Regulation suppressing required auto insurance rate increases

Some Canadian auto insurers would hike rates even further if provincial bureaucrats would let them, a New Jersey-based analyst said Wednesday at A.M. Best’s 2018 Insurance Market Briefing-Canada in Toronto.

In a recent report, A.M. Best Company Inc. warned of “ongoing challenges” in the Canadian auto insurance market, with the loss ratio in auto liability deteriorating five points from 62.3% in 2016, to 67.3% in 2017. Based on the results, insurers are looking to increase their auto insurance rates.

“One of the things we are watching there is filed rates versus what’s approved,” Gordon McLean, senior financial analyst for A.M. Best, elaborated at the briefing. “In some cases, there seems to be some significant disparity between what a carrier feels they need and what is approved by a regulator.”

Some provinces require insurers to ask regulators’ permission before changing rates. For example, Insurance Corporation of British Columbia’s rates are subject to approval from the B.C. Utilities Commission, while in Ontario, auto insurers must file their proposed changes with the Financial Services Commission of Ontario (FSCO).

One carrier experiencing such disparity is Heartland Farm Mutual Inc., which was recently approved by FSCO for a 5% rate increase. Heartland “would have absolutely” raised its auto rates even further had it obtained permission from FSCO, Heartland president and CEO Louis Durocher told Canadian Underwriter Aug. 30.

“We need to make sure we have adequate rates and right now we are quite far from this,” Durocher said in an interview, adding he planned to visit FSCO personally to explain why Heartland should be allowed further rate increases.

In its annual segment report on the Canadian insurance industry released Aug. 28, A.M. Best said that Canada-wide, the loss ratio in personal accident auto improved 10.4 points – from 89.6% in 2016 to 79.2% in 2017. But last year’s loss ratio is still up from 66.3% in 2013.

McLean noted Wednesday that some issues in auto insurance were mentioned in Fair Benefits Fairly Delivered, a 2017 report by David Marshall, a special advisor to then-Ontario finance minister Charles Sousa.

“When we look at some of the issues that were mentioned in the Marshall report, the industry continues to grapple with how to eliminate some of the leakages in the system due to fraud,” McLean said Wednesday. “I think one of the more important aspects of the [Marshall] report was the more efficient delivery of benefits [to claimants].”

In his report, Marshall recommended that create “programs of care” for the some common automobile accident injuries.

“You’re got to get that medical care to the person quickly which means you can’t start wringing your hands and doing your research and arguing about what care is appropriate each and every time,” Marshall said in 2017 during the Insurance Brokers Association of Ontario’s annual convention in Ottawa.

“There’s lots of medical evidence to show that for straightforward injuries, which are 85% or so of auto injuries – they are not complex,” Marshall added in 2017 during a BIP Talk, a series of half-hour talks at the IBAO convention for which audience members can get Registered Insurance Brokers of Ontario education credits.