Combined ratio down 9.6 points, net income more than quadruples for Intact Financial

Intact Financial Corp. released Wednesday its financial results for the three months ending Sept. 30, reporting a 9.6-point improvement in its combined ratio and a 53.7% drop in Q3 catastrophe losses, while net income improved 330%.

Toronto-based Intact also said Wednesday that company officials are “encouraged” by an Ontario government omnibus bill currently before legislative committee but they believe additional measures will be necessary to achieve the Ontario government's goal to have private passenger auto premiums 15% lower next August than they were in August, 2013.

Intact Financial's operations include Intact Insurance, non-standard Ontario auto carrier Jevco, direct writers Grey Power and Belair Direct as well as BrokerLink.

Intact Financial's combined ratio improved 9.6 points, from 102.8% in the third quarter of 2013 to 93.2% in the latest quarter. Net catastrophe losses dropped from $270 million in Q3 2013 to $125 million in Q3 2014. The Q3 2014 cat losses “were driven largely” by a hail storm in early August affecting properties in and near Airdrie, Alberta.

Intact Financial reported underwriting income of $124 million in Q3 2014, compared to an underwriting loss of $50 million in Q3 2013.

“Our operating and financial results continued to significantly improve during the quarter despite the high cost of damage caused by severe weather,” Intact chief executive officer Charles Brindamour stated in a release.

“Our personal insurance business is performing well, reflecting the successful implementation of our property improvement initiatives and the continued solid contribution of our auto insurance activities. Our commercial P&C insurance results were strong, and we are continuing our efforts to ensure their sustainability. Our strong profitability and financial position enhance our ability to pursue growth prospects.”

The company's third-quarter direct written premiums were essentially unchanged, at $1.911 billion in 2013 and $1.913 billion in 2014. Of its direct written premiums in Q3 2014, $909 million was in auto, $445 million was in property and $8 million was from industry pools.

Q3 net premiums written rose from $1.854 billion in 2013 to $1.905 billion in 2014. Net claims incurred dropped 8.6%, from $1.265 billion in Q3 2013 to $1.156 billion in the most recent quarter.

The net claims ratio for the third quarter dropped from 71.4% in 2013 to 63.6% in 2014. The underlying current year loss ratio improved 0.6 points, from 61.7% in Q3 2013 to 61.1% in Q3 2014.

“Our personal lines businesses generated a solid 96.4% combined ratio, 6.5 points improved versus Q3-2013, as lower catastrophe losses in property and a one point improvement in the underlying current year loss ratio more than offset less favourable prior year claims development in auto,” Intact Financial said in its management discussion and analysis for investors.

“Although we reported an 84.7% combined ratio in our commercial P&C business in Q3-2014, the year to date performance at 96.7% does not meet our target level of profitability. As such, we will continue to take corrective actions with the objective to operate this business at a full year combined ratio in the low 90s. Our expense ratio improved 1.8 points versus Q3-2013 to 29.6%, driven by lower general expenses and variable commissions.”

Net investment income increased 2%, from $104 million in Q3 2013 to $106 million in the most recent quarter.

Q3 net income was $202 million in 2014, up 330% from $47 million in 2013.

For the first nine months of the year, the combined ratio in personal property improved by 10 points, from 104.% in 2013 to 94.4% this year.

“We continue to renew at higher rates and to transfer remaining two-year policies in personal property to one-year policies in Québec,” Intact reported in its MD&A. “Higher deductibles, sub-limits on sewer back-up coverage, and more transparent product pricing displaying premiums by type of peril have now been rolled out in all provinces and are being applied upon renewal. In Alberta, depreciated value on roofs is also being applied upon renewal for claims caused by wind and hail.”

In its MD&A, Intact also referred to changes made in 2010 to Ontario's private passenger auto policy. That was when payments under the minor injury guideline were capped at $3,500, and — under coverage mandated by Ontario law — the medical, rehabilitation and attendant care benefits were reduced by 50% and the income replacement benefit was reduced from 80% to 70% of income.

