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ONTARIO AUTO INSURANCE FACT CHECK - Insurance Bureau of Powered By Docstoc
					What’s really wrong with Ontario auto insurance?
                                                                                                                                                  Ontario Auto Insurance

Excessive costs
The real problem with Ontario auto
insurance is excessive claims costs.
                                                   The relationship is quite simple. The higher the claims,
                                                                                                                                       FACT CHECK
                                                                 the higher the premiums.
There are legitimate auto accident
victims who need compensation in                                            Average         Average         Average
order to return to their pre-accident                                       Premium          Claim         AB* Claim
life. But then there are those who
defraud or abuse insurance accident
benefits.                                    New Brunswick                         813          4,957         12,698

If illegitimate claims costs go down,        Nova Scotia                           807          4,480           6,371
premiums will follow. It has started
to happen already.                           Newfoundland &
                                                                                   986          6,244           8,264
Auto insurance rates for the first
                                                                                                                            A number of incorrect statements about the Ontario auto insurance industry have been
quarter of 2012 declined by -0.18%.          PEI                                   758          3,920           9,828
It’s not a lot, but it’s a start. And it’s                                                                                  made in the media and in the Legislature over the last few months. We believe the errors
certainly better than the increases we       Alberta                            1,087           6,634           3,809       stem from a lack of understanding how insurance works and how risk is calculated.
saw prior to reforms.
                                             Ontario                            1,433         14,973         56,092         This brochure is meant to correct the record and provide facts about the state of auto
Insurance systems cannot turn-on-a-                                                                                         insurance in this province. We agree that insurance premiums are too high in Ontario but
dime. Since most consumers renew                                     *AB is short for Accident Benefits (med/rehab, etc.)
                                                                                                                            we disagree with the proposals put forward in Bill 45 to alter the system.
their premiums on an annual basis it
can take over 12 months before                                    Source: IBC with data from GISA (Accident year 2010)
customers feel some relief on                                                                                               Bill 45 is so flawed that it will reduce rates for people convicted of drunk driving and
premiums. But if we stay vigilant                                                                                           people who drive luxury vehicles while raising rates for northern and rural drivers.
about improper claims costs, it will                     Bill 45 will spread the pain
happen.                                            instead of attacking the root problem.                                   The insurance industry is working hard to fight fraudulent and abusive claims costs. This
                                                                                                                            is the fair way to reduce auto insurance premiums for all Ontarians and at the same time
                                                                                                                            ensure that accident victims get the compensation and care they need.

                                                                                                                                          Bill 45 will only spread the pain of high premiums instead
                                               Ontario Region                      Tel: 416.362.2031
                                               Insurance Bureau of Canada                                                                                  of attacking the root cause.
                                               Suite 2400, 777 Bay Street
                                               Toronto, ON M5G 2C8                                                We strongly urge all MPPs to vote against Bill 45 on June 7, 2012.
                       Statement                                                    True or False?                                                  Statement                                                   True or False?
“Economical saw a 167% increase” in profit between 2010           FALSE The Economical Insurance Group posted a              “According to the Auditor General of Ontario, the fraud          FALSE The very premise is wrong—the Auditor
and 2011.                                                         company-wide (across Canada and across all lines of        cost, the fraud component of that 26% increase, is between       General did not say that 10-15% of the 26% rate in-
                                                                  business) increase of 11.9% net income in 2011.            10% and 15%. What that means is, if we look at the overall       crease is due to fraud.
                                                                                                                             cost that is attributed to auto insurance by addressing
                                                                                                                             fraud, if there’s a 26% increase in fraud over five years,       What the AG did say was “The total cost of auto
                                                                                                                             that’s only a 2.6% to 3.9% impact. Essentially, this bill will   insurance injury claims in Ontario rose by 150%
                                        Jagmeet Singh, MPP                  economical-grows-net-income-by-11-9-in-
                                                                                                                             only affect a person’s insurance rate by, at most, 3.9%. “       between 2005 and 2010, even though the actual
                                      Hansard, April 26, 2012                                     2011/1000930201/
                                                                                                                                                                                              number of injury claims rose only 30% over the same
“Intact—in 2010, the company made $193 million, and in            FALSE While provincial breakdown of profit/loss is
2011, after the regulations came into effect that slashed our     unavailable, we can look at Intact’s annual report
benefits and slashed consumer services in terms of the            where they stated that for every dollar they brought                                             Jagmeet Singh, MPP                            Source:
benefits consumers received—slashed those—the profit              in on Ontario auto premiums , they spent $1.05 in                                             Hansard, March 22, 2012             news_en/11_newsreleases/2011news_3.01.pdf
went up to $273 million. That’s a 42% increase. “                 claims (or in insurance-speak, a 105% loss ratio).
                                                                  That is a loss on Ontario auto—not a profit.               “The fact that in Ontario we are paying the highest auto         FALSE We have repeatedly explained to Mr. Singh
                                                                                                                             insurance rates in the entire country is simply wrong. Why is    that there is no connection between population and
                                        Jagmeet Singh, MPP                                                                   that the case when we have the highest population? We            claims costs. We have provided him with the report
                                      Hansard, April 26, 2012                                  Source:      have the highest population in Ontario. Why are we               of an independent actuary who confirms our
                                                                                                                             paying the highest auto insurance rates?”                        position.

