Shimmer of eastern lights:
The most important development in the 3rd quarter results was that car insurance prices began coming down. The benefits of the reforms introduced this summer by the New Brunswick government are now beginning to reach consumers. Because of the retroactive nature of the price cuts, insurers are actually mailing rebate cheques to consumers along with policy renewals. A number of companies have sent rebate cheques and several additional insurers are awaiting approval from the Public Utilities Board to reduce rates and get premium rebates into the hands of drivers. Further
Variety is the spice of life?
How is the insurance industry doing? There is no one answer. Conditions and results vary dramatically by line of business. The risks faced by homeowners differ from the risks faced by business owners or drivers and results vary by product line. Even within the gloomy auto results, performance varies for sub-segments of the car insurance product.
Apples and oranges
Insurance Bureau of Canada reports that auto insurance premiums paid per vehicle increased by 20 percent through March 2003. Statistics Canada�s auto insurance consumer price index (CPI) increased by 30 percent. (In April, the CPI growth fell to 26 percent.) These measures are related, but differ due to conceptual and reporting factors.
The new data: The third quarter
Ontario auto, representing almost a quarter of the total Canadian P&C market (22 percent) continues to produce huge underwriting losses with a 93 percent loss ratio. The ten largest Ontario auto insurers reported total underwriting loss (all lines, Canada-wide) of $917 million in 2002 and of $328 million in 9 months of 2003. The alarming growth in claims costs needs to be stopped to bring Ontario auto back to healthy performance.
Over the past few years, the attractiveness of the Canadian P&C insurance industry has been on the decline, both for existing companies and potential new entrants. One explanation is that global P&C insurers feel that the Canadian market does not offer an expected return high enough to compensate for the risk of the industry.
(View IBC Perspective December 2003, pdf)
Insurance Bureau of Canada is the national trade association of the private property and casualty insurance industry. It represents the companies that provide more than 90 per cent of the non-government home, car and business insurance in Canada. To view news releases and information, visit the media section of our web site at www.ibc.ca.