“We continue to see the benefits of the reforms and of our actions, however, we remain prudent in our approach to the business, as uncertainty remains in the system.”

Intact also referred to the amendments, which took effect in August, 2013 to Ontario's Automobile Insurance Rate Stabilization Act. That law established an “industry-wide target reduction,” by 15%, of the “average of the authorized rates that may be charged by insurers” for private passenger auto, with a two-year target.

“This process to date has resulted in an average 6% industry rate reduction approved as of Q3-2014,” Intact said in its Q3 2014 MD&A, adding Intact Financial “has been reducing rates by 5.3% on average, targeting discounts to safe drivers.”

One of those strategies was its usage-based auto insurance that it launched earlier this year.

“Thanks to government measures announced last year, in addition to our own cost reduction initiatives, we believe we can protect our margins in the Ontario book of business,” Intact reported in its MD&A. “We believe the Ontario government fully understands that further rate reductions need to be accompanied by further cost reductions.”

Intact added that company officials are “encouraged” by Bill 15, an Ontario government bill that proposes a variety of reforms intended to reduce auto insurance claims costs.

The Standing Committee on General Government is scheduled to hold one day of hearings Nov. 5.

“Additional meaningful cost reduction measures will be necessary for the industry to achieve the government's 15% average rate reduction target,” Intact said in its MD&A.

If passed into law with no amendments, Bill 15 would, among other things:

·         reduce the time period, from 60 days, that a vehicle storage firm can hold a vehicle and accumulate storage charges without giving notice to the owner and still be able to claim a lien for the storage costs;

·         require tow and storage providers to publish their rates, accept credit card payments and provide itemized invoices before receiving payment;

·         move the auto insurance claim dispute resolution system – currently handled by the Financial Services Commission of Ontario (FSCO) – to the Ministry of the Attorney General's licence appeal tribunal;

·         reduce the prejudgment interest rate, for non-pecuniary loss for auto accident victims; and

·         give FSCO the authority to revoke or immediately suspend the licences of agents and adjusters who act improperly and put the public at risk.



ORA Representative Present at Queen’s Park on Bill 15



Laurie Davis, Nick Gurevich

We represent the Ontario Rehab Alliance, a non-profit association representing over 100 companies that employ more than 4500 healthcare professionals. These are the primary providers of rehabilitation services to the 65,000 Ontarians injured each year in auto accidents. We share an adherence to ethical and effective business practices and strive to keep services reasonably priced and of the highest quality.

We take every opportunity to offer constructive input into policy and regulatory change. We made presentations to the Dispute Resolution System Review panel, the Pre-Budget Hearings, the Minister of Finance’s Pre-Budget Consultation, and made a thorough submission to FSCO’s Three Year Review of Auto Insurance. We are very proud of our work on fraud prevention. We are on record supporting service provider licensing since the concept was first proposed by the Anti- Fraud Task Force, and are proud to be a participant in FSCO’s Service Providers Licensing Forum.

We support this government’s commitment to anti-fraud. It is essential that we deter fraudulent players and focus resources on legitimate claimants. Too many of the changes made to auto insurance have been across-the-board cuts that improved insurer profitability at the expense of accident benefits coverage for all.

We appreciate that this government is looking for savings to support reducing the cost of premiums by 15%. The two-year expedited timing of this must not be used as an excuse for more changes that will disadvantage victims. We see firsthand the heartbreaking consequences of the cuts made in 2010 and subsequent regulatory changes. Many of our seriously injured patients are running out of coverage before they are better.

We applaud the components of Bill 15 that expedite dispute resolution, and extend anti-fraud measures to towing and storage. We note the proposed Towing & Storage Bill of Rights, with its obligation to disclose information to consumers, and suggest this might be a model for the Accident Benefits side of the equation.

