IBC focuses on frequency

In its quarterly report on property & casualty insurance, the Insurance Bureau of Canada (IBC) looked at the extent to which auto claims frequency has declined, compared to a steep increase in severity, over the past decade.Frequency, or the number of claims filed per 100 vehicles insured, dropped by 30-50%, depending on geographic region, between 1993 and 2003. Alberta’s frequency rate fell from 17.7% to 10.2% during that period, while Ontario’s rate dropped from 22.7% to 12.0% during the same period. In Atlantic Canada, the frequency rate dropped from 17.9% to 10.1%.At the same time, consumers have increased deductibles in order to save on premiums. The average policy deductible increased from $250 to $298 between 1993 and 2002. In 1999, only 7.5% of consumers had a $500 deductible on their auto policy, while in 2003, 15.5% carried such a deductible.The IBC says that such moves are helping keep a lid on claims costs, and if drivers were to return to old habits the 10-year average of frequency premiums would have to rise 15-20% to keep pace with the claims growth.The IBC also noted that recent government reforms have helped to lower claims costs, with an independent actuary concluding such reforms have saved $800 million in future claims costs. The biggest savings in dollar amounts were in Ontario (about $500 million), followed by Alberta, with the least savings coming from Newfoundland.