March 30, 2010 by Canadian Underwriter
Canadian property and casualty insurers writing Ontario auto lost an astounding $907 million in 2009, said Barbara Sulzenko-Laurie, vice president of policy at the Insurance Bureau of Canada (IBC).
Sulzenko-Laurie presented a ‘State of the Industry’ speech at the Swiss Re–IBC Breakfast in Toronto on Mar. 30, 2010.
The continued escalation of the “excesses and abuses” of Ontario’s no-fault SABS system resulted in a 23.5% increase in the direct loss ratio in Ontario AB lines, she continued. Between 2008 and 2009 the loss ratio increased from 124% to 148%.
Sulzenko-Laurie observed companies that had more exposure to Ontario auto — based on 50% or more of direct earned premium — were much more likely to have returns on equity (ROE) of less than 9%.
“For those companies that had more exposure to Ontario auto, 75% of those companies had an ROE of less than 9%, whereas those companies that were less exposed, almost 50% of those companies achieved an ROE greater than 9%,” she said.
The Financial Services Commission of Ontario remains “very optimistic” that the reforms coming into place Sept. 1, 2010 will meet its projected savings target of 31%, but Sulzenko-Laurie said she’s holding judgement.
She noted the plaintiff bar is already “trying to undermine the reforms” by holding information sessions on “how to get around” them. She read from a sheet of proposed legal seminars entitled, ‘How to Squeeze the Most out of $50,000,’ and ‘Catastrophic Impairment: New Directions.’
In her view, the reforms may have simply come too late.
Sulzenko-Laurie noted IBC approached the government as early as 2006 to take remedial action to curb rising AB costs. Between that time and 2010, when the reforms will actually be implemented, the loss ratio in Ontario auto increased by 19%.
“The results of the slowness of responding to obvious problems in the system is that in the past two years, Ontario insurers have lost $1.3 billion,” Sulzenko-Laurie said. “Ontario consumers have seen their average premiums rise by 10.5%.”