When it comes to auto insurance consumers do not know what they are buying and they are not getting what they think they paid for. Tragically, most don’t find this out until they are injured. Most drivers assume that they are covered by the basic package, and the shortfall will be picked up by our public healthcare system. But they’re wrong. The public system cannot and does not address the gaps. The current cap of $50,000 in med/rehab benefits for serious, non-catastrophic injuries is all-too-often insufficient.

When changes to the Statutory Accident Benefits Schedule were made in 2010, there was much talk of improved consumer choice, with insured drivers having the option to ‘buy up’ to access up to $100,000 in med/rehab benefits. Only 1.4% of drivers have done this. Even when they do buy up, their benefit limits are subject to the $3,500 Minor Injury Guideline, intended to capture 80% of claimants. How many drivers have any idea about this?

Many of those injured will never return to their pre-accident health and function levels. Many will find themselves fighting a losing battle with their own insurer to get the benefits they paid for. Many will lose their employment, homes and most tragically, families.

Consumers must be better informed. Brokers, too, must be better informed and held accountable for providing this information to consumers at time of purchase and renewal. Policy language must be clearer.

The thing about insurance is that we only really find out what we’ve bought when we’ve been in an accident.

The accountability and transparency that anti-fraud measures demand of service providers must be extended to insurers. Changes to the dispute resolution system to streamline the process will remove the right of claimants to pursue court action. Disputes will be determined by arbitrators without the power to award punitive damages, as do the courts, eliminating an important tool to keep insurer misbehaviour in check.

Experience has demonstrated that the current system does not effectively respond to insurer misbehaviour and bad faith. The system requires more – not fewer – mechanisms by which insurers can be held accountable.

We are very concerned by the latest attempt to save even more money for insurers with the proposed regulation change to drastically decrease the interest rate required of insurers on all disputed benefits. This will eliminate one of the few mechanisms that reflect the reality that insurers exploit their financial strength at the expense of claimants. The proposed change will reduce the penalty interest rate insurers pay below the rate of return from their investments, creating an incentive for insurers to deny benefits.

Though this change impacts claims in the dispute system, we experience daily the negative side effects from the lack of accountability for misbehaving insurers. Some insurers do behave responsibly; too many do not.

Savings achieved changes must be passed onto consumers and insurer misbehaviour must be addressed if auto insurance is to do what it is intended for: protect us in the event that we need it.

Thank you. 

MPPs’ comments on auto insurance not flattering


by Donald Horne, 29 Oct 2014


As MPPs discuss the ongoing changes to Ontario’s auto insurance landscape in the legislature, there is a picture that is being painted of the industry – and it isn’t that flattering.


“The Liberal government promised to reduce auto insurance rates by 15 per cent. Their target was 8 per cent for August of this year. They haven’t got there,” said Welland MPP Cindy Forster. “I can tell you, in my community and many communities across this province, people have not seen a reduction in their auto insurance.”


Legislators at Queen’s Park have been debating Bill 15 – an Act that detractors argue would remove the court option as an avenue of appeal on the statutory accident benefit (no fault) side.


Nick Gurevich of the Ontario Rehab Alliance says that a proposed regulatory amendment will create an incentive for insurers to deny benefit claims for everyone.


“By reducing the penalty that insurers pay for inappropriately denied claims this proposed regulatory amendment will create a financial incentive for insurers to deny every claim for benefits,” said Gurevich. “It will further impoverish legitimate claimants trying to get the benefits they paid for when they purchased their insurance.”


MPP Bob Delaney of Mississauga-Streetsville, said during the legislature debate that these bills on auto insurance reform were important to ensure that insurance companies not only lower premiums, but not try to recover the money from drivers in some other form.

“We’ve got to keep these bills moving through committee. We’ve got to get them passed, we’ve got to get them enacted, and we’ve got to put some teeth into them,” said Delaney. “We’ve got to make sure, when that legislation is enacted, that the insurance companies actually obey the law and bring our premiums down, and that they don’t recapture them in the form of higher executive compensation and other assorted little games that they play.”


