Ontario’s Mandated Rate Reductions for Auto Insurance

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On August 23, 2013 the Minister of Finance announced a targeted 15% average rate reduction on Ontario personal auto insurance premiums. While this announcement was made in an effort to keep the public informed of the upcoming changes, we at North Kent Mutual would like to take this opportunity to ensure that you, our customer, understand the actual impact and process involved in a mandated rate reduction on insurance. Our commitment to you is to ensure that you are aware of what is happening in the industry, and that we are providing you with the products and services that match your expectations and needs, and of course, ensuring that the pricing for those needs is competitive.

Rate changes are to take place over a two year period, with a reduction of 8% to be applied to automobile insurance premiums by August 2014, and the remaining 7% to be applied during 2015. To date, we are seeing that insurance companies in Ontario are submitting their rates to the Financial Services Commission of Ontario (or FSCO, the governing body for Insurance companies and insurance rates, under the Ministry of Finance) for review and approval, but not all have yet to achieve the 8% rate reduction that the government has mandated. North Kent Mutual has implemented an overall rate decrease of -6.03% effective September 1, 2013. At that time we also implemented a new genNow discount and three new driving records. Effective July 1, 2014 we will be implementing an -8.1% overall rate reduction on private passenger rates and introduce another new discount, the Mature Driver Discount. Your Agent can confirm your discount eligibility.

What Else Is Being Done To Assist in Rate Reduction Efforts?

In order for the insurance industry to successfully achieve the mandated 15% rate reduction over a two year period, and still remain financially viable, there are several factors that must be considered, of which fraud is the most significant. If the government and insurers can work within the current system and be successful in reducing the cost of fraud, specifically in healthcare claims, there will be a far greater chance of achieving the goal of a 15% reduction.

The government is also looking at changing some definitions currently in place for auto insurance, such as the definition for “Catastrophic Loss”.

They are planning to give more power to the Financial Services Commission of Ontario (FSCO) to require insurance companies to re-file rates and ensure that they are offering discounts to good drivers, and that those with clean driving records are being rewarded. We are committed to continuing to offer fair rates and discounts to good drivers.

Another area recommended for review is the current dispute resolution process, specifically with respect to the newly introduced, under the 2010 Auto Reform, Minor Injury Guideline. Disputed claims are a significant cost to insurance companies and the backlog of disputed cases still working through the court systems is significant. FSCO and insurance companies are looking at plans to resolve disputes more quickly and at clearing up the current backlog.

Factors Impacting Auto Insurance Rate Reductions

There are many factors included in the pricing of auto insurance and as the media and government have implied, Ontario insured’s pay some of the highest rates in all of Canada. When comparing average claims costs between Ontario and other Canadian provinces, it is obvious that Ontario claims are significantly higher than other provinces. This is as a result of exaggerated claims and fraudulent claims.

29553 St.George Street • P.O. Box 478 • Dresden, ON N0P 1MO 519-683-4484 • Toll Free 1-888-736-4705 • Fax 519-683-4509 info@nullnkminsurance.com • www.nkminsurance.com

Fact: In 2012, the average insurance payment for a no-fault injury claim in Ontario was $26,863.00. In Alberta, it was $3,628.00 and in Atlantic Canada it was $7,713.00.

Fact: In 2012, the average insurance payment for a non-minor injury* claim in Ontario for which the driver was at-fault was $157,133.00. In Alberta it was $50,964.00 and in Atlantic Canada it was $49,454.00.

Fact: Ontario insurance companies are not making huge profits in Ontario. Companies must file their quarterly rates each year with the Ontario Government, with a normal profit margin planned of 12%. This is not a guaranteed profit; if claims or expenses are higher than expected, they may not reach their profit margin, or in fact, not reach a profit at all. Between 2008 and 2010, Ontario Auto Insurance Industry lost $2 billion.

**Figures used in the above examples obtained from FSCO and IBC.

So What Does This Mean To You?

As your Insurer, we will continue to keep your best interests in mind with regard to the best coverage for the most affordable premiums.

It is important to clarify that the proposed 8% reduction will not be a flat reduction for all drivers, but rather an average across Ontario.

As always, when calculating premium, the following factors for each auto renewal will be taken into consideration:

  • Your Individual Characteristics (i.e.: driving record, chargeable accidents) – if you have a poor conviction record, loss or driving history, then you should not expect to see discounts on your Automobile Insurance premiums
  • The type of vehicle you drive: insurance companies rate makes and models of vehicles according to their actual claims experience, such as the cost of repairs, the rate of injury, and the likelihood that a particular vehicle may be stolen or involved in an accident. The Insurance Bureau of Canada (IBC) has a document called How Cars Measure Up. This document provides information on the claims experience of most models of passenger vehicles. To review or print the latest version of “How Cars Measure Up”, visit IBC’s website, www.IBC.ca
  • Your Insurance Company: We must ensure we are retaining enough funds to pay for claims and other expenses.
  • Where You Live: Auto insurance rates are generally higher in larger urban centres. This is because there are a greater number of vehicles on the road, and the chances of getting into an accident are higher. Also, more vehicles are stolen in urban areas.

    There are a number of other items used to calculate premiums in addition to the above mentioned factors that will make a significant contribution to your final insurance rating. In some cases, drivers with excellent driving records may see a rate reduction greater than 8%, while others may receive a rate reduction of less than 8%. Should you have any questions with respect to the upcoming rate reduction on Ontario auto insurance premiums, we encourage you to contact your Agent. We are here to answer any questions or concerns you may have.