What’s really wrong with Ontario auto insurance?
Ontario Auto Insurance
The real problem with Ontario auto
insurance is excessive claims costs.
The relationship is quite simple. The higher the claims,
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 www.ibc.ca 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: www.auditor.on.ca/en/
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: www.intactfc.com 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
Jagmeet Singh, MPP Source: GISA
Hansard, March 22, 2012