He continued to say that penalizing drivers for living in areas of high auto insurance fraud was unacceptable.


“It does depend on where you live, and this is something that I disagree with,” said Delaney. “I don’t think it should depend on where you personally live. If there’s a statistically higher incidence of fraud in the area where you live or the postal code where you live, that shouldn’t penalize a good driver. I have never, ever accepted that argument, and I never will.”


Delaney’s constituents live in an area that historically and statistically have had high incidents of auto insurance fraud.


Rhona Desroches, board chair for the Association of Victims for Accident Insurance Reform (FAIR), feels that the new legislation will unfairly punish victims.


“The discussion at Queen's Park last week reveals that Ontario's legislators have no idea what insurers are doing with their profits or what those profits actually are and yet they are willing to rush these changes through,” said Desroches. “Our legislators are willing to penalize consumers by propping up the insurance industry already substantial profits with legislation that will further impoverish accident victims and restrict their access to our courts.”


One MPP, Arthur Potts of Beaches-East York, acknowledges that insurers are under the gun when it comes to meeting premium point, and the skyrocketing expense of court costs.


“The cost of litigation is so high that insurance companies are recognizing that sometimes it’s better just to settle. It’s unfortunate that now people realize that just by putting in an application, they’ll get a settlement. That is increasing the cost of writing insurance,” said Potts.


He told his fellow MPPs that the proposed legislation is not about consumer protection measures, but really about rooting out the fraud so that we keep the settlements down and keep our premiums down.


“The notion of prejudgment interest is not meant to be a stick to force insurance companies to settle,” he said. “It’s meant to compensate people for the reasonable cost associated with the length of time so that if legitimate claims come forward, they will be legitimately compensated for the cost of living during that period.”


Sarah Campbell, MPP for Kenora-Rainy River, also recognized that there is a need to strike a balance in auto insurance in Ontario.


“I don’t believe that cutting costs for the industry is the way to achieve balance in the system. I believe very much that we’ve been there, and we’ve done that,” said Campbell. “We’ve seen those efforts on the part of this government in 2010, and we’ve seen how those haven’t translated into savings.”


However, she was quick to take the industry to task when it came to accident victim claims.


 “Insurance companies have very, very deep pockets. They have all sorts of lawyers on staff. That’s what they do,” she said. “I think there needs to be some kind of an incentive to wrap this stuff up quickly. Having seen first-hand some of these accident victims who have struggled with going long periods of time without being paid, I would just say that we have to do that.


“The bottom line is that there are other ways to bring down auto insurance premiums by 15 per cent across this province, and there are other places to squeeze,” Campbell continued. “But paying for the reductions out of the pockets of accident victims is disgusting and it’s wrong.”


For FAIR’s Desroches, the reduced interest rate on pre-judgment interest shouldn’t be linked to fighting fraud.


“Ontario's insurers and the IBC are lobbying for a reduced interest rate of 1.3 per cent on pre-judgment interest under the guise of fighting fraud,” she told Insurance Business. “Punishing victims by eradicating their ability to recover legitimate costs has absolutely nothing to do with combating the fraud in the system.”

Successful Motion Confirms Defendant’s Right to Prepare Insurer Examiners for Trial

October 23, 2014 
Nicholaus de Koning, Helen D.K. Friedman, Audrey H. Wong

In the context of insurer examinations under the Statutory Accident Benefits Schedule (“Schedule”), the Superior Court has found that for the purpose of trial preparation, a Plaintiff’s consent is not required for Defendant’s counsel to meet with the examiners.

In Lacroix v Federation Insurance Company of Canada, 2014 ONSC 6002, the Plaintiff brought an action against the Defendant for income replacement benefits (IRB).

