OSFI concerned about politicization of auto insurance product

Canada’s federal solvency regulator is concerned the country’s auto insurance product will become “politicized” if minor injury caps are upheld to be unconstitutional and auto premium prices escalate much more beyond where they are now.
Bruce Thompson, the director of the monitoring and analytics support division at the Office of the Superintendent of Financial Institutions (OSFI), sounded the cautionary note at Standard & Poor’s Insurance Sector Briefing in Toronto.
Donald Chu, the director of financial institution ratings at Standard & Poor’s, asked Thompson for his thoughts about the increasing deterioration in the Ontario auto results seen over the past year.
“If I look at Ontario, the cost of a policy of insurance for automobile if you have a family is very expensive right now,” Thompson said. “The benefits are very rich
“I worry that the product will become more politicized if the product gets much more expensive and the availability of it declines.
“I think it’s a very tempting target for an interventionary government somewhere down the road to do a replay of what anothersystem has done in the Maritimes. There’s a populist feeling afoot in Alberta. I think I’d be very uncomfortable where the personal lines automobile market price is going.”
Thompson referenced the decision in February 2008 by the Alberta Court of the Queen’s Bench to eliminate the province’s Cdn$4,000 cap on minor injuries on the grounds that it was unconstitutional.
Charter challenges have also been launched in court against caps on minor injury claims in the Maritimes. And trial lawyers have threatened to launch a court challenge against Ontario’s Cdn$30,000 deductible from awards for pain and suffering more than Cdn$100,000.
If the Charter challenges in the Maritimes are successful and the Alberta lower court decision holds, Thompson said, ” the results [in personal lines auto] across the country might very well be cataclysmic to the industry.”