Auto insurers ‘greedy’
Head of Consumers’ Association rips industry as it imposes 3.2% average rate hike.
Consumer advocate Bruce Cran stopped to interrupt a reporter’s queries about rising auto insurance rates in Ontario.
“Are you trying to make me sick?” he asked.
The president of the Consumers’ Association of Canada won’t be starting any fan clubs in honour of Ontario car insurance industry, which this past week imposed an average rate hike of 3.2%.
It’s the highest quarterly rate increase since the Dalton McGuinty Liberals — who campaigned on the auto insurance issue, vowing to rein in out-of-control premium increases — took power in the fall of 2003. Rates had jumped a whopping 20% in the year leading up to that October’s election.
And although rates fell in the five years after McGuinty took office, they started climbing again in 2008 — and continue to do so.
“The private auto insurance companies have demonstrated that they’ve been excessively greedy,” Cran said.
Ontario residents would likely be forgiven for thinking similar thoughts to Cran’s this past week when the Financial Services Commission of Ontario (FSCO), the arm’s length body of the provincial government that regulates auto insurance, announced its auto insurance rate increases for the second quarter of 2009.
Of the 90 auto insurance providers in Ontario, 25 firms received approval to hike rates, including four companies that jacked their fees by 10% or more. CAA Insurance Co. imposed a 12.10% hike, COSECO Insurance Co. came in with an increase of 10.4%, Scottish & York Insurance Co. Ltd. boosted rates 10%, and customers of TD General Insurance Co. will pay an additional 10%.
Only one company, Belair Insurance Co. Inc., asked for a rate cut and received it — a 0.47% decrease.
The news came just weeks ahead of the provincial government’s unveiling of auto insurance reform.
Finance Minister Dwight Duncan is set to announce before fall the government’s response to a list of 39 recommendations submitted by FSCO in March to the finance ministry, said his spokesman Alicia Johnston.
She wouldn’t indicate how the government would act, but she did suggest consumers could see some breaks, given the economic climate.
“We’re especially cognizant of these tough economic times and the pressures people are under,” Johnston said, declining to comment as to whether Duncan is growing frustrated with the insurers.
They say they don’t make money from auto insurance in Ontario, and reportedly lost $390 million in their auto insurance divisions last year — despite a $2.3-billion overall profit for property and casualty insurers.
They say the auto insurance losses happen because of the cost of high payouts.
Insurers are hoping Duncan will accept the controversial FSCO recommendation to reduce medical and rehabilitation benefits for so-called non-catastrophic claims — which comprise the vast majority of claims — from $100,000 to $25,000.
It’s a measure the insurers said needs to be taken to rein in costs.
It’s not that Ontario residents are getting in more crashes than drivers in other provinces, said Mary Lou O’Reilly, of the Insurance Bureau of Canada.
“As a matter of fact there are not more collisions,” O’Reilly said. “It’s that the cost to settle those collisions is, by our definition, out of control.”
Nick Gurevich, of the Alliance of Community Medical and Rehabilitation Providers, said health-care providers aren’t opposed to capping minor injury claims at $25,000. But capping all claims from non-catastrophic injuries at $25,000 is wrong and will overburden OHIP, he said.
Of the 65,000 collisions resulting in injury across the province each year, about 99% of those, or 64,350, are non-catastrophic injuries. Catastrophic injuries are generally considered the loss of more than one limb or a severed spinal cord, Gurevich said.
About 20% of the non-catastrophic injuries — or 12,870 — require benefits of $100,000 or more, Gurevich said. Those injuries include blindness, burns and amputations. That money is needed for everything from continuing rehab to retrofitting homes for crash victims left with disabilities, Gurevich said.
“We’re not as concerned about those with minor injuries as the reduced cap wouldn’t affect them as much,” added Alliance spokesman Colleen Boyce. “But for those who are seriously hurt, they’ll run out of benefits at $25,000 long before they get better.”
The rate hikes have also put the McGuinty Liberals on the defensive over an issue that helped them win that first election in 2003, with Johnston reminding that rates are still 4% lower than the Harris-Eves era.
“Auto insurance was a big issue in the 2003 election — rates were super high,” Johnston said. “In the last three years of the Conservatives in office, rates increased by 43%, so politically it was pretty significant.”
O’Reilly compared Alberta and Ontario in an effort to illustrate the insurance industry’s view that payouts in Ontario are out of control.
“In Alberta, for a fender-bender that costs approximately $4,000 in damages to the vehicle, that results to Alberta in a medical rehabilitation claim of approximately $2,900 per collision,” O’Reilly said. “That very same collision in Ontario on average results in a medical rehabilitation claim of $38,000. Not to fix the car, but the person.”
But Cran isn’t buying it.
He said claims by the industry that they don’t make money off auto insurance don’t wash with the public.
“If they weren’t making huge profits … where does that come from? Of course that comes from auto insurance or else they wouldn’t be doing it,” Cran said.
Earlier this year, Duncan hinted he doesn’t believe the insurance industry in Ontario is in trouble.
“They appear to be very healthy,” he said in a May news conference.
But still, it remains to be seen how the finance minister will act on this latest hike in rates.
“You’ll have to wait until the minister comes back with how he’s responding,” Johnston said.
In the three years after the McGuinty Liberals took power, auto insurance rates fell by 10.6% in 2004, by 2.43% in ’05, and by 1.27% in ’06. In ’07, the rates crept up by 0.5%. In ’08, the rates jumped by 5.59%. In the first quarter of ’09, rates edged up by 0.95%. In the second quarter, they went up 3.2%.
Average accident benefit claim by province (the Insurance Bureau of Canada doesn’t track data of provinces with public auto insurance):
-- N.B. $10,998 $11,855
-- N.L. $6,211 $5,547
-- N.S. $4.689 $5,270
-- P.E.I. $7,338 $6,057
-- ALTA. .. $2,975 $3,030
-- ONT. .. $39,282 .. $42,216
— Insurance Bureau of Canada, General Insurance Statistical Agency
Average written auto insurance premium, 2008, by province:
-- P.E.I. $750
-- N.B. $808
-- N.S. $803
-- N.L. $932
-- ALTA. $1,052
-- ONT. $1,313
The Fraser Institute also tracks auto insurance premiums. In their ’08 study, Personal Cost and Affordability of Automobile Insurance in Canada, the think-tank compared the ’07 rates of provinces with government-run auto insurance monopolies (B.C., Saskatchewan, Manitoba and Quebec), with the provinces that offer private auto insurance:
-- B.C. $1,304
-- ONT. $1,229
-- SASK. $1,063
-- MAN. $1,029
-- ALTA. $959
-- N.B. $768
-- N.S. $749
-- QUE. $719
-- N.L. $703
-- P.E.I. $701