The Plaintiff was involved in a car accident in November 2004. The Defendant then proceeded with insurer medical examinations pursuant to s.42 of the Schedule (as it was then). The examiners concluded that the Plaintiff could eventually return to work with accommodations and/or retraining. Consequently, the Defendant discontinued IRB in April 2007, taking the position that the Plaintiff did not meet the “complete inability” disability criteria with respect to alternate employment. The Plaintiff disputed this and claimed to meet the disability test.

Prior to trial starting on October 14, 2014, Plaintiff’s counsel had corresponded with the s.42 examiners cautioning the examiners against communicating with Defendant’s counsel prior to the trial (as they did not have the Plaintiff’s consent to discuss her healthcare information).

Subsequently, at the start of the trial, the Defendant brought a motion for:

•   an Order confirming that counsel for the Defendant is entitled to discuss the subject matter of this action with certain medical witnesses in advance of those witnesses being called for Trial; and,

•   an Order directing counsel for the Plaintiff to communicate in writing with the witnesses [sic] that they may discuss the subject matter of this action, including health information of the Plaintiff, with counsel for the Defendant;

The Defendant argued that the Plaintiff has a reduced expectation of privacy by participating in the litigation process. Further, as is its right to prepare for trial, the Defendant wished to refresh the memory of the examiner witnesses as many years had passed since their examinations. The Defendant also asserted that by obtaining these reports pursuant to s.42 of the Schedule, these reports belonged to the Defendant. The Defendant also recognized the distinction between s.42 of the Schedule and s.105 of the Courts of Justice Act, acknowledging that leave of the Court would be required should any testimony go beyond the examiner’s initial reports.

The Plaintiff took the position that the s.42 reports did not belong to the Defendant insurer, as a copy must be provided to the Plaintiff. The Plaintiff alleged that the Defendant’s intention behind meeting with the examiners was to explore information obtained after the initial report. The Plaintiff argued that there was no statutory right for ongoing communication with these examiners; potential unfairness would ensue if one party had access to more medical information than the other, without the other’s presence.

The Honourable Justice Marc R. Labrosse noted that although s.105 of the Courts of Justice Act would also permit a “defence medical” if the insured person elected to start a court action, s.42 of the Schedule may be the insurer’s only opportunity to obtain a report from an examiner of its choice. If the Plaintiff had commenced a FSCO arbitration instead, the insurer would be limited to the s.42 reports. There is no suggestion that the examiner must be neutral. Justice Labrosse went on to note that s.42 of the Schedule neither limits nor authorizes communications between the insurer and examiner. The appropriateness of those communications is determined on a case-by-case basis. Justice Labrosse noted that the Plaintiff consented to the release of her medical information in her Application for Accident Benefits (OCF-1), so there was no concern that the examiner would disclose confidential information to the Defendant.

Justice Labrosse concluded that no further consent is required from the Plaintiff for the Defendant’s counsel to meet with the examiners, revisit the report and relevant health information, and prepare the examiner for cross-examination. It would otherwise be prejudicial to the Defendant to prevent them from doing so. In effect, this is considered a part of the normal trial preparation process.

This is a truly unusual issue as the OCF-1 should be a full answer to the concern. Had the approach taken by the Plaintiff been successful, the insurer Defendant would have been deprived of the ability to prepare their witnesses, which at the end of the day, would not benefit the court process.

How to Protect Yourself from Staged Collisions

Jil McIntosh

Published Monday, October 27, 2014

Getting into a car accident is always a bad experience, but some accidents can be even worse. The other driver might claim you were at fault when you know you didn’t do anything wrong, or his passengers could start complaining about injuries even though the collision was minor.

If you find yourself in this situation, you may be the victim of a staged collision, a particularly nasty form of insurance fraud that has become a multi-billion-dollar problem in the country.

Much of this is the work of organized crime, according to Rick Dubin, vice-president of Investigative Services at the Insurance Bureau of Canada (IBC). It’s also a very wide web, involving several levels of criminal activity.

