Drivers will face skyrocketing auto insurance costs if the
government doesn’t do something about the dramatically rising cost of
accident benefits in this province, insurers say.
Auto insurance rates last year went up an average of 5.6
per cent across the province, but that didn’t cover the costs, and many
insurers suffered huge losses.
Industry experts say even bigger rate increases might be in store for this year.
order for everyone to make an appropriate profit, they would have to
increase their rates 15 to 20 per cent,” says actuary Barb Addie of
Toronto-based Baron Insurance Services Inc.
She says with more
than 100 insurers in the province fighting for business, it is unlikely
that rates will really go up that much, but six to 10 per cent rate
increases are possible.
Noel Walpole, president of Economical
Insurance in Waterloo, a company that suffered a $102.3-million net
loss last year, says 2008 was just a bad year for insurers.
loss at Economical was the result of a host of factors, he says,
including a spike in the water and wind damage claims in home property
insurance across the country, coupled with investment markets tanking.
the rising costs of covering the automobile accident benefits is an
endemic problem for insurers across Ontario, Walpole adds.
results on the Ontario automobile product have deteriorated for pretty
well every company, and the companies that have a large portfolio in
the Ontario automobile business are feeling the pressure,” he says.
Bardswick, president and chief executive officer of The Co-operators
based in Guelph, agrees the auto accident benefits are huge problem.
“We are quite concerned about how quickly those costs are increasing,” Bardswick says.
“Right now, I think every insurer is losing money on accident benefits.”
costs of rehabilitation has risen, as well as the length of time that a
claim is open, so there are higher costs of covering people who are not
getting back to work as quickly, she says.
through the Financial Services Commission of Ontario, which approves
the insurance rate increases, is in the midst of reviewing the whole
automobile insurance system.
The insurance industry has made
submissions for that review, saying big changes are needed to prevent
even bigger rate increases in the future.
Don Forgeron, the
Ontario vice-president for the Insurance Bureau of Canada, an industry
association that represents private home, car and business insurers,
says Ontarians can claim up to $100,000 worth of auto accident
benefits, regardless of the injury, and the result is that people are
overusing the system.
“People are tending to use most of what is
available, and because the benefit levels are so rich, you are seeing
usage numbers the likes of which you don’t see in any other
jurisdiction,” he said.
Bardswick, of the Co-operators in Guelph, agrees that Ontario has “rich accident benefits” compared with other provinces.
in Ontario already pay a higher percentage of their disposable income
for auto insurance than anywhere else in Canada, Forgeron adds.
acknowledges that insurers do have cycles in their business. A few
years ago, insurers were making good profits and there was competitive
pressure to reduce rates.
But in the past year, “the costs went
up faster than the premiums,” and because of the competition, it was
impossible to raise rates to keep up with the rising costs, he adds.
Forgeron admits that other factors, such as the stock market crash, also had something to do with the losses.
things made a bad situation worse,” he said. But in the longer run, the
main problem is the rising accident benefit costs,” he adds.
Bardswick says she would like to see is a more flexible approach to accident benefits coverage.
everybody need the same level of benefits, or is there an ability to
look at some basic coverage that is simpler to understand, cheaper to
provide and gives people a choice?” she asks.
Walpole says he’d
like to see a system of assessing accident claims that is far more
efficient and faster, as well as agreement for fixed fees for health
Forgeron says the situation will get worse if the government doesn’t change the system.
we see some significant reform, we don’t see anything to indicate that
the rise in accident benefit claims will stop any time soon.”