Insurance companies have “legislated protection that              FALSE When insurance companies apply for rate                                                                               Ontario’s high insurance premiums are due to the
guarantees a return on equity of 12% per year.”                   changes with FSCO (the regulator) they have to open                                                                         highest claims costs in all of Canada (see back page).
                                                                  all their books to justify the rate.

                                                                  FSCO sets a benchmark of 12% for return on
                                                                  equity. Even when insurers strive for 12%, the                                                   Jagmeet Singh, MPP
                                                                  industry average in 2011 was only 8% (all lines of                                            Hansard, March 22, 2012
                                                                  business across Canada).
                                                                                                                             “If our rates are increasing at 20% over six years, then fraud   TRUE! The reason that insurance rates are so high in
                                        Jagmeet Singh, MPP                                  Source: FSCO, MSA Research       is a marginal portion of that increase. What I’m saying is       Ontario is claims costs (see back page).
                                      Hansard, April 26, 2012                                                                that fraud is not the majority cause of the increase in our
                                                                                                                             insurance rates. “

Fighting fraud is “another tool to the insurance companies        FALSE Insurance fraud is not a victimless crime;
to make more money”.                                              every insurance policyholder ends up footing the bill.                                            Jagmeet Singh, MPP
                                                                                                                                                                  Hansard, April 26, 2012
                                                                  And when fraud is reduced, all policyholders will
                                                                  benefit. In addition, innocent drivers are often
                                                                  injured after being lured into staged collisions.

                                        Jagmeet Singh, MPP                                                                                                               “Claims payments are the largest driver of the cost of auto
                                      Hansard, April 26, 2012
                                                                                                                                                                         insurance premiums, and with the average injury claim in Ontario of
                                                                                                                                                                         about $56,000 being five times more than the average claim in
“In fact, what happened is, if you look at the overall trend in   FALSE Ontario auto insurers paid auto insurance                                                        other provinces, Ontario drivers generally pay much higher
auto insurance, the auto insurance rates increased, despite       claims of $8.3 billion in 2009 and $8.7 billion in 2010.                                               premiums than other Canadian drivers do.”
the fact that auto insurance companies were paying out far        93 cents from every dollar paid by Ontario
less, less than half. “                                           consumers was returned in claims payments. That                                                                                         Jim McCarter, Auditor General of Ontario
                                                                  does not constitute a 50% decrease—in fact, it’s a                                                                                                          2011 Annual Report
                                                                  record high.

                                       Jagmeet Singh, MPP                                                    Source: GISA
                                    Hansard, March 22, 2012

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