INSURERS operating in Alberta have expressed serious concerns regarding the state of the province’s auto insurance market.
Pleas for product reform were presented in several submissions to the Alberta Insurance Rate Board as part of its semi-annual review of industry benchmarks for use by insurers in developing filings for private passenger auto.
A government order last year has capped increases at 5% until Nov. 30, and insurers say higher premiums are needed.
“It is clear that premiums will need to increase to catch up to the rapidly growing losses experienced over the past several years,” Intact Insurance said in its submission, released by the AIRB earlier this month.
“The current 5% limitation on private passenger rate increases will only postpone the premium adjustments needed to achieve premium adequacy.”
Intact said further product reform is needed to bring stability to the industry and maintain affordability for consumers.
Aviva Canada said in its submission that it has serious concerns over rising loss costs for bodily injury, accident benefits, collision and comprehensive coverage, and that these issues are compounded by the cap on rate increases.
“This situation is unsustainable and we need the government to take actions to stabilize loss costs.”
Desjardins Insurance said that with costs expected to increase, the 5% cap is unfair.
“This is not a healthy or sustainable situation (and) we urge the government to promptly address the underlying product cost drivers for Alberta drivers,” the insurer said in its submission to the AIRB.
The Insurance Bureau of Canada also called the cap on rate increases unfair.
It said that because of the cap, the benchmarks adopted by the AIRB are not as relevant to insurer filings as they otherwise would be.
“The current loss trends indicate that some companies would be justified in increasing rates beyond the 5% cap, yet are not permitted to do so,” the IBC said.
Bill Adams, the IBC’s western vp, said bodily injury claims costs in Alberta have increased significantly since 2011 and unless the government takes action to curb that trend, the average BI claim cost is predicted to increase to $86,000 annually by 2019 — a hike of more than 100% in eight years.
He said the trend’s main culprit is an erosion of the minor injury definition stemming from court decisions that have created uncertainty around what constitutes a minor injury.
The province introduced a $4,000 cap on pain and suffering awards in minor injury claims in 2004. Adjusted annually for inflation, it now stands at $5,080.
“That was effective for eight years but court decisions interpreted minor injury differently, and since then there has been an increase in client representation and the number of claims that are settled outside of the minor injury cap,” he said. “And what we have seen is an explosion in bodily injury claims costs.”
The IBC is calling on the government to clarify the language as to what constitutes a minor injury. Mr. Adams said opposition to this comes mainly from Alberta trial lawyers who rely on contingency fees.
“They are doing what they should do as part of the system and the (situation) is not the fault of trial lawyers,” he said. “This is a failure of government policy.”
(More coverage on the rising costs associated with Alberta auto insurance is presented in the April 16 weekly edition of Thompson’s. To subscribe, please choose the ‘Subscribe’ tab on our main page or email email@example.com).