Car insurance cuts 4 Numbers show Ontario’s auto insurers can easily afford a 15% reduction in premiums over 2 years



Is it realistic for the provincial government to require Ontario car insurers to reduce premiums for car insurance by 15% over the next two years?

Well, according to numbers released by the General Insurance Statistical Agency, the non-profit agency that tracks information on behalf of provincial insurance regulators, reductions are realistic and overdue.

According to the GISA statistics (you can read them on the tables available at, Ontario car insurers paid out only 44¢ out of every dollar of premiums collected for accident benefits in 2012.

That’s their lowest payout ratio for accident benefits in the past 10 years.

The second lowest payout was in 2011, when insurers paid out 52¢ for every premium dollar collected.

This is the natural consequence of the Ontario Liberal government’s 2010 “reforms,” where most claims were shunted into a minor injuries category, with a cap of $3,500 for medical and rehabilitation benefits.

Ontario’s payout ratio for accident benefits is now lower than those of Alberta (73¢ paid out for every premium dollar received in 2011 and 2012) and the Atlantic provinces (54¢ and 57¢ paid out for every premium dollar received in 2011 and 2012).

Using dollars instead of ratios, in 2012 Ontario’s car insurers collected $3.78 billion in accident benefits premiums but paid out only $1.67 billion in claims and adjustment expenses.

That makes Ontario’s accident benefits coverage the most profitable (both dollar wise and percentage wise) for insurers in the regions of Canada that maintain 100% private insurance.

The numbers for overall insurer payments on all car insurance coverage paint the same picture for Ontario.

In 2012, Ontario car insurers paid 62¢ out of every dollar of premiums collected for all car insurance coverage.

They collected $10.4 billion in premiums but paid out $6.48 billion in claims and adjustment expenses.

That’s the lowest payout ratio in 10 years.

Their payout ratio in 2011 was 65%.

In Alberta, the payout ratios for 2011 and 2012 were 70% and 77%. In Atlantic Canada, 64% in each of 2011 and 2012.

While none of these numbers includes insurers’ overhead costs, they similarly don’t show insurers’ investment earnings on the premiums they charge, and there can be little doubt that Ontario policyholders are paying too much for car insurance.

Of course, we already knew Ontario policyholders pay the highest premiums in the country and for the majority of accident victims, those classified into the minor injury classification, we have the worst accident benefits coverage.

According to Nick Gurevich, President of the Ontario Rehab Alliance, these numbers show insurers can easily afford to cut car insurance premiums by 15% and still obtain excellent results.

He says a 15% cut in premiums, assuming it ever actually happens, would cause the accident benefits payout ratio to increase from 44% to 52% and the total payout ratio would increase from 62% to 73%.

In each case, that would provide insurers with excellent results as compared to results in the past 10 years, and the results for Alberta and Atlantic Canada.

I’m not suggesting payout ratios in Ontario leading up to 2010 were sustainable or that some reforms were not required. Clearly changes were necessary.

But we seem to have gone overboard with the 2010 reforms and even with excellent results in the past two years, the insurance lobby continues to push the fraud button hard.

Yes, there is auto insurance fraud, too much of it, but we can’t use that as an excuse to punish legitimate accident victims — and the industry is now lobbying hard to change the current definition of catastrophic impairment.

The sought after changes would serve to lower the number of victims who qualify for enhanced catastrophic impairment medical and rehabilitation benefits, which would serve to further lower the insurers’ payout ratio for accident benefits.

As the numbers illustrate, there’s no need to take any action that would serve to lower the insurers’ payout ratio for accident benefits. A premium reduction is overdue.

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