IBC dispels myths around rising Ontario auto premiums

20 years of rising AB costs requires more reform: Palumbo

In an appearance before the Ontario government’s Standing Committee on General Government on May 28, Insurance Bureau of Canada’s (IBC) Ontario vice president Ralph Palumbo repeated the message that legislators here from their constituents repeatedly.

“I am here to deliver a simple message on behalf of our member companies: auto insurance rates in Ontario are too high.”

The average Ontario annual auto premium as of April 2012 was $1,534, compared to $1,051 in Alberta, the province with the next highest premiums, noted Palumbo.

“While four years ago Ontario premiums were on average 25% higher than the next highest province – Alberta – today the average Ontario premium is now more than 45% higher than Alberta’s and almost twice as high as premiums in the Maritime provinces.”

Palumbo used the appearance to dispel myths about insurance company pursuit of profits as the reason for premium increases, pointing out that between 2008 and 2010, the industry lost almost $3 billion on Ontario auto.

He explained how the province’s rich accident benefit scheme provides Ontarians with more compensation than any other Canadians.

“Because the benefit package has been – and remains – so rich, it has been vulnerable to significant inflation. Some of that inflation is the result of fraud, but a large part is due to the mentality on the part of too many health care professionals, medical suppliers, claimants and lawyers that goes: if the money is there, we should use it. Quite simply, the benefit maximums in the auto insurance product have become targets,” he told the committee.

More Reform Needed

Paulumbo noted that while the September 2010 reforms were a needed first step in reducing the pressure on no fault injury costs, claims costs are still out of control for four reasons.

“First, there is an excess of 30,000 unresolved claims cases awaiting dispute resolution at FSCO and these have undetermined costs. Depending on how these cases are decided it could re-ignite the accident benefits costs spiral.”

Palumbo noted that the backlog is “a major risk to insurance premium stability.”

The second reason he cited is that the number of catastrophic injury claims is rising faster than other claims. From 2004 to 2010, the number of all no-fault injury claims rose 28%, whereas the number of large claims has more than doubled.

Third, bodily injury claims cost are increasing rapidly.

“When you consider that BI claims represent more than $2 billion in costs each year, it is very concerning that the volume and average cost of these types of claims appear to be rising so rapidly.”

Finally, fraud remains a persistent problem. Palumbo noted the number of convictions that resulted from the Project 92 staged collision ring, including the sentence handed down on May 24 to a Scarboraough man identified as the ring leader.

“The habit of abusing Ontario’s benefit rich auto insurance system has grown up over more than 20 years. It will take a firm commitment to ongoing reform and to ongoing efforts against fraud and abuse to turn that habit around,” he said. “And that will only happen when all of us – industry, government, policyholders, stakeholders, and members of the legislature – work together to do what is necessary to drive down claim costs.”

 

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Transcontinental Media G.P.