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July 30: Alberta Rate board orders 5% reduction in basic auto rates despite actuarial consultants recommending no change     (Copyright Thompson’s World Insurance News)     Basic auto insurance rates in Alberta will decrease by 5% effective Nov. 1.     “This reduction is primarily the result of a projected decline in the number of bodily injury claims in the province this coming year,” Alberta Insurance Rate Board chairman Alfred Savage said in a prepared statement.     “The decrease will save Alberta drivers an average of $30 per year on their mandatory insurance premiums.”     Recommendations from actuarial consultants Oliver Wyman initially consisted of three possible rate adjustments: -3.3%, -0.9% or +1.6% (Thompson’s World Insurance News, June 28).     In a July addendum the consultant recommended no change to basic rates.     It based this on the expectation of low investment income and a levelling-off or slight increase in bodily injury claims.     But the board noted that earlier predictions of increased bodily injury claims, which influenced earlier rate decisions, have not come to pass.     It expects them to continue to decrease by 6.4% for the policy year beginning Nov. 1, 2010.     The board also rejected Oliver Wyman’s use of a 1.75% investment rate, based on the yield of Government of Canada two- and three-year bonds at the time of the actuary’s addendum.     “The board selects a 3.0% rate of return in the belief that interest rates will recover to that level by mid 2011,” it said in its decision.     “Adopting the Oliver Wyman bodily injury frequency trend of -6.4% based on the past five years and an expected investment rate of 3.0% suggests a 4.4% redundancy in the average street premium, which the board rounded up for an adjustment of -5%.”     This brings to 23% the overall reduction in industry-wide basic rates ordered by the AIRB since the introduction of auto insurance reforms in 2004.     The Insurance Bureau of Canada stopped short of criticizing the decision but said consumers are best served by premiums that, while affordable for drivers, are also adequate to keep companies solvent and able to pay claims.     “It remains to be seen whether the AIRB’s latest adjustment, which ignored the recommendations of its own actuary, will achieve that goal,” said Alberta vp Doug Noble.     “Rate-setting is a complicated, forward-looking process. So the impacts of this decision will only be known over time as new rates and future claims costs work their way through the system.”             Thompson’s World Insurance News P.O. Box 1027,  Waterloo, Ontario,  Canada  N2J 4S1 Tel: 519-579-2500 Fax: 519-745-7321 mpub@sympatico.ca THOMPSON’S WORLD INSURANCE NEWS , Canada’s only independent weekly for p&c insurance professionals, has been the industry’s most trusted news source since 1988.