Premiums falling in Ontario and Alberta, but not for the same reason

Auto insurance rates are dropping in Ontario, and will soon fall further in Alberta, but for two very different reasons. While insurers have filed for rate reductions in Ontario amounting to a further 1.12% decrease in the first quarter of 2005, the Alberta government will force insurers to drop rates by an extra 6% in that province.
The Alberta decision, announced this week by Finance Minister Shirley McClellan, and to take effect July 1, is in opposition to recommendations by the province’s own rate board, which said that insurers were already filing for reduced rates and therefore a mandatory reduction was not warranted.
McClellan, however, says insurers have not gone far enough and the government will intervene. I had hoped the voluntary approach would work,” she says. “And I would like to thank those in the industry who worked toward voluntary reductions. But it’s clear that consumer interests will have to be protected through regulation.”
She says that while 13 companies representing 60% of the market have filed for reductions, with almost 70 companies writing business in the province, this is not enough. The Auto Insurance Rate Board had stated that other insurers were in the process of filing for lower rates when it asked the government in late March not to mandate a reduction. At that time, board chair Alf Savage said, “With major insurers voluntarily reducing premiums on average in line with the board recommendation, it’s not necessary to mandate reductions.”
In Ontario, the provincial regulator says the 1.12% rate drop voluntarily made by auto insurers follows a 10.6% average decrease in rates in 2004. On average, rates at the end of the first quarter of 2005 were about 7.5% lower than at the end of the first quarter of 2004, according to the Financial Services Commission of Ontario (FSCO). The rate decreases follow a series of government reforms in Bill-198 passed by the former Conservative government and Bill-5 put in place by the current Liberal government.