IBC Reacts to Ontario Auditor General’s Report

TORONTO, Dec. 5, 2011 – Insurance Bureau of Canada (IBC) applauds today’s release of the Auditor General of Ontario’s annual report which included a number of recommendations and comments about the rising cost of auto insurance in Ontario. The Auditor pointed to the alarming example of a 150 per cent increase in claims costs when the number of injury claims only increased 30 per cent in the same time period (2005-2010).

“Is it reasonable that accidents are down while claims have increased? It just doesn’t add up. Too many people are using the auto insurance system as a profit-making opportunity,” said Ralph Palumbo, Ontario Vice-President, Insurance Bureau of Canada. “There is a sophisticated network of service providers who use the auto insurance system for their own self-interest. This problem is especially acute in the Greater Toronto Area.”

Mr. Palumbo went on to say, “We are appalled that groups like the Alliance of Community Medical and Rehabilitation Providers and others have pointed a finger of blame at insurance companies when the Auditor General clearly states what we have been saying: Ontario policyholders are paying higher insurance rates because of service providers who over-treating and over-assessing patients for personal gain.”

The Auditor General Report also quoted a 12 per cent return on equity (ROE) for insurance companies in Ontario. That number is a benchmark established by Financial Services Commission of Ontario for their use in reviewing insurer rate applications. In reality, the industry has been losing money on Ontario auto insurance for at least the past three years.

According to the Auditor’s numbers, fully 89 per cent of the $9.8 billion in auto insurance premiums collected in 2010 went to paying claims – that left very little in the system to cover operating expenses, let alone profits. Far from earning profits, insurers lost about $1.7 billion on Ontario auto insurance in 2010.

Further pointing to fraud as a root cause for concern, and citing Friday’s release of a report from Ontario’s Auto Insurance Anti-Fraud Task Force, Mr. Palumbo added, “Simply look at the Task Force Report – it has accurately recognized how these frauds are coming together, as well as identified other issues that require further examination. To have a real impact on Ontario’s efforts to significantly reduce costs and eliminate insurance fraud, we need to address the underlying factors that contribute to the problem.” He went on to say, “IBC and its member insurers will continue to work with the government to bring real reform and fairness to the system. The results will be better rates for honest policyholders.”

About Insurance Bureau of Canada

Insurance Bureau of Canada is the national industry association representing Canada’s home, car and business insurers. Its member companies represent 90% of the private property and casualty (P&C) insurance market in Canada. The P&C insurance industry employs over 114,000 Canadians, pays more than $7 billion in taxes to the federal, provincial and municipal governments, and has a total premium base of $40 billion.

To view media releases and information, visit the media section of IBC’s website at www.ibc.ca.