April 7, 2011 by Canadian Underwriter
Ontario’s upcoming election in October 2011 represents a major risk for insurers because of its potential to interfere with the ongoing reforms of the province’s auto insurance, Intact Financial Corporation president and CEO Charles Brindamour observed in a keynote speech to the Insurance Institute of Ontario’s 2011 CIP Society Symposium.
Brindamour praised the government for its auto insurance reforms, which he said were “a very good step in the right direction,” although he added it is still too early to see any “material improvement” in financial results as a result. He credited the Ontario government for trying to reduce the complexities of the product when it introduced its auto insurance reforms on Sept. 1, 2010.
Brindamour noted the auto insurance product in Ontario was quite rich. He said the issue of insurance fraud became obvious when Ontario reduced its mandatory medical-rehab benefits from $100,000 down to $50,000.
“I think the fact that the government strengthened the coverage was a recognition that the coverage was in fact rich, and led to a lot of – entrepreneurs,” he said, referring euphemistically to fraud.
Brindamour said it was positive the government had made an effort to reduce the complexity in the auto product. He raised concern, however, that all of the thoughtful work the government has done to improve the Ontario auto insurance product could be undone during the heat and rhetoric of an election.
For example, auto insurance in Ontario represents about 5% to 6% of the consumer’s disposable income whereas it is about 3% in other jurisdictions. Also, the coverage had been reduced. At the same time, insurers posted a 115% combined ratio in auto lines, suggesting more auto rate may be required.
“The fourth issue, which leads me to say that Ontario auto is our main risk in 2011, is that there is an election coming up in October,” he said. “Although I think the government intends to tackle this [auto insurance] issue thoroughly and objectively, elections tend to kick objectivity out the door, and this is one of the main risks we see at the government/regulatory level.”