What is IBC's position on auto insurance rates in Ontario?
Auto insurance rates in Ontario are too high. The average Ontario premium is now more than 45% higher than Alberta’s. It’s about twice as high as the Maritime provinces. We want rates to come down.
Why are rates so high?
Well might you wonder, considering Ontario has the safest highways in North America. And Ontario drivers are no better or worse than others in Canada. Claim costs are driving up premiums. Since 1990, when no-fault coverage was introduced, Ontario has offered the highest auto insurance benefits in North America. This has had the unfortunate effect of driving up rates.
To find out more about why rates are so high, get the facts. Read the remarks to the Ontario Standing Committee from Ralph Palumbo – Vice President, Ontario.
I still don’t get it. Why are benefits that far out of whack with other areas?
Because the benefit package has been – and remains – so rich, there are those who take advantage of it. Some of this, a significant part, results from fraud, especially in the GTA. But a large part is due to the attitudes and actions of too many for-profit health care facilities, medical suppliers, and legal representatives. They believe that if the money is there, they should get it regardless of specific needs. Quite simply, the benefit maximums have become targets.
Yes, but aren’t the insurers making a ton of money. Can’t they afford to pay all those benefits?
Auto insurance rates are set by a financial regulator called the Financial Services Commission of Ontario. FSCO sets a benchmark profit of 12% as part of the rate approval process. But this doesn’t mean that insurance companies have a guaranteed 12% profit- it is a target rate that is rarely, if ever, achieved. For example, between 2008 and 2010 the industry lost a total of almost three billion on Ontario auto – almost two billion in 2010 alone. (This is not a case of profits being less than expected. These figures are losses.)
So what’s IBC doing to help fix the problems in auto insurance?
You’ll be hearing a lot from us this summer. We’ll be running a campaign to show Ontarians how insurance works. People find insurance products confusing. We want to improve that.
We are also constantly working with the government and other stakeholders to develop reforms aimed at balancing affordable premiums, appropriate profitability for insurers and a level of benefits ensuring that injured motorists obtain the treatment they need to recover from their injuries.
In addition, we want to hear from consumers. We will be traveling to communities to answer questions and talk about how long-term change is necessary to keep insurance affordable and available in Ontario. We’ll be taking the pulse of the public and getting opinions from as many consumers as we can. We need to figure out how to make the auto insurance system better. Learning from consumers is key.
Does fraud really play into the high cost of premiums that much?
Yes. Fraud is a persistent problem driving up costs in the insurance system. For example, a single staged collision ring in the Greater Toronto Area cost insurers $25 million alone. Insurers know it’s a problem and are continually improving how they detect and fight fraud. Our government knows it’s a problem and set up the Anti-Fraud Task Force to help deal with it. The Task Force will issue an interim report in July and a final report in the fall that will contain recommendations about how the fraud issue can be dealt with. And consumers know it’s a problem and are becoming more educated, through media coverage. All this activity shows widespread concern that there is a real and present danger to affordable and available auto insurance from fraud.