate increases. The rise in claim costs is particularly pronounced by accident benefit healthcare charges. FSCO has agreed that Ontario auto insurers are currently operating on rates at about 20% less the true cost of claims, the IBC notes, with the annual cost trend rising on average by at least 5%. "Nothing short of decisive action now to control spiraling costs will restore Ontario’s auto insurance market to health," the IBC commentary report says.
In addition to the inaccurate cost data referred to in the government’s auto insurance reform paper, "Review of the Current Automobile Insurance System", the IBC says that the proposals put forward are simply "tinkering" of the key cost factors involved. "Other proposals seem content with tinkering with key cost drivers in the auto insurance system, such as the Designated Assessment Centres (DACs), rather than making much needed substantial reforms."
FSCO also came under fire in the IBC response document, with the bureau stating that the provincial regulator has in the past dragged its feet when reviewing healthcare cost-control measures, and at the same time "much more ready" to propose new requirements increasing the cost to insurers. "FSCO shares an equal commitment to control costs for the sake of keeping auto insurance affordable. That has not always been the case since the enactment of Bill-59."