The cost of insuring aches, pains and broken bones soared 23 per cent in Ontario last year, setting the stage for higher auto premiums unless coverage limits are changed soon.
"It's a disaster," says Joel Baker, president of MSA Research Inc., which will post industry results on its website today.
Baker says Ontario's no-fault accident benefits are costing 24 per cent more than premiums collected, which is worse than in 2002 when insurers' profits fell to record lows and prompted double-digit rate increases.
The new Liberal government reacted by imposing a temporary rate freeze, then it capped therapists' fees and the number of rehabilitation treatments and eliminated designated assessment centres.
Since then, premium rate increases have been modest – 5.6 per cent last year after declines from 2004 to 2006. While the average premium in January of $1,343 per vehicle was down from $1,493 in 2003, pressure for big increases is mounting.
Actuary Barb Addie of Baron Insurance Services Inc. predicts an average increase of 15 to 20 per cent if the government does not move to control costs.
"In Ontario, auto insurance already takes 5 per cent of disposable income," she says. "It is a very expensive product and I am not certain why anyone hurt in an auto accident should be treated better than someone hurt at work."
Don Forgeron, Ontario vice-president of the Insurance Bureau of Canada, says the government "can confer a benefit on the people (by addressing the rising cost of accident benefit claims) and it will cost them absolutely nothing."
Property insurers regulated by the federal government saw profits cut in half last year to $2.3 billion. Their cost of claims rose faster than premiums and investment income fell by $1 billion.
While those insurers as a group earned 5 per cent on shareholders' equity, several of the biggest auto insurers suffered losses.
Economical Mutual Insurance Co. of Waterloo led the industry with a net loss of $102.4 million. President Noel Walpole says price competition made it difficult to raise premiums as fast as costs have risen.
"We have been taking rate increases and monitoring the results," he says. "If the inflationary trends continue, we will probably be looking for additional rate increases this year."
State Farm Mutual Automobile Insurance Co., which earns most of its revenue in Ontario, lost $66 million and paid $1.69 for every dollar in premiums it collected for accident benefits.
"We need to get control of this product," says president Robert Cooke. "It is far too rich and is being used and abused. Our average cost for an accident benefit claim has risen from $22,000 in 2004 to $44,000 a case."
Cooke says regulations do not allow insurers enough time to assess the validity of claims for treatments, housekeeping and attendant care for minor injuries. Legal representatives then request 60 cents worth of assessments for every dollar spent on treatment.
Allstate Insurance Co. of Canada lost $44 million, Kingsway General Insurance Co. $35 million and York Fire and Casualty Insurance Co. $25 million.
Kathy Bardswick, president of The Co-operators Group in Guelph, and George Cooke, president of Dominion of Canada General Insurance Co., say Ontario should let motorists buy a stripped-down form of accident benefit coverage to save money.
Auto insurance is not the only problem area. Insurers, they say, are seeing more water damage claims due to sewer backups.
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