IBC study reveals factors related to auto insurance hikes

HALIFAX, Feb. 5, 2002 – The Insurance Bureau of Canada has
released a much-anticipated study that sheds new light on some of the factors responsible
for higher auto insurance costs in Nova Scotia.

The Closed Claim Study on Auto Insurance shows that the
primary factor linked to auto insurance costs is the number of soft tissue injury claims
(sprains and strains). Alone, these claims represent 70% of injury claims reviewed in the
study, and more than half the money paid out. For all claims studied, the bulk of the
amount paid (67%) was for pain and suffering – not economic loss.

“We’re confident this study is the first step towards
a full and open dialogue on the necessary changes that will improve the auto insurance
system in Nova Scotia,” says Don Forgeron, Atlantic Vice President, Insurance Bureau
of Canada. “I have no doubt that the people of Nova Scotia recognize the many factors
contributing to rising auto insurance costs. These include the cost of repairing cars,
rising health care costs for those injured in auto accidents, and the high level of
taxation paid by insurers,” he says.

The results from IBC’s study of closed claims in Nova
Scotia are consistent with closed claim studies conducted in Newfoundland & Labrador,
Manitoba and British Columbia over the last ten years.

The study also provides the following breakdown of the allocation of settlement costs:

  • Settlements for Nova Scotia claimants amounted to almost $10 million

  • 67% of total settlement amounts were for pain and suffering, 13% for past economic
    loss, and 10% for future economic loss

  • more than one third of claimants in Nova Scotia did not have any collateral source of
    income (e.g., employer plan, Employment Insurance, Canada Pension Plan, or workers’ compensation)

“IBC’s Closed Claim Study is an important step in our
effort to identify the problem and to work with consumers and legislators to consider any
necessary changes,” says Forgeron. He points to consumer research conducted last
spring, which shows 57% of Atlantic Canadians surveyed indicated they were very concerned
about insurance rates and attributed the problem to the rising cost of claims.

The Closed Claim Study is a detailed analysis of 540 claims
closed in Nova Scotia between October 1999 and September 2000. Results of a similar study
will be released by the IBC tomorrow in New Brunswick.

“Over the years, efforts by the Canadian P&C
insurance industry have resulted in theft control measures, insurance fraud prevention
programs, and road safety initiatives,” Forgeron says. “Our advocacy for such
initiatives as mandatory seatbelts, graduated licensing, and campaigns against drinking
and driving have also made a major difference in Atlantic Canada.

Unfortunately, improved road safety and cost efficiencies do not address the
primary cause of auto insurance rate increases experienced recently by consumers.”

The Insurance Bureau of Canada is the national trade
association of the private property and casualty insurance industry. It represents about
200 companies that provide more than 90 per cent of the non-government home, car and
business insurance sold in Canada. For a copy of the Closed Claim Study and other news
releases and information, check out the media section of our Web site at
www.ibc.ca.