"In 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.
The 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.
But the rising costs of covering the automobile accident benefits is an endemic problem for insurers across Ontario, Walpole adds.
"The 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.
Kathy 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."
The 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.
The government, 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.
Drivers in Ontario already pay a higher percentage of their disposable income for auto insurance than anywhere else in Canada, Forgeron adds.
Walpole 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.
"Some 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.
"Does 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 care benefits.
Forgeron says the situation will get worse if the government doesn't change the system.
"Unless we see some significant reform, we don't see anything to indicate that the rise in accident benefit claims will stop any time soon."