Industry urged to take control of auto issue

IT’S TIME for the industry to get ahead of the Ontario government plan to cut auto rates, the ceo of The Dominion told members of the Insurance Brokers Association of Ontario.

    “We are where we are,” Brigid Murphy said during the ceo panel at the IBAO annual convention late last month in Toronto.

    “One broker said to me this morning that we’ve handed the conversation to others. We are not controlling the dialogue.

    “We need to make a case for the value of the coverage that is provided,” Ms. Murphy said. “Consumers in Ontario look at what they are paying compared to other provinces and see they are paying too much but don’t see what they are getting for that.

    “The industry needs to take control of the issue.”

    Intact Insurance’s Jean-Francois Blais and others questioned the idea of such an ambitious rate reduction target.

    “We all agree we should try to reduce premiums, but when we look at the 15% (rate reduction target) and the Ontario market for the past two years — post reforms — the return on equity for the industry has been between 3% and 5%.”

    Economical Insurance ceo Karen Gavan agreed with her colleagues that without changes to the cost structure the 15% rate reduction isn’t reasonable.

    “When we go for rate filings we can’t increase rates unless we can prove that costs have deteriorated, yet we’re being asked to reduce rates on a promise.”

    She said all the work government has done over the last couple of years — the anti-fraud task force recommendation, the work on the cat definition — is all old.

    “And they haven’t implemented it. There is a problem there. So, it’s not reasonable to reduce rates by 15%.”

    The Guarantee ceo Alister Campbell said the challenge is that the industry is being asked for a certainty.

    “It’s not clear today what our costs are eight years out, which is what we are trying to price properly today,” he said.

    “We’re quite sure that the 15% is today not reasonable, but it’s entirely possible that we could work collaboratively with government to get to cost reductions in a product they designed.

    “We don’t know if that will happen as it’s a minority government and all of those premiums

    are flowing to stakeholders that are, as a result, wealthy, well-funded, and able to lobby effectively because of those premiums.”

    Former Aviva Canada ceo Maurice Tulloch, now heading the group’s new U.K. & Ireland operation, said the Ontario government needs to help insurers by completing the recommendations of the past few years.

    “There are six things that need to be done to reach the target,” he said.

    “We need to revise the cat definition. It’s still based on principles such as the Glasgow scale, which is 1970s science . . . The government commissioned a study two years ago and we haven’t moved that forward.”

    Other actions he outlined included:

    • Adjusting the interest rates on SABS, which he said are higher than those offered by any bank;

    • Stabilizing minor injury guideline reform;

    • Reducing treatment costs;

    • Reforming the arbitration regime, and

    • Replacing the Ontario bodily injury verbal threshold.

“You can get pretty close to the government’s target if these are taken care of,” he said.