Ontario auto continues to plague Canadian P&C insurers

Loss ratios for the P&C industry as a whole in Canada have dropped but the Insurance Bureau of Canada is concerned about the auto sector in Ontario, an IBC official said Thursday.

Gregor Robinson, IBC’s senior vice president and chief economist, suggested the loss ratio for the industry as a whole across Canada has improved, from 68.4% in 2011 to 64.9% in 2012.

But he added from 1994 through 2012, the average financial loss ratio for carriers in Ontario auto was 82%, though some years it was higher than that.

“Following the 2010 reforms to no-fault injury coverage, results improved from the abysmal losses of preceding years,” he said during a presentation at Swiss Re’s 28th annual breakfast meeting in Toronto.

Robinson was alluding to several changes the Ontario government implemented in September 2010. At the time, the province imposed a $3,500 cap on payments for injuries that fall under the minor injury guideline, which include sprains, strains, whiplash associated disorders, contusions, abrasions, lacerations, subluxations and any “clinically associated sequelae.”

The province also reduced benefits payable under the standard auto policy (SAP) for non catastrophic injuries. Until the reforms took effect, the SAP required carriers to cover up to $100,000 in medical and rehabilitation expenses and up to $72,000 for attendant care.

Policyholders have the option of buying additional coverage from the carriers, but those opting for the lowest coverage now get up to $50,000 coverage for medical and rehab and $36,000 for attendant care. The income replacement under the SAP was reduced from 80 to 70% of income, the maximum stayed at $400 a week and customers can now buy additional income replacement of up to $1,000 week.

But Robinson suggested Thursday the effect of these changes on carriers depends on the outcome of cases currently before arbitration at the Financial Services Commission of Ontario (FSCO) and before the courts.

“There are thousands of cases in the dispute resolution system, which suggests to us that a lot of people are betting against the ultimate success of those reforms,” Robinson said, adding the reforms “did nothing to deal with pressures in the tort system.”

Robinson said in Ontario, “bodily injury and third party liability costs have continued to rise.”

He presented a bar graph depicting the Ontario auto liability loss ratio over the past five years. While it dropped from 70.4% in 2008 to 68.2% in 2009, it has risen every year since.

“Over the past year the loss ratio for third party (auto) liability claims worsened every quarter and at year end it stood at 99.6%,” Robinson said.

“What has plagued Ontario auto for the past 25 years has been politics. We think complex problems deserve real solutions and for premiums to be addressed by any amount the government must seriously address costs” on an ongoing basis.

Ontario’s New Democratic Party wants FSCO to force carriers to reduce premiums by 15%. NDP leader Andrea Horwath recently claimed in the legislature the industry made $2 billion in “extra profits” in 2011, though IBC notes the profit of $233.2 million in 2011 was earned after an industry-wide loss of $1.7 billion in 2010.