Insurers can handle higher cap, higher claims costs: NS Board

Board promises 2012 hearing.

Insurers in Nova Scotia should be able to handle a higher minor injury cap and increased third party liability and bodily injury costs without hiking rates, according to the province’s Utility and Review Board.

The board based its decision–handed down December 9–on several key findings after reviewing submissions from insurers and the Coalition Against No Fault Insurance. After determining that industry-wide rates could absorb an anticipated 17% increase in third party liability and bodily injury costs  and a 0% future loss trend stemming from a $7,500 minor injury cap, “the Board finds that rates for TPL-BI, AB and UM (uninsured motorist) are not impacted by the minor injury reform.  Therefore, it is not necessary to further consider the impact of ROE at this time,” members stated in the decision paper.

But review board members, and chair Peter Gurnham, acknowledged that it might be too early to judge the impact of the 2010 reforms on loss trends and costs, and promised regular reviews of claims data in the province, and a formal paper hearing in 2012.

Different predictions

Separate consultants predicted very different outcomes for the post-reform environment. Analysts at Oliver Wyman forecast no impact on claims frequency, but greater claims severity because of the $7,500 cap, predicting that TPL-BI claims would rise by 17%, prompting an $24 average premium increase.

If all minor injury non-monetary claims were settled at the new cap of $7,500, the analysts predicted a higher, 24% claims increase.

Another consultant, Exactor, put the claims costs estimate at 49%, predicting a 9% hike in  accident benefit costs and a 53% increase in uninsured motorist costs, prompting a premium increase of $100.

Although insurers–including the Insurance Bureau of Canada (IBC) and Intact said the increased cap would reverse the downward claims trend that followed 2003 reforms–the Board accepted the Oliver Wyman conclusions, “because it accepts that there was a decline in frequency which started well in advance of the 2003 reform.  There is support for the conclusion that there are other causes [like better car safety] for the decline in claim frequency,” the decision states.

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