What’s really behind Ontario auto rate increases

Auto rates continue to climb in Ontario but the increase in frequency and severity of claims plays a big role, Insurance Bureau of Canada suggests.

None of the 21 Ontario auto insurers who filed for rate changes during the last quarter of 2019 reduced their average rate, the Financial Services Regulatory Authority (FSRA) reported.

Rates were unchanged for both Allstate and The Co-operators General Insurance Company, but the average rate increase, across the whole market, was 1.56%. This is down from 2.6% in the three months ending Sept. 30, 2019.

Both frequency and severity of physical damage claims are on the rise, said Pete Karageorgos, IBC’s director of consumer and industry relations for Ontario.

“It’s a concerning situation,” Karageorgos said Tuesday in an interview. “Like any business, your costs are what drive your price.”

For auto physical damage, the total number of claims reported was 21.2% higher in 2018 than in 2014 in Ontario, said Karageorgos.

Transportation ministry numbers show that over the same period, there was only a 5.6% increase – from 9.3 million in 2014 to 9.85 million in 2018- in the total number of registered vehicles in Ontario.

The largest approved rate increase in the latest quarter was for Aviva Canada subsidiary Scottish & York Insurance Co. Limited, at 11.05%. Scottish & York’s increase applies to both for new and renewal business – as of Feb. 1. One other carrier – COSECO – had a double digit rate increase, at 10.12%. With 1.35% market share, COSECO is The Co-operators subsidiary that writes insurance for employer-sponsored groups, professional associations and affinity groups. A third carrier – SGI CANADA Insurance Services Ltd., nearly had a double digit increase. SGI, which has 0.37% market share in Ontario auto, was approved for a rate increase of 9.99%

To put Scottish & York’s 11% increase into perspective, Karageorgos points out that Scottish & York has about 1% market share in Ontario.

“Each company is going to make its own decision based on its own book of business and what their needs are for rates,” he said.

The company filing in Q4 with the greatest market share – at 8.09% – is Intact Insurance Company. Intact is approved for a 5% rate increase.

Aviva General, RSA and Gore Mutual were up 3.99%, 5% and 4.97% respectively. Aviva General, RSA and Gore Mutual had market share of 4.92%, 1.09% and 1.5% respectively.

Farm Mutual Reinsurance Plan Inc. on behalf of Ontario Mutuals, was approved for a 4.8% increase. Those mutuals have 1.78% market share.

“Seeing that there is a spread within those rates – you can find low single digit increases to 11% at the upper end – there is competition that is occurring within the industry,” said Karageorgos.

FSRA notes that insurers are reporting an increase in claims costs for repairing vehicles and there is growing concern related to distracted driving.