 “They’re intentionally causing the staged collisions, and also the fraud that exists along the whole service supplier chain,” Dubin says. “There’s also the tow truck driver that brings it to a special shop that causes additional damage or bills for repairs that weren’t done, and all the kickbacks along the way.”

A recent study suggests auto insurance fraud costs as much as $1.6 billion per year in Ontario alone, and Dubin says that’s considered to be a “conservative number.”

The scam usually starts with a minor crash, sometimes involving a stolen car that’s had its vehicle identification number VIN replaced with one off a similar vehicle from a salvage yard. Several people get in, and then the driver looks for an innocent victim.

The idea is to get you into a position where it’s possible to make the crash look like it was your fault. Dubin says there are several scenarios. If you’re waiting to make a left-hand turn, the oncoming driver might wave you through, but then accelerate and hit you, which Dubin calls the “left-hand bullet situation.” This is often done in parking lots as well, with drivers stopping to let someone out of a spot, and then ramming them.

Another common tactic is the “swoop-and-squat,” where a driver cuts in front of you and then slams on the brakes, causing a rear-end collision.

Once the crash occurs, your troubles may be just beginning. The crime ring may have a tow truck driver on call, who quickly arrives and offers to tow you to a body shop he “knows will do a good job.” Some of his towing fees—and expect them to be hefty—will be skimmed off by the crime ring. The body shop will then bill big dollars to your insurance company for their repairs, which will be done as cheaply as possible for extra profit.

Meanwhile, all those passengers in the car are now going to doctors who are getting a piece of the pie to diagnose injuries, and prescribe expensive treatments and rehabilitation, that your insurance company may have to cover. They may also go to clinics that forge the signatures and use the registration numbers of innocent medical practitioners who aren’t even aware their names are being used.

In the Greater Toronto Area, which Dubin calls the “staged collision capital of Canada,” IBC has identified more than 300 clinics suspected of perpetrating insurance fraud.

So how do you protect yourself? The first step is to be cautious. Don’t accept the right-of-way when it’s not yours, and never turn in front of another vehicle if the driver waves you through. (Even if that driver is simply being polite, your actions can confuse other drivers and create a dangerous situation.)

If you are involved in a crash, watch for the warning signs. Beyond the obvious swoop-and-squat, be suspicious if you’re involved in a relatively minor collision but notice any of these:

•   the driver insists on calling emergency vehicles, especially an ambulance

•   passengers complain about neck and back injuries, particularly when emergency crews show up

•   a tow truck appears on the scene almost immediately

•   the tow truck driver, or the person who hit you, recommends a repair shop

•   the other driver’s insurance policy was recently issued, especially if the car is older

•   the driver tells police an inaccurate account of what happened

•   “witnesses” suddenly appear when the crash happened in an isolated area.

Dubin suggests that if you suspect you’re the victim of a staged collision, inform the police. Call your insurance company as soon as you can, to alert them to the possibility that they’ll be seeing a fraudulent claim. Do not use the body shop endorsed by those involved in the crash. Instead, ask your insurance company for a list of recommended shops.

If you are injured in the crash, visit your own doctor, not one the other driver “knows” (that goes for lawyers the other party might recommend, too). Do not sign any blank medical or benefit forms. If you go to a clinic for rehabilitation or treatment, keep a record of each visit, including who treated you, what was done, and how long each visit was. Keep in touch with your insurance company to be sure it’s paying only for services that were actually performed. Be diligent: those fraudulent bills add up.

“Organized crime works on volume,” Dubin says. “They try to stay below the radar, but if they do enough of these and send enough people to clinics, it may be just $10,000 here or there, but with volume, they’re making large amounts of money.”

At any time, if you suspect there’s something fraudulent about a crash or how it’s being handled, you can call IBC’s anonymous tips reporting line at 1-877-IBC-TIPS, or your local police or Crimestoppers.